Comptroller General's Forum on Health Care: Unsustainable Trends 
Necessitate Comprehensive and Fundamental Reforms to Control	 
Spending and Improve Value (01-MAY-04, GAO-04-793SP).		 
                                                                 
Unrelenting growth in health care spending has put pressure on	 
policymakers to seek health care system reforms. The stress comes
partly from a wide gap in expectations between what health care  
Americans want and what the nation can afford and sustain. GAO's 
Health Care Forum was held on January 13, 2004, to find ways to  
elevate the nation's understanding of health care cost, access,  
and quality challenges. Forum attendees included a select group  
of experts, business leaders, and public officials. The forum's  
plenary speakers discussed issues associated with health care	 
costs and value, including spending drivers, long-term		 
affordability, and the effect of differences across the country  
in medical practices. Participants in breakout sessions led by	 
the forum's faculty of experts deliberated on the merits of the  
various health care reform strategies, including focusing on	 
consumer cost sensitivity, targeting high-cost patients, reducing
unwarranted variation in medical practices, and managing	 
technology to control spending growth. GAO has developed a series
of questions to evaluate all health care reform proposals, based 
in part, on the results of this forum.				 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-04-793SP					        
    ACCNO:   A10264						        
  TITLE:     Comptroller General's Forum on Health Care: Unsustainable
Trends Necessitate Comprehensive and Fundamental Reforms to	 
Control Spending and Improve Value				 
     DATE:   05/01/2004 
  SUBJECT:   Financial management				 
	     Future budget projections				 
	     Health care cost control				 
	     Health care planning				 
	     Health care programs				 
	     Health care services				 
	     Health insurance cost control			 
	     Health statistics					 
	     Health surveys					 
	     Projections					 
	     Strategic planning 				 
	     Medicaid Program					 
	     Medicare Program					 
	     State Children's Health Insurance			 
	     Program						 
                                                                 

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GAO-04-793SP

Highlights of GAO-04-793SP

Unrelenting growth in health care spending has put pressure on
policymakers to seek health care system reforms. The stress comes partly
from a wide gap in expectations between what health care Americans want
and what the nation can afford and sustain. GAO's Health Care Forum was
held on January 13, 2004, to find ways to elevate the nation's
understanding of health care cost, access, and quality challenges. Forum
attendees included a select group of experts, business leaders, and public
officials.

The forum's plenary speakers discussed issues associated with health care
costs and value, including spending drivers, longterm affordability, and
the effect of differences across the country in medical practices.
Participants in breakout sessions led by the forum's faculty of experts
deliberated on the merits of the various health care reform strategies,
including

o  	focusing on consumer cost sensitivity,

o  targeting high-cost patients,

o  	reducing unwarranted variation in medical practices, and

o  	managing technology to control spending growth.

GAO has developed a series of questions to evaluate all health care reform
proposals, based in part, on the results of this forum.

May 2004

HIGHLIGHTS OF A GAO FORUM

  Health Care: Unsustainable Trends Necessitate Comprehensive and Fundamental
                 Reforms to Control Spending and Improve Value

The forum's plenary speakers made the following observations regarding
health care costs and value:

o  	U.S. wealth and other factors drive health care spending: A nation's
wealth is the principal driver of its health care spending. However,
wealth alone does not explain the high level of spending in the United
States. Other influential factors include the pluralistic organization of
the U.S. health care system and ambivalent attitudes toward rationing
health care. While health care spending appears affordable for another
decade or two, added spending over time will draw resources away from
other economic sectors and could induce adverse economic implications for
government, individuals, and other private purchasers of health care.

o  	Unwarranted variation in medical practices nationwide points to
quality and efficiency problems: Much of the nationwide variation in use
of medical services has been attributed to differences in an area's
resources and capacity to provide health care. Despite the greater volume
of care provided to patients in high-spending areas, they do not have
better health outcomes or experience greater satisfaction with care.
Payment reforms can foster delivery of care that is clinically proven to
be effective. In addition, health care spending can be reduced by
identifying and rewarding efficient providers and encouraging inefficient
providers to emulate best practices.

At the forum's breakout sessions, participants discussed several promising
cost containment and value enhancement strategies. The sessions focused on
the merits and drawbacks of efforts to (1) make consumers more conscious
of health care costs, (2) coordinate care for the nation's costliest
patients, (3) hold the appropriate parties accountable for the costs and
benefits of their clinical decisions, and (4) ration technology without
denying needed care. A common theme emerged from the four groups: namely,
efforts to reward efficiency and achieve better health outcomes are
dependent on a much more highly evolved information infrastructure than
exists today. Collecting and maintaining the needed data would require
political and financial support and a central, independent mechanism for
setting standards and policies. Such structural changes are likely to take
years to develop, but initiatives are under way to put promising
strategies into practice. Commitment by all interested parties and
political will are needed to achieve meaningful and sustainable results.

www.gao.gov/cgi-bin/getrpt?GAO-04-793SP.

To view the full product, click on the link above. For more information,
contact

A. Bruce Steinwald at (202) 512-7101 or [email protected].

                                    Contents

Letter 1

Introduction from the Comptroller General of the United States 1 U.S.
Health Care Has Not Achieved Sustainable Cost, Broad Access, or Good
Quality Systemwide 3 Containing Costs and Enhancing Value Are Key
Challenges Facing the Nation's Health Care System 8 Participants Discuss
Strategies for Controlling Costs and Enhancing Value in Health Care 13
Comptroller General Presents Criteria for Evaluating Health Care Reform
Proposals 25 Participants Share Views Through Informal Poll 27

Appendix I Forum Agenda

Appendix II Forum Faculty and Participants

Selected Bibliography

Tables

Table 1: Framework for Evaluating Health Care Reform 26 Table 2: Results
of the Health Care Forum Poll 28

Figures

Figure 1: National Health Expenditures as a Percentage of GDP 4 Figure 2:
Medicare and Medicaid as a Share of GDP 5 Figure 3: Composition of
Spending on Personal Health Care

Services, Selected Years 6 Figure 4: Number of Uninsured Nonelderly 7

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separately.

Introduction from the Comptroller General of the United States

In carrying out GAO's mission to help the Congress examine government
spending and its fiscal sustainability over the long term, I am acutely
mindful of the extent to which public programs financing health care-
particularly, Medicare-face serious challenges. Since the early 1990s when
I served as a trustee of Social Security and Medicare, I have been
concerned about the Medicare program's fiscal health and long-term
sustainability. My concerns have heightened as I examine GAO's long-term
budget simulations, which show a large and growing structural deficit due
primarily to our imminent demographic tidal wave and rising health care
costs. I am mindful, too, that the challenges posed by these trends affect
public sector programs at all levels of government, especially the federal
and state levels. In addition, employers and other private purchasers of
health care services are finding that increasing health care spending
poses a threat to their competitive position in an increasingly global
market. Furthermore, rising health care costs have implications for
overall tax revenues and individual employee cash compensation levels.

Unrelenting growth in health care spending has put pressure on
policymakers to seek fundamental health care system reforms. Part of the
stress comes from a wide gap in expectations among patients, providers,
and payers: what patients and providers expect is not well aligned with
what health care programs are able to deliver. The public and private
sectors can both play an important role in educating the public about the
differences between wants, needs, affordability, and sustainability at
both the individual and aggregate level.

In this regard, GAO's Health Care Forum was held on January 13, 2004, to
find ways to elevate the nation's understanding of health care cost,
access, and quality challenges. (See app. I for the forum's agenda.) Forum
attendees included a select group of experts, business leaders, and public
officials, who discussed the challenges associated with financing and
delivering health care both now and in the future. (See app. II. for a
list of participants.) Distinguished economists, practitioners, and other
leading health care authorities served as faculty for the forum's plenary
and breakout sessions. (See the selected bibliography of pertinent
articles and publications by the forum faculty.)

