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While research suggests that considerable efficiencies can be gained from cloud computing technology, concerns over privacy and security continue to deter governments and private-sector firms from migrating to the cloud. Senator Amy Klobuchar (D-Minn.) has advanced discussion of the “Cloud Computing Act of 2011,” draft legislation that would address these challenges by encouraging the U.S. government to negotiate with other countries to establish consistent laws related to online security and cloud computing. The bill also creates new enforcement tools for investigating and prosecuting those who violate online privacy and security laws.

On June 16, the Brookings Institution hosted a forum on the policy proposals in the Cloud Computing Act of 2011. Discussion included an overview of the international policy implications as governments and firms adjust to a coherent legal framework, changes and innovations in public procurement, and challenges for private industry as it balances consumer needs and compliance with these proposed cloud computing safeguards.

After the program, panelists took audience questions.

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Executive Summary

The move to the cloud is one of the defining information technology trends of the early 21st century. By providing businesses, universities, government agencies, and other entities with access to shared and often physically dispersed computing resources, cloud computing can simultaneously offer increased flexibility, reduced cost, and access to a wider array of services.

Cloud computing has also created a set of new challenges. For example, the issues of privacy and security in the cloud are well recognized and have been extensively discussed in the business and popular press. However, one critical issue that has received very little attention with respect to cloud computing is export control.

In the broadest sense, export control relates to regulations that the United States and many other countries have put in place to restrict the export of various sensitive items, information, and software.

There is an inherent tension between cloud computing and export control. While the concept of the cloud is centered on the premise of removing the need to track the details of data movement among various destinations, export control regulations are built largely around restrictions tied to those very movements.

If cloud computing is to reach its full potential, it is critical for providers and users of cloud services to address its implications with respect to export control. It is equally important to adapt the export control regulations to reflect the increasing prevalence of cloud computing in a manner that preserves the ability of American companies to benefit from the efficiencies of the cloud while also ensuring that American national security and foreign policy interests are adequately protected.

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The appointment of new federal chief information officer Steven VanRoekel comes at a challenging time for President Barack Obama. The national economy continues to be weak. Congress plans to cut trillions from the federal budget. And in the time leading up to the 2012 election, American voters remain cynical about the ability of the government to address important policy problems in an effective manner.

In an era of deficit reduction and public cynicism, the tasks facing federal officials are to determine how to do more with less and persuade voters the government can become smarter and more effective. There are going to be fewer dollars for virtually every federal program so it is important to figure how ways to innovate and perform more efficiently.

Former CIO Vivek Kundra sought to do this through encouraging agencies to move software applications to the cloud, consolidating federal data centers, improving transparency, and improving the information technology procurement process. It is important to continue this progress even as agencies are forced to downsize their operations.

As shown in the private sector, government administrators should use technology to cut costs, improve worker productivity, and streamline operations. This is not just a matter of using technology in more innovative ways, but changing the operations and culture of the public sector. Public officials must improve its data mining activities to identify fraud and abuse in Medicare, Medicaid, the Defense Department, and other domestic programs.

New software gives managers better tools to evaluate how money is being spent and whether it is fulfilling intended goals. If it is not, programs need to be modified or eliminated. The most important weapon in Mr. VanRoekel’s arsenal may be the scalpel as he goes through the federal government’s $80 billion IT budget.

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In his new book The Mobile Wave: How Mobile Intelligence Will Change Everything (Vanguard Press, 2012), CEO of MicroStrategy Michael Saylor examines the transformative possibilities of mobile computing on business, society, economies and everyday life. Saylor argues that mobile technologies such as smartphones and tablet computers – “the fifth wave of computer technology” – will be indispensible tools for modern life and completely alter how we live.

On October 5, the Center for Technology Innovation at Brookings hosted a forum on mobile computing and its monumental impact on our future. Moderated by Vice President Darrell West, Michael Saylor discussed key highlights from his book and offered insights as to what sort of change we can expect from the macro level down to the most mundane of everyday humans tasks.

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As of today, the federal government will require that all cloud service providers have Federal Risk and Authorization Program (FedRAMP) approval. FedRAMP is a program meant to standardize the security of cloud services, thus reducing the time and effort that independent cloud providers would need to spend ensuring cloud security. According to a 2013 annual report by the General Services Administration, agencies that use FedRAMP could save 50 percent on staffing and $200,000 in costs overall. FedRAMP will operate under similar rules as the Federal Information Security Management Act (FISMA), which helps maintain security of federal IT systems, applications and databases. Both FISMA and FedRAMP will provide enhanced protection and scrutiny for federal and independent agencies.

To learn more about cloud computing, read Darrell West’s papers Saving Money Through Cloud Computing and Steps to Improve Cloud Computing in the Public Sector. Visit the FedRAMP website here.

MaryCate Most contributed to this post.

