The Brief: Law School News and Events

Despite Reform, No Easy Cure for Bringing Down Health Care Costs
Professor Tom Baker explains that there is no easy answer to rising health care costs.  
Professor Tom Baker explains that there is no easy answer to rising health care costs.

The health care reform bill passed in March increased Americans' access to health insurance, but many challenges remain in bringing down costs, Penn Law professors agreed during a panel discussion over Reunion weekend.

"We've managed to get (nearly) everyone under the health care umbrella, but that was the easy problem, said Tom Baker, the William Maul Measey Professor of Law and Health Sciences.

"The difficult problem is the health care costs."

Not only does the United States far outspend other developed countries on health care, but health care costs here are rising more steeply than in the rest of the world. In 2005, the United States spent nearly twice as much on health care as other western countries, including Germany, France, Canada, and the United Kingdom, according to data from the Commonwealth Fund.

An increasing portion of Americans' incomes will have to be spent on health care in the future, Baker predicted, since "at a time when wages are just barely keeping up with inflation, health insurance premiums are going up."

"At some point, we will say we can no longer handle spending so much money on health care," added professor Kristen Madison, an economist who conducts research in the areas of health law, health policy and the delivery of health care services."But until that day comes, we'll just keep putting off talking about it." According to Madison, no part of health care reform was "specifically directed" at cost reduction. That's regrettable, she said, because health industry experts already know that a lot of the care provided today doesn't really improve Americans' health. To combat that problem, Madison said insurance programs like Medicare have already devised payment mechanisms that incentivize health care providers to lower costs, such as reducing payments to hospitals that have high readmission rates because of hospital-contracted illnesses.

Medicare will probably continue to be the leader in reducing provider costs with creative payment mechanisms, she said. And the federal government's overall role in regulating health care benefits will increase, thanks to the reforms, Baker and Madison agreed.

The government will have to stay especially vigilant against insurers who try "rating" individuals based on their levels of risk, according to Baker. Now that pre-existing conditions are no longer grounds for exclusion from plans, he said, insurance providers may resort to sneaky tactics to attract healthier customers.

"They'll start trying to invent plans that appeal disproportionately to low-risk individuals," Baker predicted. "There will be a kind of cat-and-mouse game between insurance providers and regulators."