Sept. 15 (Bloomberg) -- The U.S. can cut health-care spending by $250 billion a year within a decade, a congressionally chartered panel will say this month in a bid to show costs can be contained even if all Americans are insured.
A report from the Institute of Medicine, which advises the federal government on health care, will counter ?stingy? estimates from the Congressional Budget Office, said Arnold Milstein, planning chairman of the institute?s working group on health costs. The panel?s annual figure is five times the amount the budget office says the U.S. will save under a bill in the House of Representatives, according to the budget office?s July 17 letter to House Ways and Means Committee chairman Charles Rangel.
The preliminary findings from the institute, part of the National Academies in Washington, will be issued amid a growing debate over the health-care overhaul proposals that President Barack Obama is urging Congress to pass. The report will help bolster the argument that covering the nation?s 46 million uninsured won?t bust the budget, advocates of the bill say.
?The institute will make it very clear that we are right,? said Senator Benjamin Cardin, a Maryland Democrat who backs health legislation because he says it will save money. ?It gives us the lift we need and the encouragement to say, ?We?re right to do this.??
The report, which hasn?t been completed yet, was disclosed in interviews with Milstein, institute senior scholar Michael McGinnis, and David Walker, president of the Peter G. Peterson Foundation, which is funding the organization?s research.
?Big Differences?
The working group plans to release a preliminary version to ensure its findings contribute to the debate in Congress, Milstein said. That report is expected by about Sept. 20, McGinnis said, with a more comprehensive paper to follow.
?I think the Institute of Medicine report will garner a lot of attention,? said David Brailer, a peer reviewer on the study who was former President George W. Bush?s top adviser on health-care information technology. ?There will be big differences on the magnitude of real near-term savings.?
Budget office spokeswoman Melissa Merson didn?t return calls seeking comment.
The working group?s recommendations will cover a broad range of changes, Walker said. The panel asked dozens of experts to prepare case studies about how leading hospitals and insurance companies have saved money, said Walker, a former U.S. comptroller general.
The report is likely to reflect those cost-saving ideas, presented at three workshops in May, July and September, Walker said. Proposed solutions include simplifying medical billing forms, letting Medicare buy equipment at auction and rewarding doctors based on the quality of care, he said.
Killer Costs
?The whole objective is to have comprehensive health-care reform, but we have to control costs first because costs are going to kill the country,? Walker said.
The working group is seeking ways to cut costs in the $2.5 trillion U.S. health-care industry by at least 10 percent by 2019, Milstein said. The savings target will rise higher than $250 billion to keep up with inflation in the broader economy, Milstein said. The budget office said July 17 that proposals to extend insurance coverage may cost as much as $1.6 trillion over 10 years.
The nonprofit Institute of Medicine was chartered by Congress in 1970 to provide scientific, evidence-based advice to the government, according to its Web site. The National Academies gather independent panels of volunteer experts to make policy recommendations in their respective disciplines.
Differing Approaches
The institute took a more comprehensive approach to cost containment than the Congressional Budget Office, said Paul Ginsburg, president of the Center for Studying Health System Change, a nonpartisan policy-research group in Washington.
The largest chunk of savings in the budget office?s analysis of the health-insurance bill pending in the House of Representatives came from Medicare and Medicaid beneficiaries switching to other insurance, according to the letter to Rangel.
?The Institute of Medicine is looking at much bolder cost- containment measures than have been given to the Congressional Budget Office to analyze,? Ginsburg said.
About a third of the savings to be outlined in the institute?s report will go to the federal government, Milstein said. The cuts won?t hurt quality or innovation, he said.
The government pays for almost a third of U.S. health care, providing Medicare coverage for the elderly, the federal share of Medicaid coverage for poor families that is also partly paid for by states, and a children?s health-insurance program targeting families with incomes as high as $64,085 for a family of three.
Other Beneficiaries
The rest of the savings would benefit private insurance companies, health-care providers and consumers, McGinnis said.
Medicare can cut costs by buying equipment at auction, one study proposes. The agency saved 26 percent in a pilot test of auctions before Congress suspended the program, Mark Wynn, senior adviser at the Centers for Medicare and Medicaid Services in Baltimore, said in a May 22 presentation. Medicare spends about $10 billion a year on such equipment, including hospital beds and wheelchairs, Wynn said.
Insurers may save $109 billion over 10 years by accelerating the use of electronic payments and related technologies, David Wichmann, executive vice president at Minnetonka, Minnesota-based UnitedHealth Group Inc., the largest private U.S. health insurer, said in May.
Monthly Statements
An additional $14 billion could be cut if insurers substituted monthly statements for ?explanation of benefits? forms on each claim, he said.
Other recommendations may focus on paying doctors and hospitals based on the quality of care, instead of rewarding doctors for performing more tests and procedures, according to John Rother, executive vice president of policy at AARP, formerly the American Association of Retired Persons.
?The focus is on changing incentives,? Rother said.
Those inducements may include Medicare bonuses for hospitals? daily rates if patients do well after being discharged, or creating pools of money not tied to specific tests to cover preventive care, Rother said in an interview.
The Institute of Medicine?s report may not convince Congress that the budget office?s estimates are wrong, said Gail Shearer, director of health-policy analysis at Consumers Union and a member of the institute?s planning committee. Whether Congress will pass health-care legislation with the budget office?s estimated price tag ?will come down to political will,? she said.
Poor Record
Advocates of Obama?s health-care proposals have argued the budget office?s track record is poor in predicting health costs. The office overestimated the cost of Medicare prescription-drug coverage by 35 percent when it was proposed in 2003, and missed more than half of the effects of reimbursement cuts passed as part of the Balanced Budget Act in 1997, Clinton administration Medicare director Bruce Vladeck said in an interview.
?The Congressional Budget Office is always wrong,? Vladeck said. ?The CBO systematically underestimates savings, so we cut twice as much in 1997 as we needed to balance the budget.?
The budget office has disappointed supporters of a health- care overhaul by refusing to count savings from initiatives such as subsidizing adoption of electronic medical records, Obama said July 1 at a gathering at Northern Virginia Community College in Annandale.
Patient Records
?The CBO can?t identify how much money it will save, even though everyone believes it will be a lot,? the president said.
The government has been trying since early this decade to link computerized patient records into a nationwide network that would let researchers identify the most cost-effective treatments, eliminate duplication of tests and avoid medical errors from adverse drug interactions, Brailer said.
The budget office estimated that wide adoption of electronic medical records would save no more than $5.4 billion a year, according to a Jan. 21 letter to Rangel. The Boston- based Center for Information Technology Leadership, a nonprofit arm of Harvard University-affiliated Partners HealthCare, estimated $77.8 billion in annual savings.
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