The people who will really decide whether health-care reform succeeds or fails

By Ezra Klein

The New Yorker isn't allowing Atul Gawande's latest article out from behind the paywall, but you can read the abstract here. The basic point is well worth keeping in mind amid all the arguments over the Affordable Care Act: Health-care costs -- and thus our paychecks, and the federal budget -- won't be decided by how we deliver and structure health-care insurance. They'll be decided by how we deliver and structure health care. And though national policy has a role in that, it's not always a huge role, and it's not usually a controversial one.

Gawande relates a series of stories showing innovation in the toughest corners of the care-delivery system. The most inspiring is about Jeffrey Brenner, a Camden-based physician who began playing with his city's hospital claims data and making maps of where the money was being spent. It turned out that there were two city blocks, containing two particular buildings, where 900 people were responsible for "more than four thousand hospital visits and about two hundred million dollars in health-care bills" over the past seven years. So that's where he focused.

Insurers try to run from the costliest patients. They try to kick them out for having preexisting conditions, or they rescind their coverage, or they price coverage beyond their reach. That just makes them costlier, of course. Inconsistent access to medical care means more medical emergencies, and more medical emergencies mean higher medical costs. Brenner, by contrast, is lavishing them with attention. He's calling them daily. He's checking up on their medications, their lifestyles, their habits. He wants to open a doctor's office in their building. His patients averaged "sixty-two hospital and E.R. visits per month before joining the program and thirty-seven visits after — a forty-per-cent reduction. Their hospital bills averaged $1.2 million per month before and just over half a million after — a fifty-six-percent reduction."

We don't really know if his success can be replicated. But somebody'scan be. And that'll be where policy -- in particular, where Medicare -- comes in. The administration's vision sees things running something like this: A promising experiment or pilot program will come to the attention of the newly established Center for Medicare and Medicaid Innovation. The center will fund it on a larger scale and study it more intensely if. If it proves promising, the Independent Payment Advisory Board will force Medicare to implement it fairly quickly. And history shows that if something works in Medicare -- and, quite often, even if it doesn't -- it's soon adopted by private insurers.

That's if all goes well, of course. And all may not go well. But it's important to keep in mind that we know who costs the system money: Sick people. And we know what costs the system money: Their health care, particularly when it involves catastrophic or chronic conditions. So from a cost and quality perspective, this is where health-care reform will live and die: In doctor's offices, in community health centers, in operating rooms and in people's homes.

Insurers can play a role here, as can Medicare. But for the next few years, cost control is going to be less about setting national policy than about setting up the experiments that allow us to test what national policy should be. The Affordable Care Act's contribution to this is money, a center dedicated to bringing these experiments up to scale and a reform process that makes it easier to seed them in Medicare. But for all that to work, the component pieces need to remain in place, and some of the experiments actually need to pan out.

Photo credit: By Pat Sullivan/Associated Press

Health Care: End the 'Perverse Incentives'

In most of the U.S., health care can be confusing, uncoordinated, and expensive. What if we were to emphasize cooperation, communication, and prevention?

Imagine you were a diabetic whose doctor developed a customized plan to help keep the condition in check. Imagine a team that monitored blood sugars remotely and called you periodically to see how you felt. Imagine your doctor knowing when you experience a diabetic episode, with an appointment automatically scheduled to address it that day. Imagine seeking more intense treatment at a hospital whose staff already knew your history and could discuss follow-up care with your doctor. Here's the best part: Imagine getting all this for less than you pay today.

Sound unbelievable? With health-care costs rising every day, consumers—and even providers—have reason to be skeptical that a utopian world of good care at a good price could ever exist. But this is the future promised in Accountable Care Organizations (ACOs), a new model designed to reduce spending by improving health, eliminating inefficiencies, and preventing costly complications.

