Spending Wisely

Economist Gail Wilensky is troubled by the growth in healthcare expenditures. While many proposed health reforms appear capable of lowering the bar on spending, few address the continuously rising slope.

The nation spends $6.3 billion per day on healthcare, with recent annual growth rates ranging from 6% to 16%. It's that constant rise that makes the current system so unsustainable.

Effective Treatments

However, common sense would indicate that in order to reduce runaway spending in the fairly well-stocked grocery store of healthcare services, the system should become more thrifty. It sounds easy enough: If direct constraint on demand-rationing, as many other countries have done-is unacceptable to the American people, then smarter spending should be the strategy. Buy what works.

Health plans, employers and politicians have long had their hopes riding on a smart-spending strategy, in spite of the fact that there is little information available to tell them what treatments actually are the smart choice.

A provision in the American Recovery and Reinvestment Act (the stimulus bill) provides $1.1 billion to accelerate comparative-effectiveness research (CER). CER is the comparative study of alternative ways to treat medical conditions-not just the discrete study of treatments on their own merits-in an effort to discover which ones are most effective. It is also meant to create a growing base of evidence, which would help patients and doctors decide on the best course of care among several treatment options.

And, many hope it will lead to smart spending.

In theory, the government-funded CER would help define the best medical treatments, while the private market would take it a step further to define the best buys.