This is the accessible text file for GAO report number GAO-04-793SP 
entitled 'Comptroller General's Forum on Health Care: Unsustainable 
Trends Necessitate Comprehensive and Fundamental Reforms to Control 
Spending and Improve Value' which was released on May 01, 2004.

This text file was formatted by the U.S. General Accounting Office 
(GAO) to be accessible to users with visual impairments, as part of a 
longer term project to improve GAO products' accessibility. Every 
attempt has been made to maintain the structural and data integrity of 
the original printed product. Accessibility features, such as text 
descriptions of tables, consecutively numbered footnotes placed at the 
end of the file, and the text of agency comment letters, are provided 
but may not exactly duplicate the presentation or format of the printed 
version. The portable document format (PDF) file is an exact electronic 
replica of the printed version. We welcome your feedback. Please E-mail 
your comments regarding the contents or accessibility features of this 
document to Webmaster@gao.gov.

This is a work of the U.S. government and is not subject to copyright 
protection in the United States. It may be reproduced and distributed 
in its entirety without further permission from GAO. Because this work 
may contain copyrighted images or other material, permission from the 
copyright holder may be necessary if you wish to reproduce this 
material separately.

Comptroller General's Forum: 

Health Care: Unsustainable Trends Necessitate Comprehensive and 
Fundamental Reforms to Control Spending and Improve Value:

GAO-04-793SP:

Highlights of a GAO Forum:

Highlights of GAO-04-793SP

Why GAO Convened This Forum:

Unrelenting growth in health care spending has put pressure on 
policymakers to seek health care system reforms. The stress comes 
partly from a wide gap in expectations between what health care 
Americans want and what the nation can afford and sustain. GAO’s Health 
Care Forum was held on January 13, 2004, to find ways to elevate the 
nation’s understanding of health care cost, access, and quality 
challenges. Forum attendees included a select group of experts, 
business leaders, and public officials. 

The forum’s plenary speakers discussed issues associated with health 
care costs and value, including spending drivers, long-term 
affordability, and the effect of differences across the country in 
medical practices. Participants in breakout sessions led by the forum’s 
faculty of experts deliberated on the merits of the various health care 
reform strategies, including 

* focusing on consumer cost sensitivity,
* targeting high-cost patients, 
* reducing unwarranted variation in medical practices, and
* managing technology to control spending growth.

GAO has developed a series of questions to evaluate all health care 
reform proposals, based in part, on the results of this forum.

What Participants Said:

The forum’s plenary speakers made the following observations regarding 
health care costs and value: 

* U.S. wealth and other factors drive health care spending: A nation’s 
wealth is the principal driver of its health care spending. However, 
wealth alone does not explain the high level of spending in the United 
States. Other influential factors include the pluralistic organization 
of the U.S. health care system and ambivalent attitudes toward 
rationing health care. While health care spending appears affordable 
for another decade or two, added spending over time will draw resources 
away from other economic sectors and could induce adverse economic 
implications for government, individuals, and other private purchasers 
of health care.

* Unwarranted variation in medical practices nationwide points to 
quality and efficiency problems: Much of the nationwide variation in 
use of medical services has been attributed to differences in an area’s 
resources and capacity to provide health care. Despite the greater 
volume of care provided to patients in high-spending areas, they do not 
have better health outcomes or experience greater satisfaction with 
care. Payment reforms can foster delivery of care that is clinically 
proven to be effective. In addition, health care spending can be 
reduced by identifying and rewarding efficient providers and 
encouraging inefficient providers to emulate best practices.

At the forum’s breakout sessions, participants discussed several 
promising cost containment and value enhancement strategies. The 
sessions focused on the merits and drawbacks of efforts to (1) make 
consumers more conscious of health care costs, (2) coordinate care for 
the nation’s costliest patients, (3) hold the appropriate parties 
accountable for the costs and benefits of their clinical decisions, and 
(4) ration technology without denying needed care. A common theme 
emerged from the four groups: namely, efforts to reward efficiency and 
achieve better health outcomes are dependent on a much more highly 
evolved information infrastructure than exists today. Collecting and 
maintaining the needed data would require political and financial 
support and a central, independent mechanism for setting standards and 
policies. Such structural changes are likely to take years to develop, 
but initiatives are under way to put promising strategies into 
practice. Commitment by all interested parties and political will are 
needed to achieve meaningful and sustainable results.

www.gao.gov/cgi-bin/getrpt?GAO-04-793SP.

To view the full product, click on the link above. For more 
information, contact A. Bruce Steinwald at (202) 512-7101 or 
steinwalda@gao.gov.

[End of section]

Contents:

Letter:

Introduction from the Comptroller General of the United States:

U.S. Health Care Has Not Achieved Sustainable Cost, Broad Access, or 
Good Quality Systemwide:

Containing Costs and Enhancing Value Are Key Challenges Facing the 
Nation's Health Care System:

Participants Discuss Strategies for Controlling Costs and Enhancing 
Value in Health Care:

Comptroller General Presents Criteria for Evaluating Health Care Reform 
Proposals:

Participants Share Views Through Informal Poll:

Appendix I: Forum Agenda:

Appendix II: Forum Faculty and Participants:

Selected Bibliography:

Tables:

Table 1: Framework for Evaluating Health Care Reform:

Table 2: Results of the Health Care Forum Poll:

Figures:

Figure 1: National Health Expenditures as a Percentage of GDP:

Figure 2: Medicare and Medicaid as a Share of GDP:

Figure 3: Composition of Spending on Personal Health Care Services, 
Selected Years:

Figure 4: Number of Uninsured Nonelderly:

Introduction from the Comptroller General of the United States:

In carrying out GAO's mission to help the Congress examine government 
spending and its fiscal sustainability over the long term, I am acutely 
mindful of the extent to which public programs financing health care--
particularly, Medicare--face serious challenges. Since the early 1990s 
when I served as a trustee of Social Security and Medicare, I have been 
concerned about the Medicare program's fiscal health and long-term 
sustainability. My concerns have heightened as I examine GAO's long-
term budget simulations, which show a large and growing structural 
deficit due primarily to our imminent demographic tidal wave and rising 
health care costs. I am mindful, too, that the challenges posed by 
these trends affect public sector programs at all levels of government, 
especially the federal and state levels. In addition, employers and 
other private purchasers of health care services are finding that 
increasing health care spending poses a threat to their competitive 
position in an increasingly global market. Furthermore, rising health 
care costs have implications for overall tax revenues and individual 
employee cash compensation levels.

Unrelenting growth in health care spending has put pressure on 
policymakers to seek fundamental health care system reforms. Part of 
the stress comes from a wide gap in expectations among patients, 
providers, and payers: what patients and providers expect is not well 
aligned with what health care programs are able to deliver. The public 
and private sectors can both play an important role in educating the 
public about the differences between wants, needs, affordability, and 
sustainability at both the individual and aggregate level.

In this regard, GAO's Health Care Forum was held on January 13, 2004, 
to find ways to elevate the nation's understanding of health care cost, 
access, and quality challenges. (See app. I for the forum's agenda.) 
Forum attendees included a select group of experts, business leaders, 
and public officials, who discussed the challenges associated with 
financing and delivering health care both now and in the future. (See 
app. II. for a list of participants.) Distinguished economists, 
practitioners, and other leading health care authorities served as 
faculty for the forum's plenary and breakout sessions. (See the 
selected bibliography of pertinent articles and publications by the 
forum faculty.)

These proceedings showcase the numerous and complex issues that must be 
addressed as we seek viable options to reforming the nation's "at-risk" 
health care system. Convening discussions on these issues is a first 
step toward obtaining public acceptance of the need for comprehensive 
and fundamental changes. The next step is for the public, through open 
dialogue, to encourage elected officials to address these issues 
promptly, directly, and effectively.

I wish to thank all the forum participants for taking the time to share 
their knowledge, insights, and perspectives. We will use the knowledge 
gained from the day's deliberations in our discussions with Members of 
the Congress. I look forward to working with the forum's participants 
on important health care system reform issues in the future.

