Reducing National Health Care Spending

Four researchers from RAND Health have an interesting article in the latest New England Journal of Medicine (ht Bruce Bartlett). Based on some detailed research in Massachusetts, they identified eight strategies that might help to reduce national health care spending:

They conclude that the most promising option is to bundle payments: providers would receive a “single payment for all services related to a given treatment or condition, causing providers to assume risk for preventable costs.” Bundled payments would thus reduce one of the key inefficiencies in our current system: the tendency of fee-for-service payments to “encourage higher volume rather than better value.”

Another important finding is that several options could actually increase spending. Disease management, for example, “typically requires up-front payments for services for a broad population, and there is little evidence of substantial cost offsets.” (A few months ago, I made a similar point about prevention efforts. In both cases, it is important to keep in mind that spending reductions should not be the only goal. Disease management and prevention efforts that increase costs can still be justified if they improve health sufficiently.)