Editorial: Payment is key in health care reform

Lawmakers must fix main reason system is wasteful, expensive.

Last update: June 28, 2009 - 10:43 AM

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With an economy heavily dependent on medical care and technology, Minnesota has much at stake in the historic reforms proposed by Congress to overhaul the nation's broken health care system.

So far, lawmakers are off to a disappointing start. On Capitol Hill, key Democrats are pushing well-intentioned but shortsighted policies that would only fuel out-of-control health care costs -- rewarding costly, ineffective care while penalizing providers like those in Minnesota that provide quality care efficiently. Republicans aren't making the situation any better with their tired antigovernment rhetoric. Within the GOP are up-and-comers who understand the need for innovation and cost containment. Why aren't they out front offering solutions?

The fundamental problem with the leading proposals is that they're aimed at treating a symptom of an ailing system -- the millions of uninsured -- while ignoring the root cause of its woes: soaring costs. Americans have the most expensive health care system in the world, with annual costs well over $2 trillion a year. In 2007, that sum amounted to 16 percent of the nation's Gross Domestic Product. In 1970, the cost was 7 percent of the GDP.

It's a frightening trend that cannot continue. Increasing costs mean fewer people can afford health insurance; all the rhetoric warning of rationing under government reforms disingenuously ignores that a form of it is already happening. Mounting bills for government health entitlement programs -- Medicare for the elderly and Medicaid for the poor -- also threaten to bankrupt the nation.

Doing nothing is unacceptable. But so is a feckless rush to do something for the sake of doing something. The Democrats' main proposals boil down to putting more people into a wasteful, expensive system -- without fixing what makes it expensive and wasteful. Talk of a tax to pay for expanded access is premature. Costs would continue to soar. Any new tax would have to be raised again and again to cover them.

The issue that needs to be front and center is reimbursement: how the government and insurers pay providers for patient care. The problem is the fee-for-service system, which pays doctors per procedure provided. Author and Harvard Business School Prof. Clayton Christensen sums it up best: Fee-for-service "encourages providers not to offer as much care as needed, but to offer as much care as possible. It is akin to spraying jet fuel on the explosion in health care costs.'' Here's an even more critical conclusion from Christensen: Up to 50 percent of health care is driven by supply, not demand or need.

The debate raging over offering a new public health plan to compete with private insurers is an unproductive diversion. So far, it hasn't mattered who pays the bills -- government or industry: Cost and waste have proliferated. True reform must involve a massive overhaul of the payment system. The goal? Nothing less than a system that rewards providers for performance -- how well they take care of patients -- instead of the number of services billed. Thankfully, Minnesota's congressional delegation understands this; Sen. Amy Klobuchar and Reps. Tim Walz and Keith Ellison are introducing measures pushing for payment reform.

But it won't be an easy task. Medicare spends much more on beneficiaries in parts of Texas, Florida, California and other states than it does on Minnesota enrollees. Politicians from these influential areas will fight any changes that prevent wasted taxpayer dollars from continuing to line their providers' pockets. Another key concern: New technology infrastructure is needed to gather data linking providers' costs to outcome, providing information that ties value to reimbursement. That infrastructure is being put in place in Minnesota; it will have to be built in other areas.

Reformers on Capitol Hill need to take a summer vacation in Minnesota. The state has a long history of providing world-class yet affordable medical care. Its medical community is collaborating with state government on approaches new and old -- from information technology to care coordination to community wellness programs -- to improve health and contain costs. It's a road map, in short, for the complex undertaking that is health care reform. Lawmakers need to study it diligently or risk adopting policies that add to the system's problems rather than solving them.

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