Health care reforms proposed during the Obama administration
Encyclopedia
This article is about specific types of system changes that have been proposed during the Obama administration to reform the U.S. health care system. It is not intended to cover specific legislative proposals, which often encompass multiple reform initiatives. It is not intended to cover the broader arguments for and against reform - for those, please see Health care reform debate in the United States
.
There have been a number of different health care reforms proposed during the Obama administration. The first of these reform proposals to be passed by the United States Congress
is the Patient Protection and Affordable Care Act
, which originated in the Senate and was later passed by the House of Representatives in amended form on March 21, 2010 (with a vote of 219–212). President Obama signed the reforms into law on March 23, 2010. Reuters and CNN summarized the reforms and the year in which they take effect; see the last section in this article for a recap.
Key reform topics include obesity, prevention and treatment of chronic conditions, defensive medicine or tort reform, incentives that reward more care instead of better care, redundant payment systems, tax policy, rationing, a shortage of doctors and nurses, intervention vs. hospice and fraud.
health care system. These range from increased use of health care technology through changing the anti-trust rules governing health insurance companies and tort-reform to rationing of care. Different overall strategies have been suggested as well.
During a June 2009 speech, President Barack Obama
outlined his strategy for reform. He mentioned electronic record-keeping, preventing expensive conditions, reducing obesity, refocusing doctor incentives from quantity of care to quality, bundling payments
for treatment of conditions rather than specific services, better identifying and communicating the most cost-effective treatments, and reducing defensive medicine.
President Obama further described his plan in a September 2009 speech to a joint session of Congress. His plan mentions: deficit neutrality; not allowing insurance companies to discriminate based on pre-existing conditions; capping out of pocket expenses; creation of an insurance exchange
for individuals and small businesses; tax credits for individuals and small companies; independent commissions to identify fraud, waste and abuse; and malpractice reform projects, among other topics.
In November 2009, then-OMB Director Peter Orszag
described aspects of the Obama administration's strategy during an interview: "In order to help contain [ Medicare
and Medicaid
] cost growth over the long term, we need a new health care system that has digitized information...in which that information is used to assess what’s working and what’s not more intelligently, and in which we’re paying for quality rather than quantity while also encouraging prevention and wellness." He also argued for bundling payments and accountable care organization
s, which reward doctors for teamwork and patient outcomes.
Mayo Clinic
President and CEO Denis Cortese has advocated an overall strategy to guide reform efforts. He argued that the U.S. has an opportunity to redesign its healthcare system and that there is a wide consensus that reform is necessary. He articulated four "pillars" of such a strategy:
Writing in The New Yorker
, surgeon Atul Gawande
further distinguished between the delivery system, which refers to how medical services are provided to patients, and the payment system, which refers to how payments for services are processed. He argued that reform of the delivery system is critical to getting costs under control, but that payment system reform (e.g., whether the government or private insurers process payments) is considerably less important yet gathers a disproportionate share of attention. Gawande argued that dramatic improvements and savings in the delivery system will take "at least a decade." He recommended changes that address the over-utilization of healthcare; the refocusing of incentives on value rather than profits; and comparative analysis of the cost of treatment across various healthcare providers to identify best practices. He argued this would be an iterative, empirical process and should be administered by a "national institute for healthcare delivery" to analyze and communicate improvement opportunities.
A report published by the Commonwealth Fund
in December 2007 examined 15 federal policy options and concluded that, taken together, they had the potential to reduce future increases in health care spending by $1.5 trillion over the next 10 years. These options included increased use of health information technology, research and incentives to improve medical decision making, reduced tobacco use and obesity, reforming the payment of providers to encourage efficiency, limiting the tax federal exemption for health insurance premiums, and reforming several market changes such as resetting the benchmark rates for Medicare Advantage plans and allowing the Department of Health and Human Services to negotiate drug prices. The authors based their modeling on the effect of combining these changes with the implementation of universal coverage. The authors concluded that there are no magic bullets for controlling health care costs, and that a multifaceted approach will be needed to achieve meaningful progress.
During February 2010, President Obama updated his reform proposal, with modifications to the bills that had passed as of that time.
refers to when a patient overuses a doctor or to a doctor ordering more tests or services than may be required to address a particular condition effectively. Several treatment alternatives may be available for a given medical condition, with significantly different costs yet no statistical difference in outcome. Such scenarios offer the opportunity to maintain or improve the quality of care, while significantly reducing costs, through comparative effectiveness research. According to economist Peter A. Diamond
and research cited by the Congressional Budget Office
(CBO), the cost of healthcare per person in the U.S. also varies significantly by geography and medical center, with little or no statistical difference in outcome. Comparative effectiveness research has shown that significant cost reductions are possible. Former OMB Director Peter Orszag
stated: "Nearly thirty percent of Medicare's costs could be saved without negatively affecting health outcomes if spending in high- and medium-cost areas could be reduced to the level of low-cost areas."
Such concentration offers opportunities to focus on key ailments and treatment approaches. Peter Orszag wrote in May 2011: "The truth is that constraining future health care costs will require a variety of approaches, but in particular it will mean improving the information that providers have about their patients and best practices, and the incentives that providers are given to deliver better care, especially in expensive cases."
Both Mayo Clinic CEO Dr. Denis Cortese and Surgeon/Author Atul Gawande have argued that such panel(s) will be critical to reform of the delivery system and improving value. Washington Post columnist David Ignatius
has also recommended that President Obama engage someone like Cortese to have a more active role in driving reform efforts.
has described how the tax treatment of insurance premiums may affect behavior:
Peter Singer
wrote in the New York Times that the current exclusion of insurance premiums from compensation represents a $200 billion subsidy for the private insurance industry and that it would likely not exist without it. In November 2009, The Economist
estimated that taxing employer-provided health insurance (which is presently exempt from tax) would add $215 billion per year to federal tax revenue.
Employer-provided health insurance receives uncapped tax benefits. According to the OECD, it "encourages the purchase of more generous insurance plans, notably plans with little cost sharing, thus exacerbating moral hazard". Consumers want unfettered access to medical services; they also prefer to pay through insurance or tax rather than out of pocket. These two needs create cost-efficiency challenges for health care. Some studies have found no consistent and systematic relationship between the type of financing of health care and cost containment.
Some have proposed an "excise tax" for high cost 'Cadillac
' insurance plans. A study published in Health Affairs
in December 2009 found that high-cost health plans do not provide unusually rich benefits to enrollees. The researchers found that only 3.7% of the variation in the cost of family coverage in employer-sponsored health plans is attributable to differences in the actuarial value of benefits. Only 6.1% of the variation is attributable to the combination of benefit design and plan type (e.g., PPO, HMO, etc.). The employer's industry and regional variations in health care cost explain part of the variation, but most is unexplained. The researchers conclude ". . . that analysts should not equate high-cost plans with Cadillac plans, . . . [w]ithout appropriate adjustments, a simple cap may exacerbate rather than ameliorate current inequities"
Premium tax subsidies to help individuals purchase their own health insurance have also been suggested as a way to increase coverage rates. Research confirms that consumers in the individual health insurance market are sensitive to price. It appears that price sensitivity varies among population subgroups and is generally higher for younger individuals and lower income individuals. However, research also suggests that subsidies alone are unlikely to solve the uninsured problem in the U.S.
The GAO
reported in 2002 (using 2000 data) the following statistics regarding insurance competition in state markets: "The median
number of licensed carriers in the small group market per state was 28, with a range from 4 in Hawaii to 77 in Indiana. The median market share of the largest carrier was about 33 percent, with a range from about 14 percent in Texas to about 89 percent in North Dakota. The five largest carriers, when combined, represented three-quarters or more of the market in 19 of the 34 states supplying information, and they represented more than 90 percent in 7 of these states. Twenty-five of 37 states supplying information identified a Blue Cross and Blue Shield (BCBS) carrier as the largest carrier offering health insurance in the small group market, and in all but one of the remaining 12 states, a BCBS carrier was among the five largest. The median market share of all the BCBS carriers in the 34 states supplying information was about 34 percent, with a range from about 3 percent in Vermont to about 89 percent in North Dakota; in 9 of these states BCBS carriers combined for half or more of the market."
The GAO
reported in 2008 (using 2007 data for the most part) the following statistics: "The median number of licensed carriers in the small group market per state was 27. The median market share of the largest carrier in the small group market was about
47 percent, with a range from about 21 percent in Arizona to about 96 percent in Alabama. In 31 of the 39 states supplying market share information, the top carrier had a market share of a third or more. The five largest carriers in the small group market, when combined, represented three quarters or more of the market in 34 of the 39 states supplying this information, and they
represented 90 percent or more in 23 of these states. Thirty-six of the 44 states supplying information on the top carrier identified a Blue Cross and Blue Shield (BCBS) carrier as the largest carrier, and in all but 1 of the remaining 8 states, a BCBS carrier was among the five largest carriers. The median market share of all the BCBS carriers in the 38 states supplying this
information was about 51 percent, with a range of less than 5 percent in Vermont and Wisconsin and more than 90 percent in Alabama and North Dakota...the median market share of all the BCBS carriers in 38 states reporting this information in 2008 was about 51 percent, compared to the 44 percent reported in 2005 and the 34 percent reported in 2002 for the 34 states supplying information in each of these years."