The first instance of “cloud” computing came in 2006, when Amazon released its Elastic Compute Cloud, a service for consumers to lease space on virtual machines to run software. Now, the cloud enables the transfer and storage of data around the world, in an almost seamless fashion. Using cloud services are a seamless experience from the consumer perspective. This ease of use obscures significant regulation from governments on both sides of the Atlantic. The Safe Harbor Principles is a framework that ensures that personal consumer data being transferred from the EU to the US is still subject to a level of security in compliance with the EU’s stricter regulation on data protection. US companies must be certified within this framework, in order to transfer consumer data outside the EU.

A comprehensive data privacy arrangement that satisfies both sides of the Atlantic is necessary to preserve the free flow of data, and the resulting commerce, between the two regions. Speaking at the 2014 Cloud Computing Policy Conference, Cameron F. Kerry suggested that neither side of the Atlantic can afford to partition the Internet. Currently trade negotiators are assessing the viability including an update to Safe Harbor Principles as a part of the Transatlantic Trade and Investment Partnership (TTIP).

TTIP and the Future of Trade

The NSA revelations last year have only increased support for further regulation over the transfer of personal data in the cloud, especially in the European Union (EU). The revelations have also brought to light significant differences in the European and US conceptions of privacy. The ruling by the European Court of Justice on the “right to be forgotten” is a recent example of this transatlantic divide. In EU countries, citizens can now request Google to take down links from search results that lead users to potentially damaging information.

There are several disputes that negotiators must first resolve. Europeans would prefer that American regulators take a more active role in cases where US firms are violating the Safe Harbor principles. EU officials have also indicated they would like to include a mechanism to send an alert if data were improperly shared with US law enforcement officials. The expansion of the codes of conduct within the cloud would serve as a major step towards finalizing TTIP. A European Commission Analysis finds that TTIP would inject about $130 billion into the US economy. Ultimately both the EU and the US have so much to gain that both nations must find a way to resolve these thorny issues.

Kevin Risser contributed to this post.

Cloud computing is becoming omnipresent in the private sector as companies latch on to this innovation as a way to manage scalability, improve flexibility, and reduce cost. Analysts at IDC predict that, over the next six years, nearly 90 percent of new spending on Internet and communications technology will be on cloud-based platforms. Apple, Google, Amazon, Microsoft, and hundreds of smaller companies are positioning themselves to dominate the estimated $5 trillion worldwide market. While few companies will provide numbers, it is estimated that Amazon and Google may run as many as 10 million servers while Microsoft runs close to one million. In short, it is an innovation that makes a mockery out of Moore’s law.

But, like all innovations, cloud computing has potential pitfalls. Public sector organizations in particular have had difficulty taking advantage of new technologies. The Heritage Foundation keeps a list over 50 examples of government ineptitude including $34 billion in fraudulent Homeland Security contracts, National Institutes of Health renting a lab that it neither needs nor can use for $1.3 million per month, and the Department of Agriculture wasting $2.5 billion in stimulus money on broadband internet. Technological ineptitude received special attention with the failed launch of the Healthcare.gov, the release of classified data from Edward Snowden, and the costly FBI virtual case file debacle.

Cloud computing is far more than just a simple technology change and requires a close examination of governance, sourcing, and security. We sought to understand how well state government is prepared to address the challenges of cloud computing.

The Approach

We have gathered and started to do a content analysis of the IT strategic plans for each state. For each plan, we performed a content analysis, which is looking for certain phrases or text within the IT strategic plan in order to have a structured way to understand the data. Details for our approach can be seen in our previous blog post.

How States Are Implementing the Cloud

We were not surprised to see a number of states preparing to study or embark on cloud computing.

While some states don’t mention it (e.g. Alabama), most states are eagerly exploring it. For example, North Dakota’s plan talks about cloud computing as an integral part of the future and seven of its thirteen major IT initiatives are centered on preparation for transitioning to the cloud “where and when it makes sense”.

Vermont puts itself squarely in the studying period. The plan describes that, “While the risks of enterprise-wide and cloud-based IT must be carefully managed, trends continue to just larger-scale operations.” Wisconsin also clearly lays out its view on cloud computing, writing that, “Flexibility and responsiveness (also) guide Wisconsin’s approach toward adoption of cloud services” and suggests that its version of a private cloud “…offers advanced security and service availability tailored for business needs.” West Virginia provides an equally balanced approach by requiring that only services with an acceptably low risk and cost-effective footprint will be moved to the cloud.

In short, all of the states that are considering cloud computing are taking a thoughtful and balanced approach.

The Good

One of the most critical aspects of cloud computing is security and, without question, states understand the importance of good security. A good example of this is Colorado who designates security as one of its four “wildly important goals” and sets the target of “10 percent reduction in information security risk for Colorado agencies by close of FY15”.

South Carolina echoed the same theme by asserting that security and confidentiality are “overriding priorities at every stage of development and deployment.” Connecticut’s plans explain the need to “continuously improve the security and safeguards over agency data and information technology assets”.

The Bad

Despite the interest in cloud computing, we were only able to find a single state (Georgia) that explicitly links governance to security and, to us, by extension to cloud computing. In Georgia’s plan, they start with the idea that “strong security programs start with strong governance” and then explicitly describe necessary changes in governance to improve security.

We were, however, impressed with the seriousness that New York, North Carolina and Massachusetts took governance but it was difficult to find many other states that did.

The Ugly

Unfortunately the results on sourcing were dismal. While a few states (e.g. Kansas, Ohio, and Massachusetts) specifically discuss partnerships, most states seemed to ignore the sourcing aspect of cloud computing. The most ominous note comes from Alabama where they make a statement that innovation in the state is being stifled by a lack of strong personnel.

While we have great enthusiasm for government to address cloud computing, some of the non-technical issues are lagging in the discussion. Good government requires that these items be addressed in order to realize the promise of cloud computing.

The 2016 presidential election confronts the U.S. electorate with political choices more fundamental than any since 1964 and possibly since 1932. That statement may strike some as hyperbolic, but the policy differences between the two major parties and the positions of candidates vying for their presidential nominations support this claim.

A victorious Republican candidate would take office backed by a Republican-controlled Congress, possibly with heightened majorities and with the means to deliver on campaign promises. On the other hand, the coattails of a successful Democratic candidate might bring more Democrats to Congress, but that president would almost certainly have to work with a Republican House and, quite possibly, a still Republican Senate. The political wars would continue, but even a president engaged in continuous political trench warfare has the power to get a lot done.

Candidates always promise more than they can deliver and often deliver different policies from those they have promised. Every recent president has been buffeted by external events unanticipated when he took office. But this year, more than in half a century or more, the two parties offer a choice, not an echo. Here is a partial and selective list of key issues to illustrate what is at stake.

The Affordable Care Act, known as Obamacare or the ACA, passed both houses of Congress with not a single Republican vote. The five years since enactment of the ACA have not dampened Republican opposition.

The persistence and strength of opposition to the ACA is quite unlike post-enactment reactions to the Social Security Act of 1935 or the 1965 amendments that created Medicare. Both earlier programs were hotly debated and controversial. But a majority of both parties voted for the Social Security Act. A majority of House Republicans and a sizeable minority of Senate Republicans supported Medicare. In both cases, opponents not only became reconciled to the new laws but eventually participated in improving and extending them. Republican members of Congress overwhelmingly supported, and a Republican president endorsed, adding Disability Insurance to the Social Security Act.  In 2003, a Republican president proposed and fought for the addition of a drug benefit to Medicare.

The current situation bears no resemblance to those two situations. Five years after enactment of Obamacare, in contrast, every major candidate for the Republican presidential nomination has called for its repeal and replacement. So have the Republican Speaker of the House of Representatives and Majority Leader in the Senate.  

Just what 'repeal and replace' might look like under a GOP president remains unclear as ACA critics have not agreed on an alternative. Some plans would do away with some of the elements of Obamacare and scale back others. Some proposals would repeal the mandate that people carry insurance, the bar on 'medical underwriting' (a once-routine practice under which insurers vary premiums based on expected use of medical care), or the requirement that insurers sell plans to all potential customers. Other proposals would retain tax credits to help make insurance affordable but reduce their size, or would end rules specifying what 'adequate' insurance plans must cover.

Repeal is hard to imagine if a Democrat wins the presidency in 2016. Even if repeal legislation could overcome a Senate filibuster, a Democratic president would likely veto it and an override would be improbable. 

But a compromise with horse-trading, once routine, might once again become possible. A Democratic president might agree to Republican-sponsored changes to the ACA, such as dropping the requirement that employers of 50 or more workers offer insurance to their employees, if Republicans agreed to changes in the ACA that supporters seek, such as the extension of tax credits to families now barred from them because one member has access to very costly employer-sponsored insurance.

In sum, the 2016 election will determine the future of the most far-reaching social insurance legislation in half a century.

Social Security faces a projected long-term gap between what it takes in and what it is scheduled to pay out. Every major Republican candidate has called for cutting benefits below those promised under current law. None has suggested any increase in payroll tax rates. Each Democratic candidate has proposed raising both revenues and benefits. Within those broad outlines, the specific proposals differ.

Most Republican candidates would cut benefits across the board or selectively for high earners. For example, Senator Ted Cruz proposes to link benefits to prices rather than wages, a switch that would reduce Social Security benefits relative to current law by steadily larger amounts: an estimated 29 percent by 2065 and 46 percent by 2090. He would allow younger workers to shift payroll taxes to private accounts. Donald Trump has proposed no cuts in Social Security because, he says, proposing cuts is inconsistent with winning elections and because meeting current statutory commitments is 'honoring a deal.' Trump also favors letting people invest part of their payroll taxes in private securities. He has not explained how he would make up the funding gap that would result if current benefits are honored but revenues to support them are reduced. Senator Marco Rubio has endorsed general benefit cuts, but he has also proposed to increase the minimum benefit. Three Republican candidates have proposed ending payroll taxes for older workers, a step that would add to the projected funding gap.

Democratic candidates, in contrast, would raise benefits, across-the-board or for selected groups—care givers or survivors. They would switch the price index used to adjust benefits for inflation to one that is tailored to consumption of the elderly and that analysts believe would raise benefits more rapidly than the index now in use. All would raise the ceiling on earnings subject to the payroll tax. Two would broaden the payroll tax base.

