A couple of years ago, Jeff Bauer and I and our wives shared a nightly dinner on a transatlantic crossing and became friends. Jeff and I stayed in touch and exchanged thoughts on various subject, including healthcare, a subject on which he is an expert and I am not. I was impressed by his expertise and intrigued by his perspectives on that challenging issue and I talked him into doing a guest blog. I believe that readers of RINOcracy.com will find it both informative and thought-provoking. ~ DMP.
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Redirecting Health Reform: A Real Republican Opportunity
By Jeffrey C. Bauer, Ph.D.
The intensely partisan debate over repairing or repealing the Affordable Care Act (ACA) is a waste of everyone’s time. Democrats begrudgingly admit that Obamacare is flawed, but they refuse to modify its core goal of reducing the number of uninsured Americans. Meanwhile, Republicans keep voting to repeal the law without offering a viable alternative for solving the serious problems of our medical care system.
Expanding access to a dysfunctional system will only make the situation worse, but returning to the pre-ACA marketplace will not make things any better. As I argue in Paradox and Imperatives in Health Care: Redirecting Reform for Efficiency and Effectiveness (CRC Press, 2015), it’s time to start from scratch. A new approach to reform is sorely needed to extract us from today’s lose-lose confrontation between defenders of a poorly crafted law and opponents who would return us to the failed marketplace that Obamacare attempted to address.
Republicans have a chance to claim credit for turning things around if they use control of Congress over the next two years to shift reform’s top priority from expanding access to building an efficient and effective health system. Federal spending on health care should be capped in the process. Then, money saved by eliminating the current system’s abundant waste could be reallocated to providing appropriate care for more Americans, based on a plan carefully and openly developed by all stakeholders.
Republicans have a unique opportunity to do reform right this time. Obamacare is a failure because it was drafted behind closed doors and rushed through the House in a way guaranteed to create unpleasant surprises and unexpected consequences. By addressing the health system’s problems and solutions out in the open, Republicans could demonstrate a publicly accountable commitment to build a truly affordable health system—something the misnamed Affordable Care Act does not do for the vast majority of Americans.
Conversely, Republicans are on very shaky ground when arguing that reform is unnecessary because we already have the world’s best health system. This default position is not supported by the facts. The U.S. allocates 17% of gross domestic product (GDP) to health care, yet Americans are less healthy than the residents of three-dozen comparably developed countries that spend 12% or less on medical goods and services. Indeed, a growing number of economists and policy analysts argue that reform in the United States should simply reduce spending to 12%—what I call “same mess for less” reform.
Cutting health care’s share of GDP from 17% to 12% would reduce overall government spending, but it would not improve population health—a critical component of our future strength as a nation. Hence, I hope Republicans will formally embrace visionary actions to create the best health care that 17% of GDP can buy. After 45 years in health care, including substantial involvement in government-directed reforms, I have concluded that real reform can only be accomplished in the private sector. Republicans have failed at government-managed health reform just as much as Democrats since Medicare and Medicaid were enacted in 1965. Indeed, many of Obamacare’s key concepts were originally developed by Republicans
Cost, quality, and access have gotten consistently worse under laws passed by both parties over the past 50 years. There is a crucial lesson to be learned from this history: federal laws and government bureaucracy are incapable of building a good health care system in the United States. With respect to health reform, the time for return to traditional Republican values has come. It is a perfect cause for Republicans who admit the U.S. health system has serious problems but also believe that American ingenuity and fair competition will solve the problems far better than government regulations and higher taxes.
The Paradox: Liberal reformers who want to make the American system more Canadian or European must be reminded that privatization is a core component of current reforms in countries with so-called model systems. (As ironic proof, reaction to my book on reform has been quite positive in Socialist-led France.) We do not need to look abroad to see how to design and operate systems that provide great health care. Indeed, the world’s best health systems are located in the United States! Mayo, Cleveland, Geisinger, Intermountain, Baylor, Virginia Mason, Kaiser-Permanente, and perhaps two dozen other provider organizations set the quality bar for the rest of the world.
