Karen Davis on Lessons from Past Efforts to Control Costs

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The recent public exchange between the federal government and health care industry on the nature of the industry's commitment to cut costs highlights the difficulty of developing, enacting, and implementing effective measures to bend the health care cost curve. In a <a href="/publications/publication/2009/may/bending-health-care-cost-curve-lessons-past">new column</a>, Commonwealth Fund president Karen Davis draws on the history of such voluntary efforts to demonstrate why enforcement mechanisms are needed to ensure that spending targets are met. <br /><br />Davis discusses Congress's failed efforts to extend President Nixon's health care wage and price controls after industry leaders pledged to control costs voluntarily, and its failure in 1977 to pass a proposal that she developed on behalf of the Carter Administration to limit the rate of increase in hospital revenues. A follow-up hospital cost-containment bill specifying that mandatory limits would be imposed only if national, state, and individual hospital voluntary limits were not met was defeated two years later. <br /><br />"It was the launch of a formal 'Voluntary Effort' created by a coalition of health care provider organizations that nailed the lid on the legislative coffin," Davis says. <br /><br />With the exception of a 1978 goal to reduce the rate of increase by 2 percentage points below the 1977 rate of increase, all subsequent goals were substantially exceeded. To ensure the promised savings are realized this time around, Davis says that policymakers should consider incorporating into health reform expenditure targets that hold increases to 1.5 percentage points below baseline projections. <br /><br />"A commitment from business and industry to limit the unsustainable increases in health care is important as we work together to build a high performance health system that works for all Americans," she says. "The President and Congress now need to follow up on this pledge with legislation that ensures the promise is kept."