Health Reform

Health care reform has once again returned to the national “to-do” list, with politicians of all stripes calling for action. Historic parallels with the early 1990s are striking. The economy is weak, health care costs are high and rising, and an anxious middle class is feeling the squeeze. Facing what could be a major recession, states need to trim spending, and businesses see health costs as undercutting their ability to compete globally.^[1],[2]

Our previous national health reform debates have focused on coverage – what to do about the uninsured. This time around, politicians and policymakers are talking about the intertwined issues of coverage, cost and quality. In the policy and clinical worlds, there is a greater understanding that the three are intrinsically linked.

Likewise, there’s a growing bipartisan understanding that the health care delivery system – not just the health insurance system – needs reform.^[3]

Our system, rooted in a mid-20th century acute care model, does not adequately meet the health care or economic needs of a nation where the overarching health challenge, and expense, is chronic disease among an aging population. ^[4]

There is less agreement about how to fix our system. Despite hopes that the U.S. could enter a less partisan era, it’s unclear whether we will see more collaboration across the aisle for the long run in the 111th Congress.

Health care reform is hard because it’s big and complicated, with lots of moving parts and unintended consequences. It’s also hard because the Washington debates are not always about health care per se. Health policy gets caught up in politics and ideological conflict over the role of government.

The starting point for the next big debate may well be these questions: Can we afford to fix health care, given that the federal budget deficit could top $1 trillion in the first year of the Obama administration? ^[5] Or must we fix health care despite the deficit, given that 45 million people lack coverage, costs are high and quality is spotty? ^{[6], [7], [8]}

Lawmakers and the Obama administration will likely debate whether reform should be comprehensive, or sequential (“sequential” being the favored word these days, replacing the more anemic “incremental”). Those who argue for comprehensive reform note that the pieces of our health care system are so interconnected that it’s hard to address one element without others.

The rationale for a sequential approach is that comprehensive health care reform, as President Clinton and earlier reformers learned, may be too mammoth for Congress to swallow all at once. It may also be easier, politically, to achieve consensus around one policy step at a time.

If a consensus develops favoring a sequential approach, renewing and expanding the Children’s Health Insurance Program (CHIP) was Step One. This popular program, which enjoys bipartisan support, was reauthorized and enlarged early in 2009, and could generate momentum for further reforms.

But expect significant debate about Step Two. Do we expand health insurance coverage first? Do we clamp down on costs? Do we enact delivery system and payment reform, shifting away from our specialist-heavy, procedure intensive system and into one that places more emphasis on primary care and care coordination?

Some analysts say that given the political volatility of health care reform, we should begin with the “low hanging fruit” in each of these areas. Yet in health care politics, just defining the low-hanging fruit can be contentious. Even if lawmakers achieve consensus on health care priorities, they will still likely encounter skepticism or outright opposition from interest groups, be they health care providers, business groups, insurers, or drug and medical device makers.

Others, such as health economist Uwe Reinhardt, argue for boldness – first implementing universal coverage, which could be done quickly, and then cost control, which could take a decade or more to show results. ^[9]

Given the obstacles to comprehensive national reform, some experts suggest that the states may be more fertile ground for coverage expansion experiments. ^[10] To accomplish this, the federal government could provide greater flexibility and incentives through changes in Medicaid waiver rules, tax laws, and perhaps the Employee Retirement Income Security Act (ERISA). (See glossary for definitions.)

If the states tackle coverage, the federal government could focus on cost and health care delivery, areas where the states have less influence. However, the economic decline so obvious by late 2008 and the ensuing strains on state budgets may dampen governors’ and legislators’ willingness and ability to explore bold coverage initiatives.

Though Medicare did not figure prominently in the 2008 campaigns, it could end up center stage again. In the coming year, Congress must grapple with the Medicare physician payment formula. The bill passed in July 2008 provided only an 18-month “patch” to the problem, and physicians face a 20 percent cut in Medicare fees in January 2010. ^[11] Additionally, Congress will have to contemplate the large population of baby boomers nearing age 65. ^[12]

A major legislative push on Medicare cost containment could derail efforts to expand health coverage for the under-65 population. Or Congress could follow recent ideas from the Medicare Payment Advisory Commission (MedPAC) about changing how we pay for and deliver health care to the elderly. MedPAC has recommended that Medicare encourage increased efficiency and quality by changing both payment systems and elements of the health care delivery system. ^[13]

Medicare and other likely policy debates are discussed in the full report available for download here.

Notes: 

[1]National Governors Association (2008). "State Budget Update." (www.nga.org/Files/pdf/NGAECONREVIEW.PDF).

