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Controlling Health Spending

By May 2, 2011Commentary

In the furor over health care reform, a number of approaches that will supposedly reduce health spending have been implemented.  Are any of them likely to have a significant effect?  According to an article in the Wall Street Journal written by a British physician, where many of the same ideas have been tried, not really.  (WSJ Article) The article references in particular greater use of generic drugs, identifying and encouraging use of “cost-effective” treatments, greater use of primary care and preventive care and movement away from fee-for-service reimbursement.

The author’s overall conclusion was that health spending grew at an increasing clip during the time when all these innovations were being implemented and while there may not have been cause and effect, the best that could be said is that these “innovations” maybe made spending grow less than it otherwise would have.  In the US, for example, use of generics now is very, very high and it is not clear how much more could really be gained by switching.  The British experience with capitation indicates that in general it seemed to give doctors little incentive to improve their practices, in fact, perhaps the reverse since they made more money that way.

In regard to preventive care, the savings never materialized, partly because, as research suggests, people who live longer and healthier don’t necessarily have less total health spending and partly because setting and monitoring preventive care targets and best practice medicine created an expensive to run bureaucracy.  All-in-all, these centralized, top-down approaches seem to have done little to save money or improve health.  If someone could come up with a system which had consumers paying for most of each of the health services they consume, while helping them be informed about getting care they need, that would work a lot better.


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