What the Trump Administration Needs to Do About Health Care

On January 20 Donald Trump will be sworn in as the 45th president of the United States. How exactly he and the Republican-controlled Congress will reshape U.S. policy and institutions is unclear, but their approach to health care reform will have profound impacts on the health and well-being of the American people and on the U.S. economy. Trump’s stated goal is to repeal and replace the Affordable Care Act (Obamacare), but the details of his plan are still unknown. We can ill afford a prolonged period of paralysis and debate. The Trump administration must move quickly to apply what’s been learned so far to a new program that addresses the cost, quality, and accessibility of health care.

During this period of uncertainty, there is a real risk that health care companies and provider institutions will respond by pursuing mergers and acquisitions, bulking up so as to be able to sustain profits in the wake of whatever comes — or to ensure they are too big to fail and can dictate the policies that will govern their industries. Turning a blind eye to the potential for such a reaction could undermine efforts to build an efficient, high-quality health care sector. The new administration should therefore swiftly commit to promoting and protecting competition at every level in health care — and then flesh out the details of its policy agenda.

The broad principles of the path forward for the new administration are clear. In our article “Health Care Needs Real Competition,” from the upcoming December 2016 issue of Harvard Business Review, we describe five catalysts that can accelerate progress toward a competition-driven, value-oriented health care marketplace, one that serves the needs of patients, controls costs, and rewards providers who can innovate and execute. They are: (1) orienting around meeting the needs of patients; (2) creating choice at every level of care, from consumers’ selection of insurance products and providers to clinicians’ choice of facilities for their patients’ care; (3) ending rewards based on the volume of services delivered; (4) standardizing methods for paying for value; and (5) making the reporting of health care outcomes transparent so that patients, providers, and insurers can readily gauge and compare clinical performance.

In our article, we describe these catalysts and their implications for health care’s major stakeholders, including providers, private insurers, employers, and patients. While all stakeholders have roles in the expression of these catalysts, the history of health care shows that what stakeholders do depends enormously on the leadership provided by the federal government.

First, there is the role of government as regulator, including its vital job in protecting and promoting competition. The Federal Trade Commission and the Department of Justice Antitrust Division have a mandate to enforce competition law, but the resources allocated to these agencies have not increased in step with the volume of health care mergers and (alleged or actual) anticompetitive practices. Increasing funding for these agencies is a wise long-term investment in the productivity of the health care sector. An uncompetitive sector yields high prices and reduces the incentive to innovate.

Second, the federal government has enormous influence as a payer. Medicare and Medicaid should accelerate their redesign around the first and third of the above catalysts, moving quickly and completely away from rewarding volume on a fee-for-service basis and toward rewarding care that is organized around meeting patients’ needs. The new administration should not back away from current goals to, by the end of 2018, shift half of Medicare fee-for-service payments to alternative models that explicitly reward value.

To focus health care providers on value for patients rather than volume of services, Medicare and Medicaid should continue their work in developing and implementing innovative payment mechanisms. An example of federal leadership in this arena includes Medicare’s Comprehensive Care for Joint Replacement (CJR) program, under which hospitals in 67 regions receive a lump sum for the entire episode of care involving total hip and knee replacements. With CJR, Medicare has made a major bundled payment initiative mandatory in much of the country, and it is extending this approach to other conditions next year. In provider organizations, the conversation is no longer whether to organize for bundled payments for these conditions but how to do so. Few, if any, other payers could drive this change in attitude. Federally sponsored insurance programs can and should continue to make use of their heft to reshape the delivery system.

Finally, the federal government should work with state governments and other stakeholders to standardize the technical details of value-based payments and to encourage transparency on the outcomes that matter to patients as a tactic for driving competition on quality. The broad bones of how alternative payment models can and should work are being defined by the Health Care Payment Learning and Action Network, the multistakeholder group commissioned by the Department of Health and Human Services. By continuing work to define the rules by which “the game” must be played, the new administration can focus providers on innovation and performance, rather than contracts and negotiation tactics.

The election is over and Republicans hold both the White House and Congress. The time has come for partisan politics to give way to good health policy. By developing policies that embrace competition, the new administration has a chance to drive innovation and productivity in this large and vitally important sector. There is a way forward, and identifying it requires true leadership at the federal level.

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