August 2018 Letter from the Executive Director: The Why and How of Health Care Affordability
“Americans aren’t buying more health care overall than other countries. But what they are buying is increasingly expensive.”
I’m sure this quote from the recent Wall Street Journal article “Why Americans Spend So Much on Health Care” comes as no shock to any of you. Health care spending in our country is skyrocketing, currently accounting for 18% of the American economy and predicted to reach 20% in just two years.
Yet, although it is abundantly clear that health care in the U.S. costs too much, what isn’t as clear is WHY it costs so much and HOW to make it more affordable.
There are a number of factors driving price; certainly the emphasis in our country on treating disease rather than preventing it is one factor. As David Cordani, CEO of Cigna, expressed in a recent interview on health care cost with Business Insider, “We spend a lot more money on high cost intervention, as opposed to enabling the primary care physician, the geriatrician, and the pediatrician, by having more resources to help to coordinate care for individuals.”
Another reason often cited is the increasing price of doing business. Prices for drugs, provider services and hospital care have grown at a faster rate than inflation for the past four decades, with drug prices rising the most since 2000. Insurance costs have risen as well: According to the Wall Street Journal, the majority of consumers’ health spending now goes to paying for health insurance.
A third and very important contributor to increasing health care costs is waste. Our 2018 report, “First, Do No Harm: Calculating Health Care Waste in Washington State,” found that in one year, an estimated $282 million was spent on just 47 low-value health care services in Washington state alone. Imagine how much cost savings could be achieved across the US if we were to eliminate unnecessary tests, treatments and procedures in every state!
So what’s the solution? Some point to the consumer, saying that if consumers were to choose their health care based on value, comparatively shopping for the best quality for the lowest price, the cost savings would be substantial. But since insurers negotiate prices with providers, it is hard for individuals to judge health costs and make more informed choices. And finding transparent, easy-to-understand data is not easy.
Another proposed solution is to change the way providers are paid for Medicare and Medicaid. Efforts are underway at the local and national level to change from a volume-based system to a value-based system.
But the truth is, solving the health care affordability crisis is everyone’s responsibility and there are things each of us can do every day that can make a difference.
One of those is to take advantage of our upcoming health care affordability summit, “The Road to Affordable Health Care: Where do we go from here in Washington state?” I invite you to join us in Seattle on October 31 for presentations from national and local experts with an opportunity to discuss possible solutions and action steps to drive affordability in our state. More details on the one-day conference can be found in this newsletter. Helping drive the market to value is the Alliance’s highest priority goal. But the path to affordable health care is not going to be an easy one. It will take all of us – payers, purchasers, providers, stakeholders and patients—working together to achieve it.
Nancy A. Giunto
Published: August 14, 2018