Advanced Search

Medicare Compliance & Reimbursement

SPECIAL REPORT:

New Plan To Reduce Health Care Costs Focuses On Increases In Health Care Outlays

Published on Mon Jan 22, 2007

Is $1.4 trillion in savings too little too late?

The United States currently spends more than $2 trillion dollars every year on health care, and the price of coverage will only continue to rise. Although most industrialized countries spend eight to 10 percent of their Gross Domestic Product on health care, the United States spends 16 percent, and that percentage will increase over the next 10 years, says the Centers for Medicare & Medicaid Services.

A new report from the Commonwealth Fund proposes a plan that will trim $2 trillion in health dollars over the next 10 years by:

· Increasing the market's downward force on prices through greater competition;

· Reducing high insurance administrative overhead;

· Offering incentives to promote efficient and effective care; and

· Investing in infrastructure such as health information technology.

Proponents of President Bush's plan for health care reform might argue that Bush's Executive Order in August 2006 mandating increased federal transparency and his 2004 creation of the Health IT Initiative have already addressed these issues. While these changes might eventually level the health care playing field, recipients of federal health care currently face substantial discrepancies in health care costs, if only because of their location, the Commonwealth report indicates.

After adjusting the price of health care using area wage costs, Medicare outlays per beneficiary ranged from $4,530 in Hawaii to $8,080 in New Jersey for 2003, according to the Dartmouth Atlas of Health Care. Further, this variation in health care spending does not impact the quality of care for Medicare beneficiaries, according to the Commonwealth report.

In recognition of studies indicating unnecessary, inappropriate and duplicative care, the Institute of Medicine has recommended that the United States improve the quality, access and cost performance of its health care system.

Significant savings and a boost in cost performance might be possible through a policy that lowers the average rate of increase in health care outlays by one percentage point a year, the Commonwealth report indicates. Such a policy would save approximately $1.4 trillion dollars over the next 10 years.

As marvelous as that number sounds, however, this reduction would still find Americans paying $3.7 trillion for health care in 2015.

The projected increase in health care costs should frighten cynics who doubt President Bush's ability to work with Congress and pass health care reform; unless those two parties can agree on reform, Americans will soon need to start planning for medical bills like they currently plan for mortgage payments.

Other Articles in this issue of

Medicare Compliance & Reimbursement

View All