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How to Lower Health Care Costs in America

5 recommendations from experts at a West Health summit

By Holly Lawrence and SCAN Foundation

As nearly everyone knows, America’s health care costs are astronomical and likely to continue rising. A Health Affairs study just projected national health care spending will grow an average of 5.5 percent every year through 2026. As Martin Gaynor, an economics professor at Carnegie Mellon University said at last week’s West Health Institute 2018 Healthcare Costs Innovation Summit in Washington, D.C.: “Health care spending is high and it is ultimately unsustainable.”

Health Care Costs
Martin Gaynor  |  Credit: Chris Kleponis/MultiVu

What can be done about it?

The answer to that question is critically important to all Americans, but especially to those in their 50s or 60s who “are some of the hardest hit by this health care cost crisis," said West Health CEO and President Shelley Lyford. They tend to have high out-of-pocket costs; health care expenses can be a huge outlay in retirement, too. “For so many, one severe illness could mean financial ruin or even bankruptcy,” Lyford said. A recent RBC Wealth Management study estimated that a healthy 65-year-old couple today can expect to spend more than $400,000 on health care in retirement.

At the West Health summit, which drew around 500 attendees, Gaynor and numerous experts offered recommendations to bring health care costs down. (West Health is a family of nonpartisan nonprofits focused on health care research, policy and philanthropy.) Said Lyford: “We have a health care system that is draining our resources, weakening our country and limiting our ability to fulfill our most basic responsibilities to our citizens.  It doesn't have to be this way.  We must do better.”

Here are five solutions the summit speakers proposed to lower health care costs:

1. Give Patients and Health Care Consumers More Information

Several panelists talked about the wide variation in price for the same medical treatment in the same metropolitan area. In Atlanta, Gaynor said, it can cost 600 percent more to have a colonoscopy in one location than another. The problem is that patients usually don’t know about local price variations because they’re generally not given cost information by health care providers or insurers.

That's not true in other countries. “There are prices on walls in doctors’ offices in France. In Australia, people are entitled to binding estimates before they go in for elective surgery,” said Dr. Elisabeth Rosenthal, editor-in-chief of Kaiser Health News.

Carol Raphael, senior adviser, Manatt Health Solutions and former board chair of AARP said, “I think we shouldn't only talk about cost, because if you just tell people to go to the lowest cost option, that can be frightening.  We have to talk about value. And where are you going to get the best results, the most effective outcomes for the lowest costs? And we have to enable people to figure that out.”

Dr. Mark Smith, clinical professor of medicine at University of California, San Francisco and co-chair of the Guiding Committee of the Health Care Payment Learning and Action Network, said that in order for health care consumers to make smarter choices and save money, the health care system needs a “greater availability of usable data on cost and quality than we have now.”

One recent example of this kind of usable data: Kaiser Health News and NPR just began offering a new feature, Bill of the Month. Its dissection of real medical bills educates consumers (and shames some providers.)

2. Give Patients and Health Care Consumers More Power

“Most patients I speak to in this system feel powerless,” said Rosenthal. “And that’s what I think we have to change.”

Smith told the audience: “It is important for patients and consumers to vote with their feet and with their wallets for high-value plans and providers, because that creates an incentive for plans and providers to create greater value.”

He also said he’d like to see more “self-care,” and thinks we will, with improved health care technology. Referring to patients on dialysis, Smith said: “There’s a whole world of possibilities of how we could substitute patient-driven care for expensive, professionally-driven care.”

Dr. Mark McClellan, director of the Robert J. Margolis Center for Health Policy at Duke University and a former commissioner of the Food and Drug Administration said “there are programs not only outside the U.S., but in the U.S., that are doing self-administered dialysis at home. That leads to better control of the progression of the disease, is more convenient for the patient and is less costly.”

3. Lower the Number of Medical Tests for Patients

Dr. Atul Gawande, a surgeon, writer, public health researcher and Next Avenue's 2015 Influencer of the Year, mentioned a study of more than 1 million Medicare patients asking how often they received one of the 26 tests or treatments that were “widely recognized to be of no benefit or to, in fact, be of outright harm.” Up to 42 percent of patients received unnecessary tests in one year, Gawande said. His mother was one of them.

Rosenthal said doctors must convince patients not to expect, or feel they need, to get a test during every medical visit.

That could be difficult. Raphael called the current culture of medicine “the rescue culture,” saying: “You come in and you have an infection. You don’t want to hear that it’s a viral infection, go home and rest. You want it to be fixed.”


But, Raphael added, “if we have the space, the reimbursement system and to some extent, the technique to have conversations with patients that explain what the risks are, the potential benefits, the dangers with unnecessary radiation, they would make different choices.”

4. Increase Competition Among Health Care Providers

Gaynor explained that physician practices have been consolidating and the number of hospital mergers has been high.

A recent study by two Federal Trade Commission economists, he said, looked at the merger of six physician practices in Pennsylvania a few years ago “and they found price increases of up to 25 percent and 15 percent for different insurers."

Gaynor estimated that about 1,700 hospital mergers have occurred over the past 20 years; most urban areas now have just one to three dominant hospital systems. The “lack of competition has a large part to do with” why health care costs are high and rising, Gaynor said.

If hospitals have no local competition, he added, research has found that prices are 12.5 percent higher, on average. “Evidence shows across the board when there’s less potential competition in a market, hospital prices are higher,” Gaynor said. And, he added, “if prices are high, they stay high.”

Gaynor also noted that a study of Medicare beneficiaries who had heart attacks discovered that “those treated at a hospital that didn’t face a lot of competition were 1.46 percentage points more likely to die in the year following the heart attack than if they had been treated in a hospital in the area that faced a lot of competition. So monopoly kills.”

What’s more, Gaynor said, the largest four health insurers have 76 percent of the fully-funded market nationally and the largest two insurers have more than 70 percent of the market in half of the nation’s metro areas.

He said he sees no signs of health care industry consolidation slowing down.

“I think the strongest studies show that quality suffers when there’s less competition,” Gaynor said. “More competition leads to better quality of care.” And less competition leads to “substantially worse patient outcomes.”

5. Let Medicare Negotiate Prescription Drug Costs for Consumers

Numerous speakers called for allowing Medicare to negotiate prescription drugs for Americans 65 and older. That might happen soon.

“There is growing consensus to allow Medicare, the largest purchaser of prescription drugs, to negotiate on price,” Lyford told me. “This will help bring prices down tremendously.”

Holly Lawrence is a freelance writer on well-being and issues affecting older adults. Connect on LinkedIn. Read More
By SCAN Foundation
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