Health Care's Role in Deficit Reduction—Guiding Principles

NEJM Perspective: Focus on Slowing Long-Term Health Care Spending Growth; Avoid Cuts that Merely Shift Costs or Disproportionately Affect Low-Income People

Media Advisory
Oct. 26, 2011

FURTHER INFORMATION, CONTACT:
Alwyn Cassil (202) 264-3484 or acassil@hschange.org

WASHINGTON , DC—Cutting federal health care spending over the next 10 years will be particularly challenging for the congressional super committee charged with proposing $1.2 trillion in additional deficit reduction by Thanksgiving, according to a perspective by researchers at the Center for Studying Health System Change (HSC) published online today in the New England Journal of Medicine.

Written by HSC President Paul B. Ginsburg, Ph.D., and HSC Senior Researcher Chapin White, Ph.D., the article notes that between the scheduled 30 percent cut in Medicare physician payment rates next year and the roughly $500-billion reduction in Medicare spending growth over 10 years included in the Patient Protection and Affordable Care Act, there are few attractive short-term deficit-reduction targets left in federal health programs. Nonetheless, the committee likely will consider health care cuts and possibly health-related revenue increases, according to the authors.

“Three principles should guide health-related deficit reduction,” according to the article. “First, the highest priority should be lowering the long-term trend in overall growth in health care spending; reforms may be worthwhile even if they do little to reduce the 10-year deficit, so long as they put the overall health system on a better trajectory. Second, cuts that only shift the financing burden to states, businesses, or individuals without affecting system-wide spending are the least attractive. Third, the committee should avoid cuts that have a disproportionate effect on low-income people.”

The article identifies two key strategies to reduce health care spending growth over the long term—provider payment reform that moves away from “volume-based, fee-for-service payment” and “greater engagement of individuals, employers, and states in decisions that affect the cost of care.”

To access the NEJM article, “Health Care’s Role in Deficit Reduction—Guiding Principles,” go to www.hschange.org/CONTENT/1253/.

The Center for Studying Health System Change is a nonpartisan policy research organization committed to providing objective and timely research on the nation’s changing health system to help inform policy makers and contribute to better health care policy. HSC, based in Washington, D.C., is affiliated with Mathematica Policy Research.