6 Proposals for Reducing Rising Health Care Costs

Since 2001, the average annual insurance premium has increased 113%. In 2001, the average insurance premium was $7,061 compared to $15,073 in 2011. This year the U.S. is estimated to spend $2.8 trillion dollars on health care. These figures have many lawmakers looking for new ways to cut health care costs.

In the July/August 2012 edition of “State Legislatures” magazine an article titled “Great Ideas for Cutting Costs” detailed six strategies to manage the rising costs of health care. The six strategies discussed in this article are: monitoring prescription drug use, expanding information technology, promoting healthy behaviors, ensuring patient safety, malpractice reform and patient education. Through these and six other proposals, detailed in an earlier edition of the magazine, lawmakers hope to lower the amount states spend on health care by as much as $400 billion a year.

According to the Coalition Against Insurance Fraud, “insurance fraud drains public and private health insurers of up to $72.5 billion a year.” By implementing a monitored public database of stored information this may help to identify illegal activity, prescription drug abuse and fraudulent insurance claims. This database would contain information on which prescriptions a patient needs and how often. Currently, 42 states have implemented some type of prescription drug monitoring program and at least 38 states require Medicaid beneficiaries to use only one physician and one pharmacy.

“Since 2010, the federal government has awarded nearly $7 billion through 10 programs designed to help eligible states, professionals, hospitals and critical access hospitals adopt new or upgrade existing health information technology systems,” according to a 2008 Congressional Budget Office study, costs could be lowered “by helping providers avoid harmful and allergic drug reactions, as well as reducing duplicate or unnecessary testing and procedures”. By “insuring that providers adhere to proven practices, choose the most cost-effective treatments and compile data on the effectiveness of these treatments” medical errors and costs could be greatly reduced. But it’s not always that simple. One concern is the upfront costs of installing the programs, upgrading the systems and training employees.

It’s common knowledge that “prevention is key” in significantly reducing your odds of future health problems. By promoting healthy behaviors before issues arise, health care costs can be significantly reduced. According to the Centers for Disease Control and Prevention, “treating heart disease, cancer, diabetes and arthritis accounts for at least 75 percent of all health care costs”. “Investing an extra 10 dollars per person a year in programs that increase physical activity, improve nutrition and prevent tobacco use could save the country more than $16 billion annually within five years by preventing or delaying the onset of these chronic diseases according to an estimate by the Trust for America’s Health.”

Medical errors cost patients, insurers and governments more than $19.5 billion a year and are the eighth leading cause of death in the U.S. According to the Office of Inspector General in the U.S. Department of Health and Human Services, “about 1 in 7 patients experience a medical error, of which 44 percent are preventable.” By reducing medical errors, health care costs would be significantly reduced. Three practices showing success are: adopting electronic prescribing to prevent errors in reading a physician’s script, penalties for doctors who are found to dispense illegal prescriptions and lastly, refusing payment for certain serious and preventable medical errors.

According to the report “National Costs of the Medical Liability System” by researchers at Harvard University, “the medical liability system-including award payments, administrative expenses, the cost of defensive medicine and lost clinical time-add up to an annual price tag of $55.6 billion (2.4% of all health spending).” By limiting malpractice pay-outs, reducing the number of claims and promoting the best medical practices, costs could be lowered. These savings could increase when supported by other efforts, such as providing adequate funding for state medical boards to investigate complaints and discipline doctors, collecting data, tracking medical errors and developing and adhering to successful practice guidelines. These changes would not only increase patient satisfaction, but also, safety.

A final suggestion for reducing the cost of health care is to educate patients. Many patients are unaware of the different options that are now available as treatment. One study conducted at various Mayo Clinics by researchers at Dartmouth University found “if unwarranted variations in medical care were reduced among the Medicare population, costs could decrease by as much as 30%.” A new strategy showing promising results is the use of “patient decision aids,” or pamphlets, videos and web-based tools designed to educate patients on the various treatment options. Some new research by Lippincott Williams and Wikins Inc. suggested “patients who use decision aids tend to choose less costly, less invasive options for treatment when compared with patients who did not use the aids.” Because of this, several states have even implemented programs to educate patients on home care or “self-care” to give them knowledge of when a trip to the doctor is necessary. Teaching people the signs and symptoms that require care saves time and money for providers.

Many states and companies have taken note of these and other suggestions for reducing health care costs and have created preventive care programs and incentives to market to consumers and employees. For example, Sam’s Club launched its own preventive health care program directed to consumers and small businesses in January 2011. This program, which may be the largest in the country, is an online health screening and preventive program similar to those already being marketed to employer groups. It costs $99 dollars. In addition, Sam’s Club also offers free monthly screenings that include several tests such as blood pressure, bone density and BMI scans.

Companies understand that healthier workers equal more productivity and less sick days. For example, AstraZeneca, a leading pharmaceutical company, is helping its employees lose weight, stay healthy and exercise while on the job. Their strategy is prevention, quality and adherence. The company is continuously looking for ways to keep their programs new and exciting for their employees and one way they did this was to implement a weight loss challenge that mirrored one on the hit NBC show The Biggest Loser. A treadmill was placed near the cafeteria and employees signed up for 15-minute increments. In just eight weeks, employees lost a total of 354lbs.

AstraZeneca is not the only company implementing preventive programs for employees. General Electric (GE), Safeway stores and White Wave Foods (the maker of Horizon milks and other organic dairy products) also have programs in place for their employees. There are many other businesses across the nation that are implementing health living ideals into the daily lives of their employees.

Due to the cost of health care rising dramatically over the past decade, states, employers and lawmakers must come up with real strategies and innovative ideas to keep costs down while maintaining quality care.

“State Legislatures” magazine; July/August 2012 edition