Current Events Health Insurance Health Reform Medicaid/Medicare Public Policy

HHS recommendations to reform the health care system

HHS has a policy paper titled “Reforming America’s Healthcare System Through Choice and Competition“. In the paper, HHS describes four broad areas of reform. I describe each in term, some of the key policy recommendation under each of the four headings, and my thoughts on each reform. Here goes:

  • Health care workforce and labor markets. Here HHS makes a number of wise recommendations. The first is to allow specialties to practice at the top of their license. This means granting non-physician clinicians (e.g., physician assistants, nurse practitioners, dental hygenists) more leeway. HHS also recommends increasing provider mobility by allowing easier transfer of board licensing across states. The out-of-state issue is particularly relevant for telehealth, since it would preclude physicians from practicing ‘out of state’ if the patient is calling in across state lines. Additionally, it makes a lot of sense to modify any reimbursement policies that prohibit or impede alternatives to in-person services. To increase supply (and thus competition), HHS recommends making licensing of foreign trained physicians easier as well.
  • Health care provider markets. HHS wisely recommends limiting certificate of need (CON) laws, which have done little to improve quality, but a lot to drive up costs, as well ending or puting more limits on non-compete clauses, which also reduce competition.
  • Health insurance markets. HHS recommends ending requirements for “any willing provider”. On the one hand, eliminating AWP will drive down costs because the health plan is restricting access. On the other hand, if the HHS plan aims to increase choice, clearly eliminating AWP do limit patient access to a smaller set of providers within their network. HHS also proposes loosening state regulation of network adequacy standards…again this would drive down cost but decrease choice. HHS also proposes fewer mandates on what should be covered. Generally, this does make sense; some additional flexibility to provider insurance offerings may be helpful in theory. In practice, however, insurance contracts are very difficult to understand and having an essential benefit package makes it easier to shop across plans. Thus, if the essential benefits package is set at a fairly reasonable level, then I would argue it makes sense to keep. In practice, however, lobbying may push Congress to continue to include more and more health care goods and services in the essential benefits package, so I do recognize that there is long-run risk of costs rising due an overly generous benefits package.
  • Consumer-driven health care. HHS argues for more high-deductible health plans (HDHP). As an economist, I am partial to these arguments. Insurance causes moral hazard. HDHPs shift cost back to consumers and allow them to better shop. Empirical evidence, however, shows that while people do reduce spending in an HDHP, they also scale back on preventive and high-value care and high-value drugs as the do on lower value care. HHS does make the case that certain high-value treatments (e.g., insulin for diabetics, vaccines), could be allowed to be covered with no cost sharing, which is a more sensible approach. Still, to date, HDHP seem to work better in theory than practice. I do agree, however, with the HHS calls for increased price transparency; it is hard to measure value if one doesn’t know the price being paid. HHS also supports having the government collect quality measures and not overly burdensome, but recommends pivoting away from provider value-based purchasing system, as they are two burdensome, too crude, and sacrifice unmeasured quality for measured quality; I agree. They also propose limiting the use of accountable care organizations. While integrated care with ACOs can work and has worked largely in pilot studies, to date most integration of physician and hospital practice is for the purpose of improving provider bargaining power rather than quality of care provided to the patient. Finally, HHS recommends improving access to claims and electronic medical record (EMR) data from public payers; as a researcher, I couldn’t agree more that better access to data is key to unlocking more insights and better improving the health care system.

In short, while I don’t agree with all the proposals put forward by HHS, there is a lot to like. More choice and more competition are a step in the right direction.


  1. I agree that lack of transparency is one problem with HDHPs. But it is also important to remember that healthcare is not just a commodity like tuna fish. It is very difficult for the “consumer” of healthcare to use a healthcare savings account economically and wisely because the consumer usually does not have enough information to make the best choices. How does someone know what is the most economical way to spend their healthcare dollars? Is the less expensive CT scan a better choice than the PET scan (usually, yes, but you have to know the guidelines to be sure). Is the more expensive MRI better than an x-ray of the back (often not, but sometime yes–if your doctor has an interest in the MRI scanner, he or she may not give you an unbiased recommendation). These choices can make a big difference in overall healthcare costs and the patient is in no position to make them. Doctors need to be better stewards of healthcare resources and we need to enlist them in the process instead of penalizing them for actions they have no control over.

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