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Orszag Discusses New Ways of Alleviating Soaring Health Care Costs

By Sasha Bartolf, CQ Staff

May 22, 2007 – Congressional Budget Office Director Peter R. Orszag on Tuesday proposed the creation of a new research entity that would use evidence-based medicine to bring down soaring health care costs.

At an industry conference sponsored by Avalere Health, Orszag discussed his spending concerns for Medicare and Medicaid and the need for controlling excess cost growth that occurs through unnecessary medical procedures and the lack of standardized post-surgery processes.

Using back-surgery costs as an example, Orszag pointed to the variety of treatments and rates available to people with orthopedic problems and questioned why there wasn't a clear answer to what worked best and how much it should cost.

Orszag proposed creating a U.S. version, similar to the United Kingdom's National Institute for Clinical Excellence (NICE), which would collect non-randomized evidence of treatment provided by health care practitioners. In Orszag's vision, all health care facilities would maintain electronic health records that tracked the methodology used to treat specific ailments. Doctors would send their patient data to a research hub that would analyze which method worked best in treating a specific medical problem.

Controlling health care costs is a key focus for Orszag, who has described the issue as "the fundamental challenge facing the federal government." He has called the projected growth in health costs "unsustainable" and said the government must address the problem soon. "I would hope we do something, whatever it is," Orszag said in March. "We need to try different things" and evaluate the results.

Orszag said on Tuesday he realized that fiscal incentives are needed to motivate doctors and health care facilities to track patient diagnoses, treatment, and recovery. However, in light of rising health care costs, Orszag said that while "there are very few things that the CBO can say will offer this kind of potential for reducing health care costs," a health care system focused on evidence-based medicine is one solution.

Moreover, Orszag said he believed that the United States is "woefully underinvested in research," evidenced by the fact that 25 percent of the federal budget is spent on health care costs while CBO only has 15 percent of its staff working to analyze these costs.

Orszag said he realized that setting up research entities is not enough to produce significant overall health care savings. But he said that if the United States were to "aggressively undertake" steps to create the new entity, there would be a "significant reduction in health care costs, including Medicare and Medicaid costs.

"There is, I think, an amazing opportunity in this long-term fiscal challenge to take cost out of the system without harming health . . . and that opportunity is remarkable," Orszag said.

CBO will begin studies to determine whether existing groups could take on such a research task, and added that if a new entity had to be created, it could take even longer for them to score the costs for this project.

He said that suggestions that discretionary appropriations or private contributions through user fees could be used to fund the research are currently viable. But Orszag warned that because CBO reports usually focus on the cost-effectiveness and necessary funding for the next five to 10 years, the study would have to have a longer-term cost trajectory.

It would take at least five years for the entities to be up and running and for the financial incentives to be in place to encourage doctors to report their evidence-based medicine to these new organizations and for them, in turn, to effectively analyze the results of this data.

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