To contain health care costs, US must reduce error, modernize administration

Washington, D.C., June 11, 2003-- In invited testimony today before a Senate Appropriations subcommittee, Karen Davis, president of The Commonwealth Fund, pointed to greater efficiency in the supply side of the health care system as the key to containing rising health care costs. She said that research is needed to gather evidence on ways to achieve a "high-performance" health system.

"Rising costs put a premium on finding ways to improve the efficiency as well as the effectiveness of health care," said Davis. "The federal government pays $455 billion for health care in the U.S. but devotes only $300 million to the budget of the Agency for Healthcare Research and Quality for learning effective ways to improve the performance of the U.S. health system."

In her testimony, "American Health Care: Why So Costly?," Davis detailed reasons for the upward spiral of health care costs, which represented 14.1 percent of the U.S. gross domestic product (GDP) in 2001, a major increase from the 13.3 of GDP spent in 2000. Among the multiple reasons for higher costs in the U.S. are higher prices for care, growth in specialized procedures, and high administrative costs resulting from the complex, fragmented nature of the U.S. health care system.

Davis said that the U.S. has a much higher percentage of doctors who are specialists than other industrialized nations, and a much greater number of specialized procedures are performed here. For example, 4.8 times as many coronary angioplasties are performed per capita in the U.S. as in Canada, and 3 times as many MRIs. Recent increases in the volume of specialized services provided may be a reaction by physicians and hospitals to the constraints on prices they have received as a result of managed care and public programs such as Medicare and Medicaid.

"While new drugs and technology will undoubtedly save lives and improve quality of life, we need far more sophisticated analysis than has yet been undertaken t

Contact: Mary Mahon
Commonwealth Fund

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