What About Health Care Costs?

Mark B. McClellan
Mark B. McClellan Former Brookings Expert, Director, Margolis Center for Health Policy - Duke University

January 20, 2010

Many health experts are rightly skeptical that the current health-care reform legislation will lower spending growth, despite its many promising pilot projects and proposals.

At the heart of the legislation is what supporters describe as all of the best ideas for paying doctors and other health care providers to deliver better care. Many ideas have been proposed to improve how doctors could work together to reduce complications of diabetes and other chronic diseases, such as by using electronic medical records or working with nurse practitioners who can help patients use their prescription drugs more effectively.

What Works?

That’s a worthy goal, but only part of what’s needed to lower spending growth. The legislation as it now stands doesn’t include a fast, reliable way to figure out which of the pilot projects or proposals really work to improve care and reduce costs. Thus, we are in danger of continuing on our current course of soaring costs unless we get a fundamentally better capacity to figure out which provider-payment reforms really improve care and lower costs. In this area, the legislation doesn’t go far enough.

Some specific reform efforts appear to be working—such as one that uses a flat-rate payment for bypass operations so that surgical teams have an incentive to reduce patient complications, and so cut costs, which means they can keep more of the payment. But many similar well-intentioned ideas have failed.

No one knows how to implement in a timely manner the long list of proposed pilots that might contribute to improving care and reducing costs on a national scale. While the proposed legislation does allow for providers to share in the savings of reform, it does so only in pilots that in Medicare’s experience can take a decade to set up, implement and evaluate, and that still don’t lead to replicable results. Consequently, it is far from clear that the reform bill will transform the health-care system without compromising quality.

We are in danger of continuing on our current course of trying and failing to achieve savings by squeezing payment rates across the board, unless we get a better way to figure out which providers really are improving quality and lowering costs, and which payment reforms advance the use of such care.

Legislation must include a far better and faster capability to measure results of such projects in terms of patient health and cost, so that the pilot projects can be adopted on a broad scale. To slow the growth of Medicare payments, which is essential to reducing deficits under the reform legislation, the cycle for these pilot programs, from inception to finish, needs to fall to three or four years at most.

That means the health-care bill must call for investments that will increase the capacity for doctors and patients to receive and share real-time information about the quality of care that every Medicare beneficiary—and ideally every American—is receiving. For example, Medicare records contain information on when beneficiaries visit emergency rooms, have imaging procedures or lab tests, and are following through on recommended tests and treatments.

Making such information available to health-care providers in real time can prevent medical complications or unnecessary treatments, improving efficiency and bringing down costs. It’s also crucial to offer timely incentives to let providers keep some of the savings achieved. Without this, we will likely see continuing pressure to increase spending on Medicare.

Matters of Choice

The legislation should also not retreat on what is perhaps the most powerful force for achieving health-care savings: the decisions that people make about their health, and the coverage and care they seek. Taxing high-cost health-insurance plans provides a strong incentive to choose plans that cost less, spend less and enable workers to save more money.

This is the part of the legislation that has a real chance of “bending the cost curve,” and the tax can be modified to address concerns about the impact on plans with more older or more costly workers. But exempting whole categories of plans and workers, as recent modifications to the Senate bill would do, will undermine the impact of such a tax.

The Senate bill also would enable people to save on premiums when they take steps to stay healthier, like taking medications to lower their blood pressure or losing weight. Opponents have argued this would amount to the same kind of insurance-company behavior to avoid or undertreat people with serious illnesses that other elements of the law are intended to prevent. However, some employers have demonstrated that such provisions can be implemented in a way that does not discriminate against less-healthy workers.

Here, too, more evidence is needed on benefit reforms that lead to better health outcomes and lower costs. Without helping consumers stay healthy and make better spending choices, it’s hard to see how we will get to a truly preventive and personalized health-care system that spends money more wisely.

Important as this legislation may be, it’s unlikely to be a quick fix or the last word on bending the curve of health-care costs.