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Should the nation cut or add to the health care spending

Health Care at Lower Cost We know what steps must be taken to improve the performance of the health system. Now we must develop the political will. In other advanced industrial nations, such as Germany, the bill is roughly one-third less. Yet scores on health care quality measures in the United States are not generally higher than in other wealthy countries and compare poorly on multiple measures.

Nor is higher spending buying greater user satisfaction, as chronically ill U. This picture can be changed. Nonetheless, opportunities exist to lower both volume and unit price of services without jeopardizing quality.

Better U.S. Health Care at Lower Cost

Some methods for cutting excess costs are incorporated into one or another of the health care reform plans that have been proposed by both political parties. But no plan takes full advantage of the range of cost-cutting tools and enabling public policies that the roundtable estimates would lower per capita health care spending by double-digit percentages while protecting or raising quality of care. Though the need for change cannot be overstated, trends have been running in the wrong direction.

Unsustainable growth in U. Such excess growth is crowding out other spending priorities of federal and state governments and of employers. In the private sector, rapid growth in health care spending is suppressing growth in wages, employment, and corporate global competitiveness. Fixing this situation will require the U. In essence, it must become a learning health care system, drawing continuously on insights from outcomes research and internal organizational performance assessment to more rapidly improve.

What new public policies would enable our health care system to meet the implied annual productivity goal of generating more health with fewer dollars?

Inventory of wasted spending There are five broad categories of waste in health care: Estimates of savings from policies to address them are included in an upcoming roundtable report. Among illustrative problems, it is estimated that more than 3 million preventable serious adverse events occur in hospitals annually, with over half attributable to hospital-acquired infections and adverse drug events.

Medical imaging is ripe for waste reduction. As with imaging, almost all service categories are marked by excess use, as when laboratory tests are performed without a clinical rationale.

Some of these tests lead to further tests, such as cardiac catheterizations, that carry substantial risk of serious complications. What causes excess use of services? Failure to rapidly access prior medical records is one prominent cause. Another source is that hospitals in some areas have too many beds and too many affiliated medical specialists who, in turn, are more inclined to order services of unproven value in order to fill available capacity.

This phenomenon is demonstrated in studies where large variations in service use relative to population size and illness occur among hospitals in the same metropolitan area.

Health service and product prices that are not determined by robust market competition cause substantial wasted spending.

Mergers among insurers, among hospitals, and among physician groups—a growing trend—more often than not boost prices due to monopoly or oligopoly pricing power. Noncompetitive pricing resulting from hospital mergers is now estimated to account for approximately 0.

Administrative waste imposes excess direct and indirect costs on health care consumers, clinicians, and health plans alike. Patients waste time in repetitious completion of paper forms or in waiting for doctors with poorly managed schedules.

This, in turn, lowers U. Health system productivity losses accrue from the excessive time that physicians and their staffs spend on valueless paperwork, much of it the result of a failure to standardize billing and insurance-related activities.

The amount of time that physicians and staff members spend on various administrative tasks results, in large measure, from requirements imposed by third-party payers, often insurance companies.

  1. Payers should collaborate to ensure that all patients with advanced illness have access to and coverage for accredited palliative care programs in all communities.
  2. Administrative waste imposes excess direct and indirect costs on health care consumers, clinicians, and health plans alike. The rate should still exceed the growth of private health insurance spending.
  3. Health service and product prices that are not determined by robust market competition cause substantial wasted spending.
  4. Failure to rapidly access prior medical records is one prominent cause.
  5. Administrative waste imposes excess direct and indirect costs on health care consumers, clinicians, and health plans alike. In the private sector, rapid growth in health care spending is suppressing growth in wages, employment, and corporate global competitiveness.

Fortunately, there is an extensive inventory of tools available for trimming this waste. Waste-trimming tools Electronic health records EHRs can be both a waste-trimming tool and an enabler of other tools. Giving clinicians access to full information enables them to order and provide safer, faster, and better-coordinated care. More important to perpetual gains in the efficiency of U.

Systems engineering applications can lower annual U. For example, 40 million people are hospitalized each year.

  • What new public policies would enable our health care system to meet the implied annual productivity goal of generating more health with fewer dollars?
  • Building public-private partnerships Although most health reform debate in health care spending reduction has focused on government-sponsored health benefits programs, more than half of all national health expenditures originate in the private sector.

