“The Inevitable Math behind Entitlement Reform”

That’s the title of a new NEJM Perspective by Michael Chernew and me. After crunching the numbers, our argument is that for long term cost control we will probably need to address growth in per capita health care utilization. The easy “solutions” won’t be enough.

Much of the projected increase in inflation-adjusted spending on health care entitlements, particularly for Medicare, stems from assumed increases in utilization (e.g., 2.75 percentage points of the 5.33% annual projected growth for Medicare spending). Strategies for holding utilization growth below projections (and more in line with very recent historical growth) will thus be central to the success of any attempt at cost containment.

[One approach] is to dissuade patients from seeking care by charging them more at the point of service. About 85% of Medicare beneficiaries have supplemental plans (e.g., Medigap) that reduce their out-of-pocket costs. Policies that limit the generosity of such plans could reduce Medicare spending considerably. However, such strategies would increase beneficiaries’ financial risks, reduce access to care, and probably exacerbate health disparities.

A second strategy is to help beneficiaries improve their health by enhancing long-term care management and preventive services with the goal of avoiding more expensive services. Evidence suggests that although this type of approach is probably beneficial to patients and may be cost-effective, it is generally not cost saving.

The piece continues with some more promising approaches, in our view. Click to read it in full (unfortunately pay-walled though).

Research for the Perspective was supported by the Laura and John Arnold Foundation.


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