INQUIRY Journal Tackles the Question 'How Can We Bend the Health Care Spending Cost Curve?'

ROCHESTER, NY (02/17/2012)(readMedia)-- U.S. health care spending represents 17.6 percent of the gross domestic product (GDP) and is projected to grow to one-fifth of the GDP by 2020. With the Patient Protection and Affordable Care Act (ACA) set to be near full implementation in 2014, concern over health care spending has reached a critical juncture. This special issue of INQUIRY focuses on the compelling imperative for cost containment and features the following five papers, which help inform the question of how to bend the health care spending cost curve from its persistent upward trajectory:

Payment Incentives and Integrated Care Delivery: Levers for Health System Reform and Cost Containment by Holly Korda and Gloria N. Eldridge. This paper surveys the literature and describes the mechanisms through which financial incentives and integrated delivery of care can potentially improve value in health care. The authors find evidence that patient-centered medical homes and delivery models that integrate primary and behavioral health care can yield cost savings and enhanced quality; evidence is still limited for the newer accountable care organizations. The authors endorse the potential of bundled payment systems, but are less optimistic about pay-for-performance incentives. Korda and Eldridge recognize the role of information technology (IT) in supporting integrated delivery and acknowledge the costs associated with implementing IT. They say more empirical research on these initiatives is needed as health reform evolves.

Health Information Technology and Its Effects on Hospital Costs, Outcomes, and Patient Safety by William Encinosa and Jaeyong Bae. Using medical claims data from MarketScan, a database that covers employer-sponsored benefit plans for large employers across the country, and information technology data from the American Hospital Association, this study examines the role that electronic medical records (EMRs) play in assuring patient safety and lowering hospital costs. In a striking finding, results show that EMRs do not reduce the rate of patient safety events, but do reduce patient deaths, readmissions and costs once a medical error occurs. Thus, the results indicate that the technology is cost-effective and they validate the use of EMRs.

The Impact of Accelerating Electronic Prescribing on Hospitals' Productivity Levels: Can Health Information Technology Bend the Curve? by Eric W. Ford, Timothy R. Huerta, Mark A. Thompson, and Roland Patry. Taking a different perspective on the adoption of health information technology (HIT), this study finds that hospitals that implemented computerized prescriber order entry (CPOE) systems in a limited fashion and moved more gradually to full implementation experienced the greatest gains in efficiency and productivity. On the other hand, those hospitals that implemented the new technology hospital-wide within a year saw declines in those measures. The analysis serves as a caution to those institutions seeking a payoff from rapid HIT adoption and to policies that encourage quick implementation.

Risk-Adjusting the Doughnut Hole to Improve Efficiency and Equity by Richard C. van Kleef, Wynand P. M. M. van de Ven, and René C. J. A. van Vliet. This paper examines use of the "doughnut hole"---a gap in coverage that starts at a certain level of medical spending and is applied in Medicare Part D prescription drug coverage---as a cost-sharing tool for other health coverage. The authors say the optimal starting point to create the strongest cost containment incentives depends on a person's health and chronic illness status. Employing data from a Dutch insurer, they demonstrate that using a risk-adjusted starting point for the doughnut hole, rather than a uniform starting point, results in stronger incentives for cost containment and more equity in individuals' out-of-pocket spending.

What Can We Expect from the 'Cadillac Tax' in 2018 and Beyond? by Bradley Herring and Lisa Korin Lentz. Starting in 2018, the ACA will impose a 40 percent excise tax on high-cost private health care plans: plans whose value (premiums and amounts deposited in tax-preferred accounts) exceeds $27,500 for family coverage and $10,200 for single coverage. Applying data from the Employer Health Benefits Survey (sponsored by the Kaiser Family Foundation and Health Research and Educational Trust), Bradley and Lentz estimate that 16 percent of plans will be affected by the Cadillac tax in 2018, with 75 percent of plans incurring the tax a decade later. According to their projections, if implemented as written, the Cadillac tax will raise about $931 billion in revenue over the first decade (2020-2029), representing a significant contribution to deficit reduction.

Also featured in INQUIRY's winter issue:

The View from Here: A CLASS-less Act by Alan C. Monheit. In this column, INQUIRY's editor argues that the demise of the Community Living Assistance Services and Support (CLASS) program---which was intended to help reform our system of long-term care---should serve as a wake-up call regarding the dire situation of LTC needs and burdens that face our nation.

INQUIRY, the journal of health care organization, provision, and financing, is in its 48th year. The nonprofit Excellus Health Plan, Inc., publishes INQUIRY; the journal maintains a freelance editorial staff and is run as an independent, peer-reviewed, quarterly academic journal. Press releases and article abstracts are available on the INQUIRY website at www.inquiryjournal.org under "Current Issue Table of Contents."