Brookings's Framework to Bend the Health Care Curve

Yesterday, the Engelberg Center for Health Care Reform at Brookings released a new report on reducing health care costs called "Bending the Curve: Person-Centered Health Care Reform: A Framework for Improving Care and Slowing Health Care Cost Growth." The report is the latest in a number of plans with the goal of reforming health spending by realigning incentives to slow health care cost growth.

The authors propose an integrated set of reforms across the health care system to Medicare, Medicaid, private payers, and regulations like medical and antitrust laws. They argue the proposals in their plan illustrate consensus on reducing health care cost growth while improving care and can be used as a framework for the foundation of any reform. According to the report’s estimates, on net (after offsetting the cost of repealing the sustainable growth rate formula) these reforms could provide $300 billion in savings to the federal government over the next decade and long-term savings of $1 trillion over the next 20 years. Below are some of the key elements of this plan:

Transition to Medicare Comprehensive Care: The report calls for a transition away from traditional Medicare fee-for-service (FFS) and towards a new alternative called Medicare Comprehensive Care (MCC). Similar to the idea behind the Bipartisan Policy Center’s Medicare Networks or the Commonwealth Fund’s Medicare Essential, MCC would be an alternative payment system and benefit package to align incentives with higher value care. On the provider side, MCC would build on current payment reforms such as bundled payments, Accountable Care Organizations, and medical homes to replace FFS payments so that by the end of the decade the majority of Medicare services are reimbursed by these alternative arrangements. All Medicare payments (FFS, MCC, and Medicare Advantage) would be based on current per beneficiary spending and limited to the per capita growth rate of GDP – similar to budgetary caps called for in the Bipartisan Path Forward and other plans.

Incorporate Cost Sharing Reforms: On the beneficiary side, the MCC would offer beneficiaries the option to reduce their premiums and/or copays in exchange for choosing higher-value MCC providers. The report also proposes incorporating an out-of-pocket maximum and requiring Medigap plans to have an actuarially equivalent copay of at least 10 percent. These cost-sharing recommendations are similar to what we have seen in other plans and further demonstrate the growing support for such reforms.

Reduce Medicaid Per-Beneficiary Growth: With respect to Medicaid, the Brookings report proposes reforms that would reduce per capita cost growth and streamline the Medicaid waiver process. To encourage states to pursue reforms that lower costs and improve quality, they would allow states to share in some of the savings their plans produce. Additionally, the plan would make permanent and expand the CMS capitated Financial Alignment Demonstration for dual eligibles and allow states to benefit from their share of any savings to Medicaid.  

Limit the Employer-Provided Health Exclusion: The other large source of deficit reduction in the Brookings plan comes from new revenue by limiting the employer-provided health insurance exclusion. This has been called for in several other proposals, and the authors recommend phasing in a cap on this exclusion below the current level of the Affordable Care Act’s excise tax on high-cost plans (the “Cadillac tax”), but above the caps for the subsidies in the health insurance exchanges. 

Encourage System-Wide Efficiency: The plan includes a number of other recommendations such as improving cost and quality transparency, promoting effective antitrust enforcement, standardizing administrative requirements, supporting state-based medical liability reforms, and encouraging broader participation in the health insurance exchanges to lower rates.

By developing a plan centered on basic ideas that have been receiving considerable attention from both sides of the aisle, the Brookings report highlights that political differences on reforming federal health spending may not be that large. While their projected savings are lower than some other proposals, the proposal does demonstrate the great potential for common ground on a significant number of policies that could help put health care spending on a more sustainable path in the long term. 

Click here to read the full report.