Five Questions for... the people behind the Urban Institute research. In traditional interview format, our experts talk about the nature of their work and offer insights on what they've learned.
Health Policy Center Director John Holahan answers five questions about health care reform.
President Obama has called health care reform his top fiscal priority and aims to rein in escalating medical costs while extending health insurance coverage. Massachusetts’s 2006 reforms could provide a model for the nation. Holahan and coauthor Linda Blumberg analyze the state’s progress to date in “Massachusetts Health Reform: Solving the Long-Run Cost Problem.”
March 5, 2009
1. Is now the right time to be talking about national health care reform? Or should we get the economy back on track first?
The health care problems that need to be addressed, such as the rising number of uninsured and increasing health care costs, are only going to get worse during the recession. More people will lose health insurance coverage and employers will be less able to offer coverage because costs will go up. The pressure on local governments to support charity hospitals and safety net hospitals will intensify. And Medicaid program costs will rise. So the recession will probably increase demand for government to do something, even though it will be harder to find the revenues.
With health care reform, at least initially, money taken out of the spending stream with tax increases would be put right back in through greater spending on health care. And money on health care tend to stay in the U.S. economy, creating jobs here, while many other types of spending will send money overseas. Cost containment would have the opposite effect—taking money out of the health system and, if successful, offsetting some of the tax cost. Also, it’s possible to phase in health reform so that the expensive initiatives kick in only when revenues have picked up. But, of course, significant increases in coverage will not occur until the spending occurs.
2. What should reform look like? And how do we gauge success?
It will probably look something like the reforms enacted in Massachusetts three years ago. Most likely, public programs will be expanded and low-income people will get subsidies. There would also be an exchange or connector—a place where people can go and choose among health insurance plans and buy coverage. In Massachusetts, the Commonwealth Connector provides insurance options for small businesses and for individuals, along with subsidized options for low-income adults. And, to get to universal coverage, we’ll need a mandate requiring individuals to get insurance. For political reasons, it’s likely that we would require employers to offer coverage or pay a tax if they don’t. The research we’ve done shows that voluntary measures, even with generous subsidies, would cut the number of uninsured only by about half. Also, reform would require provisions for cost containment.
Successful reform would reduce the number of uninsured and slow the rate of health care costs. So far, in Massachusetts, the number of uninsured has fallen to about 2.5 percent of the nonelderly population. And there’s no evidence that employers are dropping health insurance benefits because subsidized coverage is available. Program costs were initially higher than expected though, and the state, like the nation, still needs to find a way to bring down health care spending.
3. What’s driving up health care costs?
Since most people have health insurance, they can pay for a wide range of treatments and procedures. That, in turn, encourages development of new pharmaceuticals, new technologies, and new procedures, which drives up costs. But right now, we do not have sufficient information about what’s cost-effective and we often don’t use the information that we do have wisely to make treatment decisions. Many of the advances are good and have improved the quality of care—it’s not simply a matter of waste and unnecessary care. That’s what makes cost containment so hard.
4. The stimulus package includes money for electronic health records and research on comparative effectiveness—figuring out which procedures work and which are relatively less effective. Will cutting inefficiencies and waste make a dent in health care costs?
Electronic health records could reduce a lot of unnecessary testing. Hospitals wouldn’t need to do a full work-up of tests when a person is admitted because doctors already would have access to a patient’s records. Electronic records are expensive to implement nationwide, so the savings we would see initially would probably be minimal. There is also significant potential for savings in the management of the high-cost chronically ill who contribute so much to health care costs.
That doesn’t mean electronic health records, increased use of prevention services, and better management of the chronically ill will not yield some savings. They will provide some help, but we will still need to tackle harder challenges, like reforming the way providers are paid. The point is, we are going to have to do a lot of things to cut costs, all of which will provide small savings but that taken together can add up to a significant amount. If we could save 5 percent of our current health care spending, we would be saving more than a hundred billion dollars annually—which would contribute greatly to the cost of covering the uninsured.
5. President Obama, who says that health care reform can’t wait, is holding a health care summit in March with policymakers and health care stakeholders. How should they start the conversation on health care reform?
This is a chance to ask some of the tougher questions: Can they live with a mandate? How far are they willing to push cost containment? How will providers react to the potential decline in revenue and income growth? What are they willing to accept in terms of new taxes—and who should pay them? Should there be universal access to a public plan, like Medicare? A public plan would put cost containment pressure in the system, and private insurers are worried about being able to compete with that type of plan.
Nobody starts out negotiations by saying what they’re willing to give up, so I think finding that out is going to be important. Hospitals, insurers, employers, and others will stake out very strong positions on what they will not accept. Health care reformers will come in with a strong vision about how to control health care costs while increasing insurance coverage—but you cannot do both unless major stakeholders give up something they treasure. So those trade-offs are really the key to whether this whole thing works or not. If nobody gives an inch, reform will stop in its tracks. If they do make compromises, the much-vaunted “down payment” in the president’s budget might lead to something bigger.
Latest Research
Browse by Topic:
