Op-Ed: Prescription for Patient-Centered Care and Cost Containment

New England Journal of Medicine | June 27, 2013

Despite high national spending, health care in the United States is uneven in quality and often wasteful, uncoordinated, and inefficient. Leaders on both sides of the political aisle, and in the health and economic policy communities, recognize the urgency of improving the quality and effectiveness of care while slowing the growth of spending. Far too often, however, attempts to address our national health and budget issues have been fragmented and unproductive, frequently owing to partisan disagreements over how to approach these highly sensitive issues.

We, the four leaders of the Bipartisan Policy Center Health Care Cost Containment Initiative, came together to bridge this divide — to start a constructive dialogue on strengthening the U.S. health care system. A strong health care system, a stable federal budget, and a productive economy are complementary, not competing, priorities. On April 18, 2013, we released a report entitled “A Bipartisan Rx for Patient-Centered Care and System-Wide Cost Containment” (see the Supplementary Appendix, available with the full text of this article at NEJM.org), which describes a comprehensive, coordinated set of recommendations to improve quality, reduce waste, and control cost. We think that solely budget-driven efforts to achieve health care savings will fail; public and private health care savings must be an outgrowth of health reform, not the underlying reason for it. We believe our policy analysis and recommendations reflect this principle, as well as a growing convergence of thinking across a wide spectrum of stakeholders.

Our Vision

In the long term, we envision health care that is value-driven and coordinated through organized systems, rather than volume-driven and fragmented. These systems will be developed and will evolve through a process of innovation and improvement that is based on collaborative structures of care delivery and payment with accountability, coordination, competition, and patient choice. The tools and incentives built into these systems will ensure that patients receive high-quality, coordinated care across multiple settings. They will avoid unnecessary or redundant treatments and services, engage patients in decisions about their care, and pay physicians for the services that patients need and want — including increased time consulting with their doctors. Our recommendations seek to align efforts in the public and private sectors to promote high-quality, coordinated systems of care. Our Medicare reforms include steps toward greater coordination in care delivery and payment, such as shared savings, bundled payments, and competitively bid, capitated health plans.

We are convinced that reforming the U.S. health care system to prioritize quality and value over volume will not only improve health outcomes and the patient experience but also constrain cost and produce systemwide savings. If enacted, our policies would reduce the federal deficit by an estimated $560 billion over the next 10 years, including nearly $300 billion in Medicare savings, which includes the cost of a permanent fix to the sustainable growth rate (SGR) formula for physician payments and the cost of increased assistance to low-income beneficiaries.

Our initiative is unique in that we have brought bipartisanship to the table, dedicating nearly a year to reasoned negotiations to break through the partisan rhetoric surrounding health care. We sought policy options around which both sides of the political aisle could realistically coalesce, and we prioritized political and economic realities over discrete options that achieve budget savings in the near term. We have been encouraged by the responses to these recommendations from representatives of both political parties.

Key Recommendations

We would engage both beneficiaries and providers with incentives to pursue a more coordinated, accountable, and sustainable health care system. These recommendations span four broad categories: improve and enhance Medicare to create incentives for quality and care coordination; reform tax policy and clarify consolidation rules to encourage greater efficiency and competition; prioritize quality, prevention, and wellness; and encourage and empower states to improve care and constrain costs by means of delivery, payment, workforce, and liability reform. The recommendations described below are highlights from the report but are not an exhaustive list of all the issues addressed in our report.

Improve and Enhance Medicare

Recommendation: Promote quality and value through an improved version of accountable care organizations — Medicare Networks — that encourage providers to meet the full spectrum of their patients' needs. Replace the SGR formula for physician reimbursement and offer all Medicare providers strong financial incentives to participate in new payment models.

Our policies would engage beneficiaries in choosing the coverage that best suits their needs. In addition to fee-for-service Medicare and Medicare Advantage, providers within traditional Medicare would be able to form Medicare Networks. Beneficiaries could choose to enroll in a Medicare Network and would receive a premium discount if they did so. They and their providers could share in savings that result from greater quality and efficiency of care. We believe that these organized systems would provide patients and families with better, more coordinated care while reducing overall spending growth.

Beneficiaries would also be free to remain in an improved fee-for-service Medicare. Our report identifies inefficiencies, misaligned incentives, and fragmented care delivery in the current fee-for-service reimbursement system that have both undermined quality and increased costs. Fee-for-service Medicare would be modernized by means of a greater commitment to competitive bidding, bundling, and other reforms that make provider health systems more accountable and affordable.

To encourage providers to move from fee-for-service Medicare to Medicare Networks, we offer carrot-and-stick incentives. Full payment updates (based on the Medicare Economic Index, which reflects the cost of medical practice) would be available to providers who form or join Medicare Networks. Payment rates would be frozen at current levels for physicians who remain in fee-for-service Medicare and temporarily frozen for other providers who remain in the fee-for-service program. The SGR formula for physician reimbursement would be eliminated. For geographic areas of the nation that could not set up alternative delivery systems, the secretary of health and human services would be authorized to ensure adequate reimbursement levels to fee-for-service providers.

Recommendation: Establish a standardized minimum benefit for Medicare Advantage plans — including all services covered by traditional Medicare, a cost-sharing limit to protect against catastrophic expenses, and slightly lower cost sharing for services than in traditional Medicare — and pay plans with the use of a competitive-pricing system.

