Health Insurance Reform Mythbuster: 'House Health Reform Bill Does Not Control Costs'

Some commentators are repeating misinformation about the provisions of the recently-passed Affordable Health Care for America Act. For example, on Meet the Press earlier this month, commentator David Brooks said:

[The House health insurance reform bill] does not change the problem with our health care system, which is the fee-for-service system, which has been driving up costs for decade after decade.

And an NPR story this week reported it as if fact:

The absence of clear measures to rein in costs is being seized on by opponents of the legislation.

MYTH: The House health insurance reform bill fails to control health care costs and to reward quality over quantity of care.

FACT: The Affordable Health Care for America Act includes numerous provisions to control health care costs, including provisions to begin to reform the current fee-for-service system — moving us away from rewarding providers for the quantity of care to rewarding them for quality and value. As an editorial in the New York Times explained:

The fundamental fix — reshaping how care is delivered and how doctors are paid in a wasteful, dysfunctional system — is likely to be achieved only through trial and error and incremental gains.

The good news is that the bill just approved by the House and a bill approved by the Senate Finance Committee would implement or test many reforms that should help slow the rise in medical costs over the long term. As a report in The New England Journal of Medicine concluded, “Pretty much every proposed innovation found in the health policy literature these days is encapsulated in these measures.”

Here are just a few of the provisions in the bill to reform the current fee-for-service system in order to promote quality and value in health care — thereby lowering overall costs:

Institute of Medicine Recommendations on Promoting High-Value Health Care. Under the bill, the Institute of Medicine, through two studies, will make recommendations to Congress on how to fix the current Medicare reimbursement system. The first study will analyze and make recommendations regarding the geographic adjustment factors in the Medicare reimbursement formula. The second study, which contains the most far-reaching reforms, will provide recommendations on changing the Medicare payment system to reward value and quality — not volume. This study would define value as the efficient delivery of high-quality, evidence-based, patient-centered care. This Institute of Medicine study, containing these recommendations, must be submitted to Congress by April 2011. These recommendations will go into effect unless the House and Senate pass a joint resolution of disapproval, subject to a Presidential veto.

Promoting Accountable Care Organizations. An “accountable care organization” is an organized group of physicians who are rewarded for providing high quality care at low cost over a sustained period of time. The bill requires HHS to establish a comprehensive pilot program for Accountable Care Organizations and also requires HHS to set specific benchmarks for the expansion of the pilot program. If the pilot proves successful, HHS is directed to expand the pilot on a large-scale basis.

Promoting Payment Bundling. Hospital and physician incentives can be restructured by paying a lump sum for an episode of care (“bundling”) payments, rather than paying separately for each service provided. The bill directs HHS to establish pilot programs to test the effectiveness of payment bundling across the nation in a wide array of settings. Under the bill, successful arrangements could be expanded nationwide without further legislation.

Reducing Hospital Readmissions. The bill uses new financial incentives to encourage hospitals and post-acute providers to undertake reforms to reduce preventable readmissions, which will improve care for beneficiaries and rein in unnecessary health care spending.

Promoting Patient-Centered “Medical Home” Model. The bill requires HHS to create a pilot program that reimburses providers who give comprehensive care coordination to patients with chronic illnesses, and requires HHS to set specific benchmarks for expansion of the pilot program. If the pilot proves successful, HHS is directed to expand the pilot on a large-scale basis.

Creating Center for Medicare and Medicaid Innovation. The bill establishes a Center for Medicare and Medicaid Innovation to empower the Centers for Medicare and Medicaid Services to pursue additional payment and delivery system reforms.

The bill includes numerous other provisions that also help control health care costs. For example, there are a broad range of provisions to achieve Medicare savings — targeting inefficiencies and waste in Medicare. In fact, the bill will reduce the average annual rate of growth of Medicare spending from 6.6 percent under current law to 5.3 percent over the next 10 years. Furthermore, the Medicare savings in the House bill grow over time — growing 25 percent per year in the 2016-2019 period. An overview of some of these other provisions:

Productivity Savings. The bill reduces the rate of growth in annual Medicare payments to hospitals, nursing homes and other providers by amounts comparable to the productivity savings routinely made in other industries with the help of new technologies and new ways to organize work.

Negotiating Drug Prices. The bill requires the Secretary of HHS to negotiate the prices of prescription drugs with drug companies on behalf of Medicare beneficiaries. Based on the experience of other countries, this will lead to lower drug prices for our seniors and people with disabilities.

Promoting Market Competition. Currently, in many regions of the country, there is little competition in the health insurance market — with one or two insurers dominating the market. The bill establishes a Health Insurance Exchange, a transparent marketplace, for the millions of Americans without access to affordable employer-sponsored insurance and for small businesses. The Exchange would demand accountability from insurers and set up a competitive system that would pressure insurers to lower premiums. All the insurance plans would have to provide standard benefit packages that would be easy to compare for consumers. To get access to millions of new customers, insurers would have a strong incentive to sell on the Exchange. And the head-to-head competition could give them a strong incentive to lower their prices.

Promoting Primary Care. Primary care providers can provide lower cost and higher quality, more personalized care for many ailments. Despite their critical function, primary care doctors are undervalued in our current system, leading to a shortage. The bill includes numerous provisions to promote primary care, including increasing Medicare and Medicaid reimbursements to primary care doctors and providing incentives for the training of more primary care doctors.

Investing in Prevention and Wellness. Today, our health care system focuses on treating sickness, instead of promoting wellness. Focusing on prevention will save money by allowing patients and doctors to detect and address health problems early when they are easier and less expensive to treat. The bill includes numerous provisions to invest in prevention and wellness, including eliminating patient co-pays for preventive services in Medicare, Medicaid, and private plans; and investing $34 billion over the next 10 years in new prevention and wellness programs.

Administrative Simplification. The bill will simplify the paperwork burden that adds tremendous costs and hassles for patients, providers, and businesses today. Any doctor who has wrestled with multiple forms from different insurers knows that simplified insurance forms will save money. The bill requires standardized insurance forms in order to facilitate automated processing. This step alone could save hundreds of billions of dollars over the next decade.

Cracking Down on Waste, Fraud and Abuse. The bill includes several new tools for combating waste, fraud and abuse within the entire health care system. For example, within Medicare, new authorities are provided to allow for pre-enrollment screening of providers and suppliers, to permit designation of certain areas as being at elevated risk of fraud to put in place enhanced oversight, and to establish compliance programs for providers and suppliers.

Sunshine on Price Gouging. The bill discourages excessive price increases by health insurance companies through providing for review and disclosure of insurance rate increases and the rationale for such increases.

Removing the Anti-Trust Exemption for Insurers. The bill also promotes competition among health insurers by removing the anti-trust exemption so that it no longer shields these insurers from fixing prices, dividing up territories, or monopolizing their market.

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