What is Happening to the Reform in Health Reform?

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That’s the subject of my story in the newest issue of dead-tree TIME, which looks at some of the ways that Congress is already undercutting many of the promised reforms in the health care system. As is often the case when politicians and interest groups get hold of a big and complicated piece of legislation, you have to look deep into the fine print to figure out what is really going on.

A couple of provisions that have been quietly inserted in the Senate bill are causing no small amount of heartburn in the Obama White House at the moment, because they call into question whether some of the most crucial reforms called for in the legislation will ever actually happen:

One has to do with the much-touted independent Medicare commission. This is something that OMB Director Peter Orszag has often called a “game changer.” Health adviser Nancy-Ann DeParle says its importance “can’t be overstated. … That’ll have huge impact, we think, on future spending growth.” But look at what has happened to it behind the scenes:

When Obama began his push for reform, he asked Congress to create an independent commission to regulate Medicare costs. Medicare, which spends more than $450 billion a year, is such a huge health care player that any changes it makes can lead the way for reforms in the private market. As originally envisioned, the new agency would essentially take over Congress’s current authority to set Medicare payment rates for hospitals, doctors, nursing homes and other health care providers. It would use a process like the military-base-closing commission, whose recommendations automatically go into effect unless Congress votes to block them.

As it turns out, however, lawmakers are reluctant to cede the power to steer extra money to hospitals in their own districts, and the House rejected the commission idea outright. While the Senate bill does contain a version of the commission, it has become weaker at every turn in the process. Under a deal to win hospitals’ support for the bill, the Senate Finance Committee agreed they would be exempt from the commission’s recommendations at least through 2019; doctors, hospices and medical-equipment suppliers would be beyond its reach entirely. Who is left? Maybe no one. “The exception for hospitals and other providers is fundamentally counter to the goals of the original bill, and I will work to see that it is removed,” says Senator Jay Rockefeller, chairman of the Finance Committee’s health care subcommittee and an original proponent of the idea. “A watered-down approach to fixing Medicare simply will not work.”

Even more damaging in the view of many reformers is a little-noticed deal that Senate majority leader Harry Reid cut to get the support he needed to bring the bill to the floor of his chamber. The original Finance Committee bill would have triggered the commission’s recommendations whenever the rate of increase in Medicare spending outpaced overall economic growth — something that happens almost every year. But the current version would allow it to make recommendations only when Medicare spending per capita grows faster than overall health costs. That almost never occurs. The change in economic measuring sounds technical. In effect, however, it “turns off the commission” before it even begins, says a senior congressional aide.

Several sources say Reid made the change in part at the pleading of former Congresswoman Barbara Kennelly, who runs the National Committee to Preserve Social Security & Medicare, a powerful senior-citizens advocacy group. “We don’t think there ought to be a commission at all — period,” says Maria Freese, the organization’s director of government relations. “This is not supposed to be a bill that shrinks Medicare.” Administration officials are working to get the teeth restored to the commission idea — “We’ve got to have it,” says an official — but that will be a huge challenge. The White House will need to find 60 Senate votes to reinsert the provision and faces another big battle when the bill reaches a conference committee with the House.

And then there are the myriad of “pilot projects” in the bill. You can argue that it makes sense to test out dramatic new ways of doing things before you put them into effect on a big scale–though many health experts say there is already plenty of evidence out there already for many of them.

In the past, however, even the most successful pilot projects rarely have made the leap from the drawing board to the real world. One of the more notorious examples of this in recent years was the concept of Medicare using competitive bidding to purchase durable medical equipment. The savings shown in demonstration projects in Texas and Florida were so impressive that HHS ordered the policy to be implemented nationwide. But that never happened. Why? Because the industry got Congress to block it.

That’s why this bill was supposedly going to give the HHS secretary more authority to act on her own. But if you look deep into the legislation, you discover that the Senate–and its medical industry allies–don’t want to let that happen on some of the more ambitious pilot projects:

While the legislation would give the Health and Human Services Secretary more authority than she has now to put some pilot programs into effect, the Senate is already putting the brakes on some of the more innovative ideas. Under its version of the bill, three of the pilot programs that have the most potential to transform health care would require congressional approval before the Secretary could apply them to Medicare nationally. The first is known as “accountable care organizations,” an arrangement in which hospitals, primary-care doctors and potentially other medical professionals would have to coordinate care for their shared Medicare patients. All would be held accountable for the results and share in any cost savings. The second is the concept of “bundling” payments. Under that system, hospitals, doctors and other providers would get paid a set fee for a single episode of care — say, bypass surgery — and everyone would have to divide it up. The third is giving patients a “medical home” — another way of ensuring greater coordination among health care providers.

All of those concepts would break the traditional fee-for-service model, in which the more treatment doctors and hospitals give, the more they get paid — regardless of whether what they are doing is necessary or even beneficial for the patient. And each is likely to draw heavy flak from health care providers who see their autonomy — and their incomes — in jeopardy.

You could also argue that Congress is making only a half-hearted effort to enforce some of the changes that actually are in the bill. Our friend Jon Cohn offered a very good example recently with regard to hospital infections, a largely avoidable problem kills tens of thousands of Americans every year:

In a now-famous study of Michigan hospitals, a physician named Peter Pronovost was able to reduce the rate of in-hospital infection nearly to zero, simply by creating a checklist with these steps and then having hospitals empower nurses to enforce it. The reduction took place in big hospitals and small ones, urban and rural, famous teaching institutions and obscure community establishments. In short, the strategy worked everywhere, which means it ought to work anywhere.

These sort of hospital infections kill as many as 20,000 people a year. And they cost a lot of money to treat. Each episode requires about $45,000 a year in overall spending, which adds up to more than $2 billion a year by some estimates. Getting doctors and hospitals to adopt the anti-infection strategy should be, as Atul Gawande has observed in the New Yorker, a “no-brainer.”

Listening to the health care debate, you might think that Congress agrees. The proponents of reform talk all the time about improving the quality of care, both to save lives and make it less expensive, and frequently cite hospital infections to make their point. (Even opponents of reform have been known to agree on this front.) And the bills they’ve moved through the legislative process supposedly follow through on this.

But if you look closely at the legislation, you’ll see that the proposals fall a bit short on that promise. The bill that passed the House of Representatives last month does have a section on reducing infections–and, smartly, it applies not only to hospitals but also to out-patient clinics, which are prone to the same problems. But the House bill requires only that hospitals and clinics report the incidence of disease. The bill doesn’t attach financial rewards or penalties to the results.

The Senate bill Majority Leader Harry Reid just introduced is a bit better on that front. It establishes a monetary penalty designed to prod hospitals in the right direction: Medicare would reduce payments to hospitals whose infection rates put them in the worst quartile nationwide. But the penalty is tiny: Just one percent. And, unlike the House, the Senate chose not to extend the penalty to outpatient clinics.

We have now reached the point in the messy legislative where you have to ask: Are these guys really serious? That, unfortunately, remains to be seen.

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