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Alliance for Health Reform releases report on causes of rising health care costs

Posted on January 4, 2013 | No Comments

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The Alliance for Health Reform recently published a new report examining drivers of rising health care costs in the United States. The report names medical waste, fee-for-service-payments, medical technology, and chronic illness as some of the major contributing factors to this mounting issue. The authors also offer examples of activities already underway to control costs.

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The Henry J. Kaiser Family Foundation (KFF) is out with a new study today that predicts a rise in health care costs. The analysis concludes that by 2019, health care costs will likely grow at a percentage closer to the national historic average, which is above 7%, compared to the 3.9% increase observed in 2009 - 2011. The authors found that the recent lag in health care cost growth was a result of the economic downturn, and pending recovery will likely coincide with increasing health care costs. The study did state that growth may be mitigated by the health care delivery-system reform attributable to the Affordable Care Act (ACA), but the most promising predictor of health care costs remains to be the country's economic status.
The Bipartisan Policy Center (BPC) recently released a new national health care cost-containment strategy. Funded in part by the Robert Wood Johnson Foundation, A Bipartisan Rx for Patient-Centered Care and System-Wide Cost Containment, proposes strategies that would save $560 billion in health care expenditures over the next 10 years. BPC's main source for cost-containment is the alteration of the Sustainable Growth Rate (SGR) formula, which accounts for nearly $300 billion of the proposed savings. Other cost-containment measures prescribed included the expansion of Medicare networks, a concept very similar to Accountable Care Organizations, and instituting the competitive bidding practice among Medicare Advantage plans.
Five entities in the health care industry, including America's Health Insurance Plans (AHIP) and Families USA, coalesced to present a document containing several ideas that, if incorporated, may help decrease health care costs. Potential provisions to accomplish this task include:
  • Altering payment models and infrastructure to incentivize effective treatment;
  • No longer using fee-for-service to pay providers;
  • Encouraging patients to visit quality providers;
  • Designing plans that permit savings for states capable of reducing health care costs.
According to a new report released by the Commonwealth Fund, a new set of proposed policies designed to accelerate innovation in care delivery could slow health spending growth by $2 trillion over the next decade. The report outlines a comprehensive set of policies to modify the way public and private purchasers pay for care, improve the accessibility of high-value care options, and address forces driving skyrocketing health care expenditures. Commonwealth estimates indicate that if the policies are implemented soon, with public and private payers acting in concert, federal spending could be reduced by $1.04 trillion, state and local government spending by $242 billion, and employer spending by $189 billion over the next decade. The proposed policies would also realize significant savings for families ($537 billion over a decade) as a result of lower future health insurance premiums and out-of-pocket costs. Click here for an executive summary of the report.
In a report released yesterday, the Center for American Progress (CAP) introduced the Senior Protection Plan, a proposal to reduce federal spending on health care delivery. Instead of shifting costs and/or ultimately increasing costs, the Senior Protection Plan, according to CAP, would improve health care delivery efficiency, eliminate waste, and improve the quality of care. This approach, in theory, would ultimately reduce health care spending. The Senior Protection Plan serves as an alternate to the other proposals made in the past years with the goal of reducing health care spending. Such proposals include transforming Medicare into a premium support or voucher program, raising Medicare's eligibility age to 67, increasing cost-sharing, and slashing Medicaid and increasing long-term care costs for seniors. The Senior Protection Plan would enhance competition based on price and quality, increase transparency of price and quality information, reform health care delivery to provide better care at lower cost, repeal the Sustainable Growth Rate (SGR) mechanism, reform graduate medical education and the workforce, reform Medicare premiums and cost-sharing, reduce drug costs, bring Medicare payments into line with actual costs, cut administrative costs and improper payments, reduce the costs of defensive medicine, reform the tax treatment of health insurance, and promote better health. CAP's Senior Protection Plan yields substantial savings, as scored by the Congressional Budget Office, without harming beneficiaries. The plan would save over $385 billion in federal expenditures over 10 years. In addition, the tax policies related to health care would generate up to $100 billion over 10 years. The plan also includes an array of reforms that would bend the cost curve over the long term. For the report summary, click here.
The Bipartisan Policy Center (BPC) recently published a report that explores the primary drivers of health costs in the U.S. The report found that costs will increase in the coming years due to drivers such as population growth, utilization and intensity of health care services, and increasing prices. According to the report's authors, the Affordable Care Act's (ACA's) provisions to expand insurance coverage, create pilot programs to control costs, and engage in comparative effectiveness research will not be enough to bring health care costs under control. BPC's Health Care Cost Containment Initiative plans to issue recommendations early next year to address these drivers. The Initiative is led by former Senate Majority Leaders Tom Daschle and Bill Frist, former Senator Pete Domenici and former Congressional Budget Office Director Dr. Alice Rivlin.
According to a new article in The New England Journal of Medicine, Medicare and Medicaid spending has grown less rapidly than private health insurance costs in recent years, and this trend is projected to continue for at least the next decade. According to John Holahan and Stacey McMorrow of the Urban Institute, the authors of the article, Medicare and Medicaid spending per enrollee will grow at rates of 3.1 percent and 3.6 percent, respectively, over the next ten years. This is well below the 5.0 percent project growth rate for private insurance. The authors based these estimates on the latest projections of national health expenditures prepared by the Office of the Actuary at the Centers for Medicare & Medicaid Services (CMS).
The Congressional Budget Office (CBO) released today an update on the budgetary impact of the Affordable Care Act (ACA). Although overall projections are similar to those released in prior years, there are several important changes in this year's updated estimates. For example, in March 2010 when the ACA was enacted, CBO estimated that the number of uninsured individuals would fall by 32 million by 2019. Now CBO estimates that the number will only fall by 31 million by 2019, but by 33 million by 2022. The projections regarding health insurance coverage has also changed...
The Affordable Care Act (ACA) created the Prevention and Public Health Fund, a 10-year, $15 billion commitment to support programs, medical screenings, and research related to public health and prevention. This national commitment to investment in preventing disease before it occurs is in line with evidence from a variety of recent reports and studies indicating that strategic investments in proven, community-based prevention programs could result in significant U.S. health care cost savings and overall economic cost savings. The Robert Wood Johnson Brief, "Return Investments in Public Health: A Summary of Groundbreaking Research Studies," summarizes the findings and recommendations from four major studies released between 2008 and 2011.
The Congressional Budget Office (CBO), the legislative branch agency responsible for estimating the cost of legislation, issued two reports on July 24th related to the Affordable Care Act (ACA). The first report, revised cost and health insurance coverage estimates for the ACA in the wake of the Supreme Court ruling in NFIB v. Sebelius[1]. In that ruling, the Court concluded the individual requirement to purchase health insurance coverage, while not a reasonable exercise of congressional Commerce Clause authority, is constitutional as a tax under congressional Spending Clause authority. The Court also held that the ACA’s Medicaid expansion, requiring states to cover all non-elderly individuals with incomes below 133[2] percent of the federal poverty level was unconstitutional. However, rather than striking the requirement, the Court precluded the Secretary of the Department of Health and Human Services (HHS) from enforcing the mandate by withholding all Medicaid funds. As a result of the ruling, states now have the option of expanding coverage to 133 percent of the federal poverty level (FPL), and will receive enhanced federal matching funds as provided under the law, but are not required to expand coverage.[3]