Cost-Cutting as the Key Element in Healthcare Reform

Important to all of us is the high cost of healthcare. Recently, a note about the over-utilization of health services with special focus on a case study of McAllen, Texas (Much of Escalating Cost of Healthcare Due to Physician-Driven Overutilization) has drawn national attention. Dr. Abraham Verghese has published a timely and well-reasoned op-ed piece in the Wall Street Journal (see: The Myth of Prevention) in which he concludes that cost-cutting must be the key element in any major federal healthcare reform. The title of the piece alludes to the face that behavioral preventive medical initiatives (e.g., weight loss, smoking cessation) are relatively inexpensive and can result in reduced healthcare expenditures. Contrariwise, screening preventive health measures can be very expensive (think CT scans for broad disease screening programs) and only a minority of consumers may have serious diseases detected. Below is one excerpt from the article addressing why there will be widespread opposition to cutting healthcare costs:

... I just don’t see how the president can pull off the reform he has in mind without cost cutting....[A] dollar spent on medical care is a dollar of income for someone. I have been reciting this as a mantra ever since....It means that all of us—doctors, hospitals, pharmacists, drug companies, nurses, home health agencies, and so many others—are drinking at the same trough which happens to hold $2.1 trillion, or 16% of our GDP. Every group who feeds at this trough has its lobbyists and has made contributions to Congressional campaigns to try to keep their spot and their share of the grub....But reform cannot happen without cutting costs, without turning people away from the trough and having them eat less. If you do that, you have to be prepared for the buzz saw of protest that dissuaded Roosevelt, defeated Truman’s plan and scuttled Hillary Clinton’s proposal.

Here's another quote that contains the "how" regarding to healthcare cost-cutting:

Contrary to what we might think, comparative studies show us that the US when compared to other advanced countries, does not have a sicker population....The bottom line is that our health care is costly because it is costly, not because we deliver more care, better care or special care. Alas, a solution that does not address the cost of care, and negotiate new prices for the services offered will not work; a solution that does not put caps on spending and that instead projects cost-savings here and there also won’t cut it. Leaders have to make tough and unpopular decisions, and if he is to be the first President to successfully accomplish reform there does not seem to be much choice: cut costs.

So here's the essence of what I have personally carried away from the Verghese article supplemented by my own understanding of the problem:

• Although cost-cutting is the only path to real healthcare reform, I don't believe that our politicians and the majority of voters will tolerate major reductions in healthcare expenditures including price caps. First of all, healthcare is the only viable industry in many small towns and even in large ones like Cleveland and Pittsburgh. Such cuts would result in fewer jobs. In addition, healthcare lobbyists will be showering money on legislators for their reelection campaigns. This will be very hard for them to turn down and will certainly influence large numbers of votes.
• I suspect that the only major plank that will remain in the current healthcare reform agenda will be a government-sponsored health insurance plan (see: George F. Will: Obama's health care plan pushes Democrats' dependency agenda). I am not sure if the Democrats have the power and will to push such a program through in the face of a determined opposition.
• If such a health insurance plan succeeds, the next initiative by the Democrats may be to try to provide such insurance to the nation's roughly 45 million uninsured. The cost of this will be in hundreds of billions of dollars. I believe that it will be proposed that the cost of such a major plan will be borne in part by new taxes, if that's politically possible. The balance will be added to the rapidly escalating federal deficit. This will cause additional opposition.
• I don't think that screening preventive health measures for individuals will fall into disfavor simply because they are expensive. The more generous health plans will continue to cover them and many healthcare consumers will also be willing to pay for them out-of-pocket, if the charges for such services are judged to be reasonable and the outcomes impressive.