We also propose to bring market forces to bear on Medicare Advantage by implementing a competitive-bidding structure. Today, many Medicare Advantage plans compete for beneficiaries by offering extra benefits, leading to higher costs. We propose a more rational system, in which Medicare Advantage plans would bid on a standardized Medicare benefit package and compete on the basis of price. Thus, beneficiaries would be able to make clear comparisons and choose the plan that offers the best value. This system would be phased in over time and include transitional protections for beneficiaries. Competitively bid payments to plans would take effect only in regions where the payments are lower than those under current law. Therefore, this policy will guarantee savings for the Medicare trust funds in regions where the new competitively bid price takes effect. Initially, a portion of the savings would be allocated to finance a reduction in beneficiary cost sharing. To help beneficiaries navigate plan selection, we propose a user-friendly, up-to-date Medicare Open Enrollment website.

Recommendation: In 2016, improve and strengthen the traditional Medicare benefit structure for Parts A and B by simplifying existing deductibles and providing protection against catastrophic costs. At the same time, restrict first-dollar supplemental coverage, increase support for low-income beneficiaries, and reduce subsidies to higher-income beneficiaries.

We propose to improve the Medicare benefit by providing long-overdue protection against catastrophic costs. We also would offer a modernized cost-sharing design, including a single annual deductible and predictable copayments. Our proposal would ensure that beneficiaries could visit a doctor for a reasonable copayment, even before meeting a deductible. In addition, we would prohibit first-dollar supplemental coverage that leads to greater use of services without necessarily producing better outcomes. We pursue further balance by providing new, substantial cost-sharing support to approximately 8 million low-income beneficiaries while reducing federal subsidies for higher-income persons.

Reform Tax Policy and Clarify Consolidation Rules

Recommendation: Replace the “Cadillac tax” on high-cost health insurance plans with a limit on the income-tax exclusion for employer-sponsored health insurance.

We propose to target the limited financial resources of our nation on health care coverage and services that are valuable. The nation cannot achieve affordable care with an open-ended, overly generous subsidy for the purchase of private health insurance that predominantly benefits higher-income persons. The tax exclusion for employer-sponsored health insurance makes providing health benefits cheaper than paying cash wages, thereby encouraging high-cost benefit designs and blunting incentives to deliver care more efficiently. We propose to reform and rationalize the current tax exclusion for employer-sponsored health insurance and make it less regressive. We recommend replacing the flawed Cadillac tax on high-cost health insurance plans with a limit on the income-tax exclusion for employer-sponsored health benefits in 2015 at the 80th percentile of employer-sponsored–plan premiums. We also support replacing the current excise tax on fully insured plans with a paid-claims tax, to remove the current distortion that favors self-insured plans and to encourage all plans to adopt alternatives to fee-for-service payment.

Recommendation: Streamline and clarify the application of existing federal legal and regulatory guidance for private-sector entities seeking to form integrated, coordinated systems of care delivery.

Another strategy for aligning incentives to support high-quality, coordinated care delivery and payment is to ensure that private-sector payers and providers who want to form integrated delivery systems have clear guidance on how to do so without violating antitrust or fraud and abuse laws. We believe that guidance should be provided in this area and that there should be strong enforcement against consolidation that leads to anticompetitive behavior and to increases in cost.

Prioritize Quality, Prevention, and Wellness

Recommendation: Prioritize, consolidate, and improve the use of quality measures by consumers and practitioners.

Effective quality metrics are essential to accountability in organized systems of care. Quality-performance metrics must be precise and clinically relevant to create incentives for better delivery, to show providers how their performance relates to that of their peers, and to facilitate the real-time design and implementation of strategies to improve quality and safety. Quality metrics must also provide the meaningful data needed for patients and families to make informed choices. Although providers have pursued quality-metric design, evaluation, and reporting, as well as the identification of different quality metrics, the quality-reporting roles and responsibilities of organizations such as health plans and accrediting bodies are ill defined, leading to confusion and inefficiency. We would strengthen the quality-reporting system and the validity of available metrics by identifying redundant or inefficient metrics and by promulgating minimum requirements that are clinically relevant and useful to providers and also understandable and accessible to consumers.

Recommendation: Advance our understanding of the potential cost savings of prevention programs, by means of support for research and innovation on effective strategies to address costly chronic conditions.

We recommend exploring the potential of prevention in improving health and containing cost, as well as eliminating barriers to the wider implementation of preventive approaches, such as workplace wellness programs, that are found to be effective. Helpful strategies include support for better collection, analysis, and dissemination of data from prevention programs, and incentives that will engage small businesses in comprehensive worksite health promotion.

Encourage and Empower States

Recommendation: Adopt a broad strategy to deliver Medicare and Medicaid services to persons with dual eligibility through a single program.

The Medicaid program provides coverage to approximately 60 million low-income Americans, including pregnant women, low-income parents, children, and persons with disabilities. Approximately 9 million persons are dually eligible for both Medicare and Medicaid coverage. Persons with dual eligibility constitute a diverse population with many complex care needs. Historically, distinct federal law, regulation, program administration, and financing for Medicare and Medicaid have constrained opportunities to better integrate care between the two programs. We recommend that state and federal leaders work toward a more streamlined and coordinated approach to deliver care to persons with dual eligibility. In addition, we recommend several ways to strengthen demonstration projects that are currently under way for persons with dual eligibility.

Recommendation: Offer a federally funded financial incentive to states that enact reforms to the scope of practice for health professionals, medical liability systems, and insurance laws.

We support resources and incentives, rather than top-down mandates, to engage state leaders in supporting coordinated and accountable models of health care delivery and payment. To this end, we recommend policies to strengthen the primary care workforce and make greater use of nonphysician practitioners, to create safe harbors for physicians to improve the medical liability system and reduce the practice of defensive medicine, to address consolidation in the financing and delivery systems, and to promote price and quality transparency for consumers, families, and businesses.


We believe that the vision and recommendations articulated in our bipartisan report, if enacted together, would help to put our national health care system, as well as our economic outlook, on a more sustainable, healthful path for the future.