What It Would Take to Really Make America's Health Care Costs Affordable and Sustainable

Most health care experts agree the reason our system is so unaffordable is because of all of the waste and unnecessary care—up to 30% of what we spend.

I will suggest that it will take the genius of individual creativity to separate the 70% of this health care system that is the best in the world from the 30% that is waste.

So far, the Congress has focused more on entitlement expansion then fundamentally reforming the system and tackling the real problem—getting all the excess costs out. The result so far is expensive health care proposals and no real reform.

How can we actually make the health care system affordable as we expand coverage? I will suggest a three-pronged attack:

1. Launching a number of hopeful initiatives already outlined by the President that would improve the delivery system. These include health information technology, comparative effectiveness research, wellness, and prevention. These have promise but there is no guarantee they will work without unambiguous changes in incentives so those who provide care will begin to effectively use them.
2. Changing the incentives for private sector consumers by adopting many of the financing proposals in the Wyden-Bennett Healthy Americans Act— which has already been scored by the CBO to broaden private sector coverage for no additional cost.
3. Adopt what I call the Health Care Affordability Model to do what we should really be doing—making our health care system affordable.

I will suggest that it is not enough to simply pay for the expansion of the American health care system and end up deficit neutral. At 17% of GDP already and with 30% of the system being wasteful we should set a goal to actually reduce costs from what they would have otherwise been.

The Wyden-Bennett proposals take us to a place where we can expand coverage for no additional cost. The Affordability Model gives the Obama cost containment policies teeth so we can actually make our system more affordable.

The Affordability Model creates an unavoidable imperative for health plans, health care providers, and consumers to finally cooperate in ridding the waste and avoidable care from our currently unaffordable health care system.

For seventy years, we have used the federal tax system to encourage the expansion of health insurance benefits. But now it only encourages more spending at a time when health care is becoming even more unaffordable.

We already know a great deal about where the waste is in our system—wasteful treatments and procedures, poor quality, avoidable sickness, and administrative costs.

We have the tools—or can create tools—to effectively manage the system.

But we haven’t done it quickly or effectively enough.

We haven’t done it because we haven’t had to—as out-of-control as the system is most of the stakeholders have continued to profit from the status quo.

There would not be any global budgets. The Affordability Model would use the tax system to fashion unavoidable incentives to control costs and improve its quality—no stakeholder would any longer profit from the status quo.

The Affordability Model would continue to allow employers to self-insure their health plans. It would not place any limits on insurance or provider prices. It would not interfere in the delivery of care.

The Affordability Model reflects a belief that quality health care decisions need to be made on a patient-by-patient basis, that health care professionals should make these decisions in collaboration with their patients, and that payers and providers cooperating toward the same objectives can produce meaningful results.

Under the Affordability Model, health plan networks would have clear-cut incentives to first begin to stabilize and then control their premiums. Failure to do so would mean the loss of their federal tax qualification and that would mean employers and consumers would move their business to health plan networks of insurers and providers that achieved results.

Consumers and employer sponsors would not be penalized. They would simply move away from inefficient and ineffective health plan networks.

If at any time all residents in a state did not have access to a tax qualified plan, the Secretary of HHS would be directed to introduce a public Medicare-like health plan in that state to compete with all private plans—qualified and non-qualified.

The Affordability Model would create an unambiguous reason for each of the stakeholders to finally work together to get America’s health care system under control. No stakeholder would want to see their network lose its tax preferences:

• The health plan would be placed at a substantial competitive disadvantage.
• If doctors, hospitals, and other providers were not in a tax qualified health care network they would lose patients to networks that did control costs.
• Employers and consumers would almost certainly purchase their health benefits only from qualified plans.

The result would be consumers and employers moving to health plans that succeeded in giving Americans better quality care at an affordable cost—and bringing the American health care system with them.

Read a detailed explanation of the how the Affordability Model would work here.