Tuesday, April 3, 2018

Consumer-Focused Approaches Won't Curb Health Care Spending

Image from https://www.ballonkunstenaarpatrick.nl
The U.S. spends roughly twice what other developed nations do on health care. With all that money, we buy the lowest life expectancy and the highest infant mortality rate. Americans don't use more services than people in other high-income countries; we pay more the services we receive. 

In the fourth quarter of last year, health care surpassed retail and manufacturing to become the largest source of jobs in the United States. Health care is a huge driver in our economy, and one person's excess is another person's income. Putting pressure in one area to control costs is like squeezing a balloon--it increases the cost somewhere else. If we're going to spend more than every other country on health care, it would at least be nice to spend that money on things that improve people's health. We need greater transparency around the effectiveness and cost throughout the system, but especially with prescription drugs.

NPR put a human face on the problem in this story about a woman who's health reimbursement account was wiped out by a prescription for Kerydin--a $1,500 treatment that cures toenail fungus in 6.5% of the patients who use it.

Prescription Drug Spending in the U.S. Health Care System, provides a good overview of the issues. Policy Strategies for Aligning Price and Value for Brand-Name Pharmaceuticals describes options for value-based pricing.

What's the best approach for employers? Do you chase rebates or move toward value-based plan design. Today, employers cannot afford not to chase the rebates. If the Chronic Disease Management Act that was introduced in Congress in February becomes law, employers will have more tools at their disposal. The act would allow employers to cover some treatments without subjecting them to a deductible. This could lead to more innovative plan design. Reform is needed throughout the system though. Consumer-focused approaches won't curb spending unless we begin to align drug prices with the clinical value the drugs provide. 

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