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Bending The Cost Curve: Do We Have The Will?

September 9th, 2009

The need to “bend the curve” of rising health care costs is certain. Less certain is the nation’s political will to take on that difficult task.

That conundrum emerged today at a Washington, D.C. briefing sponsored by Health Affairs. The briefing, held to launch the journal’s Sept-Oct issue, a thematic volume titled “Bending The Cost Curve,” featured several authors from the issue. This is the first of several reports on the event that will be posted on the Health Affairs Blog.

The lead article in the new Health Affairs issue, by Michael Chernew of Harvard and coauthors, vividly lays out the consequences of not restraining health care cost growth. If health care costs continue to grow at a rate of 2 percentage points higher than real per capita gross domestic product over the next 75 years, a staggering 119 percent of the growth in the nation’s per capita income would be devoted to health care. Every dollar of income growth, and then some, would go to health care, severely restricting funding for other goods and services such as education and infrastructure. At the briefing, Chernew illustrated the economic effect of this scenario with a picture of man wearing a barrel and nothing else.

Thus the need to bend the cost curve is not in doubt. And while, as Henry Aaron of the Brookings Institution said at the briefing, there is no single “silver bullet” available that will contain costs, many good ideas have been advanced that, taken together, offer the potential to go a long way toward bending the curve. Several of these ideas were discussed at the briefing and are featured in the new issue of Health Affairs.

However, when Health Affairs Editor-in-Chief Susan Dentzer asked participants in the event’s first panel what President Obama could say in his speech to Congress tonight that would persuade them “that there was cause for hope” about a serious effort to bend the curve, the answer given by Paul Ginsburg, President of the Center for Health System Change, was sobering: “The way things are discussed in this country, I don’t think the President can move us toward cost containment tonight. I think it’s just too dangerous,” Ginsburg said. And another panelist, Joe Newhouse of Harvard, noted that Americans think they should receive any medical care they or their physicians deem desirable, and that someone else should pay for that care. Until this mindset changes, it will be difficult to make progress on cost containment, he said.

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1 Response to “Bending The Cost Curve: Do We Have The Will?”

  1. John Welton Says:

    A large component of health care delivery costs are human capital. For example, 67.1% of hospital costs are labor and nurses make up a large percentage of these costs (approximately 42% of all personnel costs based on the 2008 occupational mix survey results from CMS).

    Two thoughts, future health care cost growth will be related to either more personnel caring for patients or much higher salaries for health care professionals. From a nursing personnel standpoint, the system would have to add several hundred thousand new RNs to meet future demand for hospital care and offset the anticipated retirement of the “baby boomer” generation of nurses. This increase in RNs is unlikely so the other contributing factor to cost growth is nursing salaries, currently at approximately $34/hr in hospitals (author’s calculation based on 2008 OMS data). RNs make up about a quarter of all hospital expenditures and small changes in salaries will have a large effect on inpatient cost growth. Yet there is clear evidence when hospitals cut nursing care, quality and safety deteriorate and overall costs of care increase due to higher rates of adverse events.

    The salient point, and my concern about the ongoing discussion regarding the cost of health care, is the poor data collection about healthcare personnel costs other than physicians. For example, hospital nursing care is still charged as daily room and board and not allocated as a variable time/cost to individual patients. Such practices threaten the validity of the payment system. We cannot control costs of care or make reasonable assessments and decisions about changes in delivery if the labor component is unknown or hidden – especially when it represents such a large percentage of overall health care costs.

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