The paper “Health Care Cost Containment Strategies Used in Four Other High-Income Countries Hold Lessons for the United States”, authored by a group of researchers from the University of Toronto, the London School of Economics, Berlin University of Technology, the Paris Health Economics and Health Services Research Units and the University of Regina, and published in the April issue of Health Affairs, reviews strategies developed in the past decade to contain costs in Canada, France, England and Germany.
The four countries were chosen to “represent a range of health system organizational structures”, specifically:
- In Canada, a “highly decentralized system of national and provincial payers”, where “the individual provinces are responsible for most decisions affecting the health sectors” (the authors focus on Ontario, British Columbia, Manitoba, Saskatchewan and Alberta),
- In Germany, a “system of competing health insurance or “sickness” funds”,
- In France, “noncompeting health insurance funds”,
- In the United Kingdom, responsibility for health care was “shifted from the central government to governing bodies… at the end of the 1990s” and the authors focus on England only.
As their main conclusion, the authors find a shift “toward policies aimed at changing the cost-benefit ratio by tailoring payment to value” through technology assessment and funding based on “activity” (an example of which is a diagnosis-related groups) instead of simply pushing more costs to households through “across-the-board budget cuts, rationing of services and higher user charges.”
The analytical foundation of the article is provided by a framework developed by Elias Mossialos and Julian Le Grand in 1999, which “categorizes cost containment strategies according to whether they shift health care expenditures to an alternative budget, usually household budgets, by reducing coverage; set budgets – that is, impose upper limits on health spending in specific areas – from the national level to the patient level; or apply direct or indirect controls to the supply of health care”. A key contribution by Mossialos and Le Grand was to document countries’ shift in strategies over time.
The Health Affairs paper first explains in depth the strategies that the countries they investigated now employ to contain public-spending costs. Below I mention a few (but not all by far) of the examples they provide.
- Population coverage (not used in practice)
- Service coverage (including “refusing to include new interventions that lacked evidence of effectiveness and cost-effectiveness”
- Cost coverage (especially increasing patient cost sharing and introducing new user charges, e.g., “France introduced deductibles calculated per service, Canada applied and increased user chargers for prescription drugs and Germany did the same for physician visits.” But “Germany introduced a cap on out-of-pocket payments… [and] abolished user charges for hospice care”, among other things. France introduced “free complementary insurance covering user charges for people with very low income.”)
- Public budget shifting (for instance, “France shifted responsibility for subsidizing long-term care for older people from the central to local governments in 1997.”)
setting (the authors note that “activity-based funding has probably
softened budget constraints” and that England and France “have emphasized
linking provider payment to evidence of quality”)
- Budget caps (England has a national budget cap, but does not set budgets by sector; instead, “local purchasers are able to determine how to spend their own “soft” or target budgets”, Germany has “sectoral budgets for hospitals and ambulatory care”, Canada generally uses soft budget caps at the regional and hospital levels.)
- Provider payment (“all four countries have… mov[ed] toward activity-based hospital payments”, in addition, there have been “small shifts toward capitation payment” in countries that mainly pay providers on a fee-for-service basis.)
and indirect controls of health care supply
- Controlling pharmaceutical prices
- Controlling physician remuneration, including rate freezes
- Other techniques such as cutting the number of hospital beds (France) or increasing the supply of doctors and nurses (Canada).
They then proceed to assess a decade of developments, especially “the increased use of policies intended to promote more efficient use of healthcare services” and not simply budget and price controls.
- Activity-based funding (“There was a move toward funding based on activity or diagnosis-related group to replace global budgets for hospitals in England, France and Canada”)
- Health technology assessment (agencies have been established to advise policy-makers)
- Pharmaceutical spending (All four countries have “explicitly negotiated and worked with pharmaceutical companies and resellers – such as pharmacies – on prices, policies and rebates.” Germany and British Columbia, Canada have experimented with reference pricing and other “value-based approaches to pricing drugs, in which a drug’s clinical value and cost effectiveness are used to negotiate its price or set reimbursement levels.”)
The authors also make the caveat that “many of the strategies reviewed here have multiple goals… For instance, most countries introduced activity-based funding to improve efficiency, quality, transparency and productivity – not necessarily to reduce costs, at least in the short term.”
They provide lessons for other countries, especially the US. You’ll have to read the whole article to know what they think! I found the following idea particularly intriguing: “The United States may wish to use… cost-effectiveness analysis that sets prices for new technologies based on the technologies’ relative value and value-based user charges.”
A very well-written, informative paper with a great international perspective on strategies to contain healthcare costs.