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On cost control, the theory is try, try and try again

Atul Gawande assesses the Senate health plan:

Pick up the Senate health-care bill -- yes, all 2,074 pages -- and leaf through it. Almost half of it is devoted to programs that would test various ways to curb costs and increase quality. The bill is a hodgepodge. And it should be.

The bill tests, for instance, a number of ways that federal insurers could pay for care. Medicare and Medicaid currently pay clinicians the same amount regardless of results. But there is a pilot program to increase payments for doctors who deliver high-quality care at lower cost, while reducing payments for those who deliver low-quality care at higher cost. There’s a program that would pay bonuses to hospitals that improve patient results after heart failure, pneumonia, and surgery. There’s a program that would impose financial penalties on institutions with high rates of infections transmitted by health-care workers. Still another would test a system of penalties and rewards scaled to the quality of home health and rehabilitation care.

Other experiments try moving medicine away from fee-for-service payment altogether. A bundled-payment provision would pay medical teams just one thirty-day fee for all the outpatient and inpatient services related to, say, an operation. This would give clinicians an incentive to work together to smooth care and reduce complications. One pilot would go even further, encouraging clinicians to band together into “Accountable Care Organizations” that take responsibility for all their patients’ needs, including prevention -- so that fewer patients need operations in the first place. These groups would be permitted to keep part of the savings they generate, as long as they meet quality and service thresholds.

The bill has ideas for changes in other parts of the system, too. Some provisions attempt to improve efficiency through administrative reforms, by, for example, requiring insurance companies to create a single standardized form for insurance reimbursement, to alleviate the clerical burden on clinicians. There are tests of various kinds of community wellness programs. The legislation also continues a stimulus-package program that funds comparative-effectiveness research -- testing existing treatments for a condition against one another -- because fewer treatment failures should mean lower costs.

There are hundreds of pages of these programs, almost all of which appear in the House bill as well. But the Senate reform package goes a few U.S.D.A.-like steps further. It creates a center to generate innovations in paying for and organizing care. It creates an independent Medicare advisory commission, which would sort through all the pilot results and make recommendations that would automatically take effect unless Congress blocks them. It also takes a decisive step in changing how insurance companies deal with the costs of health care. In the nineteen-eighties, H.M.O.s tried to control costs by directly overruling doctors’ recommendations (through requiring pre-authorization and denying payment); the backlash taught them that it was far easier to avoid sicker patients and pass along cost increases to employers. Both the House and the Senate bills prevent insurance companies from excluding patients. But the Senate plan also imposes an excise tax on the most expensive, “Cadillac” insurance plans. This pushes private insurers to make the same efforts that public insurers will make to test incentives and programs that encourage clinicians to keep costs down.

Which of these programs will work? We can’t know. That’s why the Congressional Budget Office doesn’t credit any of them with substantial savings. The package relies on taxes and short-term payment cuts to providers in order to pay for subsidies. But, in the end, it contains a test of almost every approach that leading health-care experts have suggested. (The only one missing is malpractice reform. This is where the Republicans could be helpful.) None of this is as satisfying as a master plan. But there can’t be a master plan.

Much more here. You'll also learn a surprising amount about farming.

By Ezra Klein  |  December 15, 2009; 10:19 AM ET
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Gawande's article was very interesting, showing how many little pilot programs can reap big results over time. However, there is one glaring difference between Depression-era and after farmers and doctors that he didn't address. True, farmers were somewhat hide-bound and were willing to try new things only when they could actually see the results. But they don't have the arrogance of doctors. Look at the results of the hand-washing and other guidelines about reducing hospital infections that Gawande has also written about. Docs all thought they knew what was best and thought that the guidelines were Mickey Mouse. They wouldn't follow them, costing patient lives. Cost control will be like that but even more so, because it involves money.

The secret may be to introduce several reforms at once. Docs hate insurance billing and would probably support something like a Medicare buy-in that streamlines billing. Combine that with lower reimbursement and they could accept it because they would save so much in administrative costs. Savings need to be paired like that to work.

Posted by: Mimikatz | December 15, 2009 10:57 AM | Report abuse

Something else worth noting, as a silver lining of sorts - discarding of a public option, or any facsimile thereof, destroys the conservative meme of "government run" health care. While there's little doubt that the GOP will fabricate a new and intellectually dishonest line of attack, or resurrect an old one, it will most likely be immediately discredited on the merits (a la Boehner's "abortion fee" straw man).

Posted by: The_Doc1 | December 15, 2009 11:07 AM | Report abuse

Ezra, something I think would be very valuable would be an analysis of how much of this NEEDS legislative authority.

I still want to see this bill pass, but at this point I'm not sure that it will. If that's the case, couldn't you do at least some of this stuff through existing Medicare & Medicaid authorities? I know Medicare's been trying to move in the direction of Value-Based Payment for a few years now.

As a broader question, if reform fails do you think the next healthcare fight will be over cost or access?

Posted by: NS12345 | December 15, 2009 11:37 AM | Report abuse

Dr. Gawande better hope he never runs into me on the street, because if I ever run across him I'm going to give him a great big kiss. Ezra and Jon Cohn are health care heroes for the quantity and quality of their reporting on the minutia of getting health reform passed. Dr. G is a hero for his long form, medically-informed reporting. If only all our "public intellectuals" had his wisdom and dedication.

Posted by: geoffcgraham | December 15, 2009 11:41 AM | Report abuse

I'm really surprised that Dr. Gawande's piece hasn't gotten more criticism among the chattering classes for his blanket assessment that the federal farm policy is a success. Sure, our farms are stunning productive at churning out commodity crops and putting corn and soy products in everything we eat, but the farm system has also caused a stunning amount of damage to public health and the environment.

Posted by: slyc | December 15, 2009 2:45 PM | Report abuse

Also, it's not like there aren't dozens of successful programs in other countries that Gawande kind of ignores. But this being America, we can only look at the few trials that exist here and make our own new trials

Posted by: williamcross1 | December 15, 2009 8:21 PM | Report abuse

I'm sorta with slyc on this one. Propping up the USDA and our agricultural policy as the model to follow makes me cringe. And you know as well as anyone, Ezra, that the American agricultural system suffers from deep systemic flaws.

However, I will agree that today's farm system is a vast improvement over the agricultural economic ecosystem of 100 years ago. And the specific programs Gawande points out aren't part of what's wrong with our agricultural policy. Monsanto's business practices, subsidies that make no sense, and a regulatory framework that doesn't properly price externalities like waste disposal and foodborne illness are what's wrong with food policy today. Not the statistics dissemination, government-run troubleshooting lines, etc. So maybe Gawande is right to point to the USDA as a model.

Posted by: shanehuang | December 16, 2009 12:25 PM | Report abuse

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