Such care brings patients, families, and treating physicians together to discuss pain control and other quality of life issues as well as the likely outcome from available treatment options.

When patients and family members are given objective information about the likely benefits and risks of available options, they more often choose less invasive and less costly treatments, often avoiding great patient suffering from treatments offering little or no additional longevity.

What would happen if all health providers were strongly motivated to attain the levels of quality and cost that are now generally accepted as benchmarks of high performance? Two plausible methods of motivating such attainment have been demonstrated: An example of the latter method is bundled payment methods that are subject to meeting high quality of care standards.

In bundling, a clinician or clinician organization such as a medical group or hospital would be paid an all-inclusive amount for treating a patient with a given illness or injury rather than being paid a fee for each service provided. Such a payment method shifts clinician focus from service volume to service value.

There is evidence that payment methods geared to service value rather than service volume can improve health outcomes as well. In a Medicare study of 225 hospitals that committed to this form of payment for patients with heart attacks, hospitals reduced mortality by an estimated 4,200 deaths and increased use of proven methods to prevent hospital-acquired infections to 92.

To attain this vision, the nation will need a coordinated set of new policies across a range of fronts. But even as its recommendations found fertile soil in some quarters—for example, in the evolution of the National Quality Forum—most remain unimplemented. Three unexploited broad policy options are pivotal. First, the federal government should strengthen antitrust policies to ensure that no health industry participants are able to opt for noncompetitive price increases and tepid annual gains in quality and cost-efficiency.

Second, stronger policies are needed to promote comprehensive health-relevant societal changes. These include enabling chronically ill people to easily access condition-specific and treatment-specific performance comparisons of providers and treatment options; including nutrition education and health-promoting life styles in public schools; and assuring that people in all communities have safe, accessible places to play and exercise.

  1. Fortunately, national momentum to standardize clinical performance measurement across payers is rising, and collaboratives of multiple stakeholders are converging on standardized performance measurements for public reporting and performance improvement. Eligible clinicians face up to a four percent Medicare payment adjustment in 2019 based on 2017 performance in MIPS.
  2. As with environmental impact statements, these documents could help encourage all recipients of federal funds to support obesity reduction. Private and public payers and physicians in their networks should jointly communicate to consumers the value of having a personal physician who is accountable for coordinating care and approaching regional benchmark performance on measures of quality, service, and low total cost of care.
  3. Past experience suggests the benefits of this approach. In reality there probably would be some increase in long-term care utilization under M4A because its broader coverage expansion would enable more people to make use of long-term care benefits already authorized under current law through Medicaid.
  4. Fixing this situation will require the U.

The government should give special attention to reducing the burden of obesity on health care spending by prioritizing programs likely to reduce obesity. In the near term, the president should issue an executive order requiring that an obesity impact statement be developed whenever federal funding is being considered for a project that might significantly impact obesity.

As with environmental impact statements, these documents could help encourage all recipients of federal funds to support obesity reduction. Five facets of harmonization are especially important: Standardizing measurements of comparative performance. Units of useful performance comparisons include multi-component health care systems, hospitals, physician groups, individual clinician-led care teams, treatment options, and treatment delivery methods.

Sweden knows how many of its citizens are able to walk without pain 5 years after hip-joint replacement by each hospital and surgeon. Fortunately, national momentum to standardize clinical performance measurement across payers is rising, and collaboratives of multiple stakeholders are converging on standardized performance measurements for public reporting and performance improvement.

To help drive evolution of clinical performance measurements, payers should be encouraged to test new measures. But when doing so, payers should fully disclose to consumers and their providers the specifications of the measure being assessed, the rationale behind the measure, and the expected duration of the test.

If new measurements require providers to collect new data, the payer should in some cases offer providers an incentive as a temporary bridging step.

Past experience suggests the benefits of this approach. The resulting comparisons have been incorporated in Hospital Compare, a national performance comparison tool that is now widely used by clinicians, hospital managers and their boards, payers, and consumers. Standardizing payer methods for administrative interactions with providers. Existing multi-stakeholder efforts in administrative simplification provide a solid foundation for standardizing payer interactions with health care providers.

For example, the Committee on Operating Rules for Information Exchange, a collaboration of more than 100 industry stakeholders, has been developing and promulgating operating rules and national standards for electronically exchanging data that enable providers to access administrative information before or at the time of service.

The types of data covered include such things as patient eligibility and benefits verification, patient financial liability for various services, patient deductibles, and co-pays.

