Today President Obama announced that in the coming years various segments of the health care industry have pledged to reduce the growth rate of health care expenditures by 1.5%.
And that’s why these groups are voluntarily coming together to make an unprecedented commitment. Over the next 10 years — from 2010 to 2019 — they are pledging to cut the rate of growth of national health care spending by 1.5 percentage points each year — an amount that’s equal to over $2 trillion. Two trillion dollars.
This sounds great, but the first thing that came to mind was, how are we going to measure this? Is the President going to do something unheard of before: namely set some hard measure such as using the growth rate of health care expenditures for the past few years as the benchmark? That is, if health care expenditures have grown at around 6%/year will the benchmark be 4.5% to see if this “plan” will work? Or is it going to be what we usually get, a Bravo Sierra yardstick like what we’ve gotten with the unemployment numbers (create or save x millions of jobs–how do you measure saved jobs?).
My guess is the latter. President Obama wont commit to an actual measure by which we could judge his performance, and it will go something like, “Reduce health care expenditure growth rates by 1.5% what they would be without the Grand Master Plan.” This way the President can simply add 1.5% to whatever the observed rate of growth is for health care expenditures and say that is what it would have been without his brilliant plan, oh and vote for him next election too.
Update: As far as I know, no plans have been released that describe how these savings are to be realized. This leads me to believe that the 1.5% number and the $2 trillion dollar amount are just pulled out of the air because they sound good, and have little basis in reality or an analysis of any kind.
Here is the letter these special interest groups have sent the President.
- Implementing proposals in all sectors of the health care system, focusing on administrative simplification, standardization, and transparency that supports effective markets;
- Reducing over-use and under-use of health care by aligning quality and efficiency incentives among providers across the continuum of care so that physicians, hospitals, and other health care providers are encouraged and enabled to work together towards the highest standards of quality and efficiency;
- Encouraging coordinated care, both in the public and private sectors, and adherence to evidence-based best practices and therapies that reduce hospitalization, manage chronic disease more efficiently and effectively, and implement proven clinical prevention strategies; and,
- Reducing the cost of doing business by addressing cost drivers in each sector and through common sense improvements in care delivery models, health information technology, workforce deployment and development, and regulatory reforms.
Sounds great, but my first thought is…if this is so good, why were they waiting? That last one sounds like what they should be doing already. If an improvement is common sense and reduces costs…why weren’t these special interest groups doing it already? I’m thinking these are just flowery bullet points tossed in their so that it sounds like they have some ideas. I’m thinking their ideas rest on large subsidies, government programs, and other things that will cost lots of money. Of course, they’ll tell us these things will save use n-fold in expenditures in the coming years, but we’ll have no way of verifying it. Why do I think this, well the letter has this curious little passage,
However, there are many important factors driving health care costs that are beyond the control of the delivery system alone. Billions in savings can be achieved through a large-scale national effort of health promotion and disease prevention to reduce the prevalence of chronic disease and poor health status, which leads to unnecessary sickness and higher health costs.
In other words, “We can’t do it…at least not without taxpayer dollars.”
Basically, just another photo-op where the President is taking advance credit for something we have yet to realize the benefits from. Ho-hum.
Update II: Dave Schuler posted this in comments and it is too good to leave there, IMO:
As I pointed out in my post on this subject this morning there’s no plan to reduce healthcare costs, only a hypothetical plan to reduce the rate of increase of healthcare costs. That would be fine if the problem we were facing were that healthcare might become too expensive at some time in the future.
But that isn’t the problem we’re facing. We’re already paying significantly more per capita than any other OECD country. I read the plan as a commitment that healthcare will be decreasingly affordable in the future. That doesn’t sound like a particularly bright prospect to me.
Quite right. Reducing the growth rate of health care expenditures is, I think, part of the solution. But health care is already very expensive and we pay for things via health insurance that we shouldn’t (e.g. child birth). As such I think Dave is right, any reasonable plan should also discuss reducing current costs not just future costs which is what President Obama is talking about. And keep in mind, I think it is quite likely that President Obama will point to these savings as justification for expanding health care coverage which will almost surely increase the amount of health care expenditures.
Photo by Flickr user Brooks Elliot under the Creative Commons license. It has these wonderful sounding non-specific proposals on how this 1.5% will be achieved,
