Why Health Reform is Good for Your Health

In spite of all the hoopla about the U.S. having “the best healthcare in the world”, the dirty little secret is that we don’t. By virtually every measure, the quality of our healthcare is inferior to that of Europeans, Canadians, and Australians, and we pay twice as much. In addition, millions are left without insurance coverage. That, of course, is what the Affordable Care Act (health reform) is all about. And, despite the disinformation and political posturing, that is still what it is about.

Ironically, the poor quality of our healthcare is also the reason it costs so much. Conversely, improving quality is how we can bring costs under control. In fact, it is the only voluntary way we can bring costs under control, and we need to get at it with some sense of urgency.

Our quality problem consists of both waste and inappropriate use of healthcare services. Former Secretary of the Treasury and President of Alcoa, Paul O’Neill believes that administrative and service waste account for 50percent of health care costs. Even conservative experts agree it is at least 25 percent.

Health insurance companies are the prime generators of administrative waste, estimated at 10percent of premiums, primarily through “churning”: the practice of routinely rejecting and requiring resubmission of claims. This is then matched by further waste by the physician’s office resubmitting the bills. Even an office of two practitioners needs a full time person to process bills.

Service waste includes all the inefficiencies we take for granted in health care: duplicating missing tests, x-rays, MRIs, etc., repeating histories, rescheduling, time wasted looking for missing records, equipment and supplies, and, of course, ubiquitous waiting. Another 25 percent.

Inappropriate care accounts for 25-30 percent of health care expenses. At least 30percent of tests and treatments have been shown to be unnecessary – and, therefore, potentially harmful. Conversely, a large study showed that nearly half of Americans fail to receive care that would help them (underuse). Perhaps the most serious underuse is of preventive services, especially aggressive treatment of patients with chronic diseases, like diabetes, to prevent expensive and life-threatening complications. Fewer than half of these, our sickest patients, get the quality of care we know how to give. Because they consume 70 percent of our health care expenditures, providing appropriate care to all of them would save 1000’s of lives and $100’s of billions.

Harm caused by treatment mishaps, such as medication mix-ups and hospital-acquired infections, is the third type of inappropriate care. It adds up to more than a million injuries a year, tens of thousands of unnecessary deaths, and costs of 10’s of billions of dollars annually. Yet impressive gains have been made by some hospitals in eliminating infections and reducing surgical complications and deaths. All hospitals can do it.

The opportunities to dramatically improve the quality of health care are vast. We know how to address all of these quality problems.

But we don’t do it. Why?  Because our fee-for-service payment system offers perverse incentives: it pays more for individual services and less for coordinated, team-based and preventive care. It pays more for doing more, not for doing better.

Under our system, hospitals and doctors only get paid for what they do, whether necessary or unnecessary. They get paid for tests and procedures, and for complications. They make less money when they provide better care that keeps their diabetic and asthma patients out of the hospital. They get paid for specialty care, but not for team care or the coordination needed to manage patients with chronic diseases. If we want to raise quality and lower costs, that has to change.

Amid all the contention and misinformation about the Affordable Care Act, one fact stands out: it alone has the potential to bring about the changes we need to improve quality and cut costs. It includes funds and directives to Medicare for expanding the availability of Accountable Care Organizations. These are healthcare organizations that, for a fixed annual fee, take responsibility for meeting all the health needs of a population – prevention, acute care, emergency care, complex care, wherever it is given. By giving the doctors in the ACO the responsibility for wisely using resources, it gives them the financial incentives to provide care that minimizes complications from disease and keeps patients out of the hospital. It puts the emphasis on value, not on volume.

Will it be smooth or easy? Of course not. Moving from a highly-entrenched system that handsomely rewards hospitals and caregivers for volume to an efficient system that rewards quality will be slow and difficult. But the process has begun. We know a lot about how to do this, and we will learn more as we go. But, if you are still skeptical, consider this: we have no “Plan B”.

Lucian L. Leape is Adjunct Professor of Health Policy at the Harvard School of Public Health.