HealthReformGPS is made possible through generous financial support from the RCHN Community Health Foundation. Visit them at

NEJM article proposes strategies to curb health spending

Posted on August 2, 2012 | No Comments

PDF Version
Implementation Briefs

In an article just published in the New England Journal of Medicine, many of the nation’s top health care experts, several of whom helped write the Affordable Care Act (ACA) released a strategy to curb spending.

The proposal details how states can cut spending through:

1) promotion of payment rates within global targets,

2) acceleration of the use of alternatives to fee-for-service payment,

3) the use of competitive bidding for all commodities,

4) requirement for Exchanges to offer tiered products,

5) requirement for all Exchanges to be active purchases,

6) simplification of administrative systems for all payers and providers,

7) requirement of full transparency of prices,

8) making better use of nonphysician providers,

9) expansion of Medicare ban on physician self-referrals,

10) a leverage for the federal employees program to drive reform, and

11) a reduction in costs of defensive medicine.

The Center for American Progress (CAP) convened the group for a daylong session in January to discuss health policy options for slowing the ever mounting health care costs.

No Comments

Public comments are closed.

According to an article published in the New England Journal of Medicine (NEJM), the observed trend in declining health care spending may not be permanent. The Gross Domestic Product and Health Care Spending examines data that compares changes in GDP to health spending from 1950 to 2011. During this time, GDP growth averaged 2% per year, while health care spending growth averaged 4.4% annually. The introduction of managed care in the mid-1990's, however, stiffeled growth in health care spending while the GDP continued to rise. The article claims that managed care is a likely explanation for the decline in health care spending, but it is far too soon to rule out the recent economic downturn as a major contributor.
The Government Accountability Office (GAO) yesterday released a report on the long-term costs of the Affordable Care Act (ACA). The report found that the long-term fiscal outlook depends largely on whether elements in the ACA designed to control cost growth are sustained. As federal health care spending is expected to continue growing faster than the economy over the next 75 years, the federal budget is on an unsustainable path, even with ACA measures intended to curb cost growth. Yesterday, at a Senate Budget Committee hearing, ranking member Jeff Sessions (R-Alabama), said the report showed the ACA will increase the deficit by $6.2 trillion over the next 75 years. ACA cost curbing provisions include reduced payments from Medicare and Medicaid, the creation of a 15-member Independent Payment Advisory Board to make recommendations to reduce Medicare costs, and new taxes to pay for the health care expansion.
The Centers for Medicare & Medicaid Services (CMS) Office of the Actuary reported in a recently published Health Affairs article that national health care spending growth remained at 3.9 percent in 2011 for the third year in a row. Although the national level of health care spending growth remained relatively stable, personal health care spending accelerated from 3.7 percent to 4.1 percent. In addition, Medicaid spending growth slowed, while Medicare, private insurance, and out-of-pocket spending accelerated.
An analysis recently released by The Commonwealth Fund uses data from the Organization for Economic Cooperation and Development and other sources to compare health care spending, supply, utilization, prices, and quality in 13 industrialized countries: Australia, Canada, Denmark, France, Germany, Japan, the Netherlands, New Zealand, Norway, Sweden, Switzerland, the United Kingdom, and the United States. The U.S. spends far more on health care than any other country. However this high spending cannot be attributed to higher income, an older population, or greater supply or utilization of hospitals and doctors. Instead, the findings suggest the higher spending is more likely due to higher prices and perhaps more readily accessible technology and greater obesity. Health care quality in the U.S. varies and is not notably superior to the far less expensive systems in the other study countries. Of the countries studied, Japan has the lowest health spending, which it achieves primarily through aggressive price regulation.
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...
In their recent publication, "Building Tomorrow's Healthcare System: The Pathway to High Quality, Affordable Care," BlueCross BlueShield Assocation (BCBSA) calls for incentives to reward safety and reinforce primary care. One of the nation's largest insurance companies, BCBSA encourages federal government to adopt "value-based purchasing" and urges individuals eligible for Medicare or Medicaid to enroll in managed care plans. The Association also wants faster implementation of these types of programs in order to show savings more quickly.
In an article published in Health Affairs, actuaries with the Center for Medicare and Medicaid Services project US health spending will grow at a rate .2 percent faster under health reform than projected under prior law (6.3 percent instead of 6.1) over the next decade. They also estimate the administrative costs for health reform will be $2.4 billion for the US Department of Health and Human Services, $37.7 billion in state and federal costs for establishing insurance exchanges, and an increase of $31 billion in state and federal administrative costs for Medicaid.
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]