Seven Challenges for Continued Health Care Cost Control: Will Congress Step Up to the Plate?

Tuesday, August 20, 2013

Editor’s note: Len Nichols is a professor of Health Policy and Director of the Center for Health Research and Ethics at the College of Health and Human Services of George Mason University in Fairfax, Virginia. He serves on the Altarum Center for Sustainable Health Spending National Advisory Committee. This blog is excerpted from his testimony to the Senate Budget Committee, July 30, 2013.

In Senate Budget Committee remarks on July 30, 2013, I argued that that the recent health care cost growth reduction is real, and that it could be maintained because incentive structures have the potential to link the self-interest of all major health system stakeholders with the social interest in cost growth containment, quality improvement, and better population health. I also discussed seven challenges to sustained cost growth reduction that I summarize below. Three are more political than policy-specific and thus Congressional leadership is necessary for us to rise to the challenges before us.

Challenge #1: Lessen Excessive Partisanship

Partisan politics is unavoidable, but surely we have set new records lately! Sadly, our hyper-charged partisanship diverts us from considering how the Affordable Care Act (ACA), and its implementation, should be improved. Democrats are afraid to admit the law has flaws; Republicans are afraid to admit the law has some good provisions, and that it just might work as advertised in some states. I believe that Republicans have no consensus among themselves for a viable alternative to the ACA.  Otherwise, they would have proposed and passed it in 2001-2006, when they controlled Congress and the White House. To solidify cost growth reduction, which both parties support, the charade of repeal and de-funding should stop, and Congress should seriously work together to improve the existing law of the land to better serve our people. Some traditional Republican ideas that have more support on the Democratic side – and in the health system – than may be well-known include: malpractice reform; more state flexibility (e.g., the Arkansas waiver program); and a budget failsafe that would reassure people who fear the long-term budget consequences of the ACA. The failsafe could link coverage expansion and generosity with savings performance and financing alternatives. However, these design and implementation issues cannot be addressed under constant threat of total repeal. There is a long and distinguished tradition of bipartisanship on the Senate Budget and Finance Committees, and in the Senate generally, and our country and the pursuit of bipartisan health policy to support cost containment would be well-served if Congress resurrected that tradition sooner rather than later.

Challenge #2: Tell the American People the Truth

It is stunning how hard it has become to move facts and logic to their proper places in the public mind. The truth is we can solve our current fiscal woes without abandoning our commitment to vulnerable citizens, and to ourselves. Health care cost growth, our most serious long-run fiscal problem, is coming down and will stay down if we are disciplined, and encourage the kinds of programs I described in my testimony. This is not to say every payment model has to work or the whole enterprise of health reform is doomed to saddle our children with unbearable debt. We can learn from failures and mixed successes; indeed, we rarely learn any other way. Our country is diverse, and we will need different models in different locations to reflect our differing assets on the ground, and values. Reform proponents are asking dedicated health professionals to effectively re-design the airplane they are flying without first landing it, as patients keep coming every second of every day, and because we cannot change our payment and information systems overnight. But the evidence is building that we can achieve the triple aim of cost containment, quality of care, and population health if we free our creative imagination. Furthermore, we are the least taxed advanced nation on the planet. Our federal and state governments take ten percentage points less of our gross domestic product (GDP) than the Organisation of Economic Co-operation and Development (OECD) average, and we have a larger military than all of them combined. The idea that our economy cannot tolerate tax increases and keep growing robustly is contradicted by extensive evidence. We may choose to keep taxes below what is required to support a decent social safety net in an aging society that should also invest in children and economic infrastructure and peace in a complex world, but that’s a choice, not a necessity. The debate should be framed that way.

Challenge #3: Be Honest about the Cost of Taking Care of the Poor

Why do hospital associations strongly support expanding Medicaid under the ACA? Because they must contend with our implicit policy of forcing them to compensate for Medicaid underpayment – and the cost of care for the uninsured – by charging private payers more than their true costs. We do this because we would rather force hospitals to levy this implicit tax out of the public eye than to have an honest discussion about what it costs to take care of the poor and our unwillingness to pay for that. You might have heard this rumor, but private employers are tired of paying this implicit tax because their own health care costs too much even before the surcharge. Furthermore, to thrive, hospitals must become more efficient and invest in information systems and care coordination infrastructures. They cannot do this when they have to spend so much on the under- and uninsured. Interestingly, the Virginia state chamber of commerce has done the math and endorsed Medicaid expansion, along with the local hospital association, because the evidence is overwhelming that it would be good fiscally, good economically, good for the local health care system, and good for Virginia citizens. Courageous governors in Arizona, Ohio, Florida, Nevada, and New Mexico have buried their ideological opposition to the ACA to honestly discuss costs and benefits. This discussion would surely be advanced if the Senate Budget Committee explored the implications of Medicaid expansion in an intellectually rigorous manner, focusing on economic and budget impacts. This would enable more public officials to deal openly with the twin truths that Medicaid “costs too much” and that we pay less than it costs to treat the poor (under sub-optimal care coordination conditions) in every state.

