As the US president fights to secure congressional backing for reforming healthcare, Michael Macdonnell and Douglas Noble find parallels in the UK’s drive to push quality up and cost down

Since President Obama took the helm at the White House, much has changed both politically and economically.

Six months ago, we suggested his proposed reforms for US healthcare would have lessons for UK managers and policy makers. The similarities between the two have since become more pronounced: the financial crisis has put restraining costs at the centre of policy discussions both here and in the US.

US healthcare costs account for 15 per cent of its economic output, yet healthy life expectancy and other outcomes are worse in the US than in other industrialised countries. England spends a comparatively frugal 9 per cent.

A focus on quality alone will not prevent costs from multiplying. There is no guarantee quality is cheaper

Following 10 years of heavy investment, the days of ever-increasing spending are over. A generation of UK managers has a vastly more ambitious policy to deal with - improving quality as funding is tightened.

President Obama’s efforts at reform began inauspiciously. Tom Daschle, his nominee for both health secretary and head of the White House office on health reform, was ousted in a UK-style expenses fiasco.

The president has seemed dangerously willing to delegate power to congress — perhaps to avoid the fate of the Clinton reforms, which were scotched in 1993 by a ruthless Democratic congress. As a result, several competing bills have been drafted, two in the senate alone.

Central aspects of Obama’s plan are being frustrated by fiscally conservative “blue dog” Democrats, just as President Clinton’s were. Congress has now adjourned, despite the president’s entreaties to finalise proposals before the summer recess.

However, a surprising level of consensus has emerged - although not on Obama’s original objective of extending coverage to all Americans.

Six months ago, we predicted that a truly dreadful fiscal outlook would force the president to be much more serious about cost control.

This has come true; but unexpectedly it is precisely this greater emphasis on costs that is driving agreement in Washington on the urgency and structure of reform. Universal access comes a distant second.

If the fiscal implications for sustaining existing coverage look unaffordable - current projections suggest spending increases of 4-12 per cent of GDP would be required to sustain Medicare and Medicaid alone - those for extending care to the 50 million uninsured are downright catastrophic.

Change is clearly needed - but the catch is that reforms are certain to cost still more, at least in the short term.

Each of the congressional bills under consideration include a “mandate” that would require all Americans to buy coverage (much as we do car insurance). To make this affordable, those on low incomes will be subsidised. But these subsidies are expensive: some of the congressional plans have been estimated to cost $1.2 trillion to $1.6 trillion over 10 years.

Underlying problem

So each of the players is now scrambling to plug the gap. Everyone agrees that healthcare reforms need to be “budget neutral”. This is not least because, while public support shifts, according to one poll only 21 per cent would be willing to support a plan if they had to pay more in insurance or tax.

Mr Obama suggests creating a competing federal plan to drive down private insurers’ costs and mop up uninsured Americans. However, opposition from private insurers and conservatives in both parties is steep.

In mid-July Nancy Pelosi, the speaker of the house, announced another alternative.

Her bill provides for a public insurer and is estimated to cost $1 trillion. This would be financed by requiring companies to provide coverage on pain of steep fines, and by increasing income taxes on the rich.

This approach contravenes Mr Obama’s principle that universal coverage should be paid for through efficiencies in the health system. This would be, for example, by preventing disease as well as driving out inefficiencies and improving quality and safety.

The house bill faces a much more conservative senate with plans of its own, so it is unlikely to survive in its current form.

Moreover, none of the proposals really gets to grip with the underlying problem - the overprovision of care.

The revenue of most US doctors is linked directly to the sheer quantity of treatment they provide. This creates strong incentives for overtreatment - incentives that a federal insurance plan, for instance, would do nothing to correct.

Changing this incentive structure offers the really big opportunity for reducing costs: experts estimate that 10-30 per cent of total spending could be saved.

President Obama has spoken of the need to link payments with quality of care, rather than volume of tests or procedures performed, but has few concrete proposals for how this would be implemented.

UK policy makers would do well to study the US debate. Although cuts have been rejected by both Labour and the Conservatives, it is clear that spending will be severely constrained. Demand for healthcare will continue to rise here, as in the US, not least because of an ageing population.

And the cost of each “unit” of care is also rising in both countries as new treatments and technologies are adopted.

The US reforms focus on relieving the combined effect of constrained public resources, ever rising demand and exploding costs of care. In the UK, the search for a strategy to manage these pressures has just begun.

All too often the search for a coherent strategy to tackle rising costs resorts to the panacea of quality. If better quality and safety are to save the day - or at least save billions - exactly how they will do this is a mystery in the US and the UK.

A focus on quality alone will not prevent the cost of care from multiplying. Quality may sometimes be cheaper, but there is no guarantee this is usually the case in healthcare.

Both countries will have to improve quality and control costs simultaneously - the former will not drive the latter. There is significant opportunity for both US and UK managers to share experiences and lessons in such an environment.

Cash supplements

Another leaf out of Darzi’s book has been to involve all the key players in forming policy.

Obama has courted legislators from both parties, as well as insurance and healthcare leaders. He has gone further by mobilising the local networks that played such a key role in his election campaign. One group, Organising for America, promises that “in thousands of homes across the country, we’ll gather to launch our grass-roots campaign for healthcare”. The group has 500,000 volunteers and full-time staff in 31 states. They are not alone: another has managed to raise $35m.

In the UK, tapping local partners as significant sources of funding remains restricted to the odd flying ambulance or specialist cancer support group.

NHS-led activism could be a powerful way both to supplement central resources and to mobilise behaviour-change campaigns. Social marketing only scratches the surface of the potential for mobilising citizens.

Perhaps the most powerful parallel in the two debates is about system incentives. The UK is streets ahead of the US in efforts to reduce the overprovision of care. But problems remain.

Payment by results still rewards hospitals for activity more than it does for quality, although CQUIN payments are a step in the right direction. The tariff system also encourages far too much care in acute settings. And evidence shows that treatment intensity differs across regions, rarely for compelling clinical reasons.

There is no doubt that redirecting these incentives will be central to coping with the UK’s own cost conundrum. US attempts to reduce overprovision may yield important lessons.

The unaffordability of US healthcare has been the catalyst of reform and has dictated what is acceptable - much more so than President Obama’s original goal of universal access.

The downturn has increased the urgency of reform and has required law makers to consider systemic changes, rather than simply spending more.

The same might be said of the next phase of reform in the UK. Will radical reform only emerge when we run out of money?