Bending the Cost Curve and Here Come the Judge(s)

Andrew L. Pecora, MD
Published: Thursday, May 17, 2012
Andrew Pecora, MD

Andrew L. Pecora, MD

Editor-in-Chief
Oncology & Biotech News

Chief Innovations Officer, Professor, and Vice President
of Cancer Services

John Theurer Cancer Center
at Hackensack University
Medical Center

There was a time when biology, chemistry, and a little bit of physics led to dramatic changes in healthcare and healthcare delivery. Legions of physicians, scientists, and other clinical professionals worked over many decades to “move the needle” on combating the diseases that afflict humanity. Lately, however, it appears that this group is not the driving force in effecting change in healthcare delivery. Instead, business and government have done more to “move the needle” in changing healthcare delivery.

A recent New York Times article (Lowrey A. In a hopeful sign. health spending is flattening out. The New York Times. April 29, 2012;sect:A1) noted that for the first time in history, healthcare spending has started to flatten out, growing less than 4% annually. In part this is readily explained by the recession, which leads to lower utilization of healthcare services, especially elective procedures. What has surprised the experts is that the recession is not the sole reason for this shift. New data show that the behaviors of consumers and providers have changed, leading to lower utilization, and that an economic recovery will not likely change this behavior.

Healthcare providers can take some credit in creating accountable care organizations and other structures that address multiple chronic diseases and in implementing strategies to avoid hospitalizations. However, healthcare providers have done little to “move the needle” in generating widespread reductions in healthcare utilization. Strikingly, it is the business sector that may have played the largest role here by scaling back the types and characteristics of the benefits they now offer their employees. These costcutting strategies have led to increases in out-of-pocket expenses for patients by applying higher copays for individual healthcare services.

It was during World War II that employer-sponsored healthcare benefits came into practice. These benefits provided employees with access to necessary medical care during a period of wage controls that were intended to control inflation. Now nearly 70 years later, it appears that the pendulum has swung back and employer-driven healthcare benefits may soon become passé. Regardless, they may remain the most significant factor slowing the growth of total healthcare spend.

In addition to these business influences on healthcare, we see that two branches of government (ie, Executive and Legislative) have set forth new laws called the Affordable Care Act (ACA) that will profoundly alter healthcare and its delivery if fully implemented. The other branch of government (ie, Judicial) has recently been drawn into the mix and is reviewing whether the law—in total or its key component (the individual mandate)—is, in fact, constitutional.

For the first time in history, healthcare spending has started to flatten out, growing less than 4% annually. What has surprised the experts is that the recession is not the sole reason for this shift.
While this real-life drama is playing out, large segments of our national healthcare delivery “grid” (eg, payers, business, hospitals) are aligning strategies to meet the challenges and opportunities of the ACA. If the Supreme Court rules the Act unconstitutional, then it is back to square one from the government’s perspective. If the individual mandate is thrown out and the remainder of the ACA is left unscathed, then it is anyone’s guess how this will play out because without adding the millions of uninsured to the ranks of the insured, many of the additional benefits that come with the ACA will not be affordable without a dramatic increase in insurance premiums.

One comforting thought in the middle of this evolving storm is a quote made famous by Herbert Stein, PhD, former chairman of the Council of Economic Advisors under President Nixon. Stein formulated an economic law that stated, “If something cannot go on forever, it will stop.” To me, this sounds more like a law of physics than one of economics. Even so, Stein’s theory appears to be manifesting in our economy independent of the ACA, as business, consumers, and providers are already changing their behavior.


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