Cost Sustainability

(Modern Healthcare, May 18, 2013)

By Bill Frist and Dr. Manoj Jain

We have done it. We have decreased the increase in the cost of healthcare. Let us explain. For three decades (1980–2009), the cost of healthcare has been increasing each year at an average rate of 7.4%—double the rate of inflation. However, over the past three years, the increase in healthcare expenditures has remained at a low 3.1%.

Is this decline the desperately needed bend in the healthcare cost curve or just the impact of the depressed economy?

Four leading studies point us in different directions. Last month’s Kaiser Family Foundation study deduced that 77% of the decline was attributable to the economic downturn and is likely temporary. A report by the Robert Wood Johnson Foundation echoed these conclusions.

In contrast, two articles in the May issue of Health Affairs point to structural changes such as “less rapid development of imaging technology and new pharmaceuticals, increased patient cost sharing and greater provider efficiency” as major causes of the decline, suggesting that only 40% to 55% of the decline was because of the economic downturn.

The final answer is probably somewhere in between, with about half of the decrease realized by encouraging changes in the way healthcare is delivered and the other half due simply to the downturn in our economy. Regardless, it is important to recognize—and celebrate—that the cost curve has bent without collapsing our healthcare system or being prompted by draconian measures in rationing of healthcare. Moreover, the decline has not led to deterioration in our quality measures. In fact, they have improved.

Now, the $2.7 trillion question is, “How can we sustain this slower growth over the next decades?”

Undeniably, during the past several years, the singular focus of conversation among policy makers has shifted from simply more care and better quality of care to better value in healthcare, where value is defined as quality over cost. The onset of value-based purchasing by Medicare and higher copays and deductibles for patients in employer-based plans has helped in disseminating this message to doctors and patients.

Yet if history is any indicator, the cost of healthcare will rise once again as our economy strengthens. So, last month the Bipartisan Policy Center made 50 bold recommendations on how to sustain the lower growth of healthcare costs. These recommendations are unique because they focus on improving the entire system of care over a prolonged period of time and break through the partisan rhetoric surrounding healthcare reform.

We want to highlight a few of the recommendations that will impact providers—hospitals and doctors. The BPC encourages advancing accountable care organizations to a 2.0 version where the entire spectrum of patients’ needs would be covered for a fixed payment, and in doing so replace the irrational and outdated sustainable growth-rate formula for physician reimbursement.

Also, the BPC policy paper suggests changing our present voluntary bundle payments program to the standard method of payments for certain DRGs. The impact of such a change in the payment system can be profound. When in the 1980’s Medicare changed payments to hospitals by DRG, length of stay and hospital payments declined.

If such measures are not successful in restricting the cost of healthcare, then a fallback spending limit or a “cap” would take effect based on annual per beneficiary spending growth to a target of GDP.

To sustain these reductions in cost, the availability of current cost data and transparency of such data are essential. At present when patients get their bills, they do not know the difference between healthcare charges, expenditures and costs. To borrow an analogy from car sales: the sticker price, the new owner’s price and the dealer’s invoice price, respectively.

As for providers, physicians are often unaware whether an antibiotic costs $150 or $15 when writing the prescription or a doctor’s order in the hospital chart.

These costs have real impact for Americans. One RAND Corp. study found that if healthcare costs had risen at the slower rate equal to the Consumer Price Index, an average American family would have had an additional $5,400 more to spend each year on education, entertainment, food and clothing over the past decade. But instead, the average family has spent that money on healthcare. With our healthcare system at this crucial crossroads, we need to take this opportunity and stop the collateral damage.

A slower growth of healthcare cost would mean less burden on the individual family, freeing that family to invest in and live a higher quality of life. And for communities it would free billions of dollars for education, businesses, job creation and future innovation.

The good news is that it can be done. And the blueprint for eliminating waste, lowering the cost and maximizing the value is actively being considered by voices that rise above partisan bickering.

Manoj Jain is an infectious disease specialist in Memphis, Tenn.
Bill Frist is a heart transplant surgeon and former U.S. Senate majority leader.

This article was originally published in Modern Healthcare.

