Orszag: Ration care, overhaul tort to control costs

Peter R. Orszag, the former director of the Office of Management and Budget and a key architect of the financial contours of the Accountable Care Act, told an audience at the Healthcare Financial Management Association's annual national institute that rationing healthcare and cutting prices works to control costs.

"Other nations have combined (those) elements in varying degrees," and achieved success in keeping their healthcare costs in check, Orszag told roughly 3,000 ANI attendees.

However, Orszag was quick to note that such an approach would never be politically viable in the United States. "It won't work here," he said.

Orszag, who is a now a vice chairman of CitiGroup Inc.'s institutional client group, dismissed the effectiveness of consumer-directed healthcare, wherein an individual shares financial risk in how their healthcare is delivered. While noting that such a plan would work with about 75 percent of the population--those healthy enough to assist in making choices about their healthcare--he said they only represent about 15 percent of total healthcare expenditures.

Instead, Orszag said that in order for the U.S. to control its healthcare costs in a politically acceptable manner, it should focus on provider information--particularly comparative effectiveness research--and provider incentives.

Orszag also dismissed research suggesting that medical malpractice reform would only result in modest cost benefits. He said the current system results in practice "contagion" among physicians, wherein virtually all over-practice medicine to defray potential liabilities.

"What we need is to move toward an evidence-based safe harbor," Orszag said. "If the doctor follows the (treatment) protocol, they won't get sued."

Yet, governance in the U.S. is currently in such a polarized state, according to Orszag, that gridlock should be expected for the foreseeable future--implying that such a fix should not be expected anytime soon.

Orszag also blasted the recent employer survey by McKinsey & Co. concluding that as many as 30 percent of U.S. firms would drop their employee healthcare coverage once state-based exchanges begin operating in 2014. He called the report "embarrassingly, badly done." In a brief interview after his speech, he said the fact that it was conducted completely online made it an unreliable predictor of employer behavior.

He peppered his approximately 40-minute presentation with several personal anecdotes. For instance, Orszag monitors his weight and body mass index daily through a scale that automatically transmits the data to his personal health record, and uses a pedometer that also automatically transmits his number of daily strides.

Orszag also recounted going target shooting with Rep. Paul Ryan (R-Wis.) whose proposals for cutting Medicare have been heavily derided by the Obama Administration--and tripping off gunpowder alarms when he returned to work.

And Orszag self-deprecatingly retold the infamous tale when he tried to warm up his second-floor office during his first day of work in January 2009 by lighting a fire in the fireplace, not knowing the chimney had been capped by the Secret Service. The smoke vented into a conference room two floors above, setting off both fire and security alarms. However, this story came with a new twist: Orszag said the mishap occurred inside the White House, when in fact it took place in the Eisenhower Executive Office Building, which is adjacent to the White House.

More on Orszag's speech in this week's Editor's Corner.