Regional Insights: Improved health care can help solve the federal deficit

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The single biggest challenge facing the president and Congress this year is solving the federal deficit.

How do you reduce the deficit? Although most of the rhetoric in Washington, D.C., focuses on whether to raise taxes or cut spending programs, the reality is that the deficit problem will never be solved unless we control health care spending.

The Congressional Budget Office projects that 46 percent of the growth in the federal budget over the next decade will be due to higher spending on health care (Medicare, Medicaid and health insurance subsidies), particularly Medicare spending. Another 31 percent of spending growth will be due to Social Security, and 17 percent will pay for higher interest on debt. Only 2 percent of the growth will be due to increases in discretionary spending (defense, social programs, etc.), so the kinds of spending cuts most politicians talk about won't do much good.

What policymakers are struggling with is not whether health care spending should be reduced, but how. Federal and state officials believe they have only two options for reducing Medicare and Medicaid spending.

One option is to cut benefits, such as by refusing to cover certain health care services, charging patients more for health care services, or tightening eligibility standards. Not surprisingly, this is not an attractive option for elected officials who count on seniors' votes, and it could seriously hurt seniors and low-income families who count on Medicare and Medicaid to pay for their health care needs.

The second option is to cut payment rates to doctors and hospitals, and that is exactly what is on the table now. Doctors are being threatened with the most draconian cut: a 27 percent cut in Medicare payments to doctors was scheduled to go into effect this year, but Congress delayed that cut at the last minute by reducing payments to hospitals and other health care providers instead. In the past, hospitals and doctors have compensated for Medicare and Medicaid fee cuts by raising prices for private employers and commercial health plans, but that kind of cost shifting can't continue, since it has made health insurance unaffordable for both employers and workers and it is making our businesses uncompetitive.

Is there a better way? Fortunately, yes. By redesigning the way health care services are delivered, quality can be improved and costs can be reduced without the need to cut benefits or cut fees.

Here are three examples:

Improve Primary Care -- Demonstration projects all across the country, including here in Pittsburgh, have shown that if primary care physicians are given the resources to provide more comprehensive preventive care and care coordination services for patients, they can help patients stay well and avoid expensive emergency room visits, hospitalizations and readmissions, thereby saving money.

Since Pittsburgh has one of the highest rates of hospitalization and emergency room use in the country, these "patient centered medical homes" could be of tremendous value here. Unfortunately, the health plans in our region have been very slow to implement payment systems that will support medical homes, and many physicians and health systems have been reluctant to accept accountability for controlling costs in return for more flexible payment.

To solve this, employers should only use health plans that support multipayer, physician-driven medical homes for all of their members, and patients should only choose primary care physicians who provide comprehensive medical home services. In addition, our Congressional delegation should demand that Medicare pay to support medical homes for seniors in the region.

Avoid Unnecessary Tests and Procedures -- Study after study has shown that many patients are receiving medical tests, procedures and even major surgery they do not need. This overuse not only increases health care costs, but it can often harm patients.

Overuse is a particular concern in the Pittsburgh region, since we have one of the highest rates of health care service utilization in the country. For example, federal data show that Medicare beneficiaries in the Pittsburgh region are hospitalized at the second highest rate among major regions, and they receive heart bypass surgery and stents 20 percent more often than the U.S. average. A study by the U.S. Bureau of Economic Analysis found that for commercially insured patients, the Pittsburgh region had the seventh-highest rate of health care utilization among 85 regions across the country.

A growing number of medical specialties are trying to reduce overused tests and procedures through the Choosing Wisely campaign (www.choosingwisely.org); nine specialties have identified procedures that they believe are being overused, and more specialty societies will be doing so later this month. Patients and their family members can help by taking the time to learn about the risks as well as the benefits of treatment before making a decision about their care, and health plans and hospitals need to pay physicians based on whether they achieve good outcomes for their patients, rather than based on how many procedures they perform.

Improve Maternity Care -- One of the most overused procedures in America is the cesarean section. One out of every three babies nationally and in southwestern Pennsylvania is delivered by C-section, 50 percent more than 20 years ago. Yet C-sections create greater health risks for both the mother and the baby. A report issued last month called "The Cost of Having a Baby in the United States" (available at www.chqpr.org) found that employers pay almost $10,000 more for babies delivered by C-section than by vaginal delivery, and Medicaid programs pay almost $4,000 more.

That means that reducing the C-section rate in the Pittsburgh region could save tens of millions of dollars for employers and taxpayers, as well as producing healthier babies and mothers. Pregnant women should demand to deliver their babies naturally and at full term, and health plans should pay doctors more for vaginal deliveries than C-sections.

Rather than forcing Congress to cut payments in order to reduce health care spending, our physicians and health systems need to step forward and agree to take accountability for controlling costs. Payers and purchasers, including employers as well as Medicare, need to create payment systems and benefit designs that give physicians and hospitals the flexibility to redesign care without expecting them to take on insurance risk. Quality of care for patients should be assured by the kinds of objective, publicly reported measures other regions use, not by where we rank on a U.S. News and World Report opinion poll.

bizopinion

Harold D. Miller is president of Future Strategies LLC and adjunct professor of public policy and management at Carnegie Mellon University. He also serves as executive director of the national Center for Health care Quality and Payment Reform (www.chqpr.org).


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