September 10th, 2009
The president’s speech to Congress struck important political notes. It also included three tantalizing opportunities for adding some aspects of health care reform to what was becoming simply health insurance reform.
Delaying Implementation of the Exchange
The most obvious new, and possibly controversial, point in the speech was the four-year delay in implementing the Insurance Exchange. This will definitely help the budget figures by pushing costs further out into the future, but it has substantive implications as well. The Exchange will be a central aspect of the new proposal. It may appear to be similar to what is done by some health benefits departments of large employers. It will, however, face a far more complex task than say, the Office of Personnel Management in allowing federal employees to choose among health plans. The Exchange will be faced with an entirely new pool of enrollees who are much more mobile and diverse in their health risk than those working for large employers who manage choices among plans. The Exchange will need to appropriately assess differences in the risk of enrollees choosing among the various health plans so that more money can be paid to those attracting sicker people and less to those attracting healthier people.
Some health plans, especially the well-meaning ones that provide good access to high-quality providers, will attract the enrollees most in need of care. If the Exchange is unable to do its risk-adjustment task sufficiently well and pay those health plans more, their premiums will rise more rapidly than the plans offering narrower, and often poorer-quality, provider networks. More importantly, if the rationale for having multiple health plans is for them to encourage delivery system change, the Exchange cannot let plans make profits simply by attracting low-risk enrollees. Plans should have to earn their profits by lowering administrative costs, redesigning incentives, and encouraging more cost-effective choices that provide higher quality. The Exchange needs effective risk adjustment and effective reporting on quality differences so that people will be able to make informed choices among plans. This will all take time; even a four-year lead time may not be enough.
Malpractice Liability Reform
What appears to be just a political opening to the Republicans—a directive to the secretary of the DHHS to develop demonstration projects on malpractice reform—may actually have potential for more fundamental change. Medical liability costs are a small fraction of overall health care expenditures; even totally eliminating them would not have a major impact. The fear of a suit, however, has a major impact on the system. Even if a physician is totally innocent, the impact of the time, anxiety, and insult to one’s professional identify arising from being named in a suit cannot be ignored. This may actually be the cause of defensive medicine—the excessive ordering of tests and imaging to protect oneself in case of an adverse event. Such tests, however, often also add to the physician’s revenue, usually with a much higher profit margin than simply spending more time talking with the patient. Thus, the claim that tort reform by itself will eliminate unnecessary tests may be overstated.
Tort reform, however, will remove one of the key excuses for excessive testing, and thus may facilitate efforts to reduce cost. Without tort reform, bundled payments will be unlikely to lead physicians to substitute more time with patients for current levels of testing; the perceived decrease in ability to defend oneself in the event of adverse event will far outweigh any short-term increase in earnings.
Much of the focus on tort reform has been either on caps on payments or, more creatively, administrative processes for rapid compensation for potentially avoidable adverse events. The former will have little systemic impact. While the latter would markedly reduce the costs of litigation, it does little to improve quality of care, and may simply allow hospitals to include compensation for poor quality as part of the cost of doing business.
An alternative that should be explored by Secretary Sebelius is a model in which the administratively determined payout is not necessarily the end of the case. Instead of sealing the file for each case, files would be open to “officers of the court” under rules of confidentiality that keep them out of the press. Other attorneys could examine a database of the cases to see if there is a pattern of repeated payouts for similar problems by an organization, such as a hospital. If there is no evidence of attempts to identify and correct the system errors resulting in those adverse events, a secondary suit regarding corporate negligence could be brought. This shifts the focus from individual patients and physicians to systemic problems that can be addressed, while protecting and rewarding institutions that engage in continuous quality improvement. Malpractice insurers will seek to spread the lessons that can be gleaned from organizations with effective programs, and litigators may refocus their energies on systemic problems in quality.
Revisiting Cost Savings in the Future
The third opening for reform is the president’s promise of a “provision in this plan that requires us to come forward with more spending cuts if the savings we promised don’t materialize.” Many of us are concerned that the current bills under discussion offer relatively little in terms of delivery system reform. It could be that those who are writing the bills have been ignoring what we policy analysts have been suggesting over the years. Alternatively, those in Congress may feel it isn’t worth the political capital to push for fundamental change when the Congressional Budget Office won’t give a bill credit for savings that haven’t been proven. Without proof, the CBO will score at zero even those delivery system reforms that many policy analysts believe will result in plausible savings.
The bills currently under discussion, however, include demonstration and pilot projects that address components of fundamental delivery system reform. This includes ideas such as bundled payments, accountable care organizations, responsibility for readmissions, and medical homes. The savings projected in the president’s plan will probably not be fully realized, but it will take some time before we know that. By that time, however, we may have some initial results on the feasibility and cost saving implications of various delivery system reforms that can then be scored by the CBO.
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