Improving Health Care Market Functionality Could Result In Substantial Savings For Employers And Families

A synergistic set of policies that would accelerate health care delivery system innovation could slow health spending growth by $2 trillion from 2014 to 2023, according to the Commonwealth Fund Commission on a High Performance Health System. The report, Confronting Costs: Stabilizing U.S. Health Spending While Moving Toward a High Performance Health Care System, describes a comprehensive set of policies to change the way public and private purchasers pay for care, enhance consumers’ choices of high-value care, and address the market forces driving up costs and estimates their potential to reduce cost growth.

If implemented soon with public and private payers acting in concert, the Commission believes that over the next ten years, its approach could reduce spending by employers by $189 billion, compared with projected trends. Families also would realize significant savings—$537 billion over ten years—as a result of lower future health insurance premiums and out-of-pocket costs, and the federal government would realize savings of $1.04 trillion, and state and local governments would see savings of $242 billion.

“U.S. health spending has been growing far faster than wages and putting stress on families and businesses as well as federal and state budgets,” said David Blumenthal, Commonwealth Fund president and Commission chair. “We know that by innovating and coordinating care, our health care system can provide better care at lower costs. The Commission report lays out a framework and set of strategies to accelerate innovation, with the potential to substantially lower federal costs while protecting Medicare and Medicaid beneficiaries.”

In the report, the Commission endorses the goal of holding health care spending growth to no more than the rate of long-term growth in the economy while improving health system performance. To achieve these goals, the Commission lays out a strategy that relies on three broad approaches:

• provider payment reforms to promote value and accelerate delivery system innovation;

• policies to expand options and encourage high-value choices by consumers, armed with better information about quality and costs of care; and

• system-wide action to improve how markets function, including reducing administrative costs, and setting national and regional targets for spending growth.

The Commission believes that a set of ten policies identified in these three areas would interact to accelerate the progress already being made to achieve a health system that delivers better health outcomes and better patient care experiences at lower cost. The Commission envisions the public and private sectors adopting similar approaches to enable coherent payment reforms, positive consumer incentives, and system-wide action. Estimates of these illustrative policies indicate that the bulk of the $2 trillion in potential savings would come from payment reform ($1.33 trillion in savings), with additional savings from enhanced high-value choices and consumer incentives to choose wisely ($189 billion) and systemic actions to improve the way markets function, including lower administrative costs ($481 billion).

The report notes that, on average, the U.S. spends twice as much per person on health care as other countries yet fails to achieve the healthier lives, universal access, and better quality realized by many other wealthy countries. “We have broad evidence that much of our spending is wasteful,” said Cathy Schoen, Commonwealth Fund senior vice president. “Stabilizing health spending and targeting it in ways that improve health outcomes would free up billions of dollars for critically needed economic and social investments as well as higher wages for workers.”

With health care currently constituting 18 percent of the U.S. gross domestic product and expected to reach 21 percent by 2023, the Commission stresses the importance of addressing the systemic factors that drive up total health spending, not just federal spending.

“This is not just a federal problem. Indeed, in recent years private spending per insured person has risen faster than Medicare costs per beneficiary, and this is projected to continue for most of the next decade,” said Stuart Guterman Commonwealth Fund vice president and Commission executive director. “By aligning incentives for providers and consumers across the system, we can address the underlying causes of health spending growth and avoid blunt policies like the scheduled cuts in Medicare physician fees.”

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