The Health of our Nation:

Oliver Spalding

The Health of our Nation: Fixing America s deficit problem through efficient health care policy We have a Medicare cost crisis but it s even more true that we have a national health cost crisis. We cannot solve the Medicare cost problem unless we solve the problem of cost for all of our nation s health care. - Harvey V. Fineberg, MD, PhD President of the Institute of Medicine of the National Academies Introduction: America s deficit and debt crisis is the biggest threat to America s future prosperity and security. Despite our enormous debt burden of over 16 trillion dollars, the worst is yet to come. We are currently facing the biggest unfunded liability on the face of this earth: Medicare. In the next fifteen years, baby-boomers will reach eligibility which will place enormous pressure on our country s financial resources. On our nation s balance sheet, Medicare alone represents a future financial burden of over 38 trillion dollars over the next generation. i That obligation is over twice our current national debt and is poised to cripple both our economy and our nation. While there are other issues contributing to our current deficit crisis such as Social Security and defense spending, Medicare lies at the heart of our debt burden. It is an obligation we cannot ignore thus it is imperative that leadership in Washington implement policy solutions that focus on fixing America s biggest weaknesses: our health care system. We spend more per person on health care than any other nation in the world due to our wasteful system. ii This represents over 15% of our GDP, a staggering 2.7 trillion dollars in 2010. iii It is clear; the first step to fixing our nation s deficit crisis is to fix our nation s health care inefficiencies. My proposal focuses on solving our deficit problem by putting forward realistic and implementable policy solutions. While Social Security, defense and tax reform are important, cutting costs in those programs requires immense bi-partisan collaboration and a time frame we simply do not have. Spending cuts and other austerity measures have become political suicide thus we need to propose legislation that can pass through our congress. We must work within the means of our political system to tackle our deficit issue before it is too late. My proposal is to take small but crucial steps to lower our deficit by increasing efficiency in our health care system. This is done by eliminating resource wasting policies and bringing our hospitals into the 21 st century.

Proposal: The two policy initiatives that should be introduced into Congress are: a. Reform of the current fee-for-service payment model which incentivizes an inefficient and wasteful health care system. To replace this system, America must adopt a proven payment model called the Alternative Quality Contract which significantly reduces the costs of health care. b. Mandate the use of Electronic Health Records in all patient-care facilities. These initiatives aim to fix the massive inefficiencies of America s health care system that threaten to cripple the Federal Government. If we can alleviate our Medicare liability, our nation can have realistic discussion about balancing the budget and relieving our children from our debt burden. Benefits of Fee-for-Service Reform: Moving away from fee-for-service models is high on the agenda of those looking to establish a fiscally sustainable, efficient health care system. - Michael Chernew, Professor of Health Care Policy, Harvard Medical School Fee-for-Service is a payment model used in our health care system which pays health care professionals not by the quality of their care but by the amount of tests and procedures they provide. This system inherently breeds inefficiency in hospitals by incentivizing doctors to perform unnecessary and expensive procedures. Basic economics and psychology highlight the irrationality of this system. Elliot S. Fisher, MD and Director of the Population Health and Policy division of The Dartmouth Institute aptly states (fee-for-service policy) rewards physicians for doing more services regardless of whether they are beneficial to the individual patient or not. iv It is an inherently wasteful system that is the cornerstone of our inflated health care costs. The solution is to move to a system where health care professionals are reimbursed based on the quality of their care and the number of patients they tend to. This is a model that has proven to work. Blue Cross Blue Shield of Massachusetts has successfully implemented a payment model called the Alternative Quality Contract. The Alternative Quality Contract is a health care budget program that provides a budget to health care providers to care for their patients. Continually, this model provides bonuses to health care professionals for meeting quality and efficiency standards. v Inherently, the system eliminates the incentive to provide unnecessary procedures and replaces it with an incentive to provide quality health care. The results of the Alternative Quality Contract are dramatic; in a recent 2012 study of claims by Harvard Medical School, groups that moved from a fee-for-service model to the Alternative Quality Contract recorded

spending reductions of 9.9% by year 2. Most importantly, this reduction in spending correlated with an increased quality of care. vi This figure not only represents the enormous waste of our current system but the true potential of our health care industry. It shows that by fixing the root of the issue, incentives for wasteful medicine, America can have a more efficient health care model. The main obstacle that has prevented the implementation of these initiatives has been push back from health care administration. PhD, Zirui Song notes that provider organizations must divide not only dollars, but authority and autonomy among member physicians and hospitals. vii An initiative like this would require our health care system to shift its perspective on how budgets are allocated and how our nation s providers will be reimbursed. These difficulties, however, pale in comparison to the benefits and cost savings these policy initiatives create. It is a solution that is fundamentally about decreasing the costs of health care while improving the quality of care. These decreases in cost represent a huge reduction in Medicare expenditure and wasted taxpayer money. That is why I believe it is the duty of the United States Government to implement these structural innovations through policy immediately. Benefits of an Electronic Health Records Mandate: Today s health care system is overwhelmingly fragmented. Communication between our hospitals, labs, physicians, and patients is minimal and there is a gross waste of resources and time due to faulty channels of information. Implementation of nation-wide Electronic Health Records would bring hospitals into the 21 st century and allow them to increase efficiency in all aspects of care. Electronic Health Records (EHR) is a term for an IT system that provides hospitals with real time information of patient s medical history and supplements their diagnosis with comprehensive patient data. They are an incredible asset to health care professionals who utilize these systems to improve efficiency and quality of care. viii Despite these advantages, many practices have restrained from implementing them due to their high start-up costs and their preference for traditional methods. The Federal Government has subsidized these systems in the past yet there is still not a complete adoption of health care IT systems in the United States. This lag of adoption is costing our health care system billions of dollars in efficiency which is why America needs to set a mandate for Electronic Health Records. There are several proven benefits to a national mandate for Electronic Health Records. The first and foremost is the dramatic reductions in health care costs. The U.S. Department of Health and Human Services estimates that adoption of these systems could reduce health care costs by up to 20% by saving time and reducing duplication. ix Considering that our annual Medicare expenditure is over 550 billion dollars, a 20% savings each year constitutes a huge decrease in government spending. x The next biggest reason for a health care IT mandate is the increase in quality of care. EHR supplies doctors and hospitals with more information and better tools to treat patients intelligently and efficiently. xi Finally, a mandate for adoption of health care IT would boost private sector growth in America.

The U.S. accounts for 40% of the global medical technologies industry providing jobs and prosperity around America. xii A federal mandate for the adoption of Electronic Health Records would stimulate demand for products in this sector, thus growing the American economy. Not only would this create much needed job growth in the United States, but it would increase tax revenue. By implementing effective policies that fuel economic activity, the taxable base expands which provides necessary revenue to the Federal Government. Thus, a mandate for Electronic Health Records would cut the deficit on two fronts: by cutting wasteful Medicare expenditure and by increasing tax revenue due to economic growth. These budget reductions are realized without raising any taxes or cutting any social programs. Political Viability: The proposal for new cost saving health care policies is not a controversial reform but a smart fix to health care. The critical aspect of this plan is its feasibility; America needs reform that is realistic. While politicians have frequently used rhetoric concerning fiscal responsibility, they have shown they are not willing to propose unpopular austerity measures or tax increases. Thus, we need a different kind of solution. Even in today s partisan deadlock, politicians have shown that they are willing to vote for solutions that not only promote health care efficiency but stimulate the American economy. It is my firm belief as well as the belief of many others that smart health care reform can pass congress and have a meaningful impact on our budget deficit in the coming years. The elimination of fee-for-service health care policy and the mandate of Electronic Health Records is a way that we can work within our political means to take immediate action against our budget crisis. Conclusions: While the implementation of these policies will not completely solve our problem, they represent a critical step towards the solution. Right now, our country is at an economic and political crossroads. Politicians in the United States are facing immense pressure from constituents to not only cut the deficit but to also secure our nation s entitlements. What our country needs the most now is not a budget cut proposal that politicians will fear to sign but realistic, bottom-up solutions. We need to implement programs that will begin to cut costs now as we cannot afford to wait another day. The proposal to reform our health care payment model and to mandate Electronic Health Records is a solution that will cut costs of one of our biggest liabilities: Medicare. It focuses on decreasing our government s deficit by cutting the costs of our main expenditures. It is a realistic solution that is founded in American values of innovation and growth. To bring ourselves out of this crisis, leadership in Washington needs to implement innovative and realistic solutions. By taking these positive steps today, we can tackle our deficit problem and restore promise to the next generation of Americans.