These proceedings showcase the numerous and complex issues that must be
addressed as we seek viable options to reforming the nation's "at-risk"
health care system. Convening discussions on these issues is a first step
toward obtaining public acceptance of the need for comprehensive and
fundamental changes. The next step is for the public, through open

dialogue, to encourage elected officials to address these issues promptly,
directly, and effectively.

I wish to thank all the forum participants for taking the time to share
their knowledge, insights, and perspectives. We will use the knowledge
gained from the day's deliberations in our discussions with Members of the
Congress. I look forward to working with the forum's participants on
important health care system reform issues in the future.

David M. Walker Comptroller General of the United States

U.S. Health Care Has Not Achieved Sustainable Cost, Broad Access, or Good
Quality Systemwide

Comptroller General Walker opened the forum with a presentation entitled
"Health Care System Crisis: Growing Challenges Point to Need for
Fundamental Reform." In essence, he noted that the U.S. health care system
is undergoing a period of growing stress. In today's health care sector,
there are few incentives for providers and consumers to be prudent in
their ordering and use of health care services, too little transparency
with regard to the value and costs of care, and inadequate accountability
to ensure that health care plans and providers meet standards for
appropriate use and quality. Both the public and private sectors are
facing major challenges with regard to three fundamental and
interconnected dimensions of the health care system-cost, access, and
quality. Specifically, rising costs are becoming unsustainable, some
Americans do not have access to basic care, and quality of care is uneven
across the nation. The following are highlights of the Comptroller
General's presentation.1

  Health Care Expenditures Are Escalating

Past cost containment efforts have not halted the rise in overall health
care spending. From 1990 through 2000, spending from all sources-both
public and private-nearly doubled in nominal dollars from about $696
billion to about $1.3 trillion. From 2000 through 2010, rapid growth is
expected to again double spending to an estimated $2.7 trillion in nominal
dollars. The rapid growth in health care spending means that an increasing
share of the nation's output, as measured by gross domestic product (GDP),
will be devoted to the production of health care services and goods. In
1970, health care spending represented about 7 percent of GDP. By 2010,
that share is projected to reach about 17 percent of GDP. (See fig. 1.)

1 The figures in this section are based on the most recent data available
at the time of the forum-January 2004.

Figure 1: National Health Expenditures as a Percentage of GDP

Percentage of GDP 18

16

14

12

10

8

6

4

2

0 1970 1980 1990 2000 2010

Sources: Centers for Medicare & Medicaid Services, Office of the Actuary,
National Health Statistics Group; and U.S. Department of Commerce, Bureau
of Economic Analysis.

Note: The figure for 2010 is projected.

In particular, public program obligations will be unsustainable for future
generations of Americans. For example, by 2050, the ratio of workers to
pay for each Medicare beneficiary will have dropped from about 4 to 1
today to just about 2 to 1. In addition, Medicare and Medicaid will have
more than doubled their share of the economy. (See fig. 2.)

Figure 2: Medicare and Medicaid as a Share of GDP

Percentage of GDP 16

14

12

10

8

6

4

2

0 2000 2010 2020 2030 2040 2050 2060 2070

Sources: Centers for Medicare & Medicaid Services, Office of the Actuary;
and the Congressional Budget Office (CBO).

Notes: Projections based on the intermediate assumptions of the 2003
Trustees' Reports, CBO's August 2003 short-term Medicaid estimates, and
CBO's March 2003 long-term Medicaid projections.

At the same time that health care spending has increased, consumers have
become more insulated from these escalating costs. In 1962, nearly half-
46 percent-of health care spending was financed by individuals out of
their own pockets (see fig. 3). The rest was financed by a combination of
private health insurance and public programs. By 2002, the amount of
health care spending financed by individuals' out-of-pocket spending-
spending at the point of service-was estimated to have dropped to 14
percent.

Figure 3: Composition of Spending on Personal Health Care Services,
Selected Years

                              1962 1982 2002 est.

Medicare

Medicaid

Other public

Other private

Source: Centers for Medicare & Medicaid Services, Office of the Actuary,
National Health Statistics Group.

Notes: The figure for 2002 is estimated. Out-of-pocket spending includes
direct spending by consumers on coinsurance, deductibles, and any amounts
not covered by insurance. Out-of-pocket premiums paid by individuals are
not counted here but are counted as part of private health insurance.

Tax preferences also shield individuals with health insurance from the
full brunt of health care costs. Tax considerations encourage employers to
offer health insurance to their employees, as the value of the premium is
excluded from the calculation of employees' taxable earnings. Moreover,
the value of the insurance coverage does not figure into the calculation
of payroll taxes. These tax exclusions represent a significant source of
forgone federal revenue-over $100 billion-masking the full cost of
providing health benefits. Tax preferences work at cross-purposes to the
goal of moderating health care spending.

To moderate health care spending in both sectors, we will need to look at
broad payment system reforms. For both public and private payers,
containing growth in health expenditures will be an abiding 21st century
challenge.

  Access to Basic Health

Despite higher health care spending, the United States has not achieved
Care Coverage Is Lacking broad access to coverage for basic levels of
care. Tens of millions of for Many Americans

Americans remain uninsured or underinsured. (See fig. 4.)

                    Figure 4: Number of Uninsured Nonelderly

                           Population in millions 50

                                      43.3

                                       40

                                       30

                                       20

                                      10 0

1999 2000 2001 2002

Sources: GAO, Urban Institute, and the Kaiser Commission on Medicaid and
the Uninsured.

Notes: Analyses of the Bureau of Labor Statistics and the U.S. Census
Bureau Current Population Survey, Annual Demographic Supplements and
Annual Social and Economic Supplement. Figures for 1999 through 2000 are
from the Urban Institute and the Kaiser Commission on Medicaid and the
Uninsured. The figures for 2001 through 2002 are from a GAO analysis of
the Current Population Survey.

Most nonelderly Americans without health insurance are lower-income
working age adults. Many more individuals will become uninsured as states
struggling with record budget shortfalls cut Medicaid enrollment. Most
troubling is that health insurance may be out of reach for many of those
who need it most-individuals in poor health. Even among insured
individuals, coverage is uneven. Many of these individuals find that
important services, such as long-term care and prescription drugs, are not
covered or the coverage they have may be substantially limited.

Gains in Health Status and Although increased health care spending has
likely led to much of the

Quality Are Uneven 	improvements in life expectancy and mortality, the
United States continues to lag other nations in these and several other
outcome measures. In 2000, the United States had an infant mortality rate
of 6.9 deaths per thousand live births. This was 23 percent higher than
the infant mortality rate in the United Kingdom and more than twice as
high as the

rate in Japan for that same year. The United States also exceeds other
industrialized nations in the number of potential years of life lost,
which is an indicator of premature mortality and preventable deaths.

The United States has fostered quality of care through investment and
achievement in medical science. Although advances in medical technology
have unquestionably provided medical benefits, consumers are not as
informed about the costs and benefits of health care as they may be about
other goods and services. For many treatments, experts have developed a
consensus on recommended use, but many patients do not receive these
treatments at the prescribed frequency. Similarly, some services are
overprescribed, providing little benefit and adding unnecessary costs to
the health care system. Finally, higher health care spending has not
translated to reduced medical errors. An oft-cited study by the Institute
of Medicine estimates that deaths due to medical errors in hospitals are
higher than deaths caused by automobile accidents, breast cancer, or AIDS.

The growing challenges in the U.S. health care system point to the need
for both comprehensive and fundamental reform, which grows increasingly
acute as the nation's long-term fiscal imbalance worsens. Thus, the issues
of rising costs, inconsistent quality, and uneven access will need to be
addressed simultaneously with system reforms and federal leadership on all
fronts.

Containing Costs and Enhancing Value Are Key Challenges Facing the Nation's
Health Care System

Why does health care spending in the United States consume a greater share
of the nation's economy than in other countries? Is this level of spending
affordable and sustainable? What is the value of the health care the
nation purchases? How can spending be reduced without sacrificing value?
These questions were the subject of the forum's morning plenary sessions
on health care cost and value. Presentations were given by Dr. Uwe
Reinhardt of Princeton University and respondent Dr. Alice Rivlin of the
Brookings Institution and by Dr. John Wennberg of Dartmouth Medical School
and respondent Dr. Arnold Milstein of the Pacific Business Group on
Health. The following is a summary of these presentations.