Signed by: 

David M. Walker: 
Comptroller General of the United States:

U.S. Health Care Has Not Achieved Sustainable Cost, Broad Access, or 
Good Quality Systemwide:

Comptroller General Walker opened the forum with a presentation 
entitled "Health Care System Crisis: Growing Challenges Point to Need 
for Fundamental Reform." In essence, he noted that the U.S. health care 
system is undergoing a period of growing stress. In today's health care 
sector, there are few incentives for providers and consumers to be 
prudent in their ordering and use of health care services, too little 
transparency with regard to the value and costs of care, and inadequate 
accountability to ensure that health care plans and providers meet 
standards for appropriate use and quality. Both the public and private 
sectors are facing major challenges with regard to three fundamental 
and interconnected dimensions of the health care system--cost, access, 
and quality. Specifically, rising costs are becoming unsustainable, 
some Americans do not have access to basic care, and quality of care is 
uneven across the nation. The following are highlights of the 
Comptroller General's presentation.[Footnote 1]

Health Care Expenditures Are Escalating:

Past cost containment efforts have not halted the rise in overall 
health care spending. From 1990 through 2000, spending from all 
sources--both public and private--nearly doubled in nominal dollars 
from about $696 billion to about $1.3 trillion. From 2000 through 2010, 
rapid growth is expected to again double spending to an estimated $2.7 
trillion in nominal dollars. The rapid growth in health care spending 
means that an increasing share of the nation's output, as measured by 
gross domestic product (GDP), will be devoted to the production of 
health care services and goods. In 1970, health care spending 
represented about 7 percent of GDP. By 2010, that share is projected to 
reach about 17 percent of GDP. (See fig. 1.):

Figure 1: National Health Expenditures as a Percentage of GDP:

[See PDF for image]

Note: The figure for 2010 is projected.

[End of figure]

In particular, public program obligations will be unsustainable for 
future generations of Americans. For example, by 2050, the ratio of 
workers to pay for each Medicare beneficiary will have dropped from 
about 4 to 1 today to just about 2 to 1. In addition, Medicare and 
Medicaid will have more than doubled their share of the economy. (See 
fig. 2.):

Figure 2: Medicare and Medicaid as a Share of GDP:

[See PDF for image]

Notes: Projections based on the intermediate assumptions of the 2003 
Trustees' Reports, CBO's August 2003 short-term Medicaid estimates, and 
CBO's March 2003 long-term Medicaid projections.

[End of figure]

At the same time that health care spending has increased, consumers 
have become more insulated from these escalating costs. In 1962, nearly 
half--46 percent--of health care spending was financed by individuals 
out of their own pockets (see fig. 3). The rest was financed by a 
combination of private health insurance and public programs. By 2002, 
the amount of health care spending financed by individuals' out-of-
pocket spending--spending at the point of service--was estimated to 
have dropped to 14 percent.

Figure 3: Composition of Spending on Personal Health Care Services, 
Selected Years:

[See PDF for image]

Notes: The figure for 2002 is estimated. Out-of-pocket spending 
includes direct spending by consumers on coinsurance, deductibles, and 
any amounts not covered by insurance. Out-of-pocket premiums paid by 
individuals are not counted here but are counted as part of private 
health insurance.

[End of figure]

Tax preferences also shield individuals with health insurance from the 
full brunt of health care costs. Tax considerations encourage employers 
to offer health insurance to their employees, as the value of the 
premium is excluded from the calculation of employees' taxable 
earnings. Moreover, the value of the insurance coverage does not figure 
into the calculation of payroll taxes. These tax exclusions represent a 
significant source of forgone federal revenue--over $100 billion--
masking the full cost of providing health benefits. Tax preferences 
work at cross-purposes to the goal of moderating health care spending.

To moderate health care spending in both sectors, we will need to look 
at broad payment system reforms. For both public and private payers, 
containing growth in health expenditures will be an abiding 21st 
century challenge.

Access to Basic Health Care Coverage Is Lacking for Many Americans:

Despite higher health care spending, the United States has not achieved 
broad access to coverage for basic levels of care. Tens of millions of 
Americans remain uninsured or underinsured. (See fig. 4.):

Figure 4: Number of Uninsured Nonelderly:

[See PDF for image]

Notes: Analyses of the Bureau of Labor Statistics and the U.S. Census 
Bureau Current Population Survey, Annual Demographic Supplements and 
Annual Social and Economic Supplement. Figures for 1999 through 2000 
are from the Urban Institute and the Kaiser Commission on Medicaid and 
the Uninsured. The figures for 2001 through 2002 are from a GAO 
analysis of the Current Population Survey.

[End of figure]

Most nonelderly Americans without health insurance are lower-income 
working age adults. Many more individuals will become uninsured as 
states struggling with record budget shortfalls cut Medicaid 
enrollment. Most troubling is that health insurance may be out of reach 
for many of those who need it most--individuals in poor health. Even 
among insured individuals, coverage is uneven. Many of these 
individuals find that important services, such as long-term care and 
prescription drugs, are not covered or the coverage they have may be 
substantially limited.

Gains in Health Status and Quality Are Uneven:

Although increased health care spending has likely led to much of the 
improvements in life expectancy and mortality, the United States 
continues to lag other nations in these and several other outcome 
measures. In 2000, the United States had an infant mortality rate of 
6.9 deaths per thousand live births. This was 23 percent higher than 
the infant mortality rate in the United Kingdom and more than twice as 
high as the rate in Japan for that same year. The United States also 
exceeds other industrialized nations in the number of potential years 
of life lost, which is an indicator of premature mortality and 
preventable deaths.

The United States has fostered quality of care through investment and 
achievement in medical science. Although advances in medical technology 
have unquestionably provided medical benefits, consumers are not as 
informed about the costs and benefits of health care as they may be 
about other goods and services. For many treatments, experts have 
developed a consensus on recommended use, but many patients do not 
receive these treatments at the prescribed frequency. Similarly, some 
services are overprescribed, providing little benefit and adding 
unnecessary costs to the health care system. Finally, higher health 
care spending has not translated to reduced medical errors. An oft-
cited study by the Institute of Medicine estimates that deaths due to 
medical errors in hospitals are higher than deaths caused by automobile 
accidents, breast cancer, or AIDS.

The growing challenges in the U.S. health care system point to the need 
for both comprehensive and fundamental reform, which grows increasingly 
acute as the nation's long-term fiscal imbalance worsens. Thus, the 
issues of rising costs, inconsistent quality, and uneven access will 
need to be addressed simultaneously with system reforms and federal 
leadership on all fronts.

Containing Costs and Enhancing Value Are Key Challenges Facing the 
Nation's Health Care System:

Why does health care spending in the United States consume a greater 
share of the nation's economy than in other countries? Is this level of 
spending affordable and sustainable? What is the value of the health 
care the nation purchases? How can spending be reduced without 
sacrificing value? These questions were the subject of the forum's 
morning plenary sessions on health care cost and value. Presentations 
were given by Dr. Uwe Reinhardt of Princeton University and respondent 
Dr. Alice Rivlin of the Brookings Institution and by Dr. John Wennberg 
of Dartmouth Medical School and respondent Dr. Arnold Milstein of the 
Pacific Business Group on Health. The following is a summary of these 
presentations.

U.S. Wealth and Other Factors Drive Health Care Spending:

Dr. Reinhardt presented his analyses of data from the Organisation for 
Economic Co-operation and Development (OECD), which show that U.S. 
spending on health care per capita continues to outpace other 
industrialized nations. For example, Canada, a country with a fairly 
similar health care delivery system and similar medical practices, 
spent only 57 percent as much per capita as did the United States in 
1999. Although the aging of the population is often cited as a driver 
of national health care spending, this claim is not supported by the 
data. According to Dr. Reinhardt, a nation's wealth, as measured by GDP 
per capita, is the chief health care spending driver. A nation's per 
capita GDP explains about 90 percent of health care spending 
differences across nations. Essentially, ability to pay drives 
consumption.

However, Dr. Reinhardt noted that per capita GDP does not account for 
as much of health care spending in the United States as in other 
countries. Per capita GDP in the United States explained only $3,300 of 
the $4,800 U.S. per capita spending on health care in 2001. Other 
influential factors include the organization of the U.S. health care 
system and attitudes toward health care rationing.

Dr. Reinhardt observed that the U.S. health care system is highly 
fragmented among multiple payers, hundreds of thousands of providers 
often functioning in isolation, and patients with different levels of 
private and public coverage or no coverage at all. Such complexity and 
fragmentation drives up administrative expenses as well as care costs. 
Another contributor to spending, he continued, is the unwillingness of 
Americans, most of whom are insured, to ration health care. Good health 
insurance affords millions of Americans easy access to world-class 
health care facilities. (As an aside, he noted that these advantages 
have not translated into superior health status.) In principle, neither 
the public nor its policymakers are willing to deny care, regardless of 
whether it adds value to the individual or society. For example, he 
noted that the value of doing procedures such as hip replacements on 
patients in their mid-80s and older is highly questionable. For the 
significant minority of uninsured Americans, however, Dr. Reinhardt 
observed that the rationing of health care by price and ability to pay 
is manifest, especially for primary and secondary care, if not for 
tertiary care.

