Let’s put to rest, once and for all, the idea–or rather, the notion
(it’s not even an idea, just a vague impression, based on
hearsay)–that the health reform legislation now under discussion
includes no plans for containing health care spending.
reform proposal now being debated in Washington would put a brake on
health care inflation. As an eye-opening essay in the most recent
(March 4) issue of the New England Journal of Medicine explains, Medicare
would, at last, have the power it needs to lead the way, not by cutting
benefits, but by restructuring how it does business.
pundits such as Peggy Noonan feel free to pronounce health care
reform “a disaster” and “a colossal waste of time”without giving any
indication that she has ever read the legislation. Presumably Noonan
bases the opinions that she expresses in her recent Wall Street
Journal Op-ed on what other pundits have said.
Thus, she declares reform a “waste of history’s time” because “the
president chose health-care expansion . . . at the exact moment voters
were growing more anxious about the cost and reach of government.” On
the question of whether the reform bill would control costs, Noonan does
acknowledge President Obama’s claim that reform will "'bring down the
cost of health care for millions’ that it is ‘fully paid for’ and that
it will lower the long -term deficit by a trillion dollars.”
her response is purely rhetorical: “Does anyone believe this?"
the problem with Op-eds—no proof, no evidence. Much bombast, trimmed
with rick-rack (metaphors found in the Notions’ Department of the mind.)
contrast, one of the nice things about articles in peer-reviewed
medical journals is that they are footnoted. This doesn’t mean that
they’re always right, but at least you can track what the author is
relying on as facts.
The Evidence: How the Legislation
The piece by Robert Mechanic and Stuart Altman
in last week’s NEJM may be less colorful than Noonan’s, but in place of
self-expression, it offers truth grounded in careful analysis of the
legislation: The Senate and House reform bills lay out a blueprint for
cost-containment, spelling out precisely how Medicare can squeeze waste
out of the system while simultaneously lifting the quality of care.
Anyone who tells you that seniors will no longer have access to needed
tests and treatments is, pure and simple, lying.
You may think
that you have heard talk of Medicare slowing health care inflation in
the past — with little in the way of tangible results. But as
Mechanic and Altman point out, this legislation is different: The
Secretary of Health and Human Services (HHS) will have the authority to
expand pilot programs and put them into practice—without going
through Congress. In the past, the need for congressional approval has
derailed initiatives. This will no longer be the case.
even if the reform legislation now under consideration doesn’t pass,
the authors argue that Congress will then be forced to pass stand-alone
Medicare reform legislation that targets fraud and waste. “Whatever the
fate of current reform proposals, Congress cannot avoid important
decisions about Medicare,” they declare. (As I wrote earlier this week, I
very much doubt that Obama and Pelosi have gone out on a limb planning
to join hands and jump: I believe that Congress will pass the
But even in the worst-case
scenarios, if legislators should fail, the authors argue that Congress
will have no choice but to address Medicare spending in a separate piece
of legislation. I agree.
How can Mechanic and Altman be so sure
that legislators will roll up their sleeves and take on the hard task of
putting a lid on the nation’s spiraling Medicare bill? “Without new
legislation [Medicare’s ] Hospital Insurance Trust Fund will become
insolvent by 2017. Regardless of whether Congress addresses these
challenges in separate [Medicare reform] legislation or as part of a
broad reform package,” legislators have no choice. They must find a way
to make sure that we begin to get better value for our Medicare
dollars. No one wants to be responsible for letting Medicare slide
south on his or her watch.
Either way, I see reason to be
optimistic. Whether Medicare is overhauled as part of the broader
legislation, or in a separate bill–the effect will ripple throughout
our health care system. Private insurers already have told the Medicare
Payment Advisory Commission (MedPAC) that if Medicare takes the lead,
changing the way it pays for care so that it is rewarding providers for
quality rather than quantity, private insurers will follow. They just
want Medicare to provide political cover.
Road to Reform
Already Spelled Out in the Legislation
The plans for a Medicare
overhaul that would lead to substantial savings are embedded in both
the House and the Senate bills. The key is a series of voluntary pilot
programs that would change how health care is delivered, what we pay
for, and how we pay for it. Because these will be “pilot programs”
and not simply “demonstrations” the Secretary of HHS will be able to
implement them on a “nationwide” scale without waiting on Congressional
approval. (See the Senate Bill, H.R. 3590, Patient Protection and
Affordable Care Act, § 3021 (2009), establishment of Center for Medicare
and Medicaid Innovation within CMS, p. 723).
Affordable Health Care for America (AHCA) staff
explain the difference between a pilot and a demonstration: Unlike a
demonstration project, a pilot does not need explicit permission from
Congress for continuation—the agency (HHS) holds all the power. In
fact, the House bill converts the existing acute care episode
demonstration project into a pilot program—presumably for that reason.
provision is critical,” Mechanic and Altman note, because in the past,
lobbyists have blocked efforts to make successful initiatives part of
the program—even though we know these programs work.