U.S. Wealth and Other Dr. Reinhardt presented his analyses of data from
the Organisation for Factors Drive Health Care Economic Co-operation and
Development (OECD), which show that U.S. Spending spending on health care
per capita continues to outpace other

industrialized nations. For example, Canada, a country with a fairly
similar health care delivery system and similar medical practices, spent

only 57 percent as much per capita as did the United States in 1999.
Although the aging of the population is often cited as a driver of
national health care spending, this claim is not supported by the data.
According to Dr. Reinhardt, a nation's wealth, as measured by GDP per
capita, is the chief health care spending driver. A nation's per capita
GDP explains about 90 percent of health care spending differences across
nations. Essentially, ability to pay drives consumption.

However, Dr. Reinhardt noted that per capita GDP does not account for as
much of health care spending in the United States as in other countries.
Per capita GDP in the United States explained only $3,300 of the $4,800
U.S. per capita spending on health care in 2001. Other influential factors
include the organization of the U.S. health care system and attitudes
toward health care rationing.

Dr. Reinhardt observed that the U.S. health care system is highly
fragmented among multiple payers, hundreds of thousands of providers often
functioning in isolation, and patients with different levels of private
and public coverage or no coverage at all. Such complexity and
fragmentation drives up administrative expenses as well as care costs.
Another contributor to spending, he continued, is the unwillingness of
Americans, most of whom are insured, to ration health care. Good health
insurance affords millions of Americans easy access to world-class health
care facilities. (As an aside, he noted that these advantages have not
translated into superior health status.) In principle, neither the public
nor its policymakers are willing to deny care, regardless of whether it
adds value to the individual or society. For example, he noted that the
value of doing procedures such as hip replacements on patients in their
mid-80s and older is highly questionable. For the significant minority of
uninsured Americans, however, Dr. Reinhardt observed that the rationing of
health care by price and ability to pay is manifest, especially for
primary and secondary care, if not for tertiary care.

Dr. Reinhardt explained why population age is not very significant as a
cost driver of health care spending systemwide. The United States is a
relatively young country compared with other OECD nations whose spending
per capita on health care is significantly lower. Moreover, the growth in
the proportion of the population over age 65 (an expensive demographic
group in terms of health care) will be gradual, projected to rise less
than 10 percentage points by 2050. Several simulations have shown that age
and gender account for only a small percentage of predicted annual growth
in spending on health care. Other research shows that much of the annual
growth in national spending on health care

is driven by the same factors that drive increased per capita spending
across all age groups.

Dr. Rivlin provided commentary on Dr. Reinhardt's presentation. On the
topic of rationing in the United States, Dr. Rivlin noted that organ
transplants should not be overlooked as one example: potential recipients
of organ transplants are ranked in priority order according to clinical
criteria. Nevertheless, the United States does not ration health care
extensively, she noted, because we have not reached a point where the
money spent on health care is considered not worth the investment. We are
continuing to see gains as people are living longer and leading less
impaired lives. On the topic of the aging population as a cost-driving
factor, Dr. Rivlin pointed out that from a federal budget perspective,
aging will have a significant impact. In particular, an increase in the
very old population (people in their mid-80s and older) will be important
because of their need for long-term care. In 2030, only the leading edge
of baby boomers will have reached age 80, portending significant cost
implications for Medicare and Medicaid in the years that follow.

  Unexplained Variation in Medical Practices Nationwide Points to Quality and
  Efficiency Problems

Americans' use of and expenditures for health care services vary widely by
geographic region. Much of the data showing regional differences was
developed from Dr. Wennberg's "small area analysis" research, which
divides the country into 306 geographic areas (called hospital referral
regions). Noting that the Medicare patient populations in these areas
differ little in terms of illnesses, Dr. Wennberg attributes much of the
variation in use of medical services to differences in an area's resources
and capacity to provide health care.

To explain further, Dr. Wennberg divides medical practices into three
categories of care: effective, preference-sensitive, and supply-sensitive.

o  	Effective care refers to clinical services that have been proven to be
efficacious with high benefit-risk ratios. As such, these services should
be provided to patients whose diagnoses indicate the need for them. Annual
eye exams for diabetics is one example of effective care. Dr. Wennberg's
research shows that from 1999 to 2000, 30 percent or more of diabetic
Medicare patients did not receive these medically necessary eye exams,
illustrating one of many instances of "underuse" of effective care across
the United States.

o  	Preference-sensitive care refers to clinical services that meet
several conditions: two or more valid treatment options are available, the
options

carry different risks and benefits, and patient preference should
determine which option is selected. Examples of preference-sensitive
services are coronary artery bypass grafting (CABG) and back surgery.
Misuse of these services occurs when patient preferences are not respected
in determining the choice of treatment.

o  	Supply-sensitive care refers to services for which there are few
clinical guidelines so that the per capita use of these services is
influenced by the available supply of resources. Among the Medicare
population, most supply-sensitive services are used in treating patients
with chronic illness. They include hospitalizations and use of intensive
care units, revisits to doctors, referrals to specialists, and use of
diagnostic tests and imaging procedures. Dr. Wennberg's research shows
that about 50 percent of the variation in discharge rates for patients
hospitalized with any medical condition is explained by the supply of
acute care beds. He noted that overuse of supply-sensitive care accounts
for most of the variation in overall Medicare spending.

Consistent with Dr. Reinhardt's analysis, Dr. Wennberg's studies show that
greater per capita spending buys more supply-sensitive care. Areas with
above-average spending have similar patterns of underuse of effective care
and overall rates of expensive preference-sensitive care, including
elective surgery. In other words, spending more per capita does not buy
greater quality. What greater spending purchases is more frequent use of
supplysensitive care in managing patients with chronic illness: more
hospitalizations, more stays in intensive care, more visits, and more
tests.

The critical question is this: does greater spending purchase better
health? Despite receiving a greater volume of care, Medicare populations
living in higher-spending areas compared to those living in lower-spending
areas do not have better health outcomes or experience greater
satisfaction with care. In fact, populations living in high-spending areas
appear to experience slightly worse outcomes. The results of this research
suggest that, if we can achieve more consistency with medical standards of
practice, vast potential exists to reduce spending without harm to
patients while making gains in health outcomes.

  Payment Reforms Can Foster Delivery of Effective Care, Leading to Reduced
  Health Care Spending

To achieve a health care system that delivers more effective care-medical
practice based on proven efficacy-our public and private payment systems
need to be reformed.

Dr. Wennberg offered a working hypothesis for he what terms "value health
purchasing." Health care spending can be reduced, he contends, using a
three-pronged approach:

o  	Identify efficient providers. Cost and utilization data can identify
health care organizations (for example, hospitals and associated
physicians) that use fewer supply-sensitive services than their peers in
treating patients with chronic illness.

o  	Reward efficient providers. These are providers who also address
underuse of effective care and misuse of preference-sensitive care. For
example, payers can reward providers who adhere to practice guidelines for
effective care and ensure that patient preferences drive the demand for
preference-sensitive treatment options.

o  	Encourage inefficient providers to emulate best practices through
payment incentives. For example, to discourage the provision of
unnecessary care, payers could compensate providers managing patients with
certain chronic conditions by paying fixed per-patient amounts based on
historical actuarial costs rather than paying a fee for each service.

Given the extent of variation in medical practices, Dr. Wennberg suggests
that the nation's leading medical institutions-academic medical centers-
would be a good place to begin the process of improving health care
quality and efficiency. He notes that historically, these centers'
experience in translating basic science research into clinical practice
has been inconsistent and that variations in health care delivery among
the centers points to a lack of consensus even among the nation's medical
science leaders on the appropriate use of medical care. At the very least,
he argues, federal policy should provide incentives for academic medical
centers-the facilities that train and prepare health care professionals-to
accept responsibility for the scientific basis of clinical decisionmaking.

