Thursday, July 2, 2009

Health Care Reform Should Mean Health Care Reform--A Proposal for Real Change

CMS says that we will spend 17% of GDP on health care this year and we are on our way to having 22% of our GDP being spent for health care by 2018.

The stated goal of the President and all of the Congressional health care reformers is to accomplish health care reform and have it be deficit neutral.

Deficit neutral means we wouldn't reduce our costs one bit. We would have no assurances that we would make things better than the track we are on--to 22% of GDP--and it could be even worse.

Why would the U.S., where our costs are at least 50% more than any other industrialized nation's costs, want to let this thing keep growing to 22% of GDP?

Yes, I would have to admit that having most everyone covered and spending 22% of GDP would be better than having 50 million uninsured and spending 22% of GDP.

But let me also suggest, this is nuts!

If the question is how do we reform our system over the next ten years by tackling unaffordable costs and covering everyone, why is it acceptable for the stated end result of all of these efforts to be spending 22% of GDP on health care in 2018?

Am I crazy to think that health care reform needs to be about actually changing the system and solving the problem?

I have a suggestion for how we can actually change the system.

I call it the Health Care Affordability Model.

Government wouldn't demand anything of insurers, doctors, hospitals, patients, or anyone else. The Affordability Model would not include a public health plan. It would not have a cost board or turbocharged MedPAC. There would be no price controls on insurance or provider prices. There wouldn't be any complex pay-for-performance system requirements. There wouldn't be limits on what treatment protocols or technology a provider could prescribe. There would be no global budgets.

The Affordability Model could be attached to virtually every health care reform proposal now on the table.

The Affordability Model by itself would not require anyone to pay more--or less--for good care or bad care.

The Affordability Model would focus unambiguous incentives for the health care players on actually making the system sustainable and it would phase improved performance in over a period of years so those in the system could manage the transition without causing unacceptable dislocations.

And it would not set 22% of GDP as a laudable goal.

Here's a brief outline of the Affordability Model:

The Health Care Affordability Model
  1. We can use American ingenuity to manage our health care system to better outcomes—cost and quality.
  2. Providers and insurers have the tools to give the system better cost and quality outcomes—health information technology, wellness and prevention strategies, pay-for-performance, comparative research, and the like. And they can develop new ones.
  3. But providers and insurers will not use these strategies to their full potential, or develop others, until they have to—now they do too well under the status quo.
  4. The Affordability Model gives them no alternative.
  5. Any network of insurers and providers who did not collaborate toward making the system affordable would lose their tax qualification—their plans would no longer be tax deductible for employers and consumers.
  6. In order to maintain their tax qualification, health plans—through collaboration with health care providers—would be required to first slow their annual rate increases and then over a period of years stabilize their costs to the same rate the economy grows—a rate America could afford.
  7. Because employers and consumers would only be interested in buying a qualified health plan, there would be enormous and unambiguous incentives for health plans, physicians, hospitals, drug and device companies, and other health care providers, to participate in and collaborate within networks of qualified health insurance plans.
  8. The Affordability Model would fundamentally change the incentives in America’s health care system—without government controls and global budgets—by creating an overwhelming and unavoidable incentive for insurers and providers to finally cooperate toward the shared objective of controlling costs and improving quality.
  9. But, if at any time all of the residents of a state did not have access to a qualified health plan the federal government would provide a Medicare-like public plan.
  10. The Affordability Model could be attached to virtually every health care proposal now on the table.
You can see a much more detailed description of just how the Health Care Affordability Model would work here.
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