Cutting health costs and covering everyone well by negotiating political, financial, clinical, and legal peace treaties with doctors, hospitals, and drug makers

U.S. health costs are unsustainable, with spending projected to rise 83 percent by 2016. Proposals to cover more Americans would increase spending further. Both market and regulatory cost controls have failed for decades. Concluding that current spending suffices to finance the care that works for all Americans, we suggest a different approach. It relies centrally on the nation's 800,000 physicians. They control 90 percent of health spending but they have been marginalized or treated as objects by past cost curbs. One-half of U.S. health spending is wasted on unneeded clinical services (stemming from financial incentives to over-serve, defensive medicine, and evidence gaps), financial paperwork (stemming from mistrust and complexity), high prices, and theft. That waste can be extracted and then recycled to cover all Americans. This requires doctors' enthusiastic participation which, in turn, can be elicited only through bold actions. We urge crafting peace treaties to: 1) Create trustworthy arrangements that oblige doctors to carefully marshal the money they control and use it to treat us all equitably. 2) Replace malpractice suits with effective means of weeding out dangerous doctors and compensating victims. 3) Capitate groups of doctors to care for groups of patients under a two-budget scheme, one for doctors and one for the hospital care, prescription drugs, and other things they authorize. 4) Pay hospitals and drug makers by flexible budgets. 5) Slash paperwork to free doctors' time for current and newly-insured patients. States, reformed HMOs, and others could pilot many of these approaches.