Challenge #4: Enable Clinicians to Lead the Transformation

A major difference in the health care system of 20 years ago is that nearly all physicians, nurse leaders, and hospital and health plan executives acknowledge the need for reform to make it broadly affordable. Many are eager to re-shape it, but they are frustrated by roadblocks that legitimize the flawed status quo. All have essential parts to play, but physicians need to move from the back to the front of the reform bus. For them to take the driver’s seat, two diversions must be addressed: malpractice reform and Sustainable Growth Rate (SGR) repeal. With those two strokes, tremendous good will would be engendered. Fortuitously, SGR reform is at an all-time bargain basement price, because of recent cost growth trends. Malpractice reform is more complicated, but not beyond legislative capacities. To lead redesign, physicians must also have access to total cost-of-care data. Unfortunately, the only way to ensure such data accessibility is often through legally compelled, all-payer claims data bases (APCDs). Twelve states have those; I would encourage promulgation of powerful incentives for the other 38 states. Markets cannot work without transparent cost, price, and quality data and signals. We should give markets the tools they need, over the objections of those who profit from our ignorance.

In my view, the Center for Medicare and Medicaid Innovation has done a good job of launching experiments we need to test delivery and payment reforms. Yet, given the centrality of health care cost growth to our current budget debates, something on the order of the Manhattan Project is in order. Just as with the project that developed the American atomic bomb before the Germans got one near the end of WWII, we cannot afford to fail. The Health Care Innovation Challenge grant program (round 2 applications were due August 15) is a creative way to spur innovation, but a more systematic sampling of private sector opinions, including a discussion of why CMS is sometimes perceived as a flawed research partner today, could radically accelerate reform. The key to bending the curve is implementing realigned incentives that link clinician self-interest to the social interest in the triple aim, with a special emphasis on cost containment, since if we cannot afford access and quality, we cannot sustain them. Clinicians must be involved in those incentive design discussions, sharing all relevant data.

Challenge #5: Acknowledge that Local Market Power Must be Countered

I and others have written on this topic for years. Some plan, hospital, and physician service markets are not very competitive, and in these cases it is impossible for market forces alone to drive us to an efficient state. Antitrust law and policy can help, but antitrust is a blunt instrument not well suited for the subtleties of evolving health service market competition and collaboration. As an economist, I am reluctant to “give up” and recommend unit price regulation when we haven’t seriously tried price transparency and domestic medical tourism (some health plans now pay for travel to a center of excellence that is often cheaper than the local monopolist), but an openness to rate regulation as a last resort should be in our cost containment arsenal.

Challenge #6: Engage Consumers and Patients

We have to overcome our fear of telling consumers and patients that they have an essential role in their own health, and in affordability for our overall system. The administration missed a major opportunity in the original accountable care organization (ACO) regulation by not enabling participating provider organizations to offer a positive incentive (a “carrot”-like reduced Part B premium) to remain with an ACO for a year. Signaling such a willingness to engage consumers would have made many providers more comfortable about moving to a world in which their payment will be partially determined by how compliant patients are with their regimens. Honest discussions of personal responsibility for health choices and financial responsibility could also bridge some of our partisan divides. Care is needed, but if we do not appropriately engage consumers, we are unlikely to successfully reduce costs. Charging higher premiums for smoking and less for participation in wellness programs, as the ACA permits, is a good start, but enabling medical homes and ACOs to offer incentives for sticking with them, and penalties for going out of network would add useful tools and send appropriate, “we are all in this together” signals.

Challenge #7: Emphasize Community Health Policy

Health care markets, like political markets, are ultimately local. In my experience, in virtually every state in the union, red, blue, and purple, communities are the one geographic area where most people are capable of putting aside their politics and focusing on what needs to be done to make their own health care system work where they live and work and play and pray. I applaud the Department of Health and Human Services (HHS) and some states for making local data more available and user friendly. I’m proud that the National Committee for Vital Health Statistics, on which I serve, has listened to communities and has produced reports on their use of data to promote health improvements consistent with their own priorities, great examples of democracy in action, along with what’s going on with LiveWell San Diego. I urge HHS to think creatively about using existing government data and resources to empower communities to lead conversations about the health and health system improvements they want, rather than the ones reformers might imagine they want, given the way the data look to the experts. Our political system is based on the principle that the people are the experts who matter most, at least about what they want that government may be able to facilitate. We should think more often about how government can help people inform and empower themselves.

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