Opinion: Health reformers overlook areas that could reduce most costs

Proponents of the Affordable Care Act (ACA) sought to increase access to health coverage for the poor and people with pre-existing conditions. The ACA has virtually nothing to control costs. Among other things, President-elect Donald Trump now plans to repeal some provisions of the ACA, allow consumers to shop for coverage regulated in other states (i.e., shopping across state lines) and expand health savings accounts (HSAs). 

None of these approaches (the ACA, repealing parts of Obamacare or HSAs) will necessarily rein in the rising cost of healthcare. One criticism of HSAs is that patients who are desperately ill are unlikely to forgo a potentially beneficial medical service merely because they bear a portion of the cost. Moreover, hospitalized patients have long surpassed their health plan deductibles.

Here’s the real problem: About half of all healthcare dollars are spent by the sickest 5% of patients, while nearly one-quarter (22%) of healthcare expenditures are on the sickest 1%. Thus, merely encouraging the healthiest 80% of patients to take a generic drug or comparison shop for an MRI won’t have much effect on national health expenditures since most are unlikely to require much medical care. However, there are numerous opportunities to reduce healthcare spending by carefully managing the sickest patients.

Hospitalized seniors account for a significant portion of medical spending. Hospitals are the most expensive venue to perform any medical service. Yet, there are occasions when patients are hospitalized for conditions that could have been controlled with inexpensive drug therapy. About 88% of prescriptions are dispensed as generic drugs, accounting for only 2.8% of health expenditures.Indeed, only about 10% of all medical spending is on prescription drugs. About 20% is on physicians, while nearly one-third of all medical spending occurs in hospitals. Controlling costs necessarily means looking for alternatives to keep patients out of hospitals.

Seniors tend to experience problems during transitions in care, when they shift from one care setting to the next. Often, when seniors are discharged from the hospital they are not provided with appropriate post-discharge care. Without discharge planning many get worse and have to be readmitted within days.  About 20% of seniors who are discharged from a hospital are readmitted within 30 days. More than one-third are readmitted within 90 days. More than half of Medicare discharges will return within a year. An estimated three-fourths of

Medicare readmissions could be prevented with proper transition care.

Here is my point: Health reformers tend to focus on the wrong things. Increasingly, health reformers need to begin talking about better care for America’s sickest patients. Medical homes that coordinate patients’ care before, during and after the critical care transitions could improve quality and save money. A coordinator could advise patients on lower-cost healthcare settings, evaluate the need for home care and ensure seniors receive post- hospital follow up care and comply with drug therapy instructions.  Integrated health plans have the infrastructure to share information across multiple care providers. Health plans that are financially at-risk for the cost of their enrollees’ care also have incentives to track care more closely.

Devon Herrick, PhD is a health economist and senior fellow at the National Center for Policy Analysis.