Monthly Archives: June 2009

DRAFT Lecture Notes for September 1 & 3, 2009: Econ 115: Twentieth Century Economic History


How to Save Two Trillion Dollars (Total, Over the Next Ten Years) on Health Care Spending

Total systemwide savings rising to $400 billion in 2019–and we will need those savings and more to pay for the government health programs as they are currently constituted.Melinda Beeuwkes Buntin and David M. Cutler:>The Two Trillion Dollar Solution: Saving Money by Modernizing the Health Care System: The fundamental challenge in health reform is to reduce the growth rate of health care costs…. If we cannot “bend the curve” of increasing health care costs, then we will not be able to afford our current commitments to Medicare, Medicaid, and the State Children’s Health Insurance Program, let alone the cost of covering the 45 million uninsured Americans….>[W]idely accepted solutions include bringing health care into the information age, reforming health insurance markets, and learning what works and which health care providers are better at what they do. Reform will also require reorienting payments away from fee-for-service… toward value-based systems that pay for entire episodes of care, stressing prevention and not just acute treatment….>[O]ur best guess is that fundamental health system reform involving just three of these strategies will lead to federal savings of about $550 billion over the next decade… [First,] health information technology… direct federal savings of $196 billion between 2010 and 2019… administrative simplification… more productive use of time by physicians and nurses. Second… insurance “exchanges”… $64 billion over the next 10 years. Finally, payment system reforms… could save the federal government $299 billion… by reducing the frequency and intensity of hospitalizations.>These three sets of policies together would yield overall [additional] system savings of $1.5 trillion over the coming decade [in reduced private and state costs]….>We first lay out the two potential means for achieving savings—by cutting waste and inefficiency out of the “base” of current health care spending and by aligning incentives to encourage the growth of only effective health care services. We then discuss how other industries have achieved efficiency gains and the specific policies that experts agree can bring cost savings. In the second half of the paper, we present evidence about the quantitative impact of these types of policies taken together. We sum up each section with a discussion of [additional] related strategies that [also] have promise…>>