Washington, D.C. — Today, leading experts in the field of health care joined the Center for American Progress to unveil a bold new plan to address the crisis of rising health care costs in our nation. The 11 cost-containment solutions debuted today as the subject of a New England Journal of Medicine article, authored by 23 prominent health care experts, including Dr. Ezekiel Emanuel, former Administrator of the Centers for Medicare & Medicaid Services Dr. Donald Berwick, former Director of the Office of Management and Budget Peter Orszag, and Center for American Progress President Neera Tanden.
“The Affordable Care Act was the first generation of reforms to tackle cost growth. These ideas are the next generation,” said Tanden. “They provide a roadmap to make America more competitive in the global economy because as we lower health care costs, we lower the costs of hiring new workers."
While the Affordable Care Act was the most far-reaching effort to contain health care costs to date, health care costs remain a major challenge—and concern about their effect on the federal budget has only continued to grow. To confront this challenge, the Center for American Progress convened leading health policy experts—including current and former federal and state officials, executives of health insurers and hospital systems, physicians, and economists—to develop bold and innovative solutions.
The reform agenda includes:
- Promoting privately negotiated payment rates within global spending targets: Payers and providers should negotiate payment rates that would be binding for all payers and providers in a state. The privately negotiated rates would have to fit within a global spending target for both public and private payers in the state.
- Accelerating use of alternatives to fee-for-service payment: Instead of paying a fee for each service, physicians and hospitals should receive a fixed amount for a bundle of services (also called bundled payments) or for all the care a patient needs (known as global payments). Payers must accelerate the use of such alternative payment methods. Within 10 years, Medicare and Medicaid should base at least 75 percent of payments on alternatives to fee-for-service payment.
- Using competitive bidding for all health care commodities: Instead of the government setting prices for health care commodities, manufacturers and suppliers should compete to offer the lowest price. Medicare should immediately expand such competitive bidding nationwide—and extend it to medical devices, laboratory tests, and all other commodities. Medicare’s market-based prices should then be extended to all federal health programs.
- Requiring exchanges to offer tiered plans: Tiered insurance plans designate a tier of providers with high quality and low costs, and reduce cost-sharing for patients who choose these high-value providers. Exchanges—marketplaces for insurance created by the health reform law—should offer at least one tiered plan with a premium discount of 10 percent or more.
- Requiring all exchanges to be active purchasers: Both federal and state exchanges should engage in “active purchasing”—leveraging their bargaining power to secure the best premium rates and to promote reforms that provide better care at lower cost.
- Simplifying administrative systems: Payers and providers should electronically exchange eligibility, claims, and other administrative information. A taskforce of payers and providers should set binding compliance targets, monitor use rates, and have broad authority to implement additional measures to achieve systemwide savings of $30 billion a year.
- Requiring full price transparency: It is common sense that consumers should know how much something costs before treatment. All private insurers and states should provide price information that reflects negotiated discounts with specific providers.
- Empowering nonphysician providers: Restrictive state laws prevent nonphysician providers such as advanced-practice nurses from practicing to the full extent of their training. Making greater use of these providers would expand the workforce supply, which would increase competition and lower prices.
- Prohibiting physician self-referrals: Many studies show that when physicians refer patients to facilities in which they have a financial interest, they drive up costs and may negatively affect the quality of care. Such physician self-referrals should be strictly prohibited.
- Leveraging the Federal Employees Health Benefits Program to drive reform: The program should require participating health plans to reform their payment and delivery systems—including a transition to alternatives to fee-for-service payment.
- Reducing the costs of defensive medicine: Under a “safe harbor,” physicians would be presumed to have no liability for medical malpractice if they adhere to evidence-based clinical practice guidelines and use qualified health information technology.
These solutions are designed to reduce overall health care spending for both public and private payers. By contrast, several recent proposals would simply shift federal spending to individuals, employers, and states—which would ultimately lead many people to forgo necessary care.
“The cut and shift approach advocated by many is fundamentally flawed,” said Sen. Tom Daschle, Senior Fellow at the Center for American Progress. “These ideas represent a better approach that will protect access to necessary care. Most important, they will put us on the path toward an actual health care system.”
Former Centers for Medicare & Medicaid Services Administrator and CAP Senior Fellow Donald Berwick added, “It is both important and completely feasible to reduce health care costs without any harm whatsoever to patients. Indeed, improvement of care is by far the best strategy for making care affordable. These ideas offer many helpful steps toward that goal.”
National health spending is projected to continue to grow faster than the economy, increasing from 18 percent of the economy to about 25 percent by 2037. Even with the new law, federal health spending is projected to increase from 25 percent of total federal spending to about 40 percent by 2037. These trends could squeeze out critical investments in education and infrastructure, contribute to unsustainable debt levels, and constrain wage increases for middle-class workers.
Walmart, the nation’s largest employer, praised this reform agenda as good for business. “These principles are a strong foundation that can set the U.S. health care system on a path of sustainable growth,” said Sally Welborn, Senior Vice President of Benefits at Walmart Stores, Inc. “Businesses in particular have an immediate need for value and innovation so that we have a health care delivery system that rewards quality and efficiency.”
Read the New England Journal of Medicine article: A Systemic Approach to Containing Health Care Spending
Event tomorrow: The experts behind this cost containment plan will discuss their strategies at a CAP event tomorrow, Thursday, August 2 at 10:00 a.m. Click here to RSVP for the event or to watch live streaming footage.
Related resources from the Center for American Progress:
- FACT SHEET: Cutting Health Care Costs: Leading Experts Propose Bold Solutions
- INFOGRAPHIC: America’s High Health Care Costs
To speak with an expert on this topic, please contact Katie Peters at 202.657.0685 or firstname.lastname@example.org.