All this week I've been writing about the Institute for Healthcare Improvement seminar I attended titled "Achieving the Triple Aim: The Simultaneous Pursuit of Excellent Health, Ideal Care, and Controlled Costs." For our last entry in this series we'll discuss the third aim: cost containment.

For starters, why do we care about cost containment? The big reasons are affordability and quality. The affordability piece is pretty simple: if health care becomes too expensive, people can't pay for it. Back in the good old days, most people offered health insurance on the job purchased it without a second thought. With rising monthly premiums, that's not always the case. New America's health policy director, Len Nichols, has testified in Congress about workers who don't take-up employer-sponsored insurance because the monthly premium is too expensive for them (see here, page 6). That's just one important example; the rapidly rising cost of health care affects everything from state and federal taxes and budgets to your paycheck. In short, it matters.

The second reason, quality, is counterintuitive to people who don't spend their whole day thinking about health policy. Numerous researchers have shown that higher per person Medicare spending leads to lower quality. (Note: for un- and under-insured people, higher spending is good because they are often denied the important, life-sustaining health care they need.) My favorite example is provided by Katherine Baicker and Amitabh Chandra in a 2004 Health Affairs article (subscription required; see Exhibit 1). In their paper, the top five quality states (New Hampshire, Vermont, Maine, North Dakota, and Utah) spend about $5,000 per Medicare beneficiary; the bottom five quality states (Louisiana, Mississippi, Texas, Arkansas, and Georgia) spend between $6,000 and $8,000. The Dartmouth Atlas Project has also done extensive research in this area, discussing how receiving unnecessary health services is at best unhelpful and at worst very harmful; see New Health Dialogue posts by Guy Clifton, Joanne Kenen, Elena Harman, and me. Also, US News and World Report recently discussed higher incidences of cancer from overuse of CT and MRI machines. Not good.

The IHI seminar faculty laid out how to shape per capita cost growth using both the demand side and the supply side. Demand side financial incentives shape how individuals behave. Suppliers too respond to financial incentives, and thus the right incentives will produce the right product. While we currently pay for health care (i.e. services), we need to start paying for health.

Our case study was QuadMed, an IHI collaborator out of Wisconsin. QuadMed is the self-funded health plan for Quad/Graphics; they were so successful they started doing third-party administrator work for other self-insured companies. To improve quality and reduce cost, QuadMed reformed the supply side by running "Wellness at Work" programs, such as the combined fitness center-medical clinic at the Miller Brewing Company that you can read about here (speaking of, George Will tackled the subject of beer and health yesterday) and organizing care through a patient-centered medical home. On the demand side, their benefit design balances patient choice with "steerage" (or as we say on this blog: the nudge). They emphasize personal responsibility to encourage healthy lifestyles. Interestingly, they've also been integrating workers compensation into primary care services to address the opportunity cost that comes with absenteeism at work. The result? Average health care cost per employee has been nearly level for four years, and is currently two-thirds of the American Midwest average.

I'd like to end with a vignette. IHI faculty discussed a woman with a history of heroin use who visited the emergency department 21 times in December 2007. (Remember, because of federal law, hospitals must stabilize anyone needing emergency treatment.) She is receiving Methadone treatment and has a primary care physician but transportation barriers kept her from each. The solution? "We bought a bus pass." The result: no emergency visits for two months and she is much more engaged with her treatment and her doctor. Her ER visits cost $1,400; her bus pass cost $23. That's a net savings of $1,377. This particular woman has had her costs contained and is healthier for it.

So that wraps up this series. Special thanks to IHI's Madge Kaplan for including us in this seminar. I learned a ton and I hope the perusers of these posts did too. For further reading, I highly recommend this new Health Affairs article by Donald Berwick, Thomas Nolan, and John Whittington that is the companion piece for this seminar.