The Foundry

Senators Max Baucus and Charles Grassley, the Chairman and Ranking Member respectively of the powerful Senate Committee on Finance have just delivered an indictment of the current health care system, including, strangely enough, the traditional Medicare program that top liberal health policy analysts and many in Congress want to use as the model of a new public health plan. The Baucus/Grassley policy options on Transforming the Health Care Delivery System: Proposals to Improve Patient Care and Reduce Health Care Costs shows:

• Senator Baucus agrees with conservative policy analysts. Including those of the Heritage Foundation that the traditional Medicare Fee-for-Service model is broken and should be abandoned. This goes against the traditional grain of congressional policy-making, which has sustained and protected the Medicare payment system from any serious market-based reform, including competitive bidding for medical equipment and supplies

• But knowing the current system is broken and knowing how to fix it are two different things. The Options paper has a recurring theme: “we don’t really know, so let’s try everything.” This is, however, an admission that serious reform, thinking through the consequences of different proposals, is further off than what proponents have been willing to concede, at least in public.
• The Options look like a giant maze of dead ends and back-tracking. New payment models will take years to develop which means there will not be savings generated to offset the cost. For example, final rules on hospital readmissions and bundled rates won’t occur until August 2016. A question, raised by Senator Baucus himself, is whether federal health care bureaucracy, the Centers for Medicare and Medicaid Services (CMS), certainly as it is currently constituted, is really up to the task of comprehensive reform.
• Congress can be expected to shift the responsibility onto to somebody else for making a lot of key, but crucial decisions, that will affect millions of Americans. So much authority is left to the Secretary of Health and Human Services that provisions could either save money or cost more than the current system. At this point, who knows? The lack of details and decisions means the Congressional Budget Office (CBO) will not be able to score many of the provisions. For example, there do not appear to be any substantial savings from “comparative effectiveness,” recently funded in the giant Stimulus Package. But proponents have insisted that this provision is a significant way of paying for the legislation. Really? Without a complete score, it is difficult to produce the supporting materials necessary for Members of Congress to understand what it is exactly they are voting on.
• The options are heavily dependent on the federal bureaucracy to fill in the many blanks. This presents an immediate problem for the Senate to proceed under Reconciliation rules, if that is what the Senate leadership decides to do. Without a fiscal impact, whole provisions will simply be dropped under the so-called “Byrd Rule,” the parliamentary rule for striking inappropriate provisions in the Budget reconciliation bill.
• There are little signs of support in the Baucus-Grassley document for serious marketplace competition. But just as the reader thinks the authors have embraced market competition, they back off. Nice things are said about Accountable Care Organizations (ACOs). These are among the latest buzz words of health reform. Health care reform generates lots of “buzz words” and lots of bumper stickers, promising ordinary Americans all kinds of good things at low cost. But how do ACOs differ from Provider Service Networks (PSNs) that have already been tried with mixed results? Will they be considered a type of managed care, subject to the same rules as competitors? There are more nice words for medical homes. But what do they mean for solo practitioners? If medical homes and ACOs are good and both are provider-driven models, why, then are physician specialty hospitals, which are high performing institutions, bad?
• Finally, health care reform has been touted as a centerpiece of our economic recovery. That deserves some serious testing, and perhaps a competent second opinion from serious economists. It could just as well be a job-killing, anti-recovery exercise in the short-term, especially with new taxes and mandates on businesses. And as for the health care industry, why will anyone invest in any part of the health care system unless and until they know their investment will survive reform? Money goes where there is at least stability if not certainty. Judging by the Finance Committee paper, health care reform is going to be no easy task. And remember, Congress is perfectly capable of making things worse. They have done it before, and they can do it again.