By Monheit, Alan C. | Inquiry, Winter 2011 | Go to article overview


Monheit, Alan C., Inquiry

By now, the frequently cited statistics on health care spending and its growth have contributed to an all too familiar litany of fiscal and public policy concerns. U.S. health care spending represents 17.6% of the gross domestic product (GDP); it is projected to grow to a fifth of the GDP by 2020, and for the last three decades, its annual increase has exceeded that of the GDP by nearly three percentage points. The growth of U.S. health care spending and its per capita levels are considerably higher than those of other developed countries and do not appear to yield an advantage in terms of standard measures of health or system quality and performance. Characterizations of U.S. medical care as "flat of the curve," wasteful and uncoordinated, and prone to costly medical errors have become commonplace in policy discussions, leading to calls for evidence-based practice guidelines, improved information flows among providers, and changes in the incentives that drive our health care system. Finally, a large aging population spurred by a generation of baby boomers and accompanying the implementation of health reform threaten to place new demands on our health care system that will sorely test its current capabilities, as well as our ability to maintain future commitments to provide essential services to our most vulnerable citizens.

The fiscal imperative to control health care spending and to obtain "value" for our health care dollar is a pervasive concern within both the public and private sectors of our economy. In the public sector, federal spending on the Medicare and Medicaid programs alone represents over a fifth of the federal budget and the growth in these programs is frequently cited as a primary contributor to our large budget deficit. While public health care spending continues to compromise our ability to secure resources for other social needs, proposals to gain control of such spending have become the perennial political football. Growing Medicaid costs continue to plague the fiscal health of states and have contributed to cuts in other pressing social obligations such as educational funding. In the private sector, rising health care costs have fueled the increase in health insurance premiums, leading to sustained increases in employee premium contributions and cost-sharing, thus compromising the affordability and value of health coverage during a period of stagnant earnings and mounting income inequality. Arguably, such cost increases have contributed to the rise in the uninsured population and, along with the costs of other non-pecuniary benefits, have helped to make the use of short-term and tenuous employment contracts common, which has added to our worries about job insecurity.

With the Patient Protection and Affordable Care Act (ACA) to be close to full implementation in 2014, concern over health care spending has reached a critical juncture. Coverage expansions are expected to affect some 32 million people over the next decade; they will be accompanied by new spending in the form of federal tax credits and subsidies to defray premium costs and out-of-pocket spending incurred by people with moderate incomes. Additionally, public funding will be required to support the ACA's Medicaid expansions for those with incomes below 133% of the federal poverty line. Unless health care spending is reined in over this period, the ACA's promised contribution to deficit reduction may be compromised. Federal policymakers are well aware of this implication. In devising the ACA, Department of Health and Human Services Secretary Kathleen Sebelius has noted that every cost-containment idea advanced by health economists has been included in the reform law. But despite this assurance, uncertainty remains as to whether the law will effectively contribute to cost containment or further exacerbate the growth in health care spending.

This special issue of Inquiry focuses on the compelling imperative for cost containment and includes five papers to help inform the issue of how to bend the cost curve from its persistent upward trajectory. …

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