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James Douglas is a former Republican governor of Vermont.
James Douglas is a former Republican governor of Vermont.

State intervention

Leaders have opportunity to design own reform

By James Douglas
Posted: May 23, 2011 - 12:01 am ET

In early 2009, I decided that my chair's initiative for the National Governors Association would center on improving our system of delivering healthcare to the American people.

We didn't know then whether Congress would pass a comprehensive reform bill and, if so, what it would include. What we did know was that the rapidly rising cost of healthcare was outstripping the ability of states to afford it. It was exacerbated by the recession and recovery, and by government's previous efforts to expand coverage during better fiscal times. The same pressures drive up the cost of insurance for public employees and retirees as well. Medicaid alone is approaching a quarter of the budget in many states and, because it's an entitlement, it squeezes out other essential programs, principally education, which is a similarly large expenditure.

Much of the national debate has been about coverage, specifically expanding Medicaid to larger segments of the population, but that can't be the only focus. If we simply add more Americans to the ranks of the insured, we'll make the system even more unsustainable. We need to find ways to bring costs down, regardless of how we pay for them. States have shown a lot of creativity, as laboratories of democracy, to design healthcare reform initiatives that suit the unique needs of the people they serve.

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A report prepared for NGA, with generous support from the Commonwealth Fund and others, suggests five key areas for state-based reform:

Quality improvement: Ultimately, this is what it's all about. We need to ensure that all Americans receive the care they need when they need it. A study concluded that one doctor in six ordered a test that had already been done, and one in four provided treatment that was unnecessary. We need to define quality, measure it, provide the IT support to assure its delivery and pay for it appropriately.

Care coordination and disease management: Chronic illnesses account for the overwhelming majority of healthcare costs. Those with a chronic disease must be identified and treated. Diabetes is the first chronic condition that some states have addressed, as there's a real opportunity for successful intervention and cost savings.

Primary care and prevention: We need to encourage everyone to have a medical home with a team of caring professionals to coordinate care. We must think of healthcare as a strategy not just to intervene when someone gets sick, but to keep people well. Furthermore, many chronic diseases can be prevented or their effects mitigated through timely diagnosis and early intervention.

Payment system reforms: We need to pay for healthcare based on quality, not quantity. Most payment structures compensate providers for each test, procedure or visit. We should instead pay based on performance and perhaps combine payments to groups of providers to ensure the kinds of coordination needed.

Medicaid: No system reform can ignore the large and expanding program that offers care to those with modest resources. It's the largest item in many states' budgets and will crowd out other important expenditures unless costs are contained. It can serve as a platform for improving the delivery of care.

States have many important responsibilities under the new federal healthcare reform law. They must implement insurance reforms, such as the prohibition on refusing coverage for pre-existing conditions and requiring guaranteed issue; they need to decide whether to establish an insurance exchange; they will have to enroll significant numbers of new Medicaid participants unless the courts rule otherwise. They have already determined whether to implement a high-risk pool; some states are pursuing this more aggressively than others.

States should regard this time of heightened awareness as an exciting opportunity for reform, even in the context of these requirements. State leaders can take advantage of HHS' Center for Medicare and Medicaid Innovation to try out some new approaches; they can explore the value of medical homes, accountable care organizations and health information technology.

They can work with the Medicare-Medicaid Coordination Office to determine how best to care for those who qualify for both Medicaid and Medicare. They can bolster their public health programs to encourage fitness, healthy eating, personal safety and disease prevention. And they can join in efforts with private-sector payers to make these improvements systemwide.

Every governor has established a leadership team to implement the federal reform law and to pursue initiatives at the state level. It may be a cabinet-level task force or assigned to a specific agency, but clearly the need for healthcare reform has assumed a more prominent role than in the past. Policymakers hold widely varying philosophical views on how healthcare should be regarded, structured and financed, but there is universal agreement that it is the crisis of our time. Entitlement spending at the federal and state levels threatens the prosperity of future generations. Obesity looms as a greater killer of Americans than tobacco. Employers and even our armed forces are concerned about whether there will be sufficient candidates fit enough to maintain the nation's strength.

The path of least resistance is to do little or nothing, to kick the can down the road and defer the tough choices to another era and other officials. Now is the time for state leaders to guide America along the path to reform in healthcare delivery and payment. There are many resources and a lot of smart people willing to help.

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