Dr. Reinhardt explained why population age is not very significant as a 
cost driver of health care spending systemwide. The United States is a 
relatively young country compared with other OECD nations whose 
spending per capita on health care is significantly lower. Moreover, 
the growth in the proportion of the population over age 65 (an 
expensive demographic group in terms of health care) will be gradual, 
projected to rise less than 10 percentage points by 2050. Several 
simulations have shown that age and gender account for only a small 
percentage of predicted annual growth in spending on health care. Other 
research shows that much of the annual growth in national spending on 
health care is driven by the same factors that drive increased per 
capita spending across all age groups.

Dr. Rivlin provided commentary on Dr. Reinhardt's presentation. On the 
topic of rationing in the United States, Dr. Rivlin noted that organ 
transplants should not be overlooked as one example: potential 
recipients of organ transplants are ranked in priority order according 
to clinical criteria. Nevertheless, the United States does not ration 
health care extensively, she noted, because we have not reached a point 
where the money spent on health care is considered not worth the 
investment. We are continuing to see gains as people are living longer 
and leading less impaired lives. On the topic of the aging population 
as a cost-driving factor, Dr. Rivlin pointed out that from a federal 
budget perspective, aging will have a significant impact. In 
particular, an increase in the very old population (people in their 
mid-80s and older) will be important because of their need for long-
term care. In 2030, only the leading edge of baby boomers will have 
reached age 80, portending significant cost implications for Medicare 
and Medicaid in the years that follow.

Unexplained Variation in Medical Practices Nationwide Points to Quality 
and Efficiency Problems:

Americans' use of and expenditures for health care services vary widely 
by geographic region. Much of the data showing regional differences was 
developed from Dr. Wennberg's "small area analysis" research, which 
divides the country into 306 geographic areas (called hospital referral 
regions). Noting that the Medicare patient populations in these areas 
differ little in terms of illnesses, Dr. Wennberg attributes much of 
the variation in use of medical services to differences in an area's 
resources and capacity to provide health care.

To explain further, Dr. Wennberg divides medical practices into three 
categories of care: effective, preference-sensitive, and supply-
sensitive.

* Effective care refers to clinical services that have been proven to 
be efficacious with high benefit-risk ratios. As such, these services 
should be provided to patients whose diagnoses indicate the need for 
them. Annual eye exams for diabetics is one example of effective care. 
Dr. Wennberg's research shows that from 1999 to 2000, 30 percent or 
more of diabetic Medicare patients did not receive these medically 
necessary eye exams, illustrating one of many instances of "underuse" 
of effective care across the United States.

* Preference-sensitive care refers to clinical services that meet 
several conditions: two or more valid treatment options are available, 
the options carry different risks and benefits, and patient preference 
should determine which option is selected. Examples of preference-
sensitive services are coronary artery bypass grafting (CABG) and back 
surgery. Misuse of these services occurs when patient preferences are 
not respected in determining the choice of treatment.

* Supply-sensitive care refers to services for which there are few 
clinical guidelines so that the per capita use of these services is 
influenced by the available supply of resources. Among the Medicare 
population, most supply-sensitive services are used in treating 
patients with chronic illness. They include hospitalizations and use of 
intensive care units, revisits to doctors, referrals to specialists, 
and use of diagnostic tests and imaging procedures. Dr. Wennberg's 
research shows that about 50 percent of the variation in discharge 
rates for patients hospitalized with any medical condition is explained 
by the supply of acute care beds. He noted that overuse of supply-
sensitive care accounts for most of the variation in overall Medicare 
spending.

Consistent with Dr. Reinhardt's analysis, Dr. Wennberg's studies show 
that greater per capita spending buys more supply-sensitive care. Areas 
with above-average spending have similar patterns of underuse of 
effective care and overall rates of expensive preference-sensitive 
care, including elective surgery. In other words, spending more per 
capita does not buy greater quality. What greater spending purchases is 
more frequent use of supply-sensitive care in managing patients with 
chronic illness: more hospitalizations, more stays in intensive care, 
more visits, and more tests.

The critical question is this: does greater spending purchase better 
health? Despite receiving a greater volume of care, Medicare 
populations living in higher-spending areas compared to those living in 
lower-spending areas do not have better health outcomes or experience 
greater satisfaction with care. In fact, populations living in high-
spending areas appear to experience slightly worse outcomes. The 
results of this research suggest that, if we can achieve more 
consistency with medical standards of practice, vast potential exists 
to reduce spending without harm to patients while making gains in 
health outcomes.

Payment Reforms Can Foster Delivery of Effective Care, Leading to 
Reduced Health Care Spending:

To achieve a health care system that delivers more effective care--
medical practice based on proven efficacy--our public and private 
payment systems need to be reformed.

Dr. Wennberg offered a working hypothesis for he what terms "value 
health purchasing." Health care spending can be reduced, he contends, 
using a three-pronged approach:

* Identify efficient providers. Cost and utilization data can identify 
health care organizations (for example, hospitals and associated 
physicians) that use fewer supply-sensitive services than their peers 
in treating patients with chronic illness.

* Reward efficient providers. These are providers who also address 
underuse of effective care and misuse of preference-sensitive care. For 
example, payers can reward providers who adhere to practice guidelines 
for effective care and ensure that patient preferences drive the demand 
for preference-sensitive treatment options.

* Encourage inefficient providers to emulate best practices through 
payment incentives. For example, to discourage the provision of 
unnecessary care, payers could compensate providers managing patients 
with certain chronic conditions by paying fixed per-patient amounts 
based on historical actuarial costs rather than paying a fee for each 
service.

Given the extent of variation in medical practices, Dr. Wennberg 
suggests that the nation's leading medical institutions--academic 
medical centers--would be a good place to begin the process of 
improving health care quality and efficiency. He notes that 
historically, these centers' experience in translating basic science 
research into clinical practice has been inconsistent and that 
variations in health care delivery among the centers points to a lack 
of consensus even among the nation's medical science leaders on the 
appropriate use of medical care. At the very least, he argues, federal 
policy should provide incentives for academic medical centers--the 
facilities that train and prepare health care professionals--to accept 
responsibility for the scientific basis of clinical decisionmaking.

Dr. Milstein, commenting on this presentation, observed that Dr. 
Wennberg's prescription for more efficient, higher quality care is 
consistent with the fundamentals of mainstream industrial procurement 
practices. These fundamentals anchor the new health care purchasing 
strategies that large employers are now adopting. They include (1) 
encouraging patients to use providers that, over time, have been cost-
efficient and have earned favorable quality ratings and (2) rewarding 
well-performing providers for reaching world class benchmarks of 
longitudinal cost-efficiency and quality. He concluded that an ideal 
system is one in which incentives encourage providers to be highly 
self-conscious about their performance shortfalls and consumers to be 
performance-sensitive about their choice of providers and treatment 
options.

Participants Discuss Strategies for Controlling Costs and Enhancing 
Value in Health Care:

Following the forum's plenary sessions, participants attended one of 
four breakout sessions. At these sessions, they examined cost 
containment and value enhancement strategies that underlie many recent 
proposals to reform health care. The breakout sessions had the 
following themes:

* Does a Focus on Making Consumers Sensitive to Health Care Costs Hold 
Promise for Containing Costs and Enhancing Value? (led by Paul B. 
Ginsburg, PhD):

* Can We Control Costs and Enhance Value by Targeting Patients at 
Greatest Risk for Health Problems and High Expenditures? (led by 
Elizabeth A. McGlynn, PhD):

* Can Payment Reforms and Other Structural Changes Bring About 
Reductions in Unwarranted Medical Practice Variation? (led by Mark D. 
Smith, M.D., MBA):

* Is It Feasible to Control Spending without Compromising Scientific 
Gains by Managing Medical Technology and Innovation? (led by Stuart H. 
Altman, PhD):

The following is a synthesis of these discussions.

Does a Focus on Making Consumers Sensitive to Health Care Costs Hold 
Promise for Containing Costs and Enhancing Value?

Many view "consumer sensitivity" to health care costs, along with 
increased access to user-friendly information, as key to reining in 
rising health care spending. Proponents of this view contend that 
insured consumers are insulated from the true costs of care and the 
information needed to make judicious decisions about the care they buy 
is essentially lacking. Participants discussed whether, under these 
circumstances, a focus on consumer health care decisionmaking could 
help achieve the necessary trade-offs to contain costs and maintain 
value. They concluded that linking consumer cost incentives to 
physician performance would be the most effective strategy but would 
necessitate efficiency measures that have not yet been developed.