So how can the country with the developed world’s most expensive, least productive health system also be home to providers defining world-class health care? The answer reinforces history’s lesson that government-driven reform is not the source of American exceptionalism. Each of our nation’s great systems is the product of private initiative taken by visionary leaders (physicians, with a few exceptions). Not a one of these world-class systems was created in response to a government directive. In addition, each one is unique. They are organized and operated in many different ways, demonstrating the superiority of diversity in contrast to “one-size-fits-all” rules and regulations created by government health reforms.
The Imperative: We must redirect reform—that is, move away from the futile debate over repairing vs. repealing Obamacare—because government (i.e., taxpayers) and employers have hit the limits of their ability and willingness to pay more each year for overpriced health services of inconsistent quality. For reasons explained in detail in Paradox and Imperatives in Health Care, annual growth in the medical marketplace’s share of gross domestic product (GDP) is coming to a predictable end. Health care is no longer a growth industry.
Governments and employers have shifted responsibility for any relative increases in spending to consumers. As bad luck (the great recession) would have it, they have done it at a time when consumers simply don’t have any available resources to pay more for health care. Employers have accomplished this transfer through increases in co-insurance and deductibles and narrow networks of participating providers. Obamacare has accomplished it by mandating the purchase of insurance that effectively doubles consumers’ out-of-pocket payment for health care.
Prior to the Democrats’ 2010 version of reform, health insurance plans were typically priced to pay 80% of an average patient’s expected costs of health care. Now, under Obamacare, the basic plan offered on the government exchange pays only 60%, leaving the average patient responsible for 40% of the bill instead of 20%. (I am not making this up; read the law or visit an online health exchange. It’s the dirty little secret behind “affordable” care.) Providers may see a few more patients with insurance, but most patients won’t be able to pay their growing portion of the bill.
As a medical economist and health futurist, I can envision only one way to prevent this situation from leading to widespread economic failures throughout the health system and corresponding decline in health of the American population. As previously noted, I propose shifting reform’s focus from expanding access to eliminating waste—in other words, to creating an efficient and effective health system before addressing access. Governments, employers, and patients are not going to pay any more for care in the future, but at least 30% of what they are already paying is wasted on redundant services, mismanagement, and interventions that do not make patients better (and often make them worse).
The Affordable Care Act includes several pilot programs and demonstration projects intended to reduce the waste, largely by cutting Medicare payments to provider organizations that do not meet specified quality standards or cost reduction targets. Obamacare’s quality standards institutionalize mediocrity, not excellence, but its other programs are generally sound. In fact, most of the organizational and operational concepts (e.g., shared savings, medical homes, care management) have already been proven by our world-class health systems. We must not reject these well-established mechanisms just because they are being tested again under the Affordable Care Act.
However, the way in which Obamacare’s pilots and demonstrations are being implemented is destined to bring out the worst in big government. The results of these experiments will take years to emerge from a cumbersome bureaucratic process, and they will be translated into one-size-fits-all regulations guaranteed to stifle transformational innovation in the medical marketplace. As conducted by government agencies, research simply cannot keep up with the accelerating pace of change in every aspect of health care. Obamacare also prohibits using the results of its research projects to influence future payment policies, so why waste money on them?
Republicans are on very solid ground in seeking to eliminate Obamacare’s many provisions that prevent creative renewal of the medical marketplace and waste money studying what is already known. However, in failing to offer a viable plan for creating an efficient and effective health system, Republicans are missing a golden opportunity to demonstrate the worth of their party’s traditional approach to solving serious national problems. Consequently, I hope Republicans will join me in redirecting health reform to create the best health care system that 17% of GDP can buy. Here’s a plan to start moving in the right direction:
Policy Imperative #1: The federal government should promptly implement specific directives to stabilize health spending at 17% of GDP as a first step toward long-term health reform—thus ending 50 years of failed efforts to “bend the cost curve” indirectly. This policy is the one big thing we can learn from other countries. Stabilizing the overall budget for health expenditures, not establishing a single payer, is the most common characteristic of government policy in developed countries that are used as models for reform in the U.S.However, consistent with the need to give American consumers freedom of choice, no restraints should be placed on individual patients’ ability either to select the insurance coverage they desire or to make unlimited out-of-pocket expenditures. Republicans and Democrats agree that reform must promote informed consumer choice in competitive markets; consumers must therefore be free to spend their own money as they wish. Only governments and employers, the sources of approximately 80% of all medical expenditures for the past several decades, would peg their health expenditures to grow each year at the same rate as GDP, no more and no less. “No less” is essential to prevent a crash in one of our economy’s largest sectors and to ensure providers they will not be penalized for making the changes required by the second policy imperative.
