Reforming our nation’s health care system so that it no longer delivers too much low-benefit care at too high a cost will require our new health reform law to spark a system-wide revolution. Disorganized care based solely on fee-for-service payments to a variety of unconnected physicians, hospitals, and clinics will have to give way to coordinated, integrated courses of treatment that deliver high-quality care at lower costs. Prevention and primary care will need to be stressed as much as treatment of the sick. And duplication and medical errors will have to be systematically found and eliminated.
We know medical care can be better organized and delivered. Virtually every industry in our economy over the past 15 years drove down costs, increased quality, and experienced a surge in productivity. The result: An increase in our national income at a rate not experienced since the 1960s. And the outlier in our economy? Our health care industry, which missed out on the productivity boom even as it incorporated all kinds of new and expensive life-saving equipment and services. The impact of this failure to innovate based on costs and quality in health care is enormous. Absent any savings from the recently enacted health reform law, federal spending on medical care is expected to hit 25 percent of gross domestic product (the total output of our economy) by 2035, up from 15 percent of GDP today.
In contrast, increasing health care productivity growth to the average of other industries could cut medical spending by over $2 trillion and reduce federal government spending by almost $600 billion over 10 years. Family, employer, and state and local government budgets would benefit in the same way. The possibility of a more efficient, less costly health care system is universally shared. Every analyst who studies health care believes it is possible to simultaneously lower costs and improve quality. The major question is how to realize it.
Reflecting the bulk of studies, the idea underlying the new health reform law, the Affordable Care Act, is to promote efficiency through three interlocking steps. First, we need to gather the right data on what patients need and how best to provide that, and then feed that information to patients, purchasers, and providers. Second, we need to move health care payment systems away from rewarding the provision of more care to a system of rewarding better care. Third, we need to encourage providers to reform their operations so that they can take advantage of the information resources and payment incentives.
This third step is the subject of "Achieving Accountable and Affordable Care," a new report by Judy Feder and David M. Cutler, though the concept of the accountable care organization, or ACO, is clearly and directly related to the first two steps. Why? An accountable care organization is a group of medical care providers who accept responsibility for providing or arranging all care for a group of patients under a payment arrangement that allows them to profit from reducing costs and improving quality. Because patients need so many different types of medical care—primary care providers, specialists, hospitals, labs, pharmacies, and more—an ACO must necessarily coordinate care across different providers.
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