1% Steps for Health Care Reform: Implications for health care policy and for researchers.

Abstract

Applied micro-economists, health economists, and health service researchers, for the most part, want their research to have impact, to inform public policy, and, ideally, to improve the lives of the public. Indeed, for many of us, it was the desire to create ideas and generate evidence that impact policy for the better that drove us to enter careers in academia in the first place. However, producing policy-relevant research and then having that research impact the policy process is hard and can be daunting, especially to younger academics. In many cases, the debates happening over public policy can seem detached and far removed from the questions addressed in academic articles. Likewise, the step between producing work and reaching policy makers can seem enormous and potentially out of reach. To help address this problem, we launched the 1% Steps for Health Care Reform Project in February 2021.1 Our goal was to harness the power of academic research by generating a series of briefs for policy makers that describe tangible, evidence-based interventions that could each lower health care costs in the United States by a measurable, small, but tangible amount (for example, 1% of health spending). The briefs are authored by researchers and based on their rigorous academic scholarship. The overarching aims of the project are to 1) harness academic scholarship to inform public policy and, as we discuss, 2) to reframe the causes of differentially high health care costs in the United States as the result of a series of identifiable, separate problems that we know how to solve. In this commentary, we unpack the central thesis of this project—that we should view high health care costs in the United States as the result of a series of specific problems—describe what we can learn from the first 16 briefs that were produced for this project, and then offer our analysis about how this approach to health care spending can inform public policy and academic scholarship. This is also a call for more contributors. We want the 1% Steps for Health Care Reform project to keep growing. We have 16 policies posted now, but we are soliciting ideas from the research community that we can turn into briefs, and look forward to adding more ideas, over time, that can be used by the policy community. Our core argument in the 1% Steps for Health Care Reform Project is that, too often, conversations about health care reform occur at high levels of abstraction and place too much hope on silver-bullet policy interventions. For example, in the run up to presidential elections, discussions about health care reform are frequently centered on debates about the merits of single-payer health care.2 Likewise, discussions about approaches to reform the US health system often revolve around amorphous policy concepts like “payment reform” or “value-based purchasing”.3 These are concepts which can be interpreted and operationalized in many different ways and are therefore sufficiently vague to make translating the concepts to tangible policy actions almost impossible. The truth is that there is not one thing wrong with the US health system nor is there one policy intervention that will rein in high health care costs. Instead, there are many reforms needed to make US health system perform better. Each of these steps may only get us 1% of the distance we need to travel, but it is only by starting the process of reform and moving step by step that we can lower health care costs for the public. Speaking about health care reform at a high level of abstraction ultimately obscures the specific steps the United States will need to take to reign in health care costs, is inconsistent with how knowledge is generated, and pushes the academic community away from the policy making process. Research in a complex sector that comprises nearly 20% of GDP must be, at its core, incremental, and the best scholars often answer narrow research questions. We believe that progress on reducing health care costs will come from the implementation of policies that take single steps forward. Indeed, we think that it is really the accumulation of these incremental improvements, flowing out of academic work, which will ultimately lead to large-scale changes in the performance of the US health system. The sheer scale of the US health care system is, in part, what makes health care reform so difficult. Discussions about the cost of the US health care system often center on the fact that per capita health spending in the United States is $11 582, nearly 50% higher than the per capita spending of the next highest country, Germany.4, 5 Often overlooked is the absolute amount the United States spends on health care: that, in 2019, the United States spent $3.8 trillion on health care.5 Measured via its scale of economic activity, if the US health care system was a country, it would be the fourth largest country in the world, roughly the same scale as the entire German economy and larger than the economies of India, the United Kingdom, France, and Italy.6 This distinction is important because measuring policy effects in percentage terms often leads us to overlook the gains from incremental policies that only lower health care costs by a percent or two, but that create huge savings in absolute dollars. For example, to some, addressing surprise billing may seem like a niche issue. However, we have estimated that surprise billing reforms would lower commercial health spending by approximately 5% (a 1.67% reduction in total health spending).7 Indeed, the Congressional Budget Office (CBO) estimates that the recently passed surprise billing protections would lower commercial health insurance premiums by about 1%.8 To put the scale of these reforms in context, a 1% reduction in total US health care spending would net savings of $38 billion annually. That is greater than the amount of money it would take to fund universal prekindergarten in the United States for a year.9 As we describe in Exhibit 1, the 