And Tom Coburn last week dropped out of the bipartisan “Gang of Six” budget talks in the Senate because of his insistence on deeper cuts in Medicare spending, the same cuts that he and other Republicans said they were against during last year’s election campaign.
Health care, it seems, is the political issue that won’t go away, all the more so because Republicans still can’t seem to figure out what they really stand for. While the politicians continue with their posturing and hair-splitting, however, the rest of the world is actually making some progress by improving quality and slowing the growth in health-care spending.
One of the rituals in the health-care industry is annual arm wrestling between private health insurers and hospitals over how much hospital rates will go up the next year. Over the years, the hospitals have gotten the upper hand in these negotiations, particularly as they have organized themselves into regional and national chains that are “must haves” in terms of insurers’ provider networks. So it’s not uncommon that the hospitals have won rate increases well in excess of inflation, which of course are passed on to thee and me in the form of higher premiums.
Rates, however, aren’t the only driver of spending. Just as important as the cost of MRI or a night in a hospital is how many MRI and hospital nights are utilized. And decades of research have revealed that a surprising amount of that use is unnecessary because it results from avoidable medical errors or failure by doctors and nurses to follow best medical practices.
This insight — that better quality leads to lower cost — has become the focus of the effort to slow the growth in health-care spending.
Medicare kicked things off by requiring that all hospitals begin to collect data on various quality measures. The hospitals screamed and complained the metrics were unfair, but they eventually complied. Now the results are published on the Medicare Web site and are widely used by insurers and private groups to rate the quality and cost-effectiveness of individual hospitals.
For taxpayers, the payoff to all this was written into the new health reform law. Starting in October, Medicare will launch a program it calls “value-based purchasing” in which hospitals can see that their reimbursement rates will rise or fall by one percentage point based on how they do on their quality measures, both in absolute terms and relative to their score the year before. In 2017, the stakes will double, with a two-percentage-point variation allowed in each direction. And because of the way the incentives are structured, there will be a competitive dynamic that drives the benchmarks higher every year — a “race to the top” in hospital quality.