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Book facts
“Reinventing American Health Care: How the Affordable Care Act will Improve our Terribly Complex, Blatantly Unjust, Outrageously Expensive, Grossly Inefficient, Error Prone System”
by Ezekiel J. Emanuel
400 pages, $26.99
Illustration by Gregg Bender | The Journal Gazette

Healthcare reform 2.0

4 key changes would push progress further

Editor’s note: Following are edited excerpts from “Reinventing American Health Care: How the Affordable Care Act will improve our Terribly Complex, Blatantly Unjust, Outrageously Expensive, Grossly Inefficient, Error Prone System” by Ezekiel J. Emanuel. Available from PublicAffairs, a member of The Perseus Books Group. Copyright &Copy; 2014.

However many changes the Affordable Care Act introduced to improve the American health care system, it was far from perfect. Everyone recognizes there were some things left out, some things done poorly and some things that need further modification. There are many additional changes that could be implemented to improve the system.

There are four important reforms that build on the ACA to advance health promotion and prevention, cost control and quality improvement that are “shovel ready,” meaning they can be initiated quickly and with lasting impact.

Cigarette taxes

A quick and easy way to prevent serious illness is to raise cigarette taxes.

Cigarettes and small cigars represent the single-greatest preventable cause of death in the country. Over the last 50 years or so, the United States has reduced adult smoking rates by half – a great public health triumph.

The reduction in smoking rates has tapered off, however. Today, about 20 percent of adults smoke, and it has remained at about that level for the last five years.

One effective way to further reduce smoking is to raise its cost. If we raised the federal excise tax by 50 cents, the Congressional Budget Office estimates smoking rates would drop by about 3 percent, mainly by persuading younger people not to take up smoking.

Because most people who smoke start as teenagers, this would lead to a prolonged decline in the smoking rates as well as emphysema, lung cancer, heart disease and the many illnesses tobacco produces – an important long-term preventive measure.

Furthermore, this tax will reduce the disparity in smoking. Lower-income Americans are more likely to smoke and are more price sensitive. Raising the cigarette tax will disproportionately reduce smoking among Americans with lower incomes – a very good thing.

Not only would this policy improve health, it would also generate $37 billion over the next 10 years. That money could be used to reduce the deficit or even to further improve the health of American children by investing in early childhood interventions.

Competitive bidding

Ever wonder how much a wheelchair costs? Or, more importantly, ever wonder who decides how much a wheelchair costs? You probably aren’t that concerned about the price of a wheelchair, because in all likelihood, you don’t think you’ll ever need one. You may feel medical prices are too high but think you don’t have much bargaining power to influence them.

Private insurance companies and public payers like Medicare have the power to ensure the prices are low. The problem is that our system for setting prices and paying for medical devices, equipment and procedures is broken – and we need to fix it.

Before the ACA, the government effectively set the price of a wheelchair, as Medicare determines what it will pay manufacturers for their wheelchairs. However, few Americans believe government-established prices are the best way to ensure low-cost, high-quality wheelchairs; instead, most Americans believe the market is the best way to set prices.

The ACA contains provisions designed to change the system, to move from a government-price to market-price setting. One of these provisions is competitive bidding in Medicare, requiring competitive bidding mainly for wheelchairs, hospital beds, oxygen equipment, artificial limbs and a few other things – what are technically called durable medical equipment, prosthetics and orthotics.

The program began in nine geographic areas in January 2011. Instead of the government setting prices, the companies bid on how much equipment they would supply and at what price.

The program has succeeded remarkably. Overall, prices for wheelchairs, hospital beds, walkers, oxygen equipment, and other goods dropped more than 40 percent in three years.

There is no reason competitive bidding should be limited to hospital beds, wheelchairs, walkers and oxygen tanks. There are many other medical goods and services that could be subject to competitive bidding to save money. What about all those disposable supplies, such as gauze pads, tape, sutures and tubes? What about pacemakers and stents? What about forcing the manufacturers of artificial hip, knee and spine implants to compete on price? Competitive bidding could easily drive those prices down.

And it is not just devices that are pretty standardized and could be competitively bid; so too are simple but common laboratory blood and chemistry tests. What about the taking – not the interpretation – of X-rays, CT and MRI scans? Because these tests are largely standardized and automated, driving efficiency up and prices down through competitive bidding should be possible.


Everyone hates the paperwork involved in the health care system: Filling out all those forms when you go to the physicians’ office, and then filling them out again when you go back to the same physician or to another one. Getting those incomprehensible – and invariably wrong – medical bills that aren’t really medical bills.

All that paper costs a huge amount. The Institute of Medicine estimated that as much as $190 billion a year is wasted on excessive administrative costs.

The ACA contains provisions that should reduce the paperwork, but much more could be done.

Payment reform

Today there is a serious misalignment between what we want physicians and hospitals to do in terms of improving value and efficiency and reducing unnecessary care, and how insurance companies, Medicare, Medicaid and others pay them.

About 85 percent of payment remains fee-for-service, which encourages more office visits, hospital admissions, emergency room visits, and tests and procedures. Yet we want physicians and hospitals to focus on quality, on keeping people healthy and out of the hospital.

This dissonance makes it hard for physicians and hospitals to transform how they deliver care, because we are effectively asking them, in some cases, to act against their own financial interest: if they emphasize value, they are likely to lose money.

What is the solution? The government needs to clearly delineate a specific timeline for switching fee-for-service payment to alternatives, such as bundled payments, capitation or other payment systems. The federal government should declare a timeline; for instance, by 2022, 75 percent of Medicare payments will be non-fee-for-service payments.

These four changes – higher federal excise tax on cigarettes, more competitive bidding, faster administrative simplification and expanded payment change – are not the only things that could further accelerate and solidify health care reform.

One area ripe for change is how hospitals are paid for physician training, so called graduate medical education. Each year, Medicare pays $10 billion to hospitals to train physicians, with little accountability and performance reporting. Changing payment to transform medical training with more team-based and out-of-hospital training is desirable. Similarly, medical malpractice remains a topic that still needs comprehensive reform and improvement.

In addition, innovative states, such as Arkansas, Maryland, Massachusetts, and Oregon, are testing out novel ideas to improve care and lower costs. The federal government could create a program to facilitate and expand such state-based innovation by making participation in such experiments easier for Medicare.

But the four reforms above have the virtue of being “shovel ready” and would have a substantial impact on lowering prices and transforming the delivery of care. They are the place to begin health care reform 2.0.