Dr. Milstein, commenting on this presentation, observed that Dr.
Wennberg's prescription for more efficient, higher quality care is
consistent with the fundamentals of mainstream industrial procurement
practices. These fundamentals anchor the new health care purchasing
strategies that large employers are now adopting. They include (1)
encouraging patients to use providers that, over time, have been cost-

Participants Discuss Strategies for Controlling Costs and Enhancing Value in  o 
Health Care

efficient and have earned favorable quality ratings and (2) rewarding
wellperforming providers for reaching world class benchmarks of
longitudinal cost-efficiency and quality. He concluded that an ideal
system is one in which incentives encourage providers to be highly
self-conscious about their performance shortfalls and consumers to be
performance-sensitive about their choice of providers and treatment
options.

Following the forum's plenary sessions, participants attended one of four
breakout sessions. At these sessions, they examined cost containment and
value enhancement strategies that underlie many recent proposals to reform
health care. The breakout sessions had the following themes:

Does a Focus on Making Consumers Sensitive to Health Care Costs Hold
Promise for Containing Costs and Enhancing Value? (led by Paul B.
Ginsburg, PhD)

o  	Can We Control Costs and Enhance Value by Targeting Patients at
Greatest Risk for Health Problems and High Expenditures? (led by Elizabeth
A. McGlynn, PhD)

o  	Can Payment Reforms and Other Structural Changes Bring About
Reductions in Unwarranted Medical Practice Variation? (led by Mark D.
Smith, M.D., MBA)

o  	Is It Feasible to Control Spending without Compromising Scientific
Gains by Managing Medical Technology and Innovation? (led by Stuart H.
Altman, PhD)

               The following is a synthesis of these discussions.

  Does a Focus on Making Consumers Sensitive to Health Care Costs Hold Promise
  for Containing Costs and Enhancing Value?

Many view "consumer sensitivity" to health care costs, along with
increased access to user-friendly information, as key to reining in rising
health care spending. Proponents of this view contend that insured
consumers are insulated from the true costs of care and the information
needed to make judicious decisions about the care they buy is essentially
lacking. Participants discussed whether, under these circumstances, a
focus on consumer health care decisionmaking could help achieve the
necessary trade-offs to contain costs and maintain value. They concluded
that linking consumer cost incentives to physician performance would be
the most effective strategy but would necessitate efficiency measures that
have not yet been developed.

Increasing Consumer Cost Sensitivity Has Potential for the Future but
Currently Suffers from Serious Data Limitations

Consumer Cost Incentives Would Need to Be Modified for Low-Income,
Uninsured, and Chronically Ill Populations

Ideally, consumers become more sensitive to the costs of health care when
they have incentives to make decisions based on value-the best quality for
the lowest cost. Because this strategy depends on good consumer
information, its implementation to date has been less than perfect. For
example, some employers seek to steer their employees toward choosing the
best value health plans, but data on health outcomes and best medical
practices as well as an infrastructure to make this information readily
available to the public are lacking. One participant gave the example of
an employer that was considering offering its employees different
costsharing arrangements. Under a baseline arrangement, the employer's
plan would pay 70 percent of an individual's health care costs and the
worker, 30 percent; or the plan would pay 90 percent and the worker, 10
percent, if the individual called a plan-sponsored telephone number before
seeking care to get advice and education on appropriate services and
providers. A participant noted that this proposal assumes that there are
extensive data on services available and the telephone staff can give good
advice.

Participants noted that workers may resist employers' efforts to encourage
cost-consciousness, as these efforts are seen as cost shifting (increasing
workers' share of costs) rather than as a step to improve value. Often the
higher cost sharing is a compromise, but participants agreed that until
tools are available to assess the quality of providers' care, it is too
early to use increased cost sharing as a means to achieve better value.

Participants also made the following points, suggesting that conventional
consumer cost incentives may not make sense for low-income, uninsured, and
chronically ill individuals. Little research exists on the effectiveness
of cost sharing (such as $1 or $2 copayments) for low-income individuals
who are on Medicaid or the State Children's Health Insurance Program
(SCHIP) or who are uninsured. Some states' Medicaid and SCHIP programs use
scaled-down cost sharing, but there is less interest in cost incentives
for this population both because the population is low income and because
Medicaid and SCHIP are less constrained to use administrative procedures
to control costs. When Massachusetts added a 50-cent copayment per
prescription for low-income individuals, the number of people who filled
prescriptions in a homeless community plummeted. Participants discussed
whether the measures of efficiency should be the same for low-income
populations as for others. For example, the time needed to counsel a
homeless population on healthy behaviors was much longer than for more
affluent populations.

Participants also discussed the nature of cost incentives for chronic care
and other high-cost patients. One participant noted that much of health

Incentives Could Be More Effective If Focused on Physicians

care spending is by high-cost patients who exceed their maximum for
covered out-of-pocket costs. Moreover, many high-risk, chronically ill
patients are loyal to certain providers, even if it costs them more to
obtain care from these providers. Thus, cost incentives that encourage
consumers to differentiate among plans and providers will have a limited
effect on the behavior of these high-cost patients. Issues associated with
high-cost patients are also discussed in the next breakout session
summary.

With regard to cost incentives, participants agreed that "it's all about
the doctor," as consumers' initial decisions about the care they receive
typically start with advice they receive from their physicians.
Participants discussed importance of focusing on physician performance
rather than on hospital performance. One participant suggested developing
"fuel efficiency" ratings with information on physicians' costs and
quality and translating this information into cost incentives for
consumers to choose the more efficient physicians. He said that a few
large purchasers are moving in this direction. Another reason to focus on
physicians, he said, is that measures of hospital efficiency can be linked
to physicians' ratings. For example, some hospitals may charge more than
twice as much as other hospitals for an MRI; if these costs were built
into physicians' ratings, physicians would be induced to affiliate with
the more efficient hospitals.

Participants noted the need to address the reality of patients' strong
affiliation with their physicians. A participant shared an example of a
Kentucky employer that had provided its workforce information on costs and
quality at 14 Louisville-area hospitals; even with such information
available, 40 percent of patients the employer covered went to the
highcost, low-quality hospitals. The employer now has plans to link
hospital performance information to differential cost-sharing plans,
making workers pay steep cost differences if they choose the
lower-performing hospitals. According to one participant, the employer in
this example has "already lost the battle," because patients typically
make hospital choices on the basis of their physicians' affiliation with
particular hospitals. As a practical matter, however, he noted that it is
easier to get data on hospitals than physicians, which is why many health
plans and employers have started with cost incentives linked to hospitals
rather than physicians.

Linking Cost Incentives to Appropriate Care Is Difficult without Consensus
on What Services and Treatments Are Discretionary

Participants were skeptical about the potential in the near term to
develop measures of physician performance, as these measures would require
medical experts to arrive at a consensus about whether a given treatment
was necessary or elective. For example, as one participant noted, many
would agree that the use of Viagra (and drugs like it) is elective and
thus a potential candidate for higher cost sharing, but achieving a
consensus on other treatments was not as clear-cut. While one participant
said any given health problem can be placed on a spectrum, with variable
out-of-pocket costs depending on relative efficiency, another responded
that this would lead to an "abyss." For example, even erectile dysfunction
drugs in some circumstances could be determined to reduce other medical or
mental health costs. Similarly, for back surgeries, it is unclear whether
"adding two screws to the spine," for example, is an effective treatment.
Participants also noted that a good efficiency measure needs to adjust for
hospitals or physicians that take high-risk patients or providers will
avoid risky patients. However, there is debate on how good today's risk
adjusters are and whether, in addition to risk, longitudinal efficiency
measures also need to be adjusted for unavoidable social costs, such as
uncompensated care, and for training expenses, such as those incurred by
teaching hospitals.

