Health Reform: Can a "High-Performance" Focus Make a Difference?

The two major efforts of the 1990s to reform the U.S. health care system—one led by government, one by employers—ended in failure. The first, laid out in a 1993 Clinton Administration proposal, would have provided universal health insurance and fundamental reform of health care delivery and financing. The second, a movement initiated by employers, sought to rein in health care costs by shifting employees into private managed care and giving them incentives to choose less-expensive plans. The Clinton plan lost in the political arena. Managed care foundered as patients chafed at restrictions on their care and physicians and hospitals demanded higher prices or left managed care networks.

Today, we find ourselves discussing the case for health reform more intently than any time in the past decade, and with good reason. In the wake of those experiments of the '90s, health costs have again accelerated, more Americans are uninsured, and the quality of care falls far short of what is both possible and desirable. Gaps in insurance coverage remain one of the most important challenges facing the nation. With more than 15% of all Americans uninsured and at least another 10% with inadequate or unstable coverage, far too many people are unable to obtain care that could keep them healthy and productive.

Maybe this time?
Will this time around be the charm for true reform? Perhaps. But improving quality and efficiency, and expanding coverage and access, requires a different strategy from what was tried in the 1990s. No industry should expect its customers to lead the way in preventing defects, eliminating waste, improving productivity, and increasing the rate of return on investment—exactly what the failed reforms expected of health care consumers. Both approaches relied on consumers to make cost-conscious choices but did not demand change—by adopting new payment methods, for example, to reward efficiency and quality—from the health care system.

Genuine reform must come from within the health care sector itself, as a new generation of reformers learns to tap the potential of modern information technology, measure performance against relevant benchmarks, learn from best practices, and adopt systems, processes, and tools that improve performance. This "supply side" strategy is being pursued by innovative and visionary leaders in the public and private sectors. We can achieve even more if we make special efforts to increase efficiency, rationalize our fragmented insurance system, and seize opportunities to improve the quality and effectiveness of American health care.

There is a common belief that the United States has the world's best health care system. In fact, there is extensive evidence that this is not the case. A candid look at the data shows that the U.S. system performs less well than those of other countries on many important dimensions. What we clearly lead the world in, however, is health care spending. Outlays for health care totaled $4,887 per capita in the U.S. in 2001, 75% more than in Canada, 91% more than in France, and 126% more than the average across industrialized nations. Enrollment in private managed care slowed U.S. spending in the mid-1990s, but other countries did as well or better in the same period using other cost-containment strategies. Perhaps we cling to the notion that we have the best health care in the world in part because we spend more on it than any other country. Yet here, too, our beliefs do not meet the test of data. A growing body of evidence suggests the absence of any systematic relationship between cost and quality. And for all we spend, we fall especially short in the area of access to needed services. Each year since 1998, the Fund's international survey has found that the United States ranks last among five English-speaking countries on measures of equity and first for access problems due to costs. Americans are much more likely than their counterparts in other countries to say they did not visit a doctor, fill a prescription, or get a recommended test, treatment, or follow-up care due to cost. Disparities between people in above- and below-average income groups were greatest in the U.S., and the uninsured were far more likely to report problems in obtaining needed care.

Doing what it takes
High-quality care is clearly not about dollars alone. It means providing the right care in the right way at the right time. The right care sometimes increases immediate costs and sometimes reduces them, but it tends overall to generate value by lengthening life expectancy, reducing illness, and enhancing patient functioning. Poor-quality care can mean underuse of certain services, such as screening or treatment for diabetes, depression, and other conditions. It can also mean overuse of services that provide no benefit or, like antibiotics to treat upper respiratory infections in children, can produce harmful effects. Poor quality can mean errors that endanger patients' health and increase costs, as when a surgery patient needs to stay in the hospital longer or be readmitted to treat an infection.

Some private purchasers have made quality improvement a priority. The Leapfrog Group, a coalition of major employers' health benefit plans and public program purchasers, has issued quality standards and provided financial incentives for enrollees to seek care at hospitals with stronger quality records. Bridges to Excellence is a new employer initiative to reward "gold standard" care. Despite these promising developments, a Fund-supported project found that examples of "value-based purchasing" are relatively limited.

Public programs also have been slow to embrace measures to reward better care, but some interesting examples show the potential of using health insurance coverage to leverage quality improvement. A Fund-supported study documented Rhode Island's RIte Care program for low-income children, which provides bonuses to participating managed care plans that meet quality targets. A new policy of providing coverage to women for two years after they give birth has made family planning services more available and generated savings by reducing the number of births annually. Prenatal and obstetrical care has improved, lead poisoning screening has increased, and childbirth parity (births to a mother more than 18 months apart) has increased.

Medicare is also testing bonuses to hospitals that meet quality performance targets and reduce payments to hospitals that fail to improve over a three-year period. Community health centers are participating in learning collaboratives to improve care for patients with chronic conditions such as diabetes. An evaluation, supported in part by the Fund, will examine the impact on quality, but preliminary indications show improvements in glucose control, blood pressure management, and patient self-management. The Veterans Administration has undergone a major organizational transformation focused on information technology and quality improvement processes; as a result, the share of patients meeting targets for prevention, chronic disease management, and palliative care has doubled over the past five years.

