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Cost Sustainability

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(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.

Need for Affordable Care Cuts Across Party Lines

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(The Hill, August 1, 2012)

Need for affordable care cuts across party lines
By Tom Daschle and Bill Frist

On June 28, 2012, the Supreme Court issued a decision that affects the health and well-being of every American, as well as the fiscal future of our nation. By affirming the constitutionality of the Patient Protection and Affordable Care Act (PPACA), the private and public sectors can now turn to implementation, along with natural and needed shaping and modification of the underlying policy along the way.

The court’s decision can and should be a turning point for our national discussion and action on healthcare. Though the upcoming elections might amplify our differences in the short term, it is in the long-term interest of every American to begin now to work together and forge consensus-based solutions for our nation’s most critical healthcare challenges.

The United States currently has an expensive, uncoordinated and inefficient healthcare system. By 2020, healthcare spending will make up one-fifth of our national economy. Excessive and wasteful healthcare spending fuels our nation’s exploding federal debt and imposes unsustainable burdens on our federal and state governments, employers, individuals and their families. This is a grave threat to our nation’s future health, economic viability and ability to compete in an increasingly competitive global marketplace.
As the co-leaders of the Bipartisan Policy Center Health Project, our mission is to bring together federal, state, business and workforce leaders to develop health system solutions that address ongoing budgetary and healthcare reform challenges. We are embarking on a new initiative to confront and curb the country’s out-of-control healthcare cost growth: Our goal is to promote a rational, competitive, accessible and affordable healthcare system. We will be collaborating on this initiative with Alice Rivlin and former Sen. Pete Domenici (R-N.M.), the distinguished co-chairs of the Bipartisan Policy Center Debt Reduction Task Force. The task force is dedicated to reducing the federal deficit and helping America achieve a sustainable fiscal path, which simply cannot be accomplished without significant healthcare reform.

Healthcare cost containment is a profoundly complex and divisive issue, but we are steadfast in our belief that this issue can be addressed in a meaningful way. We as a nation cannot wait any longer. Our broken healthcare system can be fixed; there are solutions to each of the challenges. But we will never devise and apply them until we commit to do so together, reaching across the political aisle to work with one another.

All Americans generally agree on the end goals for health reform — appropriate and effective patient care, lower costs and easier access for all. We might not agree on the individual mandate, but we do agree on the power of embracing personal responsibility for our health and health decisions. We do not always agree on the most effective way to execute state insurance exchanges, but we can agree that these exchanges provide opportunities for states to use the power of market competition to control costs and engage their constituents on the individual level.

We all know that greater transparency in pricing and outcomes will help eliminate duplication, waste and inefficiency. We want to see our system provide frictionless and coordinated care that brings satisfaction to caregivers and peace of mind to patients. We want our health records and data systems to be brought into the 21st century through health information technology, providing vital health information when and where it is needed instantly and securely. The only question is how we get there.

Healthcare is in a period of explosive growth and transformation. Every day, the sector performs technological miracles, creates jobs and saves lives. We must harness this power, but at the same time, strive to do more. The American healthcare system has the power to be more efficient and more accurate, without sacrificing our nation’s capacity for private-sector innovation, productive public-private collaboration and incredible technological advancement.

Allowing healthcare costs to soar at unsustainable levels and allowing America to fall behind on key indicators of care quality and access is not a political victory for either side of the aisle. Assigning blame along partisan lines gets us nowhere.

A healthy population, a happy and productive workforce, and affordable healthcare are vital to the future of our nation. Unless we are willing to work together to transform our healthcare system for the better, these essential goals will remain out of our reach.

Former Senate Majority Leaders Daschle (D-S.D.), now a senior policy adviser at DLA Piper, and Frist (R-Tenn.) lead the Bipartisan Policy Center’s Health Project.

This article was originally featured in The Hill http://thehill.com/blogs/congress-blog/healthcare/241701-need-for-affordable-care-cuts-across-party-lines

Premium Support is the Only Way to Fix America’s Medicare Mess

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(The Week, March 27, 2012)

By Bill Frist, M.D.

To save Medicare — and rein in our national debt — we must transform the entitlement program into a defined-contribution system

Nothing is scarier than losing your health.

A close second, however, is getting sick and not being able to afford the care you need. For seniors, Medicare has been the entitlement program that for 47 years has dependably provided health security and peace of mind.

But today, demographics are shifting. Fewer workers are contributing to the pay-as-you-go system that by 2030 will cover double the number of beneficiaries it does now. Those reaching 65 this year, on average, will take out in services more than twice what they paid in over their lifetime. That is simply unsustainable. Medicare cannot last as currently configured.

Absent real changes, Medicare will be unable to meet the needs of seniors in the future.