Economist Paul Krugman
argued that allowing interstate competition would create a "race to the bottom," in which "[t]he states with the weakest regulations — for example, those that allow insurance companies to deny coverage to victims of domestic violence — would set the standards for the nation as a whole. The result would be to afflict the afflicted, to make the lives of Americans with pre-existing conditions even harder."
" to provide incentives for healthier behavior, either by levying the tax on products (such as soft drinks) that are thought to contribute to obesity, or to individuals based on body measures, as they do in Japan.
A study released in October, 2010 had a similar cost estimate, of $168 billion, nearly 17% of U.S. medical costs. This is an estimated $2,400 per obese person. The study was performed by researchers at Cornell and Emory universities.
Increased use of preventive care (e.g., regular doctor visits) is often suggested as a way of reducing health care spending. Research suggests, however, that in most cases preventive care does not produce significant long-term cost savings. Preventive care is typically provided to many people who would never become ill, and for those who would have become ill, it is partially offset by the health care costs during additional years of life.
, if not implemented on a systematic basis with appropriate safeguards, market reform has the potential to cause more problems than it solves.
Since most Americans with private coverage receive it through employer-sponsored plans, many have suggested employer "pay or play" requirements as a way to increase coverage levels (i.e., employers that do not provide insurance would have to pay a tax instead). However, research suggests that current pay or play proposals are limited in their ability to increase coverage among the working poor. These proposals generally exclude small firms, do not distinguish between individuals who have access to other forms of coverage and those who do not, and increase the overall compensation costs to employers.
In October 2009 the Wall Street Journal
reported that while requirements to purchase health insurance were central to proposals in both the House and Senate, these coverage mandates were "under fire from both ends of the political spectrum, with some liberals saying the penalties are too harsh for those who refuse and conservatives denouncing the whole concept." According to the article, however, "[h]ealth-policy experts . . .say there is a good reason for the mandate." Proposed reforms would prohibit health insurers from denying coverage to individuals with pre-existing medical conditions. Insurers said that, to keep premiums from rising for everyone, it is necessary for healthier people to pay into the insurance pools to balance out the cost of these higher cost individuals.
Arguing against requiring individuals to buy coverage, the Cato Institute
has asserted that the Massachusetts law forcing everyone to buy insurance has increased costs: "Premiums are growing 21 to 46 percent faster than the national average, in part because Massachusetts' individual mandate has effectively outlawed affordable health plans." They say that "the mandate gives politicians enormous power to dictate the content of every American's health plan — a power that health care providers inevitably capture and use to increase the required level of insurance" and state that providers were successful in persuading legislators to include an additional 16 benefit mandates in the required benefit package during the first three years after the coverage mandate was enacted. They also say that by prohibiting the use of health status in pricing, the Massachusetts law "further increase[s] premiums for the young and healthy" and, as the result of adverse selection
, drives more comprehensive health plans out of the market. The conclusion they draw is that "[T]he most sweeping provision . . . is an 'individual mandate' that makes health insurance compulsory. Massachusetts shows that such a mandate would oust millions from their low-cost health plans and force them to pay higher premiums."
Writing in the New York Times
opinion blog
"Room for Debate" the single-payer health care
advocate Marcia Angell
, former editor-in-chief of the New England Journal of Medicine
, said that a coverage mandate would not be necessary within a single-payer system and that even within the context of current system she was "troubled by the notion of an individual mandate." She described the Massachusetts mandates as "a windfall for the insurance industry" and wrote, "Premiums are rising much faster than income, benefit packages are getting skimpier, and deductibles and co-payments are going up."
In April 2009 the Boston Globe
reported that the number of people seeking emergency room care and the cost of emergency room visits increased after the 2006 mandates went into effect (comparing 2005 to 2007). The number of visits increased by 7% during that period, while costs rose by 17%. State officials cautioned that it was too early to determine if the state's new coverage mandate had failed to reduce the emergency room use, but several physicians and policymakers said that it was unlikely that a coverage mandate alone could solve the problems of emergency room crowding and overuse. In August 2009 the Boston Globe
reported that Massachusetts had "the most expensive family health insurance premiums in the country." Premiums in Massachusetts increased by 40 percent from 2003 to 2008, compared to a national average increase of 33%. The report did not break out the amount of the increase since 2006, but as the Massachusetts reforms are often taken as a model for national reform, "advocates on various sides of the issue said the report underscores the urgency of including cost controls in any large-scale federal or state overhaul." Karen Davenport, director of health policy at the Center for American Progress
, has argued that "before making coverage mandatory, we need to reform the health insurance market, strengthen public health insurance programs, and finance premium subsidies for people who can’t afford coverage on their own."
Addressing the issue when it was proposed in 1994, CBO
wrote: "A mandate requiring all individuals to purchase health insurance would be an unprecedented form of federal action. The government has never required people to buy any good or service as a condition of lawful residence in the United States." There is also disagreement as to whether federal mandates would be constitutional, and state initiatives opposing federal mandates may lead to litigation and delay.
Gawande argued: "Our fee-for-service system, doling out separate payments for everything and everyone involved in a patient’s care, has all the wrong incentives: it rewards doing more over doing right, it increases paperwork and the duplication of efforts, and it discourages clinicians from working together for the best possible results."
Gawande quoted one surgeon who stated: "We took a wrong turn when doctors stopped being doctors and became businessmen." Gawande identified various revenue-enhancing approaches and profit-based incentives that doctors were using in high-cost areas that may have caused the over-utilization of healthcare. He contrasted this with lower-cost areas that used salaried doctors and other techniques to reward value, referring to this as a "battle for the soul of American medicine."
costs (insurance and lawsuits, for example) are significant and should be addressed via tort reform
.
How much these costs are is a matter of debate. Some have argued that malpractice
lawsuits are a major driver of medical costs. A 2005 study estimated the cost around 0.2%, and in 2009 insurer WellPoint Inc. said "liability wasn’t driving premiums." A 2006 study found neurologists in the United States ordered more tests in theoretical clinical situations posed than their German counterparts; U.S. clinicians are more likely to fear litigation which may be due to the teaching of defensive strategies which are reported more often in U.S. teaching programs. Counting both direct and indirect costs, other studies estimate the total cost of malpractice "is linked to" between 5% and 10% of total U.S. medical costs.
A 2004 report by the Congressional Budget Office
put medical malpractice costs at 2 percent of U.S. health spending and "even significant reductions" would do little to reduce the growth of health-care expenses. A 2009 CBO report estimated that approximately $54 billion could be saved over ten years by limiting medical malpractice lawsuits. A tort reform package that includes caps on jury awards of $500,000 for punitive damages and $250,000 for "pain and suffering" damages would lower liability insurance premiums by about 10 percent.
In August 2009, physician and former Democratic National Committee Chairman Howard Dean
explained why tort reform was omitted from the Congressional health care reform bills then under consideration: "When you go to pass a really enormous bill like that, the more stuff you put in it, the more enemies you make, right?...And the reason tort reform is not on the bill is because the people who wrote it did not want to take on the trial lawyers in addition to everybody else they were taking on. That is the plain and simple truth."
Others have argued that even successful tort reform might not lead to lower aggregate liability. For example, the current contingent fee system skews litigation towards high-value cases while ignoring meritorious small cases; aligning litigation more closely with merit might thus increase the number of small awards, offsetting any reduction in large awards. A New York study found that only 1.5% of hospital negligence led to claims; moreover, the CBO observed that "health care providers are generally not exposed to the financial cost of their own malpractice risk because they carry liability insurance, and the premiums for that insurance do not reflect the records or practice styles of individual providers but more-general factors such as location and medical specialty." Given that total liability is small relative to the amount doctors pay in malpractice insurance premiums, alternative mechanisms have been proposed to reform malpractice insurance.
In 2004, the CBO studied restrictions on malpractice awards proposed by the George W. Bush
Administration and members of Congress; CBO concluded that "the evidence available to date does not make a strong case that restricting malpractice liability would have a significant effect, either positive or negative, on economic efficiency." Empirical data and reporting have since shown that some of the highest medical costs are now in states where tort reform had already caused malpractice premiums and lawsuits to drop substantially; unnecessary and injurious procedures are instead caused by a system "often driven to maximize revenues over patient needs."
argues that U.S. healthcare is rationed, based on income, type of employment, and pre-existing medical conditions, with nearly 46 million uninsured. He argues that millions of Americans are denied coverage or face higher premiums as a result of pre-existing medical conditions.
