What Will Congresses’ Next Step Be on Healthcare?

After a two-week break Congress is coming back in session at a time that historically has been an active period for passing legislation. This time, however, there might not be much activity. As you probably know the Build Back Better (BBB) Act failed to gain traction at the end of last year. The House passed the BBB Act, but it died in the Senate due to the reluctance of Senator Manchin to pass legislation that cost over two trillion dollars on programs that he didn’t think were needed. Parts of the Build Back Better Act passed by the House would have made changes to Medicare. It would have added some level of eye, hearing and dental benefits, initiated government price controls on many prescription drugs, and would have set a cap on the yearly out-of-pocket costs in the Medicare prescription drug (Part D) benefit. I’ve commented in a recent blog on how destructive government price controls would be. In that same blog I stated that a yearly out-of-pocket cap on costs for Part D would be a great change. While adding benefits seems like a positive change the costs and the details for the added benefits would need to be carefully scrutinized.

I’ll go out on a limb (a pretty secure limb) and say that the BBB Act as passed by the House is dead. I’ll go out on a little less secure (but still pretty secure) limb and say that pulling out some of the parts of the BBB Act that affect Medicare and passing them in some other smaller bill is not going to happen in the next few months. Given that assessment I would like to talk about some overall long term healthcare changes that Washington should be considering.

We need to somehow wean ourselves away from a fee for service healthcare system. It magnifies the wrong incentives by focusing on volume rather than outcomes. This doesn’t mean we should cut back on tests and procedures that give us the advantage of early detection of health problems; it means we should pay attention to best practices and gather the data that will allow us to develop insights into the true value of individual tests. This same perverse incentive to order added tests is also driven by the lack of tort reform for our healthcare providers. When the fear of being sued drives our providers to order excessive tests and procedures it not only raises the overall healthcare and individual patient costs but often exposes the patient to added discomfort and danger. These types of changes have enjoyed bipartisan and bicameral support in the past and should be revisited.

We need to consider pricing drugs by the value they impart. We have been experimenting and, in some cases, implementing results-based pricing contracts that are based on the overall effectiveness of a medicine or procedure. There are ways to make informed estimates of the true overall value of a medicine. A medicine that saves lives, restores the ability of the patient to be self-sufficient or allows a patient not to be institutionalized all have a huge impact on healthcare and societal costs. We need to pursue these types of value-based solutions.

The value and effectiveness of preventative programs have been widely recognized but paying for these types of programs have been difficult to implement given the current short-term focus on cost. This bias was evident in my experience at the American Society on Aging conference I attended two weeks ago. There was real resistance to the idea of expanding Medicare Advantage (MA) programs that have the benefit of offering wellness programs to help us stay healthy rather than treat us after we get sick. MA plans are an example of the type of incentives we need to adopt in America’s healthcare system. The MA program saves money in the long run by keeping us healthy and out of the doctor’s office and out of the hospital. This allows the cost of a medicine or procedure to be offset by the savings generated by the avoidance of a stay in the hospital. Our siloed Medicare system (divided into Parts A,B, C, and D) prevents this type of accounting. For example, when Medicare Part D was first implemented hospital admittance by seniors fell. There was no way then or now for the savings generated by these lower hospital admissions to be credited to Part D. This lack of accounting is even less accurate in estimating the social affect of a patient who, through the efficiency of a provider or a new medicine, is able to return to work, support themselves and pay taxes rather than consume government funds. We need to find out how to develop systems that look to the long term and take a broader look at keeping seniors healthy.

These are some pretty lofty goals and may seem unreachable. I often find myself looking only at the next piece of legislation or the next executive order or the next regulatory change and fail to step back and look at the direction we should be headed to really fix America’s healthcare system. I think the suggestions detailed above should be touchstones to which we compare each proposed change, asking the question, does this get us closer to the above descriptions or take us further away? We can’t get closer to these long-term solutions if our next piece of legislation or executive order or regulation takes us further away.

As always, I’ll keep my eye on any healthcare legislation that pops up and keep you informed, but rest assured that I won’t just be interested in the short-term savings or impacts, I’ll also be looking at the long-term implications of each proposal.

Best, Thair