Issue Brief: Ensuring Health vs. Insuring Costs  

A fundamental tension lies at the core of our system of health care. On the one hand, our system for financing care is rooted in the principles of insurance where we each pay so that “if the worst happens” our collective payments are used to protect each of us from catastrophic treatment costs. But unlike insurance against the effects of flood, fire, and wind, we also have come to expect our health benefits to cover the costs of routine health care, including preventive care, screenings, and certain “elective” procedures. Although there is an element of insurance here, the premiums paid for these “health benefits” don’t really reflect an insurance model so much as a plan for systematically collecting funds for provider compensation based on the projected consumption of routine health care services.  

Arguably, both types of financing are necessary to a functioning health care system. Where the tension between the two becomes obvious and unacceptable is when we try using either approach to talk about how to better contain the costs of health care delivery, for it is clear that addressing the cost of our health care system is absolutely integral to health care reform.1 If an insurance approach guides the discussion of cost, we find ourselves talking about how to distinguish and pay only legitimate claims based on a coverage policy. But, as has been noted elsewhere, people seldom seek chemotherapy, organ transplants, or other expensive, invasive care unless they need it, making it easy to portray claims adjudication in a given case as contrary to health care and a form of “rationing.” On the other hand, so long as consumers and their providers decide what services to consume and how much is to be charged, it is easy to portray at least some types of expenditures as pretty well uncontrolled.2 The specter of uncontrollable cost conjured up by this “fee-for-service” approach is what leads some to fear any reform where the government (or American business) is at risk of the cost of consumption, and leads others to talk about “price controls.”  

Dissatisfaction with both of these possibilities is part of what is driving public opinion to see a need for health care reform. Indeed, in recent weeks President Obama has been urging consumers to avoid the rhetoric of both models (i.e., rationing and price controls). From a policy perspective, there are some signs that there may be a way forward. The public health community has gone a long way toward providing a basis for consensus among policy makers that any reform of the nation's health care system must emphasize prevention and wellness in order to improve the health of Americans and reduce expenditures in the long term. However, to do so would arguably involve reforming health care delivery in ways that transcend the existing financial models.  

To a greater or lesser degree, almost all of the alternatives under discussion in Congress involve redirecting at least some expenditures into one or another approach to improving health in ways that are believed to reduce the cost of treating chronic disease. To be successful as system reform, this would not be a small effort or temporary project. According to the Centers for Disease Control and Prevention, almost half of all Americans have at least one chronic condition; chronic diseases account for 70 percent of all deaths in the United States; and the medical care costs of people with chronic diseases account for more than 75 percent of the nation’s $2 trillion medical care costs.3 Moreover, in plans financed with public dollars, according to some estimates, treatment of chronic diseases such as diabetes, heart disease, obesity, chronic obstructive pulmonary disease, and certain types of cancers consume 96 cents out of every Medicare dollar and 83 cents of every Medicaid dollar.4  

Testimony at Congressional hearings has advocated both better approaches to managing and preventing chronic illness. A study conducted by Trust for America’s Health, for example, concluded that investing $10 for every person in America to work with a community-based health clinic to prevent tobacco use, increase exercise, and improve nutrition could save the country over $16 billion per year after five years. Savings as well as improved quality of life also is possible for those who already have a chronic condition. For example, a study helping people self-monitor their asthma resulted in 7 percent savings in health care expenditures for individuals in the first year and 28 percent in the second year. Local, integrated prevention and wellness care studied in other research reduced the onset rate of heart disease by 23 percent and stroke by 46 percent when compared with untreated Medicare beneficiaries.5  

President Obama’s public remarks in recent weeks have reiterated that a focus on prevention and wellness is one of the “game changers” that needs to be in the health care reform mix. In recent days he also has asked pointed questions about how certain health plans have achieved a cost structure that is up to 30 percent lower than in other communities6 — plans that are known in health policy circles for their community-based programs focusing on wellness and prevention.  

As Congress returns from the July 4 recess to begin pulling together the elements of legislation, a crucial question will be whether legislators can ensure that the focus of reform remains on health, given the prominence of the cost issue in the political debate. At issue is the fact that despite the emerging data on the potential cost savings from reorganizing health care delivery to focus on prevention and wellness, the Congressional Budget Office has rejected entreaties to “score” these measures as saving on health care expenditures, as these projections are not based on its accepted principles for scoring legislation.7 Without a foundation in the score on the savings side, legislators’ commitment to prevention and wellness will be the only basis for ensuring that a policy shift — reforming health care delivery to ensure health and not just to insure costs — has a prominent role in the legislation and meaningful opportunities for implementation. Notwithstanding accord of witnesses at the hearings,8 it could prove to be difficult for Members to follow through if prevention and wellness programs were to be scored as adding costs.