Changing the Game in Health Care

The National Journal blog entry on the Administration’s proposals on health care reform highlights some important issues.  But is also contains some red herrings – like the idea the Administration’s proposals won’t reduce costs.

To be clear, every proposal the President put forward as part of his health care proposal in the FY 2010 Budget was vetted and estimated by the Department of Health and Human Services actuaries.  Estimated savings from these proposals total $316 billion over ten years.  The Congressional Budget Office has analyzed these proposals and concluded that the savings are close to what was estimated in the President’s Budget.  So the savings here are very real.  But the real story is in the steps that may not "score" to any substantial degree in the short run but that will likely prove crucial over the long term.

In particular, the President’s proposals represent an aggressive plan to start "changing the game" in health care.  Len Schaeffer and Dennis Cortese put it very well in their responses to the blog:  we have to shift our focus and rethink roles in health care.  We can’t simply continue paying on a piecework basis; we have to adapt financial incentives to promote smarter and better care.

As an example of steps in the "game changing" mode, I recently blogged about a set of proposals designed to reduce costly hospital readmissions.  In addition, the Administration has put forward other proposals designed to promote hospital quality and efficiency, to make the market for biological treatments more competitive through a new pathway for generic biologics, and to promote more efficient payments in Medicare and Medicaid.  And we have already enacted historic incentives to promote health information technology and to invest in developing critically needed information about how treatments work and which ones work better -- information doctors and patients can use to make more informed decisions about courses of treatment.

The bottom line is that health care reform must be deficit neutral in the short run and deficit reducing in the long term.  We have to have scoreable savings in the short term to finance additional benefits or coverage.   But we must do more than that.  We have to move aggressively to change the rules of the game so that we slow the growth in long term costs.  Many of these things may not have substantial short-term savings, but over the long term will contribute to more efficient arrangements in the health sector.