Five years have elapsed since the passage of groundbreaking health care reform legislation, and the task of expanding insurance coverage to most Americans is well underway[1]. However, substantial health policy challenges still remain. Of the many pressing concerns, two of the most critical issues are reform of hospital pricing and payment systems and the establishment of a comprehensive primary care system.

While the health care legislation passed in 2010 included several demonstration projects and commissioned studies on payment reform, there were no substantial changes made to hospital pricing and payment. In the current fee-for-service system, hospitals set prices from a master charge list, then negotiate rates down from this charge list with all private payers individually[2]. Without regulation, hospitals can charge rates which are entirely unrelated to their actual cost; in 2004, for example, the average hospital charged over three times the Medicare allowable cost for care provided[3]. Accusations of cost-shifting abound, as hospitals try to gain dollars from private payers to make up for low Medicare and Medicaid reimbursement rates. The resulting payment system is one with considerable administrative waste, restricted consumer choice, misaligned incentives for providing quality care, and escalating prices[4]. The passage of the 2010 reforms and subsequent expansion of public programs has only increased the incentives for hospitals to raise their rates for private payers in order to recoup dollars lost caring for Medicaid and Medicare patients.

Several viable options exist for reforming the payment system, but there is no question that change is necessary. One proven option for reducing costs is an all-payer rate setting system, such as has been in place in Maryland for the past thirty years. In Maryland, an independent commission sets the rates that hospitals can charge to all payers. As a result, from the implementation of the system in 1976 to 2007 the cost of an average hospital admission has dropped from 26% above the national average to 3% below the average[5]. Furthermore, themeasure is cost-saving – a recent study predicted that if national hospital expenditure decreased by only 5%, a goal achieved by most states attempting rate-setting, the annual savings could be $35 billion[6]. An alternative to a universal rate-setting system would be to create a set of prices for the relative cost of each diagnosis related group, and allow hospitals to set their own conversion factor which they made publicly available4. This would keep prices scaled to the actual cost of each procedure. Any all-payer system has the added advantage of allowing for the possibility to move away from fee-for-service models towards bundled payments and per-case cost constraints, with incentives for high quality. Such programs would help to align incentives between payers and providers as both try to improve care while controlling utilization and cost.

A second major health policy challenge is to take advantage of the increase in the number of insured Americans to establish a primary care system in the United States. Numerous analyses have shown that in countries with better primary care services, morbidity and mortality are reduced, health resources are more equitably distributed, and health outcomes are improved while cost is lower [Starfield B, Shi L, Macinko J. Contribution of primary care to health systems and health. Milbank Q 2005;83:457-502.]. The weakness of the American primary care system, where an estimated 60 million people lack access, goes a long way to explaining why in Cuba, a country with low overall health care spending compared to the US, but a strong primary care system, the infant mortality rate is on par with that of the US, or why of OECD countries, the US has lower than average life expectancy and the highest hospital admission rates in the OECD for diseases such as asthma and diabetes, which can be well controlled in the primary care setting[7][8][9].

While the health care reform bill did take steps towards improving the delivery of primary care by measures such as increasing funding for community health centers and incentivizing doctors and nurses to enter into primary care, such efforts are not adequate to address the shortage of skilled health professionals or the lack of coordination that plagues primary care. Reform of the system must take place both vertically and horizontally, with a focus on geographically and
socially equitable distribution of health resources, providing free or low cost primary care services, and developing networks of coordinated care teams while subsidizing and expanding roles for trained non-physician healthcare workers.

With expanded numbers of insured individuals, the US now has an unprecedented incentive to create a comprehensive primary care system. There is much already known about the delivery of good primary care, and international examples demonstrate that supportive government policy is associated with good primary care delivery[10]. For example, Spain’s reform in moving to a tax-based financing system with primary health care centers has increased access and quality at reduced cost[11]. In this respect the US stands to learn from many other countries, such as the UK, Spain, Cuba, and Costa Rica; market forces in the US certainly have not, on their own, created an acceptable system.

Regardless of the specific path to systemic reform, there is a need for expanded primary care training programs, a re-examination of the roles that each health care provider can play in a comprehensive care team, and a focus on addressing the geographic and financial barriers to care. The evidence is strong for an expanded role for nurses, as research has shown that appropriately trained nurses can achieve the same quality of care as physicians in primary care, with equally good health outcomes[12]. The demonstration projects and commissioned studies on more effective delivery of primary care mandated by the 2010 reform bill have strong conclusions about the creation of an ideal system. 2015 is the time to act on the information about what works, and why. Expanding coverage is a first step towards reform, but it means little unless there is a system for those with health insurance to access care and realize improved health.