What is the formula for sustainable healthcare reform?

May 18 2009

A new report, released today by the Manhattan Institute's Center for Medical Progress and authored Douglas Holtz-Eakin, the former Director of the Congressional Budget Office, makes the fiscal and political case for bipartisan healthcare reform.

Holtz-Eakin addresses dysfunctions in the existing healthcare delivery system; provides solutions to expanding access to affordable private health insurance in an incremental and fiscally responsible manner; and shows how improving market-based options will lead to better consumer access to information on healthcare quality. He argues that the only way to fix our broken healthcare system is through reforms that incentivize competition and pay for quality care.

Principle 1: It's about value. Any reform that does not address low-value care and cost growth will fail. Reforms consisting of a mandate to purchase insurance, in the absence of changes to the growth in health-care spending, would become increasingly expensive.

Anticipated reforms:

• Medicare and Medicaid payment reforms
• reduce payment for readmissions and other low-quality care
• reduce the subsidy in Medicare for high-income individuals
• medical malpractice reform
• Development of a pathway for follow-on biologics.

Principle 2: A rising tide of quality insurance. The focus on covering the uninsured should be on a process that leads to increasing insurance. This is very different from an immediate move to universal coverage or other massive expansion. State-based approaches are the recommended vehicle for finding the best way to cover the uninsured.

Principle 3: Private money, private insurance. Increasing coverage does not mean larger government programs. Instead, it should mean better and broader private health insurance for the U.S. population. Accordingly, there should be a firewall that does not permit new taxes or other private resources (fees, costs of complying with mandates, etc.) to be devoted to a "tax and spend" government-centric health-care reform.

Anticipated reforms for Principles 2 and 3:

• The federal government should reform the subsidy for private health insurance.
• The exclusion should be eliminated and re­placed with a flat credit of $4,500 (indexed for CPI inflation) for those who have private health insurance
• States should be permitted to allow Medicaid funds to be used for enrollment in private health insurance

Principle 4: No more blind leading the sick. Families, providers, device manufacturers, hospitals, drug companies, and other participants in the U.S. health-care system interact in a complex and often baffling fashion. We must ensure that all participants understand their options, the cost implications of their options, and the likely health or economic consequences of their decisions.

Anticipated reform:

• Increase the penetration of health information technologies throughout the system with a business model that supports the use of such technologies
• Transforming the payment system to reward coordination, quality, and low cost will create a business model for health information technology, for private-sector incentives to invest in these technologies, and for greater diffusion of information throughout the system.

These reforms will gradually expand access to affordable, private health insurance; reduce waste and improve access to high-quality health care; and commit policymakers to fiscally sustainable health-care reforms.