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There is a near-universal belief that health care costs too much. As a result, health care seems likely to fall once again under the budget axe. At the same time, no one wants to harm access or the quality of care by seeking cost savings. How can these twin goals be met?

The health care system is complex, but there is a logic to health spending that transcends the complexity. Here are 3 possible routes that policymakers could follow to reduce health care costs without harming patients or further burdening clinicians.

The first way to decrease costs is to reduce the need for care. Healthy people use fewer medical services than less healthy people. Past decades have witnessed impressive changes in some dimensions of health that have led to large cost savings.¹ Hospitalizations for cardiovascular disease have , contributing to lower spending among older individuals. The incidence of has decreased as well (especially lung and colorectal cancer), again lowering acute care costs. However, the prevalence of pain and musculoskeletal impairment has increased, and each is costly.²

One way to decrease costs is to systematically work to achieve a healthier and thus less expensive population. Risk factor reduction offers a clear approach to improve health. , and governments should work to continue this trend. Obesity as a major contributor to rising health care costs has not been adequately addressed. A good start would and beverages. Air pollution is also a contributor to poor health, and , but battles over clean air still rage.

Clinical practice also has a role to play in decreasing health costs. Cancer screenings such as mammography and colonoscopy have contributed to fewer advanced cases, though each of these is underused.³ Similarly, greater use of medications such as antihypertensives, statins, and other drugs to treat chronic diseases like diabetes and obesity are particularly important for health and cost savings. Unfortunately, obesity and diabetes rates have increased during the past decade, and rates of controlled hypertension have remained flat. Only hyperlipidemia rates have continued to decline.⁴

Ironically, some of these therapies have become more expensive. One of the largest changes in the US health care system within the past 15 years has been the . High cost sharing often leads to reduced adherence to medications.⁵ It is not a coincidence that rates of risk factor control for cardiovascular disease have stagnated as use of plans with high cost sharing has increased.

Policy changes could ameliorate this effect of high-cost plans. Just as the Affordable Care Act made (including mammograms and colonoscopies) free, the same could be done for medications that are cheap and clinically effective in treating chronic diseases. This would be consistent with recent calls for .

A second way to sensibly reduce spending is to stop paying more than is necessary for health care treatments. The classic example is brand-name pharmaceuticals. The prices for drugs with exclusivity (on patent) are far above the expenses incurred by the company for discovery and production, even when accounting for the cost of failed research. Among all industries in the economy, the pharmaceutical industry appears to be especially profitable.⁶

The Inflation Reduction Act of 2022 took a first step in reducing high pharmaceutical prices, allowing for 10 drugs that have been on the market for a long time and do not have generic competition. The first set of negotiations recently concluded with for Medicare. Extending this negotiation process to other drugs with high rates of use is not conceptually difficult and could yield significant savings. For example, the top 50 prescribed drugs account for , and the top 10 drugs account for .

Extending negotiated rates to the private sector would require legislation. It is possible that this will occur, though Congress may first wait to see if the discounts negotiated by Medicare will be passed through to private payers in their negotiations.

A third way to reduce spending is to substitute less expensive personnel and sites of care for more expensive ones, such as performing outpatient surgery over inpatient surgery when feasible, using nurse practitioners and physician assistants when they can clinically substitute for physicians, and using less expensive drugs when they are available and equally efficacious.

Such changes have already been implemented in large segments of health care. The move to ambulatory surgical centers,⁷ the increase in use of and ,⁸ and the have each led to cost savings.

For additional savings from substituting to lower-cost settings and personnel, health care would likely have to incorporate the use of artificial intelligence (AI). For example, using AI-enabled technology to interpret medical images will save clinician time and enable more patients to be treated without adding clinical staff.

Artificial intelligence can also help reduce the cost of administrative tasks. The increase in prior authorizations of care required by payers has been accompanied by increased administrative personnel for physicians and hospitals. The result is a high financial burden, delays in care, and frustration among patients and physicians.

One estimate suggested use of AI can result in possible savings of 5% to 10% in US health care spending.⁹ Governments and private payers can help clinicians implement AI solutions by subsidizing systems that meet common functionalities, much as the Health Information Technology for Economic and Clinical Health Act led to the rapid and widespread diffusion of electronic medical records.

Other ways of reducing health care costs are more problematic. Higher cost-sharing plans and greater use of prior authorizations are the most common strategies used during the past decade, but as described above, each has problems. Reducing payments to physicians is another common strategy, especially by Medicare and Medicaid. Such price cuts may lead to some efficiency improvements, but greater efficiency is not guaranteed to be the result. And what will happen to the willingness of physicians to accept public patients if the price differential between public and private coverage ?

To achieve sustained cost reductions without upsetting the entire health care system, the focus must be on those areas where cost savings can be achieved with improved quality of care, or at least without harming care. Fortunately, there are ways to do this.

Published: November 21, 2024. doi:10.1001/jamahealthforum.2024.4956

Open Access: This is an open access article distributed under the terms of the CC-BY License. © 2024 Cutler DM. JAMA Health Forum.

Corresponding Author: David M. Cutler, PhD, Department of Economics, Harvard University, 1805 Cambridge St, Cambridge, MA 02138 (dcutler@fas.harvard.edu).

Conflict of Interest Disclosures: Dr Cutler reported serving as a commissioner of the Health Policy Commission in Massachusetts.