Herdt: The next step in health reform

Even as most of the nation was focused on the U.S. Supreme Court case that could potentially throw implementation of the Affordable Care Act into chaos, health policy experts from the two states that are arguably most committed to its success came together in Sacramento last week to talk about the next big step.

Now that access to insurance has been dramatically expanded, now that coverage provided by insurance policies has been standardized, what can be done to keep health care costs under control?

It is a question ripe for scrutiny. In a report last year on potential solutions, the Washington, D.C.-based West Health Policy Center acknowledged the status quo: 'There is broad consensus among health policy experts that U.S. health spending is inappropriately high and the health care system is woefully inefficient.'

The issue of cost containment is at the top of the agenda these days in California, which has embraced federal health reform as aggressively as any state, and in Massachusetts, which got a head start on the nation by adopting a state-run system similar to the federal plan in 2006. The open secret about the Affordable Care Act is that the fragile political coalition that enabled its narrow passage would have fractured had it attempted to do much to tackle runaway costs.

Largely as the result of good timing, however, the rates of medical inflation and insurance premium increases have calmed since the act was passed in 2010.

That's good, but cycles of rapid increases followed by periods of relative stability have come and gone before.

'We're in a valley right now,' said David Seltz, executive director of the Massachusetts Health Policy Commission. 'How can we make this valley sustainable?'

Among the answers offered by experts from both coasts:

1. Create financial incentives that reward hospitals and medical groups based not on how many procedures and tests they administer to patients, but rather on how well they succeed in improving patients' health.

2. Make both pricing and treatment outcomes more transparent, so that patients can shop for cost and quality.

To implement either requires an abundance of information. 'The big stick,' said Dolores Mitchell, executive director of the Massachusetts Group Insurance Commission, 'is data and the willingness to use it.'

She described an initiative undertaken by her agency in which every physician in a health plan is evaluated and assigned a tier score. Patients are then rewarded with lower co-pays if they select a Tier 1 doctor.

'Medical professionals were not wild about this, nor were they properly grateful about receiving all this data about their performance,' Mitchell said.

The West Center's study asserted better use of price and outcome data has significant potential: 'Using state all-payer claims databases to gather and report hospital-specific prices might reduce spending by an estimated $61 billion over 10 years.'

In California this year, state Sen. Ed Hernandez, D-West Covina, has introduced legislation to create just such an all-payer database. Anthony Wright, executive director of the consumer advocacy group Health Access, said it is the goal of California policymakers 'to get data, analytics and become the 'Moneyball' for health care.'

Dana Gelb Safran, an executive with Blue Cross Blue Shield of Massachusetts, spoke of how a commitment to analyzing data about patients, treatments and outcomes has produced outstanding results among providers who sign 'alternative quality contracts.'

'Provider organizations agree to be accountable for patients across the full continuum of care,' she said. 'There is a very significant opportunity to earn based on quality outcomes and patient-care experiences.'

Her assessment of the results: 'Never in 30 years have I seen anything that improved quality to such magnitude or breadth.' And on the other side of the ledger, she noted: Cost increases that are 10 percent below national benchmarks after four years — even after paying providers 'generous bonuses' for meeting performance targets.

For all that has been said about the Affordable Care Act, it was hardly revolutionary. It tweaked an existing private-insurance system to ensure that everyone could buy, was required to buy and could afford a policy that provided adequate benefits. Not much more than that.

The next step — to keep the world's most expensive health care system in check — will be much more challenging. For decades, American health care, funded by third-party payers, largely disregarded costs.

If California or Massachusetts or any state can craft health reforms that transform the approach of providers so that it is in their self-interest to deliver the best care at the least cost — well, that would be revolutionary.

Timm Herdt is a columnist for the Ventura County Star.