As these examples indicate, the two parties have quite different visions for Social Security. Major changes, such as those envisioned by some Republican candidates, are not easily realized, however. Before he became president, Ronald Reagan in numerous speeches called for restructuring Social Security. Those statements did not stop him from signing a 1983 law that restored financial balance to the very program against which he had inveighed but with few structural changes. George W. Bush sought to partially privatize Social Security, to no avail. Now, however, Social Security faces a funding gap that must eventually be filled. The discipline of Trust Fund financing means that tax increases, benefit cuts, or some combination of the two are inescapable. Action may be delayed beyond the next presidency, as current projections indicate that the Social Security Trust Fund and current revenues can sustain scheduled benefits until the mid 2030s. But that is not what the candidates propose. Voters face a choice, clear and stark, between a Democratic president who would try to maintain or raise benefits and would increase payroll taxes to pay for it, and a Republican president who would seek to cut benefits, oppose tax increases, and might well try to partially privatize Social Security.

On no other issue is the split between the two parties wider or the stakes in their disagreement higher than on measures to deal with global warming. Leading Republican candidates have denied that global warming is occurring (Trump), scorned evidence supporting the existence of global warming as bogus (Cruz), acknowledged that global warming is occurring but not because of human actions (Rubio, Carson), or admitted that it is occurring but dismissed it as not a pressing issue (Fiorina, Christie). Congressional Republicans oppose current Administration initiatives under the Clean Air Act to curb emission of greenhouse gases.

Democratic candidates uniformly agree that global warming is occurring and that it results from human activities. They support measures to lower those emissions by amounts similar to those embraced in the Paris accords of December 2015 as essential to curb the speed and ultimate extent of global warming.

Climate scientists and economists are nearly unanimous that unabated emissions of greenhouse gases pose serious risks of devastating and destabilizing outcomes—that climbing average temperatures could render some parts of the world uninhabitable, that increases in sea levels that will inundate coastal regions inhabited by tens of millions of people, and that storms, droughts, and other climatic events will be more frequent and more destructive. Immediate actions to curb emission of greenhouse gases can reduce these effects. But no actions can entirely avoid them, and delay is costly.  Environmental economists also agree, with little partisan division, that the way to proceed is to harness market forces to reduce greenhouse gas emissions.” 

The division between the parties on global warming is not new. In 2009, the House of Representatives narrowly passed the American Clean Energy and Security Act. That law would have capped and gradually lowered greenhouse gas emissions. Two hundred eleven Democrats but only 8 Republicans voted for the bill. The Senate took no action, and the proposal died.

Now Republicans are opposing the Obama administration’s Clean Power Plan, a set of regulations under the Clean Air Act to lower emissions by power plants, which account for 40 percent of the carbon dioxide released into the atmosphere. The Clean Power Plan is a stop-gap measure. It applies only to power plants, not to other sources of emissions, and it is not nationally uniform. These shortcomings reflect the legislative authority on which the plan is based, the Clean Air Act. That law was designed to curb the local problem of air pollution, not the global damage from greenhouse gases. Environmental economists of both parties recognize that a tax or a cap on greenhouse gas emissions would be more effective and less costly than the current regulations, but superior alternatives are now politically unreachable.

Based on their statements, any of the current leading Republican candidates would back away from the recently negotiated Paris climate agreement, scuttle the Clean Power Plan, and resist any tax on greenhouse gas emissions. Any of the Democratic candidates would adhere to the Clean Power Plan and support the Paris climate agreement. One Democratic candidate has embraced a carbon tax. None has called for the extension of the Clean Power Plan to other emission sources, but such policies are consistent with their current statements.

The importance of global policy to curb greenhouse gas emissions is difficult to exaggerate. While the United States acting alone cannot entirely solve the problem, resolute action by the world’s largest economy and second largest greenhouse gas emitter is essential, in concert with other nations, to forestall climate catastrophe.

If the next president serves two terms, as six of the last nine presidents have done, four currently sitting justices will be over age 86 and one over age 90 by the time that presidency ends—provided that they have not died or resigned.

The political views of the president have always shaped presidential choices regarding judicial appointments. As all carry life-time tenure, these appointments influence events long after the president has left office. The political importance of these appointments has always been enormous, but it is even greater now than in the past. One reason is that the jurisprudence of sitting Supreme Court justices now lines up more closely than in the past with that of the party of the president who appointed them. Republican presidents appointed all sitting justices identified as conservative; Democratic presidents appointed all sitting justices identified as liberal. The influence of the president’s politics extends to other judicial appointments as well.

A second reason is that recent judicial decisions have re-opened decisions once regarded as settled. The decision in the first case dealing with the Affordable Care Act (ACA), NFIB v. Sibelius is illustrative.

