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Reason for Optimism: Key Roles for State, Providers, Insurers


As someone who has been doing health policy reform for 35 years at the local and national level, I am beginning to get that Winston Churchill feeling — that Americans eventually get it right, but only after they've tried everything else. The process by which the Accountable Care Act of 2010 (ACA) became law was quite partisan, but much of the new law is not partisan at all. In fact, I am amazed that, despite the process, Congress managed to finally get the policy goals right.

We can't get health care costs under control without changes in the design and delivery of health care goods and services. We can't get health care costs under control with the current public and private insurance system, which leaves nearly 48 percent of Americans without insurance at some time in their lives. We can't get health care costs under control unless we change the business model and reward value for money as in every other industry except health care and education.

The ACA calls for key delivery, insurance, and payment reforms and implementing these goals will be critical to the success of this enterprise. The ACA delegates implementation to a variety of systems players. The Department of Health and Human Services and the Centers for Medicare and Medicaid Services have important roles, but the most critical roles will be played by states, health care professionals and systems leadership, and health insurance plans. Therein lies my optimism.

Why optimism when my own governor in Minnesota is running for president against the policy in the new law?

It's Déjà Vu All Over Again. There are dozens of sections of ACA that authorize new directions, such as accountable care organizations and patient-centered medical homes, global payments for capitation, and a new center for medical innovation. But these aren't new ideas. Everything we need to bend the cost curve in health care has already been invented.

In the 1980s we experimented with privatizing Medicare, paying at-risk HMOs 95 percent of traditional Medicare. The result was utilization change and costs came down by 15 to 20 percent in just two years in communities with HMO competition. What's an HMO? It's a co-op in which doctors, hospitals, insurers, and members have similar incentives to improve health and care and share in the savings. Call it an accountable care organization.

All Health Care Is Local. The CEO of the largest employer in La Crosse, Wisc. asked the physician CEOs of the two competing local health systems why he should pay them to fill their hospitals. In response, the two systems began collaborating to improve the health of people in southwest Wisc. and competing to deliver the best patient value for medically necessary hospitalizations. Out here we also call these "accountable care organizations" — accountable to the community they serve.

Sadly, a Medicare Advantage plan in Dade County, Fla., is paid 248 percent more than a similar plan in La Crosse. Former HCFA Administrator Bruce Vladeck in a recent op-ed suggests we "stop obsessing over geographic practice variation." Yet, we live in a national marketplace for many medical specialties where doctors can move where they make the most, not do the best. Communities from Ogden, Utah, to Hershey, Pa., can tell you what's best for patients does not need to cost what Miami is willing to pay.

If you want to bend the cost curve, then redesign the Medicare program to operate regionally and with the authority to share savings accrued to the program from practice improvement with the professional change agents. We cannot afford to wait for a one-size-fits-all accountable care organization because it won't fit all. The evolution of accountable care will begin as quickly as Medicare begins to reward systems for setting and achieving national cost/quality/value goals.

A New Federalism. As we near the first anniversary of the infamous health care town hall meetings, we are reminded of the lethal nature of "government-run health care," "socialized medicine," and "death panels." The reality of ACA is much more interesting. It challenges leaders in both the national and state governments to test the strengths of constitutional federalism.

While the law is national policy, and much of the financing of its implementation is up to the national government, critical policy changes are left to the states. States have always set the rules for insurance markets and medical markets. The two industries liked it that way to discourage competition based on informed consumer choice.

The threat of the "public option" helped create authority for serious health insurance reform which will put the industry to the test. It will also test the capacity of states to set strict market rules that go beyond solvency and consumer protection requirements. In addition, the implementation of health insurance exchanges creates state opportunities for consumer choice of health plans based on more than premiums.

Timing Is Everything. Health reform happens to coincide with a great recession, a jobless recovery, a record spending spree, and realities new to most Americans. We also face the prospect of increased productivity, especially in industries like health care and education, where we've shown little aptitude for such. Productivity isn't just reducing costs, but a) making things better (quality improvement), and b) making better things (disruptive technology and the redefinition of innovation).

Perhaps this is a historic time that will bring out the best in medicine — and in Americans.

Publication Details



D. Durenberger, Reason for Optimism, The Commonwealth Fund Blog, July 2010.