The likely shape of a healthcare reform bill that the Congress will be debating come Thanksgiving — give or take a week or two — is becoming clearer, and those hoping for something that will significantly “bend the cost curve” right away have reason to be disappointed.
Reform, if it passes — as seems increasingly likely day by day — will consist of a significant expansion in insurance coverage and important changes to the way private insurers do business: Elimination of pre-existing condition exclusions, guaranteed portability, well-defined standardized policies written in clear English, coverage for preventive services, exchanges to give individuals and small businesses access to the same rates as larger employer group health plans, and the possibility of a public option.
To my mind, these are all unequivocally good things. But coverage expansion and market reforms won’t — absent a robust public option — do very much to lower total healthcare costs in the near term. And they won’t change the perverse incentives that characterize our fee-for-service medical system and drive up costs. The troubling thing for those who want a reform with a real impact is how hard it has been to do what, in a perfect world, should be Phase One, and how little energy, political will and budgetary flexibility there is likely to be to dive into Phase Two any year soon. And the opposition is ready to pounce on a job half-done — a promise only half-kept.
At a conference on Wednesday devoted primarily to issues of how to find financing for new life sciences companies in difficult economic times, Foley Hoag partner Tom Barker — who worked in the Derpt. of Health & Human Services for the Bush administration — provided an excellent summary of the current legislative proposals. And while he clearly expressed the belief that legislation modeled on the current Senate Finance proposal is likely to be enacted, he didn’t think it would result in much change: Some pain for the insurance industry; a punitive tax on device companies because they offended Sen. Baucus; overall neutral for most providers, pharma and biotech.
What of all the talk about cost reduction? It was essentially a cynical cover for the effort to broaden coverage. Now that passage of the reform program seems likely, the Republican line has changed from, “It’s too big and tries to do too much” to, “It doesn’t do enough.”
So let’s be clear:
- The legislation likely to pass Congress does more than any Republican member seems to have wanted to do;
- There is at present no meaningful constituency for the policy changes that could yield dramatic cost reductions right away;
- Given political realities, coverage expansion and insurance market reform are essential precursors for market-driven changes that might control and reduce total healthcare expenditures;
- And the failure of the market to deliver on cost control, and the financial crisis that would build toward, is the only way to build a meaningful constituency for the public policy most likely to sharply bend the cost curve: a publicly managed single payer system.
Once we have near-universal health insurance coverage, the critical issue on the table will become control of total costs. Elements of the reform legislation will, in time, yield some of what is needed: Insurance market reforms, coverage of preventive care, access to primary care in cost-effective venues, fraud reduction initiatives, tort reform (thank you, Republicans), electronic medical records and comparative effectiveness research are all addressed in the legislation. All have the potential to improve the efficiency of health resource utilization.
But the big savings come only by eliminating the perverse incentives inherent in our fee-for-service payment system. Today, almost every significant provider and health service institution does better financially by doing more — more visits, more admissions, more tests, more operations and more prescriptions. That needs to be turned upside-down: Fixed revenue in return for responsibility to provide needed care; doing better financially by getting good results while spending fewer resources.
The models (like this and this) are out there and well-understood. Patients will love it if they give it a try. It’s up to the private market to provide the choices.
And here’s the kicker: If the market doesn’t find the efficiencies and cost savings, healthcare spending levels will become unsupportable, broad segments of the population will feel real financial pain — especially as there will be a mandate — and will demand that something be done. At that point there will be no alternative other than a single-payer system. I don’t know if the health insurance industry knows the trouble that lies ahead. If they don’t get creative, they might wish they’d supported a public “option” when they had the chance.
Edward Berger is a senior healthcare executive with more than 25 years of experience in medical device reimbursement analysis, planning and advocacy. He’s the founder of Larchmont Strategic Advisors and the vice president of the Medical Development Group. Check him out at Larchmont Strategic Advisors.