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Key Drivers of Health Care Costs

  • Published: 2009-09-09 (Revised/Updated 2010-06-30) : Author: American College of Physicians
  • Synopsis: A policy paper that identifies and analyzes the key drivers of health care costs was released today by the American College of Physicians.

Main Document

A policy paper that identifies and analyzes the key drivers of health care costs was released today by the American College of Physicians (ACP).

Controlling Health Care Costs While Promoting the Best Possible Health Outcomes provides nearly four dozen recommendations to achieve better quality care to more people.

ACP is particularly concerned that the high cost of health care in the United States is not correlated with high quality and efficiency in the delivery of services or improved health outcomes.

Public policymakers in the United States, like those in most other countries, have struggled to find ways to restrain rapidly rising health care costs while providing opportunities for all persons to live better and healthier lives. Yet the rate of increase in U.S. spending on health care continues to exceed the rate of growth of the economy at a pace that is unsustainable. Pressures to reduce costs in the United States are intensifying due to current fiscal and economic constraints, an aging population, and many other factors.

"This especially timely white paper is designed to help guide public policymakers as they grapple with the Herculean task of taking action to reduce the rate of growth in health care spending," said Joseph W. Stubbs, MD, FACP, president of ACP. "It begins by providing an overview of U.S. health care spending and identifies the principal payers. It then discusses the major drivers of rising health care costs and identifies potential means for achieving savings."

After noting 10 key drivers of health care costs, Controlling Health Care Costs presents public policy options to control health care costs generated by each of the key drivers:

Advancing Technology, Demographics and Declining Health Status

Lack of Productivity Growth

Inappropriate Utilization

Payment System Distortions

Consumer Price Insensitivity

Medical Errors and Inefficiency

Medical Malpractice

Defensive Medicine

Higher Prices

Administrative Costs

ACP believes that savings can be achieved by reducing inappropriate utilization of services and encouraging clinically-effective care based on comparative effectiveness research. A national workforce policy is needed, it says, to assure an appropriate physician workforce specialty mix. However, to achieve the goal, health care services must be appropriately paid for, and adoption of innovative models of health care delivery such as the Patient-Centered Medical Home must be encouraged.

"We have much existing policy that addresses both the drivers of health care costs and options for controlling them," Dr. Stubbs noted. "Existing ACP policies are summarized in this paper, and there are references to the full position papers for further details and rationale."

ACP also believes that administrative costs and costs from medical malpractice resulting in defensive medicine practices must be reduced. Perhaps most importantly, it says cost savings can be achieved by encouraging patients to take active responsibility for their health by promoting wellness, prevention, participation in chronic disease management, changing unhealthy behaviors, and increasing cost consciousness.

None of its recommendations in isolation will solve all of the problems besetting America's health care system, ACP points out. However, meaningful cost reductions can be achieved without sacrificing quality or decreasing access to health care.

In fact, it believes that cost controls must be accomplished in order to expand access and to achieve health care reform. The experience in Massachusetts has shown that increasing coverage alone does not solve the problem of access or costs. Assuring a sufficient supply of primary care physicians offers great promise toward improving access, cutting costs, and improving quality, but to accomplish this, payment reforms are necessary as well as other measures, such as expansion of student loan and debt forgiveness programs, to attract and retain physicians to careers in primary care.

In addition to the options presented in this paper, ACP recognizes that there are other options that could be considered that have been used in other countries, but are not likely to be accepted by the American public, at least until other approaches have been tried. Accordingly, the paper does not specifically address approaches such as global budgets, explicit rationing of services (denial of services based on health status, age, quality of life for the cost involved, or other factors) or nationalization of U.S. health care.

"This paper addresses the mal-distribution of health care expenditures and the need for equitable and judicious use of resources in America," concluded Dr. Stubbs.

Reference: The American College of Physicians (www.acponline.org) is the largest medical specialty organization and the second-largest physician group in the United States. ACP members include 129,000 internal medicine physicians (internists), related sub-specialists, and medical students. Internists specialize in the prevention, detection, and treatment of illness in adults.

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