One participant noted that health plans already have consumer cost
incentives for prescription drugs. Plans can steer their beneficiaries'
purchases to specific drugs through the use of a formulary-that is, a list
of prescription drugs around which health plans create incentives for
physicians to prescribe and beneficiaries to choose. Many plans have three
tiers of cost sharing based on a patient's choice to use a generic,
formulary, or nonformulary drug. Several participants agreed that tiered
cost sharing for drugs was acceptable because having tiers informed the
consumer about the drug's relative cost-effectiveness without denying
coverage altogether.

Can We Control Costs and Enhance Value by Targeting Patients at Greatest
Risk for Health Problems and High Expenditures?

A small fraction of the population accounts for a substantial share of
total health care spending, due to these patients' high use of services,
the high costs of their care, or both. While some of these people are
acute care patients, such as trauma victims or certain newborns, others
have chronic conditions, such as renal failure, asthma, and diabetes.
Regardless of the source of their illness, these groups of patients have
ongoing needs and place continual demands on the health care system.
Participants in this session discussed whether strategies targeted at the
chronically ill population could lead to reductions in health care
spending and quality improvements overall.

A Focused Strategy on Chronic Care Could Improve Value, but May Not Reduce
Costs

Systematic Data, Payment Reforms, Health Education, and Authoritative
Standards Needed to Achieve Value

The group noted that a focus on managing chronic illnesses could improve
patients' health care quality for at least two reasons. First, the
nation's delivery systems are designed primarily for acute, episodic care,
but chronically ill patients need continuous and coordinated care, as well
as a focus on preventive services, self-care, and adoption of healthful
behaviors. Stated one participant, "The best way to not die of a heart
attack is to not have the heart attack in the first place." Second,
current research shows that patients do not receive the most effective
care known. Work by RAND has shown that appropriate care is provided to
patients only about half the time. The current system does not effectively
meet the needs of people with chronic illness, and this contributes to
less than optimum value for the very patients that rely most heavily on
the health care system. Meeting the needs of chronically ill patients
could improve the quality of care they receive and their outcomes but
could also increase costs. The group recognized that improving value for
these patients would require improving quality, decreasing costs, or some
combination of both.

The group also recognized that the burden of illness is not the only
factor driving health care costs, noting that Dr. Wennberg's seminal work
on regional differences in the use of medical services shows that wide
variation is not explained by differences in medical diagnosis. Relating
this phenomenon to caring for the chronically ill, the group noted the
cost and value implications associated with the three categories of care
classified by Dr. Wennberg-effective (care proven clinically effective),
preferencesensitive (care involving trade-offs because more than one
treatment exists and each may result in different outcomes), and
supply-sensitive (care based more on the capacity to provide services than
on medical knowledge or evidence). On the one hand, the group postulated,
policies aimed at managing supply-sensitive care could have the most
promise for reducing expenditures but may be the most difficult to
implement politically. On the other, policies that encourage the practice
of effective care-ideal from the standpoint of quality-could raise
spending for some services and lower it for others but would also be
difficult to implement, owing to the small number of clinical practices
for which there is rigorous established evidence. Following this last
point, the group focused the bulk of its remarks on the challenges
associated with encouraging effective clinical care.

The group determined that to achieve a value-driven health care system, it
is necessary to have (1) better information about the services provided
and outcomes of care to assess value, (2) incentives to provide the most
effective care known, (3) public awareness of the impact of lifestyle and
personal health behaviors on the costs of care, and (4) an authoritative

source of reference for the public, providers, and payers on what
constitutes effective care. These translated into the need to address the
following key areas:

o  	Systematic data: Participants noted that better clinical information
and better information technology are needed to create incentives, enhance
transparency, and ensure accountability in health care. The development of
such information involves two steps: (1) information systems would need to
be built, perhaps starting with data on high-risk patients whose care by
multiple providers would require an infrastructure of compatible systems,
and (2) support for the public reporting of information, which would
include addressing antitrust laws that now inhibit efforts to share
utilization and outcome data on the care delivered by a community's
physicians, hospitals, and other health care providers. The group
recognized that building an information infrastructure would be expensive
and would need to be viewed as a public good and social investment.
Ideally, there should be a central, independent mechanism for setting
standards, policies, and regulations and public support for developing the
infrastructure, although multiple private sector entities could
participate in developing the systems. It would be logical to begin the
design and development of information systems with a focus on chronically
ill patients since they have the most frequent contact with the health
system, but over time, the information systems would be diffused to the
larger population.

o  	Payment reforms: Participants noted that in the current environment,
incentives are lacking to provide certain types of cost-effective care.
For example, physicians paid under a fee-for-service arrangement generally
need a medical "event," such as a visit or a procedure, to get paid for
care. Usually, insurers do not pay physicians solely to counsel patients
or coordinate their care, services that are particularly important for
chronically ill patients. Furthermore, if a group of clinicians in a
hospital want to change a care process, it is difficult to move resources
between the different parties that are each paid separately (for example,
hospitals and physicians), in addition to the challenge of freeing
resources that have already been allocated in line with existing
processes. Participants also discussed the need to create financial
incentives to foster the use of effective care. For physicians, incentives
could include increased payments or loans to reward the use of information
technology; for patients, they could include reduced copayments or
deductibles to reward good health habits and cooperation in permitting use
of personal health care information.

o  	Health education: Steps to improve health quality would need to be
accompanied by a sustained health education campaign, such as the one
conducted over many years on smoking. People should be made more aware of
the need to improve health quality and how their lifestyle and other
choices affect the outcomes and costs of their health care. For example,
to combat the obesity problem, the public could receive information on the
"body mass index," explaining how higher levels are related to costs of
care.

o  	Authoritative standards: The group determined that practicing
effective, evidence-based medicine and encouraging it through payment
reforms required an authoritative body of experts to develop and
promulgate standards of practice. These standards, based on science and
expert consensus, would guide clinical decisionmaking and payers'
determination about whether services claimed were medically necessary. In
addition, the standards would be linked to tort reform: as long as the
standards were followed appropriately, a clinician would not be subject to
litigation. The group believed this standard-setting body should first
focus on high-cost, high-use patients and on obvious opportunities for
quality improvements. Some participants contended that more than standards
are needed to address the problem of wide variability observed in medical
practices, as studies by RAND show that even where there are agreedupon
standards, appropriate care is provided only about half the time. Issues
associated with medical practice variation are also discussed in the next
breakout session summary.

  Can Payment Reforms and Other Structural Changes Bring About Reductions in
  Unwarranted Medical Practice Variation?

Studies show that the rates at which patients receive physician office
care, surgical procedures, and hospital care vary extensively across the
country without clinical explanation. Health care outcomes-such as
mortality, quality of life, and medical errors-similarly vary. Leading
experts, such as professors Reinhardt and Wennberg, contend that for much
of U.S. health care, supply drives demand. In other words,
higher-than-average utilization of a particular procedure may occur in an
area where the technology or specialists performing the procedure are in
abundance. Dr. Wennberg estimates that such supply-sensitive care accounts
for much of the regionally high service use in Medicare and that reducing
high use to levels seen in low-use regions would result in about a
30-percent reduction in Medicare spending. Patient preferences for certain
procedures and services also contribute to variability in health care use
rates. Participants in this session discussed whether better outcome data
for providers and patients to make clinical decisions and the
restructuring of payment

Reducing Medical Practices That Are Inconsistent with Quality and
Efficiency Will Depend on Collecting Better Clinical Outcome Data

Accountability for Clinical Decisionmaking Involves Several Parties to
Varying Degrees

systems to reward quality and efficiency could achieve desired health care
system reforms.

Participants agreed that the systematic collection of clinical outcome
data is fundamental to building a health care system that promotes
efficiency, decreases the use of unnecessary procedures, and improves
quality. With longitudinal data, analysts can begin to develop quality and
efficiency measures that providers, patients, and payers can use to make
and reward the best clinical decisions. Better outcome data could, for
example, identify which patients are suitable for organized chronic
disease management programs and where the provision of unnecessary care
could be reduced. Such data could be used to guide patients' health care
decisions, particularly when care alternatives are available without a
clearcut choice. For example, one participant contended that less than a
third of male patients with severe prostate problems preferred surgery
once informed of the risks and trade-offs.

