USC Price School of Public Policy

Schaeffer Center Hosts First Health Policy Conference

Schaeffer Center Hosts First Health Policy Conference

By David Westphal

Schaeffer Conference USC School of Pharmacy Dean R. Pete Vanderveen; Dana Goldman, director of the Schaeffer Center; USC President C. L. Max Nikias; Leonard D. Schaeffer; USC provost Beth Garrett; and SPPD Dean Jack Knott.
Photo by Tom Queally

The United States faces a Herculean challenge in trying to bend the curve on health costs, and it may take a national emergency before something finally can be done about it, health policy experts warned at an October conference at USC.

Although some analysts saw a few glimmers on the horizon, mainly due to health care reform, the weight of opinion at the all-day discussion was decidedly gloomy.

Leonard D. Schaeffer, the Judge Robert Maclay Widney Professor at USC, said it may take a national security crisis to force politicians into making radical change in health care financing and delivery.

“The problem is there is no organized constituency for reducing health care costs,” he said. “Everybody’s cut is somebody’s income or somebody’s treatment.”

Schaeffer said the federal government ultimately may establish a single-payer approach to health care if costs are not brought under control, even though this idea has been a political nonstarter for decades.

Schaeffer is the benefactor of the Leonard D. Schaeffer Center for Health Policy and Economics at USC, which sponsored the event. Dana Goldman, the center’s director, said this was just the first among policy forums, seminars and conferences to bring academia and industry together at the university.

Policymakers, analysts and industry executives came from across the country and beyond to discuss the recently passed health reform legislation and measure its impact on the overall economy.

Launching the conference, USC President C. L. Max Nikias said he intended to help make the Schaeffer Center at USC one of the world’s top health-policy think tanks, noting that the topic of health care has now “taken center stage.”

Overwhelmingly, the day’s discussion zeroed in on ever-rising health-care costs as a problem so vast that it could threaten national stability.

Kevin Sharer, chairman and chief executive officer of Amgen, the pharmaceutical giant, described an American political system that is “nearly broke” and unable to act unless confronted with crisis.

Compared to other industrialized countries, he said, “We cost more and deliver less. This is a dramatic problem of huge scope. The U.S. health system is out of control on costs.”

Although most of the speakers at the meeting said the health reform legislation would have negligible effect on health costs that are projected to consume 25 percent of the economy by 2035, many said it would make significant gains in reducing the number of uninsured.

Douglas Elmendorf, director of the Congressional Budget Office in Washington, D.C., said his agency estimates that 32 million people will become insured by 2019, boosting overall demand for health services by several percentage points. That could help reduce demand for acute care in emergency rooms by low-income people, speakers said.

David Cutler, a Harvard economics professor, was a counter-weight to the gloom-and-doom majority, saying the arrival of a more robust information technology should change dynamics in the current health-care system.

“A nurse today spends 30 percent of her time just documenting information,” he said, often in the form of translating digital information to written data. The application of information technology and other modern business strategies to the health arena could begin to bend the cost curve, he said.

But Schaeffer said it may take the weight of the national government to stop costs from going ever skyward.

Conference participants got a glimpse of what that would look like from Sir Michael Rawlins, chairman of the National Institute of Health and Clinical Excellence in Great Britain – or, as he jokingly described himself, “chairman of the death panel.”

Rawlins described how his agency sets controversial coverage policy and prices on how much the government will pay for various drugs and treatments, using science wherever it can to set benchmarks. But he acknowledged that, inevitably, the decisions are based in large measure on social value judgments. “You can’t escape that fact,” he said.

Rawlins said the key to public acceptance of the agency’s findings is transparency.

Although the conference looked largely at the overall impact of health care on the economy, it also focused on certain sectors – insurance in particular. Prospects there aren’t good either.

David Knott of Booz & Co.’s Global Health Practice said insurers face a fight for survival in coming years as some providers and employers seek to edge third-party players out of the picture. Knott said it’s possible that move might succeed. More likely, he said, are outcomes in which insurers muddle through amid political gridlock or alternatively become subject to rate regulation along the lines of state utility boards.

Although most speakers said they thought health reform would be beneficial in expanding insurance coverage – albeit ineffectual in cutting costs – one expert said it would be a disaster for the country.

Joel Hay, Professor of Pharmaceutical Economics and Policy at the USC School of Pharmacy, said it had set the country back 10 years because it now gets in the way of real reform to control costs.

The Schaeffer Center is a collaboration between the USC School of Policy, Planning, and Development and the USC School of Pharmacy.