Conclusions

Moving forward on a comprehensive reform agenda and making significant progress quickly require major changes. In a care system that touches so many lives and generates over $2 trillion in revenue per year, such changes will be very difficult to make. Yet, if we fail to act now with bold reforms, the situation we face in the future will be much worse.

The insurance design, including the exchange and new public plan, seeks a dynamic, competitive strategy that retains a mixed private and public insurance system, with the best of what each sector has to offer. The challenge will be achieving a balance in which the public and private plans compete within market rules or regulations that stimulate innovation and outcomes in the public interest. It will be important to develop a mechanism to set the price point and payment policies in a nonarbitrary fashion. The goal should be to provide incentives and support for high-quality and efficient care systems, with rational public and private insurance payment policies. The Commission will continue to explore and address this issue in upcoming reports.

It will take time and flexibility to develop innovative payment reforms to stimulate the kinds of delivery system changes needed. Currently, public programs like Medicare, the Civilian Health and Medical Program of the Uniformed Services, and the Federal Employees Health Benefits Program set payment policies in multiple ways. If the new public plan and Medicare are to support improved performance, they will need the authority and flexibility to act on behalf of beneficiaries, with targets set by Congress and the President. This will also require accountability for preserving and enhancing access and health outcomes. A new national health council, Medicare board, or other mechanism will be necessary to enable Medicare and the new public plan to serve as prudent purchasers, to facilitate and spread innovative payment policies, and to collaborate with private and other public payers within a multipayer system.

Significant reform will also be needed to change the way we pay for care to focus on value and to set up a national exchange in which all insurers agree to accept everyone and charge the same premium, regardless of health. Providing positive incentives for patients to seek high-quality, effective care and assess alternatives will require investment in information systems, public reporting, and support for evidence-based medicine and mechanisms for applying that evidence.

Overall, moving on a path to high performance will require that we, as a nation, reach consensus that the status quo is not acceptable. It will require bold action on behalf of the greater good of the population, health outcomes, and economic security. Successful implementation of effective policies will require leadership with authority to act and collaboration across sectors to achieve targets and goals.

The results presented in this report underscore several key themes and build on the Commission's earlier analysis of strategies to achieve a high performance system:

• We should aim high. Better access and health outcomes, along with slower cost growth, are possible. It is urgent to start now. The consequences of maintaining the status quo—in terms of both human and economic costs—put the nation at risk. Early action has the potential for substantial cumulative benefits. Delay increases the magnitude of the problems. We cannot afford to continue on our current path.
• A comprehensive system approach is essential. We need to simultaneously expand coverage and take bold action to improve quality and efficiency. There is no "magic bullet" that can alone address rising costs, access, and quality. A coherent set of policies aimed at misaligned incentives, an information deficit, and structural flaws that drive costs up and drag outcomes down is necessary to improve.
• Better information is a key to improved performance. We need to invest for the future. Improving the health system requires a clinical information system to support patients and clinicians; better evidence on the effectiveness of treatments, drugs, and devices; and information to compare performance at the national, community, and provider levels.
• Insurance provides an essential foundation for payment and system reforms. If designed to ensure access and improve insurance efficiency, coverage expansion provides a base for payment and system changes that create more consistent signals and drive delivery systems to higher performance. Benefit design can provide incentives for preventive care and essential care for chronic disease. Less fragmented coverage enables purchasing leverage for change. Universal coverage, coupled with payment and system reforms, would provide a catalyst for significant gains in value.
• Value means more than savings. Higher value includes improvements in quality, equity, access, and healthy lives, in addition to savings. The potential to improve health outcomes, not just savings, should drive decisions for the future.
• Achieving high performance will require all stakeholders to take part in solutions and come together to focus on the gains for patients and the nation. Expanding coverage to everyone, improving performance, and achieving national health system savings will not be easy. It will require a shift in the way we pay for and deliver care, as well as major insurance reforms. Payers and providers must address current payment inequities and reach consensus on reforms to support efficient, high-value care.
• Leadership is critical. Building consensus requires leadership and public-private collaboration. Successful implementation of effective policies requires leadership with authority to act and collaboration across sectors to achieve targets and goals.

As a nation, we all gain by moving in new directions to expand coverage and implement payment and system reforms, with a focus on improving health, patient experiences, and value. The stakes are high if we fail to act.