Peter Singer
and David Leonhardt
have each separately noted that health care rationing is not a choice, but an economic necessity. All health care resources are finite and have to be allocated in some way or other. The issue is which way is the most sensible way to do it.
Former Republican Secretary of Commerce Peter G. Peterson
has also argued that some form of rationing is inevitable and desirable considering the state of U.S. finances and the trillions of dollars of unfunded Medicare liabilities. He estimated that 25-33% of healthcare services are provided to those in the last months or year of life and advocated restrictions in cases where quality of life cannot be improved. He also recommended that a budget be established for government healthcare expenses, through establishing spending caps and pay-as-you-go rules that require tax increases for any incremental spending. He has indicated that a combination of tax increases and spending cuts will be required. All of these issues would be addressed under the aegis of a fiscal reform commission.
Rationing by price means accepting that there is no triage according to need. Thus in the private sector it is accepted that some people get expensive surgeries such as liver transplants or non life threatening ones such as cosmetic surgery, when others fail to get cheaper and much more cost effective care such as prenatal care, which could save the lives of many fetuses and newborn children. Some places, like Oregon for example, do explicitly ration Medicaid resources using medical priorities.
Politicians on the right tend to be fearful of democratically elected governments becoming involved in rationing decision. Former House Speaker Newt Gingrich
(R-GA) argued that the reform plans supported by President Obama expand the control of government over healthcare decisions, which he referred to as a type of healthcare rationing. Senator Charles Grassley (R-IA) makes similar arguments claiming for example that people like the late Senator Edward Kennedy received health care in the U.S. that would have been denied in countries which have government controlled health care, a claim that The Economist magazine said was "dangerous" and went on to say that "The reality is that America, like Britain, already makes extensive use of rationing.
Proponents of health care reform argue that moving to a single-payer system would reallocate the money currently spent on the administrative overhead required to run the hundreds of insurance companies in the U.S. to provide universal care. An often-cited study by Harvard Medical School and the Canadian Institute for Health Information determined that some 31 percent of U.S. health care dollars, or more than $1,000 per person per year, went to health care administrative costs. Other estimates are lower. One study of the billing and insurance-related (BIR) costs borne not only by insurers but also by physicians and hospitals found that BIR among insurers, physicians, and hospitals in California represented 20-22% of privately insured spending in California acute care settings.
Advocates of "single-payer" argue that shifting the U.S. to a single-payer health care system would provide universal coverage, give patients free choice of providers and hospitals, and guarantee comprehensive coverage and equal access for all medically necessary procedures, without increasing overall spending. Shifting to a single-payer system, by this view, would also eliminate oversight by managed care reviewers, restoring the traditional doctor-patient relationship. Among the organizations in support of single-payer health care in the U.S. is Physicians for a National Health Program
(PNHP), an organization of some 17,000 American physicians, medical students, and health professionals.
has concluded that increased use of health information technology has great potential to significantly reduce overall health care spending and realize large improvements in health care quality providing that the system is integrated. The use of health IT in an unintegrated setting will not realize all the projected savings.
The American Academy of Family Physicians predicts a shortage of 40,000 primary care doctors (including family practice, internal medicine, pediatrics and obstetrics/gynecology) by 2020. The number of medical students choosing the primary care specialty has dropped by 52% since 1997. Currently, only 2% of medical school graduates choose primary care as a career. An amendment to the Senate health bill includes $2 billion in funds over 10 years to create 2,000 new residency training slots geared toward primary care medicine and general surgery. Writing in Forbes, a physician argued that this is a "tiny band-aid at best," advocating full loan repayments and guaranteed positions upon graduation.
Physicians wrote a NYT Op Ed in May 2011 stating that doctors typically graduate with an average of $155,000 in debt from Medical school, with over 80% owing debt of some type. This drives some doctors into higher paying specialties as opposed to primary care. As specialists, they prescribe more expensive treatments. About $2.5 billion/year would be required to make Medical school free, which the writers estimated at one-thousandth the total annual healthcare costs. Making medical school free would help address the shortage in their view.
The U.S. had 2.3 doctors per 1,000 people in 2002, ranking 52nd. Germany and France had approximately 3.4 and ranked in the top 25. The OECD average in 2008 was 3.1 doctors per 1,000 people, while the U.S. had 2.4.
The American Association of Colleges of Nurses cited studies estimating that a shortage of registered nurses would reach 230,000 by 2025 as America ages, with over 135,000 open positions during 2007. An additional 30% more nurses would have to graduate annually to keep up with demand. A study by Price Waterhouse advanced several strategies for addressing the nursing shortage, including developing more public-private partnerships, federal and state-level grants for nursing students and educators, creating healthy work environments, using technology as a training tool, and designing more flexible roles for advanced practice nurses given their increased use as primary care providers.
Newsweek
wrote: "Lately, some policymakers have argued that instead of having a primary-care doctor, more people—especially young, healthy patients with simple medical needs—should see a nurse or physician assistant who administers routine care and kicks more complex problems up to a doctor when they arise. 'If you're just coming in to have your blood pressure checked and your pulse taken, you really don't need to see a doctor, and you might not need to see a nurse, either,' says David Barrett, president and CEO of the Lahey Clinic in Burlington, Mass. "There are three-stripe military sergeants with two-year degrees who can provide excellent primary care. There's absolutely no reason to force all primary-care providers to have an M.D."
lists Medicare as a "high-risk" government program due to its vulnerability to improper payments. Estimates of Medicare fraud or "improper payments" vary. The Office of Management and Budget reported that $54 billion in "improper payments" were made to Medicare ($24B), Medicaid ($18B) and Medicaid Advantage ($12B) during FY2009. This was 9.4% of the $573 billion spent in these categories. GAO reported in 2000: "The Department of Health and Human Services’ Office of Inspector General has reported that $13.5 billion of processed Medicare fee-for-service claim payments for fiscal year 1999 may have been improperly paid for reasons that ranged from inadvertent error to outright fraud and abuse." Fewer than 5% of Medicare claims are audited.
According to CBS News, Medicare fraud accounts for an estimated $60 billion in Medicare payments each year, and "has become one of, if not the most profitable, crimes in America." Criminals set up phony companies, then invoice Medicare for fraudulent services provided to valid Medicare patients who never receive the services. These costs appear on the Medicare statements provided to Medicare card holders. The program pays out over $430 billion per year via over 1 billion claims, making enforcement challenging. Its enforcement budget is "extremely limited" according to one Medicare official. U.S. Attorney General Eric Holder
said in a interview: "Clearly more auditing needs to be done and it needs to be done in real time." The Obama administration is providing Medicare with an additional $200 million to fight fraud as part of its stimulus package, and billions of dollars to computerize medical records and upgrade networks, which should assist Medicare in identifying fraudulent claims.
During July 2010, President Obama signed into law the Improper Payments Elimination and Recovery Act of 2010
, citing approximately $110 billion in unauthorized payments of all types, including Medicare and Medicaid. President Obama has directed his administration to reduce these payments by $50 million annually by 2012, less than 1%.
(R) has proposed the Roadmap for America's Future, which is a series of budgetary reforms. His January 2010 version of the plan includes the transition of Medicare to a voucher system, meaning individuals would receive a voucher which could be used to purchase health insurance in the private market. This would not affect those near retirement or currently enrolled in Medicare. A series of graphs and charts summarizing the impact of the plan are included. Economists have both praised and criticized particular features of the plan. The CBO also partially scored the bill.
Health care reform debate in the United States
The health care reform debate in the United States has been a political issue for many years, focusing upon increasing coverage, decreasing the cost and social burden of healthcare, insurance reform, and the philosophy of its provision, funding, and government involvement...
.
There have been a number of different health care reforms proposed during the Obama administration. The first of these reform proposals to be passed by the United States Congress
United States Congress
The United States Congress is the bicameral legislature of the federal government of the United States, consisting of the Senate and the House of Representatives. The Congress meets in the United States Capitol in Washington, D.C....
is the Patient Protection and Affordable Care Act
Patient Protection and Affordable Care Act
The Patient Protection and Affordable Care Act is a United States federal statute signed into law by President Barack Obama on March 23, 2010. The law is the principal health care reform legislation of the 111th United States Congress...
, which originated in the Senate and was later passed by the House of Representatives in amended form on March 21, 2010 (with a vote of 219–212). President Obama signed the reforms into law on March 23, 2010. Reuters and CNN summarized the reforms and the year in which they take effect; see the last section in this article for a recap.
Key reform topics include obesity, prevention and treatment of chronic conditions, defensive medicine or tort reform, incentives that reward more care instead of better care, redundant payment systems, tax policy, rationing, a shortage of doctors and nurses, intervention vs. hospice and fraud.