And looming behind all this is our nation’s debt, skyrocketing on autopilot from $15 trillion today to $22 trillion in eight years. The higher the debt, the slower our economy grows, and the fewer jobs are created. Though a lot of people think Social Security is the culprit, it is not. As a percentage of GDP, it is our two government health programs, Medicare and Medicaid, which, left unchecked, will disproportionately balloon over the next 50 years.

For these reasons, the single most important reform that our next president must address is Medicare modernization.

Absent real changes, Medicare will be unable to meet the needs of seniors in the future.

This week marks the two-year anniversary of the President Obama’s health reform initiative. But that law did little to reform Medicare. Instead, it primarily addressed an entirely different issue, increasing access and expanding Medicaid so that one out of every four Americans will be on Medicaid in 36 months. Structurally, President Obama did not change Medicare at all.

If demographics, determined years in advance, define the impending bankruptcy of Medicare, why haven’t our elected leaders acted? Well, in fact, both President Clinton and President Obama, under mandates by Congress, appointed high-profile presidential commissions to address the issue of entitlement reform and Medicare modernization.

The irony is that both bipartisan commissions, one in 1998 and the other in 2010, demonstrated majority support for the exact same type of fundamental reform for Medicare, a plan that maximized security for our seniors, choice for the individual, and longterm sustainability of the program.

It’s called premium support. Here is how it would work:

When you become eligible for Medicare at 65, you choose a health plan from a menu of integrated private plans that all cover the basic benefit package provided under traditional Medicare today. They can vary in depth and scope of additional coverage. Or you can choose to keep traditional Medicare instead of choosing one of the more modern plans. It’s your choice. All the plans and the exchange system through which they are selected are regulated by the federal government to guarantee security, fairness, and accountability for the individual and a level playing field for the plans.

Your premium for the coverage will be paid partly by the government (known as a defined contribution or premium support). For example, hypothetically, this year the government might pay $8,000, and you pony up a supplementary sum — the total would depend on the additional benefits of the plan you selected. Your personal contribution would be means-tested, with more aggressive subsidies paid for those without resources to afford the basic coverage. The premium support level would be adjusted by income, geography, and health status. You would be able to afford it.

Is such a transformation of Medicare risky? Not really.

The government has a whole lot of experience successfully managing such an exchange, transparently ensuring its equity and value. It has been doing so with the FEHBP (Federal Employees Health Benefit Plan) for the past 52 years. This system has insured all federal employees, currently covering 9 million people, including me when I was a senator — making it the largest employer-sponsored group health insurance program in the world.

The advantages of premium support are many.

Each senior is empowered with a choice of comprehensive plans, similar to what each member of Congress enjoys. Plans can rapidly adopt improved innovations in benefits and coverage rather than wait years for Washington to pass another law. And increased price transparency demanded by active consumers interested in making a value-based choice of plans will empower 50 million Americans to powerfully participate in reducing waste, continually squeezing the fat out of the system.

Premium support would reduce total spending by stimulating price competition among plans (just as has been observed with the Medicare prescription drug coverage structure created in 2003). Beneficiaries become more cost conscious in choosing a plan that best suits their needs.

No longer would doctor and hospital reimbursement be determined by Washington-based price fixing (and arbitrary, blunt, across-the-board cuts) but rather, by value to beneficiaries. No longer will federal centralized pricing of 155,000 service codes based on episodic and unpredictable review be necessary. A side benefit would be a reduction in the costly and distorting power of lobbyists and Washington-based special interests who thrive on managing this centralized price setting to their advantage.

Premium support makes Medicare sustainable longterm, and goes a long way toward reversing the debt and entitlement problems that threaten America’s future.

And what are the naysayers worried about? First, they say providing seniors with more choice is just too confusing. But seniors can keep what they have in traditional Medicare if they want. Second, they argue premium support simply shifts costs and does nothing to reduce the overall price of care. But aligning reimbursement with value and quality rather than quantity will minimize this shift.

The premium support concept is neither novel nor new. Initially proposed in a bipartisan spirit by two congressmen in 1983, endorsed by two prominent health policy economists in 1994, supported by a majority of both of the last two presidential commissions, and more recently proposed by members of both political parties in Congress, premium support is the leading solution to achieve Medicare modernization for seniors and fiscal solvency for our country.

Dr. William H. Frist is a nationally acclaimed heart transplant surgeon, former U.S. Senate Majority Leader, the chairman of Hope Through Healing Hands and Tennessee SCORE, professor of surgery, and author of six books.

 

This article was originally featured in The Week http://theweek.com/article/index/226065/premium-support-is-the-only-way-to-fix-americas-medicare-mess