Cost containment through Obama-care- A political illusion or reality?

The United States spends an estimated $2.5 trillion annually on healthcare expenses, more than any other industrialized country, especially on a per-capita basis. The $2.5 trillion tag for healthcare is currently running at 18% of the GDP and is expected to grow beyond the 20% mark, in a reasonably short time. Yet today, more than 45 million Americans stand un-insured and the country’s vital statistics are mediocre compared to other developed democracies.  Hopefully, the recently enacted health care bill will bring some cheer for the Americans.

The overhaul with IT induced meaningful usage; restructured insurance market; increased social entitlement; research based treatment directives enhanced the quality of care and improved the efficiency in the care delivery. However, the extent of success with these initiatives is still open to question. In fact, the CMS office of the Actuary opines that the proposed reform might increase national spending on health care by $311 billion in this decade .

The crux of the healthcare reform as detailed in the act is to “spend heavily now to save on the future costs”. This is good, as long as the speculative cost containment ensures the return on investment. But, what if it fails and the federal healthcare account gets heavily swamped with social obligations? Can Obamacare cope-up with such fiscal imbalance? Will healthcare rationing be the option left for the government to equate the balance sheet? Who knows…..let’s dig out a few fallacies (in my opinion) from the 2500 page reform bill that are claimed to be the “healthcare cost scalpel” in the Obama-care plan.

“Comparative effectiveness research” not a politically hot topic, is a process which the democrats vouch will reduce costs. This deals with decision induced care utilization (very similar to NICE of UK) that aims to provide clinical agility and enable physicians towards adoption of best practices for health and well-being. However, the expectation that this will flatten the rising healthcare cost curve might fall short of expectation.

Best practices are not always the adoption of least expensive approaches. Evidence based research has shown that when evaluated in terms of cost per life-year gained, implantation of expensive ICDs proved to be clinically superior over optimal medication therapy in patients with acute myocardial infarction, complicated with ventricular dysfunction or unsustainable tachycardia . Likewise, several cross-sectional studies on HIV, Cancer, and Hepatitis-B have reported positive associations between increased spending and better health outcomes.

Experience from NICE has also revealed the effectiveness of “compassionate care exception”, as implemented in UK, for patients who require expensive but effective treatment for life threatening conditions. This implies that cost effectiveness is different to cost containment. I would rather vouch for CER to be an approach towards cost effectiveness and rationalization of medical practice than a tool for cost reduction.

Similarly, the sweeping mantra “prevention- the driver for cost savings” according to me is a bit overstated. Prevention potentially saves money, but series of health-economic studies have also suggested that often preventive health measures add to the health care cost. An example being, any preventive measure, say  annual mammography post 35 years of age, persistent screening in colorectal carcinoma, frequent ophthalmic and neurological exams in chronic diabetics, regular cholesterol measure for obese people prone to Chronic Heart Diseases, etc., that involves increased utilization of medical resources eventually results in inflated costs. In contrast, behavioral health such as exercise, dieting for obese or diabetic patients and right medical decision that aids in lowering the costly preventive service diffusion like reducing the frequency of screening tests in target population can be a better cost saving tool. I strongly feel that this reform needs to initiate such measures that aim at accruing incremental QALYs inexpensively and turn to be cost effective rather than blindly directing preventive actions for cost reduction.

Establishing new public plans for younger individuals, implementing health insurance exchange marketplaces and allowing pre-existing conditions in benefits are a few of Obama’s fiscal measures to address the healthcare cost inflation in the country. Possibly, such a restructuring of insurance market can bring some upfront administrative cost savings by reducing the sales force utilization, and lowering underwriting and actuarial efforts.

However in the proposed restructure of the insurance marketplace, where the plans are forced to compete, there are chances that the issues of moral hazard and adverse selection will get compromised due to the need to protect bottom lines. The federal budget is sure to get imbalanced as the hidden tax of $1000 per family is coming to an end. Good that blanket coverage with minimal accumulators (i.e. deductibles, co-pays) will no more be a hindrance for access to healthcare; however this will increase unnecessary utilization of medical resources even in trivial conditions.  Above all, the premiums are sure to rise as we know that “There's no such thing as a free lunch”. All these might turn to be unfortunate consequences of the bill that intends to achieve the ethical necessity of universal coverage, possibly compromising the larger financial interests of the country.

Let’s now look into the stimulus jackpot of $44 billion that enforces providers towards wide ranging adoption of healthcare information technology and ensure meaningful usage of the same. Honestly, it’s a great concept for driving quality care, improving efficiency and enhancing patient safety. However, I have my own apprehensions that even if the provider moves up in the EMR value chain and reaches closer to its “meaningful usage” goal, the challenge of reducing cost might still remain as a vital cog in the wheel of this EMR evolution.

A nationwide study of 4000 hospitals by Harvard revealed that “there is no big cost benefit from computerization; rather the hospitals actually experienced a rise in their administrative cost due to procurement of systems, maintenance and support, customization, process re-engineering, training and productivity losses” .

Apparently, this is just an upfront one time investment, but in reality the expenses are expected to remain elevated even years after implementation. Similar cost increase post EMR implementation is also reported by another longitudinal study conducted on 350 short-term and general acute care hospitals in California . The bottom line is - healthcare IT can bring efficiency by reducing manual intervention, but its ability to reduce cost is still open to debate. I sincerely think that cost-benefit analysis is a pre-requisite before the directives get rolled out.

Conclusion-

Any reform is sustainable only when the underlying cost influencers are in absolute control. In Obama’s reform, healthcare cost savings through technology boost, prevention, restructuring of insurance market and comparative effectiveness research sounds more like a benign device attempting to control a malignant growth. The recent reform agenda seems to increase political rather than individual control of the health markets, which is in-turn making the acceptance of cost control mechanisms all the more elusive. No-doubt, the reform is timely in the current US healthcare scenario, but, if the United States is to restrain its health care costs, it should learn from the other industrialized nations that have embraced reforms in the past for similar reasons.

Dr. Suman De, Senior Associate Consultant, Product Incubation & Engineering, Infosys Technologies.

Dr. Suman is a clinician with a MBA in Healthcare Administration and over 5 years of experience in both medicine and healthcare IT domain.  He comes with extensive insight on US Payer & provider industry as well as expertise into the development and implementation of IT-enabled business solutions for health payers and providers related to HIPAA 5010 migration, ICD-10 transition and EMRs.  He is currently engaged as a domain expert in the iTransform Product Development Team.  He has credits in authoring white papers as well as point of views related to HIPAA 5010 & ICD-10 transition.  He is an active associate with NCPDP, AHIMA & WEDI SG for 5010 & ICD-10.