In Barack Obama's overflowing in-tray is a file marked 'healthcare'. Michael Macdonnell and Douglas Noble explore how he will increase coverage and control costs and what UK managers should watch

With the fever of the inauguration behind him, Barack Obama must now turn his attention to the sober task of delivering his promises. Top of his domestic priorities will be economic recovery. But healthcare reform will also be on the list, not least because in a system where employers provide the majority of health insurance, levels of coverage will drop as unemployment rises.

Despite his strong mandate, negotiating a comprehensive and radical package with Congress will take all the new president's bipartisan spirit and a good deal of his political capital, as former president Bill Clinton found out. And, notwithstanding fundamental differences between the two systems, central aspects of the debate in the US will become increasingly relevant for UK policy makers and practitioners.

Two pillars

On the campaign trail, the healthcare debate focused on two pillars of reform: coverage and cost. President Obama, then senator, tended to emphasise the first, while presidential rival John McCain stressed the second. But any successful reform package will need to be radical on both. Although Medicare and Medicaid have, since the 1960s, provided basic coverage for the elderly and the poor, more than 45 million Americans remain uninsured - a number sure to grow in the wake of the economy's tailspin.

President Obama promises several measures to address this gap. He pledges to put a stop to the practice of denying those with a pre-existing condition access to private or employer-based insurance - in effect, insuring only the healthy. He also proposes a new public plan that would be available to individuals and employers alongside approved private plans on a newly established and highly regulated national health insurance exchange. Means-tested tax credits would be offered to people needing support to purchase a plan from the exchange; small businesses offering healthcare insurance would also benefit from aid.

The president has resisted calls to compel people to purchase health insurance (with the notable exception of children). And his plans do not require employers to provide coverage: small businesses do not have to unless they accept tax credits, and large employers that do not insure their employees merely need to contribute to the costs of the new national plan. Many of these reforms would, if enacted, improve coverage, perhaps dramatically. But in the absence of compulsion for either individuals or employers, it is hard to see how universal access to basic healthcare can be achieved.

President Obama claims these proposals for increasing coverage would be paid for by rolling back President Bush's tax cuts.

Out of control

Controlling the spiralling costs of healthcare was the second major theme of the campaign. For good reason: the Congressional Budget Office reckons that by 2050 the costs of existing federally funded healthcare programmes - never mind their expansion to the uninsured - will exceed the entire federal budget.

In a speech at the University of Iowa, President Obama drew attention to the interdependence of cost and coverage, describing a vicious cycle where "premiums rise, more employers drop coverage, and more Americans become uninsured" - which is compounded further when the uninsured are forced to rely on emergency settings for their basic medical needs.

To arrest this cycle, he plans to reimburse employers for a portion of their "catastrophic" costs for those relatively few patients with very high medical expenses, provided premium reductions are passed on to other holders. He also wants to allow generic drugs into the US market, until now blocked by some pharmaceutical companies, and to allow Americans to import drugs from countries where prices are lower. President Obama also has plans to reduce administrative costs by encouraging providers to move to electronic records, although experience in the UK suggests this is ambitious to say the least.

Of course, each measure will need to be painstakingly negotiated with Congress. That is why the president has appointed former Senate leader Tom Daschle as health and human services secretary. Senator Daschle is supremely qualified for this role and highly trained in the black arts of legislative wrangling. But it will be a challenge. The House of Representatives will probably do President Obama's bidding so long as he remains as popular as he is. The Senate will be less tractable. The Republicans retain their ability to filibuster, and they may reason that voters will agree that an imploding economy is hardly the right time to enact expensive reforms.

Smaller steps

They are also eager to reclaim their title as champions of small government and smaller budget deficits (forecast to reach an unfathomable $1.2trn this year). Indeed, some members of President Obama's own party, the so-called "blue dog" Democrats, are fiscal hawks. For these reasons, the generosity of the new public plan may be curtailed, and measures to control costs expanded. Some of Senator McCain's proposals for increasing competition among insurers might even reappear. Indeed, Senator McCain himself might reappear: what better way to negotiate a package in the senate than to enlist McCain's bipartisan instincts?

As the Democrats' final proposals are developed, three themes that will also be central for UK policy makers and practitioners over the next few years are likely to feature at the centre of the debate. The first is affordability. UK policy makers would do well to study the cost control proposals worked up by the Obama team: although health cuts may not yet be on the agenda in the UK, it is clear that spending will be severely constrained. Rising drug and treatment costs are common to both countries, and there are reports that the US is considering its own version of the National Institute for Health and Clinical Excellence, independent of government and charged with weighing the benefits of new treatments against their costs.

But with the rate of cost inflation that both countries are facing, the solution will need to be much more systemic. President Obama's plans recognise this, pointing out that according to some estimates chronic or long term conditions cost $1.7trn yearly and account for three quarters of all healthcare spending - and growing. Similarly, the Department of Health estimates 70 per cent of all health and social care expenditure in England goes towards long term conditions. This means that if President Obama is going to get serious about improving systemic affordability he will need proposals to reduce radically the amount of care given to these patients in expensive hospital settings.

This is also a big challenge for the NHS. Much greater integration of care pathways that bridge primary and secondary care, as well as health and social services, will be part of the answer, as will community and self-care models. Existing models such as that used by Kaiser Permanente will provide invaluable lessons. So there will be a chance to learn from, or even collaborate with, US policy makers and practitioners.

Lessons from the UK?

Maintaining systemic affordability also implies getting much better at prevention. This is hard to disagree with; the difficulty is putting prevention into practice, especially when it comes to lifestyle factors such as obesity. President Obama plans to reorient spending away from disease care and towards public health interventions. He has also promised to expand nurse-family partnerships to all low-income, first-time mothers - a similar programme is well established in the UK. Perhaps most intriguingly, according to a Number 10 source, the Obama team shows great interest in understanding the UK's primary care model and the Brown government's efforts to expand and reform it.

In the UK and US, reinforcing the roles of GPs and other primary care practitioners as well as strengthening the public health service - perhaps through innovative models of dual accreditation for hospital clinicians as proposed by Lord Darzi - will be central to effective prevention and gatekeeping secondary care. Again, there are ripe opportunities for learning from each other.

A final common theme is improving the quality of services. Lord Darzi has made this central to the reforms in England, moving the debate beyond access to how we drive excellence in health services across the country. President Obama has said relatively little on this, focused as he is on coverage, although he has voiced concerns about the disparities in the quality of provision for certain populations.

More concretely, he wants hospitals to report basic performance, with familiar measures such as hospital acquired infections and other "never events", and he proposes incentive payments for those that achieve clinically validated outcome targets. If he does push ahead with these proposals, it would be one important step beyond the quality accounts mandated by Lord Darzi: standards would be based on clinically evidenced outcome data, rather than on access or process measures alone. This is done only in a handful of specialties in the UK, such as cardiac surgery. But the quality agenda may encourage policy makers and practitioners to extend this further. If so, both the US approach and the comparative data the process yields will be of interest.

President Obama's healthcare plans are sure to change as they go through the Congressional meat-grinder - as the last reformer Bill Clinton discovered - and as the economic downturn deepens. But the debate that will ignite around driving quality, preventing disease and, especially, affordability will equally be central to the discussion in the UK in the coming years.