Health reform: Penalties don't work. Try incentives

Hank Werronen (Photo: Provided by Hank Werronen)

The failure of Congress to pass health care reform is not at all surprising. There are so many moving parts in our health care system that it has proven impossible to build a meaningful consensus to "repeal and replace" Obamacare in one giant step, particularly with the threat of taking away existing benefits. This cloud has a silver lining for Americans because the proposed top-down legislation was unlikely to achieve the fundamental goals of affordability and access. 

So is there any way to achieve bipartisan support that results in more affordable health care and improved access to primary care? Like other complex problems, the solution is to break the problem into incremental, manageable chunks.

The first chunk is the individual and small group market, which is facing instability in rates, insurance coverage and access. Based on the success of the Patient Centered Medical Home with over 500 health care organizations and insurers, a practical bottoms-up solution could be built around incentives to restore the relationship of patients to their chosen primary care provider, including:

► Substantial health savings accounts for individuals who participate in the Medical Home program and select a primary care physician to coordinate their care. The HSA could be used to pay for health related expenses, tax-free, with any unused funds belonging to the individual. This would moderate high copayments and make patients more cost conscious.  

► Substantial increases in reimbursement for primary care physicians who meet established quality standards in coordinating care for their patients. This would help alleviate the shortage of primary care physicians that makes access to care difficult, even for people with coverage.

► Substantial re-insurance funds at the state level for insurance companies who adopt a Medical Home plan for their members. This would provide relief to insurers for patients with pre-existing conditions without distorting the rates for all patients, particularly younger members. It would restore participation of insurance companies in the individual and small group market. 

But how to pay for these incentives? Independent studies reported by the Patient Centered Primary Care Collaborative show that coordination of care through Medical Homes improves quality outcomes and reduces the growth of expenditures by preventing the onset and progression of chronic conditions that account for 85 percent of health care costs.

The second manageable chunk is Medicaid, which has grown so large that it crowds out other essential programs such as education. A practical solution could be built around providing flexibility to states that adopt the Medical Home for Medicaid beneficiaries. In fact, the Secretary of Health and Human Services already has considerable authority to grant waivers to states that adopt cost-effective and quality-improving initiatives. This initiative would also include incentives:

► Substantial flexibility for states to tailor their Medicaid programs to meet their needs, without taking away coverage granted through expansion under Obamacare. By reducing the rate of growth of Medicaid through improved care coordination, the financial pressure on state and federal government would be reduced. 

► Substantial increases for primary care physicians and Federally Qualified Health Centers who participate in the Medicaid Medical Home and meet established quality standards in coordinating care for their patients. This would help alleviate the shortage of primary care physicians that diminishes the value of expanded coverage.  

The incentive-based Medical Home solution has many advantages. It is a proven way to improve quality and lower the growth of expenses. It is supported by physicians, health care organizations and insurers. But perhaps most of all, it is something that the public can understand and support. 

Hank Werronen founder and president of the Return on Medical Quality Institute in Arlington, Virginia. He served as the Chief Operating Officer for Humana Health Plans during its start-up and national roll out but no longer has ties to the company.

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