When the ACA was enacted, few observers doubted the power of the federal government to require people to carry health insurance. That power was based on a long line of decisions, dating back to the 1930s, under the Constitutional clause authorizing the federal government to regulate interstate commerce. In the 1930s, the Supreme Court rejected an older doctrine that had barred such regulations. The earlier doctrine dated from 1905 when the Court overturned a New York law that prohibited bakers from working more than 10 hours a day or 60 hours a week. The Court found in the 14^th Amendment, which prohibits any state from ‘depriving any person of life, liberty or property, without due process of law,’ a right to contract previously invisible to jurists which it said the New York law violated. In the early- and mid-1930s, the Court used this doctrine to invalidate some New Deal legislation. Then the Court changed course and authorized a vast range of regulations under the Constitution’s Commerce Clause.  It was on this line of cases that supporters of the ACA relied.

Nor did many observers doubt the power of Congress to require states to broaden Medicaid coverage as a condition for remaining in the Medicaid program and receiving federal matching grants to help them pay for required medical services.

To the surprise of most legal scholars, a 5-4 Supreme Court majority ruled in NFIB v. Sibelius that the Commerce Clause did not authorize the individual health insurance mandate. But it decided, also 5 to 4, that tax penalties could be imposed on those who fail to carry insurance. The tax saved the mandate. But the decision also raised questions about federal powers under the Commerce Clause. The Court also ruled that the Constitution barred the federal government from requiring states to expand Medicaid coverage as a condition for remaining in the program. This decision was odd, in that Congress certainly could constitutionally have achieved the same objective by repealing the old Medicaid program and enacting a new Medicaid program with the same rules as those contained in the ACA that states would have been free to join or not.

NFIB v. Sibelius and other cases the Court has recently heard or soon will hear raise questions about what additional attempts to regulate interstate commerce might be ruled unconstitutional and about what limits the Court might impose on Congress’s power to require states to implement legislated rules as a condition of receiving federal financial aid. The Court has also heard, or soon will hear, a series of cases of fundamental importance regarding campaign financing, same-sex marriage, affirmative action, abortion rights, the death penalty, the delegation of powers to federal regulatory agencies, voting rights, and rules under which people can seek redress in the courts for violation of their rights.

Throughout U.S. history, the American people have granted nine appointed judges the power to decide whether the actions taken by elected legislators are or are not consistent with a constitution written more than two centuries ago. As a practical matter, the Court could not maintain this sway if it deviated too far from public opinion. But the boundaries within which the Court has substantially unfettered discretion are wide, and within those limits the Supreme Court can profoundly limit or redirect the scope of legislative authority. The Supreme Court’s switch in the 1930s from doctrines under which much of the New Deal was found to be unconstitutional to other doctrines under which it was constitutional illustrates the Court’s sensitivity to public opinion and the profound influence of its decisions.

The bottom line is that the next president will likely appoint enough Supreme Court justices and other judges to shape the character of the Supreme Court and of lower courts with ramifications both broad and enduring on important aspects of every person’s life.

***

The next president will preside over critical decisions relating to health care policy, Social Security, and environmental policy, and will shape the character of the Supreme Court for the next generation. Profound differences distinguish the two major parties on these and many other issues. A recent survey of members of the House of Representatives found that on a scale of ‘liberal to conservative’ the most conservative Democrat was more liberal than the least conservative Republican. Whatever their source, these divisions are real.  The examples cited here are sufficient to show that the 2016 election richly merits the overworked term 'watershed'—it will be the most consequential presidential election in a very long time.

Ahead of Tuesday’s primary elections in Ohio, Florida and other states, the 2016 presidential candidates have been talking about the future of Social Security and its funding shortfalls.

Over the next two decades, the money flowing into Social Security will be too little to pay for all promised benefits. The reserve fund will be exhausted soon after 2030, and the only money available to pay for benefits will be from taxes earmarked for the program. Unless Congress and the President change the law before the reserve is depleted, monthly benefits will have to be cut about 21%.

Needless to say, office holders, who must face voters, are unlikely to allow such a cut. Before the Trust Fund is depleted, lawmakers will agree to some combination of revenue increase and future benefit reduction, eliminating the need for a sudden 21% pension cut. The question is: what combination of revenue increases and benefit cuts does each candidate favor?

The candidate offering the most straightforward but least credible answer is Donald Trump. During the GOP presidential debate last week, he pledged to do everything within his power to leave Social Security “the way it is.” He says he can do this by making the nation rich again, by eliminating budget deficits, and by ridding government programs of waste, fraud, and abuse. In other words, he proposed to do nothing specifically to improve Social Security’s finances. Should Trump’s deal-making fail to make us rich again, he offered no back-up plan for funding benefits after 2034.

The other three GOP candidates proposed to repair Social Security by cutting future pensions. No one in the debate, except U.S. Sen. Marco Rubio from Florida, mentioned a specific way to accomplish this. Rubio’s plan is to raise the age for full retirement benefits. For many years, the full retirement age was 65. In a reform passed in 1983, the retirement age was gradually raised to 66 for people nearing retirement today and to 67 for people born after 1960. Rubio proposes to raise the retirement age to 68 for people who are now in their mid-40s and to 70 for workers who are his children’s age (all currently under 18 years old).