Increasing Consumer Cost Sensitivity Has Potential for the Future but 
Currently Suffers from Serious Data Limitations:

Ideally, consumers become more sensitive to the costs of health care 
when they have incentives to make decisions based on value--the best 
quality for the lowest cost. Because this strategy depends on good 
consumer information, its implementation to date has been less than 
perfect. For example, some employers seek to steer their employees 
toward choosing the best value health plans, but data on health 
outcomes and best medical practices as well as an infrastructure to 
make this information readily available to the public are lacking. One 
participant gave the example of an employer that was considering 
offering its employees different cost-sharing arrangements. Under a 
baseline arrangement, the employer's plan would pay 70 percent of an 
individual's health care costs and the worker, 30 percent; or the plan 
would pay 90 percent and the worker, 10 percent, if the individual 
called a plan-sponsored telephone number before seeking care to get 
advice and education on appropriate services and providers. A 
participant noted that this proposal assumes that there are extensive 
data on services available and the telephone staff can give good 
advice.

Participants noted that workers may resist employers' efforts to 
encourage cost-consciousness, as these efforts are seen as cost 
shifting (increasing workers' share of costs) rather than as a step to 
improve value. Often the higher cost sharing is a compromise, but 
participants agreed that until tools are available to assess the 
quality of providers' care, it is too early to use increased cost 
sharing as a means to achieve better value.

Consumer Cost Incentives Would Need to Be Modified for Low-Income, 
Uninsured, and Chronically Ill Populations:

Participants also made the following points, suggesting that 
conventional consumer cost incentives may not make sense for low-
income, uninsured, and chronically ill individuals. Little research 
exists on the effectiveness of cost sharing (such as $1 or $2 
copayments) for low-income individuals who are on Medicaid or the State 
Children's Health Insurance Program (SCHIP) or who are uninsured. Some 
states' Medicaid and SCHIP programs use scaled-down cost sharing, but 
there is less interest in cost incentives for this population both 
because the population is low income and because Medicaid and SCHIP are 
less constrained to use administrative procedures to control costs. 
When Massachusetts added a 50-cent copayment per prescription for low-
income individuals, the number of people who filled prescriptions in a 
homeless community plummeted. Participants discussed whether the 
measures of efficiency should be the same for low-income populations as 
for others. For example, the time needed to counsel a homeless 
population on healthy behaviors was much longer than for more affluent 
populations.

Participants also discussed the nature of cost incentives for chronic 
care and other high-cost patients. One participant noted that much of 
health care spending is by high-cost patients who exceed their maximum 
for covered out-of-pocket costs. Moreover, many high-risk, chronically 
ill patients are loyal to certain providers, even if it costs them more 
to obtain care from these providers. Thus, cost incentives that 
encourage consumers to differentiate among plans and providers will 
have a limited effect on the behavior of these high-cost patients. 
Issues associated with high-cost patients are also discussed in the 
next breakout session summary.

Incentives Could Be More Effective If Focused on Physicians:

With regard to cost incentives, participants agreed that "it's all 
about the doctor," as consumers' initial decisions about the care they 
receive typically start with advice they receive from their physicians. 
Participants discussed importance of focusing on physician performance 
rather than on hospital performance. One participant suggested 
developing "fuel efficiency" ratings with information on physicians' 
costs and quality and translating this information into cost incentives 
for consumers to choose the more efficient physicians. He said that a 
few large purchasers are moving in this direction. Another reason to 
focus on physicians, he said, is that measures of hospital efficiency 
can be linked to physicians' ratings. For example, some hospitals may 
charge more than twice as much as other hospitals for an MRI; if these 
costs were built into physicians' ratings, physicians would be induced 
to affiliate with the more efficient hospitals.

Participants noted the need to address the reality of patients' strong 
affiliation with their physicians. A participant shared an example of a 
Kentucky employer that had provided its workforce information on costs 
and quality at 14 Louisville-area hospitals; even with such information 
available, 40 percent of patients the employer covered went to the 
high-cost, low-quality hospitals. The employer now has plans to link 
hospital performance information to differential cost-sharing plans, 
making workers pay steep cost differences if they choose the lower-
performing hospitals. According to one participant, the employer in 
this example has "already lost the battle," because patients typically 
make hospital choices on the basis of their physicians' affiliation 
with particular hospitals. As a practical matter, however, he noted 
that it is easier to get data on hospitals than physicians, which is 
why many health plans and employers have started with cost incentives 
linked to hospitals rather than physicians.

Linking Cost Incentives to Appropriate Care Is Difficult without 
Consensus on What Services and Treatments Are Discretionary:

Participants were skeptical about the potential in the near term to 
develop measures of physician performance, as these measures would 
require medical experts to arrive at a consensus about whether a given 
treatment was necessary or elective. For example, as one participant 
noted, many would agree that the use of Viagra (and drugs like it) is 
elective and thus a potential candidate for higher cost sharing, but 
achieving a consensus on other treatments was not as clear-cut. While 
one participant said any given health problem can be placed on a 
spectrum, with variable out-of-pocket costs depending on relative 
efficiency, another responded that this would lead to an "abyss." For 
example, even erectile dysfunction drugs in some circumstances could be 
determined to reduce other medical or mental health costs. Similarly, 
for back surgeries, it is unclear whether "adding two screws to the 
spine," for example, is an effective treatment. Participants also noted 
that a good efficiency measure needs to adjust for hospitals or 
physicians that take high-risk patients or providers will avoid risky 
patients. However, there is debate on how good today's risk adjusters 
are and whether, in addition to risk, longitudinal efficiency measures 
also need to be adjusted for unavoidable social costs, such as 
uncompensated care, and for training expenses, such as those incurred 
by teaching hospitals.

One participant noted that health plans already have consumer cost 
incentives for prescription drugs. Plans can steer their beneficiaries' 
purchases to specific drugs through the use of a formulary--that is, a 
list of prescription drugs around which health plans create incentives 
for physicians to prescribe and beneficiaries to choose. Many plans 
have three tiers of cost sharing based on a patient's choice to use a 
generic, formulary, or nonformulary drug. Several participants agreed 
that tiered cost sharing for drugs was acceptable because having tiers 
informed the consumer about the drug's relative cost-effectiveness 
without denying coverage altogether.

Can We Control Costs and Enhance Value by Targeting Patients at 
Greatest Risk for Health Problems and High Expenditures?

A small fraction of the population accounts for a substantial share of 
total health care spending, due to these patients' high use of 
services, the high costs of their care, or both. While some of these 
people are acute care patients, such as trauma victims or certain 
newborns, others have chronic conditions, such as renal failure, 
asthma, and diabetes. Regardless of the source of their illness, these 
groups of patients have ongoing needs and place continual demands on 
the health care system. Participants in this session discussed whether 
strategies targeted at the chronically ill population could lead to 
reductions in health care spending and quality improvements overall.

A Focused Strategy on Chronic Care Could Improve Value, but May Not 
Reduce Costs:

The group noted that a focus on managing chronic illnesses could 
improve patients' health care quality for at least two reasons. First, 
the nation's delivery systems are designed primarily for acute, 
episodic care, but chronically ill patients need continuous and 
coordinated care, as well as a focus on preventive services, self-care, 
and adoption of healthful behaviors. Stated one participant, "The best 
way to not die of a heart attack is to not have the heart attack in the 
first place." Second, current research shows that patients do not 
receive the most effective care known. Work by RAND has shown that 
appropriate care is provided to patients only about half the time. The 
current system does not effectively meet the needs of people with 
chronic illness, and this contributes to less than optimum value for 
the very patients that rely most heavily on the health care system. 
Meeting the needs of chronically ill patients could improve the quality 
of care they receive and their outcomes but could also increase costs. 
The group recognized that improving value for these patients would 
require improving quality, decreasing costs, or some combination of 
both.

The group also recognized that the burden of illness is not the only 
factor driving health care costs, noting that Dr. Wennberg's seminal 
work on regional differences in the use of medical services shows that 
wide variation is not explained by differences in medical diagnosis. 
Relating this phenomenon to caring for the chronically ill, the group 
noted the cost and value implications associated with the three 
categories of care classified by Dr. Wennberg--effective (care proven 
clinically effective), preference-sensitive (care involving trade-offs 
because more than one treatment exists and each may result in different 
outcomes), and supply-sensitive (care based more on the capacity to 
provide services than on medical knowledge or evidence). On the one 
hand, the group postulated, policies aimed at managing supply-sensitive 
care could have the most promise for reducing expenditures but may be 
the most difficult to implement politically. On the other, policies 
that encourage the practice of effective care--ideal from the 
standpoint of quality--could raise spending for some services and lower 
it for others but would also be difficult to implement, owing to the 
small number of clinical practices for which there is rigorous 
established evidence. Following this last point, the group focused the 
bulk of its remarks on the challenges associated with encouraging 
effective clinical care.

