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The Commonwealth Fund Commission on a High Performance Health System, in its new report, The Path to a High Performance U.S. Health System (Path proposal),1 has endorsed a set of health care policies that would produce savings for the system: the creation of a national health insurance exchange with a choice of private plans and a new public-plan option; investment in systemic changes, such as accelerated adoption of health information technology and health insurance benefits that are based on evidence of the comparative effectiveness of treatment options; realignment of incentives for health care providers under Medicare and the public plan to encourage accountability for patient outcomes and prudent use of resources; and public health measures, including increasing taxes on harmful products as a way of combating smoking and obesity. All these policies would require substantial changes in the financing and delivery of health care, and all would be politically difficult to accomplish. Estimates of the effect of this proposal on the trajectory of health care spending and coverage were prepared with the use of a health-benefits-simulation model and assumptions derived from the literature.2
Inclusion in the national insurance exchange of a public-plan option that would be open to businesses and individuals is key to achieving savings. Medicare has lower administrative costs and provider-payment rates than fee-for-service commercial insurers; if private plans did not bring down rates, a new public-plan option could offer premiums that would be 20 to 30% lower than commercial rates for similar benefits.1 To be competitive, private insurers would need to become more efficient and work with providers to integrate, coordinate, and redesign care to treat chronic conditions more effectively and avert preventable hospitalizations, complications, and readmissions.
Up-front investments that are key to long-term savings and improved performance include those designed to accelerate adoption of health information technology and evidence-based care. Under the Path proposal, an assessment on private insurers of 1% of premiums, plus an equal proportion of projected Medicare spending, would provide about $13 billion per year to assist safety-net, rural, and small medical practices in adopting information technology and establish a national electronic network to facilitate the exchange of patient health information. Similarly, an assessment on private insurers of 0.05% of premiums, along with the same proportion of projected Medicare and Medicaid spending, would generate about $14 billion through 2020 for research, undertaken by a newly established center for comparative effectiveness, to evaluate devices, drugs, procedures, and other treatments in order to encourage the use of cost-effective therapies.
Achieving substantial savings in care delivery will require payment reforms in both the public and private sectors. The Path proposal would increase payment for primary care services by 5% through revision of the Medicare fee schedule; encourage adoption of the "medical home" model to promote coordinated care; implement a global case rate for episodes of acute hospital care, including follow-up care; and correct overpayments for prescription drugs and other services to align payments with value.
Substantial savings could be achieved by eliminating excess payments to Medicare Advantage plans relative to the costs of traditional Medicare.3 Prices that are paid for prescription drugs in the United States continue to be well in excess of those paid in other countries.4 In addition, other countries are more advanced in assessing the cost-effectiveness of treatments and basing prices on the lowest-cost treatment with equivalent effectiveness.5
The Path proposal also calls for strategies to improve public health, including increasing the federal excise tax on cigarettes by $2 a pack, instituting a new federal tax on sugar-sweetened soft drinks of 1 cent per 12 oz, and increasing the federal excise tax on beer by 5 cents per 12-oz can and on other alcohol products by proportional amounts. A portion of these tax revenues would be used to fund state and local public health initiatives.
Our analysis of these proposals indicates that reform that simultaneously improves coverage, quality, and efficiency can lead to better health and economic security for American families. The inclusion of an individual mandate to obtain coverage, along with income-related assistance in paying premiums and expanded coverage under Medicaid and SCHIP, would lead to near-universal coverage, with only 4 million people, or 1% of the U.S. population, uninsured in 2020, instead of a projected increase to 61 million under current policies.1
Equally important, the projected growth in annual national health expenditures through 2020 would slow from 6.7% to 5.5% — resulting in cumulative savings of $3 trillion over 11 years. These savings, while representing approximately 7% of the $42 trillion in health care spending that is currently projected through 2020, would reduce expenditures in that year from 21% of the gross domestic product to 18%.
The cumulative cost to the federal budget of expanding coverage alone is $1.9 trillion over the same 11-year period (see Table 1). Though difficult to achieve, the above-mentioned reforms — in the context of a coverage expansion that broadened the potential effect by increasing the number of patients to whom the reforms apply and eliminating the need for cross-subsidies and a patchwork of public policies now used to offset the costs of care for the uninsured — could offset more than two thirds of the incremental costs in the federal budget.
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No potential conflict of interest relevant to this article was reported.
Source Information
Dr. Davis is the president of the Commonwealth Fund, New York.
This article (10.1056/NEJMp0900309) was published at NEJM.org on February 19, 2009.
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