In his campaign literature, Rubio also proposes slowing the future rate of increase in monthly pensions for high-income seniors. However, by increasing the full retirement age, Rubio’s plan will cut monthly pensions for any worker who claims benefits at 62 years old. This is the earliest age at which workers can claim a reduced pension. Also, it is by far the most common age at which low-income seniors claim benefits. Recent research suggests that low-income workers have not shared the gains in life expectancy enjoyed by middle- and especially high-income workers, so Rubio’s proposed cut could seriously harm many low-income workers.

Though he didn’t advertise it in the debate, Sen. Ted Cruz favors raising the normal retirement age and trimming the annual cost-of-living adjustment in Social Security. In the long run, the latter reform will disproportionately cut the monthly pensions of the longest-living seniors. Many people, including me, think this is a questionable plan, because the oldest retirees are also the most likely to have used up their non-Social-Security savings. Finally, Cruz favors allowing workers to fund personal-account pensions with part of their Social Security contributions. Although the details of his plan are murky, if it is designed like earlier GOP privatization plans, it will have the effect of depriving Social Security of needed future revenues, making the funding gap even bigger than it is today.

The most revolutionary part of Cruz’s plan is his proposal to eliminate the payroll tax. For many decades, this has been the main source of Social Security revenue. Presumably, Cruz plans to fund pensions out of revenue from his proposed 10% flat tax and 16% value-added tax (VAT). This would represent a revolutionary change because up to now, Social Security has been largely financed out of its own dedicated revenue stream. By eliminating the independent funding stream, Cruz will sever the perceived link between workers’ contributions and the benefits they ultimately receive. Most observers agree with Franklin Roosevelt that the strong link between contributions and benefits is a vital source of the enduring popularity of the program. Social Security is an earned benefit for retirees rather than a welfare check.

Gov. John Kasich does not propose to boost the retirement age, but he does suggest slowing the growth in future pensions by linking workers’ initial pensions to price changes instead of wage changes. He hints he will impose a means test in calculating pensions, reducing the monthly pensions payable to retirees who have high current incomes. Many students of Social Security think this a bad idea, because it can discourage workers from saving for retirement.

All of the Republican candidates, except Trump, think Social Security’s salvation lies in lower benefit payouts. Nobody mentions higher contributions as part of the solution. In contrast, both Democratic candidates propose raising payroll or other taxes on workers who have incomes above the maximum earnings now subject to Social Security contributions. This reform enjoys broad support among voters, most of whom do not expect to pay higher taxes if the income limit on contributions is lifted. Sen. Bernie Sanders would immediately spend some of the extra revenue on benefit increases for current beneficiaries, but his proposed tax hike on high-income contributors would raise enough money to postpone the year of Trust Fund depletion by about 40 years. Hillary Clinton is less specific about the tax increases and benefit improvements she favors. Like Sanders, however, she would vigorously oppose benefit cuts.

None of the candidates has given us a detailed plan to eliminate Social Security’s funding imbalance. At this stage, it’s not obvious such a plan would be helpful, since the legislative debate to overhaul Social Security won’t begin anytime soon. Sanders has provided the most details about his policy intentions, but his actual plan is unlikely to receive much Congressional support without a massive political realignment. Cruz’s proposal, which calls for eliminating the Social Security payroll tax, also seems far outside the range of the politically feasible.

What we have learned from the GOP presidential debates so far is that Republican candidates, with the exception of Trump, favor balancing Social Security through future benefit cuts, possibly targeted on higher income workers, while Democratic candidates want to protect current benefit promises and will do so with tax hikes on high-income workers. There is no overlap in the two parties’ proposals, and this accounts for Washington’s failure to close Social Security’s funding gap.

Editor’s note: This piece originally appeared in Fortune.

Led by presidential candidate Bernie Sanders, one-time supporters of ‘single-payer’ health reform are rekindling their romance with a health reform idea that was, is, and will remain a dream.  Single-payer health reform is a dream because, as the old joke goes, ‘you can’t get there from here.

Let’s be clear: opposing a proposal only because one believes it cannot be passed is usually a dodge.One should judge the merits. Strong leaders prove their skill by persuading people to embrace their visions. But single-payer is different. It is radical in a way that no legislation has ever been in the United States.

Not so, you may be thinking. Remember such transformative laws as the Social Security Act, Medicare, the Homestead Act, and the Interstate Highway Act. And, yes, remember the Affordable Care Act. Those and many other inspired legislative acts seemed revolutionary enough at the time. But none really was. None overturned entrenched and valued contractual and legislative arrangements. None reshuffled trillions—or in less inflated days, billions—of dollars devoted to the same general purpose as the new legislation. All either extended services previously available to only a few, or created wholly new arrangements.

To understand the difference between those past achievements and the idea of replacing current health insurance arrangements with a single-payer system, compare the Affordable Care Act with Sanders’ single-payer proposal.

