Five Questions with David Howard on Cost Containment in Health Care

Medicare and Medicaid spending is projected to grow to $3.7 trillion by 2033, and finding ways to control spending is critical for reducing the federal debt. Legislators are exploring ways to reduce spending and control costs through proposals such as site-neutral reforms and expanding the use of prior authorization to prevent unnecessary spending. 

We spoke with David Howard, PhD, professor of health policy and management at the Rollins School of Public Health, to get his insights on Medicare payment reform, the effects of health policy on care delivery, and strategies for reducing health care spending. 

What is the inpatient–outpatient payment differential in Medicare, and why does it matter for patients?

The payment differential happens when Medicare reimburses for the same procedure at a different rate depending on where it happened—such as a hospital, ambulatory surgery center, or physician office. One that hasn’t been discussed a lot is the differential between hospital inpatient and outpatient care. Currently, Medicare pays hospitals significantly more for inpatient procedures than outpatient ones, even when the services are similar.

Because advances in medical practices now make many procedures safe to perform on an outpatient basis, I argue that aligning payment rates between inpatient and outpatient care presents an opportunity to save billions of dollars while encouraging more efficient care delivery and making patient cost sharing fairer and more predictable.

What role do prior authorization policies play in controlling costs?  

Private insurers are the only entities in the health care system that are financially motivated to reduce low-value care (defined as care where costs outweigh benefits). They use prior authorization to influence where and how procedures are delivered. Traditional Medicare, in contrast, sets fixed payment rates that hospitals can accept or decline.

Hospitals have been resisting prior authorization because outpatient services reduce revenue. But the government’s main priority should be to limit health care spending, not to ensure hospitals remain profitable.

How are states responding to this? 

Many states have adopted or are considering adopting restrictions on prior authorization. However, as I argue in a recent piece for the American Journal of Managed Care, prior authorization remains a key tool to manage costs effectively while steering patients away from low-value care. Research shows that beneficiaries of Medicare Advantage plans, which typically use prior authorization, are less likely to use low-value care. And in 2026, traditional Medicare is piloting prior authorization programs to evaluate their impact on utilization and spending. 

While prior authorization saves money, it can sometimes produce delays in care—but we can’t afford to do without it.  Prior authorization is the main tool insurers have to limit spending on low-value care. 

Why is it important to address health care fraud and low-value health care services? 

Health care fraud—including kickbacks, Medicare Advantage fraud, and electronic medical records that promote overuse—continues to be a source of waste, though difficult to measure precisely. My research shows that tackling fraud represents an opportunity to reduce growth in federal health care spending and the federal debt. There have been recent federal efforts to combat fraud that will face substantial headwinds from recent court rulings limiting the scope of the False Claims Act (FCA). If courts continue to chip away at the FCA, the ability of the Department of Justice to punish and prevent health care fraud will be severely compromised. 

Other strategies, such as reducing reimbursement for low-value imaging and other low-value services, have been used by policymakers to reduce overuse. While our research showed that a large payment cut did not lead to meaningful shifts in imaging sites or usage, this may be because usage decisions are made by referring physicians, not radiologists actually impacted by these reduced payments. 

How can students of health policy and public health study and influence these changes?

 We use tools to anticipate policy impacts, evaluate proposed reforms, and model potential outcomes. Learning how to analyze these changes is essential for making evidence-based decisions that improve efficiency, reduce waste, and promote value in health care delivery. If these issues interest you, consider signing up for my Policy Analysis for Health Care and Public Health course, offered every fall, which explores these issues in more depth.