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Political Connections

Repeal and Avoid

Critics of the health care reform law overlook its innovative efforts to restrain health care costs.

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In step: Michele Bachmann, part of unanimous GOP opposition.(Win McNamee/Getty Images)

With this week’s vote to repeal President Obama’s health care reform, House Republicans struck a blow for freedom.

They struck a blow for the freedom of hospitals to avoid financial penalties, no matter how many Medicare patients develop infections under their care. They struck a blow for the freedom of hospitals to avoid consequences, no matter how many Medicare patients are re­admitted soon after treatment. And they struck a blow for the freedom of health care providers to receive unending annual increases in their Medicare reimbursements, even if they fail to improve their productivity by even a fraction of what’s occurring in other industries.

 

Take that, Big Government.

Penalties for excessive infections and re­admissions, as well as productivity-linked cuts in provider payments, are all part of the health care law that House Republicans voted unanimously to repeal this week. They are among dozens of the statute’s provisions intended to improve efficiency, increase coordination, enhance quality, and expand competition in the health care system. The House voted to rescind all of them.

House Republicans today can’t undo Obama’s law, or impose their own. But their vote underscored the GOP’s determination to uproot the plan if the 2012 election empowers it to do so. One casualty of that effort would be the law’s frequently overlooked, but consistently innovative, efforts to slow the crushing rise in health care costs.

 

The health care law mobilized an integrated array of carrots and sticks to reshape the incentives for all participants in the medical system. It encourages greater personal responsibility by authorizing employers to provide larger premium discounts than currently allowed to workers who lose weight or take other steps to improve their health. It nudges consumers to focus more on cost by imposing a first-ever tax on high-price “Cadillac” health insurance plans.

Simultaneously, it exposes insurers to new competitive pressures. One or two insurance companies now dominate many markets; the statute establishes insurance exchanges that should attract competitors, potentially lowering prices. It also authorizes more insurance sales across state lines, while preserving consumer protections.

But mostly the legislation takes initial steps to reorient the financial model for providers, such as doctors and hospitals, from volume toward value. It seeks to tilt away from today’s bloated “fee-for-service” system, in which providers are paid based on the amount of care they provide, toward a structure that more closely links compensation for providers to outcomes for patients. With repeal, Republicans voted to raze those reforms and signaled again their intention to ask patients, rather than providers, to bear the brunt of controlling health care spending.

The health care law pushes on providers from many angles. It pressures them to improve quality for Medicare beneficiaries with the penalties for excessive infections and readmissions and by linking compensation for hospitals to their ranking on performance measures. It encourages teams of providers to better coordinate care by allowing them to share in savings when they work together more closely to manage a patient’s overall health. It establishes new systems to compare the effectiveness of alternative treatments and also to track which doctors are ordering excessive care for their Medicare patients. From the other direction, the law’s reduction in annual Medicare payment increases encourages providers to adopt these and other productivity-enhancing reforms.

 

These ideas represent cutting-edge thinking about controlling costs. But no one knows how well, if at all, they will work. So the legislation establishes two powerful new institutions—a Center for Medicare and Medicaid Innovation and an independent Medicare payment advisory board—to test these and other new ideas and expand those demonstrating the most promise. In that way, the law offers a floor, not a ceiling, for further change. In all, says Donald Berwick, administrator of the federal Centers for Medicare & Medicaid Services, “The law puts into our hands, in concert with the private sector, a chance to not just encourage providers to do far better for patients at sustainable cost, but also to help them do that.”

If anything, the law’s payment and delivery-system reforms need stronger incentives and more-rapid implementation (as Berwick is working to do by rallying private insurers to adopt such innovations as rewarding better coordination of care). But House Republicans, in their resolution establishing priorities for an alternative bill, say nothing about changing the way providers operate; instead, they talk only about encouraging more “personal responsibility for health care coverage and costs.”

That reflects the widespread GOP belief that the best way to control health costs is to directly expose consumers to more of them—for instance, by relying on insurance only for catastrophic expenses while using tax-favored accounts to pay routine costs. That may, in some circumstances, be part of the solution. But it’s not the entire solution. By voting this week to free providers from the responsibility to reform, House Republicans have signaled that if they get the chance after 2012, they will seek to control costs primarily by asking patients to shoulder more of the burden.

This article appears in the January 22, 2011 edition of National Journal Magazine.

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