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A leap forward to better care

By Peter R. Orszag
Friday, November 20, 2009

The nation stands on the verge of achieving fundamental health-care reform. For the first time in history, the House of Representatives has enacted comprehensive health-reform legislation, and the Senate has begun its own debate. These bills will provide a bedrock sense of security and stability for Americans who have health insurance, and quality, affordable options for Americans without it.

But health reform has an economic and fiscal dimension, too. For more than 30 years, health-care costs have risen much more rapidly than either inflation or the growth of the economy -- yet these higher costs are not delivering higher-quality care for Americans.

Looking forward, if we do nothing to slow the skyrocketing cost of health care, the federal government will eventually be spending more on Medicare and Medicaid than all other government programs combined. It's time to move toward the high-quality, lower-cost health system of the future, and the reforms under discussion in the House and Senate will put us firmly on that path.

Recently, some have raised questions about the feasibility of undertaking health reform that delivers quality care in a fiscally responsible way. Interestingly, these doubts have been raised just as the House was passing a health-reform bill that -- according to the nonpartisan Congressional Budget Office (CBO) -- would reduce the deficit by $109 billion over the first decade and potentially by more than that over the second.

Nevertheless, as the debate moves to the Senate and we move closer to a final bill, there is lingering anxiety about the fiscal impact of health reform. Two events this week should help allay these fears.

On Wednesday, the CBO returned its analysis of the Senate bill. Like the House legislation, the Senate bill is not only deficit-neutral but also reduces the deficit: by $130 billion in the first decade and by more than half a trillion dollars in the next decade. This assessment is based on hard, tangible savings -- not on the harder-to-quantify, yet very real steps that hold the most promise of transforming health care and bringing down the rate of cost growth over time.

Earlier this week, the Office of Management and Budget reached out to 23 of the nation's most prominent economists -- a group that included Republicans, Democrats, former Bush administration officials and Nobel laureates -- to get views on the four elements critical to reducing long-term health-care costs while improving the quality of care for all Americans. Each of the steps endorsed by this bipartisan group is embodied in the legislation under consideration.

The first is deficit neutrality, which -- according to the CBO -- is achieved in both the House and Senate bills.

The second is an excise tax on the highest-cost insurance plans. The Senate's proposed tax on "Cadillac" health insurance plans will do more than help pay for reform. It also will curtail the growth of private health insurance premiums -- by providing employers with an incentive to seek higher-quality and lower-cost health benefits that will generate higher take-home pay for American workers and their families. In other words, this reform would slow health-care cost growth and give Americans a pay raise.

Third, a bill must include a way for the health system to keep pace with innovation and the dynamic health-care marketplace. An independent Medicare commission of medical experts would be able to give the system that flexibility. It will ensure that reforming the health-care system is not a one-time event but an ongoing process that implements the most recent progress in medical science with the goal of improving care and lowering costs.

Finally, reform needs to create incentives to improve the way health care is delivered to patients throughout the country. We need to put in place incentives that reward higher quality for patients rather than more quantity in health care. Already, in the American Recovery and Reinvestment Act, we made historic investments in health-information technology and research into which medical treatments work best so that doctors have the most recent, science-based information to help them and their patients make the best medical decisions. Health reform must build on this by providing the tools and incentives for physicians, hospitals and other providers to improve the quality of care for all Americans.

For example, bundled payments and accountable-care organizations, as well as incentives to prevent harmful and avoidable readmissions and health-facility-acquired infections, will induce physicians and hospitals to innovate and redesign the way they deliver care through better coordination that will keep people healthy and avoid unnecessary complications.

In addition, laying out a clear and rapid pathway for biogeneric drugs to come to market -- such as was proposed in our budget -- will lower prices and help contain future health-care costs.

With well-designed pilot projects, we also can test what works to put these programs in place, rapidly evaluate them and quickly adopt the best strategies throughout the health-care system -- and the Medicare commission could help to facilitate the movement from pilot programs to full practice as we learn more.

As we enter the homestretch, the greatest risk we run is not completing health reform and letting this chance to lay a new foundation for our economy and our country pass us by. We have the building blocks to construct a health-care system that provides the highest quality of care while embodying a process of continuous improvement -- a leap forward for the health of Americans and the fiscal health of the entire nation.

The writer is director of the Office of Management and Budget.

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