US could save $2 trillion on health costs

The United States could save $2 trillion in healthcare spending over the next decade, if the US government used its influence in the public and private sectors to nudge soaring costs into line with economic growth, a study released on Thursday said.

Compiled by the nonpartisan Commonwealth Fund, the study recommends holding the $2.8 trillion US healthcare system to an annual spending target by having Medicare, Medicaid, other government programs and private insurers encourage providers to accelerate adoption of more cost-effective care.

Such a plan would require new legislation from a bitterly divided US Congress, where Republicans would likely oppose new government controls, despite claims by the study's authors that families, employers and government budgets would receive long-sought relief from their growing financial healthcare burdens if the changes were enacted.

But Commonwealth Fund president Dr David Blumenthal, a former healthcare adviser to President Barack Obama, said the approach could find bipartisan support in upcoming deficit talks as an alternative to cutting so-called entitlement programs including Medicare, the popular healthcare program for the elderly and disabled.

"In comparison with what some of those proposals advocate, we think that some of what we're proposing will look like an escape valve," Blumenthal told reporters in a conference call.

The United States has the world's most expensive healthcare system, which government forecasters say will cost more than $9,200 this year for every man, woman and child.

Spending growth has slowed in recent years, but costs continue to outpace inflation and restrain overall economic growth.

Despite the nation's massive healthcare bill, research shows that Americans die earlier and experience higher rates of disease than people in other countries -- regardless of age, education, income, healthy behaviours or whether they

have health insurance.

Obama has said he is willing to address the underlying rise in healthcare costs as a way to pare back spending on Medicare without resorting to deep cuts or fundamental changes.

Commonwealth Fund, a private foundation dedicated to improving the US healthcare system, is one of a number of groups working to develop policy proposals at the federal and state levels as the country prepares for tens of millions of uninsured Americans to enter the healthcare system on January 1 next year, under Obama's healthcare reform law.

The study calls for the federal government to set gross domestic product per capita as a target for overall healthcare spending growth.

In 2007, before the current slump in growth, healthcare spending rose 7.6 per cent, while GDP per capita gained only 4.1 per cent, according to the US Centers for Medicare and Medicaid Services.

The Commonwealth Fund study advocates accelerated acceptance of changes that are already taking place, including financial rewards for physicians and hospitals that participate in coordinated team-based treatment strategies.

It also would offer Medicare's 50 million beneficiaries a new plan with better protections against catastrophic illness and incentives aimed at better outcomes for lower costs rather than the current fee-for-service structure.

The study's authors said the plan would free up resources for physicians and hospitals by reducing administrative costs.

It also would eliminate permanently a long-standing Medicare pay cut for physicians that Congress has repeatedly delayed.

Many of the innovations are experimental and unlikely to achieve savings that could be measured by the Congressional Budget Office.

But according to the Commonwealth Fund, the federal government would save $1 trillion on healthcare spending over 10 years as a result of its recommendations.

State and local governments would save $242 billion, employers $189 billion and consumers $537 billion.