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Delivery System Day: Peter Orszag

PH2009040603857.jpgYou all know who Peter Orszag is. So rather than wasting time on an introduction, I'll just jump right into our interview on the delivery system reforms.

You’ve been in a lot of these internal discussions. How much of the work here has focused on reforming the delivery system?

The Finance Committee mark includes most of the proposals that have been put forward. That’s why folks from Mark McClellan on the right to lots of folks on the left have said the mark is impressive. You don’t get to that point without having done a lot of work ahead of time.

Why do they get less attention than insurance market reforms?

For a few reasons. Insurance market reforms are more immediately salient., Everyone knows what it means to say no more preexisting conditions in terms of affecting coverage. What exactly you mean by accountable care organization, or bundled payments, is more esoteric. People don't really see the plumbing beneath the system.

Many of these changes seem modest. As opposed to the insurance market, where we ban practices we don't like, or add structures we do like, the delivery system side of things seems concentrated around pilot programs and demonstrations and experiments.

I’d say it’s a mixture. But yes, what needs to happen is we need to put into place the infrastructure to aggressively experiment with what works and what doesn’t, and a lot of what this bill is doing is putting that infrastructure in place, through the Innovation Center and the demonstration projects. But don’t forget that there are direct and immediate changes taking place to provider payment updates and home health reimbursements and so forth.

Which of the policies strike you as most promising?

Let me answer that by harkening back to what I think is the key to a higher-value, lower-cost system over time. The first is we need to digitize the system, and that was part of the Recovery Act. We need a lot more evidence on what works and what doesn't, and Recovery Act had some of that, and the Mark goes further. The third is we need to move away from fee for service and towards fee for value, and the Chairman’s Mark does a lot of that through bundled payments and medical homes and value-based payments for hospitals and accountable care organizations.

I would also include in that bucket the Innovation Center and the Medicare Commission. Both are aimed at trying lots of things, seeing what’s working and what’s not, and having policy adapt to what’s working immediately. This allows for the dynamic and iterative nature of cost containment over time. We don’t know exactly how to get from here to a high value, low cost system because the health-care sector dynamic. So you need a process.

What's the Innovation Center?

The Innovation Center is a $6.6 billion fund to test out different ways of linking payments to quality. The key is that they’re creating a structure in which you can try out different things. That then feeds into the commission that will help expedite changes in Medicare policy. You can go from aggressively testing something out to implementing it quickly.

That's a point I hadn't heard before about the MedPAC proposal: that it's part of a whole chain. In that telling, it sounds like much of this is providing support for MedPAC's work.

Exactly. You need these feedback loops. You can digitize medical records, so then you have much more information on what outcomes are. That gets fed into experiments to see what works and what doesn’t. Which gets fed into policy changes. And hopefully, the electronic health records system will also have decision-making tools so the doctor has research at his fingertips helping show what's best for the patient.

It's like a Google brain for doctors.

Right. This is building out the Google brain for the medical system. And just like with Google, we can’t just put in an IT system where physicians scroll through 30 pages of data. Doctors are people too. The system needs a simplified template. Your patient seems to have the following conditions, you might want to test for x. And you can click through for more.

I'd heard that the IT system was still troubled, as crucial decisions about standards and interoperability hadn't been put into place.

David Blumenthal is now in place as the Health IT coordinator over at HHS. A lot of progress is being made. There’s a process.

How do the delivery-side reforms interact with the insurance market?

Several ways. Perhaps most immediately, your premiums will ultimately be driven by the underlying cost of health care. To the extent these reforms help to contain costs over time, they have a significant influence in the insurance market through the level of premiums. It’s also the case that Medicare can lead the private insurance market in terms of moving towards a value-based system, and we’ve seen that in past examples. In the ’80s, Medicare moved towards fixed payments for each hospital stay, and that created an incentive for hospitals to reduce the length of stays. The result was shortened stays for everyone and not just Medicare patients. And many of the changes floating around with regard to Medicare in this bill have similar potential.

Photo credit: Getty Images

By Ezra Klein  |  September 22, 2009; 4:36 PM ET
Categories:  Health Reform  
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This is the first time I've heard anyone publicly discussing the medical records issue (which was indeed a part of the Recovery Act, to a degree).

