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HSC Leaders Comment on Health Care Cost-Coverage Conundrum

American Health Care Too Expensive; Increasingly Unaffordable for More and More People

News Release
Nov. 6, 2003

Alwyn Cassil: (202) 264-3484

ASHINGTON, D.C.—Pervasive unwillingness to confront the difficult trade-offs inherent in containing health care costs and expanding health insurance coverage, coupled with how the United States finances most health care, contributes to the seemingly intractable nature of the cost-coverage conundrum, according to a commentary published today by Center for Studying Health System Change (HSC) President Paul B. Ginsburg, Ph.D., and Vice President Len M. Nichols, Ph.D.

To start an honest discussion about how to extend coverage to the estimated 43.6 million uninsured Americans, the authors—both economists at HSC, a nonpartisan policy research organization funded exclusively by The Robert Wood Johnson Foundation—identify three key factors:

  • Cost-containment and quality-improvement efforts are essential if Americans are to get better value for the tremendous amount of money-$1.4 trillion annually-spent on U.S. health care.
  • If we are to cover everyone, we cannot cover everything, and we need to make informed choices about which medical services are more beneficial to patients than others.
  • Even if we slow cost trends, significant public funding will be needed to expand coverage to uninsured Americans, whether through tax subsidies, expansion of public coverage or a combination of both approaches.

Both public and private leaders consistently have avoided the idea that real cost containment involves real sacrifice-patients going without services that may provide some benefit or physicians, hospitals and insurers settling for smaller incomes or profits, according to Ginsburg and Nichols. The full essay—The Health Care Cost-Coverage Conundrum: The Care We Want vs. The Care We Can Afford—is available by clicking here.

"In our view, a more clinically based form of rationing is needed to avoid pricing health care out of the reach of an increasing proportion of Americans," Ginsburg and Nichols write. "Though some deny it, we ration care today. The uninsured get much less care than the insured and suffer worse health outcomes because of it, and the insured with ample means get more care than the lower-income insured, although without clear outcome differences. The challenge is to ration in a way that is more efficient and equitable."

Ginsburg and Nichols point out that how the United States finances most health care makes cost containment difficult. Health insurers’ financial obligations are defined in terms of what treatments physicians and patients decide to pursue—providing an environment in which treatment decisions can be made with little regard for treatment costs. When someone else pays—the health insurer—patients have little price sensitivity and almost no incentive to economize and make sure the expenditure is commensurate with the clinical value of the service.

The impact of low patient out-of-pocket costs—coupled with payment systems that encourage providers to deliver more services—is probably magnified by limited information about the effectiveness of many medical tests and procedures. Limited public funding for effectiveness research is puzzling, given the clear interests of public and private payers-not to mention taxpayers.

"To date, providers and developers of medical technology have been more effective politically than proponents of technology assessment," according to the authors.

The two suggest that greater reliance on evidence-based practice guidelines and institutionalized technology assessment could help inform private benefit package design and differential patient cost-sharing requirements. In contrast to systems that decide for the patient what services are unavailable because of limited clinical value, a system more compatible with American values would continue to allow broad patient and provider choices, coupled with extensive information about likely clinical value and higher cost sharing when the values are small.

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The Center for Studying Health System Change is a nonpartisan policy research organization committed to providing objective and timely insights on the nation’s changing health system to help inform policy makers and contribute to better health care policy. HSC, based in Washington, D.C., is funded exclusively by The Robert Wood Johnson Foundation and is affiliated with Mathematica Policy Research, Inc.


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The Center for Studying Health System Change Ceased operation on Dec. 31, 2013.