Bending the Curve
Effective Steps to Address Long-Term Health Care Spending Growth

Executive Summary

Reducing the growth of health care spending must be a top priority for health reform. The President, members of Congress on both sides of the aisle, and key stakeholders have all asserted the need for aggressive reforms to slow spending growth without compromising quality of care--indeed, while improving value. But despite agreement that inefficiencies in the current system both increase costs and reduce quality, identifying a set of reforms that can credibly and practically achieve this goal has been difficult.

To address this issue, we--a group of experts who have spent our careers studying the health care system--convened to identify a path for sustainable reform. From our diverse backgrounds and points of view, we reached consensus on a set of concrete, feasible steps that show promise for slowing spending growth and improving quality. This is not meant to be an exhaustive list, nor does it necessarily reflect what we each would propose individually, but rather it is a comprehensive, coherent proposal that builds on current health reform bills.

Underlying these steps is the conclusion that the standard short-term measures to address rising costs, such as reducing prices, cannot succeed in the long run. Instead, legislation must support needed reforms in health care by reforming payment systems, regulations, and institutions that currently prevent patients from consistently getting the best quality care at the lowest cost. To bend the cost curve, health reform must include a comprehensive strategy to increase accountability and support for lowering costs and improving quality.

This strategy consists of four interrelated pillars:

Invest in better information and tools, such as health information technology, as a foundation to guide and support a reformed system. Critical to these investments’ success is ensuring providers and insurers have the flexibility and incentives to use these tools effectively--for example, liability protections for following best practices identified by comparative effectiveness research. But reform cannot stop here: These investments are a necessary foundation for cost containment that will be ineffective if implemented alone.

Transition to accountable payment systems that reward providers for delivering lower-cost, high-quality care. Adjustments in Medicare and Medicaid fee-for-service payments can yield short-term savings. However, fundamental reform requires transitioning to accountable payments in these public programs, reinforced by budget pressures to make fee-for-service less attractive over time. Critical to reform’s success is greater institutional flexibility and ability to learn from experience, including an independent entity with authority to ensure that steps to improve Medicare and Medicaid sustainability are addressed by Congress.

Restructure non-group and small-group health insurance markets and coverage subsidies based on an exchange model that pools risk outside of employment and promotes competition on cost and quality. To bend the curve in the employer-provided insurance market, the tax exclusion must be scaled back to foster the design and purchase of more cost-effective benefits. New affordable coverage subsidies should be structured so that beneficiaries pay the incremental cost for richer insurance benefits. Finally, Medicare Advantage benchmarks should be reduced through competitive bidding, with quality bonuses.

Support and encourage better individual choices to enhance the patient role in improving health and lowering health care costs. Medicare’s benefit design should feature value-based tiered copays and protect against high out-of-pocket costs, while limiting first-dollar supplemental coverage. Reforms should support premium rebates for measurable health improvements. Also, prevention investments should broadly pilot and evaluate measurable strategies for helping individuals to lose weight and reverse the obesity trend.

Slowing health care cost growth, while sustaining and improving quality, will not be easy but is doable. Successful implementation of our recommendations to achieve a meaningful slowdown in spending growth will require:

  • Improvements in the incentives of all health care stakeholders, with increasing effects over time
  • Enough flexibility to continually evaluate and modify reforms, building on successes and learning from mistakes; and
  • Clarity of vision about achieving a health care system that consistently achieves better quality while saving money, with steady, interdependent and reinforcing steps to get there.

We believe the reform strategy presented here offers the most promise for bending the cost curve and producing the high-value health care system our nation urgently needs.

Click here to view the full report as an Adobe Acrobat PDF.

Joseph Antos is the William H. Taylor Scholar in Health Care and Retirement POlicy at AEI. John Bertko is a visiting scholar at The Brookings Institution. Michael Chernew is a professor of Health Care Policy at Harvard Medical School. David Cutler is the Otto Eckstein Professor of Applied Economics at Harvard University. Dana Goldman is the Norman Topping Chair in Medicine and Public Policy at the University of Southern California and RAND Corporation. Mark McClellan is the director of the Engelberg Center for Health Care Reform and the Leonard D. Schaeffer Chair in Health Policy Studies at The Brookings Institution. Eilzabeth McGlynn is associate director of RAND Health, the Distinguished Chair in Health Quality, and a senior principal researcher at the RAND Corporation. Mark Pauly is the Bendheim Professor, a professor of health care management at the University of Pennsylvania, and an adjunct scholar at AEI. Leonard Schaeffer is the Judge Robert Maclay Widney Chair and Professor at the University of Souther California. Stephen Shortell is the dean and Public Health Blue Cross of California Distinguished Professor of Health Policy and Management at the University of California, Berkeley.