Overview
A variety of specific types of reform have been suggested to improve the United StatesUnited States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
health care system. These range from increased use of health care technology through changing the anti-trust rules governing health insurance companies and tort-reform to rationing of care. Different overall strategies have been suggested as well.
During a June 2009 speech, President Barack Obama
Barack Obama
Barack Hussein Obama II is the 44th and current President of the United States. He is the first African American to hold the office. Obama previously served as a United States Senator from Illinois, from January 2005 until he resigned following his victory in the 2008 presidential election.Born in...
outlined his strategy for reform. He mentioned electronic record-keeping, preventing expensive conditions, reducing obesity, refocusing doctor incentives from quantity of care to quality, bundling payments
Bundled payment
Bundled payment, also known as episode-based payment, episode payment, episode-of-care payment, case rate, evidence-based case rate, global bundled payment, global payment, package pricing, or packaged pricing, is defined as the reimbursement of health care providers "on the basis of expected...
for treatment of conditions rather than specific services, better identifying and communicating the most cost-effective treatments, and reducing defensive medicine.
President Obama further described his plan in a September 2009 speech to a joint session of Congress. His plan mentions: deficit neutrality; not allowing insurance companies to discriminate based on pre-existing conditions; capping out of pocket expenses; creation of an insurance exchange
Health insurance exchange
A health insurance exchange is a set of state-regulated and standardized health care plans in the United States, from which individuals may purchase health insurance that is eligible for Federal subsidies...
for individuals and small businesses; tax credits for individuals and small companies; independent commissions to identify fraud, waste and abuse; and malpractice reform projects, among other topics.
In November 2009, then-OMB Director Peter Orszag
Peter Ország
Peter Ország is a Slovak ice hockey referee, who referees in the Slovak Extraliga.-Career:He has officiated many international tournaments including the Winter Olympics. He has been named Slovak referee of the year....
described aspects of the Obama administration's strategy during an interview: "In order to help contain [ Medicare
Medicare (United States)
Medicare is a social insurance program administered by the United States government, providing health insurance coverage to people who are aged 65 and over; to those who are under 65 and are permanently physically disabled or who have a congenital physical disability; or to those who meet other...
and Medicaid
Medicaid
Medicaid is the United States health program for certain people and families with low incomes and resources. It is a means-tested program that is jointly funded by the state and federal governments, and is managed by the states. People served by Medicaid are U.S. citizens or legal permanent...
] cost growth over the long term, we need a new health care system that has digitized information...in which that information is used to assess what’s working and what’s not more intelligently, and in which we’re paying for quality rather than quantity while also encouraging prevention and wellness." He also argued for bundling payments and accountable care organization
Accountable care organization
An accountable care organization is a type of payment and delivery reform model that seeks to tie provider reimbursements to quality metrics and reductions in the total cost of care for an assigned population of patients. A group of coordinated health care providers form an ACO, which then...
s, which reward doctors for teamwork and patient outcomes.
Mayo Clinic
Mayo Clinic
Mayo Clinic is a not-for-profit medical practice and medical research group specializing in treating difficult patients . Patients are referred to Mayo Clinic from across the U.S. and the world, and it is known for innovative and effective treatments. Mayo Clinic is known for being at the top of...
President and CEO Denis Cortese has advocated an overall strategy to guide reform efforts. He argued that the U.S. has an opportunity to redesign its healthcare system and that there is a wide consensus that reform is necessary. He articulated four "pillars" of such a strategy:
- Focus on value, which he defined as the ratio of quality of service provided relative to cost;
- Pay for and align incentives with value;
- Cover everyone;
- Establish mechanisms for improving the healthcare service delivery system over the long-term, which is the primary means through which value would be improved.
Writing in The New Yorker
The New Yorker
The New Yorker is an American magazine of reportage, commentary, criticism, essays, fiction, satire, cartoons and poetry published by Condé Nast...
, surgeon Atul Gawande
Atul Gawande
Atul Gawande is an American physician and journalist. He serves as a general and endocrine surgeon at Brigham and Women's Hospital in Boston, Massachusetts and associate director of their Center for Surgery and Public Health...
further distinguished between the delivery system, which refers to how medical services are provided to patients, and the payment system, which refers to how payments for services are processed. He argued that reform of the delivery system is critical to getting costs under control, but that payment system reform (e.g., whether the government or private insurers process payments) is considerably less important yet gathers a disproportionate share of attention. Gawande argued that dramatic improvements and savings in the delivery system will take "at least a decade." He recommended changes that address the over-utilization of healthcare; the refocusing of incentives on value rather than profits; and comparative analysis of the cost of treatment across various healthcare providers to identify best practices. He argued this would be an iterative, empirical process and should be administered by a "national institute for healthcare delivery" to analyze and communicate improvement opportunities.
A report published by the Commonwealth Fund
Commonwealth Fund
The Commonwealth Fund is a private U.S. foundation whose stated purpose is to promote a high-performing health care system that achieves better access, improved quality, and greater efficiency, especially for society's most vulnerable.-History:...
in December 2007 examined 15 federal policy options and concluded that, taken together, they had the potential to reduce future increases in health care spending by $1.5 trillion over the next 10 years. These options included increased use of health information technology, research and incentives to improve medical decision making, reduced tobacco use and obesity, reforming the payment of providers to encourage efficiency, limiting the tax federal exemption for health insurance premiums, and reforming several market changes such as resetting the benchmark rates for Medicare Advantage plans and allowing the Department of Health and Human Services to negotiate drug prices. The authors based their modeling on the effect of combining these changes with the implementation of universal coverage. The authors concluded that there are no magic bullets for controlling health care costs, and that a multifaceted approach will be needed to achieve meaningful progress.
During February 2010, President Obama updated his reform proposal, with modifications to the bills that had passed as of that time.
Overutilization and comparative effectiveness research
OverutilizationOverutilization
Overutilization refers to medical services that are provided with a higher volume or cost than is appropriate. In the United States, where health care costs are the highest as a percentage of GDP, overutilization is the predominant factor in its expense...
refers to when a patient overuses a doctor or to a doctor ordering more tests or services than may be required to address a particular condition effectively. Several treatment alternatives may be available for a given medical condition, with significantly different costs yet no statistical difference in outcome. Such scenarios offer the opportunity to maintain or improve the quality of care, while significantly reducing costs, through comparative effectiveness research. According to economist Peter A. Diamond
Peter A. Diamond
Peter Arthur Diamond is an American economist known for his analysis of U.S. Social Security policy and his work as an advisor to the Advisory Council on Social Security in the late 1980s and 1990s. He was awarded the Nobel Memorial Prize in Economic Sciences in 2010, along with Dale T. Mortensen...
and research cited by the Congressional Budget Office
Congressional Budget Office
The Congressional Budget Office is a federal agency within the legislative branch of the United States government that provides economic data to Congress....
(CBO), the cost of healthcare per person in the U.S. also varies significantly by geography and medical center, with little or no statistical difference in outcome. Comparative effectiveness research has shown that significant cost reductions are possible. Former OMB Director Peter Orszag
Peter Ország
Peter Ország is a Slovak ice hockey referee, who referees in the Slovak Extraliga.-Career:He has officiated many international tournaments including the Winter Olympics. He has been named Slovak referee of the year....
stated: "Nearly thirty percent of Medicare's costs could be saved without negatively affecting health outcomes if spending in high- and medium-cost areas could be reduced to the level of low-cost areas."
Address expensive chronic cases
The CBO reported in May 2005: "Medicare spending is highly concentrated, with a small number of beneficiaries accounting for a large proportion of the Medicare program's annual expenditures. In 2001, the costliest 5 percent of beneficiaries enrolled in Medicare's fee-for-service (FFS) sector accounted for 43 percent of total spending, while the costliest 25 percent...accounted for fully 85 percent of spending...These high-cost beneficiaries, compared with beneficiaries in the bottom 75 percent in terms of their spending, were slightly older, more likely to suffer from chronic conditions, such as coronary artery disease and diabetes, and more likely to die in a given year."Such concentration offers opportunities to focus on key ailments and treatment approaches. Peter Orszag wrote in May 2011: "The truth is that constraining future health care costs will require a variety of approaches, but in particular it will mean improving the information that providers have about their patients and best practices, and the incentives that providers are given to deliver better care, especially in expensive cases."
Independent advisory panels
President Obama has proposed an "Independent Medicare Advisory Panel" (IMAC) to make recommendations on Medicare reimbursement policy and other reforms. Comparative effectiveness research would be one of many tools used by the IMAC. The IMAC concept was endorsed in a letter from several prominent healthcare policy experts, as summarized by OMB Director Peter Orszag:Both Mayo Clinic CEO Dr. Denis Cortese and Surgeon/Author Atul Gawande have argued that such panel(s) will be critical to reform of the delivery system and improving value. Washington Post columnist David Ignatius
David Ignatius
David R. Ignatius , is an American journalist and novelist. He is an associate editor and columnist for The Washington Post. He also co-hosts PostGlobal, an online discussion of international issues at Washingtonpost.com, with Newsweek 's Fareed Zakaria...
has also recommended that President Obama engage someone like Cortese to have a more active role in driving reform efforts.
