Congress, Tackle Systemwide Cost in Health Reform

Posted December 4, 2009 at 3:07pm

Now that the House of Representatives has passed health care reform legislation and Senate consideration of its bill continues, it is important to acknowledge how much has been accomplished. In just 10 months, more progress has been made toward enacting comprehensive health care reform than in the previous 10 decades. Together, the House and Senate bills comprise a solid start toward fixing our dysfunctional and inequitable health care system.

Included in these measures are essential provisions to:

• Extend health insurance coverage to tens of millions of uninsured people;

• Mandate insurance industry reforms to address pre-existing conditions, portability, lifetime caps on benefits, rescission and limits on copayments and deductibles; and

• Meet the budget-neutral criteria of the Congressional Budget Office.

However, fundamental reforms such as expanded coverage are dependent on effective systemwide cost control for their success. Annual health care spending in the United States is $2.5 trillion and growing exponentially. According to the Business Roundtable, this has an enormous negative effect on every other area of American business, including jobs, competitiveness and economic growth. With best estimates suggesting that 30 percent to 40 percent of all health care costs result from waste and inefficiencies, America faces squandering $10 trillion over the next decade.

Some pending measures do begin to address cost containment’s interdependency with providing higher quality care. Regrettably, they do so only gradually through pilot and demonstration projects. Initiatives on payment reforms that reward quality and care coordination, administrative simplification, prevention and primary care, and other patient-centered cost-saving quality and safety improvements need to be incentivized more robustly and accelerated.

Making health care reform effective and fiscally sustainable requires stronger medicine than the current bills provide. Reform must include enactment of provisions that better control health expenditures across the board for American families, individuals, businesses and governments — both now and in the long term. The only way to slow the rate of increase in national health expenditures is by improving the quality and safety of care while simultaneously and equitably holding all stakeholders accountable for better cost control and fiscal responsibility.

Specifically, cost containment provisions must apply systemwide and not be limited to the federal government on the theory that savings there eventually will seep into the states and private sector. They must be robust and accelerated. And they must be fail-safe.

Fortunately, the health care industry and the president have already laid the foundation to help Congress address this formidable cost containment challenge. Last spring, the CEOs of major health care industries, including the Pharmaceutical Research and Manufacturers of America, America’s Health Insurance Plans, the American Hospitals Association and the American Medical Association, among others, all promised President Barack Obama that they would voluntarily decrease the rate of their yearly cost increases by 1.5 percent each year for 10 years. These commitments, if met, are projected to save the country $2 trillion in health care costs in one decade.

Sadly, such voluntary efforts rarely, if ever, succeed without powerful incentives. To be effective, these pledges must be both codified and enforceable. A top Congressional priority for health care reform, therefore, should be inclusion in legislation of an enforcement mechanism to guarantee that these provider pledges are kept — and kept without allowing costs to be shifted inequitably within the system.

Simply put, all sectors of the health care industry should be given three to five years to meet their 1.5 percent yearly goal for reducing rate increases. Absent extraordinary circumstances, if these targets are not being met, a fail-safe provision would kick in to guarantee realization of all the promised savings within the decade.

Such a provision is consistent with Obama’s September speech before a joint session of Congress where he reinforced his commitment to serious cost containment by proposing a fail-safe mechanism, after a period of years, if the federal savings “promised don’t materialize.— Only inclusion of an impartial enforcement mechanism that is applicable systemwide can make the goals of health care reform — access, affordability, stability, quality and safety — sustainable.

A systemwide fail-safe provision would incentivize cost-related reforms and make our economy stronger. The tools needed to fix the health care system are at hand if Congress and the president have the political will to use them. Surely Republicans, Democrats, Independents, leaders and advocates from all perspectives, regardless of where they may be on other aspects of reform, should be able to act in concert now to rein in future national health care expenditures. Failure to do so puts both the historic reforms and the economic vitality of the nation at risk. Nothing less than America’s future is at stake.

Dr. Henry E. Simmons is founder and president of the National Coalition on Health Care. Ralph G. Neas is the president and CEO of the NCHC Action Fund.