Does Health Reform Fail to Address Cost Controls?

Of all of the arguments surrounding health reform, the one that grabbed my attention was the critique that the health reform bill passed earlier this year fails to address the spiraling costs of our healthcare system. The need to bend the cost curve is truly the most pressing goal surrounding health reform. The remaining goals are irrelevant if the healthcare industry in the U.S. collapses under its own weight

So when I heard this again this morning on NPR, it got me thinking about health reform and pondering – does health reform address the cost question?

Yes and no.

The idea that health reform failed to tackle the cost question isn’t without merit; however, the bill does layout a framework and a set of pilot programs designed to move toward these goals over time.

It is reasonable that we could achieve, as a healthcare system, both higher quality and lower costs.  A  landmark Dartmouth Institute study looking at the relationship between cost and quality on a state by state basis demonstrated a negative correlation between state-by-state Medicare spending and care quality.  In other words, some areas of the country simply spend less on medical care and lower spending has a positive impact on outcomes.  Dr. Atul  Gawande goes further in his classic New Yorker article, “The Cost Conundrum.” He points out how individual healthcare systems, such as the Mayo Clinic, have been able to deliver and then replicate lower cost care with very high levels of quality.

There are many reasons why the system, as a whole, fails miserably today: culture, education of clinicians, the lack of a reliable system to effectively roll out new evidence-based care protocols, and massive misalignment of incentives.  The systems that work well require high levels of coordination and collaboration along the entire care continuum.  This is often accomplished, at least in part, by mergers, acquisitions and employment – a tough model to legislate.

To the extent that health reform includes cost controls, they focus on solving these issues.  To get there, however, is a matter of realigning the relationships between providers by forcing them to collaborate, changing their compensation to create incentives for them to do the right things, and inventing new structures to assess healthcare innovations and quickly move them into general practice.

There are a few programs the reform bill does push to manage costs explicitly:

  • Greater coverage should move those receiving primary care in the emergency department to a primary care physician where care is far less expensive
  • Regular checkups, screenings, immunizations are encouraged by minimizing or eliminating out of pocket costs to the patient – prevention and early detection will push costs down
  • Pay cuts to Medicare Advantage providers

Let’s face it, though – these don’t really cut it.  The big changes, the ones that have the potential to shift the cost curve, are coming primarily in the form of pilot programs:

  • Accountable Care Organizations (ACOs) – The reform bill funds ACO pilot programs and provides financial incentives to encourage doctors to join ACOs.
  • Payment bundling – Another model, attempting to provide fixed-price reimbursements for incidents of disease, will be piloted under the health reform bill.  It’s another approach to creating collaboration between providers and shifting risk away from government payers without the formal structures of accountable care organizations.
  • Patient-Centered Medical Home – Again, pilots to broaden the adoption of this care delivery model which has been particularly effective in controlling costs for patients with chronic disease, one of the largest segments of preventable healthcare expenditure.

Add to this the Center for Medicare and Medicaid Innovation set to launch in 2011 and funding for Comparative Effectiveness Research in last year’s stimulus bill and the government is, in fact, throwing a lot of cost containment efforts out there.

It’s just not yet clear what’s going to stick.

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Ben Dillon

About Ben Dillon

Ben’s a big picture type of guy. He loves sharing new ideas in digital marketing, keeping a watchful eye on healthcare industry trends and seeing how it all intersects. A sought-after speaker, writer, blogger and current SHSMD board member, Ben’s an influential voice in healthcare marketing, helping organizations across the country embrace online strategies to engage health consumers. Combine his industry savvy with his background in software development and you can see why he’s also an important member of Geonetric’s software team, ensuring our content management system stays a step ahead of market needs. Ben holds a master’s degree in eBusiness and strategic management from the University of Iowa and a bachelor’s degree in computer engineering from the University of Michigan. When he’s not traveling and evangelizing, Ben enjoys cooking with his family and playing the Big House with the University of Michigan Alumni marching band.

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