Technology and Cost Containment

Technology and Cost Containment

summarize a significant challenge to containing health care costs.
How do policymakers envision technology could be utilized to address this challenge (above)? Provide at least one example to support your response. Do you agree or disagree with the policymakers? Describe why you agree or disagree and include one or more insights from this analysis that relate to the question of how information technology could, or could not, help contain costs while supporting health care reform initiatives.

To prepare:

Reflect on the challenges of containing health care costs in the U.S. presented in the Learning Resources and discussed by Dr. Kominski and Dr. Zelman in the media.
Consider how information technology may be used to address health care issues related to cost.
Examine the Health Information Technology for Economic and Clinical Health (HITECH) provision and its goals.

The high cost of health care limits access for many people in
the United States and poses a threat to the viability of health care
organizations. In this program, Dr. Gerald Kominski and Dr. Walter Zelman
focus on the challenges policymakers face in containing costs and
achieving successful health reform in this country.
DR. GERALD KOMINSKI: Health care cost and health care expenditures
in the United States have been a policy issue since the early 1970s. And it
was not long after the enactment of the Medicare program that health care
expenditures in the U.S. started growing at a very rapid rate. It’s not
surprising in retrospect that that would happen, because suddenly millions
of American seniors had access to very good insurance where prior to the
implementation of Medicare many did not have very good insurance. So
it’s not surprising that when millions of seniors who have, in general, very
high need for health care suddenly have insurance, that expenditures and
costs would start rising rapidly. But what we observed in the seventies was
also a very rapid increase in expenditures by the non-elderly population as
well, so it wasn’t just confined to the elderly. Cost has been a major
concern in the United States for over three decades, and as a result, there
have been many policy efforts at the federal, state level as well. To try and
deal with rapidly increasing costs, there are effective mechanisms for
controlling both costs at the sort of the unit level, that is the price of
services that we pay for health care, as well as overall costs or overall
expenditures for health care, which is really a function of both the price per
unit of service and the quantity of services that are used or consumed.
Other Western European nations and other developed nations control
health care expenditures by putting explicit limits either on the price per
unit of service that can be charged or by placing global limits on the
amount that can be spent for health care, either within a region or within
the entire nation. And that will filter down to both doctors as well as
hospitals. There are many nations that employ global budgets as a way of
controlling hospital expenditures. In the United States, we’ve been very
reluctant over the years to adopt these mechanisms because there’s a
general belief that we should not exercise government authority over
prices or over health care budgets. One of the other challenges with regard
to health care cost and health care expenditures is that there is increasing
evidence that a very small portion of the population accounts for
substantial portion of health care expenditures. In the Medicare population,
for example, about 10% of the elderly account for 60% of total Medicare
expenditures. And in the non-elderly population, the figures are
comparable. And what we’re seeing is that when we look at the small–that
small portion of the population, that many of those individuals have
ongoing high annual health care expenditures related to chronic illnesses.
So as a result over the last decade, there’s been an increasing awareness
and interest in trying to more effectively manage the cost and the
expenditures of this small group of the population that has very high
annual expenditures for health care. And so what we’re seeing is increased
emphasis on disease management, on case management, care
coordination, a number of efforts to try and reduce the costs of those highcost chronic illnesses.
DR. WALTER ZELMAN: Why is it hard to contain cost in health care? In
almost any sphere of public policy, it’s easier to make policy, it’s easier to
find compromise when the pie is big or getting bigger. You can then divi up
a bigger pie more easily amongst the competing interest. Cost containment
usually means making the pie smaller. You can be guaranteed that in
almost any cost containment effort, somebody’s gonna look at it.
Somebody powerful is gonna look at it and say, “This is not good for me.”
Managed care proved, you know, it was a fairly effective cost containment
tool for a while, but the public didn’t like it. They lost their choice. You can
try to deal with scope of practice laws, which means you’re going to let the
nurse and anesthetist do more, right? And maybe then you don’t need the
anesthesiologist there all the time. That’s a problem. So you can look at
malpractice, you know, and the doctors will wanna get malpractice costs
down, but you’re running into all kinds of consumer groups and others and
the legal profession that doesn’t want the malpractice system tinkered with.
If we can reduce the number of people going into the ER unnecessarily,
we could contain cost. But there are all kinds of reasons people are going
to the ER. Physicians are underpaid in some cases in the Medicaid
program so they send their patients to the ER. So it’s not an easy one to fix
either. People have been talking about, you know, disease management
for years and making the treatment of chronic care more efficient, but we
haven’t had a lot of success in that yet. So changing–cost containment
really means changing the delivery system. And the delivery system is very
resistant. Or the elements of the system, delivery system, they’re gonna be
very resistant to change. So cost containment is hard. Cost containment
could be achieved in the private sector, and the best example of that would
be the efforts of managed care companies in response to pressures from
employers finding ways to reduce health care costs and premiums. So
health care cost containment can be done in the private sector without
public policy, or public policy could tweak those things, right, and do things