Tax reform
The Congressional Budget OfficeCongressional Budget Office
The Congressional Budget Office is a federal agency within the legislative branch of the United States government that provides economic data to Congress....
has described how the tax treatment of insurance premiums may affect behavior:
Peter Singer
Peter Singer
Peter Albert David Singer is an Australian philosopher who is the Ira W. DeCamp Professor of Bioethics at Princeton University and Laureate Professor at the Centre for Applied Philosophy and Public Ethics at the University of Melbourne...
wrote in the New York Times that the current exclusion of insurance premiums from compensation represents a $200 billion subsidy for the private insurance industry and that it would likely not exist without it. In November 2009, The Economist
The Economist
The Economist is an English-language weekly news and international affairs publication owned by The Economist Newspaper Ltd. and edited in offices in the City of Westminster, London, England. Continuous publication began under founder James Wilson in September 1843...
estimated that taxing employer-provided health insurance (which is presently exempt from tax) would add $215 billion per year to federal tax revenue.
Employer-provided health insurance receives uncapped tax benefits. According to the OECD, it "encourages the purchase of more generous insurance plans, notably plans with little cost sharing, thus exacerbating moral hazard". Consumers want unfettered access to medical services; they also prefer to pay through insurance or tax rather than out of pocket. These two needs create cost-efficiency challenges for health care. Some studies have found no consistent and systematic relationship between the type of financing of health care and cost containment.
Some have proposed an "excise tax" for high cost 'Cadillac
Cadillac insurance plan
A Cadillac plan is an informal term for any unusually expensive health insurance plan, usually arising in discussions of medical-cost control measures in the United States. The term derives from the Cadillac automobile, which has represented American luxury since its introduction in 1902, and as a...
' insurance plans. A study published in Health Affairs
Health Affairs
Health Affairs is a peer-reviewed healthcare journal established in 1981 by John K. Iglehart. It was described by The Washington Post as "the bible of health policy". Health Affairs is indexed and/or abstracted in PubMed, MEDLINE, EBSCO databases, ProQuest, LexisNexis, Current Contents/Health...
in December 2009 found that high-cost health plans do not provide unusually rich benefits to enrollees. The researchers found that only 3.7% of the variation in the cost of family coverage in employer-sponsored health plans is attributable to differences in the actuarial value of benefits. Only 6.1% of the variation is attributable to the combination of benefit design and plan type (e.g., PPO, HMO, etc.). The employer's industry and regional variations in health care cost explain part of the variation, but most is unexplained. The researchers conclude ". . . that analysts should not equate high-cost plans with Cadillac plans, . . . [w]ithout appropriate adjustments, a simple cap may exacerbate rather than ameliorate current inequities"
Premium tax subsidies to help individuals purchase their own health insurance have also been suggested as a way to increase coverage rates. Research confirms that consumers in the individual health insurance market are sensitive to price. It appears that price sensitivity varies among population subgroups and is generally higher for younger individuals and lower income individuals. However, research also suggests that subsidies alone are unlikely to solve the uninsured problem in the U.S.
Insurance company antitrust reforms
Some conservatives advocate free market reforms such as breaking up state monopolies on insurance and licensing and allowing consumers to purchase health insurance licensed by other states.The GAO
Gao
Gao is a town in eastern Mali on the River Niger lying ESE of Timbuktu. Situated on the left bank of the river at the junction with the Tilemsi valley, it is the capital of the Gao Region and had a population of 86,663 in 2009....
reported in 2002 (using 2000 data) the following statistics regarding insurance competition in state markets: "The median
Median
In probability theory and statistics, a median is described as the numerical value separating the higher half of a sample, a population, or a probability distribution, from the lower half. The median of a finite list of numbers can be found by arranging all the observations from lowest value to...
number of licensed carriers in the small group market per state was 28, with a range from 4 in Hawaii to 77 in Indiana. The median market share of the largest carrier was about 33 percent, with a range from about 14 percent in Texas to about 89 percent in North Dakota. The five largest carriers, when combined, represented three-quarters or more of the market in 19 of the 34 states supplying information, and they represented more than 90 percent in 7 of these states. Twenty-five of 37 states supplying information identified a Blue Cross and Blue Shield (BCBS) carrier as the largest carrier offering health insurance in the small group market, and in all but one of the remaining 12 states, a BCBS carrier was among the five largest. The median market share of all the BCBS carriers in the 34 states supplying information was about 34 percent, with a range from about 3 percent in Vermont to about 89 percent in North Dakota; in 9 of these states BCBS carriers combined for half or more of the market."
The GAO
Gao
Gao is a town in eastern Mali on the River Niger lying ESE of Timbuktu. Situated on the left bank of the river at the junction with the Tilemsi valley, it is the capital of the Gao Region and had a population of 86,663 in 2009....
reported in 2008 (using 2007 data for the most part) the following statistics: "The median number of licensed carriers in the small group market per state was 27. The median market share of the largest carrier in the small group market was about
47 percent, with a range from about 21 percent in Arizona to about 96 percent in Alabama. In 31 of the 39 states supplying market share information, the top carrier had a market share of a third or more. The five largest carriers in the small group market, when combined, represented three quarters or more of the market in 34 of the 39 states supplying this information, and they
represented 90 percent or more in 23 of these states. Thirty-six of the 44 states supplying information on the top carrier identified a Blue Cross and Blue Shield (BCBS) carrier as the largest carrier, and in all but 1 of the remaining 8 states, a BCBS carrier was among the five largest carriers. The median market share of all the BCBS carriers in the 38 states supplying this
information was about 51 percent, with a range of less than 5 percent in Vermont and Wisconsin and more than 90 percent in Alabama and North Dakota...the median market share of all the BCBS carriers in 38 states reporting this information in 2008 was about 51 percent, compared to the 44 percent reported in 2005 and the 34 percent reported in 2002 for the 34 states supplying information in each of these years."
Economist Paul Krugman
Paul Krugman
Paul Robin Krugman is an American economist, professor of Economics and International Affairs at the Woodrow Wilson School of Public and International Affairs at Princeton University, Centenary Professor at the London School of Economics, and an op-ed columnist for The New York Times...
argued that allowing interstate competition would create a "race to the bottom," in which "[t]he states with the weakest regulations — for example, those that allow insurance companies to deny coverage to victims of domestic violence — would set the standards for the nation as a whole. The result would be to afflict the afflicted, to make the lives of Americans with pre-existing conditions even harder."
Preventive strategies
Preventing obesity and overweight conditions presents a significant opportunity to reduce costs. The Centers for Disease Control reported that approximately 9% of healthcare costs in 1998 were attributable to overweight and obesity, or as much as $92.6 billion in 2002 dollars. Nearly half of these costs were paid for by the government via Medicare or Medicaid. However, by 2008 the CDC estimated these costs had nearly doubled to $147 billion. The CDC identified a series of expensive conditions more likely to occur due to obesity. The CDC released a series of strategies to prevent obesity and overweight, including: making healthy foods and beverages more available; supporting healthy food choices; encouraging kids to be more active; and creating safe communities to support physical activity. An estimated 25.6% of U.S. adults in 2007 were obese, versus 23.9% in 2005. State obesity rates ranged from 18.7% to 30%. Obesity rates were roughly equal among men and women. Some have proposed a so-called "fat taxFat tax
A fat tax is a tax or surcharge that is placed upon fattening foods, beverages or individuals. As an example of Pigovian taxation, a fat tax aims to discourage unhealthy diets and offset the economic costs of obesity....
" to provide incentives for healthier behavior, either by levying the tax on products (such as soft drinks) that are thought to contribute to obesity, or to individuals based on body measures, as they do in Japan.
A study released in October, 2010 had a similar cost estimate, of $168 billion, nearly 17% of U.S. medical costs. This is an estimated $2,400 per obese person. The study was performed by researchers at Cornell and Emory universities.
Increased use of preventive care (e.g., regular doctor visits) is often suggested as a way of reducing health care spending. Research suggests, however, that in most cases preventive care does not produce significant long-term cost savings. Preventive care is typically provided to many people who would never become ill, and for those who would have become ill, it is partially offset by the health care costs during additional years of life.
