Thank you, Mr. Chairman and members of the Committee, for the invitation to testify regarding insights for the United States from international experiences with health care system reforms to improve access, outcomes, and value. As the U.S. confronts the urgent need for federal action to expand and improve access and to slow the increase in health care costs for families, employers, and the public sector, we might well ask how other countries insure everyone, achieve outcomes that rival or exceed those in the U.S., and yet spend far less than we do.
The U.S. stands out among wealthy, industrialized nations for: our failure to cover everyone; our expensive, complex, and inefficient insurance system; our fragmented health care delivery systems with weak primary care foundations; our lack of information; and incentives to increase the volume of health services irrespective of quality of care or outcomes. We are the only country with high rates of uninsured and underinsured, where even the insured can face cost-related access barriers and financial stress or bankruptcy if they become sick. Such concerns are "made in America"—that is, virtually all other high-income, advanced industrialized countries have adopted health insurance policies that guarantee coverage for the entire population, access to care, and financial protection, with an emphasis on protecting those individuals who are vulnerable because of poor health or low income. Moreover, they do so at far lower cost, and achieve health outcomes that are often comparable to or better than those in the U.S.
The U.S. leads the world in health spending, with costs projected to continue rising far faster than incomes over the next decade if trends continue. Health care spending, at $2.5 trillion or $7,290 per person, already consumes 17 percent of our nation’s gross domestic product (GDP), and it is more than twice what other major high-income, industrialized countries spend. If trends continue, health spending as a percentage of our GDP will likely reach 21 percent by 2020. Compared to other industrialized countries, we spend about twice as much per person. As a share of national resources (GDP), we spend from one-and-a-half to two times as much as other countries—and the gap has been widening since 1980, particularly in the past five years. Relatively higher-cost countries, such as Germany and Canada, have moderated their spending growth relative to income, while countries with lower spending, such as the United Kingdom, have increased outlays as a matter of deliberate public policy.
As other countries adopt innovative policies to improve performance, incorporate incentives to enhance value, and harness markets and competition in the public interest, we as a nation have opportunities to learn from these international strategies and reforms. The key question confronting U.S. policymakers contemplating national reforms is how to expand coverage to everyone and slow the growth in health care costs while maintaining or improving the quality of care. Looking at other countries, it is clear that each has developed, and continues to develop, its own approach, with policies and health systems evolving from their unique histories and institutions. Similarly, the U.S. will need to craft policies and adapt changes that fit our history, institutions, and values. Still, we can learn from the values and strategies that cut across diverse countries and from examples of incentives, policies, and practices that contribute to higher performance. The international experience provides insight regarding the potential direction and effectiveness of U.S. insurance, payment, and delivery system reforms.
Five lessons from the international experience stand out:
- Payment Policies: Prices, Purchasing Power, Information, and Incentives
In addition to its health insurance gaps, the U.S. is notable for paying higher prices than other countries, including very high prices for more specialized care, and for incentives to do more irrespective of value. Unlike other countries with multiple payers and competing insurers—such as Germany, Switzerland, and the Netherlands—we lack a mechanism to coordinate payment policies so that price signals are coherent, or a way to use group purchasing power to move in the same direction. In more monopolized
markets, U.S. private insurers often act as price-takers to maintain networks and pass through higher prices, with a mark-up for marketing, administrative costs, and margins.
As a result, the U.S. tends to pay higher prices for specialized services, including prescription drugs—particularly brand-name drugs without generic options. A recent McKinsey study found the U.S., compared with other developed countries, pays 50 percent more for comparable drugs and pays for a more expensive mix of drugs, leading to total costs that are twice as high as expected—amounting to some $98 billion in excess spending per year.
- Primary Care: Payment, Incentives, and Infrastructure
Overall, the U.S. stands out for its weak primary care foundation and poorly coordinated care. Most striking is that other countries have insurance systems that promote continuity in care, including long-term relationships with physicians, and provide the choice of all primary care practices in the community. Many encourage or require patients to identify a “medical home” to serve as their principal source of primary care and to coordinate specialist care when needed. After-hours cooperatives take over for primary care physicians at nights and on weekends in several countries.
Most fundamentally, other countries make primary care financially and physically accessible to their residents. Insurance designs emphasize coverage of primary care with low or no cost-sharing for preventive care and essential medications for chronic illnesses. Such value-based benefit designs provide positive incentives for patients, lower financial barriers for highly effective care, and align patient incentives with efforts to hold clinicians accountable for high-quality, effective care.