1% steps for Health Care Reform Project is composed of 16 briefs produced by 27 authors. If fully implemented, the recommendations outlined the briefs would result in approximately a $320 billion (8.9%) reduction in health spending. The recommendations span a number of topical areas (see the 1% Steps webpage for each brief). There are two proposals related to antitrust reforms (one proposal focused on horizontal mergers, the other on vertical transactions). We have two proposals focused on regulating providers’ pricing (one proposal on addressing out-of-network billing, another on capping providers’ prices). There are two proposals focused on post-acute care (one on eliminating Medicare's differentially high payments to long-term care hospitals and a proposal to reduce fraud in home health care). There are two proposals designed to increase the supply of kidneys for transplantation. We have three proposals focused on addressing the cost of prescription drugs (a proposal on addressing the cost of orphan drugs, a proposal to reform the way the Medicare program pays for biologic and biosimilar physician-administered drugs, and a proposal on increasing the use of preferred pharmacy networks). Finally, we have four proposals designed to improve the functioning of insurance markets (one proposal is designed to aid consumers in identifying the most appropriate health insurance plans, a second proposal advocates for improving the auto-assignment process in Medicaid managed care, a third proposal recommends insurers create plans with networks that are broad for differentiated services and narrow for services where care is undifferentiated, and a fourth proposal recommends steps the federal government could take to increase the efficiency of the insurance claims adjudication process). The briefs we received from the 27 authors were also informative about which parts of the health care system seem to have the most potential to reduce US health care costs. First, it is notable that all but one of the briefs in the project recommend interventions that are either focused on “the supply-side” and target health care providers or are focused on steps that could be taken to strengthen insurance markets or insurance products. That is, there were no briefs that were focused on nudging or using cost sharing to incentivize patients to consume care more in a more cost-effective manner. This pattern is consistent with the many recent economics papers that have repeatedly shown that patients are generally ineffective and inattentive health care consumers.10-12 Indeed, the lone topic that was explicitly focused on individuals—a proposal to cover the costs individuals face when they donate organs—recommended reducing individuals’ cost exposure in order to increase the supply of available organs to transplant. Second, all but a handful of briefs in the project include recommendations for savings that are reliant on government interventions. Even the policy briefs that are focused on improving the productivity of care delivered to the privately insured generally require government intervention. Because the government procures a large amount of health care itself and commercial insurers often mimic Medicare's policies, government can steer market dynamics through its procurement policies. Likewise, most health care providers are regulated or licensed to ensure quality, and therefore government regulations strongly affect entry and the nature of competition. As a result, the range of recommendations in this project highlight that, even if a large share of US health care spending is privately funded, we need to be cognizant of the fact that the steps needed to increase the productivity of the health care sector will come from government interventions, either directly in, or affecting, those markets, including efforts to promote competition. We are eager to receive more proposals for policy briefs that make recommendations on concrete steps, based on academic research, that will lower US health care costs. The website for the 1% Steps for Health Care Reform includes a page for authors to contact us. We encourage you to think about whether your policy-relevant research could make a contribution to the project (and could lower US health care spending) and get in touch if so. In order to produce work that can be translated into public policy, we urge researchers, in their scholarly pursuits, to ask policy-relevant research questions that offer insights into the impact of why spending in a particular area is high relative to the benefits they are producing. This includes carrying out policy evaluations and taking the crucial step of analyzing how any program or policy could be improved to achieve its goal with less waste. This is the work that will be appealing to policy makers and will be lead to policy recommendations. While it is surely easier to critique past policies, it is also important to look forward and make positive recommendations about what can be done to improve the US health care system. In a 2017 article, Nobel Laureate Esther Duflo, noted that for economists to be effective at creating public policy, they needed to adopt the mindset of a “plumber”.13 That is, in addition to focusing on the broad design of new policies and articulating theory, economists should be interested in and engage with how policies get implemented and how they play out in practice. We agree wholeheartedly. Particularly in health care, we believe that the changes that will lower health care costs for the public will be less “blue sky” masterpieces and more technocratic improvements that incrementally improve specific problems in the US health care system. Joint Acknowledgment/Disclosure Statement: This project received financial support from Arnold Ventures and the Tobin Center for Economic Policy at Yale University. Please note: The publisher is not responsible for the content or functionality of any supporting information supplied by the authors. Any queries (other than missing content) should be directed to the corresponding author for the article.