Become a member

The payers have produced millions of magnetic stripe ID cards to enable electronic eligibility determination and provide accurate co-payment information at the point of care. However, adoption is lagging badly in physician offices where photocopying of magnetic strip ID cards remains a common practice.

Also, the Council for Affordable Healthcare, a nonprofit alliance of health plans, has developed the Universal Provider Datasource as a Web-based electronic service for collecting provider data used in credentialing, claims processing, quality assurance, and emergency response, and in providing such member services as directories and referrals.

Approximately 760,000 physicians and other health care professionals in more than 500 organizations now use the system. Congress now needs to legislatively mandate a timetable by which all parties will adopt uniform standards to support more efficient administrative transactions. Standardizing payment methods that give providers robust incentives to improve the value of the care they deliver.

Payer attempts to dissuade or withhold payment for such services in individual cases have often proved unsatisfactory, due to the sparseness of comparative effectiveness research and limitations on applying such research to specific patients. Promising solutions include providing higher payments for primary care, bundling payments into a single all-inclusive payment, having payers share with providers savings that result from more efficient care, and conditioning provider access to opportunities for higher payment on the formation by providers of better-organized forms of care delivery and management.

A more complex form is an accountable care organization ACO. A typical ACO might include a hospital, primary care physicians, specialists, and potentially other service providers. Because all components of an ACO assume joint accountability for the value of care, they would share in any cost savings if quality of care also improves.

An example is an organization such as Kaiser Permanente that integrates care delivery with health insurance, thereby transferring to clinicians accountability for improvements in patient health, customer service, and the total annual cost of patient care.

The power of such value-based provider payment methods in speeding clinical performance improvements and cost reductions hinges on their adoption by all or most payers.

Medicare Spending, Prices Drive Healthcare Spending Growth

Absent such standardization, the strength of the signal to clinicians and other health industry participants is lost. One way to entice care providers to support a shift to more performance-dependent payment methods would be to offer national tort reform to clinical service providers in exchange for their acceptance of a major revenue-neutral shift to performance-sensitive payment methods.

  • Giving clinicians access to full information enables them to order and provide safer, faster, and better-coordinated care;
  • The timing for this bill, coming in the last year of a Congress with little appetite for significant changes, was 2 years premature;
  • For example, the Committee on Operating Rules for Information Exchange, a collaboration of more than 100 industry stakeholders, has been developing and promulgating operating rules and national standards for electronically exchanging data that enable providers to access administrative information before or at the time of service.

Standardizing payer incentives for patients to improve the value of the care they receive. Payers have a number of avenues for encouraging patients to seek high-value care. Payers also can structure their plans to encourage consumers to choose higher-value treatment options or to adhere to physician-recommended treatment. The size and direction of such incentives would need to be tailored to fit different beneficiary populations, since large negative financial penalties for selecting a low value care option would be unfairly coercive for non-affluent patients.

These include incentives for consumers to select a health insurance plan that includes only higher-value providers, to select higher-value providers participating in their health insurance plan, and to select higher-value treatment options such as generic drugs. Coordinating methods for assisting patients and providers to improve health care value. Payers, especially private payers, should be given incentives to pool their efforts to assist patients and providers to improve the value of health care.

Examples of possible approaches include: Private and public payers and physicians in their networks should jointly communicate to consumers the value of having a personal physician who is accountable for coordinating care and approaching regional benchmark performance on measures of quality, service, and low total cost of care.

All payers should contribute to supporting joint obesity prevention efforts, given the evidence about the mounting economic and health burden of this national epidemic. Payers should collaborate to ensure that all patients with advanced illness have access to and coverage for accredited palliative care programs in all communities. Payers should converge on a common method to provide clinicians and smaller institutional providers with information on how to improve the value of their clinical services.

  • Some methods for cutting excess costs are incorporated into one or another of the health care reform plans that have been proposed by both political parties;
  • Promising solutions include providing higher payments for primary care, bundling payments into a single all-inclusive payment, having payers share with providers savings that result from more efficient care, and conditioning provider access to opportunities for higher payment on the formation by providers of better-organized forms of care delivery and management;
  • Mergers among insurers, among hospitals, and among physician groups—a growing trend—more often than not boost prices due to monopoly or oligopoly pricing power;
  • Noncompetitive pricing resulting from hospital mergers is now estimated to account for approximately 0;
  • Five facets of harmonization are especially important: