Cost Control and Health Care Reform: The Case for All-Payer Regulation

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Cost Control and Health Care Reform The Case for All-Payer Regulation
Executive Summary
Rate regulation that standardizes billing:
• Lower prices and administrative costs: Systematically lower prices in all-payer systems than in the United States, which is mainly how other countries control costs. Price variation creates administrative costs; excessive payments lead to purchase of excess equipment which can then lead to excessive volume.
• Likely significant savings: Experience and evidence show that improved price regulation based on increasing payers’ market power could yield major savings.
• Better cost control: All payers in same boat increases both market power for cost control and the political force for cost control
• Better protections for individuals: Increases transparency and accountability
• Good research data to drive value: It is much easier to keep reliable records on practice patterns, to identify providers with questionably high or low resource use, and to perform research about the consequences of care patterns
• Substantial benefits for providers: Both significant administrative savings within the provider organizations since billing is much less complicated and expensive, and fewer hassles because there will be fewer rules to understand
• Level playing field between public and private plans.

Without rate regulation:
• Insurers unable or unwilling to pay fair provider rates
• Many medical care providers in many markets have the ability to demand payment rates from insurers which make cost control extremely difficult.
• Excessive payment rates drive excessive purchase of equipment and excess capacity, making production less efficient in the U.S.
• No other way to achieve significant cost savings in next decade: CBO has analyzed cost implications of system reorganization.

Other methods of cost-containment will not work in foreseeable future
• Very uncertain whether HIT will contain costs. (CBO, Paul Ginsburg)
• Pay for performance might improve quality. No evidence reduces costs.
• Limited prospects for savings from reducing geographical cost variation because not all variation stems from unjustified utilization (MedPAC) and neither guidelines nor other measures to appropriately reduce utilization exist.
• Applying comparative effectiveness findings unlikely to offset research costs. (CBO)
• Reorganizing and emphasizing primary care delivery not likely to lower costs because it takes time set up new systems, incent doctors to go into primary care.
• Medical home and care coordination involve extra costs and do not show savings. (CBO and MedPAC)

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