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Leavitt Says New 'Payer Power' Plan Will Lower Health Costs, Boost Quality

MARCH 17, 2006 -- There are times, it seems, when big government really can work to improve health care.

HHS Secretary Michael O. Leavitt unveiled a plan this week that would bind together the collective buying clout of the public and private sector to pressure doctors and hospitals to list their prices and disclose the quality of their care.

"People have a right to know the quality of care they are receiving and its cost," Leavitt declared in a speech March 14 to the Commonwealth Club in San Francisco. "Every consumer should have a reason to look for the best value. None of that is true right now!" he said.

Leavitt announced that government analysts will examine claims data from the Medicare, Medicaid, Defense Department, and Federal Employee Health Benefits Program so that "price and quality data will be available for each hospital and doctor."

The initiative calls for listing the total costs of particular procedures, even though insured patients pay only a small fraction of those costs themselves.

"Take hip replacement surgery, for example. It would change the health care world if people could know, before their operation, what the overall package price is going to be, including lab tests, anesthesia, rehab costs, as well as specific information on quality, such as complication rates and patient satisfaction," Leavitt said in prepared remarks.

Leavitt said "we will start with a few of the most common procedures and expand as quickly as possible."

In another phase of the program, HHS said it will analyze six metropolitan markets around the country in coming weeks. Leavitt said he will then travel to those markets, and ask that their largest employers formally declare that they will join with the federal government in a program to pressure providers to measure quality, list prices, and adopt health information technology. The effort also aims to promote health savings accounts.

As a condition of doing business with the employers, providers and insurers would have to agree to disclose the quality of their care for 20 of the most frequently used medical procedures.

Similarly, prices would have to be listed for the most common medical procedures.

"As first steps toward full electronic health records, insurers, administrators, and providers will be asked to use an interoperable electronic registration system that will do away with the medical clipboard as we know it," Leavitt said.

A fourth element of the "Payer Power" plan is to promote HSAs.

"We would like payers to make health savings accounts a voluntary option on their menu of health insurance plans," Leavitt said. "That will be a very important and a powerful step forward. There are currently 3.5 million people who have adopted health savings accounts and that trend will grow." A key reason, he said, "is that more people will buy insurance when it is $300 a month than when it is $600 a month. It's as simple as that."

The public listing of prices—on—will help the uninsured find lower prices for care, according to Leavitt. Seeing the lower prices Medicare pays for care will give them leverage to bargain with hospitals to charge less them than full price, he suggests.

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