Efficiency and Quality: The Role of Controlling Health Care Cost Growth in Health Care Reform

Originally published by the Center for Studying Health System Change (HSC), a nonpartisan policy research organization funded principally by the Robert Wood Johnson Foundation.

Efficiency and Quality: The Role of Controlling Health Care Cost Growth in Health Care Reform

This June 2009 commentary by HSC President Paul B. Ginsburg, Ph.D., published through the Center for American Progress, addressed one of the central tensions in health reform: the need to expand insurance coverage to more than 45 million uninsured Americans while simultaneously reining in the unsustainable growth of health care spending. Ginsburg argued that coverage expansion without cost containment was a formula for long-term fiscal failure.

The Case for Cost Containment Alongside Coverage Expansion

Health care spending in the United States had been growing far faster than the overall economy for decades, consuming an ever-larger share of GDP and squeezing household budgets, employer payrolls, and government programs alike. By 2009, national health expenditures approached $2.5 trillion, and projections showed costs continuing to climb unless structural reforms changed the trajectory. Ginsburg's paper made the case that health reform legislation then under active consideration in Congress had to include meaningful steps to slow spending growth, not just mechanisms to cover the uninsured.

The logic was straightforward. Covering 45 million additional people would cost hundreds of billions of dollars over a decade. If the underlying rate of health care cost growth remained unchanged, the price tag would keep escalating, and future Congresses would face mounting pressure to cut benefits, raise taxes, or both. Moreover, unchecked cost growth would continue to erode employer-sponsored coverage, pushing more people into the ranks of the uninsured even as reform brought others into coverage.

Near-Term Steps Congress Could Take

Ginsburg identified several steps that Congress could take immediately as part of reform legislation. These included reforming provider payment systems to reward efficiency and quality rather than volume, reducing the geographic variation in Medicare spending that research had shown contributed to waste without improving outcomes, and investing in comparative effectiveness research so that clinicians and patients had better information about which treatments worked best for which conditions.

Payment reform was a recurring theme. The fee-for-service system that dominated American medicine rewarded doing more rather than doing better, creating incentives for physicians and hospitals to increase the volume of services without regard to whether those services improved patient health. Ginsburg discussed alternatives like bundled payments, which would pay a single price for an episode of care rather than billing separately for each test, procedure, and visit, and accountable care organizations, which would hold groups of providers financially responsible for the total cost and quality of care for a defined population.

Longer-Term Policy Development

Beyond the immediate legislative agenda, Ginsburg outlined a direction for developing and implementing longer-term policies to slow spending growth. He argued for creating institutional capacity within the federal government to continuously evaluate and update payment policies, rather than relying on Congress to legislate specific payment rates and rules that would quickly become outdated. An independent body with the authority to adjust Medicare payment policy, subject to Congressional override, could be more nimble and less susceptible to lobbying pressure from provider groups.

The commentary also stressed the importance of delivery system reform. Expanding the use of health information technology, promoting care coordination for patients with chronic conditions, and aligning financial incentives with quality and efficiency were all areas where sustained policy attention could bend the cost curve over time. Ginsburg acknowledged that no single policy lever would be sufficient and that a comprehensive strategy combining multiple approaches would be necessary.

Context and Significance

Published in the months before the Affordable Care Act took its final legislative form, this commentary captured the policy thinking of a leading health economist at a pivotal moment. Many of the ideas Ginsburg discussed, including accountable care organizations, comparative effectiveness research, and an independent payment advisory board, were ultimately incorporated into the ACA when it passed in March 2010. The paper reflected a growing consensus among health policy researchers that coverage expansion and cost containment were not separate goals but deeply interdependent ones that had to be pursued together for either to succeed.

Ginsburg's argument that health reform would be incomplete and ultimately unsustainable without serious attention to cost growth proved prescient. In the years following the ACA's passage, the debate over health care costs continued to intensify, and many of the cost-containment tools he advocated became central features of federal health policy. The challenge of balancing expanded access with fiscal sustainability remains one of the defining questions in American health care.

Sources and Further Reading

Center for American Progress — Original publisher of this commentary on health reform and cost containment.

Centers for Medicare and Medicaid Services — Federal agency managing Medicare and Medicaid programs.

Health Affairs — Leading health policy journal.

Robert Wood Johnson Foundation — Health and health care research philanthropy.