September 8, 2008
Controlling Health Care Costs
By Michael D. Shaw
Anyone who has ever seen a hospital bill, or has found out the actual cost of a prescription medicine—if insurance did not apply—can attest to the astronomical amount of money spent on health care in this country. It is said that the cost of providing health care for its employees adds $1,100 to $1,500 to the cost of each car built by the Big Three automakers.
About three years ago, Lee Iacocca noted that “It is a well-known fact that the U.S. automobile industry spends more per car on health care than on steel. This problem is not going to go away on its own.” In the early 1990s, the former Chrysler chairman advocated a national health care program as a solution.
Whether run by the government, or via the private sector, Iacocca was referring to some sort of managed health care—classically defined as a system that controls the financing and delivery of health services to members, who are enrolled in the plan. These days, the most common managed care plans are Health Maintenance Organizations (HMO), Preferred Provider Organizations (PPO), and Point-of-Service (POS) plans.
Officially, managed health care strives to…
- Deliver high-quality care in an environment that manages or controls costs
- Ensure that the care delivered is medically necessary and appropriate for the patient’s condition
- Ensure that care is rendered by the most appropriate provider
- Ensure that care is rendered in the most appropriate, least-restrictive setting
Many will argue that these lofty goals are often not met. Surely, costs have continued to increase, and patient complaints regarding waiting times, not enough face time with a physician, and impersonal treatment are widespread.
As it happens, managed health care is by no means a novel concept. In fact, it actually dates back to ancient Babylon, circa 1700 BC, and the Codex Hammurabi. In the Codex, according to Professor Allen D. Spiegel, one can find the following:
- Rates set for general surgery, eye surgery, setting fractures, curing diseased muscles, and other specific health care services
- Fees set according to a sliding scale based on ability to pay
- Owners to pay for health care for their slaves
- Objective outcome measurement standards to assure quality of care
- Outcomes information management to include data collection and evaluation
- Consumer and patient’s rights to be publicized, explained and made known to all
One wonders if King Hammurabi’s plan was any more successful than the present-day versions, and what sort of expectations patients had back then.
Rarely mentioned in discussions on the health care crisis—but certainly another way to control costs—is to keep people healthy. Note that “health insurance” is inaptly named. In its current format, it is primarily acute care and prescription drug financing, with any notion of “health” clearly pushed to the background.
How about incentivizing such things as cutting prescription drug use and encouraging a healthy lifestyle? Willing participants could have mini-physicals once or twice a year, and key indicators would be compared. If such things as Body Mass Index (BMI) or performance on a Exercise Stress Test (to name only two possibilities) were to improve, and/or prescription drug consumption reduced, rebates could be issued to whoever pays for the health insurance.
By the same token, doctors could be encouraged to provide non-treatment health consultations to interested patients, and the doctors would be likewise rewarded for the health improvements observed in their patients, that could occur with minimal conventional treatment modalities.
The only reason preventive medicine is so de-emphasized is that there has never been any money in it, with the possible exception of diagnostic procedures such as mammograms, colonoscopies, or PSA testing—and even then, we are stretching the definition of “preventive.”
Ironically, changing to a model that truly concentrates on health care, rather than just disease care, might be the best way to control ever-rising costs.