A Progressive Prescription For Cutting Health Care Costs

While the Affordable Care Act included an array of regulations to lower administrative costs and encourage more efficient delivery of care — and the CBO’s score of the reform law may have undershot its potential to reduce the debt — more can and should be done to lower health care spending. Even with the Obamacare, the nation’s health care spending as a whole is predicted to rise from 18 percent of the economy to 25 percent by 2037.

Since government health care programs like Medicare and Medicaid purchase care from private providers, this will drive up their costs as well — increasing the government’s spending, its debt, and crowding out other programs. To counter the increases, the Center for American Progress has released a report detailing a host of new reform proposals for the government to reduce its own health care costs, as well as encouraging private providers to do the same.

Most of the reforms recommended by Republicans and conservatives control costs by concentrating risk on individuals, and thus price many who need care out of being able to purchase it entirely. But there are alternative reforms which can increase awareness of prices for consumers and encourage insurers and providers to deliver quality care for lower cost. Here are a few the report recommends:

Promote privately negotiated payment rates between insurers and providers: The federal government should award grants to states to encourage programs that bring payers and providers together — along with economists and business and consumer representatives — to self-determine a ceiling on payment rates. The ceiling would limit growth in per capita health spending to the average growth in wages, and would apply to all public and private payers in a given state. This would prevent cost-shifting between public and private payers, and between large and small ones.

Require all state exchanges to actively promote better care at lower cost: Instead of just passively offering any insurance plan that meets the minimal standards, the exchanges should also actively promote better care by awarding bonuses to plans that meet higher measures of quality care and patient experience. These plans would then be highlighted for consumers shopping on the exchanges.

More steps to ensure transparency in prices: In America’s health care market as it stands, consumers almost never receive price information before treatment, even though the cost of services can vary widely in the same area. The state exchanges should collect, audit, and publicly report data on prices and claims. Aetna, a private insurer, and the state of New Hampshire already provides similar information through the internet. Government should also prohibit “gag clauses” in contracts between providers and insurers, which forbid the release of price information to an insurer’s customers.

Expand the use of non-physician providers: Restrictive state laws often prevent non-physician health care workers such as nurses to practice to the full extent of their training, or to practice without physician oversite. This decreases the supply of workers, which reduces competition and drives up costs. The federal government should award bonuses to states to encourage the adoption of more nimble scope-of-practice standards as set down by the Institute of Medicine.

Reduce the risk of malpractice claims for physicians: Fear of malpractice suits can drive physicians to engage in “defensive medicine,” which drives up the cost of care. Unfortunately, the Republicans’ preferred solution of capping damages would have a negligible effect on spending and would limit consumers’ ability to discipline genuine malpractice. Instead, “safe harbor” standards should set — drawing upon health information systems and evidence-based guidelines — which physicians could adhere to and then use as an affirmative defense in the early stages of litigation. This would provide physicians a concrete target to both ensure efficient care and preemptively guard against the risk of lawsuits.

There are six other reforms included in the report, which range from speeding up the use of delivery and payment systems other than the fee-for-service model, to bringing the health insurance plan for federal employees on board with the reforms already scheduled in Medicare and the exchanges.