Missed Opportunities to Control Future Healthcare Costs in the House Healthcare Reform Bill

It is generally agreed that the recently passed House Reform Bill will cause healthcare costs to explode. Providing more people with insurance coverage and making certain services free to the patient (e.g. there will be no cost sharing for preventive services) will cause an explosion in demand. As the Massachusetts experiment has shown, the only restraint on the increase in demand will be the shortage of physicians, especially primary care physicians.

This is not to say that none of the provisions in the Bill address healthcare costs. It is worth reviewing some of these provisions.

Reducing Fraud and Abuse:

The Bill increases funding for fraud and abuse investigations. Congress learned in the 1990s after passage of the Kennedy-Kassenbaum Bill that there is potentially a lot of money to be recovered from misbehaving providers committing Medicare fraud. There have definitely been some egregious cases of fraud where providers have engaged in scams to get Medicare reimbursement for fictitious services. For the most part, however, this fraud is small dollar fraud relative to the size of the Medicare budget. The big recoveries have come from cases where the fraud was dubious at best and at worst were attacks on specific industries or companies. The actions against lab companies, home health agencies, dialysis companies, and Columbia/HCA in the 1990s and early 2000s come to mind. The accusations mostly involved different interpretations of various regulations between Medicare and the providers. In most of the cases, the government decided to go after providers for long established practices that were well known. This is not true fraud and speaks more to the complexity of Medicare’s regulations and the government’s incompetence than anything else. If the government goes after major recoveries based on “new” interpretations of what is acceptable practice, no cost reductions are being accomplished. Medicare will recover the funds, but the providers will have to seek other revenues to replace what is lost and cover the fines. As they have for 50 years, they will look to private insurers (if they are still around). This is cost shifting, not cost reduction.

Establishing Clinical Standards:

Perhaps the more interesting cost-control provision of the Bill establishes a Center for Comparative Research inside the Agency for Healthcare Research and Quality. The purpose of this new Center is “to identify the manner in which diseases, disorders, and other health conditions can most effectively and appropriately be prevented, diagnosed, treated and managed clinically” i.e. this Center will be establishing new clinical standards. For opponents of the Bill, this Center is the dreaded “Death Panel”. They fear that the Center and its related Commission inevitably would establish standards that limit care for cost reasons. However, to avoid this criticism, the following language was added to the Bill:

“Nothing in this section shall be construed to permit the Center or Commission to mandate coverage, reimbursement or other policies for public or private payers.”

“Nothing in this section shall be construed to authorize any Federal officer or employee to exercise any supervision or control over the practice of medicine.”

The Bill’s opponents can decide whether these latter two provisions provide enough security from the federal government meddling in people’s healthcare decisions. From my perspective, it is simply a missed opportunity for the government to initiate some meaningful reform. The lack of consistently applied and dynamic clinical standards is perhaps the greatest weaknesses of the healthcare system today. No other industry operates in such a manner. This lack of standards makes it impossible for insurers to adequately describe what they cover (or do not cover) and for patients to understand what they should expect from their providers. This vacuum leaves the door wide open for attorneys to sue providers and insurers for their decisions when their client did not get the desired outcome. Without standards, there is always an “expert” available to say that the care could have been better. The lack of standards also allows many medical device and pharmaceutical companies to market inferior, more expensive, and sometimes even ineffective therapies in partnership with bought off medical researchers.

While undertaking comprehensive healthcare reform, the government has a real opportunity to bring some discipline to the provision of medical services. The physician’s decision to order tests or treatments is always an exercise in probability. The current system that exposes doctors to severe malpractice risks and financially protects patients from the cost of their care leads physicians to order tests and treatments that have a low probability of providing useful information or getting effective results. Clinical standards that are developed after consideration of clinical probabilities and costs of various treatment alternatives could be very helpful to physicians. While physicians have been generally resistant to these efforts, I believe their concerns can be addressed. If the standards are tied into protection from baseless malpractice suits, physicians will be more open to the idea. The process for setting standards would have to be dynamic so that they change as new technology and information become available. They would also have to clearly indicate where physician judgment is necessary. Most importantly, insurance companies should be allowed to make coverage decisions based on these standards. Their decisions could be reviewed by an outside panel where there is disagreement. Because the standards would be based on an evaluation of probabilities, patients should always be allowed to pay for tests and treatments that are not within the standards. Research companies could also pay for “non-covered” services for their purposes.

It is absurd to think that when the government gets to the point that it is paying 60 to 70% (whether this is appropriate is another discussion) of the nation’s healthcare bill that it should not make decisions about the value of what is being purchased. It is the same discretion that any intelligent person exercises when a significant purchase is being considered. Unfortunately, the House Bill is setting up the scenario where the government will eventually pay a large percentage of the nation’s healthcare bill and have to forego a valuable tool to manage its expenditures. It is a missed opportunity.