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Health Reform: What Congress Can Do to Help

  • David Cutler
    David M. Cutler

    Otto Eckstein Professor of Applied Economics, Kennedy School of Government, Harvard University

  • David Cutler
    David M. Cutler

    Otto Eckstein Professor of Applied Economics, Kennedy School of Government, Harvard University

Health reform is once again front and center in Congress. Clearly, Democrats and Republicans have very different views about last year’s Affordable Care Act, and some in the Republican party argue that nothing short of repeal is worth pursuing. But that may not be the right conclusion. There is another path that is available to Republicans, and that path would gather some Democratic support as well. Rather than "repeal and replace," however, the Republican mantra will need to be "improve and innovate."

I am a supporter of the Affordable Care Act, but even supporters of the bill agree that the legislation is not perfect. Too much was left out to avoid the rationing label, and some issues were addressed only tangentially. Republicans and like-minded Democrats together can make the law better, by pursuing three avenues:

First, Congress should strengthen the delivery system reforms in the bill. The key to saving money in health care is to improve the efficiency with which services are delivered. As virtually every analyst agrees, medical care costs too much because care is not coordinated. Take a concrete example. One of five Medicare beneficiaries admitted to a hospital will be rehospitalized within a month, often without seeing a doctor or nurse between admissions. People take too many medications upon discharge, they stop taking other medications that are necessary, they have side effects that need to be addressed, and so on. The result is a trip back to the hospital.

Eliminating unnecessary readmissions is not rocket science. Having a nurse coordinate among the patient, their primary care physician, and specialists reduces readmissions by three quarters. Electronic monitoring aids this process. The difference between a readmission rate of 20 percent and one of 5 percent is tens of billions of dollars annually.

The failure to ensure good coordination is not technological. Rather, it is financial. Hospitals are paid extra for readmissions and nothing for care coordination, so coordination is haphazard and readmissions are common.

The Affordable Care Act has a number of steps to address this. It bundles acute and post-acute care payments for many admissions, sets up an accountable care organization program, and incentivizes value-based care. But in each case, the law could go further. Incentives could be stronger and be implemented sooner. Successful programs could be expanded more rapidly. And private initiative could be encouraged more. If Congress chooses to follow this path, the net effect would be a bipartisan commitment to delivery system reform that would significantly increase the odds of major cost reductions.

Second, Republicans could lead an effort to reform the nation's malpractice laws. There is some malpractice reform in the Affordable Care Act, but it is not enough. Because the law demands so much of physicians in changing the way they practice medicine, physicians need to feel that every impediment to change has been lessened. Fear of being sued stops many physicians from pursuing better approaches to care. Thus, we need to loosen that fear. Republicans harp on caps on malpractice compensation, but that is not the real issue; total malpractice awards are not a large share of medical spending. Rather, doctors need to feel that providing the right care will enable them to avoid the time and administrative hassles of being sued. This argues for an evidence-based standard for malpractice reform: If a physician follows evidence-based standards in caring for a patient, that physician cannot be sued for damages. Such a reform would pave the way for a focus on the right care at the right time.

Third, Congress should attack a neglected but enormously important issue: administrative costs. Perhaps $200 billion annually is spent on administrative services that need not occur–billing operations that require photocopies and faxes instead of electronic interchange; time that physicians and nurses spend on the phone instead of seeing patients; and documentation requirements that reward good billing practices but not good care.

Administrative costs remain in the system because no one has the ability to get rid of them on their own. Medicare and Medicaid contribute to administrative costs, but so do private insurers. Providers could be more efficient, but many choose not to be. Congress could address this issue by setting clear goals and providing the tools to meet those goals. A bold declaration would help: the United States should commit to reducing administrative costs by 50 percent in the next five years. The Department of Health and Human Services would be charged with making this happen and proposing further legislation as needed to make it happen.

Congress has occasionally acted this way, with good results. In 2009, Congress appropriated money for health care information technology (IT), and tasked the Department of Health and Human Services with developing a plan to make IT ubiquitous and interoperable. The Department has done that, and the country is well on the way to meeting the IT goal. Now we need to expand this model to overall administrative reform.

Republicans and Democrats will never agree about everything in health reform. But for too long, that disagreement has prevented any progress. The question for Congress is whether it should move ahead on areas where there could be widespread agreement, or whether we will have more gridlock. If congressional leaders want to improve the health care system, they would find many supporters, and a grateful public.

This blog post is a commentary on Health Care Opinion Leaders’ Views on Congressional Priorities .

David Cutler, Ph.D., is the Otto Eckstein Professor of Applied Economics in the department of economics and Kennedy School of Government at Harvard University.

Publication Details



D. Cutler, Health Reform: What Congress Can Do to Help, The Commonwealth Fund Blog, February 2011.