Institute of Medicine
May 21, 2009
Controlling Health Care Costs and Improving Quality
By Hon. David M. Walker, President and CEO of the Peter G. Peterson Foundation
and Former U.S. Comptroller General
Thank you for that kind introduction and thanks to Dr. Harvey Fineberg, Dr. Michael McGinnis, and all the IOM and Peterson Foundation staff who worked to make this conference a reality.
We at the Peter G. Peterson Foundation are pleased to be partnering with the IOM in addressing the issue of how best to defuse the ticking time bomb associated with escalating health care costs. We are sponsoring this meeting and a series of other meeting as well as engaging in a number of joint activities. Just last Friday we conducted a small Health Care Summit of key leaders that was focused on how to address escalating health care costs and what role(s) our foundation should play in the months and years ahead.
We all know that health care costs are out of control and dissatisfaction among a broad range of key stakeholders is growing. Our nation spends plenty of money in the U.S. on health care. Over $2.5 trillion a year, 17 percent of GDP, and about double the average of other industrialized nations, even though almost 50 million Americans lack any health insurance. At the same time, many researchers believe that 30-50 percent of health care costs do not contribute to better outcomes. And what about outcomes? While we have the best high end health care on earth, many of our broad-based outcome statistics are below average for industrialized nations.
Last week's Summit and our various other efforts have served to reinforce a number of key points:
- First, health care costs represent the single largest challenge to our nation's fiscal future.
- Second, escalating health care costs represent a major competitiveness challenge to American business and a growing concern to American families.
- Third, as I noted previously, despite spending over double per capita on health care costs, our nation has below average outcomes in a number of key areas.
- Fourth, if there is one thing that could bankrupt America, it's out-of-control health care costs.
- Fifth, there is broad-based and growing discontent with our current health care system and general agreement that the "status quo" is both unacceptable and unsustainable.
- Finally, while we must take immediate steps to control health care costs, we ultimately need to engage in comprehensive health care reform that addresses the four key pillars of coverage, cost, quality and personal responsibility.
What are some of the key drivers of health care costs? They include, but are not limited to: inadequate health and wellness efforts by individuals; the perverse incentives associated with our current payment systems; the lack of coordinated and integrated care; variances in standard practices by geographic areas; legal liability and defensive medical practices; a proliferation of medical procedures, technologies and equipment; the lack of timely, reliable and useful cost and quality information; excessive administrative costs, and; the failure to properly design and target existing taxpayer subsidies.
While controlling health care costs is essential, we at the Peterson Foundation also support the need for comprehensive health care reform. This includes achieving the ultimate goal of providing universal coverage for a basic and essential level of care that is both affordable and sustainable over time and avoids taxpayer funded "heroic measures". At the same time, we are against any attempt to engage in a reform effort that will serve to worsen our nation's financial condition and longer-term fiscal outlook.
We should adopt a fiscal Hippocratic oath in connection with any health care reform effort. Namely, "do no further harm" to our nation's already deteriorating finances and already unsustainable fiscal path. In particular, we must avoid any attempts that would expand coverage in ways that are not fully paid for, both in the short-term and beyond the 10 year budget horizon. We must not enact anything close to a Medicare Part D program on steroids. We cannot afford to shoot ourselves again.
We must also recognize the reality that solutions to our health care challenge will require tough choices and some dramatic and fundamental changes. For example, if the nation invests in health care IT and evidence-based practice standards, the government must be prepared to adjust its payment systems based on the related results. Failure to do so would result in a partial waste of the initial investment and a failure to significantly reduce health care costs.
In the final analysis, any system, including a health care system, must be designed consistent with three key principles in order to be both successful and sustainable over time. First, incentives need to be properly aligned and integrated to encourage desired behaviors. Second, there needs to be adequate transparency, including cost and quality, in order to encourage proper behavior because others will be looking. Finally, there needs to be appropriate accountability, including economic consequences, if people do not behave properly. Unfortunately, our current health care system is zero for three. That's a strike out. We can, and must, do better.
In closing, the days of Harry and Louise ads may be over. However, we must avoid a "Thelma and Louise" ending to the current health care reform debate. Specifically, our nation is already headed for a fiscal cliff; we must take steps to avoid it. This will require not punching the accelerator and finding a way to change course before it's too late.
We look forward to today's conference and to reviewing the related results of this meeting and future planned efforts with the IOM. Thanks to each and every one of you for taking time out of your busy schedules to be here today.