Coverage mandates
Reforming or restructuring the private health insurance market is often suggested as a means for achieving health care reform in the U.S. Insurance market reform has the potential to increase the number of Americans with insurance, but is unlikely to significantly reduce the rate of growth in health care spending. Careful consideration of basic insurance principles is important when considering insurance market reform, in order to avoid unanticipated consequences and ensure the long-term viability of the reformed system. According to one study conducted by the Urban InstituteUrban Institute
The Urban Institute is a Washington, D.C.-based think tank that carries out nonpartisan economic and social policy research, collects data, evaluates social programs, educates the public on key domestic issues, and provides advice and technical assistance to developing governments abroad...
, if not implemented on a systematic basis with appropriate safeguards, market reform has the potential to cause more problems than it solves.
Since most Americans with private coverage receive it through employer-sponsored plans, many have suggested employer "pay or play" requirements as a way to increase coverage levels (i.e., employers that do not provide insurance would have to pay a tax instead). However, research suggests that current pay or play proposals are limited in their ability to increase coverage among the working poor. These proposals generally exclude small firms, do not distinguish between individuals who have access to other forms of coverage and those who do not, and increase the overall compensation costs to employers.
In October 2009 the Wall Street Journal
The Wall Street Journal
The Wall Street Journal is an American English-language international daily newspaper. It is published in New York City by Dow Jones & Company, a division of News Corporation, along with the Asian and European editions of the Journal....
reported that while requirements to purchase health insurance were central to proposals in both the House and Senate, these coverage mandates were "under fire from both ends of the political spectrum, with some liberals saying the penalties are too harsh for those who refuse and conservatives denouncing the whole concept." According to the article, however, "[h]ealth-policy experts . . .say there is a good reason for the mandate." Proposed reforms would prohibit health insurers from denying coverage to individuals with pre-existing medical conditions. Insurers said that, to keep premiums from rising for everyone, it is necessary for healthier people to pay into the insurance pools to balance out the cost of these higher cost individuals.
Arguing against requiring individuals to buy coverage, the Cato Institute
Cato Institute
The Cato Institute is a libertarian think tank headquartered in Washington, D.C. It was founded in 1977 by Edward H. Crane, who remains president and CEO, and Charles Koch, chairman of the board and chief executive officer of the conglomerate Koch Industries, Inc., the largest privately held...
has asserted that the Massachusetts law forcing everyone to buy insurance has increased costs: "Premiums are growing 21 to 46 percent faster than the national average, in part because Massachusetts' individual mandate has effectively outlawed affordable health plans." They say that "the mandate gives politicians enormous power to dictate the content of every American's health plan — a power that health care providers inevitably capture and use to increase the required level of insurance" and state that providers were successful in persuading legislators to include an additional 16 benefit mandates in the required benefit package during the first three years after the coverage mandate was enacted. They also say that by prohibiting the use of health status in pricing, the Massachusetts law "further increase[s] premiums for the young and healthy" and, as the result of adverse selection
Adverse selection
Adverse selection, anti-selection, or negative selection is a term used in economics, insurance, statistics, and risk management. It refers to a market process in which "bad" results occur when buyers and sellers have asymmetric information : the "bad" products or services are more likely to be...
, drives more comprehensive health plans out of the market. The conclusion they draw is that "[T]he most sweeping provision . . . is an 'individual mandate' that makes health insurance compulsory. Massachusetts shows that such a mandate would oust millions from their low-cost health plans and force them to pay higher premiums."
Writing in the New York Times
The New York Times
The New York Times is an American daily newspaper founded and continuously published in New York City since 1851. The New York Times has won 106 Pulitzer Prizes, the most of any news organization...
opinion blog
Blog
A blog is a type of website or part of a website supposed to be updated with new content from time to time. Blogs are usually maintained by an individual with regular entries of commentary, descriptions of events, or other material such as graphics or video. Entries are commonly displayed in...
"Room for Debate" the single-payer health care
Single-payer health care
Single-payer health care is medical care funded from a single insurance pool, run by the state. Under a single-payer system, universal health care for an entire population can be financed from a pool to which many parties employees, employers, and the state have contributed...
advocate Marcia Angell
Marcia Angell
Marcia Angell, M.D. is an American physician, author, and the first woman to serve as editor-in-chief of the New England Journal of Medicine...
, former editor-in-chief of the New England Journal of Medicine
New England Journal of Medicine
The New England Journal of Medicine is an English-language peer-reviewed medical journal published by the Massachusetts Medical Society. It describes itself as the oldest continuously published medical journal in the world.-History:...
, said that a coverage mandate would not be necessary within a single-payer system and that even within the context of current system she was "troubled by the notion of an individual mandate." She described the Massachusetts mandates as "a windfall for the insurance industry" and wrote, "Premiums are rising much faster than income, benefit packages are getting skimpier, and deductibles and co-payments are going up."
In April 2009 the Boston Globe
The Boston Globe
The Boston Globe is an American daily newspaper based in Boston, Massachusetts. The Boston Globe has been owned by The New York Times Company since 1993...
reported that the number of people seeking emergency room care and the cost of emergency room visits increased after the 2006 mandates went into effect (comparing 2005 to 2007). The number of visits increased by 7% during that period, while costs rose by 17%. State officials cautioned that it was too early to determine if the state's new coverage mandate had failed to reduce the emergency room use, but several physicians and policymakers said that it was unlikely that a coverage mandate alone could solve the problems of emergency room crowding and overuse. In August 2009 the Boston Globe
The Boston Globe
The Boston Globe is an American daily newspaper based in Boston, Massachusetts. The Boston Globe has been owned by The New York Times Company since 1993...
reported that Massachusetts had "the most expensive family health insurance premiums in the country." Premiums in Massachusetts increased by 40 percent from 2003 to 2008, compared to a national average increase of 33%. The report did not break out the amount of the increase since 2006, but as the Massachusetts reforms are often taken as a model for national reform, "advocates on various sides of the issue said the report underscores the urgency of including cost controls in any large-scale federal or state overhaul." Karen Davenport, director of health policy at the Center for American Progress
Center for American Progress
The Center for American Progress is a progressive public policy research and advocacy organization. Its website states that the organization is "dedicated to improving the lives of Americans through progressive ideas and action." It has its headquarters in Washington D.C.Its President and Chief...
, has argued that "before making coverage mandatory, we need to reform the health insurance market, strengthen public health insurance programs, and finance premium subsidies for people who can’t afford coverage on their own."
Addressing the issue when it was proposed in 1994, CBO
Congressional Budget Office
The Congressional Budget Office is a federal agency within the legislative branch of the United States government that provides economic data to Congress....
wrote: "A mandate requiring all individuals to purchase health insurance would be an unprecedented form of federal action. The government has never required people to buy any good or service as a condition of lawful residence in the United States." There is also disagreement as to whether federal mandates would be constitutional, and state initiatives opposing federal mandates may lead to litigation and delay.
Reform of doctor's incentives
Critics have argued that the healthcare system has several incentives that drive costly behavior. Two of these include:- Doctors are typically paid for services provided rather than with a salary. This provides a financial incentive to increase the costs of treatment provided.
- Patients that are fully insured have no financial incentive to minimize the cost when choosing among alternatives. The overall effect is to increase insurance premiums for all.
Gawande argued: "Our fee-for-service system, doling out separate payments for everything and everyone involved in a patient’s care, has all the wrong incentives: it rewards doing more over doing right, it increases paperwork and the duplication of efforts, and it discourages clinicians from working together for the best possible results."
Gawande quoted one surgeon who stated: "We took a wrong turn when doctors stopped being doctors and became businessmen." Gawande identified various revenue-enhancing approaches and profit-based incentives that doctors were using in high-cost areas that may have caused the over-utilization of healthcare. He contrasted this with lower-cost areas that used salaried doctors and other techniques to reward value, referring to this as a "battle for the soul of American medicine."
Medical malpractice liability costs and tort reform
Critics have argued that medical malpracticeMedical malpractice
Medical malpractice is professional negligence by act or omission by a health care provider in which the treatment provided falls below the accepted standard of practice in the medical community and causes injury or death to the patient, with most cases involving medical error. Standards and...
costs (insurance and lawsuits, for example) are significant and should be addressed via tort reform
Tort reform
Tort reform refers to proposed changes in common law civil justice systems that would reduce tort litigation or damages. Tort actions are civil common law claims first created in the English commonwealth system as a non-legislative means for compensating wrongs and harm done by one party to...
.
How much these costs are is a matter of debate. Some have argued that malpractice
Malpractice
In law, malpractice is a type of negligence in, which the professional under a duty to act, fails to follow generally accepted professional standards, and that breach of duty is the proximate cause of injury to a plaintiff who suffers harm...
lawsuits are a major driver of medical costs. A 2005 study estimated the cost around 0.2%, and in 2009 insurer WellPoint Inc. said "liability wasn’t driving premiums." A 2006 study found neurologists in the United States ordered more tests in theoretical clinical situations posed than their German counterparts; U.S. clinicians are more likely to fear litigation which may be due to the teaching of defensive strategies which are reported more often in U.S. teaching programs. Counting both direct and indirect costs, other studies estimate the total cost of malpractice "is linked to" between 5% and 10% of total U.S. medical costs.
