Managing Healthcare Costs: Meredith Rosenthal

Kristina Lewis and Meredith Rosenthal have a provocative suggestion in this week's New England Journal of Medicine. Instead of taxing non-nutritious food -- new taxes face seemingly insurmountable political opposition -- they propose establishing a "cap and trade" regime that depends on the free market, much as we have done for sulfur dioxide emissions. Cap and trade has allowed us to decrease sulfur dioxide emissions by about half, and it's cost far less than standard emission-lowering regulations would have.

The idea is straightforward -- create a target for the total amount of harmful food products, and allow individual manufacturers or marketers to sell to each other the right to incorporate more fat, more calories, or more salt in their products. That would allow full, free consumer choice, but would tend to increase the prices of unhealthy food while decreasing the prices of healthier alternatives.

Some will consider this a back-door attempt to tax unhealthy food - but it's not. Obesity and diabetes caused by poor dietary habits have real social consequences and costs; this proposal would be an innovative way for the government to structure a market to improve our health and lower our health care bills.

Today’s Managing Health Care Costs Indicator is 160,000

That’s how many lives the EPA calculates will be saved in 2010 by the Clean Air Act of 1990. The costs of the Act ware around $65 billion, and the financial benefits are calculated to be $2 trillion – an ROI of 90:1. In fairness, these are all the economic benefits - not just health care claims cost savings.

I bring this up in a blog on health care costs to emphasize the point that public health efforts really work –and they cost very little compared to medical interventions.

Another happy note – the CDC reports that 25 states have outlawed smoking in restaurants, bars and workplaces since 2000 - and predicts that smoking could be banned in restaurants, bars and workplaces in all 50 states by 2020. This is another no-brainer public health move that can continue to lower health care costs, prevent premature death, and improve overall societal health. Total cost: close to zero.

Finally, Meredith Rosenthal has an article on the NEJM website comparing the Ryan and the Obama approaches to lowering Medicare costs. My summary: The Ryan plan shifts costs and counts on patients facing larger bills to lower their utilization, and the Obama plan lowers provider payments. The Obama plan better addresses the underlying causes of high health care costs, as we have high cost per unit and low utilization compared to most of the developed world. Her summary is below: