Why Piecemeal Reform Won’t Suffice
Since the special election in Massachusetts, there’s been a resurgence of the notion that it was a mistake for Democrats to lump all of health reform together in one giant package, rather than breaking it down into more manageable pieces that could be tackled separately.
The idea is that, because the legislation is so long and complicated and affects so many different interest groups and because there is so much ideological baggage in play, it has inevitably been under attack from every angle, doomed to death by a thousand cuts. If the effort were broken into smaller chunks, we are told, lawmakers could take on just one or two big interests at a time and have a better chance of getting things done. That’s the idea.
But it’s a bad idea. Reform can’t work that way. Not this reform, anyway. The problem is that the piecemeal theory ignores the difference between legislative politics and policy and fails to recognize the interdependence of policy that underlies the legislation’s many components.
Start with insurance reforms: banning exclusions for pre-existing conditions, guaranteed issue, guaranteed renewability, and community rating. Those things are going to drive insurers out of business if you don’t address adverse selection, so you impose an individual mandate. Because you’re making everyone get insurance, you have to make sure everyone can afford insurance, so you pump subsidies into the exchanges and expand Medicaid for those with the lowest incomes. Now the government is putting a lot of money into covering everyone, and it has to raise the revenue to pay for it all, so we get an excise tax, wring some inefficiencies and waste from Medicare, and cut the excess from Medicare Advantage. Because of the size of the government’s commitment to health spending—which is in fact already unsustainable—we have to slow the rate of growth in healthcare costs, so we throw in a smorgasboard of delivery and payment system demonstrations and pilot programs and an independent commission to recommend and in some cases implement cost-saving measures.
And there we are. Given the objectives and the starting point, the several components follow naturally. If you didn’t start with the private insurance reforms, you wouldn’t need mandates or Medicaid expansion; but then you wouldn’t get anywhere near universal coverage. You could do cost controls and delivery reforms before expanding coverage; but it wouldn’t make much sense to do it that way, because the effectiveness of those reforms will depend on the way we choose to pursue coverage expansion.
Fundamentally, health reform is complex because our goals make it complex. In fact, contrary to another common critique (that the bill is a radical restructuring of our market-based healthcare system), it is largely because our goals are so moderate that reform is so complex. We are trying to achieve near-universal coverage while preserving the status quo for as much of the system as possible and indeed while rewarding as many of the system’s major players as possible. As long as we try to achieve near-universal coverage within a largely private insurance system, reform will be a massively complex undertaking.
This is make-no-enemies health reform, moderate to the core. If it fails, it will not be because its complexity engenders enemies, but because the political process has been engulfed by a cancer and is in need of reform of its own.
Phases of Reform, Part 2
Peter Jacobson, for Georgetown Law’s O’Neill Institute Health Reform blog, writes:
We face both a moral crisis and a cost crisis and we can’t seem to navigate both simultaneously. As between the two, Congress should expand coverage and worry about costs later. If the absence of cost controls, which do not appear to be adequate in any of the pending bills, results in no legislation being enacted, it will be a tragedy. If the legislation expands coverage without adequate cost controls, it will be a policy problem to be rectified in subsequent legislation, but hardly a tragedy.
* * *
For those individuals and families without adequate health insurance, there is no brutal choice between costs and access; there is only the brutal reality of what happens when they need medical care and can’t afford it. * * * I’m sick of the distraction that bending the cost curve has become. To paraphrase Keyshawn Johnson, just pass the damn bill.
Photo by stephanebenito.
That captures the moral force of the argument for providing health security before cost reform. (Although, as I mentioned before, I think the current legislation is actually quite ambitious with respect to payment and delivery-system reforms.) There’s also a strong pragmatic consideration.
We have to settle some big questions about the structure of the healthcare system before we can know how best to allocate our resources within it, and before we can know what tools we have are at our disposal. It wouldn’t make sense to invest a lot in fine-tuning the preferences or settings on your computer just before you switch to a new operating system. Or—because every policy debate should at some point be reduced to a hypothetical about pizza toppings: it wouldn’t be prudent to order 10 double meat-eor pizzas with carnivore crust for your party before you even know basic facts like how many people are coming, if any are vegetarians, and whether someone can bring extra lipitor and defibrillators.
Reform of the payment and delivery systems is a complicated and largely experimental endeavor, but providing for health security is comparatively simple. Until we get everyone in “the system,” our efforts to fix it are likely to be inefficient and the benefit of those efforts maldistributed.
The Phases of Healthcare Reform
Does the legislation before Congress reform the healthcare system, or merely expand it?
The overhaul of our country’s healthcare system has two broad objectives: to provide for the health security of all Americans and to reduce the growth in national health spending to sustainable levels. It has become a common complaint that the legislation currently under consideration by Congress neglects to seriously confront the crisis of healthcare costs—and thus fails to meet the second objective—even if it makes significant headway on the first objective by expanding insurance coverage. I am more inclined to view the current legislative efforts as a necessary first phase in the pursuit of both of these complementary, intertwined goals.
Photo by stephanebenito.
But I also think that both the House bill (H.R. 3692) and the Senate bill (H.R. 3590) take appropriate and significant strides towards reform of the fee-for-service payment system widely considered responsible for the disproportionate inflation in the healthcare economy.
The health-security phase of reform is largely about insurance coverage. Both the House and Senate bills seek to ensure that everyone, or nearly everyone, has access to adequate and affordable health insurance, regardless of income or health status. As means to this end, the bills impose new federal regulations on insurers, expand Medicaid eligibility, create new infrastructure for the individual (non-group) insurance market, and offer subsidies to help low-income Americans purchase insurance. (NYT has a great comparison of details of the House and Senate bills.)
Much of the focus of the reform legislation is on the coverage issues, but that doesn’t mean that the cost problem is being ignored. In fact, both bills lay important groundwork for reforming the delivery system and “bending the cost curve.” In a very helpful review for Health Affairs, health law professor Tim Jost writes that the House bill contains:
a laundry list of virtually every idea for improving the delivery, enhancing the quality, or controlling the cost of medical care now current. It is like they read through the table of contents of every Health Affairs for the past five years. (See, for example, Bending The Cost Curve, The Crisis In Chronic Disease, and Overhauling The Delivery System.) Accountable care organizations, bundled payments for hospitals and physicians, medical homes, incentives to reduce hospital readmissions, increasing payments for primary care, quality and efficiency incentives for Medicare Advantage plans, comparative effectiveness research, promotion of shared decision-making, gainsharing, reporting on infections acquired in hospitals and ambulatory surgical centers, and more—it is all in there. While some of these programs are funded as demonstration projects, a number of them like accountable care organizations and medical homes are authorized as “pilot programs,” meaning that HHS can extend and expand them if they prove successful.
Health economist Jonathon Gruber, as related by Ronald Brownstein (in a piece reportedly circulated in the West Wing by the president), says the Senate bill also throws the kitchen sink at cost control and delivery reform. It also includes two important measures, not in the House bill, with the potential for even greater cost-curving effect: the Independent Medicare Advisory Board (aka, “Super-MedPAC”) and the excise tax on high-value insurance plans (aka, “Cadillac plans”). For more on these two provisions, see Peter Orszag’s OMB blog on the IMAB (back when it was called IMAC) and Ezra Klein on the excise tax.
I’ll explain why I think it’s a good idea to do coverage reform before cost reform in another post. The point here is that these bills do address the cost problem, and they make a promising start at moving us away from fee-for-service medicine.
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