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What the U.S. can learn (and will likely ignore) from other countries about controlling health costs


In an attempt to get past politics and ideology, a group of researchers recently published a report in Health Affairs that examined the health systems in Canada, England, France and Germany for insights on how the United States could better control costs.

It's well-documented that the United States spends far more on healthcare than other countries yet frequently lags other developed countries in the quality of care it provides to its citizens.

That would suggest other developed countries know something we don't about healthcare. Or, perhaps more likely, we know it but choose to dismiss it for political or ideological reasons.

In an attempt to get past politics and ideology, a group of researchers recently published a report in Health Affairsthat examined the health systems in Canada, England, France and Germany for insights on how the United States could better control costs.

Of course, it's an open question whether the U.S. political landscape will ever shift enough to make these "lessons" realistic alternatives, though it should be acknowledged that some of these ideas are making inroads in U.S. health policy circles. But that's still a far cry from seeing them implemented at the federal level.

Writing at the Incidental Economist, Aaron Carroll, MD, isn't too optimistic. "All of these strategies-almost to a fault-are resisted or demonized here," Carroll said. "Instead, we’ll likely continue to try things that have never worked or have no evidence behind them."

Below are a few key highlights from the report, called "Healthcare Cost Containment Strategies Used in Four Other High-Income Countries Hold Lessons for the United States."

Budget setting: Budget setting aims to create an upper limit on third-party payer spending, either at the level of the health sector as a whole or for specific service areas, according to the report. Much of this revolves around linking provider to payment to evidence of quality, which in fairness, is something being seriously discussed in the United States.

Activity-based funding: An important element of budget setting involves activity-based funding, which allocates funding to hospitals based on the type and volume of services they provide, adjusted for the patient population they serve. Activity-based funding typically is based on diagnosis-related groups (DRGs), a way of grouping together patients with similar conditions and needs, and attaching a value to the care for each group. This is similar to global or bundled payments, a movement that's been gaining steam in the United States, particularly in Massachusetts.

Health-technology assessment: The idea here is to use the best available clinical evidence to guide decisions on what procedures, drugs, and medical devices to cover. In other words, comparative effectiveness research. The Affordable Care Act contains plans to draw up a committee to do just that for Medicare, called the Independent Payment Advisory Board, but it's received stiff and shrill opposition (think death panels), and it's unclear whether the committee will ever come to fruition.

Price controls: Here's the one that, like nothing else, will leave free-market advocates who fancy themselves defenders of traditional American values foaming at the mouth. All four countries in the report have central mechanisms to set healthcare prices, which are set or agreed on through negotiation at the national level, instead of being determined by individual purchasers and suppliers. For example, France has cut its number of hospital beds, encouraged early retirement to reduce the number of self-employed physicians, and increasingly tightened volume. We know this works in America-hospital rate-setting in Maryland has resulted in that state significantly slowing down spending growth, and it's not exactly a socialist hellhole-but general hostility toward government-imposed solutions means this has no chance of happening on the national level any time soon.

The authors, fully aware of the political realities in the United States, end their report with a note of skepticism about whether these cost-cutting measures have any chance of being implemented.

"It seems unlikely, however, that the U.S. system will move toward the types of volume and price controls used in the countries examined here," they wrote. "Thus…it is likely that the large gap in healthcare spending between the four countries in our study and the United States will remain."


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