Healthcare Business News

Commonwealth proposals include national health spending target

By Melanie Evans
Posted: January 10, 2013 - 12:01 am ET

Health policy experts with the Commonwealth Fund urged Congress to set a national target for health spending not to exceed per capita growth of the gross domestic product as part of a plan to improve U.S. healthcare quality and reduce health spending.

The spending target borrows a page from an aggressive law that Massachusetts enacted last year to rein in healthcare costs, viewed as a second stage to its 2006 law that expanded access to health insurance. And Commonwealth's proposal comes as the president and Congress are poised for a far-reaching debate over the costs of federal healthcare programs and their role in the rising national debt.

The target is one of 10 proposals by the fund's Commission on a High Performance Health System that would, its chairman said, deliver significant federal fiscal relief without the pain of policies being debated as Congress and the White House work against another fast-approaching deadline to reach another major budget compromise.

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Medicare and Medicaid are likely key targets for cuts as Congress and the White House grapple in coming weeks with postponed federal spending cuts and the nation's debt limit.

Dr. David Blumenthal, who succeeded Karen Davis as president of the Commonwealth Fund on Jan. 1, said the policy proposals—which also include a permanent fix for recurring and repeatedly delayed Medicare physician pay cuts—would seem to be “an escape valve” by comparison to policies under consideration.

The Commonwealth Fund policies would reduce national health spending by $2 trillion by 2023, according to an estimate for the fund by Actuarial Research Corp. Two-thirds of the savings, about $1.3 trillion, would come from four policies, including $90 billion in reduced spending from an overhaul of Medicare pay for physicians and malpractice reform.

The 26.5% Medicare cut to physician pay, which Congress once again temporarily delayed on Jan. 1, would be eliminated under the Commonwealth Fund plan to overhaul physician pay. Instead, Medicare would freeze physician payment at its 2013 level and increase pay for physicians with medical homes, bundled payments and accountable care contracts or other innovative pay models, the fund proposed. Physician payments would also be readjusted to eliminate “overpriced” services.

The remaining proposals call for incentives for medical homes and team care for chronically ill costly patients; use of bundled payment in Medicare, Medicaid and plans operating in health insurance exchanges; require plans inside exchanges to adopt alternative payment models; and provide antitrust protection for plans that coordinate payment methods.

The Commonwealth Fund proposal would also create a new Medicare plan to incorporate benefits typically sold in supplemental and Part D policies; offer beneficiaries information and financial incentives to choose providers with medical homes; promote public access to price, quality and patient satisfaction data collected through health information technology; simplify administration; and overhaul medical malpractice.

Massachusetts, which mandated an expansion of health insurance coverage ahead of the 2010 federal law to do so, also served as a model for the Commonwealth Fund after the state enacted a target for state health spending. “Massachusetts certainly was a model conceptually” said Stuart Guterman, vice president and executive director of the Commonwealth Fund Commission on a High Performance Health System.

The use of per capita spending growth rates adjust for spending caused by changes in population, such as an increase in Medicare enrollees as baby boomers age, an expansion of Medicaid scheduled for 2014 under the health reform law, or regional differences in population growth, Guterman said.

National health spending has cooled with the recession and remained sluggish through 2011, the latest federal figures show. National health spending figures released by CMS this week show health spending and the economy per capita grew at roughly the same rate in 2011. U.S. health spending per capita increased 3.1% and economic growth per capita, as measured by the gross domestic product, increased 3.2%.

—with Gregg Blesch

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