[2]Nichols, Len; Axeen, Sarah (2008). "Employer Health Costs in a Global Economy: A Competitive Disadvantage for U.S. Firms" New America Foundation policy paper. May. (www.newamerica.net/publications/policy/employer_health_costs_global_economy).

[3]Former Republican House Speaker Newt Gingrich, an opponent of the Clinton health reform plan of 1993-94, has become an advocate for a redesigned health care system -- www.healthtransformation.net. Also see Joseph Antos, Gail Wilensky and Hanns Kuttner (2008). "The Obama Plan: More Regulation, Unsustainable Spending." Health Affairs Web Exclusive, Sept. 16.(www.healthaffairs.org)

[4] In 2005, 133 million people, almost half of all Americans lived with at least one chronic condition. Chronic diseases account for 70% of all deaths in the United States. The medical care costs of people with chronic diseases account for more than 75% of the nation's $2 trillion medical care costs. Chronic diseases account for one-third of the years of potential life lost before age 65. Hospitalizations for pregnancy-related complications occurring before delivery account for more than $1 billion annually. The direct and indirect costs of diabetes is $174 billion a year. Source: National Center for Chronic Disease Prevention and Health Promotion, "Chronic Disease Overview," Centers for Disease Control and Prevention, March 20, 2008, available at: (http://www.cdc.gov/nccdphp/overview.htm#related). See also: Schoen, Cathy et al. (2008) "In Chronic Condition: Experiences of Patients with Complex Health Care Needs, in Eight Countries, 2008." The Commonwealth Fund, Nov. 13. (www.commonwealthfund.org/publications/publications_show.htm?doc_id=726492) and Milken Institute report (2007). "An Unhealthy America: The Economic Burden of Chronic Disease." (http://www.chronicdiseaseimpact.com/).

[5]Haass, Richard N (2008). "The World That Awaits." Newsweek, Nov. 3. (www.newsweek.com/id/165648).

[6]Fronstin, Paul (2008). "Sources of Coverage and Characteristics of the Uninsured: Analysis of the March 2008 Current Population Survey." EBRI Issue Brief no. 321, Figure 1. Washington, DC: Employee Benefit Research Institute. (www.ebri.org/pdf/briefspdf/EBRI_IB_09a-2008.pdf).

[7] Keehan,, Sean; Sisko, Andrea; Truffer, Christopher; Smith, Sheila; Cowan, Cathy; Poisal, John; Clemens, M. Kent; National Health Expenditure Accounts Projection Team (2008). "Health Spending Projections Through 2017: The Baby-Boom Generation is Coming to Medicare." Health Affairs; Feb. 26, 27.2.w145. http://books.nap.edu/openbook.php?record_id=11378&page=99

[8]McGlynn, Elizabeth;, Asch, Steven; Adams, John; et al (2003). "The quality of health care delivered to adults in the United States." N Engl J Med.;348(26):2635-2645. (http://content.nejm.org/cgi/content/abstract/348/26/2635).

[9]Reinhardt, Uwe (2008). "The Imperative of Enacting Health Reform Now: An Economic Perspective." Testimony before the Senate Finance Committee, Nov. 19, p. 14. (http://finance.senate.gov/hearings/testimony/2008test/111908urtest.pdf). See also: Lubell, Jennifer (2008). "Cost containment also needed, witnesses say." Modern Healthcare's Daily Dose, Nov. 19.

[10] Aaron, Henry; Butler, Stuart (2004). "How Federalism Could Spur Bipartisan Action on the Uninsured." Health Affairs Web Exclusive, March 31. (http://content.healthaffairs.org/cgi/reprint/hlthaff.w4.168v1.pdf).

[11]Pear, Robert (2008). "Congress, Overriding Bush, Blocks Cut for Doctors." New York Times, July 16. (http://www.nytimes.com/2008/07/16/washington/16medicare.html?scp=1&sq=Congress,%20Overriding%20Bush,%20Blocks%20 Cut%20for%20Doctors&st=cse). See also Glendinning, David (2008). "Medicare 10.6% Pay Cut Reversed as Congress Overrides Bush Veto." (http://www.ama-assn.org/amednews/2008/07/28/gvl10728.htm).

[12]Centers for Medicare and Medicaid Services (2008). "2008 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds." March 25, p. 11. (www.cms.hhs.gov/ReportsTrustFunds/downloads/tr2008.pdf).

[13]Medicare Payment Advisory Committee (2008). "Report to the Congress: Reforming the Delivery System," Statement of Mark E. Miller, executive director. Sept. 16. (www.medpac.gov/documents/20080916_Sen%20Fin_testimony%20final.pdf).