When Barack Obama announced health reform as a part of his first presidential campaign, the cost of healthcare was never a major priority. Expanding coverage was always the main intent despite the fact that the United States spends more on health care than any other country in the world, reaching almost three trillion dollars or about 17 percent of the nation’s GDP. So if you’re going to attempt comprehensive health reform, why wouldn’t you have cost control included? If you take a look at other attempts of cost control in the past, you can see how the piece-meal attempts have not gotten close to fixing the problem.
The last time a president directly controlled health care costs was in 1971 under President Nixon with his executive order to freeze wages and prices. His Cost of Living Council allowed physician’s fees to increase by only 2.5 percent a year but its authority expired in 1974. The council however, did spark in interest into looking at how hospitals were paid, which were at that time on a per diem basis. The department of Health, Education and Welfare then came up with a payment system based upon diagnosis, now called the Diagnosis Related Grouping (DRG) system and widely used throughout the world. In 1984 Medicare adopted DRG, which is based upon the average cost of treating a patient per a particular diagnosis. During Nixon’s time in office Medicare also changed to have a regulated room and board cost to all hospitals and limited the per diem cost, which was not regulated. Yet, eight states at that time decided to control the rates that Medicare paid to hospitals, and today Maryland is the only state left standing.
After Nixon sparked the idea of health reform and cost containment, President Ford attempted a unique approach. Under the National Health Planning and Resource Development Act, local planning agencies were created to approve new facilities or buy expensive equipment. The agencies were presented with Certificates of Need (CON) to determine if spending was appropriate. The program was inefficient as CONs sometimes were too hard to get, and was eventually eliminated under President Reagan.
Then we have President Carter who was ambitious with his attempt at cost control. Twice during his presidency his proposals for limiting hospital’s total revenues were defeated. At this time, congress must have been feeling pretty optimistic as they agreed to have hospitals voluntarily contain costs. And that policy is still in use today.
The next attempt at cost control was under the Balanced Budget Act of 1997 that proclaimed physicians’ fees would decrease in the future if they exceeded a targeted amount set the previous year. It was enacted for the first two years, but since 2002 congress has postponed the decrease each year and has even allowed small increases. So much for that!
From past attempts at controlling costs, it was obvious a total re-haul of health care spending would be difficult. Obama knew he had to start (somewhat) small to pass something. Though it was an absolute battle to pass, it was a walk in the park compared to what could have been, or what could have never happened at all.
Nonetheless, Obamacare has a few provisions that will feebly attempt to control costs, mostly through regulation of insurance company administration costs by adopting a set of standards (all effective by January 2016) and through Medicare. Medicare Advantage plans have been greatly subsidized in the past, but will be greatly reduced by 2019. Also, the Independent Payment Advisory Board (IPAB) will establish growth spending rates by 2018 and will decrease funding if Medicare exceeds this target. The other provisions allow for tests or trials to control, such as centering care around primary care physicians, which is why many preventative services are free of cost.
Most of the cost control attempts in Obamacare are experimental. And USA Today claims that in the past three years Obamacare has slowed health care spending growth. Others would strongly disagree. Considering we spend the most on health care in the world, and have the 38th best health system (it makes me cringe to say this), Obamacare is better than nothing.
