In the past two months, Medicare spending has been lower than in October and November of 2012, according to the Congressional Budget Office. It’s an extraordinary feat that continues a several-years-long streak of deceleration in health costs.
If this streak keeps going, the U.S. will reap enormous economic benefits: a better-balanced federal budget in the long term, more take-home pay for workers, greater competitiveness for U.S. industries, and more room in state budgets for other kinds of spending.
Yet achieving better value in health care requires setting clear goals. In the past month, we saw President Barack Obama call on his administration to make HealthCare.gov function better. The White House set a deadline -- Nov. 30 -- and a measurable goal -- capacity for 800,000 users a day. The result was a “tech surge” that galvanized public and private efforts to reach this goal. And it worked.
This experience demonstrated the president’s unique ability to mobilize a national effort by setting well-defined goals. We urge Obama to set in motion a similar effort to reduce health-care costs.
Without a doubt, there is plenty of room to improve the value Americans receive from their health-care dollars. The president’s own Council of Economic Advisers estimated that the U.S. could save more than $700 billion every year without compromising health outcomes; the Institute of Medicine has put the number at $765 billion; the New England Healthcare Institute has set it at $850 billion annually; Rand Corp.’s savings range averages $910 billion a year; and the Lewin Group and former George W. Bush Treasury Secretary Paul O’Neill have estimated the annual savings at $1 trillion. Whatever the precise number, the potential savings are big.
Some progress has been made, as the most recent Medicare numbers reflect. Indeed, over the past few years, the Congressional Budget Office has lowered by more than $1 trillion its projected estimates of Medicare and Medicaid spending over the next decade. But we are only at the beginning of what is possible.
Now, President Obama should step forward with bold national goals. One would be a dollar-and-date target for total health-care savings, based on the above projections for improvements in the quality and coordination of care. Or, to make the goal easily measurable, the president could declare that, starting in 2020, health-care spending per person should rise no faster than general inflation.
President Obama could also set specific goals for reforming payment systems and digitizing medical information -- both crucial strategies for lowering costs while improving care. By 2020, at least 75 percent of Medicare payments should be assessed in some way other than fee-for-service. Alternative fee-for-value mechanisms, such as bundled payments and accountable care organizations, do away with incentives to merely provide more care. The secretary of health and human services has substantial authority under current law to move the system in this direction -- for example, by putting in place more broadly the approach used in the Acute Care Episode demonstration project, which has used bundled payments to hospitals and doctors for various episodes of orthopedic and cardiovascular treatment.
The president could also set a goal to use zero paper in the health sector by 2020. A paperless system would improve the patient experience and bolster safety by reducing errors; it would enable doctors and hospitals to better respond to incentives to provide high-value care; it would lower the costs of billing and filing claims; and the robust data it would yield could propel innovation in personal health-care mobile applications.
Imagine paperless health care in 2020, with no real per capita growth and with most payments set according to value rather than intensity of treatment. That’s a set of goals worth shooting for.
(Peter Orszag is vice chairman of corporate and investment banking and chairman of the financial strategy and solutions group at Citigroup Inc. and a former director of the Office of Management and Budget in the Obama administration. He is a Bloomberg View columnist. Ezekiel Emanuel, an oncologist and former White House adviser, is a vice provost and professor at the University of Pennsylvania. Sheldon Whitehouse is a U.S. senator from Rhode Island.)
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