Weekend Reader: ‘Reinventing American Health Care’

Weekend Reader: ‘Reinventing American Health Care’

Today the Weekend Reader brings you Reinventing American Health Care, by bioethicist, former special advisor on health care reform to the White House, and current senior fellow at the Center for American Progress, Ezekiel Emanuel. According to Emanuel, health care in the U.S. was a “terribly complex, blatantly unjust, outrageously expensive, grossly inefficient, error-prone system,” but the Affordable Care Act aims to fix all that. Emanuel’s extensive background in both medicine and public policy is poured into Reinventing American Health Caremaking it a manual for understanding why health care is not only a divisive issue, but how the ACA will greatly improve our health care system for years to come. 

Despite being an advocate for the ACA, Emanuel recognizes that it was not a perfect law as implemented and will need improvements moving forward. The excerpt below highlights two of his four recommendations for continuing to develop the 2010 law. 

You can purchase the book here.

What Are the Post-ACA Reforms?

The Affordable Care Act was passed in 2010. However many changes it introduced to improve the American health care system, it was far from perfect. Everyone recognizes there were some things left out, some things done poorly, and some things that need further modification. There are many additional changes that could be implemented to improve the system.

There are four important reforms that build on the ACA to advance health promotion and prevention, cost control, and quality improvement that are “shovel ready,” meaning they can be initiated quickly and with lasting impact.

Raise Cigarette Taxes

A quick and easy way to prevent serious illness is to raise cigarette taxes.Cigarettes and small cigars represent the single-greatest preventable cause of death in the country. Over the last 50 years or so, the United States has reduced adult smoking rates by half—a great public health triumph. According to most experts a combination of factors, from eliminating advertising and adding graphic package warnings to forcing smokers out of restaurants and office buildings and raising cigarette taxes, have contributed to positive outcomes. The reduction in smoking rates has tapered off, however. Today about 20% of adults smoke, and it has remained at about that level for the last 5 years.

One effective way to further reduce smoking is to raise its cost. In 1862, during the Civil War, the federal government imposed an excise tax on tobacco. By 1969 all states had their own additional excise tax on tobacco. In 2009 the federal excise tax on cigarettes was raised from 39 cents to $1.01. If we raised the federal excise tax by 50 cents, the Congressional Budget Office estimates smoking rates would drop by about 3 percent, mainly by persuading younger people not to take up smoking. Because most people who smoke start as teenagers, this would lead to a prolonged decline in the smoking rates as well as declines in emphysema, lung cancer, heart disease, and the many tobacco-related illnesses—an important long-term preventive measure. Furthermore, this tax will reduce the disparity in smoking. Lower-income Americans are more likely to smoke and are more price sensitive. Raising the cigarette tax will disproportionately reduce smoking among Americans with lower incomes—a very good thing.

Not only would this policy improve health, it would also generate $37 billion over the next 10 years. That money could be used either to reduce the deficit or even to further improve the health of American children by investing in early childhood interventions.

More Competitive Bidding

Ever wonder how much a wheelchair costs? Or, more importantly, ever wonder who decides how much a wheelchair costs? You probably aren’t that concerned about the price of a wheelchair because in all likelihood you don’t think you’ll ever need one. You may feel that medical prices are too high but think you don’t have much bargaining power to influence them. Private insurance companies and public payers like Medicare have the power to ensure the prices are low.

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The problem is that our system for setting prices and paying for medical devices, equipment, and procedures is broken—and we need to fix it. Before the ACA, the government effectively set the price of a wheelchair. Medicare determined what it paid manufacturers for their wheelchairs.However, few Americans believe government price setting is the best way to ensure low-cost, high-quality wheelchairs; instead, most Americans believe the market is the best way to set prices.

The ACA contains provisions designed to change the system, to move from a government-price setting to market-price setting. One of these provisions is competitive bidding in Medicare, requiring competitive bidding mainly for wheelchairs, hospital beds, oxygen equipment, artificial limbs, and a few other things—what are technically called durable medical equipment, prosthetics, and orthotics.

The program began in 9 geographic areas in January 2011. Instead of the government setting prices, the companies bid on how much equipment they would supply and at what price. The program has succeeded remarkably. Overall, prices for wheelchairs, hospital beds, walkers, oxygen equipment, and other goods dropped more than 40 percent in 3 years. The ACA requires this competitive bidding program expand nationwide by 2016. The CBO projects that over the next 10 years it will save the government nearly $26 billion and Medicare beneficiaries, through reduced co-payments, $17 billion.

Behind the scenes, however, private companies that typically champion the free market in their public remarks are trying to modify and weaken the law. They have profited from the old government price-setting arrangement and, despite their rhetoric, don’t really like the competitive market as much. Using claims of artificially low prices, limited supply, and shoddy quality, they are suggesting ways to keep prices up.

What should the government do? Resist these company entreaties and expand competitive bidding. First, given the success of the program thus far, there is no compelling reason to wait until 2016 to expand it nationwide. Why not expand it nationwide by 2015 and reap billions in additional savings not just for the government but also for seniors?

Second, to help CMS run this process even better, we might establish an independent advisory board composed of business and academic experts in the competitive bidding process. For instance, wouldn’t you want Walmart’s or GE’s experts to help run the government’s competitive bidding process? There are economists who study successful and unsuccessful competitive bidding processes that can also help to improve the operations. Adjustments in how the competitive bidding process is run can help ensure low prices, a diversity of suppliers, and high-quality equipment.

If you enjoyed this excerpt, purchase the full book here.

Excerpted from Reinventing American Health Care: How the Affordable Care Act Will Improve Our Terribly Complex, Blatantly Unjust, Outrageously Expensive, Grossly Inefficient, Error-Prone System by Ezekiel J. Emanuel (March 2014).  Reprinted with permission from PublicAffairs.

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