The group also observed that more outcome data could not only help inform
case-by-case clinical decisions but also strengthen market forces. For
example, making comparative data available to providers and patients about
costs and clinical outcomes could help channel patients toward the most
efficient practitioners. On this basis, payment systems could be
restructured to reward the best value of care. Several participants
suggested that providers' payments and patients' insurance copayments
could be aligned with quality and efficiency data to pay more for
delivering higher quality efficiently. Many managed care plans use such an
incentive to contain prescription drug costs: patients can choose to pay
more for a branded drug and less for a generic equivalent. Participants
suggested that insurers could similarly decrease or waive patients'
insurance copayments if they participated in a shared decisionmaking
process with their physician and relied on efficacy and quality data in
opting for treatment.

The group agreed that effective change strategies will not only require
the collection of better health outcome data but will also require that
those that exercise control over clinical and cost decisions-health care
systems, hospitals, physicians, and patients-be made accountable and
rewarded, when appropriate. Participants agreed that assigning
accountability for cost and clinical decisions is as challenging as it is
important, because there are multiple parties that have decisionmaking
control.

o  	Health care systems: Participants noted that variation in the degree
to which health care systems are organized makes it difficult to assign

accountability at a "system" level. One participant noted that some health
care systems were too loosely organized to permit credible accountability.
Another noted that too many of the relevant decisions were controlled by
physicians rather than plans.

o  	Hospitals: Participants agreed that in principle, hospitals could be
an appropriate party to hold accountable for constraining health care
supply in that they hire physicians, "build beds," and invest in
technology-all of which offer potential avenues for influencing cost and
clinical decisionmaking. If data were available to determine what
constitutes an "appropriate hospitalization," a hospital could be paid a
fixed amount that reflects the number of hospitalizations expected for its
patient base, regardless of how many beds it uses. However, perverse
payment incentives and lack of leverage in certain instances suggest that
hospitals alone cannot assume accountability for optimal clinical
decisionmaking. One participant observed that hospitals generally do not
have control over the prescribing behavior of their attending physicians.
Participants also discussed the increasing number of procedures-orthopedic
surgeries, endoscopies, and mammographies, for example-that are now being
done in physicians' offices, thereby decreasing the influence that
hospitals have over these and other inpatient procedures. The group agreed
that other procedures are performed for which hospitals could be
appropriately held accountable for quality or appropriateness, such as
CABGs and other surgeries.

o  	Physicians: Like other breakout session participants, this group
determined that physicians were the appropriate party to hold accountable
for a number of clinical decisions and costs. According to one
participant, general practitioners in the United Kingdom receive
substantial bonuses for quality and efficiency. She suggested that a
similar "pay for performance" model could be applied in the United States,
under which physicians who referred patients for fewer procedures that
result from excess capacity, such as CT-scans and MRIs, could be
financially rewarded. Other participants disagreed and warned that
strategies designed to curtail the provision of health care services carry
with them the risk of a backlash, if it appears that providers are being
rewarded for denying care. One participant asked, "Would people be
comfortable paying more for less?" Another participant suggested that
doing so would send the wrong message: "Why pay doctors to do things
right, rather than not pay them if they do things wrong?"

o  	Patients: One participant noted that although physicians were an
obvious party to hold accountable for clinical decisionmaking, patients
themselves were important in the process. In principle, if comparative
quality and

efficiency data were available to patients, financial incentives, such as
lower copayments, could steer patients toward using the appropriate
physician, hospital, or health plan. This could result in a spillover
effect: as more patients choose these providers, the providers would have
incentives to perform better. Another participant noted that the use of
data to influence patient choice assumes rational decisionmaking on the
part of the patient, but in many cases, acutely ill patients must make
decisions quickly that may be more emotionally based. The group agreed
that as a practical matter, the lack of adequate comparable data today
limits the ability to link incentives to patients' decisions.

Participants emphasized that regardless of who is held accountable for
clinical and cost decisions, a "one-size-fits-all" approach to payment
incentives will not work. Incentive strategies should be structured
differently for inpatient and outpatient services, specialty care and
primary care, and other groupings. Payment restructuring would need to
reflect variation within the existing payment systems and be tailored to
differences among payers-such as Medicare, Medicaid, and private
insurance-and their covered populations.

Participants noted that a data-driven reform strategy to improve health
care quality and efficiency depends on an information technology (IT)
infrastructure that is virtually nonexistent today. In particular, the
necessary level of technological sophistication to gather, monitor, and
securely transmit data does not widely exist at the physician office
level. Without appropriate IT resources, office-based physicians are
likely to have difficulty expeditiously recording the information that is
needed for outcomes research and applying the findings of such research to
their own practices. On a systemwide scale, differences in payment methods
will require more IT sophistication to implement structural changes.

Implementation Issues Make the Prospect of a Value-Based Health Care
System a Longterm Goal

  Is It Feasible to Control Spending without Compromising Scientific Gains by
  Managing Medical Technology and Innovation?

Policymakers are looking at the role of technological advancements as an
important driver of future spending growth. Although some technologies can
achieve savings-for example, by reducing hospital stays-the increase in
utilization that results from technology advances has generally offset any
related savings. Finding appropriate limits on technology development and
use is problematic, however, as such limits may deny patients improvements
in health care quality, such as life-extending care. In light of these
trade-offs, participants discussed the difficulty of assessing
technology's net impact on health care spending and the lessons this holds
for controlling its use.

Difficult to Determine Technology's Impact on Spending Because Systematic
Assessment of Costs and Productivity Offsets Is Lacking

Acknowledging that technological change accounts for a significant share
of health care inflation, participants addressed the question, "Have we
been getting our money's worth?" The group agreed that technology's
contributions over the last 20 years-new pharmaceuticals, diagnostic
imaging, and genetic engineering, among others-have been, on the whole, of
significant value to the nation's health. However, on a case-by-case
basis, the use of high-tech procedures to improve health and prolong life
may be of questionable value when the technology to be used is very
expensive and odds for the patient to have a good outcome are very low.
For example, one participant noted a case in which a 92-year-old cardiac
patient underwent bypass surgery and received a heart-valve replacement
but died 2 months later from pneumonia. Participants agreed that the
general tendency in this country is to treat patients with available
technology when there is the slightest chance of benefit to the patient,
even though the costs may far outweigh the benefit to society as a whole.
Other countries do not spend as much at the end of life. The group also
agreed, however, that no one would choose to go back to the 1980s
technology over that of today's, despite all its inefficiencies. But,
asked one participant, "Can we figure out how to get more efficient?"

The group determined that a big problem in using technology efficiently
was a lack of information, developed and disseminated systematically, on
which patients, providers, and payers could make good health care and cost
trade-off decisions. They noted that progress in the discipline of
technology assessment has not kept pace with medical technology
advancements. The medical community has not invested in IT-such as the
adoption of computerized patient records-despite the potential for patient
safety improvements and savings through administrative simplification. The
reason, contended one participant, is that market forces have not driven
IT investment in same way that they have driven investments in
pharmaceutical research and diagnostic imaging equipment. Nevertheless,
today's employers, who finance a substantial share of the health care of
the privately insured population, are seeking more information on health
care technology costs and benefits. At the same time, the technology
industry has been thwarting efforts by public payers to assess their
products on the basis of cost-effectiveness. Some participants cited the
need for government investment and direction, through grants and
reimbursement policies. The group determined that without greater
transparency and knowledge about technologies' benefits relative to their
cost, technology will continue to "test positive" as a major cost driver.

