REFORM: The Challenge of Health Care and Entitlements

We came to the National Press Club today ready for a debate on health care and entitlement reform. What we got was a lot of consensus on the serious challenge of health care cost growth and the need to do everything in our power to bend the cost curve. That, and an interesting bowl of gazpacho with chunks of watermelon in it….

Our cold soup confusion aside, we were pleased to participate in the panel of experts put together by our colleague Maya MacGuineas, Director of New America’s Fiscal Policy Program and President, Committee for a Responsible Federal Budget.

Our co-panelists addressed the need to make hard choices in health care and the budget and the potential of Medicare to drive changes in the system. With such a broad range of expertise in fiscal and health policy, there was naturally some disagreement on priorities and political viability of different options. But every panelist shared the goal of getting health care costs under control. The purpose of our presentation was to show that there are real, tangible ways of holding down costs that can provide the basis of meaningful reform.

 You can find the whole discussion webcast here. Below are a few of our key themes:

• Transforming inefficiency into savings: Roughly one third of current health care spending adds little or no clinical value. If we were able to reduce unnecessary care by just 10 percent a year for the next 10 years we could save $900 billion —enough to cover the uninsured while addressing the needs of Medicare, Medicaid, and other budgetary priorities.
• Payment reform is key: To tap into the tremendous potential savings in our health care system we need to change the way we pay for health care. Fee-for-service medicine encourages volume over quality. As we and others have noted in the past, payment reforms such as bundling, medical homes, and shared savings models have the potential to reduce costs while improving the quality of care. The state of North Carolina has generated more than $240 million a year in Medicaid savings from its medical home model, simply by paying doctors a small fee per patient to manage and coordinate their care.
• Building an infrastructure for reform: Changing the way we pay for medical services will require real data on what works and doesn’t in health care. During Q&A, former Senator John Breaux raised the concept of comparative effectiveness being discussed by the Senate Finance Committee.  He asked whether such research of comparing health care treatments should take into account costs. We agreed with our co-panelist, a senior fellow at Brookings and former director of the CBO, Alice Rivlin, who said that as an economist, costs always matter. As we noted during our presentation, the CBO recently concluded that such comparative effectiveness when coupled with changes in the financial incentives of patients and providers has the potential to reduce health care spending over the long term.

None of this is easy. But all of it is necessary. Fortunately, both presidential candidates have recognized the challenge of health care costs in their platforms and campaign proposals. Furthermore, both houses of Congress have introduced bipartisan comprehensive health care reform bills that have much more than  token support. Finally, the major stakeholders in health care reform—insurers, physician groups, consumers advocates, unions, employers—all agree that major change is necessary. We can afford to pass on the gazpacho, but we can’t afford to wait any longer for sustainable comprehensive health reform.