Affordable Coverage That’s Economically Sustainable

Health care reform worth the name would accomplish two things: (1) quality, affordable coverage for all, and (2) a high-quality health system that is economically sustainable. These goals are linked --one cannot be achieved without the other. We must summon the courage to do bold reforms, not timid half-measures, when the going gets tough.

These goals require heavy lifting, but the payoff is far greater. Policy changes must render unprofitable two obsolete business models that have long dominated and distorted our health system: risk segmentation by insurers, and fee-for-service reimbursement of providers.

Insurers should compete by helping subscribers find health and value in the health system, not by shirking costs by avoiding the truly sick. This will require new rules that end discrimination based on health status, which will ensure insurance is accessible to all. Sliding scale, low-income subsidies will make insurance affordable and an individual requirement to purchase coverage will make insurance markets work more efficiently and more fair. Let us not forget the Institute of Medicine’s conclusions that about 20,000 Americans die every year because they are uninsured or that the economic cost of lost productivity and quality of life for the uninsured outweighs the public cost of covering all. We have both a moral and economic obligation to finally cover all Americans.

Fee-for-service payment rewards volume, not value. Consequently we spend far more per person on health care than any other country. Federal and state budgets are increasingly strained by health spending, and yet, we get mediocre results. Stunningly, we have invested little (until the stimulus package of 2009) in the infrastructure of the future: information systems and decision support tools for providers and patients. These resources combined with new payment models can align the interests of patients, clinicians and taxpayers.

As the largest purchaser of health care, Medicare must lead the way. This means Medicare must create better incentives for providers to focus on quality and efficiency. Preferably, Medicare must help align incentives across providers to refocus the delivery of care on the patient. Medicare should move away from fee-for-service payment that rewards providers regardless of quality and outcome, and toward more integrated, bundled payment models that encourage coordination and shared savings among providers, payers and patients. To turbocharge provider success, Medicare should help disseminate best practice processes, eliminate unnecessary regulatory burdens, and incentivize the adoption of information tools.

Recently Health CEOs for Health Reform, a diverse coalition of health care stakeholders from many different sectors, called publicly for providers to be held accountable to cost and quality standards at a specific date (within five to six years). To guarantee that health reform will slow the rate of health care cost growth, Health CEOs for Health Reform recommends that Medicare reduce payment updates to high-cost providers at a date certain if the proposed efforts to increase value and lower costs fail. This type of reform could save $500 billion to $600 billion over 10 years in Medicare alone, and help encourage the broader health system to adopt similar payment policies.

Delivery system reforms that drive quality and produce savings are important both to finance coverage expansion and improve Medicare’s long term fiscal picture. Yet, we will need more funds to cover all.

Currently, we exclude employer health care contributions from tax liability, which costs the Treasury $200 billion a year. This is one useful financing source. The current subsidy is inefficient and unfair because it disproportionately benefits high-income workers who would buy insurance anyway. In addition, the Congressional Budget Office declared that reducing this subsidy will actually help slow the rate of growth in health care costs, which in turn will reduce subsidy and Medicare costs. Thus, capping the employer exclusion could be a progressive and efficient way to finance reform.