Peter Orszag, former director of the Office of Management and Budget, speaking before health finance executives in Orlando, said an overhaul of U.S. healthcare payment to reward value cannot succeed without Medicare, yet policymakers face gridlock in what is a highly politicized environment.

“We are going to have legislative gridlock a long period of time,” said Orszag, now a vice chairman with Citigroup, as he addressed attendees on the third day of the Healthcare Financial Management Association's Annual National Institute. A politically polarized Congress supports the need for the Center for Medicare and Medicaid Innovation and the Independent Payment Advisory Board, which operate with independence from Congress, he said.

Commercial insurers are too fragmented to change healthcare payments, but Medicare has the clout, he explained. Options under consideration to address the nation's rising healthcare costs, which Orszag called the primary source of the U.S. fiscal woes, won't accomplish much, Orszag said. Cuts to Medicare provider payments are “blunt” and “temporarily effective” but not a “long-term answer.” He dismissed rationing care as politically unviable. Proposals to increase household financial liability for healthcare are least effective among the most costly patients, which policy makers must address to slow spending, he said.

Healthcare providers push to eliminate unnecessary medical care is critical to an overhaul of delivery. “I don't believe there is a viable alternative” to what Orszag called the provider value approach. Orszag said improving healthcare value hinges on health information technology investment, reducing unnecessary variation in healthcare delivery and new payment models. Too often, treatment follows local norms rather than evidence-based protocol, he said. Most variation is “just the way we do it here medicine,” he said.

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