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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.

Another of the panel’s proposals aimed at rewarding value is to allow providers to share in savings if certain budget and quality targets are achieved through expansion of existing programs, or new value-based payment withhold proposals, which would withhold a portion of the providers’ payment up front until they meet certain quality and savings goals.

Under the Affordable Care Act, a value-based purchasing (VBP) program has been established in Medicare to base a portion of a provider’s payment on measures of care quality or value. Policymakers could further develop the VBP by increasing reliance on metrics focused on outcomes and patients’ experience (whether a patient’s blood pressure is controlled) rather than processes (whether a patient is screened for high-blood pressure), Rother said.

Other recommendations to promote care coordination and inject more competition into the U.S. healthcare system include bundling certain provider payments and expanding competitive bidding for durable medical equipment and other services.

Ed Lorenzen, executive director of the Moment of Truth Project, said policymakers should pursue reforms even if these do not immediately “bear fruit” and produce savings because they could result in future savings or data that could be used to modify these reforms.


At a meeting Thursday with his export council, President Obama made the claim that his healthcare law has driven down health costs.

“Thanks in part to the Affordable Care Act, also known as ‘Obamacare,’ the cost of healthcare is now growing at the slowest rate in 50 years,” Obama said.

“Just yesterday CMS [Centers for Medicare and Medicaid Services] estimated that healthcare spending grew at it second-slowest rate ever in 2012, will grow at its third-slowest rate ever in 2013, and grew at its slowest rate in 2011,” he said. “So the three years since Obamacare passed, we’ve seen the slowest growth in health care costs on record.”

Many independent experts, including those on the panel, believe the slowdown is largely a result of the recession with its very high, prolonged unemployment, stagnant wages, and sluggish economic growth.

After a long stretch of rapid growth – including 11 percent average growth between 1980 and 1990 – the growth of national health expenditures has slowed over the past few years. Between 2009 and 2011, growth held steady at 3.9 percent. An April analysis by the Kaiser Family Foundation concluded that “the vast majority (77 percent) of the recent decline in the health spending trend can be attributed to broader changes in the economy.” At the same time, the report noted “structural changes in the health care system may be playing a modest role.”

A bipartisan group of House and Senate members introduced legislation in June aimed at reducing waste, fraud, and abuse from Medicare and Medicaid. The FAST Act, introduced last Congress, also had bipartisan backing.


The Brookings Institution released a report developed by a broad range of healthcare experts and leaders with bipartisan experience. The Bipartisan Policy Center and the Heritage Foundation have also recently released healthcare reform proposals.

Rother said healthcare reform advocates have to push more aggressively if they want Congress to ultimately pass any significant delivery and payment reforms.

“If a short-term fix is enacted, that will pull the rug out from something more ambitious,” he said.

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