A Question of Value
By Dave Durenberger
A number of people who oppose health care reform have angrily predicted that the majority party leadership is going to blend the features of the House and Senate bills without a formal conference committee and the implied transparency that goes with it. They forget that the Obama administration has tried since February 2009 to involve everyone—the entire medical industry as well as all of Congress—in developing the language of health care policy reform. Early on, it became obvious that Republican leaders in the House and Senate wanted nothing to do with universal coverage and its associated costs and were unwilling to discuss new sources of revenue and system changes.
So what else is new? This is exactly what some Republicans did to the Clinton proposal in 1993-94. Twenty-two of us—an equal number of Democrats and Republicans—worked for more than a year to bring the two sides together to no avail. This year, the one bipartisan health care reform effort, the Wyden (D-Oregon)-Bennett (R-Utah) plan that would have achieved universal coverage by establishing state-based purchasing pools and required nearly all Americans (except those in Medicare and the military) to enroll in a private insurance plan, fell victim to politics.
The result is a plan from the Democrats that is little more than a promise. A promise of universal coverage, if it can be paid for without increasing the deficit. A promise of health insurance reform, as long as everyone retains a choice of plans. A promise of system reform, so long as everyone agrees that Health and Human Services can do comparative effectiveness research and that the Centers for Medicare and Medicaid Services (CMS) and some new agencies and commissions can change payment policy for Medicare. A promise that Congress will not allow factions of the health care industry to stop them from implementing cost-saving changes.
If this administration and this Congress really want to enact the policy reforms that make health care affordable for all Americans, they must commit to paying for value in medical care. To do this, they must be prepared to fight off the attacks from a few states and the medical industry groups that have a financial interest in preserving the current system.
Of course, that’s not as easy as it looks to those of us in the upper Midwest who believe we’re always better than Los Angeles and Miami. Back in 1985, the nation launched an effort to privatize the Medicare program by paying HMOs 95 percent of the dollars traditional Medicare was then paying per beneficiary. At that time, traditional Medicare reimbursements per beneficiary in parts of the upper Midwest (Ramsey County, Olmsted County, and North Dakota) were above the national average. Because this demonstration provided incentives for practice change, two years later, our reimbursements were as much as 17 percent below the national average. This is what led us to believe we’re so darned good. Unfortunately, Medicare did not allow those who changed utilization practices to keep some of the financial savings.
Lawmakers from Midwestern states have made sure that the current reform legislation includes Medicare payment reform that restores financial incentives for providing low-cost, high-quality care. In the Senate bill, it’s called the “value index.” The House bill calls for a study of cost and quality variation by the Institute of Medicine. But these efforts are under attack from those on the West and East coasts, who refer to them as the “Mayo-Clinic-gets-extra-payments” sections.
Work on a value index should begin ASAP. But distortions on all sides are preventing that from happening. MedPAC’s recent analysis of utilization differentials suggests that reality is a bit different from the Dartmouth Atlas data most have been using to justify their claims. MedPAC Chairman Glenn Hackbarth tells me that 90 percent of U.S. Medicare beneficiary payments are within 15 percent of the national average. Yes, southern California, eastern Florida, and parts of Texas and Louisiana are off the charts. But Boston and New York are not. In their case, some of the variation is due to the presence of large graduate medical education, indirect medical education, and Medicaid Disproportionate-Share Hospital payment requirements not directly attributable to practice variation. But this makes the point and demonstrates the need for arriving at consensus on cost/quality/value—the causes of variation and measures of it.
Mayo Clinic uses its own set of data and probably doesn’t deserve its poster-child-for-value status. In fact, Mayo’s out-front role on this issue may prove to be unhelpful, given that they bail out on Medicaid and Medicare in various parts of their operations and as details come out about the prices they charge in those Mayo Health System communities in which they have near monopoly control.
Having said all this, I don’t think we need to let selfish interest win this political debate. What needs to happen instead is for the care delivery community to take charge of its future and find a way to demonstrate what value really is and how it can be measured in order to overcome the made-up arguments from UCLA, Harvard economist Martin Feldstein, and others. The best way to do this will be for CMS to move as soon as possible on pilot projects in various regions of the country where existing data on cost and quality show high value consistency. The framework for this can come from the new Center for Innovation language in both the Senate and House bills.
Dave Durenberger is a senior health policy fellow at the University of St. Thomas and chair of the National Institute of Health Policy. He was a Minnesota U.S. senator from 1978 to 1995.