Criticized by some for alleged radicalism, the ACA is actually stunningly incremental. Most of the ACA’s expanded coverage comes through extension of Medicaid, an existing public program that serves more than 60 million people. The rest comes through purchase of private insurance in “exchanges,” which embody the conservative ideal of a market that promotes competition among private venders, or through regulations that extended the ability of adult offspring to remain covered under parental plans. The ACA minimally altered insurance coverage for the 170 million people covered through employment-based health insurance. The ACA added a few small benefits to Medicare but left it otherwise untouched. It left unaltered the tax breaks that support group insurance coverage for most working age Americans and their families. It also left alone the military health programs serving 14 million people. Private nonprofit and for-profit hospitals, other vendors, and privately employed professionals continue to deliver most care.

In contrast, Senator Sanders’ plan, like the earlier proposal sponsored by Representative John Conyers (D-Michigan) which Sanders co-sponsored, would scrap all of those arrangements. Instead, people would simply go to the medical care provider of their choice and bills would be paid from a national trust fund. That sounds simple and attractive, but it raises vexatious questions.

• How much would it cost the federal government? Where would the money to cover the costs come from?
• What would happen to the $700 billion that employers now spend on health insurance?
• How would the $600 billion a year reductions in total health spending that Sanders says his plan would generate come from?
• What would happen to special facilities for veterans and families of members of the armed services?

Sanders has answers for some of these questions, but not for others. Both the answers and non-answers show why single payer is unlike past major social legislation.

The answer to the question of how much single payer would cost the federal government is simple: $4.1 trillion a year, or $1.4 trillion more than the federal government now spends on programs that the Sanders plan would replace. The money would come from new taxes. Half the added revenue would come from doubling the payroll tax that employers now pay for Social Security. This tax approximates what employers now collectively spend on health insurance for their employees...if they provide health insurance. But many don’t. Some employers would face large tax increases. Others would reap windfall gains.

The cost question is particularly knotty, as Sanders assumes a 20 percent cut in spending averaged over ten years, even as roughly 30 million currently uninsured people would gain coverage. Those savings, even if actually realized, would start slowly, which means cuts of 30 percent or more by Year 10. Where would they come from? Savings from reduced red-tape associated with individual insurance would cover a small fraction of this target. The major source would have to be fewer services or reduced prices. Who would determine which of the services physicians regard as desirable -- and patients have come to expect -- are no longer ‘needed’? How would those be achieved without massive bankruptcies among hospitals, as columnist Ezra Klein has suggested, and would follow such spending cuts? What would be the reaction to the prospect of drastic cuts in salaries of health care personnel – would we have a shortage of doctors and nurses? Would patients tolerate a reduction in services? If people thought that services under the Sanders plan were inadequate, would they be allowed to ‘top up’ with private insurance? If so, what happens to simplicity? If not, why not?

Let me be clear: we know that high quality health care can be delivered at much lower cost than is the U.S. norm. We know because other countries do it. In fact, some of them have plans not unlike the one Senator Sanders is proposing. We know that single-payer mechanisms work in some countries. But those systems evolved over decades, based on gradual and incremental change from what existed before. That is the way that public policy is made in democracies. Radical change may occur after a catastrophic economic collapse or a major war. But in normal times, democracies do not tolerate radical discontinuity. If you doubt me, consider the tumult precipitated by the really quite conservative Affordable Care Act.

Editor's note: This piece originally appeared in Newsweek.

Much public focus is being given to a broader role for hospitals in improving the health of their communities. This focus parallels a growing interest in addressing the social determinants of health as well as health care policy reforms designed to increase the efficiency and quality of care while improving health outcomes.

This interest in the community role of hospitals has drawn attention to the federal legal standards and requirements for nonprofit hospitals seeking federal tax exemption. Tax-exempt hospitals are required to provide community benefits. And while financial assistance to patients unable to pay for care is a basic requirement of tax-exemption, IRS guidelines define the concept of community benefit to include a range of community health improvement efforts.

At the same time, the IRS draws a distinction between community health improvement spending–which it automatically considers a community benefit–and certain “community-building” activities where additional information is required in order to be compliant with IRS rules. In addition, community benefit obligations are included in the Affordable Care Act (ACA).

Specifically, the ACA requires nonprofit hospitals periodically to complete a community health needs assessment (CHNA), which means the hospital must conduct a review of health conditions in its community and develop a plan to address concerns. While these requirements are causing hospitals to look more closely at their role in the community, challenges remain. For instance, complex language in the rules can mean hospitals are unclear what activities and expenditures count as a “community benefit.” Hospitals must take additional steps in order to report community building as community health improvement.

These policies can discourage creative approaches. Moreover, transparency rules and competing hospital priorities can also weaken hospital-community partnerships. To encourage more effective partnerships in community investments by nonprofit hospitals:

• The IRS needs to clarify the relationship between community spending and the requirements of the CHNA. 
• There needs to be greater transparency in the implementation strategy phase of the CHNA. 
• The IRS needs to broaden the definition of community health improvement to encourage innovation and upstream investment by hospitals.

Download "Hospitals as Community Hubs: Integrating Community Benefit Spending, Community Health Needs Assessment, and Community Health Improvement" »

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Editor's note: On March 16, Paul B. Ginsburg testified before the California Senate Committee on Health on fostering competition in consolidated markets. Download the full testimony here.

