Medical Device Daily Washington Editor
WASHINGTON — The mood at the Willard Hotel here in the nation's capital, the site of yesterday's health reform session sponsored by the health policy monthly Health Affairs, was perhaps best distilled in comments overheard before the session began. "Are you ready for serious reform?" one attendee asked another. "Oh, I'm ready," came the ardent response.
Still, some observers believe the pace of reform is likely to be incremental despite the enthusiasm at such gatherings. Skeptics of healthcare reform were not in abundance at the session, which included more rhetoric on healthcare from representatives of Sens. Clinton, McCain and Obama, but the skeptics did have a representative on the dais in the person of the director of the Congressional Budget Office (CBO), Peter Orszag.
Orszag made the case during his discussion that none of the healthplans offered by the presidential candidates addressed the fundamental problem of healthcare — which he said is cost — in a meaningful way.
Orszag said that CBO is putting a lot more effort into its analysis of healthcare, partly because it is such a large portion of the overall economy. CBO, he said, "is significantly expanding our healthcare staff" from 30 full-time equivalents to 47. The agency is also "putting together two significant volumes" slated for release by the end of the year that review all the big issues in healthcare, including care coordination and disease management.
"I'd also note that we're spending a lot of time with the Joint Committee on Taxation," he said, adding that coordination between CBO and the Joint Committee, a group of legislators who keep an eye on the impact of taxes on the economy, "is critically important to make sure that he underlying behavioral assumptions are consistent."
Orszag said "the rate at which healthcare costs grow is the key to our fiscal future," given the size of the healthcare economy in proportion to the overall economy. However, he reminded attendees that most of the projected growth in Medicare and Medicaid growth is not from the addition of more people to the rolls, but the higher costs per beneficiary, assuming that current rates of healthcare inflation hold.
"Until we get that basic fact in our heads," he said, reforms will do little but nibble at the margins, if that.
On the other hand, "embedded in that fact ... is the single biggest opportunity to improve economic efficiency in the United States," the CBO director said, stating that a CBO analysis indicated that about $700 billion a year could be trimmed from healthcare spending if waste and redundancy were eliminated. He described this as "a very substantial opportunity."
"That [fact] doesn't seem to be generating much action" in Washington because the problem is a "gradual long-term problem" that doesn't feed the polls and election booths, Orszag said. He also referred to a recent study that indicated that St. Mary's Hospital, a unit of the Mayo Clinic (both Rochester, Minnesota) spends an average of about $53,000 per patient over the last two years of life, a stark contrast to the $93,000 said to be spent by the University of California at Los Angeles Medical Center (Los Angeles) for the same group of patients.
"All of you in this room are paying for that difference today," Orszag said.
Orszag also highlighted a healthcare conundrum that is rarely discussed: "The backlash that we hear about out-of-pocket spending is striking when you realize" that it accounts for only 15% of total healthcare spending.
Policymakers need "far more information about what works and what doesn't," Orszag said, adding that like so many others, he is of the opinion that "we need to change our financial incentives" in order to make reimbursement sensible.
So how does a policymaker rationally approach healthcare reform? "I think we need a little less Economics 101 and a little more Psychology 101," Orszag said, adding that behavior "can matter a lot more [than financial incentives], at least on the beneficiary side."
In reference to the tax-free status of healthcare premiums, Orszag said "taxes are important, but one danger of looking at the tax code is that it perpetuates the myth that financial incentives on both the provider side and patient side" can single-handedly convert an irrational system into a rational one.
"I would be much more inclined to look at what the default was for how we are funneled into [healthcare] plans," he said. Orszag said that if Medicare beneficiaries were automatically enrolled into the lowest cost Part D plan, substantial savings might accrue. He gave the example of automatic enrollment in a 401(k) retirement plan as one that has had a salutary effect on the savings rate in the U.S.
Orszag gave another example, that of routine vaccination for influenza. He stated that a simple reminder is not nearly as effective at prompting compliance as a reminder that gives a specific date and location for the vaccination.
"Inertia is an incredibly powerful force, more powerful than financial incentives," Orszag said in reference to patient behaviors.
Healthcare information technology (HIT) is not likely to change the cost landscape anytime soon, either. Orszag described HIT as "unlikely to be the panacea" it is sometimes touted as. "Without a change in incentives and how the structure is used, just plopping" HIT into medical practice will have little effect, he said.
Orszag also said of the healthcare reform plans offered by the candidates for the White House that none "would restore long-term balance to Medicare and Medicaid."