In the steady flurry of updates from Washington on health care reform’s prospects, and with the obvious complexity of the policy puzzle Congress is wrestling with when it comes to health care, it would be easy to overlook the victory engineered in part by the Minnesota delegation last week. It only briefly registered in the public debate, before being overtaken by the kind of breathless political play-by-play that has dominated news coverage for weeks.
Let’s do our Congressional representatives justice. Before their quiet triumph passes altogether from public recollection, let’s recognize it for what it is: a crucial step toward rewarding quality instead of volume in the delivery of health care services.
Minnesota’s delegation, together with representatives from other states with lower-cost, higher-quality health care (such as Iowa, Wisconsin, and Washington), pushed hard to change the reform bill making its way through the House of Representatives. Specifically, they pushed for “payment reform”: a change in the way Medicare reimburses states for medical expenses, away from payments based on the number of procedures performed and toward payments based on health outcomes for patients.
A few days before the deal was struck, Rep. Tim Walz observed that “it will be hard to get the stars and momentum aligned again” for serious payment reform. On July 22, all of Minnesota’s representatives and senators sent a letter to President Obama urging payment reform. Any effort that can bring Rep. Michelle Bachmann and Rep. Keith Ellison together has got to be powerful stuff indeed. And it was: just two days later, Rep. Betty McCollum joined leaders of the quality-care initiative from other states to announce a payment reform deal they’d brokered with the House leadership.
As a result of the deal, the final health care reform bill will direct the Institute of Medicine (IOM) to conduct two important studies that will shape the evolution of the nation’s health care system. One study will investigate regional variations in the reimbursement rates Medicare pays to states, and will recommend changes. The other will consider a wide range of proposals for restructuring Medicare payments to reward quality instead of volume, and will also offer concrete policy prescriptions.
Critically, these prescriptions will not be mere suggestions or “expert advice” – something we have no shortage of when it comes to health care policy. Instead, the Secretary of Health and Human Services and the President will present the IOM studies’ recommendations to Congress, and unless both chambers of Congress reject the changes on an up-or-down vote (that is, with no opportunity for amendments) they will become law.
Why is this a big deal? Because it’s that very rare thing in Washington: a victory of good policy over politics.
From the perspective of economics – not to mention common sense – the policy arguments for moving away from a “fee for service” health care payment system toward one that rewards health outcomes are clear as day. As Karen Davis of the Commonwealth Fund has summarized the case, “Our current fee-for-service system reimburses ‘inputs’: hospital stays, physician visits, and procedures.” Fee-for-service “create[s] incentives to provide more and more services, even when there may be better, lower-cost ways to treat a condition.” Why would a reasonable patient, or taxpayer, ever choose higher costs with worse health outcomes over the opposite combination?
When payments are made based on the volume and cost of services provided, high-quality, basic preventive care – the best way to keep people healthy – proves an especially unattractive business model. Buying and over-using lots of fancy new machines, on the other hand, rakes in revenue. When a pair of prominent economists posed the question “Is American Health Care Uniquely Inefficient?” in the title of an article published last year in a prestigious academic journal, their answer was strongly in the affirmative. Among the primary causes of waste they reported were “poorly restrained incentives for overutilization” and “a tendency to adopt expensive medical innovations rapidly, even when evidence of effectiveness is weak or absent.”
On policy grounds, the argument against fee-for-service is long since settled. But when it comes to politics, it’s been hard to figure how fee-for-service could ever be undone. Medicare reimbursement decisions are made by Congress. For every member from a state like Minnesota that has higher quality and lower cost health care, there’s at least one other member from a state with lower quality and higher costs fighting to make sure that hospitals in their district don’t see revenues dry up. Even if some legislators from lower-quality, higher-cost states understand the economic merits of moving toward a system that rewards health outcomes not volume of services, it seems unrealistic to expect them to ever vote for a bill authorizing that change.
Hence the structure of the policy changes coming out of these studies: non-partisan recommendations that become law unless they are overturned by a majority in both the House and Senate, with no room allowed for amendments and side-deals to compensate states that will lose revenue as a result of payment reform.
But how did the Minnesota delegation and its allies pull this off? Naturally it’s in their self-interest, as politicians representing districts where health care providers offer higher-quality, lower-cost care, to push for the kind of payment reform a dispassionate policy analyst or well-informed taxpayer would also endorse: a move away from rewarding volume and toward rewarding quality. The Mayo Clinic, HealthPartners, Allina and other Minnesota health care providers with a track record for quality have most certainly been giving our Congressional delegation an earful of advice. But aren’t such representatives outnumbered nationally, or at the very least balanced out, by representatives from states with lower-quality, higher-cost health care, resulting in – at best – stalemate and inaction?
That’s the real story of this payment reform deal – a deal easily forgotten, rendered no more than a footnote in the complex, evolving beast of a policy that is federal health care reform. In this instance, quite unexpectedly, good policy trumped political math.
As President Obama has so often emphasized, comprehensive reform of our health care system is no longer just a moral imperative; it is also an economic one. If we do not “bend the curve” of health care cost inflation in the United States – if we do not reduce the rate of increase of health care costs – our society will suffer greatly as a result in the near future. Spiraling health care costs with no corresponding improvement in health outcomes are an enormous drag on economic growth. The payment reform deal announced last week, engineered in large part by a strikingly united Minnesota Congressional delegation, makes a concrete contribution toward bending that curve. And it must have been politically difficult to achieve.
As the news deluge on health reform continues – day after day, detail after detail – it’s worth pausing for a moment as Minnesotans to appreciate this accomplishment. Our representatives deserve praise. And now that they’ve gotten what they asked for on payment reform, it’s reasonable for us to expect a final product that reins in cost growth and ensures quality health care for all.
Fellow Phillip Cryan is the Assistant Organizing Director of SEIU Healthcare Minnesota, a 17,000-member labor union representing health care workers. He received a Masters degree in Public Policy from the University of California, Berkeley. He lives in St. Paul.
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