A 2004 report by the Congressional Budget Office
Congressional Budget Office
The Congressional Budget Office is a federal agency within the legislative branch of the United States government that provides economic data to Congress....
put medical malpractice costs at 2 percent of U.S. health spending and "even significant reductions" would do little to reduce the growth of health-care expenses. A 2009 CBO report estimated that approximately $54 billion could be saved over ten years by limiting medical malpractice lawsuits. A tort reform package that includes caps on jury awards of $500,000 for punitive damages and $250,000 for "pain and suffering" damages would lower liability insurance premiums by about 10 percent.
In August 2009, physician and former Democratic National Committee Chairman Howard Dean
Howard Dean
Howard Brush Dean III is an American politician and physician from Vermont. He served six terms as the 79th Governor of Vermont and ran unsuccessfully for the 2004 Democratic presidential nomination. He was chairman of the Democratic National Committee from 2005 to 2009. Although his U.S...
explained why tort reform was omitted from the Congressional health care reform bills then under consideration: "When you go to pass a really enormous bill like that, the more stuff you put in it, the more enemies you make, right?...And the reason tort reform is not on the bill is because the people who wrote it did not want to take on the trial lawyers in addition to everybody else they were taking on. That is the plain and simple truth."
Others have argued that even successful tort reform might not lead to lower aggregate liability. For example, the current contingent fee system skews litigation towards high-value cases while ignoring meritorious small cases; aligning litigation more closely with merit might thus increase the number of small awards, offsetting any reduction in large awards. A New York study found that only 1.5% of hospital negligence led to claims; moreover, the CBO observed that "health care providers are generally not exposed to the financial cost of their own malpractice risk because they carry liability insurance, and the premiums for that insurance do not reflect the records or practice styles of individual providers but more-general factors such as location and medical specialty." Given that total liability is small relative to the amount doctors pay in malpractice insurance premiums, alternative mechanisms have been proposed to reform malpractice insurance.
In 2004, the CBO studied restrictions on malpractice awards proposed by the George W. Bush
George W. Bush
George Walker Bush is an American politician who served as the 43rd President of the United States, from 2001 to 2009. Before that, he was the 46th Governor of Texas, having served from 1995 to 2000....
Administration and members of Congress; CBO concluded that "the evidence available to date does not make a strong case that restricting malpractice liability would have a significant effect, either positive or negative, on economic efficiency." Empirical data and reporting have since shown that some of the highest medical costs are now in states where tort reform had already caused malpractice premiums and lawsuits to drop substantially; unnecessary and injurious procedures are instead caused by a system "often driven to maximize revenues over patient needs."
Rationing of care
President Barack ObamaBarack Obama
Barack Hussein Obama II is the 44th and current President of the United States. He is the first African American to hold the office. Obama previously served as a United States Senator from Illinois, from January 2005 until he resigned following his victory in the 2008 presidential election.Born in...
argues that U.S. healthcare is rationed, based on income, type of employment, and pre-existing medical conditions, with nearly 46 million uninsured. He argues that millions of Americans are denied coverage or face higher premiums as a result of pre-existing medical conditions.
Peter Singer
Peter Singer
Peter Albert David Singer is an Australian philosopher who is the Ira W. DeCamp Professor of Bioethics at Princeton University and Laureate Professor at the Centre for Applied Philosophy and Public Ethics at the University of Melbourne...
and David Leonhardt
David Leonhardt
David Leonhardt is the Washington bureau chief of The New York Times. He joined The Times in 1999 and wrote the "Economics Scene" column, and for the Times Sunday Magazine. Before coming to The Times, he wrote for Business Week and The Washington Post...
have each separately noted that health care rationing is not a choice, but an economic necessity. All health care resources are finite and have to be allocated in some way or other. The issue is which way is the most sensible way to do it.
Former Republican Secretary of Commerce Peter G. Peterson
Peter George Peterson
Peter G. Peterson is an American businessman, investment banker, fiscal conservative, author, and politician whose most prominent political position was as United States Secretary of Commerce from February 29, 1972, to February 1, 1973 under Richard Nixon. He is most well known currently as...
has also argued that some form of rationing is inevitable and desirable considering the state of U.S. finances and the trillions of dollars of unfunded Medicare liabilities. He estimated that 25-33% of healthcare services are provided to those in the last months or year of life and advocated restrictions in cases where quality of life cannot be improved. He also recommended that a budget be established for government healthcare expenses, through establishing spending caps and pay-as-you-go rules that require tax increases for any incremental spending. He has indicated that a combination of tax increases and spending cuts will be required. All of these issues would be addressed under the aegis of a fiscal reform commission.
Rationing by price means accepting that there is no triage according to need. Thus in the private sector it is accepted that some people get expensive surgeries such as liver transplants or non life threatening ones such as cosmetic surgery, when others fail to get cheaper and much more cost effective care such as prenatal care, which could save the lives of many fetuses and newborn children. Some places, like Oregon for example, do explicitly ration Medicaid resources using medical priorities.
Politicians on the right tend to be fearful of democratically elected governments becoming involved in rationing decision. Former House Speaker Newt Gingrich
Newt Gingrich
Newton Leroy "Newt" Gingrich is a U.S. Republican Party politician who served as the House Minority Whip from 1989 to 1995 and as the 58th Speaker of the U.S. House of Representatives from 1995 to 1999....
(R-GA) argued that the reform plans supported by President Obama expand the control of government over healthcare decisions, which he referred to as a type of healthcare rationing. Senator Charles Grassley (R-IA) makes similar arguments claiming for example that people like the late Senator Edward Kennedy received health care in the U.S. that would have been denied in countries which have government controlled health care, a claim that The Economist magazine said was "dangerous" and went on to say that "The reality is that America, like Britain, already makes extensive use of rationing.
Payment system reform
The payment system refers to the billing and payment for medical services, which is distinct from the delivery system through which the services are provided. The over 1,300 U.S. health insurance companies have different forms and processes for billing and reimbursement, requiring enormous costs on the part of service providers (mainly doctors and hospitals) to process payments. For example, the Cleveland Clinic, considered a low-cost, best-practices hospital system, has 1,400 billing clerks to support 2,000 doctors. Further, the insurance companies have their own overhead functions and profit margins, much of which could be eliminated with a single payer system. Economist Paul Krugman estimated in 2005 that converting from the current private insurance system to a single-payer system would enable $200 billion per year in cost savings, primarily via insurance company overhead. One advocacy group estimated savings as high as $400 billion annually for 2009 and beyond.Proponents of health care reform argue that moving to a single-payer system would reallocate the money currently spent on the administrative overhead required to run the hundreds of insurance companies in the U.S. to provide universal care. An often-cited study by Harvard Medical School and the Canadian Institute for Health Information determined that some 31 percent of U.S. health care dollars, or more than $1,000 per person per year, went to health care administrative costs. Other estimates are lower. One study of the billing and insurance-related (BIR) costs borne not only by insurers but also by physicians and hospitals found that BIR among insurers, physicians, and hospitals in California represented 20-22% of privately insured spending in California acute care settings.
Advocates of "single-payer" argue that shifting the U.S. to a single-payer health care system would provide universal coverage, give patients free choice of providers and hospitals, and guarantee comprehensive coverage and equal access for all medically necessary procedures, without increasing overall spending. Shifting to a single-payer system, by this view, would also eliminate oversight by managed care reviewers, restoring the traditional doctor-patient relationship. Among the organizations in support of single-payer health care in the U.S. is Physicians for a National Health Program
Physicians for a National Health Program
Physicians for a National Health Program , is an advocacy organization of some 17,000 American physicians, medical students, and health professionals founded by Quentin Young who support a single-payer system of national health insurance....
(PNHP), an organization of some 17,000 American physicians, medical students, and health professionals.
Healthcare technology
The Congressional Budget OfficeCongressional Budget Office
The Congressional Budget Office is a federal agency within the legislative branch of the United States government that provides economic data to Congress....
has concluded that increased use of health information technology has great potential to significantly reduce overall health care spending and realize large improvements in health care quality providing that the system is integrated. The use of health IT in an unintegrated setting will not realize all the projected savings.
Addressing the shortage of doctors and nurses
The U.S. is facing shortages of doctors and nurses that are projected to grow worse as America ages, which may drive up the price of these services. Writing in the Washington Post, cardiologist Arthur Feldman cited various studies that indicate the U.S. is facing a "critical" shortage of doctors, including an estimated 1,300 general surgeons by 2010.The American Academy of Family Physicians predicts a shortage of 40,000 primary care doctors (including family practice, internal medicine, pediatrics and obstetrics/gynecology) by 2020. The number of medical students choosing the primary care specialty has dropped by 52% since 1997. Currently, only 2% of medical school graduates choose primary care as a career. An amendment to the Senate health bill includes $2 billion in funds over 10 years to create 2,000 new residency training slots geared toward primary care medicine and general surgery. Writing in Forbes, a physician argued that this is a "tiny band-aid at best," advocating full loan repayments and guaranteed positions upon graduation.
