Controlling healthcare costs

1 06 2009

My career plans following Kellogg are to work in the healthcare industry, so I’ve been following the push by the Obama Administration to overhaul the US healthcare system pretty closely.  Today, the plethora of health industry groups that recently pledged to cut $2 trillion (with a “T”) in health costs over the next 10 years sent the President a letter outlining exactly how they plan to achieve that.  Some excerpts:

  • “We have convened seven all-day meetings and multiple conference calls” (NB: nothing says “we’re determined to figure out how to improve efficiency” like all day meetings and multiple conference calls.)

Ok, that’s the last snarky comment, I promise.  I just couldn’t resist.  Now onto the serious ideas presented in the letter, and my commentary:

  • Several of the proposals focus on examining the utilization of medical care and creating protocols for preventing “overuse” of medical services, medical devices, drugs, etc.  Overall, the groups project savings of $150-$180 billion through better utilization of care.  However, creating guidelines for when it is appropriate to use certain medical services/products will not reduce the overuse of these services/products without some sort of accompanying mechanism to prevent deviation from those guidelines.  The last time this was attempted, it was by the HMOs and patients fought back against the strict utilization rules.  It should be interesting to see now whether the trade-off between cost-reduction and flexibility has tilted from where it was when the HMOs tried this.
  • Reducing administrative burdens by standardizing claims submissions, eligibility, claims status, payment and remittance.  Sounds good.  Not a huge fan of asking the government to mandate the required standard, but I guess if they’re asking the government to mandate the standard that the industry agrees is best, it’s not so bad.  They also said they will support market reforms to make it easier for consumers to compare plans’ benefits, price and other features.  I am a big fan of making the insurance market more competitive and transparent by removing the multitude of state mandates on insurance coverage, but that’s beyond what the industry can achieve on their own.
  • Adoption of Personal Health Records.  I’m skeptical of the claim that this will save $11 billion a year, but think this is a huge step in the right direction purely from a quality of care standpoint.
  • The hospitals have proposed cutting costs by preventing a laundry list of complications, including MRSA, central line blood infections, surgical infections & complications, etc.  Um, I’m not a doctor, but shouldn’t the hospitals have been working towards eliminating those things anyway?  (Ok, maybe there was another snarky comment in me after all)
  • Developing a regulatory framework for biosimiliars (aka generic biotech drugs) – seems like a no brainer if the science can be worked out.  Generic drugs are a hugely cost-effective alternative to branded pharmaceuticals.
  • A few proposals relating to better preventative care, to reduce reliance on more expensive acute care.  Good idea, but will have to rely on some changes in behavior in the patient population.

Overall, a good effort from the industry, both to present some real reforms but also to try and steer the agenda so change isn’t entirely forced on them from Washington.  Of course, this doesn’t address (nor could it address) the 500 pound gorilla: whether any cost savings achieved by the industry are dwarfed by the increased cost of providing insurance to the uninsured and the cost associated with the presumed higher utilization of care once the previously uninsured have coverage.  Stay tuned.