Three “Easy” Steps to Health Care Reform

We are well on the way to significant reform of the health care system. There are of course major battles to fight, but those who advocate for the status quo are finding it increasingly difficult to find a way of defending a system that taxes every citizen an extra $3000 or so to pay for health care that is radically uneven, unsafe, exposes everyone to potential financial ruin and simply underperforms.

The exact shape of the future system cannot be known at this time, and only fools would ask for every detail of the world’s sixth largest economic system, but it will include these elements:

  • something that approaches universal access, 
  • a way to pay for performance based on cost reduction and quality improvement, 
  • an ability to release the American genius for innovation and entrepreneurship, 
  • new ways to engage consumers in taking responsibility and ownership for their health,
  • a mechanism for providing meaningful public oversight, 
  • and a concerted and sustained effort to reinvent the ways in which care is produced.

The nation will need three stages of reform to assemble these elements. Today we are in the first stage of rationalizing the financing system. It seems likely that by summer’s end, there will be a new mandate for individual insurance coverage. This may well be augmented by a new public insurance plan that will be available to individuals as they purchase coverage. While there are many detractors of such a plan today, mostly from private insurers and providers that do not want to see much market concentration and bargaining power in the government’s hands, it is really not all that scary. Most people like the ideas behind Medicare: universal access, low administrative costs, and efficient purchase of services. Well, for those who have been denied access, don’t like paying expensive overhead, feel themselves at financial risk because their current “insurance” doesn’t protect them from that catastrophe, or don’t like the inefficient way care is provided today -- the public program might be worth a look. Think of it as Medicare that has a means test for the premium, maybe on a sliding scale.

In addition to the mandate and public health insurance provider, some of the bills for the change will likely be paid by removing the tax free status of insurance benefits, particularly for those that are able to afford to have these taxed. One of the things that had led to the proliferation of costs in health care has been the pernicious effect of the tax free policy for health care benefits.

By fall the nation will be looking for the next stage of policy shifts that can begin to drive efficiencies into our system. One of the great drivers of poor and costly care is the inherent disconnectedness of the system. Anyone who has had to schlep their own x-rays, explain one doctor’s diagnosis to another doctor or felt like the discharge from the hospital was a little like being dumped on the sidewalk outside, knows what this disconnectedness is about. Economists call these disconnects between systems “transaction costs.” Some of these are in the contracting between doctor and hospital and health plan, some in the professional communication from doctor to nurse, some in the differences in perspective between in-patient and ambulatory or specialist and generalist. They are literally endemic to the system, and they cost a lot of money and – more importantly -- kill a lot of people every year.

The second stage of reform will need to address these and do so in a way that encourages innovation and minimizes the continued gaming of health care for individual institutional gain. The potential savings in health care will not come about because everyone is in the system or even with aligned financing; these are necessary conditions, but not sufficient to the bigger outcomes. The second stage will need to produce deeper integration of provider group, hospital system, and health plan. Today, such integration at this level is illegal because of anti-trust and anti-competitive fears. These anxieties are real as the system had in the past evidenced the ability to watch out for its own interests whenever the rules were changed. Today, what is needed are a dozen or more experiments at the state or sub-state level that will allow for such deep integration of the components of health care, but with a twist. Instead of allowing the consolidation and hoping the market and competition will work their magic to produce high quality care at a low cost, there needs to be a policy structure to create public health utility commissions that can set performance standards, limit cost increases, and drive real competition among integrated providers. Such districts could easily become “Health Commons”, which not only structure competition, but begin to reintegrate broader public health outcomes with the effort of what has been the private health system.

In addition the regulatory changes, this second stage should also advance demonstrations of malpractice and tort reform, make innovations in practice acts easier, and standardize state data about professionals and practice structures.

The third stage of reform comes a year from now as the nation approaches universal access, has new financing structures in place, has integrated providers emerging and can now signal what is desired in cost and quality, and reinforce this through payments to an integrated system that have major incentives to comply. At this point, the models by which care is organized and delivered need to change. At first this will build off the existing evidence based practices, but will increasingly come to reflect the work of the integrated systems to meet customer and public performance demands. These innovations will run the gamut from the beginning to the end of life. At their heart they will begin the process of balancing the current focus on diagnostic and treatment care with prevention and management of care. This transition is key to creating the right set of services for an aging population.

This final stage will not happen as quickly as the first two because it is more complex and varied, and there are few national levers that can be used to create a satisfactory response for individuals at the local level. But there can be an expectation of change and leadership at the national level to bring these new practice models to life.