Systematic Data, Payment Reforms, Health Education, and Authoritative 
Standards Needed to Achieve Value:

The group determined that to achieve a value-driven health care system, 
it is necessary to have (1) better information about the services 
provided and outcomes of care to assess value, (2) incentives to 
provide the most effective care known, (3) public awareness of the 
impact of lifestyle and personal health behaviors on the costs of care, 
and (4) an authoritative source of reference for the public, providers, 
and payers on what constitutes effective care. These translated into 
the need to address the following key areas:

* Systematic data: Participants noted that better clinical information 
and better information technology are needed to create incentives, 
enhance transparency, and ensure accountability in health care. The 
development of such information involves two steps: (1) information 
systems would need to be built, perhaps starting with data on high-risk 
patients whose care by multiple providers would require an 
infrastructure of compatible systems, and (2) support for the public 
reporting of information, which would include addressing antitrust laws 
that now inhibit efforts to share utilization and outcome data on the 
care delivered by a community's physicians, hospitals, and other health 
care providers. The group recognized that building an information 
infrastructure would be expensive and would need to be viewed as a 
public good and social investment. Ideally, there should be a central, 
independent mechanism for setting standards, policies, and regulations 
and public support for developing the infrastructure, although multiple 
private sector entities could participate in developing the systems. It 
would be logical to begin the design and development of information 
systems with a focus on chronically ill patients since they have the 
most frequent contact with the health system, but over time, the 
information systems would be diffused to the larger population.

* Payment reforms: Participants noted that in the current environment, 
incentives are lacking to provide certain types of cost-effective care. 
For example, physicians paid under a fee-for-service arrangement 
generally need a medical "event," such as a visit or a procedure, to 
get paid for care. Usually, insurers do not pay physicians solely to 
counsel patients or coordinate their care, services that are 
particularly important for chronically ill patients. Furthermore, if a 
group of clinicians in a hospital want to change a care process, it is 
difficult to move resources between the different parties that are each 
paid separately (for example, hospitals and physicians), in addition to 
the challenge of freeing resources that have already been allocated in 
line with existing processes. Participants also discussed the need to 
create financial incentives to foster the use of effective care. For 
physicians, incentives could include increased payments or loans to 
reward the use of information technology; for patients, they could 
include reduced copayments or deductibles to reward good health habits 
and cooperation in permitting use of personal health care information.

* Health education: Steps to improve health quality would need to be 
accompanied by a sustained health education campaign, such as the one 
conducted over many years on smoking. People should be made more aware 
of the need to improve health quality and how their lifestyle and other 
choices affect the outcomes and costs of their health care. For 
example, to combat the obesity problem, the public could receive 
information on the "body mass index," explaining how higher levels are 
related to costs of care.

* Authoritative standards: The group determined that practicing 
effective, evidence-based medicine and encouraging it through payment 
reforms required an authoritative body of experts to develop and 
promulgate standards of practice. These standards, based on science and 
expert consensus, would guide clinical decisionmaking and payers' 
determination about whether services claimed were medically necessary. 
In addition, the standards would be linked to tort reform: as long as 
the standards were followed appropriately, a clinician would not be 
subject to litigation. The group believed this standard-setting body 
should first focus on high-cost, high-use patients and on obvious 
opportunities for quality improvements. Some participants contended 
that more than standards are needed to address the problem of wide 
variability observed in medical practices, as studies by RAND show that 
even where there are agreed-upon standards, appropriate care is 
provided only about half the time. Issues associated with medical 
practice variation are also discussed in the next breakout session 
summary.

Can Payment Reforms and Other Structural Changes Bring About Reductions 
in Unwarranted Medical Practice Variation?

Studies show that the rates at which patients receive physician office 
care, surgical procedures, and hospital care vary extensively across 
the country without clinical explanation. Health care outcomes--such as 
mortality, quality of life, and medical errors--similarly vary. Leading 
experts, such as professors Reinhardt and Wennberg, contend that for 
much of U.S. health care, supply drives demand. In other words, higher-
than-average utilization of a particular procedure may occur in an area 
where the technology or specialists performing the procedure are in 
abundance. Dr. Wennberg estimates that such supply-sensitive care 
accounts for much of the regionally high service use in Medicare and 
that reducing high use to levels seen in low-use regions would result 
in about a 30-percent reduction in Medicare spending. Patient 
preferences for certain procedures and services also contribute to 
variability in health care use rates. Participants in this session 
discussed whether better outcome data for providers and patients to 
make clinical decisions and the restructuring of payment systems to 
reward quality and efficiency could achieve desired health care system 
reforms.

Reducing Medical Practices That Are Inconsistent with Quality and 
Efficiency Will Depend on Collecting Better Clinical Outcome Data:

Participants agreed that the systematic collection of clinical outcome 
data is fundamental to building a health care system that promotes 
efficiency, decreases the use of unnecessary procedures, and improves 
quality. With longitudinal data, analysts can begin to develop quality 
and efficiency measures that providers, patients, and payers can use to 
make and reward the best clinical decisions. Better outcome data could, 
for example, identify which patients are suitable for organized chronic 
disease management programs and where the provision of unnecessary care 
could be reduced. Such data could be used to guide patients' health 
care decisions, particularly when care alternatives are available 
without a clear-cut choice. For example, one participant contended that 
less than a third of male patients with severe prostate problems 
preferred surgery once informed of the risks and trade-offs.

The group also observed that more outcome data could not only help 
inform case-by-case clinical decisions but also strengthen market 
forces. For example, making comparative data available to providers and 
patients about costs and clinical outcomes could help channel patients 
toward the most efficient practitioners. On this basis, payment systems 
could be restructured to reward the best value of care. Several 
participants suggested that providers' payments and patients' insurance 
copayments could be aligned with quality and efficiency data to pay 
more for delivering higher quality efficiently. Many managed care plans 
use such an incentive to contain prescription drug costs: patients can 
choose to pay more for a branded drug and less for a generic 
equivalent. Participants suggested that insurers could similarly 
decrease or waive patients' insurance copayments if they participated 
in a shared decisionmaking process with their physician and relied on 
efficacy and quality data in opting for treatment.

Accountability for Clinical Decisionmaking Involves Several Parties to 
Varying Degrees:

The group agreed that effective change strategies will not only require 
the collection of better health outcome data but will also require that 
those that exercise control over clinical and cost decisions--health 
care systems, hospitals, physicians, and patients--be made accountable 
and rewarded, when appropriate. Participants agreed that assigning 
accountability for cost and clinical decisions is as challenging as it 
is important, because there are multiple parties that have 
decisionmaking control.

* Health care systems: Participants noted that variation in the degree 
to which health care systems are organized makes it difficult to assign 
accountability at a "system" level. One participant noted that some 
health care systems were too loosely organized to permit credible 
accountability. Another noted that too many of the relevant decisions 
were controlled by physicians rather than plans.

* Hospitals: Participants agreed that in principle, hospitals could be 
an appropriate party to hold accountable for constraining health care 
supply in that they hire physicians, "build beds," and invest in 
technology--all of which offer potential avenues for influencing cost 
and clinical decisionmaking. If data were available to determine what 
constitutes an "appropriate hospitalization," a hospital could be paid 
a fixed amount that reflects the number of hospitalizations expected 
for its patient base, regardless of how many beds it uses. However, 
perverse payment incentives and lack of leverage in certain instances 
suggest that hospitals alone cannot assume accountability for optimal 
clinical decisionmaking. One participant observed that hospitals 
generally do not have control over the prescribing behavior of their 
attending physicians. Participants also discussed the increasing number 
of procedures--orthopedic surgeries, endoscopies, and mammographies, 
for example--that are now being done in physicians' offices, thereby 
decreasing the influence that hospitals have over these and other 
inpatient procedures. The group agreed that other procedures are 
performed for which hospitals could be appropriately held accountable 
for quality or appropriateness, such as CABGs and other surgeries.

* Physicians: Like other breakout session participants, this group 
determined that physicians were the appropriate party to hold 
accountable for a number of clinical decisions and costs. According to 
one participant, general practitioners in the United Kingdom receive 
substantial bonuses for quality and efficiency. She suggested that a 
similar "pay for performance" model could be applied in the United 
States, under which physicians who referred patients for fewer 
procedures that result from excess capacity, such as CT-scans and MRIs, 
could be financially rewarded. Other participants disagreed and warned 
that strategies designed to curtail the provision of health care 
services carry with them the risk of a backlash, if it appears that 
providers are being rewarded for denying care. One participant asked, 
"Would people be comfortable paying more for less?" Another participant 
suggested that doing so would send the wrong message: "Why pay doctors 
to do things right, rather than not pay them if they do things wrong?":

* Patients: One participant noted that although physicians were an 
obvious party to hold accountable for clinical decisionmaking, patients 
themselves were important in the process. In principle, if comparative 
quality and efficiency data were available to patients, financial 
incentives, such as lower copayments, could steer patients toward using 
the appropriate physician, hospital, or health plan. This could result 
in a spillover effect: as more patients choose these providers, the 
providers would have incentives to perform better. Another participant 
noted that the use of data to influence patient choice assumes rational 
decisionmaking on the part of the patient, but in many cases, acutely 
ill patients must make decisions quickly that may be more emotionally 
based. The group agreed that as a practical matter, the lack of 
adequate comparable data today limits the ability to link incentives to 
patients' decisions.