Physicians wrote a NYT Op Ed in May 2011 stating that doctors typically graduate with an average of $155,000 in debt from Medical school, with over 80% owing debt of some type. This drives some doctors into higher paying specialties as opposed to primary care. As specialists, they prescribe more expensive treatments. About $2.5 billion/year would be required to make Medical school free, which the writers estimated at one-thousandth the total annual healthcare costs. Making medical school free would help address the shortage in their view.
The U.S. had 2.3 doctors per 1,000 people in 2002, ranking 52nd. Germany and France had approximately 3.4 and ranked in the top 25. The OECD average in 2008 was 3.1 doctors per 1,000 people, while the U.S. had 2.4.
The American Association of Colleges of Nurses cited studies estimating that a shortage of registered nurses would reach 230,000 by 2025 as America ages, with over 135,000 open positions during 2007. An additional 30% more nurses would have to graduate annually to keep up with demand. A study by Price Waterhouse advanced several strategies for addressing the nursing shortage, including developing more public-private partnerships, federal and state-level grants for nursing students and educators, creating healthy work environments, using technology as a training tool, and designing more flexible roles for advanced practice nurses given their increased use as primary care providers.
Newsweek
Newsweek
Newsweek is an American weekly news magazine published in New York City. It is distributed throughout the United States and internationally. It is the second-largest news weekly magazine in the U.S., having trailed Time in circulation and advertising revenue for most of its existence...
wrote: "Lately, some policymakers have argued that instead of having a primary-care doctor, more people—especially young, healthy patients with simple medical needs—should see a nurse or physician assistant who administers routine care and kicks more complex problems up to a doctor when they arise. 'If you're just coming in to have your blood pressure checked and your pulse taken, you really don't need to see a doctor, and you might not need to see a nurse, either,' says David Barrett, president and CEO of the Lahey Clinic in Burlington, Mass. "There are three-stripe military sergeants with two-year degrees who can provide excellent primary care. There's absolutely no reason to force all primary-care providers to have an M.D."
Addressing Medicare fraud
The Government Accountability OfficeGovernment Accountability Office
The Government Accountability Office is the audit, evaluation, and investigative arm of the United States Congress. It is located in the legislative branch of the United States government.-History:...
lists Medicare as a "high-risk" government program due to its vulnerability to improper payments. Estimates of Medicare fraud or "improper payments" vary. The Office of Management and Budget reported that $54 billion in "improper payments" were made to Medicare ($24B), Medicaid ($18B) and Medicaid Advantage ($12B) during FY2009. This was 9.4% of the $573 billion spent in these categories. GAO reported in 2000: "The Department of Health and Human Services’ Office of Inspector General has reported that $13.5 billion of processed Medicare fee-for-service claim payments for fiscal year 1999 may have been improperly paid for reasons that ranged from inadvertent error to outright fraud and abuse." Fewer than 5% of Medicare claims are audited.
According to CBS News, Medicare fraud accounts for an estimated $60 billion in Medicare payments each year, and "has become one of, if not the most profitable, crimes in America." Criminals set up phony companies, then invoice Medicare for fraudulent services provided to valid Medicare patients who never receive the services. These costs appear on the Medicare statements provided to Medicare card holders. The program pays out over $430 billion per year via over 1 billion claims, making enforcement challenging. Its enforcement budget is "extremely limited" according to one Medicare official. U.S. Attorney General Eric Holder
Eric Holder
Eric Himpton Holder, Jr. is the 82nd and current Attorney General of the United States and the first African American to hold the position, serving under President Barack Obama....
said in a interview: "Clearly more auditing needs to be done and it needs to be done in real time." The Obama administration is providing Medicare with an additional $200 million to fight fraud as part of its stimulus package, and billions of dollars to computerize medical records and upgrade networks, which should assist Medicare in identifying fraudulent claims.
During July 2010, President Obama signed into law the Improper Payments Elimination and Recovery Act of 2010
Improper Payments Elimination and Recovery Act of 2010
The United States Improper Payments Elimination and Recovery Act of 2010 was signed by President Barack Obama into law on July 22, 2010. The law requires federal agencies to spend at least $1 million annually on audits which target government fraud and waste....
, citing approximately $110 billion in unauthorized payments of all types, including Medicare and Medicaid. President Obama has directed his administration to reduce these payments by $50 million annually by 2012, less than 1%.
Importation of prescription drugs
Congressional proponents argue that drugs manufactured overseas by U.S. companies could be imported and purchased more cheaply in the U.S. Drug manufacturers argue that certain foreign countries have price controls, which they recoup by charging higher prices in the U.S. Whitehouse spokesman Robert Gibbs said President Obama is supportive of importing drugs, provided safety concerns related to the drugs can be addressed. This is because drugs manufactured outside the country may be held to different standards. According to Bloomberg News, drugmakers agreed in June 2009 to contribute $80 billion over 10 years, largely to help the elderly afford medicines, in return for staving off other profit-endangering proposals such as drug importation.Pilot programs
Gawande wrote that the Senate bill contains a variety of pilot programs that may have a significant impact on cost and quality over the long-run, although these have not been factored into CBO cost estimates. He stated these pilot programs cover nearly every idea healthcare experts advocate, except malpractice/tort reform. He described how the U.S. faced a cost problem with agriculture, with nearly 40% of household disposable income absorbed by food costs in 1900. With a central oversight panel (the U.S.D.A.) and many pilot programs, the U.S. was able to vastly improve the productivity of its food production and reduce these costs over time. He wrote:Privatize Medicare with a voucher system
Rep. Paul RyanPaul Ryan (politician)
Paul Davis Ryan is the U.S. Representative for , serving since 1999. He is a member of the Republican Party and has been ranked among the party's most influential voices on economic policy....
(R) has proposed the Roadmap for America's Future, which is a series of budgetary reforms. His January 2010 version of the plan includes the transition of Medicare to a voucher system, meaning individuals would receive a voucher which could be used to purchase health insurance in the private market. This would not affect those near retirement or currently enrolled in Medicare. A series of graphs and charts summarizing the impact of the plan are included. Economists have both praised and criticized particular features of the plan. The CBO also partially scored the bill.
External links
- Slate's online guide to the health care reform bill. - By Timothy Noah
- Washington Post's Ezra Klein on Health Reform
- Mark Merlis, "Individual Mandate: Congress is now weighing different versions of a requirement that individuals obtain health insurance," Health AffairsHealth AffairsHealth Affairs is a peer-reviewed healthcare journal established in 1981 by John K. Iglehart. It was described by The Washington Post as "the bible of health policy". Health Affairs is indexed and/or abstracted in PubMed, MEDLINE, EBSCO databases, ProQuest, LexisNexis, Current Contents/Health...
Policy Brief, January 13, 2010. - Susan Jaffe, "Public Health Insurance Plan: Should some uninsured Americans be able to enroll in a newly created, publicly administered health plan as the nation works to expand health insurance coverage?" Health AffairsHealth AffairsHealth Affairs is a peer-reviewed healthcare journal established in 1981 by John K. Iglehart. It was described by The Washington Post as "the bible of health policy". Health Affairs is indexed and/or abstracted in PubMed, MEDLINE, EBSCO databases, ProQuest, LexisNexis, Current Contents/Health...
Policy Brief, November 10, 2009. - Susan Jaffe, "Health Insurance Reforms: Should there be a new federal law and regulations to broaden coverage and make the market work better for individuals and small businesses?" Health AffairsHealth AffairsHealth Affairs is a peer-reviewed healthcare journal established in 1981 by John K. Iglehart. It was described by The Washington Post as "the bible of health policy". Health Affairs is indexed and/or abstracted in PubMed, MEDLINE, EBSCO databases, ProQuest, LexisNexis, Current Contents/Health...
Policy Brief, October 21, 2009. - Susan Jaffe, "Key Issues in Health Reform: The federal government’s role in financing and delivering health care; Lowering the rate of growth of Medicare spending; Advance care planning for serious illness," Health AffairsHealth AffairsHealth Affairs is a peer-reviewed healthcare journal established in 1981 by John K. Iglehart. It was described by The Washington Post as "the bible of health policy". Health Affairs is indexed and/or abstracted in PubMed, MEDLINE, EBSCO databases, ProQuest, LexisNexis, Current Contents/Health...
Policy Brief, August 20, 2009. - President Barack Obama, President's Proposal Summary - February 2010