There are good reasons to be optimistic about true health reform

Two patients check in at a nurse's station
Editor's note:

This article originally appeared in Real Clear Markets on August 14, 2018.

It is no surprise that partisan gridlock in Washington triggers widespread concern about the future of our health system. It is not just that there are worries about the future cost and availability of coverage for families. It is also that Congress seems quite unable to settle on a permanent framework for 18 percent of the entire US economy.

Still, we should temper our anxiety about deep disagreement and legislative paralysis hampering the long-term management of this vital part of the economy. That’s because there are at least three reasons for some cautious optimism.

First, the genius of our system of federalism allows organizational design innovation to evolve in the regulation and public management of our health care sector despite intense disagreement at the national level. For instance, when there are national-level disputes about the best way to achieve stable insurance markets to cover high-cost people at reasonable premiums, or to care for the frail elderly, state-led federalism allows alternative strategies to be tried and compared and agreement to emerge. That is currently happening because federal law gives the federal government power to grant waivers to states to modify some programs within the state’s borders. For instance, the Trump Administration currently is granting federal waivers to permit some states to experiment with “high risk pools” that subsidize high cost individuals while lowering premiums for families with lower average health costs.

True, such experiments do not always succeed, and the waivers tend to reflect the perspective of each federal administration, as well as the political culture of the state requesting a waiver. So there have to be safeguards. But this experimentation, over time, can significantly improve the operation of the health system. Not only that, state leadership and experimentation can also help a national consensus to develop in areas where there had once been deep disagreement at the national level. We saw this in the 1990s in the case of welfare reform, and more recently in the state-led acceptance of gay marriage.

Second, there is a growing recognition that there is much more to achieving good health than just spending money on medical care. We could save billions of dollars repairing hip fractures for seniors, for instance, by investing a fraction of that money in such things as safer bathrooms and non-slip carpeting. Meanwhile, tackling stress and abuse affecting young children can sharply reduce downstream mental health costs.

The problem is that while other countries achieve better health results by improving the balance between medical and social service spending, America is the outlier by over-medicalizing health. But the good news is that all over the country, often with federal encouragement, there are more and more efforts to incorporate non-medical services to boost health outcomes. For instance, Vermont’s “SASH” program coordinates medical and social services to improve health outcomes for the elderly. Meanwhile federal waivers are allowing state Medicaid programs to use funds on housing and social services that improve health. And new federal legislation permits Medicare Advantage plans to use some funds for health-related transportation and other non-medical services.

These initiatives mean the health system is gradually changing, quietly, and in a bipartisan way, despite gridlock at the national level. Over time the resulting change could be profound.

And third, there is the wild card of “disruptive innovation.” We tend to think of health care innovation only as breakthrough drugs and surgeries, or perhaps organizational developments like the growth of local urgent care centers and telemedicine. But far more radical change can happen when huge new players enter an industry. Remember how Steve Jobs and Apple transformed the music industry, or how Amazon upended not only the selling of books but the selling of everything.

The health industry is ripe for a similar dramatic transformation from the outside. After all, except for new technology, the hospital and doctor’s office model has changed little in well over a hundred years. Powerful new entrants like the joint venture of Amazon, JPMorgan Chase and Berkshire Hathaway could be dramatic agents of change. There is a reason that people like Jeff Bezos and Warren Buffet are billionaires – they perceive opportunities for transformation that the rest of us don’t see. Whether this particular venture will be the Jobs-style gamechanger remains to be seen, but two things are clear. Transformative disruption is coming in health care. And federal legislation is generally irrelevant to this kind of radical industry restructuring.

These four patterns are going on to a large extent under the radar. They do not depend on bipartisanship and legislative breakthroughs in Washington. But they are altering the health industry in positive ways while we wait for Congress to get its act together.