Cost Control Is Still Nowhere in Sight, Experts Say

(MoneyWatch)  The President and Congress are not within striking distance of a solution that will truly contain health spending, says William Winkenwerder, MD, who has had decades of experience in the private and public healthcare sectors. Winkenwerder, who led the military health system for six years during the Bush administration, and previously held high posts with Blue Cross Blue Shield of Massachusetts and Kaiser Permanente, says that the Democratic reformers are paying too much attention to coverage expansion and insurance reform. Consumer demand for healthcare and the treatment decisions that providers make, he says, "are the activities that drive the cost of healthcare. The insurance mechanism is not the principal driver."

Nevertheless, because consumers use more health care when they think somebody else is paying for it, he would reduce the amount of insurance people have --a longtime Republican goal that is, unfortunately, well on its way to being accomplished. In addition, he believes that the provider reimbursement system must be changed. With Medicare taking the lead, he thinks there should be more "shared risk" arrangements, including bundled payments (which are being discussed in Congress) and perhaps even global or professional services capitation.

The only time in recent decades when costs actually declined, Winkenwerder notes, was in the mid-'90s, during the golden age of HMOs. The main reason for their ability to control costs, he says, is that they were able to force providers to accept lower payments; in addition, he notes, HMOs exerted some control over the utilization of services. Today, he says, insurance companies no longer have strong employer support to exert downward pressure on provider reimbursement. Moreover, in many markets, hospitals and large specialty groups have consolidated to such a degree that health plans no longer have much bargaining power.

In an essay in the New England Journal of Medicine, economists Jonathan Oberlander and Joseph White also cast doubt on the cost controls in current reform bills. Neither prevention, disease management, health IT, nor comparative-effectiveness research will make a dent in costs anytime soon, they note. And even if the President's proposed Independent Medicare Advisory Council could somehow use regulations to slow Medicare spending, they observe, that's only a modest part of national health spending. Reducing Medicare payments to hospitals and managed-care plans, another ingredient in the Democratic plan, will be offset by an anticipated rise in physician reimbursement. Moreover, if providers were paid less by Medicare, they'd shift some of that shortfall to private insurers. Even the much-touted public plan is no panacea, they point out: the strongest version in Congress right now would cover only 10 million people by 2019, so it would have little leverage in the insurance market.

I won't go into the details of Oberlander and White's solution, which involves an all-payer system patterned after European models. But once again, while Republicans and some Democrats are asking whether Obama is going too far on healthcare reform, it seems clear that he and his party aren't going far enough. If they can't control costs, nothing else they do will matter in the long run.