to the employers or to the insurance companies or to the providers that
encourage them or incentivize them to do various different things. So cost
containment can take place through public policy or through the private
sector. But either way, it’s difficult, because there’s a lot of resistance,
largely in the very powerful provider community. The public doesn’t really
see the cost. So when you contain costs and you encourage the doctors or
hospitals to do less, or you have a little bit of a waiting line, or you have a
gatekeeper so that you can’t get to the specialist that fast, the patient sees
that. They see the impediment to their access to care that may be saving
costs. They don’t see the savings. They think that the savings from that are
going to their employer who’s paying less in premium or to the insurance
company that’s gonna make more profit. So cost containment doesn’t sit
that well with the public because they don’t see most of the time the full
direct benefit of saving the money. Cost containment generally doesn’t sit
well with the provider community because almost by definition, it means
they as a community are going to get less. Some of them may get more.
Maybe we might contain costs by pushing more business to primary care
physicians and having them do more and specialists less. But specialists
are not gonna be happy about that. In the end, in order to contain cost, you
either have to pay less for each thing or you have to do less of it. That’s
where the money is. The only alternative to that sometimes might be
substitution, like using a generic drug rather than a, you know, high cost
prescription drug. That even is gonna run into some opposition with the
pharmaceutical companies. But, you know, the doctors and hospitals may
not mind that. Patients may not mind that so some substitution works. But
generally speaking, if you wanna contain costs, you have to pay less or
you have to do less. If you pay the suppliers a fixed amount like managed
care companies did or do still sometimes and you tell a group of doctors,
“Here’s a fixed amount of money that we’re gonna pay you for taking care
of all our enrollees that chose your medical group. So here’s two million
dollars. Now, you take care of those patients for $2 million. We’re out of the
way. It’s up to you. You’re sending a message to the physicians you’ve got
$2 million. If you do more than necessary, you’re gonna lose money. If you
do–you shouldn’t do less than necessary, but if you do what’s necessary,
you should come out with a good profit. So it’s an incentive on them to do
less. On the other hand, if you pay doctors as we traditionally did,
whatever you do, we’ll pay you. You’re giving them a kind of hidden or
unspoken incentive that do more rather than less. In the face of
uncertainty, do it. So how you pay doctors has a lot to do with cost
containment, and of course, that’s very, very controversial. I think the
linkage between cost containment and health reform, meaning dealing with
the 40 plus or 46 or 47 million people that are uninsured in the United
States, is obviously the biggest, you know, sore thumb in the American
health care system. That’s the thing that everybody focuses on as the
single most glaring deficiency in our system. And I think cost containment
is absolutely central to why we can’t get there. In the mid-part of the 1990s,
health care costs actually were down for a while, or at least they weren’t
going up any faster than inflation. And premiums came down largely
because of the movement of people from traditional insurance into
managed care. But the public and providers didn’t like that. We moved
away from managed care, lost some of those cost containment tools, and
the old, you know, cost growth indicators jumped back up again for that
and many other reasons so that by 1998 to 1999, 2000, we were again
beginning to see health care costs going up two, three times the rate of
inflation year after year. What that means is that now, as compared to, say,
1993 when we tried the Clinton plan, far more people now need to be
subsidized into health care, into buying insurance than was the case
before. When it comes down to it, it is about the money and is about how
are you going to pay for subsidizing, you know, at least 40 million people
who can’t afford it, or their employers, if you wanna go that route, how do
you subsidize them? And the amount of money we now need because
costs have been going up so much faster than inflation is so much greater
than it used to be that the problem is that much more difficult. It’s been
difficult for policymakers to address cost. I think they talk about it more
than they do something about it. And for many years, I think they just didn’t
spend a great deal of time on it. It’s become a much more critical question,
I think. Policymakers these days are much, much more conscious of the
cost problem. Many health policy analysts believe that in the long run, the
main mechanism of containing health care cost is going to have to involve
some greater consumer awareness of what the costs are. I think the
consumer has to have a bigger understanding that there’s a value in lower
health care costs that the system overall can’t sustain itself like this. But I
think we just also have to find other means of controlling the costs and how
we organize the system. We just have to find ways to basically make it
more efficient and to enable it in some ways to do less and not lose quality.

Bodenheimer, T., & Grumbach, K. (2020). Understanding health policy: A clinical approach (8th ed.). McGraw-Hill.

Chapter 8, “Painful Versus Painless Cost Control”

Chapter 8 focuses on the relationship between health care costs and health outcomes and its importance on the health policy agenda. This chapter also presents strategies for effectively utilizing resources as opposed to rationing health care services.

Chapter 9, “Mechanisms for Controlling Costs”

Chapter 9 examines an array of policies aimed at controlling health care costs and reviews specific financial and reimbursement cost containment methods to health outcomes.
Buntin, M. Jain, S., & Blumenthal, D. (2010). Health information technology: Laying the infrastructure for national health reform. Health Affairs, 29(6), 1214-1219. doi: 10.1377/hlthaff.2010.0503

In this article, the authors examine the role of health information technology as a major component in the restructuring of health care. They suggest it will improve quality, reduce costs, and allow for seamless access to data across providers.