Under the proposal, the major public and private players in each state would negotiate payment rates with service providers such as hospitals. The idea is to get away from paying for each individual test and procedure. Negotiated rates could be based on an entire course of treatment. Payments would have to fit within an overall budget that could grow no faster than the average rise in wages.
The spending limits would be enforced by an independent council, but crucial details need to be spelled out. In Massachusetts, for example, budget-busting providers will be required to file plans with the state laying out how they’ll amend their spendthrift ways.
The federal government would provide grants to states interested in developing their plans.
Tanden joined a brain trust of former administration officials floating the proposal recently in the New England Journal of Medicine. The group included Peter Orszag (former budget director), John Podesta (transition director), Donald Berwick (first Medicare chief), Ezekiel Emanuel (Orszag’s health policy guru), and Joshua Sharfstein (former No. 2 at the Food and Drug Administration). Also on board was former Senate Majority Leader Tom Daschle, D-S.D., Obama’s first pick to shepherd his health care overhaul.
This item from the Associated Press dubs the initiative “Health Care Overhaul, Version 2.0,” with the goal of establishing a “first-ever budget for the nation’s $2.8-trillion health care system, through negotiated limits on public and private spending in each state.”
The proposal represents an expansion of the accountable care organization concept in the Patient Protection and Affordable Care Act’s Medicare Shared Savings Program (Section 3022 of the PPACA) beyond Medicare to encompass private payments. It is a government led market intervention designed to shift the business model and economics of the health care industry away from the current model that rewards the provision of discrete medical procedures to an all inclusive, coordinated system of care.
Arguably, the existing health maintenance organization (HMO) is based on the same principle. But that hasn’t bent the so-called cost curve. The difference here is that the power of government would be brought to bear to hold down costs such as in Massachusetts. The Bay State recently enacted legislation that among other things, subjects providers to cost growth benchmarks. Those providers exceeding the benchmarks must file and implement a performance-improvement plan, with potential penalty up to $500,000 for failure to comply. The New England Journal of Medicine has more details on the Massachusetts law here.
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