Private health care systems are beginning to embrace such techniques. The Council of Accountable Physician Practices, which includes many of the nation's largest and most prestigious medical groups, totaling more than 22,000 physicians, has focused on quality, efficiency, and a culture of performance measurement, continual learning, innovation, and technology readiness. It has achieved Health Plan Employer Data and Information Set (HEDIS) quality indicator scores 22% above the national averages for managed care plans, better financial performance than the plans, and comparable patient satisfaction.

How to achieve a high-performance health care system
These examples are encouraging, but they are far too isolated and their influence on the health care system has been dampened by the high cost of modern information technology and a shortage of benchmarks against which to measure the performance of individual providers. Creating systems that prompt and reward doing the right thing at the right time will take a major shift in the culture of health care delivery.

One place to begin the necessary cultural change is with a careful look at what patients want—as opposed to what is convenient for physicians, what makes money for hospitals and managed care plans, or what saves money for employers or taxpayers. "Consumer-driven health care" is a popular phrase, but the term is deceptive. Suggesting consumer control, this approach, often tied to high-deductible catastrophic coverage, actually shifts the bulk of health care costs to patients in an effort to drive them to less expensive providers or make them think twice about using the health care system in the first place. The approach might actually result in poorer health should patients avoid seeking the care they need because of the cost of doing so. Indeed, strategies such as these may well alienate employees and trigger a backlash, especially when the economy rebounds and a labor shortage resurfaces.

We have the world's costliest health system, yet we fail to make care accessible to everyone and fall far short of providing the patient-centered, safe, high-quality care that we know is possible. The conclusion is inescapable: there is room for improvement. Only by facing the fact squarely and putting into action the best ideas from around the country and the world can we achieve a health care system that meets our needs and aspirations. To build a truly high-performance health system, bold action is required. The following steps would start us on course:

  • Provide automatic, affordable health insurance for all. Fund staff recently proposed a framework for extending health insurance coverage to all Americans, building on existing sources of group insurance. Proposed strategies include adding to employer coverage, opening up a Congressional Health Plan for small businesses and uninsured individuals, and expanding Medicare and the State Children's Health Insurance Program. Automatic enrollment through the income tax system and graduated tax credits would make coverage affordable for all, while requiring only modest commitment of federal funding.
  • Put the patient first. Physician practices, hospitals, nursing homes, and other health care providers need to redesign practices and systems around what works for patients. Listening to patients, obtaining their feedback, and involving them in governance and care processes can help. Simplifying care and having a trusted personal physician or advanced practice nurse can improve safety and adherence to recommended care. Insurers and regulators can support change by rewarding care that is responsive to patients' preferences.
  • Report cost and quality data publicly. The Medicare program has been a leader in posting nursing home quality data on its Web site, but those efforts are just a modest beginning. If we are serious about doing better, we need to know where we stand. Data reporting should cover physicians, hospitals, nursing homes, other health care providers, and health plans.
  • Invest in health information technology. Other countries are quickly surpassing the United States in adopting electronic medical records and prescribing systems. Their governments have invested in infrastructure and established the necessary standards, and the United States needs to do the same.
  • Promulgate guidelines on quality and effectiveness. It is long past time to establish a scientific basis for all health care services—not just new drugs, but consultations, procedures, and tests. This could be accomplished by establishing a new national institute on clinical effectiveness.
  • Pay for performance. Medicare and private insurers tend to pay standard rates, regardless of quality, despite the fact that errors and other defects can produce significant additional costs. The federal Centers for Medicare and Medicaid Services has already begun modest testing of pay-for-performance rewards. Those efforts should be expanded substantially and best practices documented and disseminated. Medicare's leadership also could be instrumental in moving private payers, who so far have been slow to institute value-based purchasing strategies.
  • Demonstrate new approaches. The Institute of Medicine issued a report in the fall of 2002 calling for statewide demonstrations of health insurance coverage for all, model chronic care and primary care initiatives, information technology, and medical malpractice. A 10-year federal commitment of $50 billion would go a long way toward putting those recommendations into action in a number of states.
  • Invest in research. We urgently need to gather evidence on what works to improve care, eliminate waste, and promote efficiency. The federal government pays $455 billion annually for health care but devotes only $300 million to the Agency for Healthcare Research and Quality. The Agency's national report on the quality of American health care could be an important starting point, but it should be followed with significant new investment in research.
The Commonwealth Fund seeks to be a catalyst for change by identifying promising practices and contributing to solutions that could help us achieve a high-performance health system. The Fund's role is to help establish a base of scientific evidence on what works, mobilize talented people to transform health care organizations, and collaborate with organizations that share its concerns. Our communications efforts enable us to spread the word, share knowledge and experience, and urge the agenda forward. At this critical juncture, we hope our work will contribute to the creation of a bold new strategy to make high-quality health care accessible to all Americans.

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October 2004

Publication Details

Publication Date:
October 15, 2004
Authors:
Karen Davis

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