Experts Propose Saving Money by Improving Quality of Healthcare

WASHINGTON – A range of recent proposals have suggested an emerging consensus on some key elements of reform in healthcare delivery and payment to achieve both improvements in care and reductions in healthcare spending growth.

Healthcare experts on both sides of the aisle have united around the notion that more can be done to put healthcare spending on a sustainable path.

The Moment of Truth Project, the budget group co-chaired by former Clinton Chief of Staff Erskine Bowles and former Sen. Alan Simpson (R-Wyo.), and the National Coalition on Health Care (NCHC) hosted a panel last week to present their joint paper outlining their recommendations for healthcare delivery system and payment reform. The paper builds upon elements of the consensus among experts to provide three broad strategies aimed at improving healthcare, while lowering costs.

Healthcare costs in America are the highest in the world and the problem will only get worse as Baby Boomers age onto Medicare and need more healthcare.

The Centers for Medicare and Medicaid Services (CMS) projects that total national health expenditures will grow from $2.9 trillion in 2013 to $4.72 trillion by 2021, an annual growth rate of 6.1 percent over the course of the intervening years – a rate that would outpace projected GDP growth over the same period.

Under current policy, federal health spending will grow from $779 billion, or 4.9 percent of GDP in 2013, to over $1.6 trillion or 6.3 percent of the economy by 2023. Federal health spending will reach 8.3 percent of GDP by 2035, and 11 percent by the late 2050s.

This growth is rooted in the incentive structure across Medicare and the rest of the U.S. healthcare system. Currently, physicians and other providers are generally rewarded for quantity rather than quality and value, and lack strong financial incentives to improve clinical quality.

The main culprits are a volume-driven incentive structure and fee-for-service model across Medicare and the U.S. healthcare system as a whole. Despite high and rising spending, NCHC president and CEO John Rother said quality of care in the U.S. remains uncoordinated and inefficient.

Notwithstanding the efforts to reorient payment toward value in the private sector, one recent survey of private payers found that 90 percent of private commercial payment was not performance-based.

“For all the disagreements elsewhere in health policy, our analysis found that consensus has formed around three bipartisan approaches that curb costs while improving care…pay providers for value over volume, promote care coordination, and inject competition into our health care system,” Rother said.

The panel suggested several options to reward value, instead of volume.

Rother said physician payment reform could be achieved by replacing Medicare’s Sustainable Growth Rate (SGR) formula with payment reforms that move providers away from volume-based fee-for-service reimbursement to payment models that encourage care coordination and enhanced quality.

In February, the Congressional Budget Office reported slower growth in Medicare costs and lowered its estimate for the 10-year cost of addressing the formula and freezing physicians’ payments from $245 billion over the course of 10 years to $138 billion. The cost estimates for repealing the SGR depend on projections of growth in the volume and intensity of services provided by physicians and other health professionals and the relationship between that volume growth and GDP growth.

Support for reforming the SGR has increased in recent months as lawmakers in the House and Senate are eagerly pursuing a permanent fix to the problem. Two House panels outlined in April the details of their draft plan to reform the current payment system.

“I believe we currently have a good window of opportunity before us. But, we must act soon,” Sen. Orrin Hatch (R-Utah) said at a recent hearing on the issue.