The U.S. relies on market incentives to shape its health care system, yet other countries are more advanced in providing financial support and incentives to primary care physicians that target quality of care. Incentives and targeted support for primary care in other countries include: extra payments for adding nurses to care teams, payment for email consults, and enhanced visit payments for after-hours care. Providers receive financial incentives for enrolling patients and for offering chronic care services such as patient self-management education. Several countries pay physicians in a way that narrows the spread between primary care physicians’ and specialists’ income, especially compared to the widening gaps in the U.S. Countries that have traditionally paid on a fee-for-service basis are increasingly moving toward a mixed payment method that includes a per-patient monthly allotment for providing access, coordination, and team-based care and for serving as a "medical home," as well as fees for visits or incentives for quality.
- Information Systems to Inform, Guide, and Drive Innovation
Other countries have made investments to promote the adoption and use of electronic health information technology with the capacity for information exchange. As of 2006, one-fourth of U.S. primary care physician report using electronic medical records, compared with nearly all primary care physicians in the Netherlands, New Zealand, and the U.K. Primary care physicians in other countries also increasingly have health IT featuring an array of functionality, a result of efforts by these countries to build on their IT capacity. When assessed against 14 different functions of advanced information capacity, one of five U.S. primary care physicians reported having at least seven of the 14 functions, compared with 60 percent to 90 percent of physicians in the Netherlands, Australia, the U.K., and New Zealand. The wide differences reflect these other nations’ efforts to standardize and promote use of health IT, often through financial incentives.
- Comparative Information and Transparency
In addition to using assessments of clinical effectiveness to inform medical decisions and insurance benefit designs, several countries are developing rich comparative information systems on performance. In Germany, peers visit hospitals whose quality is substandard and enter into a “dialogue” about why that is the case. The Netherlands and the U.K. are also investing in transparency in reporting quality data, including patients’ experiences. In both countries, this information is posted on public Web sites and fed back to clinicians. The U.K. publishes extensive information on hospital quality and surgical results by hospital and surgeon.
- Insurance-Related Complexity and Administrative Costs
As currently structured, the U.S. health insurance system also generates high insurance-related administrative and overhead costs—for insurers as well as for doctors and hospitals. On a per-person basis, the U.S. spends more than twice as much for the net costs of insurance administration. Varying benefit designs, marketing costs, churning in and out of coverage, underwriting, and insurance profit margins also contribute to higher overhead costs. A recent McKinsey study estimates such complexity—including multiple reporting requirements—accounts for some $90 billion in excess costs each year. And this does not count the internal costs to physician practices in time and staff resources to cope with complex variations.
In summary, several core strategies span diverse countries, although each country has evolved its own approach. These include:
Coverage for everyone: an explicit national goal and shared value
- Insurance designs emphasize access, financial protection, and value
- Insurance provides foundation for payment and system reforms
Payment policies that emphasize value and use group-purchasing power, and that promote primary care, prevention, and effective care of chronic disease
System reforms that harness markets and competition in the public interest and provide information to spur improvement performance and innovation
- Market rules that focus competition on quality and efficiency
- In multipayer systems, joint efforts to move in the same direction
- Information systems to inform, guide, and drive change and innovation
- Market rules that focus competition on quality and efficiency
Leadership, goals, and targets
- In countries with multiple payers and competing insurers, this includes provisions for public and private participation.
Insurance reform is fundamental for access and financial protection. Other countries provide evidence that it also can serve as a base for a more rational payment system and for incentives that reward value, not volume. Coherent prices and payment policies that support effective and efficient care are critical for markets to work, as is information. Investing in comparative information and assessment and advanced clinical information systems are instrumental to inform, guide, and drive innovation. These core strategies cut across other countries and have fueled reforms designed to meet the health needs of their populations.
The time has come for the U.S. to move forward on behalf of the health and economic security of current and future generations. We have the benefit of being able to draw from multiple examples of international strategies, as well as care systems here in the U.S. that achieve high quality at lower cost. We can learn from diverse international experiences as nations innovate to provide accessible, high-quality, and efficient care. By enacting national reforms that take strategic steps to put the nation on a path to high performance, we have the opportunity to reap a high return for the health of the population and the economy.