Participants emphasized that regardless of who is held accountable for 
clinical and cost decisions, a "one-size-fits-all" approach to payment 
incentives will not work. Incentive strategies should be structured 
differently for inpatient and outpatient services, specialty care and 
primary care, and other groupings. Payment restructuring would need to 
reflect variation within the existing payment systems and be tailored 
to differences among payers--such as Medicare, Medicaid, and private 
insurance--and their covered populations.

Implementation Issues Make the Prospect of a Value-Based Health Care 
System a Long-term Goal:

Participants noted that a data-driven reform strategy to improve health 
care quality and efficiency depends on an information technology (IT) 
infrastructure that is virtually nonexistent today. In particular, the 
necessary level of technological sophistication to gather, monitor, and 
securely transmit data does not widely exist at the physician office 
level. Without appropriate IT resources, office-based physicians are 
likely to have difficulty expeditiously recording the information that 
is needed for outcomes research and applying the findings of such 
research to their own practices. On a systemwide scale, differences in 
payment methods will require more IT sophistication to implement 
structural changes.

Is It Feasible to Control Spending without Compromising Scientific 
Gains by Managing Medical Technology and Innovation?

Policymakers are looking at the role of technological advancements as 
an important driver of future spending growth. Although some 
technologies can achieve savings--for example, by reducing hospital 
stays--the increase in utilization that results from technology 
advances has generally offset any related savings. Finding appropriate 
limits on technology development and use is problematic, however, as 
such limits may deny patients improvements in health care quality, such 
as life-extending care. In light of these trade-offs, participants 
discussed the difficulty of assessing technology's net impact on health 
care spending and the lessons this holds for controlling its use.

Difficult to Determine Technology's Impact on Spending Because 
Systematic Assessment of Costs and Productivity Offsets Is Lacking:

Acknowledging that technological change accounts for a significant 
share of health care inflation, participants addressed the question, 
"Have we been getting our money's worth?" The group agreed that 
technology's contributions over the last 20 years--new pharmaceuticals, 
diagnostic imaging, and genetic engineering, among others--have been, 
on the whole, of significant value to the nation's health. However, on 
a case-by-case basis, the use of high-tech procedures to improve health 
and prolong life may be of questionable value when the technology to be 
used is very expensive and odds for the patient to have a good outcome 
are very low. For example, one participant noted a case in which a 92-
year-old cardiac patient underwent bypass surgery and received a heart-
valve replacement but died 2 months later from pneumonia. Participants 
agreed that the general tendency in this country is to treat patients 
with available technology when there is the slightest chance of benefit 
to the patient, even though the costs may far outweigh the benefit to 
society as a whole. Other countries do not spend as much at the end of 
life. The group also agreed, however, that no one would choose to go 
back to the 1980s technology over that of today's, despite all its 
inefficiencies. But, asked one participant, "Can we figure out how to 
get more efficient?"

The group determined that a big problem in using technology efficiently 
was a lack of information, developed and disseminated systematically, 
on which patients, providers, and payers could make good health care 
and cost trade-off decisions. They noted that progress in the 
discipline of technology assessment has not kept pace with medical 
technology advancements. The medical community has not invested in IT-
-such as the adoption of computerized patient records--despite the 
potential for patient safety improvements and savings through 
administrative simplification. The reason, contended one participant, 
is that market forces have not driven IT investment in same way that 
they have driven investments in pharmaceutical research and diagnostic 
imaging equipment. Nevertheless, today's employers, who finance a 
substantial share of the health care of the privately insured 
population, are seeking more information on health care technology 
costs and benefits. At the same time, the technology industry has been 
thwarting efforts by public payers to assess their products on the 
basis of cost-effectiveness. Some participants cited the need for 
government investment and direction, through grants and reimbursement 
policies. The group determined that without greater transparency and 
knowledge about technologies' benefits relative to their cost, 
technology will continue to "test positive" as a major cost driver.

Controlling Use of Technology Faces Barriers to Change:

The group noted that the conventional controls to rein in technology 
use focus on supply, as supply is a primary factor driving health care 
demand. For example, formularies are lists of drugs developed by health 
plans to control the use of expensive drugs. Formularies favor the use 
of the generic equivalents of brand-name drugs on the assumption that 
generics are, more or less, equally effective and, being less expensive 
than branded drugs, are thus more cost-effective. Similarly, 
certificates of need (CON) are a regulatory measure some states use to 
limit the diffusion of high-tech equipment, such as MRIs and CT-scans. 
CON requirements enable states to limit expensive technology to a few 
strategically located facilities and help even out the distribution of 
resources across locations.

Efforts to use cost-effectiveness as a criterion for deciding when and 
whether to use medical technology have had mixed success. Participants 
noted that many entities try to do their own cost-effectiveness 
analyses, but there is a lot of duplication of effort and their efforts 
are typically impeded by incomplete or otherwise less than robust data. 
For example, one participant noted that health plans developing 
formularies each seek information on the cost-effectiveness of various 
drugs, but outside of the drug companies, no one--not even the Food and 
Drug Administration (FDA)--has access to the data needed to conduct 
these analyses effectively.

Much of the discussion focused on the need for a central function, 
independent of the industries, that would assess health care 
technologies beyond the level of the safety and efficacy analyses that 
FDA conducts. Some participants favored the establishment of a public 
(that is, government) entity, whereas others supported a public-private 
partnership, modeled after the National Quality Forum (a consortium of 
businesses and not-for-profit organizations that do studies on building 
a "business case" for quality). As part of the discussion of barriers 
to centralization, several participants cited the reining in or 
elimination by the Congress of government entities tasked with 
assessing technology or promulgating practice guidelines, such as the 
Agency for Healthcare Research and Quality and the Office of Technology 
Assessment.

The group agreed that a major barrier to advancing technology 
assessment is the technology industry itself. Better information on 
cost-effectiveness, participants noted, may not be in the financial 
interest of a company whose drug or device is not judged cost-
effective. Other barriers, a participant noted, come from institutional 
providers and individual practitioners. Ideally, hospitals and 
physicians will use quality measurement--outcomes and effectiveness 
data--to foster best medical practices. In fact, providing feedback 
data to physicians--for example, on their prescribing behavior compared 
to that of their peers--has been a powerful tool in bringing the 
practice patterns of "outlier" physicians in line with an appropriate 
norm. At the same time, physicians and hospitals have raised 
methodological concerns about the soundness of quality measurement 
initiatives, given that flaws exist in the age and completeness of the 
data collected and in the adjusters used to take patients' severity of 
illness into account. Participants noted that debate about what is an 
acceptable level of imperfection can often derail quality measurement 
initiatives.

The group concluded that the cost and productivity offsets associated 
with technology use could not be determined systematically without 
widespread IT use and improvements. It also determined that the 
government would need to assume a key role in supporting IT 
development. However, until such IT capabilities are in place, 
incentives must be developed for providers and patients to use new 
high-tech procedures prudently, or health care expenditures will 
continue to escalate at ever-increasing speed with serious consequences 
for the nation's economy.

Comptroller General Presents Criteria for Evaluating Health Care Reform 
Proposals:

Several common themes emerged from the four breakout sessions, despite 
their focus on different health care reform strategies. Collectively, 
participants' observations affirmed the position that in today's health 
care sector, there are few incentives for providers and consumers to be 
prudent in their ordering and use of health care services, too little 
transparency with regard to the value and costs of care, and inadequate 
accountability to ensure that health care plans and providers meet 
standards for appropriate use and quality. The groups essentially 
concluded that these problems cannot be solved overnight and that it 
will require committed, long-term resolve and a more highly evolved 
information infrastructure to help policymakers and the public 
understand the need to move beyond the status quo.

To this end, the Comptroller General has argued for adopting a 
systematic approach to assessing health care reform proposals. GAO 
therefore created a framework that includes a comprehensive set of 
criteria for the Congress to consider as it evaluates proposed health 
care reforms. GAO's framework incorporates comments made by forum 
participants in an extensive discussion following the Comptroller 
General's presentation on health care system challenges; it is 
constructed around the dimensions of cost, access, quality, and 
implementation. (See table 1.)

