Decrease costs to increase care

By Dwight K. Bartlett

June 24, 2008

During the recent presidential primary campaign, the candidates talked frequently about proposals to reduce the 47 million people in this country without health insurance by measures such as expanding eligibility for Medicaid and requiring that individuals buy coverage or pay a fine. What they failed to do is recognize that lack of coverage is merely a symptom of a larger problem: the high cost of medical care, which makes insurance unaffordable for many.

U.S. health expenditures as a percentage of gross domestic product run around 16 percent, far in excess of any other technologically advanced country. And we get less for it, as measured by statistics reflecting health status, such as life expectancy at birth and infant mortality rates. We can only hope that in the coming presidential election campaign, Sens. John McCain and Barack Obama will shift their focus from symptom to cause.

Reforms aimed at controlling medical care costs should recognize the following:

•Much of the medical care delivered in the U.S. - perhaps 30 percent to 40 percent - is unnecessary, wasteful, even dangerous. Incentives to provide unnecessary care need to be removed. Providing reimbursement to providers on a capitated, rather than fee-for-service, basis might help. Capitation means the provider is compensated on the basis of the number of people for whose medical care he is responsible rather than the cost of the services provided, motivating the provider to keep costs low.

•Medical care decisions should reflect protocols developed as a result of experienced-based effectiveness studies.

•Open-ended medical malpractice tort liability leads providers to practice defensive medicine excessively, ordering tests and procedures to eliminate the possibility of being sued. Capping awards for non-economic damage such as pain and suffering would help.

•We must make better use of technology to improve communications between providers in the interest of carrying out a well-coordinated treatment program for a patient. Too often, uncoordinated care results in duplicated or conflicting procedures.

•Health care administration expenses could be lowered by discouraging the enormous multiplicity of competing insurance plans, each of which has its rules of what is covered, how to file claims, and so on. For many small plans, administrative expenses run as high as 35 percent of the premium. Medicare, whose administrative expenses run about 2 percent, shows the economies of scale. More uniform regulation of health insurance plans at the federal, rather than state, level might help.

There may well be other reforms as useful, or more so, than these. Let us hope they can be identified during the presidential campaign and implemented by the successful candidate.

Dwight K. Bartlett was chief actuary of the Social Security Administration from 1979 to 1981 and Maryland insurance commissioner from 1993 to 1997.