Cost Containment and the Patient Protection and Affordable Care Act

FIU Law Review Volume 6 | Number 1 Article 7 Fall 2010 Cost Containment and the Patient Protection and Affordable Care Act David Orentlicher Indiana University School of Law-Indianapolis Follow this and additional works at: https://ecollections.law.fiu.edu/lawreview Part of the Other Law Commons Online ISSN: 2643-7759 Recommended Citation David Orentlicher, Cost Containment and the Patient Protection and Affordable Care Act, 6 FIU L. Rev. 67 (2010). Available at: https://ecollections.law.fiu.edu/lawreview/vol6/iss1/7 This Article is brought to you for free and open access by eCollections @ FIU Law Library. It has been accepted for inclusion in FIU Law Review by an authorized editor of eCollections @ FIU Law Library. For more information, please contact . Cost Containment and the Patient Protection and Affordable Care Act David Orentlicher * The legislation “puts into place virtually every cost-control reform proposed by physicians, economists, and health policy experts.” - Peter Orszag and Ezekiel Emanuel1 "The job of figuring how to cover uninsured people used up all the political oxygen that was available. They didn't have the energy for costs." - Alan Sager2 For decades, the U.S. health care system has grappled with two key problems — inadequate access to coverage and increasingly unaffordable health care costs. Paradoxically, the U.S. spends far more of its gross domestic product (GDP) on health care than do other economically-advanced democracies, yet provides health care insurance to fewer of its citizens.3 During the debate that led to the enactment of the Patient Protection and Affordable Care Act, public officials recognized the need to address the problems of both access and cost, but in the end, the Act does far more about increasing access than it does about cutting * Samuel R. Rosen Professor of Law and Co-Director of the Hall Center for Law and Health, Indiana University School of Law-Indianapolis; MD, Harvard Medical School; JD, Harvard Law School. The author wrote this paper while serving as a visiting professor of law at University of Iowa College of Law. 1 Peter R. Orszag & Ezekiel J. Emanuel, Health Care Reform and Cost Control, 363 NEW ENG. J. MED. 601, 603 (2010). 2 John Dorschner, Cost Issues Remain Despite Healthcare Reforms, MIAMI HERALD, Mar. 31, 2010 (quoting Alan Sager). 3 TOTAL EXPENDITURE ON HEALTH PER CAPITA, OECDILIBRARY, http://www.oecdilibrary.org/social-issues-migration-health/total-expenditure-on-health-per-capita_20758480-table2 (last updated Mar. 11, 2011). 67 68 FIU Law Review [6:67 costs. And this result is not surprising. As a matter of politics, it is much easier to sell the public on more benefits than greater sacrifice, so cost control was largely left to another day. To be sure, taking a wider-coverage-first, cost-containment-second approach is not unique to the Affordable Care Act. Health care reforms typically expand access initially and envision cost containment as the next step. That 4 was the approach of Medicare and Medicaid in 1965; it also was the strategy for Massachusetts when it passed its health care reform in 5 2006. Still, we are left with the question of whether future Congresses will implement the measures necessary to tame health care cost inflation or whether uncontrolled costs will cause the Affordable Care Act to unravel. I. THE COST PROBLEM For many years, the United States has spent more than other countries on health care, and the gap is only widening. In 2008, for example, the U.S. spent more than $7,500 per capita on health care, which was more than double what Germany spent and nearly three 6 times what New Zealand spent. To some extent, it makes sense for the U.S. to spend more on health care — as a country’s wealth increases, so does its ability to fund services like health care that can prolong life and improve health. But even as a percentage of GDP, the U.S. spends far more than other countries on health care. In 2008, for example, Germany spent at 66 percent of the U.S. level, and New Zealand spent at 61 percent of the U.S. level.7 It is not only the case that the U.S. spends much more than anyone else; there also is the problem that the U.S. realizes a smaller return on its health care dollar. In one study, researchers compared the actual improvement in health in different countries with the potential improvement that could have been achieved with the dollars that the countries spent.8 By that measure, the U.S. health care system was less efficient than the systems in Western European countries like the UK, Spain, France, Germany, Austria and Italy; Northern European countries like Denmark, Norway and Sweden; Far Eastern countries 4 David Blumenthal & James Morone, The Lessons of Success—Revisiting the Medicare Story, 359 NEW ENG. J. MED. 2384, 2384, 2388 (2008). 5 Jon Kingsdale, Implementing Health Care Reform in Massachusetts: Strategic Lessons Learned, 28 HEALTH AFF. w588, w588, w589 (2009). 6 OECDILIBRARY, supra note 3, at 1. 7 TOTAL EXPENDITURE ON HEALTH, OECDILIBRARY, http://www.oecd-ilibrary.org/ social-issues-migration-health/total-expenditure-on-health_20758480-table1 (last updated Mar. 11, 2011). 8 David B. Evans et al., Comparative Efficiency of National Health Systems: Cross National Econometric Analysis, 323 BMJ 307 (2001). 2010] Case Containment and the PPACA 69 like Japan, China and Australia; and Western Hemisphere countries 9 like Canada, Mexico, Colombia and Venezuela. The inefficiency of the health care system is reflected in key statistics on the quality of health. Thus, life expectancy in the U.S. trails that of Japan, Switzerland, Canada, France, Italy, Spain, Israel, Germany, Greece and the U.K., while the infant mortality rate is higher in the U.S.10 To some extent, U.S. citizens benefit from the higher levels of spending. For example, survival rates for patients with breast or colon cancer tend to be higher in the U.S.11 However, in many other ways, the greater spending does not translate into better health. People with asthma or diabetes are much more likely to need treatment in a hospital at some point during the year in the U.S. than in other countries. Americans are more than six times as likely as Canadians to be hospitalized for asthma and more than five times as likely as Italians 12 to be hospitalized for diabetes. One might suppose that the U.S. gets less bang for its health care buck because Americans are not as healthy as citizens of other countries. That does not seem to be the explanation either. Americans are more obese than others, often much more so,13 but they also are less 14 likely to smoke tobacco or consume alcohol. Americans also are younger,15 which should mean lower health care costs. According to one study, Americans are overall less healthy than in other economically-advanced countries, but the additional cost from the greater 9 Id. at 309 fig.1. LIFE EXPECTANCY AT BIRTH, TOTAL POPULATION, OECDILIBRARY, http://www. oecd- (...truncated)