The agenda for health care reform actually addresses two main items: “health care delivery system reform” and “insurance reform,” a term the president used in his press conference comments Wednesday evening. In fact, the President made the case for both.
It’s useful to understand the distinction between these two areas of health reform and how they are related. Overall, delivery system reform is essential for making insurance reform affordable.
While the main focus of insurance reform is to expand coverage to uninsured Americans, it also pertains to insurance industry regulations that could set minimum standards for coverage and limit insurers’ ability to deny coverage. But insurance reform, particularly expanding coverage to the uninsured, is where most of the projected 10-year cost of $1 trillion is concentrated.
By contrast, health care delivery system reform focuses on reforming how health care is delivered to Americans. The objective of health care delivery system reform is to improve quality and reduce growth in costs by increasing efficiency, reducing waste and redundancies and adding cost-saving coordination in the delivery and administration of health care.
There is overlap between these two areas of reform, of course. For example, providing health care coverage to uninsured Americans will be considerably less costly if newly insured Americans are brought into a high-quality, relatively low-cost health care delivery system, as opposed to the fragmented, inefficient, and higher-cost delivery system that is typical in most American health care, today.
That makes delivery system reform essential for making insurance reform affordable.
Implementing delivery system reform will require adjustments in the current insurance system. For example, the current insurance practice of patient cost-sharing — that is, charging patient copays and deductibles for medical services — suppresses short-term utilization of medical services by patients and boosts short-term profits for insurance companies. But the practice also discourages chronically ill patients from getting medically-recommended preventive care and disease management services. That increases the likelihood that chronically ill and at-risk patients will acquire avoidable, acute chronic disease conditions later on that are the most costly to treat and have the worst prognosis for good outcomes.
Cost-saving delivery system reforms would eliminate cost-sharing for medically-recommended preventive and chronic disease management services. From a long-term cost-savings perspective, we want patients to get the care they need.
Delivery system reforms point to the need for insurance reimbursement reforms for physicians, as well. Reliable studies demonstrate that only 56% of physician-prescribed treatment of chronic illnesses qualifies as “appropriate care.” That’s not good enough to contain growth in health costs for insured Americans. Just as delivery system reform would prescribe elimination of cost-sharing to reduce long-run costs of treating chronically ill patients, it would also prescribe incentives to encourage physicians to adopt best practice protocols for treating their patients.
In light of the fact that 75% of all health costs are associated with treatment of chronic diseases — 95% in the case of Medicare beneficiaries — health care delivery system reforms that include patient and provider incentives like these would generate significant savings to insured Americans and help underwrite the costs of expanding coverage.
When the President and members of Congress talk about “squeezing waste and inefficiency out of the health care system,” they are talking, by and large, about delivery system reform. Sure, there is interplay between this focus and the insurance reform that the President referred to at his press conference, yesterday. But in the political arena, insurance reform immediately raises the thorny questions of “How much will it cost?” and “Who’s going to pay for it?”
Delivery system reform is the item on the reform agenda that offers major opportunities, substantially untapped, as yet, in either the House or Senate HELP reform proposals, for reducing growth in health care costs that are the number one concern of voters.