U.S. must set agenda to break status quo

February 1, 2013

A think-tank report calls for national agenda to hold spending down to the growth in GDP per capita

A report released last month by the non-partisan Commonwealth Fund identifies $2 trillion in net savings opportunity. The gains would come through payment reforms, value-based design, and administrative streamlining.

Commonwealth Fund President David Blumenthal, MD, says the United States has “an appetite for these changes,” especially in contrast to the sweeping cuts to entitlement programs suggested in recent weeks by policymakers. The boldest mechanism proposed by the organization is setting a healthcare-spending growth target equal to long-term GDP growth per capita.

Specifically, the organization’s roadmap calls for a synergistic model of:

• Provider payment reforms to promote value and accelerate delivery system innovation;

• Policies to expand options and encourage high-value choices by consumers; and

• Improvement in how markets function, including streamlining administration and spending growth limited to the growth of GDP.

“Putting a target in place would help motivate action,” says Stuart Gutterman, a report co-author.

Congress would likely need to set a national agenda to drive the spending-growth benchmark, according to Cathy Schoen, report co-author. And the benefits to stakeholders and American consumers would be the selling point.

According to the Commonwealth Fund, over the next 10 years, its recommendations can reduce spending by the federal government by $1.04 trillion, state and local governments by $242 billion, and employers by $189 billion, compared with currently estimated trends. Consumers would also save $537 billion in premiums and out-of-pocket costs.

Schoen says the healthcare market would need data-data that is not readily available today-to track its spending, as well as the discipline to make immediate changes when spending overshoots GDP growth. Adjustment measures would take place as needed in specific segments, with specific stakeholders or in specific geographic areas to correct.

“It puts everyone on notice that if we don’t see trends come down, we must act,” she says.

Dr. Blumenthal says while the sequestration, fiscal-cliff and debt-ceiling measures all proposed painful ways to drive down healthcare spending, the Commonwealth’s plan has the unique benefit of also creating delivery system improvements. He characterizes the organization’s model as “an escape valve” by comparison.

Many of the mechanisms, he says, already have a track record of bipartisan support, and he believes the country will be more receptive to models that improve the healthcare system than those that only aim to cut costs.

A key strategy calls for a $481 billion reduction in costs by streamlining and standardizing administration. Payers would be called upon collectively to adopt uniform standards not just in claims or coding but in other measurable transactions.

“Exchanges have the authority to ask private payers who participate to meet certain conditions, and some of those could involve coordination in measures of quality and making available price information, [and] involvement in patient-centered medical homes, and that’s an important way for the first time to create a link between what the pubic sector does on one hand and what the private sector does on the other hand,” Dr. Blumenthal says.

However, while the active responsibility of reducing reporting and transactional burdens would fall heavily on the payers, the providers would realize most of the financial and logistical benefits, Schoen says. The rest of the world operates healthcare systems with just 5% administrative costs, compared to the United States’ 15% to 20%. Experts have routinely identified administrative complexity as a clear opportunity for savings potential.

If payers simplify their benefit designs, for example, they could lower their own costs as well as reduce the burden on the system at large.

“We’ve seen in the last year some of the costs coming down in claims processing,” she says. “People have to get serious about it.”

Another aspect within the model proposed by the Commonwealth Fund includes a value-based Medicare Essential Plan product. The plan would provide more comprehensive benefits and increased catastrophic coverage with provider and enrollee incentives woven in.

Beneficiaries would have incentives to seek care from high-performing providers, medical homes and ACOs. Providers would have incentives to develop innovative care systems and achieve improved outcomes. Shared decision making would be embedded in the design as well.

Schoen says integrating the benefits together-rather than parsing them out in supplemental and Part D plans, for example-would reduce wasted time and money associated with administration of multiple products for each member. It is also more difficult to collect performance data from multiple products, she says. MHE