There are two premises underlying ACOs that make them unique and unlike past efforts to contain costs, including Health Maintenance Organizations (HMOs). First is the need to change the way we pay for health care. Today's health-care providers are paid by the number of office visits, tests ordered, and procedures performed, regardless of whether these services yield a better outcome. The system rewards volume: the more services consumed, the higher the payments. This approach has had disastrous effects, including runaway spending and insurance premium increases that reached an estimated 17.3 percent of U.S. gross domestic product in 2009, the largest one-year increase in history.

ACOs propose to fix this system of perverse incentives. Rather than paying for treatments when people get sick, caregivers in an ACO would be held accountable for keeping patients well. Their reward is a portion of the funds that are saved when people improve their health and require less care.

CHEAPER TO PREVENT THAN TO AMPUTATE

Diabetic care today costs insurers an average of about $30,000 a year, most of which goes toward treating expensive complications. An oft-cited example of today's absurdist approach to health care is that many insurers will not reimburse $150 for someone to get a routine foot checkup, but nearly all will pay $30,000 for a foot amputation, an all-too-common remedy in advanced cases of diabetes. In the ACO model, there would be a significant investment in the preventive care needed to avoid the expensive amputation, obviating the hospital visit. In such a scenario, average diabetic care costs could be reduced to $20,000. The ACO could keep a chunk of the $10,000 savings as a new form of reimbursement. Moreover, doctors who achieve such quality enhancements would be able to earn bonus pay for better care and reduced costs. The reward is no longer based on consumption, which HMOs tried to restrict. Instead the incentive is for doctors to make decisions to improve a condition, which benefits patients, insurers, employers, and doctors alike.

A second break with the past is the onset of the notion that we must overcome fragmentation in health care. In our current system, people are passed among doctors, specialists, clinics, hospitals, and others, often without coordination of care or discussion by providers. This frequently means that vital information is unavailable when a clinical decision needs to be made, leading to duplicate or conflicting treatments, waste, and unnecessary expense. The Congressional Budget Office estimates that up to 30 percent of all health-care dollars are wasted in unnecessary or duplicate care, with no corresponding benefits in outcome.

In contrast, when working as part of an integrated ACO, doctors, specialists, nurses, long-term care providers, and others are all part of a united team that provides seamless access to care, any time, anywhere. That sort of teamwork will ensure that clinicians have the information they need to provide effective treatments to improve health.

The Top Five Branches Of Health Law GOP Wants To Prune

by LEXIE VERDON, BARA VAIDA AND JORDAN RAU

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January 24, 2011

The Republican effort to repeal the health care law is going nowhere in the Democratic-controlled Senate, but that doesn't mean that the GOP is backing down. House Republicans are already beginning work in committees to lop off and possibly replace some of the law's individual provisions.

Party leaders have released few specifics, but some of the changes that have been urged by Republicans and a few Democrats could affect Americans' health care spending and coverage under the law.

Ways and Means Committee Chairman Dave Camp of Michigan was blunt about the strategy when addressing reporters last week: "If the tree is rotten, you cut it down." If that doesn't work, "we'll prune it branch by branch."

Here is a quick look at five "branches" of the health law "tree" Republicans are eyeing.

1. Reporting Business Payments on 1099 Forms

What the law says: Businesses that make payments of $600 in a year for goods or services to a single provider must file a 1099 form to the Internal Revenue Service identifying the company or person receiving the payment.

Purpose: The reporting requirement is expected to raise $19 billion over 10 years to help pay for the cost of expanded insurance coverage under the health law. It is intended to help increase taxpayers' compliance with income reporting rules.

Where it stands: This provision quickly raised concerns from business groups, which argue that the $600 trigger is too low and will create an administrative nightmare, especially for small businesses. That prompted bipartisan support to change or repeal the provision; the White Houseagreed that it should be amended.

Both Republican and Democratic lawmakers have offered proposals, but none passed last year. The new GOP majority in the House is determined to take up the issue again and have made a bill repealing the reporting requirement a priority. Three Democratic senators have written Speaker John Boehner to urge quick passage of the bill.

