The case for collaboration

As the nation debates health reform along with its choices for president, two health economists last week said the public sector could best serve innovation by following private markets' lead.

The economists, Neeraj Sood of the University of Southern California, and Aparna Higgins of America's Health Insurance Plans, made a case for the public sector as a collaborator rather than pioneer in efforts to develop new healthcare payment and delivery models. The government can best intervene, wrote Sood and Higgins, in cases where it could supply the capital, data or coordination to support private-market innovation.

Public officials should also consider more than their coffers as they debate public policy. And they should weigh the risks of how markets may respond to public policy, such as the potential for providers to exit markets when Medicare and Medicaid cut payment rates.

By closely working with health plans, hospitals and doctors, the public sector could avoid creating additional burdens on business with a program that diverges from efforts emerging in the private markets, the authors wrote.

Sood, an associate professor and director of international programs at the USC health policy center, described the government's role as one that should disseminate information—something it has not always done in a timely fashion—and fill in gaps where the private sector stalls, typically because of high risk.

Federal officials could do more to promote research on some technical aspects of payment reforms, including how models such as shared savings programs attribute patients to providers for quality and cost-control measurement, the authors wrote.

Sood said the federal government could also circulate timely information about initiatives across the country.

New payment models may not take hold among small or rural providers, who lack the capital and infrastructure to adopt new payment models without support and cannot attract private-sector capital, Sood said. Indeed, the CMS tailored one accountable care program to provide start-up funding for small and rural medical groups and hospitals, a policy move he praised.

Sood said a framework to guide public-sector initiatives would be important as momentum builds behind payment and delivery reform efforts in the wake of the Patient Protection and Affordable Care Act.

Dr. Robert Berenson, a health policy expert at the Urban Institute and formerly head of Medicare payment policy for the CMS, said the paper would stimulate discussion on the role of the public sector, a debate he called useful. But Medicare should not always defer to the private sector, he cautioned.

Berenson said Medicare has the size and clout to promote change that players in the private sector lack. The CMS also frequently consults the private sector as it develops pilots and demonstrations and new policies are vetted publicly through a comment period.

“I think there are mechanisms for making sure Medicare is not doing something in isolation and imposing something that's not accepted,” he said.

Berenson said the private healthcare sector is also rife with “market failures,” as the authors described. Those failures, such as a lack of competition in local markets, make the need for Medicare's intervention necessary. “We need Medicare to be innovative because of market failure,” he said.