Ad hoc efforts help cut U.S. healthcare costs

Jul 15, 2011, 4:57 a.m.

Neither lawmakers nor the White House are likely to undertake a new concerted effort to find a solution until after the 2012 presidential election. They are wary of the setbacks that Democrats saw in crafting President Barack Obama's healthcare law and that Republicans faced after proposing changes to the Medicare program for the elderly.

In the interim, the best hope for change might be strategies such as those employed at Intermountain, which seeks to coordinate care through medical teams whose job is to find the best practices for keeping patients healthy and curbing costs.

Similar innovations have taken root elsewhere. An example is Group Health Cooperative, a Seattle-based nonprofit system that provides both health insurance and medical care.

Its vertical integration -- linking doctors, hospitals and insurance coverage in a single system -- eliminates the fee-for-service incentives many blame for sky-high healthcare costs elsewhere.

The cost of a C-section at a Group Health hospital can average between $7,100 and $9,400, compared with an average statewide range of $15,200 to $21,600, according to data compiled by the Washington State Hospital Association.

Health insurance companies such as UnitedHealth Group Inc and Aetna Inc are building incentives for primary and preventive care and acquiring clinics and small networks of physicians to have full control over how healthcare services are delivered.

"If we don't change, it's a bleak picture. There's no question. But there are some glimmers of hope," said Dr. Elliott Fisher of Dartmouth Medical School, a leading voice in healthcare reform.

"A year or two from now, we will have a firm foundation to come back to Congress and say there are things you could do now to move further in this direction."


Healthcare costs make up 16.5 percent of U.S. GDP and are projected to equal more than one-quarter of the economy by 2035, according to the nonpartisan Congressional Budget Office. By contrast, healthcare costs were only 4.8 percent of GDP in 1960 and 9.8 percent in 1985.

The CBO's 2011 report, which notes it is difficult to make accurate long-term cost projections, warns that spiraling health costs would probably slow only as a result of higher costs, less access for most households and tighter state Medicaid eligibility for poor families, unless U.S. law is changed.

Analysts say any deal to close the U.S. government's $1.4 trillion annual budget deficit would also suffer repercussions if the government took no action to control rising healthcare costs that are driving growth in Medicare and Medicaid.

"Failure to address healthcare will make the solution inevitably more painful," said Paul Ginsburg of the nonpartisan Washington-based Center for Studying Health System Change.

"It will mean more spending cuts in other areas. It will eventually, despite what Republicans say, lead to higher tax rates. Because the alternative is a bankrupt country."

The difficulty lies in attacking healthcare costs broadly without hurting individual patients' access and quality of care. It also raises the prospect of a new showdown between Republicans, who see deregulation and market competition as the best lever for curbing costs, and Democrats who favor government intervention.

When might those battles begin?

"2013," said Joseph Antos of the conservative American Enterprise Institute. "There's going to be a hue and cry for somebody to do something. Even Republicans, who used to shy away from health, they're going to be on this whether they're the minority or not."

(Reporting by David Morgan; editing by Michele Gershberg and Andre Grenon)

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