Strong management will be critical to health care reform

Administrative factors largely forgotten in the debate over plans to enhance the health system will be central to success, academies find.

Administration officials, lawmakers and citizens concerned about plans to expand and improve health care would do well to examine the recent findings of a two-year study of the administrative issues inherent in increasing access to health care.

The July report by the National Academy of Public Administration and National Academy of Social Insurance -- both nonprofit, independent organizations -- concludes that management issues, "the structures, processes and staffing necessary to implement a plan and establish an effective program," will prove central to the success or failure of any reforms.

"If we were dealing with a simple, uncomplicated arrangement, this inattention to management would be understandable," the report said. "But the American health care financing system is anything but simple and uncomplicated. Built piece by piece over a long period, lacking a comprehensive design, involving all levels of government, and accounting for almost one-sixth of the U.S. economy, it has a multitude of moving parts that must interact smoothly to achieve reasonable results."

A panel of experts convened by the academies identified seven administrative functions critical to a variety of health reform proposals: planning and coordinating implementation; subsidizing health insurance premiums and cost sharing; administering health insurance mandates; regulating health insurance; restructuring health insurance markets; designing administrative organizations; and simplifying administration and controlling costs.

"As with other large, new government programs, health reform should build, to the extent possible, on existing government capacities, arrangements and institutions," the report noted. "In this instance, however, these capacities do not exist in a single entity but are spread across various agencies of federal and state governments."

The panel recommended that President Obama immediately designate an agency and an individual to direct the implementation of the health care overhaul: "The health reform administrator would draw attention to administrative issues while legislation is being drafted, begin planning to carry out the legislation even before it is enacted, and coordinate the efforts of the various federal and state agencies that would be involved in administering the new programs."

The report's authors also strongly recommended that any plan include a carefully constructed schedule for phasing in its various elements, noting: "Although the aim of reform is to extend health coverage as widely and quickly as possible, trying to start everything and cover everyone at one time could overwhelm the administrative apparatus."

The panel found clear lessons in the Social Security Administration's implementation of Medicare, which extended health care to 19 million elderly Americans. The agency had both funding and clout, which proved essential to developing the administrative capacity needed to manage what was widely understood to be a top national priority.

Planning for Medicare implementation was critical. Although President Lyndon Johnson signed the law authorizing the program in July 1965, benefits for hospital and physician services did not begin until the following July, and nursing home coverage did not start for six months after that. Officials had been discussing how to implement the law for several years before it was enacted, and selected a summer start date because that's when hospital occupancy is generally lowest. A proposal to offer the elderly a choice of benefit packages was dropped because it was deemed too administratively complex.

Congress also increased the agency's budget sufficiently to hire 9,000 staff and open 100 new offices to handle the increased workload. SSA was given almost complete authority and responsibility for implementing the program. To move more swiftly than the federal rule-making process allowed, the agency developed policy consensus through informal working groups and task forces.

There are substantial differences between the rollout of Medicare and the implementation requirements of the reforms under consideration today, not least of which is that Medicare did not have the mission of reforming an existing system or cutting costs. Nonetheless, the panel found that advance planning pays substantial benefits, agencies implementing reforms must have the political backing to enact ambitious reforms and their administrative costs must be adequately funded.

Among the biggest challenges federal and state administrators face if comprehensive health care reform is enacted will be restructuring health insurance markets and regulating insurance. Most regulation is handled by states now. At the federal level, regulation happens largely through the income tax system and the Medicare and Medicaid programs, although the Internal Revenue Service provides little oversight and has been slow to develop implementing regulations or enforce tax penalties for violations. "No significant administrative structure now exists at the federal level for regulating health insurance," the panel found.

Some of the reforms lawmakers are weighing would create new responsibilities for the federal government, such as determining the nature and extent of coverage, or producing information on the comparative effectiveness of various diagnostic methods and treatments. That raises questions about whether those responsibilities should be administered through existing agencies or through new government entities. Because of concerns about the influence of special interests or political gridlock, a number of proposals would create new agencies with substantial independence from the political process, described as a kind of Federal Reserve system for health matters.

But the panel recommended against using the Federal Reserve as a model for administering health care, noting the line between accountability and interference often is fuzzy in health care. Any agency that conducts comparative-effectiveness analysis or makes coverage decisions will affect the livelihood of health care providers and medical companies, the access of individuals to potentially life-saving treatments and the cost of insurance to those who pay the taxes or premiums, the panel noted.

"The autonomy of the Federal Reserve is acceptable because its primary task -- the determination of monetary policy -- is limited, involves no obvious coercion and affects people only indirectly," the report said. "In contrast, the decisions of a 'Health Fed' regarding health care coverage and costs would directly affect millions of individual Americans. Such important, sensitive matters cannot and should not be taken out of politics."

The study's most important conclusion, the authors noted, was that administrative challenges, while complex, can be met if the White House and Congress take appropriate actions and plan accordingly.

The study was funded with support from the Robert Wood Johnson Foundation.