Controlling Use of Technology Faces Barriers to Change

The group noted that the conventional controls to rein in technology use
focus on supply, as supply is a primary factor driving health care demand.
For example, formularies are lists of drugs developed by health plans to
control the use of expensive drugs. Formularies favor the use of the
generic equivalents of brand-name drugs on the assumption that generics
are, more or less, equally effective and, being less expensive than
branded drugs, are thus more cost-effective. Similarly, certificates of
need (CON) are a regulatory measure some states use to limit the diffusion
of high-tech equipment, such as MRIs and CT-scans. CON requirements enable
states to limit expensive technology to a few strategically located
facilities and help even out the distribution of resources across
locations.

Efforts to use cost-effectiveness as a criterion for deciding when and
whether to use medical technology have had mixed success. Participants
noted that many entities try to do their own cost-effectiveness analyses,
but there is a lot of duplication of effort and their efforts are
typically impeded by incomplete or otherwise less than robust data. For
example, one participant noted that health plans developing formularies
each seek information on the cost-effectiveness of various drugs, but
outside of the drug companies, no one-not even the Food and Drug
Administration (FDA)-has access to the data needed to conduct these
analyses effectively.

Much of the discussion focused on the need for a central function,
independent of the industries, that would assess health care technologies
beyond the level of the safety and efficacy analyses that FDA conducts.
Some participants favored the establishment of a public (that is,
government) entity, whereas others supported a public-private partnership,
modeled after the National Quality Forum (a consortium of businesses and
not-for-profit organizations that do studies on building a "business case"
for quality). As part of the discussion of barriers to centralization,
several participants cited the reining in or elimination by the Congress
of government entities tasked with assessing technology or promulgating
practice guidelines, such as the Agency for Healthcare Research and
Quality and the Office of Technology Assessment.

The group agreed that a major barrier to advancing technology assessment
is the technology industry itself. Better information on
cost-effectiveness, participants noted, may not be in the financial
interest of a company whose drug or device is not judged cost-effective.
Other barriers, a participant noted, come from institutional providers and
individual practitioners. Ideally, hospitals and physicians will use
quality measurement-outcomes and effectiveness data-to foster best medical

practices. In fact, providing feedback data to physicians-for example, on
their prescribing behavior compared to that of their peers-has been a
powerful tool in bringing the practice patterns of "outlier" physicians in
line with an appropriate norm. At the same time, physicians and hospitals
have raised methodological concerns about the soundness of quality
measurement initiatives, given that flaws exist in the age and
completeness of the data collected and in the adjusters used to take
patients' severity of illness into account. Participants noted that debate
about what is an acceptable level of imperfection can often derail quality
measurement initiatives.

The group concluded that the cost and productivity offsets associated with
technology use could not be determined systematically without widespread
IT use and improvements. It also determined that the government would need
to assume a key role in supporting IT development. However, until such IT
capabilities are in place, incentives must be developed for providers and
patients to use new high-tech procedures prudently, or health care
expenditures will continue to escalate at ever-increasing speed with
serious consequences for the nation's economy.

Several common themes emerged from the four breakout sessions, despite
their focus on different health care reform strategies. Collectively,
participants' observations affirmed the position that in today's health
care sector, there are few incentives for providers and consumers to be
prudent in their ordering and use of health care services, too little
transparency with regard to the value and costs of care, and inadequate
accountability to ensure that health care plans and providers meet
standards for appropriate use and quality. The groups essentially
concluded that these problems cannot be solved overnight and that it will
require committed, long-term resolve and a more highly evolved information
infrastructure to help policymakers and the public understand the need to
move beyond the status quo.

To this end, the Comptroller General has argued for adopting a systematic
approach to assessing health care reform proposals. GAO therefore created
a framework that includes a comprehensive set of criteria for the Congress
to consider as it evaluates proposed health care reforms. GAO's framework
incorporates comments made by forum participants in an extensive
discussion following the Comptroller General's presentation on health care
system challenges; it is constructed around the dimensions of cost,
access, quality, and implementation. (See table 1.)

Comptroller General Presents Criteria for Evaluating Health Care Reform
Proposals

Table 1: Framework for Evaluating Health Care Reform

Dimension Criterion

Cost: Does the proposal help to ensure: 	 o sustainable growth in public
and private sector health care expenditures? For example,

o are Medicare and Medicaid reform efforts aligned with the nation's
long-term fiscal outlook?

o are health care financing policies compatible with the efforts of U.S.
companies to compete in global markets?

o efficient production and consumption of health care resources, including

o economical pricing of services?

o incentives for providers to make prudent medical decisions based on
benefit and cost?

o consumer sensitivity to the benefits and costs of health care services?

o that government tax incentives do not have unintended consequences?

o that government financing meets the nation's most critical health care
needs?

Access: Does the proposal help to ensure:  o guaranteed access to
essential health care coverage, including  o catastrophic loss protection?
    o children's preventive health care services?

o an insurance market that adequately pools risk and offers alternative
levels of coverage?

Quality: Does the proposal help to ensure:  o care that meets acceptable
standards, including  o lowering the occurrence of medical errors?  o
medical practices based on scientific evidence?  o limiting disparities in
treatment for all patients?

Implementation: Does the proposal help to  o the development of an
information infrastructure that provides prompt and reliable ensure: data
to monitor cost, quality, and system integrity?

o transition to a new structure that effectively mitigates potential
disruptions and any new demands on resources and affected individuals?

o oversight and enforcement mechanisms for effective accountability?

o reforms that consumers can easily adapt to and understand?

Source: GAO

Ideally, health care reform proposals will ultimately provide and align
incentives, foster transparency, and ensure accountability. The reality is
that comprehensive reforms may need to be incremental in order to minimize
disruptions and facilitate political consensus. The hope is that the
framework can guide us through an orderly process of debate.

Participants Share At the forum's conclusion, participants were polled on
14 statements

concerning the nation's health care system. A consensus on these
viewsViews Through was neither hoped for nor expected-with the exception
of the last Informal Poll statement asking participants for a commitment
to further public dialogue

on health care reform issues. The results in table 2 are based on the

confidential responses of two-thirds of the participants.

Table 2: Results of the Health Care Forum Poll

                                  Percentages

                               Strongly       Neither agree          Strongly 
            Statement             agree Agree nor disagree  Disagree disagree 
     The United States has a                                         
     serious and structural                                          
             fiscal                                                  
     imbalance that requires                                                  
        tough choices by             76    21             3        -        -
          policymakers.                                              
    Patients need to be more                                         
       active and informed                                           
         participants in                                             
the decisionmaking process                                        
    relating to discretionary                                        
               and                                                   
        expensive medical            62    34             -        3        - 
           procedures.                                               
The U.S. health care system                                       
    is characterized by both                                         
    underuse of wellness and                                         
preventive care and overuse                                       
               of                                                    
      high-tech procedures.          55    34             7        3        - 
     Defensive medicine is a                                         
significant problem that is                                       
            caused by                                                
concerns about litigation.        24    38            21       17        - 
     The current health care                                         
system is unsustainable and                                       
            requires                                                 
      significant reforms.           45    45            10        -        - 
Ten years ago, managed care                                       
      was thought to be the                                          
             answer                                                  
       to health care cost                                           
     containment, but it no                                          
        longer appears to                                            
offer a long-term solution        24    28             7       38 
      to escalating costs.                                           
    Based on comparisons with                                        
other major industrialized                                        
            nations,                                                 
it appears that the United                                        
    States is lagging in the                                         
          areas of cost                                              
       containment, health                                           
     outcomes, and access to         32    39            14        7 
              care.                                                  
       Given the power of                                            
    providers and the desires                                        
           of insured                                                
    consumers, market forces                                         
      alone are unlikely to                                          
           reasonably                                                
      constrain health care          39    29            11       21        - 
             costs.                                                  
Health care costs represent                                       
     a growing burden among                                          
employers, especially given                                       
      increasing global and                                          
            domestic                                                 
          competition.               58    28             3        7 
      Although not equally                                           
    available to all segments                                        
             of the                                                  
     population, the highest                                         
     quality health care is                                          
        delivered in the                                             
         United States.              11    29            14       32 
The United States pays more                                       
than its fair share of R&D                                        
               for                                                   
    new medical products and         24    44            17       10 
          technologies.                                              

In the long run, health policies may need to focus more on
attaining a basic level of health care for all Americans than on
providing expanded coverage for certain segments of the U.S.
population. 28 55 17 - -

Ultimately, the division of responsibilities for health care
access and financing-currently shared by the government,
employers, and individuals-may need to be redefined. 18 57 14 11 -

I will continue participating in public discussions and debates
that can help elevate the nation's understanding of the long
term challenges posed by today's health care financing and
delivery systems. 90 10 - - -

Source: GAO analysis of Health Care Forum participant poll.

