Last week, President Barack Obama shared his highly anticipated plan for reducing the national deficit by $4 trillion over the next 12 years. According to a fact sheet released by the White House, the plan would save $480 billion in healthcare costs by 2023 by, among other things, expanding upon the Affordable Care Act and fundamentally reforming Medicare and Medicaid to strengthen the programs over the long term.
I agree with the President that we can and should lower “the government’s healthcare bills by reducing the cost of healthcare itself.” How best to go about that is the critical question. Paying less can mean great things when quality and health improvement are the focus, and bad things – like denying access, cutting benefits, and hitting providers – when the focus is just on paying less.
We can improve quality and lower costs when the focus is on what’s driving costs – chronic diseases and how we can best prevent their onset and the costly complications that result from poor management. In fact, the burden of chronic diseases on the American economy is costly, accounting for 75 cents of every dollar we spend on healthcare in the U.S. each day and more than 90 cents of every dollar taxpayers spend on Medicare and Medicaid. The good news is that chronic diseases such as diabetes, cancer and heart disease are largely preventable and highly manageable with well-designed systems and solutions in place.
As models working in our healthcare system today demonstrate, efforts that emphasize quality, coordination and communication among patients and their providers can reduce healthcare costs and repeat hospitalizations and improve patient health and safety. For example, the Marshfield Clinic and others participating in the Medicare group physician practice shared saving demo have shown – aligning incentives in the system to reward quality outcomes benefits patients, providers, and ultimately taxpayers. Marshfield Clinic exceeded 98 percent of the quality goals set by Medicare and achieved savings of more than $23 million in a single year.
Top-performing hospitals, including McKay-Dee Hospital Center (Utah) and Mercy Medical Center (Iowa) have lowered readmission rates, generated significant savings, and improved the quality of life for the people affected. We know that avoidable hospital readmissions cost billions, but not only are hospitals not reimbursed to prevent readmissions, they, in fact, lose revenue if admission rates drop. Medicare alone will spend over $250 Billion over the next decade on potentially preventable hospital readmissions.
Unfortunately, the incentives in our current healthcare system, and particularly in traditional Medicare and Medicaid programs, are set up to reward the volume of care provided instead of the quality of care provided or long-term health improvement. Only by realigning the system to reward health promotion and the savings that result, can we encourage others to replicate these models and broaden their impact.
Our budget challenges present an historic opportunity to align the incentives in the healthcare system – starting with Medicare and Medicaid – to promoting health. Regardless of political perspectives, only a deficit-reduction effort that lowers budget-busting healthcare costs by addressing chronic diseases head on will ultimately reduce the deficit.