Already Know How Medicare Can Save Billions
promises that Medicare can save billions over the next ten years, and we
already know how this can be done. As an example, Mechanic and Altman
point to Medicare’s heart-bypass demonstration project which paid a
single global fee for services provided by hospitals and cardiac
surgeons involved in a bypass operation, including doctors who saw the
patient both before and after he left the hospital. (This is also known
as “bundling” payments.)
As a result, participating providers
did a better job of coordinating care, patient satisfaction rose,
Medicare saved money and both hospitals and doctors saw higher profits.
more could you want? (Medicare rolled out this voluntary program
nation-wide , why wouldn’t private insurers follow suit, reducing their
own costs while pleasing both doctors and patients?)
reasons best known to politicians, Congress never expanded the program
beyond the seven initial hospitals. For more on the success of this
project, scroll down to “The Medicare Experience” here .For a general
discussion of global fees, see this Commonwealth Fund report.
implementation? My best guess is that hospitals and doctors who never
read the final report on the project feared that they would lose under a
global fee system, and so lobbied against it. As Dr. Don Berwick,
president of the Institute for Health Care Improvement (IHI) points out in the film, Money-Driven Medicine,
a great many stake-holders worry, needlessly, that they will lose
something under reform. Berwick acknowledges that “some oxes will be
gored” as those who profit from waste lose revenue. “But a lot of
people with oxen that won't get gored think they will,” Berwick notes.
And this "coalition of the people who would be better off under reform”
plus those “who are needlessly afraid of change . . that's an immense
coalition, “ he observes, “That's eighty percent of America!”
who oppose reform are always available to confirm a stake-holder’s most
paranoid fears. Those who support reform should counter the spread of
misinformation. Unfortunately, it’s much, much easier to “frame” a lie
than it is to explain the truth. Lies lend themselves to one-liners.
Typically, the truth is far more complicated. I understand why reformers
have had a hard time explaining reform.
Mechanic and Altman
offer a second example: a demonstration project that tested competitive bidding
for durable medical equipment between 1999 and 2002, and discovered
that the bidding reduced Medicare expenditures by 19% . Needless to say,
those who profit from making equipment were not thrilled. They were
horrified—and with some reason. They, in fact, would lose under a
competitive bidding system. Ultimately, Congress authorized the Centers
for Medicare and Medicaid (CMS) to expand the program, but it delayed
implementation until 2010.
The Senate and House bills also
propose a program that would let accountable care organizations
that successfully control growth in spending while simultaneously
meeting quality goals share in Medicare’s savings. In addition, the
bills recommends rewarding doctors who create medical homes that
focus on disease management—and keep patients out of the hospital.
Center for Medicare and Medicaid Innovation
Perhaps the most
important cost-saving innovation in the legislation that the president
is championing calls for a new independent Center for Medicare and
Medicaid Innovation (CMI). “Several aspects of the proposed CMI offer
hope that this effort could be fundamentally different from previous
Medicare-sponsored experiments” Mechanic and Altman explain. (See the
Senate bill, H.R. 3590, Patient Protection and Affordable Care Act, §
3021 (2009) (establishment of Center for Medicare and Medicaid
Innovation within CMS, p. 723)
For one, as noted, the Secretary
of HHS could roll out successful pilot projects on a broad scale, making
them part of the Medicare program.
Secondly “although the CMI
proposal lists 18 payment or delivery models for consideration, the
center would have broad authority to select the programs best suited to
its objectives.” By contrast, today, "the CMS’s Office of Research,
Development, and Information has far less flexibility, because a large
proportion of its resources are devoted to congressionally mandated
A third critical difference is that the CMI would
not have to require projects to be budget-neutral during their initial
testing period. “Many health care innovations require initial
investments in staff, training, and infrastructure to achieve long-term
efficiencies. But federal budget-neutrality requirements frequently
discourage potential applicants, leave valuable concepts on the
cutting-room floor at the Office of Management and Budget, and cut
short promising programs that appear to be increasing Medicare costs
Finally, the proposal includes a $10 billion
appropriation for the CMI through 2019. “This would allow the CMS,
which has faced chronic shortages of administrative resources, to build
the capacity necessary to manage the program effectively. It would also
allow the CMI to pay for services such as care coordination that
aren’t covered by traditional Medicare and to support activities such as
electronic data sharing, performance measurement, and quality
improvement at participating health care systems.” Keep in mind, both
medical research and practical experience show that when it comes to
health care, higher quality and lower spending go hand in hand.
