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Testimony--Putting the U.S. Health System on the Path to High Performance

Thank you, Mr. Chairman, for this invitation to testify on Health Reform in the 21st Century: Expanding Coverage, Improving Quality, and Controlling Costs. With the economy in crisis and health costs increasing faster than incomes, families, employers, and federal, state, and local government budgets are feeling the pressure. Yet, despite the high level of spending, the U.S. health system falls short of producing the quality and outcomes that should be possible. We can do much better. But to do so will require extending insurance coverage to everyone; changing the way insurance markets work; moving away from fee-for-service payment to encourage value rather than volume; rewarding more patient-centered, effective, and efficient care; and the leadership and commitment needed. It is urgent to start now—the longer we wait, the worse these problems get and the more difficult they are to confront.

A recent report of The Commonwealth Fund Commission on a High Performance Health System, The Path to a High Performance U.S. Health System: A 2020 Vision and the Policies to Pave the Way, offers an integrated system framework that moves the U.S. health system on a path to high performance—slowing the growth in health care costs, ensuring access to quality care, and protecting families. The Path framework encompasses five key strategies:

  • Affordable coverage for all: access and foundation for payment and system reforms
    – Insurance exchange: choice of private plans and new public health insurance plan
    – Market reforms, affordability, and shared responsibility
  • Align incentives: payment reform to enhance value
    – Accessible, patient-centered primary care
    – Move from fee-for-service to more "bundled" payment, with accountability
    – Align price signals with efficient care and value
  • Accountable, patient-centered, coordinated care
  • Aim high to improve quality and health outcomes
    – Invest in infrastructure and information
    – Promote health and disease prevention
  • Leadership and collaboration among private and public stakeholders

Analysis of specific policies consistent with this approach indicates that an integrated set of policies could slow the growth in national health spending from a 6.7 percent annual rate of growth over the 2010–2020 period to 5.5 percent. Doing so would yield total system savings of a cumulative $3 trillion through 2020, compared with current projections. Employers would save $231 billion over this period—providing much needed relief to struggling businesses. State and local governments, hard hit by the economic crisis, would save $1 trillion. Households would save $2.3 trillion over the period, averaging $2,300 per family per year in 2020 alone. As the central source of financing for coverage expansions, the federal government’s costs would increase during early years. The federal government’s cumulative net costs—with all of the components of the Path framework in place—would be $593 billion over 2010–2020. Most of the federal expenses would occur in early years as a result of initial investments. These upfront investments would yield a substantial return for the nation and the federal government: by 2020, payment and system reform savings would offset nearly all the increase in annual federal spending compared with baseline projections.

The Path framework would achieve near-universal coverage, ensure access, enable continuity of care and coverage, and lower premiums. The numbers of uninsured would drop quickly, falling to less than 1 percent of the population without health insurance coverage by 2012. In addition, coverage would be improved for millions of the underinsured, those with inadequate coverage that put them at high financial risk if sick or injured.

The central feature of the Path framework is an insurance foundation that would enable rapid progress toward slowing the growth in national health spending—with gains in efficiency and value nationwide. Based on the belief that the U.S. needs to find its own unique path forward, the insurance framework builds on the strengths of private and public insurance while offering new choices for families and businesses. The creation of a national health insurance exchange with a choice of private plans and a new public health insurance plan would provide a mechanism for employers and individuals to obtain coverage with multiple advantages. The approach would:

  • Build on and harness the strengths of both private insurance and publicly sponsored insurance;
  • Improve choice and continuity, and provide a secure option nationwide that will always be there;
  • Broaden the foundation for rapid implementation of payment and system reforms that align incentives to enhance value and bend the cost curve;
  • Ensure that markets work in the public interest and serve as a counterbalance to undue market power by insurers or providers;
  • Reduce administrative cost and complexity—making it easy to enroll, select a plan, and change or keep coverage; and
  • Provide a less-expensive foundation for expanding health insurance coverage to everyone and thus lower the federal cost of covering the uninsured and improving coverage for the underinsured.

 By focusing competitive market forces in the public interest, this framework offers a path to rapid gains in slowing the growth in national health spending, and it does so in a way that also improves access and financial protection for families.

One major advantage of the public health insurance plan is that it broadens the foundation for rapid implementation of payment and system reforms that align incentives to enhance value and bend the cost curve. The Commission recommended payment policies that would reward value—better outcomes and more-efficient care. The payment reforms would apply to Medicare, Medicaid, and the public health insurance plan and could be adopted and adapted by private insurance. The reforms would:

  • Enhance payment for primary care by revising the Medicare fee schedule and updates;
  • Encourage adoption of the medical home model to promote coordinated care with new payment methods for primary care;
  • Implement bundled payment for acute care episodes to encourage integrated care; and
  • Correct price signals in health care markets to align payments with value.

 These policies replace the adverse incentives posed by the current fee-for-service system that pay for volume with reforms to spur the reorganization and reorientation of the health care delivery system to improve quality and promote more prudent use of resources.

The President has called for bold change to address the crushing financing burdens of rising health care costs for both businesses and families. His proposed health reform reserve fund, included in budget reconciliation, would provide the essential start for reform. The American Recovery and Reinvestment Act of 2009 made key investments in health information technology and generation of evidence-based information about medical care to support patients and clinicians.

Building on this start and moving forward will require deciding how to secure insurance coverage and change payment incentives to emphasize value, not volume. Medicare can innovate but it cannot go alone. Reforms that seek to bend the cost curve and improve coverage for those under age 65 will need to incorporate these payment and system reforms to have coherent policies and a significant impact. In short, we need a "system" approach to take a new path for the nation’s health system.

Although politically difficult, there is an urgent need to move in a new direction. The comprehensive reforms proposed here will help spark economic recovery, put the nation back on a path to fiscal responsibility, and ensure all families are able to get the care they need with financial security. The cost of inaction is high. With both a historic political opportunity and a clear path toward a high performance health system, the time has come to take bold steps to ensure the health and economic security of this and future generations.

Publication Details



K. Davis and C. Schoen, Putting the U.S. Health System on the Path to High Performance, Hearing on "Health Reform in the 21st Century: Expanding Coverage, Improving Quality, and Controlling Costs," U.S. House of Representatives, Committee on Ways and Means, March 11, 2009.