In the interview above, Orzag says "The first is we need to digitize the system, and that was part of the Recovery Act. [...] You can digitize medical records, so then you have much more information on what outcomes are. [...] This is building out the Google brain for the medical system." For decades, Sen Leahy [D-VT] has voiced concerns about such a "Google brain" of legal and medical records, noting its potential for abuse. The clerk who gives you the once over before releasing (for example) public divorce records containing financial data serves a purpose: without such a human factor in the mix, digitized medical records in uniform format become a quiver of arrows just begging to be fired back at unsuspecting patients.

To be clear, I support digitization of records; however, I'm also keenly aware of what Seisent and Google have done with public records, so I'm a bit reluctant to let the Recovery Act provisions stand on their own for too long.

Posted by: rmgregory | September 22, 2009 5:10 PM | Report abuse

Ok, so that interview was a policy wonks dream come true right there. The idea that eventually a process will be in place innovation, search, and a user interface that is simple and changes the way medicine is practiced could be a game changed.

Reading an interview that wonky, I must ask, who is the policy wonk demographic? What are the characteristics of the average Ezra Klein reader?

Posted by: econowonk | September 22, 2009 5:56 PM | Report abuse

I keep waiting for someone to explain why we need to be forced to buy overpriced private insurance to make any of this happen.

Pilot projects are good. They belong in the science budget, not in a multi-trillion dollar buttressing of the current failed system.

Posted by: bmull | September 22, 2009 6:08 PM | Report abuse

Three answers:

1) There's a limit to the good that cost-saving policies can do in a non-universal system; sick people can still get dumped off their coverage and be denied for pre-existing conditions, which will wall them off from the primary care and care management strategies that can lower costs. Plus it's harder to rationalize incentives when yu've got the kind of cost-shifting that our high rates of uninsurance impose.

2) Covering people is reasonably popular -- politicians and interest groups like spending money. Cutting costs tends to be much less popular, and is much less politically viable by itself. Hundreds of thousands of people are not going to rally in the streets to expand adoption of the ACO model and promote CER -- but the special interests will certainly mobilize against them. And we've seen how quickly interests and ideology appear to trump concern for lowering costs and the federal deficits with at least some of our elected officials.

3) Even if they don't have much to do with each other, bringing down health care costs and helping more people get coverage are both good things to do, so why shouldn't we do both?

Posted by: Mike_Russo | September 22, 2009 6:29 PM | Report abuse

Encouraging interview. I like what I'm hearing.

An idea on trying to get to a value-based compensation, from here to there.

Incrementally. Start with some simple steps like small bonus payments when a certain narrowly defined conditions are treated successfully as indicated by no relapse (new treatment for that specific condition) within a certain time period for each specific condition. This could be done for initially just 10-20 specific, moderately expensive narrow conditions which have clear enough typical outcomes such that it is easy to specify what is a good outcome-over-time in terms of no-relapse time period. After the period, the successful treatment earns a certain bonus payment to the provider. This is a simple, limited version of pay-for-outcome-over-time which would have low stakes, and allow a gradual implementation.

Posted by: HalHorvath | September 22, 2009 6:32 PM | Report abuse

Ezra, thanks for Delivery System Day!

Posted by: Lee_A_Arnold | September 23, 2009 12:32 AM | Report abuse

"Medicare can lead the private insurance market in terms of moving towards a value-based system"

Thanks for the morning laugh! Orszag has obviously never worked in the real world, or he'd know that it's the other way around. Medicare doesn't lead anything, except perhaps in bureaucracy and paying for fraudulent and abusive charges. Medicare is still at pay-for-reporting, while the private insurance industry has been at pay-for-performance for years. Fail!

Posted by: Policywonky | September 23, 2009 10:42 AM | Report abuse

Orszag is the best wonk we've had in years, but he's a political disaster. Whenever he talks about health-care, his wonkish statements seem to presuppose that the government will be running the system. He never mentions who the stakeholders are and what they'll be doing, it's all just technocrat-speak, which allows anyone opposed to reform to credibly claim that Obama's proposing a government takeover. This interview is a perfect example: it seems to assume that the government runs the health-care system already, not private insurance companies, private hospitals and private doctors. Only towards the end does he mention that Medicare would be the transmission mechanism for his policies.
Love what he says, hate how he says it.

Posted by: neel1 | September 23, 2009 12:23 PM | Report abuse

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