Providers Who Want to Be More Efficient
The CMI would encourage
delivery innovation by creating alternative payment structures for
organizations that would like to reduce waste, but have been held back
by the knowledge that, under the fee-for-service system, if they “do
less,” they will lose money. Mechanic and Altman suggest that CMI
might “follow the new quality-based global payment model that Blue Cross
Blue Shield of Massachusetts has already implemented in contracts
covering about 20% of the providers in its
health-maintenance-organization network. Medicare participation would
magnify the potential rewards.” In other words, CMI wouldn’t have to
reinvent the wheel. In various parts of the country, providers have
moved away from fee-for-service, and watched local health bills fall
while outcomes remained at least as good—if not better—as they had been
when doctors and hospitals were paid piece-work.
priorities will be crucial. The authors of the NEJM article highlight
the importance of making sure that Medicare payments are “aligned with
scientific evidence about what works. One opportunity for moving in this
direction lies in having the CMI fund delivery systems that document
which care processes are the most effective for specific medical
conditions. Having this information would help the CMS develop payment
policies that reward hospitals and physicians who follow best practices.
model described in the CMI proposal is a collaborative of health care
organizations equipped with electronic records that could document and
implement best practices and assist other institutions in employing
them,” Mechanic and Altman explain. “In such a rapid-learning network,
participants would embed decision support into their electronic health
records to guide clinicians through specific care processes, document
outcomes, report results, and adjust clinical practices on the basis of
those results.” Such a collaboration could also “provide valuable
information for the proposed national center for
comparative-effectiveness research , but would be fundamentally
different, because the CMI would pay for clinical services, not just
sponsor research.” This is important—Medicare needs to move beyond
theory to practice. Reform legislation would let Medicare do just that.
and Altman go on to explain that, under the reform proposals, CMI would
have the opportunity to align Medicare payment with state and local
reform initiatives: Individual states and most private payers do not
have sufficient clout to implement payment reforms if providers are
reluctant to participate. However, "a Medicare waiver could allow
states such as Massachusetts, which has proposed moving toward a global
payment system, to establish a uniform structure of incentives that
reward organizations for becoming more integrated and more accountable
for cost and quality.”
Providers would not be forced to
participate. But under such a system, doctors and hospitals who are
prepared to accept alternative payment models would be rewarded.
Mechanic and Altman acknowledge that incomes might nor soar the way they
do today when some providers make up for flat fees by “doing more.”
Still, those who experimented with alternatives such as “bundling”
payments to doctors and hospitals would receive bonuses for good
And they would no longer have to paddle harder just
to keep up with rising costs. Many providers don’t want to have to “do
more” just to keep the lights on. They would like to be able to spend
more time with patients—and to be paid for the quality of their care,
rather than how quickly they are able to “churn” patients. That’s what
Medicare’s restructuring of how it pays for care is all about. The goal
is to change “how” care is delivered.
Let me be clear: doctors
would not be forced to accept “alternative payments” from Medicare.
Those who chose to remain in the fee-for-service system” could, but
they “ would face diminishing financial prospects.” In other words they
wouldn’t be eligible for the bonuses for better outcomes under
alternative payment systems.
New Leadership for CMS
and Altman acknowledge that “success is ultimately about execution. The
CMI would have to overcome a risk-averse CMS culture that promotes
rigid adherence to rules. Although risk-averse behavior may be rational
in a government bureaucracy, it often kills innovation. “
would it take to establish an effective innovation group within the CMS?
“ they ask. “The first step is to select a leadership team that
understands health care delivery and federal government operations,
thinks outside the box, and is willing to accept occasional failures as
it pursues its objectives. It will need to interact regularly with
innovators and build on existing knowledge about what works.”
Obama administration has not yet appointed a new director for CMS. I
have argued that I believe that White House health care policy-makers
want to select someone strong enough to pursue a relatively radical
agenda. My guess is that the White House did not want to face a battle
over Senate confirmation of such a candidate while fighting the larger
war over healthcare reform.
Rumors have circulated in
Washington for months about who will be offered the position—and who may
have already turned it down. All of the names I have heard would
be excellent candidates: visionary, experienced, articulate and
iconoclastic. They would be willing to break the bureaucratic mold,
as needed, discarding worn ideas, embracing new ones and admitting to
mistakes along the way, in a process that IHI’s Don Berwick describes as
It is clear that, as Mechanic and
Altman suggests, we need a CMS director who will overhaul how we pay
for care, penalizing inefficiency, ferreting out fraud, and
squeezing out waste, while rewarding better, safer, more collaborative
care. . Medicare must pay for Value, not Volume.
Altman conclude: “Successful innovation is essential to the long-term
sustainability of Medicare and Medicaid. The CMI would cost relatively
little in the context of the overall CMS budget, but if it were
successful, the long-term effect on the U.S. health care system could be
Yes. Since I began this blog in 2007, I have argued
that Medicare reform will pave the way for health care reform. And we
don’t have to wait for the broader reform legislation to roll out in
2014. Medicare can begin saving money and improving quality this year.
CMS has announced that it will no longer pay for an excessive
number of preventable hospital readmissions, that it is cutting
cardiologists’ fees while raising fees for primary care doctors and
nurse practitioners, and that it is slashing fees for some diagnostic
tests that are being recommended more and more often –with no medical
evidence of better outcomes for patients.
The Wall Street
Journal has reported on the proposed changes and how much money
could be saved here.
But I guess Peggy Noonan
doesn’t read the Wall Sreet Journal, she just writes for its