How to Build a Better Health-Care System

(Washington Post, April 17, 2013)

By Tom Daschle, Bill Frist, Pete Domenici, and Alice Rivlin

Tom Daschle, a Democrat and former senator from South Dakota, was Senate majority leader from 2001 to 2003. Bill Frist, a Republican and former senator from Tennessee, was Senate majority leader from 2003 to 2007. Pete Domenici, a Republican and former senator from New Mexico, was chairman or ranking minority member of the Senate Budget Committee from 1981 to 2003. Alice Rivlin is a former director of the Congressional Budget Office. The four co-chair the Bipartisan Policy Center’s Health Care Cost Containment Initiative.

The four of us came together to change the conversation around how to improve health care and constrain cost growth. What we learned is that, until better care is prioritized over more care, our nation will continue to face a problem with health-care costs. The good news is that, through thoughtful policy, health-care practitioners can be encouraged through rewards to focus far more on what is best for their patients and less on the number of tests and procedures they can order. The even better news is that such a health-care vision can not only produce better care but also cost less.

With the Bipartisan Policy Center, we will release a report Thursday with more than 50 recommendations to achieve the critical goal of improving the quality and affordability of care for all Americans while containing high and rising health-care spending. This report is the culmination of nearly a year of work, including stakeholder outreach, thorough research and substantive analytics to quantify the impact of our proposed policies.

Too often we in Washington talk about health care as though it is little more than a line item on a budget table. Those of us who have experienced the best of health care know that is not how care should be delivered or policy crafted in this most personal of issues. Our country can achieve a higher-value health-care system — meaning both higher quality and greater efficiency.

Health-care cost drivers are complex and interwoven, but the most problematic ones we identified are the inefficiencies, misaligned incentives and fragmented care delivery in the current fee-for-service reimbursement system. To address these, we seek to promote coordinated and accountable systems of health-care delivery and payment, building on what has proved successful in the private and public sectors. Organized systems of care emphasize the value of care delivered over the volume of care. These systems are often better able to meet patients’ needs and desires and are able to effectively reimburse providers and practitioners for delivering high-quality care.

In all our proposals, we sought to avoid simple cost-shifting as a means to generate federal budgetary savings, instead promoting transparency and protecting patient choice. We also focused on reforms that will incite transformation across the health-care system, not limited to Medicare. We believe, however, that the power of Medicare can be leveraged to lead the way in transforming U.S. health care.

In brief, our recommendations:

●Preserve the promise of traditional Medicare while adding more choices and protections for beneficiaries, including accountable systems of care and a stronger, more competitive Medicare Advantage program.

●Strengthen and modernize the traditional Medicare benefit, including adding a catastrophic cap, rationalizing cost-sharing and premiums and expanding access to assistance programs for those with low incomes.

●Reform the tax treatment of health insurance to limit the taxfavored treatment of overly expensive insurance products.

●Empower patients by promoting transparency that is meaningful to consumers, families and businesses, and streamline quality reporting.

●Advance the nation’s understanding of potential cost savings from prevention programs, through support for research and innovation on effective strategies to address costly chronic conditions.

●Offer incentives to states to promote policies that will support a more organized, value-driven health-care delivery and payment system, such as supporting medical liability reform and strengthening their primary-care workforce.

All of these policies are designed to improve the quality and value of our nation’s health care. That is where every health-reform effort should start. The savings that we achieved — $560 billion over 10 years in debt and deficit reduction — is the outgrowth of our work, not the goal.

No single set of recommendations can fix the health-care system or the nation’s debt and deficit crisis overnight, but we hope this report can start a constructive, pragmatic dialogue among policymakers and political leaders. By presenting this report to federal, state and private-sector leaders, we hope to promote a collaborative dialogue and a shared understanding of strategies to put our nation’s health system, as well as its economic outlook, on a sounder, healthier and more sustainable path.

This article was originally published in the Washington Post http://www.washingtonpost.com/opinions/how-to-build-a-better-health-care-system/2013/04/17/a44dd478-a6d1-11e2-8302-3c7e0ea97057_story.html