Health Business Blog’s David Williams hosted this week’s Health Wonk Review; it’s an excellent round-up of the best healthcare-focused articles from around the web. One of my favorite health wonks is Maggie Mahar, who always delivers outstanding, well-researched posts. Her contribution to this week’s HWR is no exception, and is a must-read for anyone who is concerned about reducing the cost of healthcare rather than just focusing on the cost of health insurance.
Much has been said about Medicare’s impending implosion due to lack of funds, and the program’s inability to keep up with the cost of delivering healthcare to an aging population. Maggie’s article is a welcome change from the doom and gloom. She notes that although Medicare reimbursements were increasing by nearly 10% per year from 2000 to 2009, that dropped to about 4% last year and is (so far) a little under 4% this year. So perhaps the tide is turning. (She also points out that even 4% annual increases in Medicare spending are not great, since that still exceeds the rate of inflation of the overall economy. We need to get it down to 2%, and some of the provisions of the PPACA that will kick in over the next few years should help with that).
Maggie’s article focuses on the supply side of the healthcare supply-and-demand curve, since healthcare is somewhat unique in terms of being supply-driven. In general, we tend to rely on our doctors’ advice when it comes to treatment plans and our overall consumption of healthcare. Some patients are savvy enough to question the doctor about less-expensive alternatives that provide the same outcomes. But I would say that’s the exception rather than the rule. People who have comprehensive health insurance that pays most of the cost of their care have little incentive to seek out less expensive treatment. HSA-qualified health insurance policies were supposed to make patients into better “healthcare consumers” but it can be very challenging to “shop around” for the best price when you’re in need of medical care.
So when the doctor says that we need imaging, testing, surgery, or a particular medication, that tends to set the stage for our demand for healthcare. And as Maggie’s article shows, doctors and hospitals seem to be making headway in terms of reducing unnecessary care for Medicare beneficiaries, in anticipation of the PPACA guidelines that will pay for “value” rather than “volume”. In addition, there seems to be a shift away from the mindset of doing everything possible to extend a patient’s life and towards enhancing the patient’s qualify of life instead (eg, foregoing yet another round of chemo for a patient with non-responsive cancer, when the chemo is likely to make their final days worse instead of better).
As usual, Maggie’s article is thorough (my take-away points here are just skimming the surface), yet easy to understand. Definitely a good article to read if you’re interested in how healthcare costs can be contained. She specifically addresses Medicare costs, but it stands to reason that the same cost-saving strategies and paradigm shifts will also help to lower healthcare costs that are being reimbursed by private health insurance carriers. Not only do private carriers tend to follow Medicare’s lead, but the focus on value over volume from a provider perspective will benefit everyone, as it’s unlikely to be applied only to Medicare patients.