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Kenneth Thorpe Headshot

Securing Health in the Sequester

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Even though it is universally acknowledged that health care spending increases are unsustainable, the current slash and burn strategies when it comes to health care threaten to do a lot of harm. This approach, behind proposed health-related budget cuts that emerge in virtually every deficit reduction plan from sequestration to Simpson-Bowles, fails to consider any of the value derived or to anticipate the losses that follow arbitrary cuts.

Maybe it's time, though, before we go too far down this road of panicked budget-cutting to take a closer look at this conventional wisdom on health spending. As consumers, we don't just look at a price and decide whether to make any purchase. Instead, we look under the hood, kick the tires, and decide if the value is there to make the price we pay worthwhile. Similarly, I like to think policymakers can do better than to simply look at an annual expenditure number and say it's too much, without first understanding what that number involves and the economic and social value generated by those dollars.

What is the effect, for example, if Congress decides it's necessary to cut federal healthcare spending across-the-board by a certain percentage? Well, one of the first things we'll notice is slower job growth. Over the past five years, job creation in the health sector has outpaced overall employment growth and served as a bright spot in a slow recovery. In fact, according to a report in The Huffington Post, positions in the health care field accounted for one of every six new jobs created in 2012. That's not small potatoes at a time when unemployment continues to hover around the eight percent level.

But, in a conversation about the value of health care spending, let's keep the focus on health. Our political rhetoric and the very real health challenges facing our society are like two speeding trains moving in opposite directions. While, on one hand, we have politicians and pundits talking about taking a cleaver to health care budgets, at the same time we have 10,000 people turning 65 and becoming eligible for Medicare every single day. We also have disturbingly high escalations in chronic diseases including diabetes, heart disease, stroke and pulmonary disease.

So, Washington can talk endlessly about the need to cut health care spending, but it's an undeniable demographic reality that we have significantly more people who need to utilize health care services.

Given these hard facts, what then should be our conventional wisdom when it comes to health care spending levels? I would suggest we should eschew the easy solutions, such as the arbitrary global spending caps called for in Simpson-Bowles I and II or the across-the-board cuts that would inevitably result from the Independent Payment Advisory Board (IPAB). Instead, let's figure out how to target our health care dollars more effectively to achieve better societal health and restrain prolonged cost growth in the years to come.

And that brings us back to the need to aggressively attack chronic disease. Smart investments now in effective therapies, personalized medicine, early interventions and health literacy, particularly among at-risk populations, can pay significant dividends down the road in healthier communities and a reduced need for hospitalizations, surgeries, emergency room visits and acute care episodes.

Without this investment, we're looking at projections such as the one from the Centers for Disease Control and Prevention that the number of Americans with diabetes could triple by the year 2050. And if that happens, today's supposed health care spending crisis will look like small change compared to the bills we'll be facing in the future.