Cost of Care

Incremental Healthcare Reform: A Focus on Cost

April 3, 2017 2:39 pm

Seven years ago, the Affordable Care Act was signed, bringing a major healthcare overhaul with two goals: reduce the number of uninsured Americans and reduce the cost of care. The legislation was successful on the first goal, reducing the number of uninsured Americans from 15.1 percent in 2011 to less than 10 percent by 2016, according to the Centers for Disease Control and Prevention and National Center for Health Statistics (NCHS). a But the second goal remains elusive as healthcare costs continue to rise above inflation and are expected to top $10,000 per capita in 2016, according to the Department of Health & Human Services. b

Now Americans are faced with another overhaul of our healthcare system, and it is too early to tell what the end-product will be. Most of the attention is focused on insurance reform and how we allocate and share risk. Insurance reform is important because it will significantly affect the healthcare costs of individual consumers by changing how healthcare costs are distributed among consumers. However, it has almost no impact on the actual cost of care—the most pressing issue in health care today.

A Focus on Cost

Although an overhaul seems likely from a political standpoint, we believe what is needed instead is a focus on better managing the cost of care. If that cost continues to increase more rapidly than inflation, it will become the major reason people lose insurance, likely bringing about a reversal of the gains we have seen in the number of Americans covered. Even today, many newly insured individuals have high-deductible plans, which essentially translates to catastrophic insurance and restricts their access to basic preventive and primary care services. It will not be long before most figure out it is better to go without insurance and have charity care pay for catastrophic illnesses while they save on the premium payment.

The high cost of care is not only a major barrier to accessing care, but also a drain on the economy at 17 percent of GDP and rising. But slowing the growth of healthcare cost has proven extremely difficult since the first HMOs were founded 40 years ago to do just that. Market forces alone cannot bend the healthcare cost curve because healthcare markets do not function like other competitive markets. Government must take a key role.

Many of the strategies designed to reduce healthcare spending have been fragmented, uncoordinated, and underfunded. In addition, much of the focus on reducing healthcare costs has been on utilization of services and elimination of unnecessary care. These strategies, although useful, are not nearly enough to bend the healthcare curve. To really have an impact on cost, government must think and act big.

To slow the nation’s rate of healthcare cost growth, it will be necessary to effectively address several areas that drive the current trend:

  • Public health concerns such as obesity, illicit drug use, sugar consumption, and gunshot injuries
  • Capacity issues that contribute to costs, including numbers of magnetic resonance imaging units and other expensive technological devices per capita that far surpass those of most countries
  • Healthcare labor costs that are higher than those of most countries
  • Drug and device costs are significantly higher than those of most if not all other countries
  • Expenditures on end-of-life care that far exceed those of most developed countries

These are all big-ticket items, and addressing them successfully can substantially reduce healthcare spending. The nation’s successes in reducing tobacco use offer evidence that public health interventions do succeed, even going head to head with big-industry spending. However, we will need innovative approaches to public health policy and implementation to reach a new generation of tech-savvy patients.

A New Approach

Capacity issues are more difficult to address. One way to address some overcapacity issues is to give patients compelling incentives to use higher-quality, lower-cost providers, especially in the outpatient, nonemergency setting.

More innovative payment methodologies that focus on population outcomes and cost, such as global and bundled payment methodologies, also can drive down both unit cost and overutilization. Allowing importation of pharmaceuticals and other devices and allowing Medicare to negotiate prices will bring down drug and device costs fast.

Training physicians on how to successfully navigate through end-of-life concerns with their patients and to provide patient education will help to reduce high end-of-life spending. Indeed, studies show we are making progress in this area relative to other western countries.

Each of these issues is extremely difficult to address, but there are technically feasible solutions. The difficulty lies in the politics, so it will require courage, tenacity, bold leadership, and political savvy to take on powerful stakeholders and successfully push through any initiative for improvement.

A focus on the cost of care and addressing the big issues that drive cost provides the best opportunity for improvement. As cost improves, so too will access, leading to truly affordable health care for everyone.

Olakunle Olaniyan, MD, FHFMA, MBA, FACP, FACPE, is president, Case Management Covenants LLC, Columbia, Md.


a. NCHS, Health Insurance Coverage: Early Release of Estimates From the National Health Interview Survey, January–June 2016 , November 2016.

b. Alonso-Zaldivar, R., “$10,345 per Person: U.S. Health Care Spending Reaches New Peak,” PBS News Hour, July 16, 2016.


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