- Policy Imperative #2: The federal government should require providers to use enterprise-wide performance improvement (PI) systems as a precondition for all Medicare and Medicaid reimbursement. Unlike Obamacare, where providers are only at risk for a 2% reduction in reimbursement if they fail to meet federal quality standards 80% of the time, mandating state-of-the-art performance improvement/management engineering programs would require providers to evaluate all activity all the time and to undertake immediate corrective actions for any deviations from acceptable performance—a widespread practice in America’s leading industries (e.g., aviation, manufacturing, chemicals). Providers should be given extensive relief from selected regulations in exchange for authority and responsibility to develop their own PI programs consistent with best practices in competitive marketplaces. Because the effectiveness of performance improvement is already proven in private industry [see below], the federal government would mandate and monitor the use of established PI tools, not define a single federal tool. Republicans would do the nation a great service by leading efforts to develop this policy.
[Readers who are unfamiliar with performance improvement can find good explanations of the concept and its application at the following sites:
For example, a hospital performance improvement program for surgery would collect and evaluate data on every aspect of each patient’s procedure, from pre-operative assessment to discharge from the surgical unit, and then compare actual performance of each step with established standards. Any variation would immediately invoke an investigation to discover what went wrong and an industrial engineering process to eliminate events that allowed the error to occur. Our country’s world-class health systems are recognized for using these processes across their organizations.]
- Policy Imperative #3: A bi-partisan group of public and private leaders should oversee a process to develop national consensus on characteristics of the best health system that 17% of GDP can buy. This approach would invest Americans in determining the long-run future direction of their health care, unlike the exclusive, closed-door sessions that produced the Affordable Care Act and other problem-ridden reforms of the past. In effect, the process would emulate the polling methods that politicians use to determine public preferences on other issues. The leaders of this effort should ensure inclusive, open-minded discussions where Americans can define the health system they want, realistically limited by what they are willing to pay and compromises they are willing to make. (Sample questions: Is health care a right? If so, what are the corresponding responsibilities? Should public funds be used to treat illnesses and injuries caused by individuals’ poor choices? Because the U.S. cannot afford to provide unlimited medical services, how should health spending be prioritized?)
Redirecting reform provides a special opportunity to create the world’s best health system through fair competition in competitive markets, with informed individuals making better decisions than bureaucrats responsible to special interests. If motivated by traditional Republican principles, redirecting reform would give party leaders an opportunity to focus on doing something good collectively rather than blaming Democrats for doing something bad unilaterally. As a disaffected Democrat, I feel kinship with the RINOcracy and hope that redirecting health reform can bring us all back together.
Updated as of 2/27/15
About the Author
Dr. Jeff Bauer has published over 250 books and articles and given hundreds of speeches on transforming the medical marketplace. He has been a medical school professor, consultant, government health policy adviser, and vice president for health care forecasting and strategy for two Fortune 500 companies. He was a Ford Foundation Independent Scholar, Fulbright Scholar, and Kellogg Foundation National Fellow. Contact him author at firstname.lastname@example.org or 773.477.9339. Order Paradox and Imperatives in Health Care: Redefining Reform for Efficiency and Effectiveness at www.crcpress.com/product/isbn/9781466593244. (Enter code DVN26 for 20% discount.) His other current title, Upgrading Leadership’s Crystal Ball (CRC Press, 2014), provides a practical guide for managing strategic change in today’s unpredictable world of expanding possibilities.