November 13, 2014

Little Incentives, Big Changes
The state of health care spending in the U.S. often seems like a mixed bag of nuts. On the one hand, health care spending growth rates have slowed substantially in the past few years. That’s good news. On the other hand, that rate is projected to speed back up as soon as next year, as the economy recovers from the Great Recession. That’s bad.
“If we do nothing about health care costs, then by the year 2080, health care will be forty percent of our economy,” says Jon Gruber, an economics professor at MIT and the Director of the Health Care Program at the National Bureau of Economic Research. “That’s clearly untenable.”
So what is a patient – or a doctor, hospital system, or insurance agency – to do?
The answer, says Gruber – no stranger to the tricky politics of health care – is to innovate in careful, cost-effective ways. The FDA might approve a sparkly new medical device, for example, but that doesn’t necessarily mean it’s the most efficient way to treat a patient.

“As folks say, the most expensive medical device in America is the doctor’s pen,” says Gruber.
To keep costs down, hospitals and doctors need to have financial incentives to care for patients holistically, rather than treating crises as they arise.
There are a number of promising, incentive-based experiments underway, including one from Medicare that fines hospitals for discharging patients and then re-admitting them in the same month. Since Medicare introduced a fine for readmission three years ago, Gruber says there’s been an enormous drop in the problem, as well as a shift in focus towards outpatient care.
But for the most part, innovation in the health care industry is now concentrated around the consumer. Wearable exercise trackers, automated prescription reminders, and other devices are getting people more engaged in their health maintenance.
If these technologies aren’t integrated into a larger system, involving health care providers and long-term care, they won’t be worth the cost, says Gruber. “If all we do is give people Fitbits and monitor their steps, that doesn’t do that much,” he says. “But if you integrate them with changes in the way health care is delivered, then it could be very important."

Body and Mind, government, health care, Jon Gruber

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