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About the Author

 

Joseph
Antos
  • Joseph Antos is the Wilson H. Taylor Scholar in Health Care and Retirement Policy at the American Enterprise Institute (AEI), where his research focuses on the economics of health policy — including the Affordable Care Act, Medicare, the uninsured, and the overall reform of the health care system and its financing. He also studies the impact of health care expenditures on federal budget policy.

    Before joining AEI, Antos was assistant director for health and human resources at the Congressional Budget Office (CBO). He has also held senior positions in the US Department of Health and Human Services, the Office of Management and Budget, and the President’s Council of Economic Advisers. He recently completed a seven-year term as health adviser to CBO, and two terms as a commissioner of the Maryland Health Services Cost Review Commission. In 2013, he was also named adjunct associate professor of emergency medicine at George Washington University.

    Antos has a Ph.D. and an M.A. in economics from the University of Rochester and a B.A. in mathematics from Cornell University.



    Follow Joseph Antos on Twitter.

  • Phone: 202-862-5938
    Email: jantos@aei.org
  • Assistant Info

    Name: Neil McCray
    Phone: 2028625826
    Email: Neil.McCray@aei.org

 

Dana
Goldman
  • Dana Goldman is a Professor and the Norman Topping Chair in Medicine and Public Policy at the University of Southern California. Until Fall 2009, he held RAND's Distinguished Chair in Health Economics and directed RAND's program in Economics, Finance, and Organization. He is also an Adjunct Professor of Health Services and Radiology at UCLA.


    Dr. Goldman is a nationally-recognized health economist influential in both academic and policy circles. He is the author of over 100 articles and book chapters, including articles in some of the most prestigious medical, economic, health policy, and statistics journals. He is a health policy advisor to the Congressional Budget Office, and is a frequent speaker on health care issues. He serves on several editorial boards including Health Affairs and the American Journal of Managed Care. He is also a founding editor of the Forum for Health Economics and Policy, an online journal devoted to health economics and health policy.

  • Email: dpgoldma@usc.edu

 

Michael
Chernew
  • Michael E. Chernew, Ph.D. is a Professor of Health Care Policy in the Department of Health Care Policy at Harvard Medical School. Dr. Chernew's research examines several areas related to controlling health care spending growth while maintaining or improving the quality of care. His work on consumer incentives focuses on Value Based Insurance Design (VBID), which aligns patient cost sharing with clinical value. His work on payment reform involves evaluation of bundled payment initiatives, including global payment models that include pay-for-performance components. Additional research explores the causes and consequences of rising health care spending and geographic variation in spending, spending growth, and quality.


    Chernew is Vice Chair of the Medicare Payment Advisory Commission (MedPAC), which is an independent agency established to advise the U.S. Congress on issues affecting the Medicare program. He is also a member of the Congressional Budget Office’s Panel of Health Advisors and The Commonwealth Foundation’s Commission on a High Performance Health Care System.

  • Email: chernew@hcp.med.harvard.edu

 

Mark V.
Pauly

  • Mark V. Pauly is the Bendheim Professor in the Department of Health Care Management;  professor of health care management, insurance and risk management, and business and public policy at the Wharton School; codirector of the Roy and Diana Vagelos Life Sciences and Management Program; and professor of economics in the School of Arts and Sciences at the University of Pennsylvania. A former commissioner on the Physician Payment Review Commission, Mr. Pauly has served on the advisory committee to the Agency for Health Care Research and Quality and on the Medicare Technical Advisory Panel. He currently serves on the National Advisory Council for the National Institutes of Health National Center for Research Resources, the National Academy of Sciences' Committee to Study the Veterinary Workforce, and its Committee on the Biomedical Workforce. He has been a consultant to the Congressional Budget Office, the Office of the Secretary of the US Department of Health and Human Services (which supported some of his work on individual health insurance), and health trade associations. Mr. Pauly is a coeditor-in-chief of the International Journal of Health Care Finance and Economics and an associate editor of the Journal of Risk and Uncertainty.  


  • Phone: 2158986861
    Email: pauly@wharton.upenn.edu

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