2. Individual Mandate

What the law says: U.S. citizens and legal residents are required to have health insurance by 2014 or pay a penalty. A number of people are exempted from the mandate, including those for whom the coverage would cost more than 8 percent of their income, American Indians and those who have religious objections.

Purpose: The mandate is designed to discourage consumers from waiting to apply for coverage until they are sick and need costly treatments. Backers say that's important because insurers will be required to provide coverage to people with pre-existing medical conditions.

The Congressional Budget Office has estimated that if the provision were struck from the law, fewer healthy people would purchase insurance and the result would be a 15 to 20 percent increase in premiums in the individual insurance market. It also predicted that the number of uninsured Americans would rise to 39 million from 23 million by 2019 if the mandate is repealed or overturned by courts.

Where it stands: Republicans argue it is unconstitutional to force individuals to purchase a product and about two dozen states are challenging the provision in court.

The issue is expected to go all the way to the Supreme Court.

Even some Democrats who supported the law, such as Sens. Claire McCaskill of Missouri and Ben Nelson of Nebraska, have backed away. Various groups are promoting alternatives like limiting insurance plan enrollment to specific times or imposing penalties on those who do not enroll when they first become eligible; or replacing the mandate with an incentive to buy health insurance, such as a tax credit.

3. Independent Payment Advisory Board

What's in the law: This 15-member board is tasked with curbing the per capita rate of growth in Medicare spending. The board's recommendations will be automatically implemented in the 2015 fiscal year unless Congress comes up with its own solution.

Congress may also vote, by a supermajority, to reject the recommendations and send the bill to the president, who can sign or veto the measure. Both Congress and the board face statutory deadlines for action.

Purpose: Efforts by Congress to rein in Medicare spending have been met by repeated resistance from special interests, making it politically difficult for lawmakers to slow health care spending. The board is supposed to make the hard decisions on spending that Congress has been unable to implement.

Where it stands: Republicans see the board as another expansion of government over health care, and many House Democrats oppose an independent board exercising control over Medicare. Many powerful interests, including doctors, drug companies, hospitals and patients-rights groups have begun lobbying Congress to get rid of the provision. They say they're worried the cuts will be draconian, disrupting the health care system.

4. Health Care Flexible Spending Accounts

What's in the law: Starting this year, people who put money into pre-tax flexible spending accounts (FSAs) can no longer use those funds to buy over-the-counter medications or health care products without a prescription. Starting in 2013, the maximum contributions to those accounts will be capped at $2,500 a year.

Purpose: The change is intended to help the government pay for the broader health overhaul. Many economists also argue that FSAs encourage consumers to make needless purchases because they fear forfeiting their account balances at the end of the year.

Where it stands: Companies that administer these accounts are pressing Congress to rescind the restriction on over-the-counter medications and products. They also hope that if Congress won't raise the $2,500 annual limit, lawmakers will at least allow people to roll unspent money into the next year's account or have it returned to them as taxable income.

5. The CLASS Act

What's in the law: This insurance program would allow people to volunteer for a payroll deduction to help them finance long-term care in their own homes if they become disabled.

Purpose: The payments of at least $50 a day can be used for a variety of expenses, including paying for a home health aide or family member who provides care, household modifications, respite care, special transportation or technology needs or to help pay for assisted living expenses. There is no lifetime limit on benefits.

Where it stands: Conservatives argue that the program will quickly outpace its funding and become an entitlement that the country cannot afford. Some of these experts, including theHeritage Foundation, have urged Congress to repeal the provision before CLASS begins operation.

Last year, Rep. Charles Boustany, R-La., introduced a bill requiring Congress to reconsider whether the program was self-sustaining but lawmakers did not act on it.

This story was produced through collaboration between NPR and Kaiser Health News (KHN), an editorially independent news service and a program of the Kaiser Family Foundation, a nonpartisan health care policy organization that isn't affiliated with Kaiser Permanente.