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Health Spending Growth Prompts a New Examination of Causes

By Jane Norman, CQ HealthBeat Associate Editor

April 18, 2012 -- There is a need to slow down the unsustainable growth in U.S. health care spending, panelists at an Alliance for Health Reform event recently agreed. But they found much less consensus on what or who is to blame, be they doctors, hospitals, insurers, patients, or a complicated brew of all four.

Leaders of the non-profit alliance are organizing three sessions to encourage a discussion of spiraling U.S. health care costs, a familiar problem that's dogged policy makers for decades.

The health care law (PL 111-148, PL 111-152) included such cost containment measures as federal reviews of certain health insurance premium increases. But the law's emphasis overall was on access for the uninsured to health insurance rather than reining in spending.
Yet costs are a major problem for government programs like Medicare and Medicaid as well as private insurers. And it's touchy because changes likely will involve tough choices about who gets what health care and how much of it.

Politically, it's difficult. "The bottom line is everybody wants a lot of stuff and they don't want to pay for it," said Michael Chernew, health care policy professor at Harvard Medical School and a member of the Medicare Payment Advisory Commission.

Dan Mendelson, CEO and founder of Avalere Health, was blunt. "I think by and large our elected officials are cowards," said Mendelson, a former associate director for health at the Office of Management and Budget in the Clinton administration. He pointed to the fiery debate over "death panels" that consumed discussions of the health care overhaul for a time as an example of how difficult it is to talk about any limitations on health care.

The wonk-heavy session at the Kaiser Family Foundation featured an all-star cast of health policy panelists talking about the nation's $2.6 trillion in health expenditures in 2010. Data from the foundation shows that the rate of spending has slowed in comparison to the 1990s. But it's still growing faster than national income and that trend is expected to continue.

The alliance organized the forum as an overview of the drivers in health care costs but not a session necessarily focused on solutions. It is to be followed May 29 by another session on the roles of technology and chronic illness in increasing costs. A third forum on June 12 will look at real-world examples of techniques that have been used to reduce costs.

Chernew said that "health care spending is not sustainable" as its share nears 18 percent of gross domestic product. Growing rates of obesity and the health conditions that come along with obesity, such as diabetes and heart problems, likely contribute to spending growth, said Chernew. Yet even before the obesity epidemic, health care spending was growing faster than gross domestic product during every 10-year period since World War II, he said.

The long-run drivers of growth include better medical technology, aging, rising incomes, more generous insurance coverage, inefficiency and fears of liability, he said. Yet "the benefits might justify the costs and that's the crucial question," he said. The public portion of spending growth can be controlled by shifting more of the costs to patients. But that presents problems as well, he said.

Henry J. Aaron, a senior fellow in economic studies at the Brookings Institution who's also served in government, said the health care law does contain cost control provisions though many are pilot programs or don't go far enough. If the law survives a Supreme Court challenge, it will be a "way station along the road to transformation of the U.S. health system," and a recognition that budget constraints will be needed to rein in spending, said Aaron.

The budget constraints will have to come from some political body, perhaps one eventually made up of the state-based health benefits exchanges that are authorized by the law, he said.

Gail Wilensky, a former top Medicare official, said reports are that Americans don't stay in the hospital as long and see physicians less often than citizens of other countries. But once that visit or stay occurs, "it's gang busters in terms of what happens," she said, referring to the intensity of services provided to a patient. There will be budget constraints in the future, she predicted, whether it is through the Independent Payment Advisory Board authorized in the health overhaul or other means.

In a report, the alliance singled out national per capita income, age and disease prevalence as national top-line factors driving U.S. health spending. "There is no 'right' level of spending or rate of increase, but it is clear that the United States is at levels and future growth rates that are viewed by most observers as too high," the alliance report said.

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