Remember payment reform? Shared risk, bundled payments, global budgets—these baby steps are supposed to teach hospitals and physician practices how to stay on their feet financially while walking away from fee-for-service medicine.
That was the idea behind the half of the 2010 Affordable Care Act that tackled delivery system reform. It also inspired the physician pay changes included in the 2015 Medicare Access and CHIP Reauthorization Act, which passed by a large, bipartisan majority.
The architects of those laws understood that health insurance affordability, whether measured by the growth in private-sector insurance premiums or the cost of government programs, is largely determined by the growth in healthcare spending. And that, in turn, is driven by three factors: the price and volume of services delivered, the price and value of new technologies, and demographics.
Payment reform won't change the graying of America. But it is exactly what the doctor ordered to deal with the outrageously high prices and overutilization of questionable technologies that plague the entire system.
We've heard almost nothing about payment reform during the first 3½ months of the Trump administration. The only concrete move by HHS Secretary Tom Price and CMS Administrator Seema Verma was a decision in March to delay until next year expanding the bundled-payments program to include more cardiovascular and orthopedic procedures.
Payment reform is hard. Success means providers will be delivering fewer unnecessary tests and procedures. They will be reducing variations from the highest standards of care. They will be demanding greater value from their suppliers, especially drug, device and equipment makers.
Let's not mince words about the implications. If payment reform is successful, every provider—the doctors, the hospitals, the drug and device companies, the equipment makers—will be taking a haircut.
That's why the original architects of reform understood adoption had to be gradual. Hospitals have a huge capital plant with fixed costs. Doctors have incomes to maintain. Vendors need time to transform their businesses from ones that depend on volume and exorbitant prices into ones that deliver value.
But for payment reform to be successful, pilot projects must eventually give way to mandatory programs. Gain-sharing must give way to downside risk. The endgame will be some form of capitated, risk-adjusted payment per patient whose growth each year will be set at a fixed percentage of some benchmark such as gross domestic product, consumer prices or real wage growth.
In a rational political environment, these changes would be warmly welcomed by politicians seeking a market-based solution to the problem of rising healthcare costs. Providers and payers or alliances between the two can compete to deliver the highest quality, lowest cost care within those fixed budgets. Let the losers fall by the wayside.
Yet the endless debate about Republicans' Obamacare replacement proposal has drowned out talk about cost control through payment reform. Limiting benefits, charging people who are older more, forcing people with pre-existing conditions into underfunded pools, raising co-pays and deductibles, expanding the ranks of the uninsured—every element in their plan will drive overall costs higher and make cost control harder.
The millions of people losing coverage will delay care until it's more expensive and return to high-cost ERs. Charging older working adults more will encourage them to postpone care until their more expensive needs can be met by Medicare. The unpaid bills owed by people in high-deductible plans or forced into underfunded high-risk pools will lead to higher prices for everyone with traditional employer-based coverage.
Hospital and physician groups rose in unison to oppose the American Health Care Act, which passed the House last week but now faces a longer, tougher slog in the Senate. At the same time, some are now lobbying to permanently postpone expanding the mandatory bundled-payment program.
That's unfortunate. It's time for the baby to learn to walk.