Focus on Health Savings Obscures Other Issues

By Ceci Connolly
Washington Post Staff Writer
Sunday, July 26, 2009

President Obama says the primary goal of health reform is to rein in runaway spending, and he points to real-world examples in which doctors and hospitals have improved care and reduced costs.

Making the leap from a handful of success stories to restructuring one-sixth of the nation's economy -- and writing it all in legislative language -- is a puzzle he has not solved.

The proposals circulating in Congress make strides toward curbing medical spending, largely by grabbing what Len Nichols of the nonpartisan New America Foundation calls the "low-hanging fruit." The bills extract savings by targeting medical errors, administrative waste and unnecessary duplication -- money that would be reallocated to cover many of the 47 million uninsured.

But a diverse cross section of experts says the legislation lacks the more far-reaching structural changes needed to ensure that over the long term the nation gets its money's worth.

"The truth is that we don't know today all of the steps that are necessary to move towards providing higher-quality, lower-cost care," White House budget chief Peter Orszag recently told the Council on Foreign Relations.

As health care consumes more and more of the total economy, it reduces the money available for other expenditures. The question is whether Americans are getting a good return on the investment.

Achieving Obama's goal, say Orszag and other experts, requires covering every American, digitizing records, encouraging healthy behaviors and, perhaps most important, rewarding medical teams that deliver evidence-based care rather than those with the highest volume. It means focusing on chronic illnesses, reducing costly hospital and specialist visits, and nudging doctors to work in teams.

Combined, those strategies "represent our best chance of creating a health-care system" that delivers value and does not bankrupt the nation, Orszag said.

Many of the concepts have made appearances in the unfolding congressional drama, but they are largely cameo roles. The debate over cost controls has become a central dilemma slowing progress on the president's top legislative priority.

Negotiations in the House blew up last week over the cost issue, with one faction of conservative Democrats and prominent medical systems such as the Mayo Clinic clamoring for reforms that address underlying cost drivers. Senate leaders have announced that no votes will occur before September, and prospects have dimmed for action in the House before its break starts Friday.

An Economic Approach

In the past, Congress has framed health reform as a moral imperative to cover everyone. The Obama team approaches it as an economic issue, noting that $1 of every $6 spent in America goes to health care. If nothing changes, it will be $1 of every $5 by 2017.

"The evidence is clear that the biggest threat to our fiscal future is rising health-care costs," Orszag said.

The amount of money is not the problem, said former Bush administration official Mark B. McClellan -- it's what we get for it. "If we're living longer, better lives, that health-care spending is a good thing," he said. "The problem is that a lot of that spending is not leading to productive improvements in the quality of life."

Repeating lab work, performing unnecessary surgeries, treating hospital-acquired infections -- all sources of revenue for providers -- have no health benefit and may cause harm. Although the changes envisioned by Obama have not been tested on a large scale, many of the ideas have shown promising results, said McClellan, a physician and an economist.

Regions such as Sacramento; Green Bay, Wis.; and Portland, Maine, have held Medicare increases to about 2 percent a year, he said. One of his major complaints about the legislative plans, including a deal announced Friday in the House, is that he thinks they are small and incremental and do not give the government the power to rapidly implement what works.

McClellan said it is possible to write policy that over several years would reduce medical growth by about 1.5 percentage points annually, which he said would result in "trillions in savings." The draft bills in Congress, he said, "have a ways to go."

Health systems such as Intermountain Healthcare in Utah, the Billings Clinic in Montana and Gundersen Lutheran in Wisconsin have brought growth under control while delivering superior care, though they largely serve smaller, homogeneous populations. And the results did not come easily.

'Challenging Work'

It took Virginia Mason Medical Center in Seattle "eight years of very difficult, challenging work" to wring tens of millions of dollars in waste out of its system, Chairman Gary Kaplan said.

In one case, Virginia Mason teamed with Starbucks to re-engineer treatment of lower-back pain, the No. 1 medical expense for the coffee company. By offering physical therapy on the front end, doctors reduced the number of costly MRIs from 35 percent of patients to less than 5 percent. And the vast majority of baristas who once endured 66 days of exams, tests and waiting now return to work within 48 hours.

"The insurance company does better, the employer does better, the patient does better," Kaplan said. "The only entity that doesn't reap the benefit is Virginia Mason, because the only thing that was really profitable was the MRI."

Number-crunchers at Intermountain found that reducing the number of Caesarean sections it performs from 21 percent of births to 19 percent would save patients and insurers $8 million but cost Intermountain $1.8 million, Vice President Brent James said. One solution is to add "gain-sharing" to the legislation, enabling health systems to retain a portion of the money saved and use it to continue innovating, he said.

Financial incentives are also critical to instituting broad changes beyond providers with creative leaders such as Kaplan and James, said Nichols of the New America Foundation. Paying for results "creates a motivation for people with eyesight that is not as good as the visionaries'," he said.

Conceptually, some lawmakers embrace the notion. Senate Finance Committee Chairman Max Baucus (D-Mont.) has not released his bill but has expressed enthusiasm for reorienting financial incentives. The challenge lies in the nature of today's system, a $2.3 trillion industry that touches every person, business and politician.

David Kendall, a senior fellow at the nonpartisan Third Way think tank, notes that one out of every 10 health-care dollars spent in the United States is directly linked to diabetes. Pilot projects have shown that paying a medical team for total care -- monitoring blood-sugar levels, giving eye and foot exams -- rather than paying for each visit to an ophthalmologist or podiatrist is better for the patient and costs less.

"The financial losers will be hospitals that no longer amputate somebody's foot or the dialysis centers" that are no longer needed, he said. "That's where we save a lot of money."

Congress should direct Medicare to make a single "bundled" payment for packages of services, such as diabetes care, and publish results so that patients can shop around for the best doctors, Kendall said. "We have every reason to believe it will be worthwhile, but we're not sure how to implement" a variety of such experiments in a large, diverse country, he said.

Dick Davidson, a former president of the American Hospital Association, said too much of the debate has focused on the insurance market, rather than on broader problems inherent in the country's "piecemeal" delivery system.

Still, Davidson, who helped defeat the Clinton administration's health-care plan, had words of praise for Obama, saying the president "has had enormous courage" in pushing for major changes. "People say, 'Slow down, slow down,' but that's what policymakers in Washington always say," he said. "If he misses this opportunity, he's not going to have another one."

Staff writer Dan Eggen contributed to this report.

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