             Note: Percentages may not add to 100 due to rounding.

                            Appendix I: Forum Agenda

9:00 a.m. Welcome and Introductions

Dave Walker, Comptroller General of the United States Forum Participants

9:15 a.m. GAO's Health Care Framework

Dave Walker, Comptroller General of the United States

10:15 a.m. Break

10:30 a.m.	Plenary Session 1: The Cost Dimension Presenter: Uwe Reinhardt,
James Madison Professor of Political Economy, Princeton University
Respondent: Alice Rivlin, Senior Scholar, The Brookings Institution

11:30 a.m.	Plenary Session 2: The Value Dimension Presenter: John
Wennberg, Center for Evaluative Clinical Sciences, Dartmouth Medical
School Respondent: Arnold Milstein, The Pacific Business Group on Health

12:30 p.m. Break

1:00 p.m. Breakout Sessions

Group 1:

Group 2:

Group 3:

Group 4:

                                2:30 p.m. Break

Consumer Cost Sensitivity
Session Leader: Paul Ginsburg, President, Center for
Studying Health System Change

High-Cost Patients
Session Leader: Elizabeth McGlynn, Associate Director,
RAND Health, and Director of the Center for Research on
Quality in Health Care

Medical Practice Variation
Session Leader: Mark Smith, President and CEO,
California Health Care Foundation

Technology Management
Session Leader: Stuart Altman, Sol C. Chaikin Professor of
National Health Policy, Brandeis University

                            Appendix I: Forum Agenda

2:45 p.m. Plenary Session 3: Breakout Session Conclusions

Breakout Session Leaders

4:15 p.m. Opinion Poll and Wrap-up

Dave Walker, Comptroller General of the United States

                  Appendix II: Forum Faculty and Participants

                                 Forum Faculty

Stuart H. Altman Sol C. Chaikin Professor of National Health Policy,
Brandeis University

Paul B. Ginsburg President, Center for Studying Health System Change

Elizabeth A. McGlynn 	Associate Director, RAND Health, and Director of the
Center for Research on Quality in Health Care

Arnold Milstein 	Medical Director, Pacific Business Group on Health, and
National Health Care Thought Leader, Willam M. Mercer Consulting

Uwe E. Reinhardt James Madison Professor of Political Economy, Princeton
University

Alice M. Rivlin Director and Senior Fellow, The Brookings Institution

Mark D. Smith President and CEO, California Health Care Foundation

John E. Wennberg 	Director, Center for the Evaluative Clinical Sciences,
Dartmouth Medical School

Forum Participants

Janice Angell Executive Director, Health and Benefits, 3M

Jim Bentley 	Senior Vice President, Strategic Policy Planning, American
Hospital Association

Barbara Blakeney President, American Nurses Association

Charles A. Bowsher 	Former Comptroller General of the United States, U.S.
General Accounting Office

Karen Davis President, The Commonwealth Fund

Senator David F. Durenberger 	Chair, National Institute of Health Policy,
University of St. Thomas and the University of Minnesota

                  Appendix II: Forum Faculty and Participants

Harvey V. Fineberg President, Institute of Medicine of the National
Academies

Jeffrey L. Gabardi 	Senior Vice President, Policy, American Association of
Health Plans/Health Insurance Association of America

Tony Gamboa General Counsel, U.S. General Accounting Office

Mary Grealy President, Healthcare Leadership Council

Glenn Hackbarth Chairman, Medicare Payment Advisory Commission

Bruce H. Hamory 	Executive Vice President and Chief Medical Officer,
Geisinger Health System

Randy Johnson Director, Human Resources Strategic Initiatives, Motorola,
Inc.

Chip Kahn President, Federation of American Hospitals

Vincent Kerr 	Executive Vice President, Network and Clinical Solutions,
UnitedHealth Group

James R. Knickman 	Vice President, Research and Evaluation, The Robert
Wood Johnson Foundation

Carolyn J. Luckensmeyer President, America Speaks

Randall Lutter 	Chief Economist, Food and Drug Administration, U.S.
Department of Health and Human Services

Mark Miller Executive Director, Medicare Payment Advisory Commission

Donald Palmisano President, American Medical Association

Robert D. Reischauer President, Urban Institute

John Rother Director of Policy and Strategy, AARP

Dallas L. Salisbury President and CEO, Employee Benefits Research
Institute

William J. Scanlon Director, Health Care Issues, U.S. General Accounting
Office

Leon H. Schellman Manager, United States Benefits, Procter & Gamble

                  Appendix II: Forum Faculty and Participants

Gerald M. Shea 	Assistant to the President, Government Relations, American
Federation of Labor and Congress of Industrial Organizations

Jean Sheil 	Director of Family and Children's Programs Group, Centers for
Medicare & Medicaid Services, U.S. Department of Health and Human Services

Henry E. Simmons President, National Coalition on Health Care

Pete Smith President and CEO, Private Sector Council

Ian D. Spatz Vice President, Public Policy, Merck and Company, Inc.

A. Bruce Steinwald 	Director, Health Care, Economic and Payment Issues,
U.S. General Accounting Office

Louise Van Diepen Clinical Executive, U.S. Department of Veterans Affairs

David M. Walker Comptroller General of the United States, U.S. General
Accounting Office

Andrew Webber President and CEO, National Business Coalition on Health

GAO Forum Managers

Jessica Farb Hannah Fein A. Bruce Steinwald

                             Selected Bibliography

Altman, Stuart H., et al. "Escalating Health Care Spending: Is it
Desirable or Inevitable?" Health Affairs (Web Exclusive, January 8, 2003).

Altman, Stuart H., et al. "The Outlook for Hospital Spending." Health
Affairs, vol. 22, no. 6 (2003).

Ginsburg, Paul B., et al. "Are Market Forces Strong Enough to Deliver
Efficient Health Care Systems? Confidence is Waning." Health Affairs, vol.
23, no. 2 (2004).

McGlynn, Elizabeth A., et al. "The Quality of Health Care Delivered to
Adults in the United States." New England Journal of Medicine, vol. 348,
no. 26 (2003).

Milstein, Arnold, and Nancy E. Adler. "Out of Sight, Out of Mind: Why
Doesn't Widespread Clinical Quality Failure Command Our Attention?" Health
Affairs, vol. 22, no. 2 (2003).

Reinhardt, Uwe E., et al. "U.S. Health Care Spending in an International
Context." Health Affairs, vol. 23, no. 3 (2004).

Reinhardt, Uwe E. "Does the Aging of the Population Really Drive the
Demand for Health Care?" Health Affairs, vol. 22, no. 6 (2003).

Reinhardt, Uwe E., et al. "It's the Prices, Stupid: Why the United States
Is So Different From Other Countries." Health Affairs, vol. 22, no. 3
(2003).

Rivlin, Alice M. and Isabel Sawhill, eds. Restoring Fiscal Sanity: How to
Balance the Budget. Washington, D.C.: Brookings Institution Press, 2004.

Smith, Mark D., et al. "The Nonpoor Uninsured in California, 1998." Health
Affairs, vol. 19, no. 4 (2000).

Wennberg, John E., and David E. Wennberg. "Perspective: Addressing
Variations: Is There Hope for the Future?" Health Affairs (Web Exclusive,
December 10, 2003).

Wennberg, John E., et al. The Quality of Medical Care in the United State:
A Report on the Medicare Program, The Dartmouth Atlas of Health Care 1999.
Chicago: American Hospital Association, 1999.

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