Table 1: Framework for Evaluating Health Care Reform:

Dimension: Cost: Does the proposal help to ensure: 
Criterion: 
*sustainable growth in public and private sector health care 
expenditures? For example, 
*are Medicare and Medicaid reform efforts aligned with the nation's 
long-term fiscal outlook? 
*are health care financing policies compatible with the efforts of U.S. 
companies to compete in global markets?

Dimension: Cost: Does the proposal help to ensure: 
Criterion: 
*efficient production and consumption of health care resources, 
including; 
*economical pricing of services? 
*incentives for providers to make prudent medical decisions based on 
benefit and cost? 
*consumer sensitivity to the benefits and costs of health care 
services?

Dimension: Cost: Does the proposal help to ensure: 
Criterion: 
*that government tax incentives do not have unintended consequences?

Dimension: Cost: Does the proposal help to ensure: 
Criterion: 
*that government financing meets the nation's most critical health care 
needs?

Dimension: Access: Does the proposal help to ensure: 
Criterion: 
*guaranteed access to essential health care coverage, including; 
*catastrophic loss protection? 
*children's preventive health care services?

Dimension: Access: Does the proposal help to ensure: 
Criterion: 
*an insurance market that adequately pools risk and offers alternative 
levels of coverage?

Dimension: Quality: Does the proposal help to ensure: 
Criterion: 
*care that meets acceptable standards, including; 
*lowering the occurrence of medical errors? 
*medical practices based on scientific evidence? 
*limiting disparities in treatment for all patients?

Dimension: Implementation: Does the proposal help to ensure: 
Criterion: 
*the development of an information infrastructure that provides prompt 
and reliable data to monitor cost, quality, and system integrity?
*transition to a new structure that effectively mitigates potential 
disruptions and any new demands on resources and affected individuals?
*oversight and enforcement mechanisms for effective accountability?
*reforms that consumers can easily adapt to and understand? 

Source: GAO:

[End of table]

Ideally, health care reform proposals will ultimately provide and align 
incentives, foster transparency, and ensure accountability. The reality 
is that comprehensive reforms may need to be incremental in order to 
minimize disruptions and facilitate political consensus. The hope is 
that the framework can guide us through an orderly process of debate.

Participants Share Views Through Informal Poll:

At the forum's conclusion, participants were polled on 14 statements 
concerning the nation's health care system. A consensus on these views 
was neither hoped for nor expected--with the exception of the last 
statement asking participants for a commitment to further public 
dialogue on health care reform issues. The results in table 2 are based 
on the confidential responses of two-thirds of the participants.

Table 2: Results of the Health Care Forum Poll:

Statement: The United States has a serious and structural fiscal 
imbalance that requires tough choices by policymakers; 
Percentages: Strongly agree: 76%; 
Percentages: Agree: 21%; 
Percentages: Neither agree nor disagree: 3%; 
Percentages: Disagree: --; 
Percentages: Strongly disagree: --.

Statement: Patients need to be more active and informed participants in 
the decisionmaking process relating to discretionary and expensive 
medical procedures; 
Percentages: Strongly agree: 62%; 
Percentages: Agree: 34%; 
Percentages: Neither agree nor disagree: --; 
Percentages: Disagree: 3%; 
Percentages: Strongly disagree: --.

Statement: The U.S. health care system is characterized by both 
underuse of wellness and preventive care and overuse of high-tech 
procedures; 
Percentages: Strongly agree: 55%; 
Percentages: Agree: 34%; 
Percentages: Neither agree nor disagree: 7%; 
Percentages: Disagree: 3%; 
Percentages: Strongly disagree: --.

Statement: Defensive medicine is a significant problem that is caused 
by concerns about litigation; 
Percentages: Strongly agree: 24%; 
Percentages: Agree: 38%; 
Percentages: Neither agree nor disagree: 21%; 
Percentages: Disagree: 17%; 
Percentages: Strongly disagree: --.

Statement: The current health care system is unsustainable and requires 
significant reforms; 
Percentages: Strongly agree: 45%; 
Percentages: Agree: 45%; 
Percentages: Neither agree nor disagree: 10%; 
Percentages: Disagree: --; 
Percentages: Strongly disagree: --.

Statement: Ten years ago, managed care was thought to be the answer to 
health care cost containment, but it no longer appears to offer a long-
term solution to escalating costs; 
Percentages: Strongly agree: 24%; 
Percentages: Agree: 28%; 
Percentages: Neither agree nor disagree: 7%; 
Percentages: Disagree: 38%; 
Percentages: Strongly disagree: 3%.

Statement: Based on comparisons with other major industrialized 
nations, it appears that the United States is lagging in the areas of 
cost containment, health outcomes, and access to care; 
Percentages: Strongly agree: 32%; 
Percentages: Agree: 39%; 
Percentages: Neither agree nor disagree: 14%; 
Percentages: Disagree: 7%; 
Percentages: Strongly disagree: 7%.

Statement: Given the power of providers and the desires of insured 
consumers, market forces alone are unlikely to reasonably constrain 
health care costs; 
Percentages: Strongly agree: 39%; 
Percentages: Agree: 29%; 
Percentages: Neither agree nor disagree: 11%; 
Percentages: Disagree: 21%; 
Percentages: Strongly disagree: --.

Statement: Health care costs represent a growing burden among 
employers, especially given increasing global and domestic 
competition; 
Percentages: Strongly agree: 58%; 
Percentages: Agree: 28%; 
Percentages: Neither agree nor disagree: 3%; 
Percentages: Disagree: 7%; 
Percentages: Strongly disagree: 3%.

Statement: Although not equally available to all segments of the 
population, the highest quality health care is delivered in the United 
States; 
Percentages: Strongly agree: 11%; 
Percentages: Agree: 29%; 
Percentages: Neither agree nor disagree: 14%; 
Percentages: Disagree: 32%; 
Percentages: Strongly disagree: 14%.

Statement: The United States pays more than its fair share of R&D for 
new medical products and technologies; 
Percentages: Strongly agree: 24%; 
Percentages: Agree: 44%; 
Percentages: Neither agree nor disagree: 17%; 
Percentages: Disagree: 10%; 
Percentages: Strongly disagree: 3%.

Statement: In the long run, health policies may need to focus more on 
attaining a basic level of health care for all Americans than on 
providing expanded coverage for certain segments of the U.S. 
population; 
Percentages: Strongly agree: 28%; 
Percentages: Agree: 55%; 
Percentages: Neither agree nor disagree: 17%; 
Percentages: Disagree: --; 
Percentages: Strongly disagree: --.

Statement: Ultimately, the division of responsibilities for health care 
access and financing--currently shared by the government, employers, 
and individuals--may need to be redefined; 
Percentages: Strongly agree: 18%; 
Percentages: Agree: 57%; 
Percentages: Neither agree nor disagree: 14%; 
Percentages: Disagree: 11%; 
Percentages: Strongly disagree: --.

Statement: I will continue participating in public discussions and 
debates that can help elevate the nation's understanding of the long-
term challenges posed by today's health care financing and delivery 
systems; 
Percentages: Strongly agree: 90%; 
Percentages: Agree: 10%; 
Percentages: Neither agree nor disagree: --; 
Percentages: Disagree: --; 
Percentages: Strongly disagree: --. 

Source: GAO analysis of Health Care Forum participant poll.

Note: Percentages may not add to 100 due to rounding.

[End of table]

[End of section]

Appendix I: Forum Agenda:

9:00 a.m.
Welcome and Introductions 
Dave Walker, Comptroller General of the United States 
Forum Participants:

9:15 a.m. GAO's Health Care Framework 
Dave Walker, Comptroller General of the United States:

10:15 a.m.Break:

10:30 a.m. Plenary Session 1: The Cost Dimension Presenter: Uwe 
Reinhardt, James Madison Professor of Political Economy, Princeton 
University Respondent: Alice Rivlin, Senior Scholar, The Brookings 
Institution:

11:30 a.m. Plenary Session 2: The Value Dimension Presenter: John 
Wennberg, Center for Evaluative Clinical Sciences, Dartmouth Medical 
School 
Respondent: Arnold Milstein, The Pacific Business Group on Health:

12:30 p.m. Break:

1:00 p.m. Breakout Sessions:

Group 1: Consumer Cost Sensitivity 
Session Leader: Paul Ginsburg, President, Center for Studying Health 
System Change:

Group 2:High-Cost Patients 
Session Leader: Elizabeth McGlynn, Associate Director, RAND Health, and 
Director of the Center for Research on Quality in Health Care:

Group 3: Medical Practice Variation 
Session Leader: Mark Smith, President and CEO, California Health Care 
Foundation:

Group 4: Technology Management 
Session Leader: Stuart Altman, Sol C. Chaikin Professor of National 
Health Policy, Brandeis University:

2:30 p.m. Break:

2:45 p.m. Plenary Session 3: Breakout Session 
Conclusions 
Breakout Session Leaders:

4:15 p.m. Opinion Poll and Wrap-up 
Dave Walker, Comptroller General of the United States:

[End of section]

Appendix II: Forum Faculty and Participants:

Forum Faculty:

Stuart H. Altman: 
Sol C. Chaikin Professor of National Health Policy, 
Brandeis University:

Paul B. Ginsburg: 
President, Center for Studying Health System Change:

Elizabeth A. McGlynn: 
Associate Director, RAND Health, and Director of the Center for 
Research on Quality in Health Care:

Arnold Milstein: 
Medical Director, Pacific Business Group on Health, and 
National Health Care Thought Leader, Willam M. Mercer Consulting:

Uwe E. Reinhardt: 
James Madison Professor of Political Economy, Princeton University:

Alice M. Rivlin:
Director and Senior Fellow, The Brookings Institution:

Mark D. Smith: 
President and CEO, California Health Care Foundation:

John E. Wennberg: 
Director, Center for the Evaluative Clinical Sciences, 
Dartmouth Medical School:

Forum Participants:

Janice Angell: 
Executive Director, Health and Benefits, 3M:

Jim Bentley: 
Senior Vice President, Strategic Policy Planning, American Hospital 
Association:

Barbara Blakeney: 
President, American Nurses Association:

Charles A. Bowsher: 
Former Comptroller General of the United States, 
U.S. General Accounting Office:

Karen Davis: 
President, The Commonwealth Fund:

Senator David F. Durenberger: 
Chair, National Institute of Health Policy,
University of St. Thomas and the University of Minnesota:

Harvey V. Fineberg: 
President, Institute of Medicine of the National Academies:

Jeffrey L. Gabardi: 
Senior Vice President, Policy, American Association 
of Health Plans/Health Insurance Association of America:

Tony Gamboa: 
General Counsel, U.S. General Accounting Office:

Mary Grealy: 
President, Healthcare Leadership Council:

Glenn Hackbarth: 
Chairman, Medicare Payment Advisory Commission:

Bruce H. Hamory: 
Executive Vice President and Chief Medical Officer, 
Geisinger Health System:

Randy Johnson: 
Director, Human Resources Strategic Initiatives, 
Motorola, Inc.

Chip Kahn: 
President, Federation of American Hospitals:

Vincent Kerr: 
Executive Vice President, Network and Clinical Solutions, 
UnitedHealth Group:

James R. Knickman: 
Vice President, Research and Evaluation, The Robert 
Wood Johnson Foundation:

Carolyn J. Luckensmeyer: 
President, America Speaks:

Randall Lutter: 
Chief Economist, Food and Drug Administration, 
U.S. Department of Health and Human Services:

Mark Miller: 
Executive Director, Medicare Payment Advisory Commission:

Donald Palmisano: 
President, American Medical Association:

Robert D. Reischauer: 
President, Urban Institute:

John Rother: 
Director of Policy and Strategy, AARP:

Dallas L. Salisbury: 
President and CEO, Employee Benefits Research Institute:

William J. Scanlon: 
Director, Health Care Issues, U.S. General Accounting Office:

Leon H. Schellman: 
Manager, United States Benefits, Procter & Gamble:

Gerald M. Shea: 
Assistant to the President, Government Relations, 
American Federation of Labor and Congress of Industrial Organizations:

Jean Sheil: 
Director of Family and Children's Programs Group, 
Centers for Medicare & Medicaid Services, 
U.S. Department of Health and Human Services:

Henry E. Simmons: 
President, National Coalition on Health Care:

Pete Smith: 
President and CEO, Private Sector Council:

Ian D. Spatz: 
Vice President, Public Policy, Merck and Company, Inc.

A. Bruce Steinwald: 
Director, Health Care, Economic and Payment Issues, U.S. General 
Accounting Office:

Louise Van Diepen: 
Clinical Executive, U.S. Department of Veterans Affairs:

David M. Walker: 
Comptroller General of the United States, 
U.S. General Accounting Office:

Andrew Webber: 
President and CEO, National Business Coalition on Health:

GAO Forum Managers:

Jessica Farb:

Hannah Fein:

A. Bruce Steinwald:

[End of section]

Selected Bibliography:

Altman, Stuart H., et al. "Escalating Health Care Spending: Is it 
Desirable or Inevitable?" Health Affairs (Web Exclusive, January 8, 
2003).

Altman, Stuart H., et al. "The Outlook for Hospital Spending." Health 
Affairs, vol. 22, no. 6 (2003).

Ginsburg, Paul B., et al. "Are Market Forces Strong Enough to Deliver 
Efficient Health Care Systems? Confidence is Waning." Health Affairs, 
vol. 23, no. 2 (2004).

McGlynn, Elizabeth A., et al. "The Quality of Health Care Delivered to 
Adults in the United States." New England Journal of Medicine, vol. 
348, no. 26 (2003).

Milstein, Arnold, and Nancy E. Adler. "Out of Sight, Out of Mind: Why 
Doesn't Widespread Clinical Quality Failure Command Our Attention?" 
Health Affairs, vol. 22, no. 2 (2003).

Reinhardt, Uwe E., et al. "U.S. Health Care Spending in an 
International Context." Health Affairs, vol. 23, no. 3 (2004).

Reinhardt, Uwe E. "Does the Aging of the Population Really Drive the 
Demand for Health Care?" Health Affairs, vol. 22, no. 6 (2003).

Reinhardt, Uwe E., et al. "It's the Prices, Stupid: Why the United 
States Is So Different From Other Countries." Health Affairs, vol. 22, 
no. 3 (2003).

Rivlin, Alice M. and Isabel Sawhill, eds. Restoring Fiscal Sanity: How 
to Balance the Budget. Washington, D.C.: Brookings Institution Press, 
2004.

Smith, Mark D., et al. "The Nonpoor Uninsured in California, 1998." 
Health Affairs, vol. 19, no. 4 (2000).

Wennberg, John E., and David E. Wennberg. "Perspective: Addressing 
Variations: Is There Hope for the Future?" Health Affairs (Web 
Exclusive, December 10, 2003).

Wennberg, John E., et al. The Quality of Medical Care in the United 
State: A Report on the Medicare Program, The Dartmouth Atlas of Health 
Care 1999. Chicago: American Hospital Association, 1999.

FOOTNOTES

[1] The figures in this section are based on the most recent data 
available at the time of the forum--January 2004. 

GAO's Mission:

The General Accounting Office, the investigative arm of Congress, 
exists to support Congress in meeting its constitutional 
responsibilities and to help improve the performance and accountability 
of the federal government for the American people. GAO examines the use 
of public funds; evaluates federal programs and policies; and provides 
analyses, recommendations, and other assistance to help Congress make 
informed oversight, policy, and funding decisions. GAO's commitment to 
good government is reflected in its core values of accountability, 
integrity, and reliability.

Obtaining Copies of GAO Reports and Testimony:

The fastest and easiest way to obtain copies of GAO documents at no 
cost is through the Internet. GAO's Web site ( www.gao.gov ) contains 
abstracts and full-text files of current reports and testimony and an 
expanding archive of older products. The Web site features a search 
engine to help you locate documents using key words and phrases. You 
can print these documents in their entirety, including charts and other 
graphics.

Each day, GAO issues a list of newly released reports, testimony, and 
correspondence. GAO posts this list, known as "Today's Reports," on its 
Web site daily. The list contains links to the full-text document 
files. To have GAO e-mail this list to you every afternoon, go to 
www.gao.gov and select "Subscribe to e-mail alerts" under the "Order 
GAO Products" heading.

Order by Mail or Phone:

The first copy of each printed report is free. Additional copies are $2 
each. A check or money order should be made out to the Superintendent 
of Documents. GAO also accepts VISA and Mastercard. Orders for 100 or 
more copies mailed to a single address are discounted 25 percent. 
Orders should be sent to:

U.S. General Accounting Office

441 G Street NW,

Room LM Washington,

D.C. 20548:

To order by Phone: 	

	Voice: (202) 512-6000:

	TDD: (202) 512-2537:

	Fax: (202) 512-6061:

To Report Fraud, Waste, and Abuse in Federal Programs:

Contact:

Web site: www.gao.gov/fraudnet/fraudnet.htm E-mail: fraudnet@gao.gov

Automated answering system: (800) 424-5454 or (202) 512-7470:

Public Affairs:

Jeff Nelligan, managing director, NelliganJ@gao.gov (202) 512-4800 U.S.

General Accounting Office, 441 G Street NW, Room 7149 Washington, D.C.

20548: