In Part 1
of this series on healthcare reform and healthcare costs, I discussed how implementation of the Affordable Care Act (ACA) has led to unintended consequences that appear to be driving up healthcare costs.
To recap: national healthcare spending
increased 3.6 percent to $2.89 trillion in 2013 and is expected to increase by as much as 6.5 percent in 2014. By comparison, the United States GDP increased 3.4 percent in 2013. Healthcare spending already accounts for a staggering 17.9 percent of that GDP
, which has serious economic implications
for our country.
While the ACA put the burden on hospitals to change they way they operate, it ignored other factors that contribute to rising healthcare costs, including:
- Medical technology
- Unnecessary testing (driven by concerns about malpractice)
- More ED visits (due to access issues)
- Sharp increase in the number of insured patients (who tend to be less price sensitive)
- Demand marketing by drug companies
- Medicare price-fixing
So What Can We Do?
The healthcare cost picture is a complex one, and I think the limitations and omissions of the ACA may force us to ask some hard questions about approaches that could help control rising healthcare costs:
Can expensive new technologies be justified?
Because new technology drives half of healthcare cost inflation
, we must weigh its costs and benefits. Of course, this is easier said than done.
For example, let’s consider the new hepatitis C drug sofosbuvir (Sovaldi) that hit the market in 2013. It was truly a game-changer for people with this deadly infectious disease. Ninety percent of patients
treated with it are be cured — most of them without serious side effects.
Here’s the rub: Sovaldi costs over $1,000 a pill
, or about $84,000 for a full course of treatment.
In the short-term, this may seem like unconscionable price gouging. But we also need to consider that it costs around $300,000
to treat a hepatitis C patient with advanced disease. So Sovaldi actually has the long-term potential to cut costs (not to mention human suffering).
So when an expensive new drug emerges, who should get it? When? The question is especially salient for public payers like Medicaid. Only a minority of states have added Sovaldi to their preferred drug lists
, and many of those have strict utilization rules
that curb its prescription.
Is this approach unfair? Perhaps, but it's also increasingly necessary in my view. Adopting new technology indiscriminately will continue to drive rising costs. While the idea of "rationing" is politically unpopular, guidelines regarding the adoption and use of technology may eventually be necessary to curb out-of-control spending. (For example, a few states require patients to undergo a liver biopsy
before covering Sovaldi to make sure they'll actually benefit from treatment.)
Should malpractice plaintiffs have the right to uncontrolled non-economic damages?
As I write this, Californians are just days away from a vote on Prop. 46, which (among other bad ideas) proposes to quadruple the cap on non-economic damages in malpractice cases. Results of at least one analysis suggest the new law would cost the average family $1,000 per year
. There's also concern that rising costs could drive doctors from the state — or at least from medically underserved areas.
In addition to preventing costly lawsuits, tort reform has many indirect benefits. It keeps the cost of practicing medicine reasonable
, allowing physicians to see more uninsured and underinsured patients. Physicians also feel less pressure to order unnecessary tests
in order to reduce medical liability (thereby driving up healthcare costs).
While it wasn't addressed by the ACA, tort reform plays a vital role in containing healthcare costs while still allowing plaintiffs to seek fair and reasonable economic and punitive damages. (California's embattled statute puts no limit on economic damages, allowing plaintiffs to recoup all medical expenses and loss of wages.)
What responsibility should patients play in controlling costs?
As of March 2014, 9.3 million people
had gained healthcare coverage under the ACA. I think we all agree that healthcare access is a good thing. However, this influx also makes it more difficult to contain rising costs.
That's because insured patients are both more likely to utilize the healthcare system and less likely to feel the sting of rising costs. This raises the concept of moral hazard in which consumers spend more freely when they believe someone else is paying the bill.
So how do we eliminate moral hazard in healthcare and encourage patients to steward our finite resources? Well, I think we're already seeing some positive movement in this area.
For one, payers are increasingly involving patients in cost sharing (most commonly through high-deductible health plans). This appears to make patients more cost-conscious. Physicians in some specialties are reporting an increase in patient "price shopping,"
a good indicator or price sensitivity. We're also seeing payers, government and private companies working to increase transparency
and provide patients with the information they need to hone in on high-value care.
In addition, educational campaigns like “Choosing Wisely
” have helped make both patients and physicians more mindful of the cost and quality of healthcare. Participating professional groups make evidence-based "lists of things to question" that can guide conversations between physicians and patients. The program aims to eliminate duplicative and unnecessary procedures that account for up to 30 percent of healthcare spending.
Other areas for action.
The ACA created momentum for population health management. This could be a powerful systemic incentive to curb chronic disease, which currently accounts for 75 percent of healthcare spending
. The sooner payers, providers and community organizations begin to track health data, promote wellness and incentivize patients to manage their health, the sooner our economy will reap the benefits.
End-of-life care is another area not addressed by the ACA that demands our attention. Thirty percent of Medicare dollars
are spent on patients in the last year of life. Often, these measures do not extend life, nor do they improve quality of life for the patient and family. Investment in palliative care programs
can help ensure that terminally ill patients understand their options and are involved in decision-making — all while stewarding valuable healthcare resources.
Doing Our Part
It's a challenging and interesting time for healthcare, and it's uncertain what the future holds. But one thing's for certain: the stakes are high when it comes to reining in runaway healthcare costs.
As physicians and administrators, we don't have control over all of the factors listed above. But if we each do what's in our power to fill the gaps in the ACA, we can help contain costs and preserve access for our patients.
What are your ideas about how we care control rising healthcare costs? Comment to share below.