Federal Incentives Could Save $1.5 Trillion in Healthcare Costs

U.S. spending on healthcare is projected to reach $4 trillion in 2016, up from $2 trillion in 2006, even as the number of uninsured rise, according to a Commonwealth Fund report released this week.

The nation could save as much as $1.5 trillion over the next decade if federal policies to guarantee insurance for all, produce better information, and fund incentives that promote health and prevent disease were adopted by federal and state governments, say the authors of “Bending the Curve: Options for Achieving Savings and Improving Value in U.S. Health Spending.”

"If we continue down this path of escalating costs and eroding health insurance coverage we will pay an enormous human and economic price," Commission member Glenn Hackbarth said in a press release. "Building consensus to move in a healthier direction will require leadership, private and public collaboration, and a shared aim at improved access, quality and cost performance."

The report presents several options to address the factors that contribute to rising costs. Central to slowing this trend is investing in the knowledge needed to improve decision-making, which the report says could save $368 billion over 10 years. Increasing federal taxes on cigarettes by $2 a pack could save about $191 billion, the report says.

Other options the report suggests could yield big savings over 10 years include:

- Establishing a 1 cent tax on a 12-ounce sugar-sweetened soft drink to finance national and state obesity prevention programs for an estimated $283 billion in savings.

- An investment of $2 billion in federal funds and incentives to encourage employers to create incentives for individuals to engage in wellness programs and healthy behavior could save $19 billion.

- Giving the U.S. Secretary of Health and Human Services the authority to negotiate or set price limits for Medicare prescription drug plans for their enrollees could net $43 billion in savings.

Based in New York City, The Commonwealth Fund is a private foundation that promotes a high performing healthcare system. It commissioned healthcare consulting firm The Lewin Group to estimate the potential effects of each option presented, including the effects of incremental and cumulative spending by each option over a 10-year period.