Last week, the Joint Select Committee on Deficit Reduction - better known to most as the Supercommittee - announced that it would not be able to reach a compromise for federal budget cuts of $1.2 trillion by its set Thanksgiving deadline.
Although there was much handwringing and finger pointing in the media, failure to reach a compromise should come as no surprise to those who follow healthcare policy.
The debt is a political hand grenade, used by both sides of the aisle to gain a leg-up over the other in the polls leading into an election year. On the one hand, there were accusations of Republicans trying to gut programs such as Medicare and Medicaid. On the other, Democrats were painted as preserving a culture of handouts. Given the polarized nature of election year politics and the need to curry favor with the base of voters loyal to both parties, elected officials serving on the Supercommittee had few options other than to stare one another down in hopes that the other side would blink first – hardly a prescription for compromise.
Moreover, consider the risks of a compromise when balanced against those of inaction. In order to reach a deal, the Supercommittee needed to recommend a series of program spending cuts, coupled with increased taxes. For Democratic members, defending those proposed cuts would make a most unpleasant holiday season. Similarly, Republicans could hardly defend tax increases during a recession.
But what were the risks of inaction? The markets have already built the cost of failure into stock prices, and the U.S. sovereign credit rating was already downgraded, so there was no falling off the cliff as there was this summer. On the upside, everyone gets to return to their districts with their hands clean.
So what’s next?
As Congress moves into the sequestration process, healthcare isn’t likely to get any relief from the proposed 2 percent across the board provider cuts that were included as part of the original budget proposal. In fact, hospitals could face even deeper cuts, as Congress still needs to figure out a way to permanently fix physician reimbursement, a bill they have delayed paying for years that now requires nearly $300 billion in funds for a long-term fix and $22 billion for a one-year patch. And all of those newly appropriated funds need to be offset with savings or added revenues. But how the cuts are calculated and achieved is very much up for debate.
Rather than move toward blunt, across-the-board cuts to providers, there are better approaches to controlling healthcare spending, including measures that will accelerate savings through delivery system reforms. The goal should be for policy to incent reducing waste, not paying in the same fee-for-service way but cutting back on the fee for each service.
For example, Congress could recognize participants in shared savings and bundled payment programs for efforts to reduce spending, and count any costs eliminated through these programs as a way to satisfy the 2 percent sequestration requirement. Such a policy would reduce federal spending, and simultaneously encourage providers to participate in these programs, which many agree represents the best hope for overcoming today’s siloed payment systems that incent waste, inefficiency, variation and over-use.
Another simple way to achieve the spending cuts required in sequestration would be for Congress to require the speedy implementation of the unique device identifier (UDI) in healthcare. Although Congress passed a law requiring UDI for devices four years ago, it has never been implemented.
UDI will enable healthcare providers to more effectively track medical devices electronically to improve the recall process, better track device adverse events and reduce healthcare costs through improved efficiency. In fact, reports evaluating the efficiencies of UDI implementation estimate that this measure alone will yield 10-year savings of up to $150 billion – half of the amount needed to offset the physician reimbursement fix.
By taking a more rational approach to achieving spending reductions in healthcare, we can avoid further cuts to provider payments and simultaneously improve the health of both our economy and our communities.
Although a deal has not yet been reached, we still have an opportunity to do the necessary work that will put healthcare back on a financially stable, sustainable path. Let’s hope that Congress is now prepared to act.
Blair Childs is the senior vice president of Public Affairs with the Premier healthcare alliance.