Windows of opportunity for real health reform do not stay open for long. While the challenge is daunting, it is imperative that our new federal leadership move swiftly to change direction and put the U.S. health system on the path to high performance.

---

Summary of Policy Modeling Specifications for Coverage and Cost Estimates

---

Coverage

• National Health Insurance Exchange. Offers businesses and individuals a choice of private plans and a new public plan, phased in by size of firm with all eligible by 2014. Premium of the public plan would be community rated within broad age bands. Benefits are similar to the standard option in the Federal Employees Health Benefits Program. The plan would use Medicare's claims administrative structure and reformed payment methods and rates.
• Individual Mandate. All individuals are required to obtain coverage.
• Affordability. Premiums are capped at 5 percent of income for low-income individuals and 10 percent of income for those in higher-income tax brackets.
• Shared Financial Responsibility. Employers are required to provide coverage or contribute to a trust fund. The example used in the model included 7 percent of payroll, up to $1.25 an hour.
• Medicaid/SCHIP Expansion. All individuals with incomes up to 150 percent of the federal poverty income level are eligible for Medicaid acute care benefits. Medicaid provider payment rates are raised to Medicare levels. The federal matching rate is increased to offset state costs.
• Medicare. The two-year waiting period for coverage of the disabled is eliminated. Medicare beneficiaries are offered a supplement with the same acute care benefits as in new public plan and premium affordability provisions.
• Insurance Market Reforms. Require community-rate premiums (age bands permitted) and guaranteed issue and renewal of policies. Premium and insurance information would be publicly available on the Web.

Payment Reform: Aligning Incentives to Enhance Value

• Enhance Payment for Primary Care. Increase Medicare payments for primary care by 5 percent and apply differential updates for primary care and other care.
• Encourage Development and Spread of Patient-Centered Medical Homes. Provide payment per patient in addition to fee-for-service to practices qualified to provide patient-centered care. Reduced premiums and cost-sharing available to patients who designate a primary care practice as their medical home. Shared savings would be distributed on the basis of performance.
• Bundled Payments for Acute Care Episodes. Expand acute care payment to include services during the hospital stay and 30 days post-discharge in a global fee. The policy would be phased in, starting with inpatient services in 2010, then post-acute care in 2013, and hospital inpatient and outpatient physician care in 2016.
• Correcting Price Signals. Modify payments by: 1) slowing the rate of Medicare payment updates in geographic areas with high costs; 2) reducing prescription drug costs by having Medicare pay Medicaid prices for drugs used by dually eligible beneficiaries and determining Medicare payments for unique drugs with effective monopolies based on prices paid in other countries; and 3) resetting benchmarks for Medicare Advantage plans in each county to projected per-capita spending under traditional Medicare.

Investing in Information Infrastructure

• Accelerate the Adoption and Use of Health Information Technology. Require all providers to report key health outcomes electronically by 2015 to qualify for payment updates. Provide funding to support health information networks and assistance for safety-net providers and small practices through a 1 percent assessment on insurance premiums and Medicare outlays.
• Center for Medical Effectiveness and Health Care Decision-Making. Create a mechanism to develop information on the clinical and cost-effectiveness of alternative treatment options. Fund the Center with a .05 percent assessment on insurance premiums and Medicare and Medicaid spending. Use the information in benefit designs with higher out-of-pocket costs or differential pricing depending on comparative effectiveness and include physician-patient shared decision-making.

Promoting Health and Disease Prevention

• Reduce Tobacco Use. Increase federal taxes on tobacco products by $2 per pack of cigarettes. Use revenues to fund public health programs and insurance expansion.
• Reduce Obesity and Alcohol Use. Establish a new tax on sugar-sweetened soft drinks of 1 cent per 12-ounces to finance state obesity prevention programs, and increase the federal excise tax on alcohol by 5 cents per 12-ounce can of beer, with proportionate increases on other alcohol products. Use funds for prevention and insurance expansion.

Methodology Note: Modeling the Commission recommendations required detailed specifications for each of the policy approaches. The above specifications were used for illustrative purposes. Recognizing that multiple policy variations are feasible for key policy reforms, the Commission endorses the strategic approaches rather than the specific policy parameters used to model potential effects. The main report provides further detail. The Lewin Group technical report, The Path to a High Performance U.S. Health System: Technical Documentation, is available online at www.Lewin.com for data and parameters used to estimate 2010–2020 impacts.