A Second Wind for Health-Care Reform

The Affordable Care Act of 2010 (ACA) achieved one big thing -- covering some 32 million more Americans -- but made limited progress toward the other major change that is needed: reforming the way we deliver and pay for health care. Without success on the latter item, implementation of the former is unlikely to be completely successful or politically sustainable.

Key to this effort is making Medicare, the country's expensive public health care program for senior citizens, more efficient. The act includes provisions that would reduce wasteful and unnecessary spending under Medicare, partly by experimenting with new ways of caring for the elderly. But those provisions are in danger because Republicans saw the cuts as a political opportunity, inverting the traditional political alignments around Medicare in order to court worried senior voters. Republicans opposed Medicare when it was created and sought to cut its funding dramatically the last time they took over the House of Representatives, but this year they campaigned as the protectors of Medicare. The success of that strategy seemed one more threat to health reform.

But then came the deficit commission. While the Bowles-Simpson National Commission on Fiscal Responsibility and Reform did not succeed in creating a package that Congress will have an up-or-down vote on, it did make cynical Republican opposition to reform untenable. The commission called for immediate and bold experiments to fix problems with how health care is delivered, The commission became a cheerleader for system-wide change, according Ed Howard, executive vice president of the Alliance for Health Reform. Going forward, the argument will not be will not be about who wants to cut growth. It will be about how smartly to do it. Using Obama's favorite metaphor, the question is whether we will cut with a scalpel or an axe.

Many of the fiscal panel's recommendations are clumsy and harsh, but among them are more subtle, constructive proposals. Although it didn't make headlines, the focus on reforming the health-care delivery system may help Democrats protect some of the innovations and tools incorporated into the ACA -- such as the Center for Medicare and Medicaid Innovation or the Independent Payment Advisory Board -- when Republicans try to take out the budget axe. These deficit-cutting measures could reinforce progressive elements of the health-reform law as it comes under Republican assault in the months ahead. The Bowles-Simpson report even included some surprises -- such as an invitation to take another look at creating a "robust public option" as a cost-saver, and a call for a catastrophic cap, a limit to the amount of money that the elderly would have to shell out in any given year.

Finding ways to improve quality while lowering cost is both possible and essential, and the deficit-cutting squads (Bowles-Simpson was one of three -- the other two were private) recognized and respected that fact. The current health-care system can perform modern miracles, but it also brings hospital-acquired infections, medical errors, unnecessary hospitalizations and re-hospitalizations, fragmentation, duplication, poor communication, and care with inadequate coordination. Those side effects increase costs, but could be dealt with by reforming the way we deliver care.

Delivery-system reform means creating new ways of taking care of people, usually with more of a focus on primary care and on coordination among doctors, specialists, hospitals and patients. Changing those relationships requires changing the payment incentives that now reward abundant care rather than good care. The current system of paying for health care encourages doctors to circle a whole lot of numbers on those master bills, or makes patients come in more frequently than necessary and encourages more procedures. . On the grandest scale, delivery system reform means gradually shifting from a health care system that responds to acute episodic diseases, to one that addresses the growing burden of an aging population with slowly progressing chronic diseases. It will cost less and improve health.

"Bring together all the ideas that people have had up to this point, try things out, see what works -- and quickly forget about what doesn't," says Paul van de Water, a health policy expert at the Center for Budget and Policy Priorities. Van de Water has critiqued aspects of the deficit recommendations, but still says this is the moment for real reform.

"The waste is enormous," says Harvard health care economist David Cutler. "You can easily convince yourself that there is 40 to 50 percent to be saved." Squeezing out every single bit of that inefficient or unnecessary care may not be realistic. But it also isn't necessary; eliminating even a small fraction of the current waste each year over the next decade would make a huge difference, he added. Health care would finally start acting like "a normal industry." Productivity would grow, in the one area of the economy where it has not, and with productivity gains, prices could be expected to fall.

One commission innovation was linking new ways of providing care with the old problem of paying doctors. Congress used to have one dragged out fight about Medicare doctor payments every year -- the dreaded "Sustainable Growth Rate" or SGR, also known as the "doc fix." Recently, with costs soaring and options shrinking, lawmakers patched it a few months at a time, and this month they jerry-rigged another one-year fix. Ideally, less time, money and political angst should go to the "doc fix," and more to the system fix. As the deficit commission put it, doctors in the future should be paid under a "formula that encourages care coordination across multiple providers and settings" and rewards quality instead of quantity. In other words, stop paying doctors, particularly specialists who are already paid way more than primary care physicians, in ways that perpetuate the flaws of the fee-for-service system. Start paying them in ways that reward smart care, not just abundant care.

The health- reform law encouraged some of the experimentation and creativity that will be needed for delivery- system reform within Medicare and Medicaid, and states that actually want to implement the law well will innovate too.

But because of the partisan warfare that envelopes that law, and the promised effort to roll back parts of it that are unpopular or sound worrisome, these initiatives are vulnerable.

The deficit commission validated delivery system reform as a bipartisan project, putting the ideas in a different context, and imparting them with a new urgency. Like the Congressional Budget Office in its "score" of health legislation, the deficit panel did not definitively count on any savings from these experiments. There are still too many unknowns about what will work, for which populations, and in which settings. But the commission affirmed that "there could be substantial savings. . . from aggressive implementation of successful pilots." If this element of the Commission's report, focused on fixing the overall health care system rather than slashing and burning specific programs, like Medicare, catches on, it could secure one of the ACA's most promising reforms, and lead to an implementation that not only expands coverage, but also reduces costs. The commission's support for delivery reform may improve the health care that all of us -- whether covered by Medicare, Medicaid, private insurance, or through the new exchanges -- will receive in the future.