i Goins, Christopher. "CNSNews.com." Medicare Faces Unfunded Liability of $38.6T, or $328,404 for Each U.S. Household. CNS News, 23 Apr. 2012. Web. 09 Oct. 2012. <http://cnsnews.com/news/article/medicare-facesunfunded-liability-386t-or-328404-each-us-household>. ii WHO Department of Health Statistics and Informatics (May 13, 2011). "World Health Statistics 2011". Geneva:WHO. Retrieved 2012-10- 09. iii "SelectUSA." The Health and Medical Technology Industry in the United States. The Department of Health and Human Services, n.d. Web. 09 Oct. 2012. <http://selectusa.commerce.gov/industry-snapshots/health-and-medicaltechnology-industry-united-states>. iv I.O.U.S.A. Dir. IOUSAtheMovie. Perf. Patrick Creadon. I.O.U.S.A. YouTube, 25 Aug. 2010. Web. 09 Oct. 2012. <http://www.youtube.com/watch?v=9ain_vxnuhs>. v Chernew, Michael, Robert Mechanic, Bruce Landon, and Dana Safran. "Health Affairs."Private-Payer Innovation In Massachusetts: The 'Alternative Quality Contract'Harvard Medical School, Jan. 2011. Web. 09 Oct. 2012. <http://content.healthaffairs.org/content/30/1/51.abstract>. vi Cameron, David. "Moving beyond Health Care's Fee-for-service." Harvard Gazette. N.p., 11 July 2011. Web. 09 Oct. 2012. <http://news.harvard.edu/gazette/story/2012/07/moving-beyond-health-cares-fee-for-service/>. vii Cameron, David. "Moving beyond Health Care's Fee-for-service." Harvard Gazette. N.p., 11 July 2011. Web. 09 Oct. 2012. <http://news.harvard.edu/gazette/story/2012/07/moving-beyond-health-cares-fee-for-service/>. viii "Study Links Electronic Health Records to Improved Quality in Primary Care Treatment."Study Links Electronic Health Records to Improved Quality in Primary Care Treatment. RAND Corporation, 5 Oct. 2009. Web. 09 Oct. 2012. <http://phys.org/news173987022.html>. ix "Office of the National Coordinator for Health Information Technology (ONC)." Office of the National Coordinator for Health Information Technology (ONC). United States Department of Health and Human Services, 23 May 2005. Web. 09 Oct. 2012. http://www.hhs.gov/healthit/valuehit.html x "Medicare Spending and Financing." Medicare Policy Fact Sheet. Kaiser Family Foundation, Sept. 2011. Web. 9 Oct. 2012. <http://www.kff.org/medicare/upload/7305-06.pdf>. xi "Study Links Electronic Health Records to Improved Quality in Primary Care Treatment."Study Links Electronic Health Records to Improved Quality in Primary Care Treatment. RAND Corporation, 5 Oct. 2009. Web. 09 Oct. 2012. <http://phys.org/news173987022.html>. xii "SelectUSA." The Health and Medical Technology Industry in the United States. The Department of Health and Human Services, n.d. Web. 09 Oct. 2012. <http://selectusa.commerce.gov/industry-snapshots/health-and-medicaltechnology-industry-united-states>.