In the United States, per capita spending on health care is more than double that in most other high-income, industrialized countries, including Australia, Germany, Japan, and Sweden. Yet performance on many health outcome measures in the U.S. lags these lower-spending nations. A New England Journal of Medicine Perspective examines two effective cost-containment strategies from abroad: Germany’s bundled payment system and Japan’s volume-driven pricing adjustment.
What the Study Found
In Germany, the average payment for a hospitalization is less than $5,000, compared with more than $19,000 in the U.S., even though German patients typically remain in the hospital nearly 40 percent longer than their American counterparts. To contain costs, the German system bundles payments for physician and other services delivered during an episode of care. No additional payments are made if a patient is rehospitalized.
Although providers in Japan are paid primarily on a fee-for-service basis, per capita spending and prices remain low. The Japanese payment system monitors use of specific health services and then adjusts payments to reflect changes in volume. If the volume for a given service is higher than expected, prices may be reduced. Alternatively, prices could be raised for services whose increased use is a policy goal, such as end-of-life care.
In the U.S., where fee-for-service still predominates, health systems and purchasers are beginning to experiment with payment innovations—notably the Medicare program’s bundled payment demonstrations and financial penalties for hospitals exceeding thresholds for readmission. While applauding these efforts, the authors urge policymakers and health system leaders to do more to study and adopt cost-containment strategies used successfully in other countries.