Mr. Chairman, Madame Vice Chairman and Members of the Committee, I am honored to be invited to testify before this committee on this very important topic. I am a professor of health policy at the University of Southern California and director of public policy at the USC Schaeffer Center for Health Policy and Economics. I am also a Senior Fellow and the Leonard D. Schaeffer Chair in Health Policy Studies at The Brookings Institution, where I direct the Center for Health Policy. Much of my time is now devoted to leading the new Schaeffer Initiative for Innovation in Health Policy, which is a partnership between USC and the Brookings Institution. I am best known in California for the numerous community site visits over many years that I led in the state while I was president of the Center for Studying Health System Change; most of those studies were funded by the California HealthCare Foundation.

The key points in my testimony today are:

• Health care markets are becoming more consolidated, causing price increases for purchasers of health services, and this trend will continue for the foreseeable future despite anti-trust enforcement; 
• Government can still play an effective role in addressing higher prices that come from consolidation by pursuing policies that foster increased competition in health care markets. Many of these policies can be effective even in markets with high degrees of concentration, such as in Northern California.

[1] Gaynor, M., and R. Town, The Impact of Hospital Consolidation – Update, Robert Wood Johnson Foundation Synthesis Report (June 2012).

[2] Baker, L. C., M.K Bundorf and D.P. Kessler, “Vertical Integration: Hospital Ownership Of Physician Practices Is Associated With Higher Prices And Spending,” Health Affairs, Vol. 35, No 5 (May 2014).

[3] Chapin White and Megan Egouchi, Reference Pricing: A Small Piece of the Health Care Pricing and Quality Puzzle. National Institute for Health Care Reform, Research Brief No. 18, October 2014.

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According to an August 2015 survey, 72 percent of Americans find drug costs unreasonable, with 83 percent believing that the federal government should be able to negotiate prices for Medicare. Recently, Acting Administrator of the Centers for Medicare and Medicaid Services (CMS) Andy Slavitt commented that spending on medicines increased 13 percent in 2014 while health care spending growth overall was only 5 percent, the highest rate of drug spending growth since 2001.

Some of the most expensive drugs are covered under Medicare’s medical benefit, Part B, because they are administered by a physician. They are often administered in hospital outpatient departments and physician offices, and most commonly used to treat conditions like cancer, rheumatoid arthritis, and macular degeneration. Between 2005 and 2014, spending on Part B drugs has increased annually by 7.7 percent, with the top 20 drugs by total amount of Medicare payments accounting for 57 percent of total Part B drug costs. While overall Part B drug spending is a small portion of Medicare drug spending, the high growth rate is a concern, especially as new expensive breakthrough cancer drugs enter the market and have a negative effect on consumers’ pockets.

Unlike Part D, the prescription drug benefit, there are fewer incentives built in to Part B for providers to consider lower cost treatments for patients even if the lower cost drug may be clinically equivalent to the more expensive drug, because prior to budget sequestration, providers received 6 percent on top of the Average Sales Price (ASP) of the drug. Larger providers and hospitals often receive discounts on these drugs as well, increasing the amount they receive directly on top of the out-of-pocket cost of the drug.

This leads to more out-of-pocket costs for the consumer, as patients usually pay 20 percent of Part B services. The Government Accountability Office (GAO) estimated that in 2013, among new drugs covered under Part B, nearly two-thirds had per beneficiary costs of over $9,000 per year, leading to out-of-pocket costs for consumers of amounts between $1,900 and $107,000 over the year. On top of these high costs, this can lead to problems with medication adherence, even for serious conditions such as cancer.

A New Payment Model

To help change these incentives and control costs, CMS has proposed a new demonstration program, which offers a few different reimbursement methods for Part B drugs. The program includes a geographically stratified design methodology to test and evaluate the different methods. One of the methods garnering a lot of attention is a proposal to lower the administration add-on payment to providers, from current 6 percent of ASP, to 2.5 percent plus a flat fee of $16.80 per administration day.

Policymakers, physician organizations, and patient advocacy organizations have voiced major concerns raising the alarm that this initiative will negatively affect patient access to vital drugs and therefore produce poorer patient outcomes. The sequester will also have a significant impact on the percentage add on, reducing it to closer to an estimated .86 percent plus the flat fee. But we believe the goals of the program and its potential to reduce costs represent an important step in the right direction. We hope the details can be further shaped by the important communities of providers and patients who will deliver and receive medical care.

Geographic Variation

Last year, we wrote a Health Affairs Blog that highlighted some of the uses and limitations of publicly available Part B physician payment data. One major use was to show the geographic variation in practice patterns and drug administration, and we particularly looked at the difference across states in Lucentis v. Avastin usage. As seen in Exhibit 1, variation in administration is wide among states, even though both are drugs used to treat the same condition, age-related macular degeneration, and were proven to have clinically similar outcomes, but the cost of Lucentis was $2,000 per dose, while Avastin was only $50 per dose.

Using the same price estimates from our previous research, which are from 2012, we found that physician reimbursement under the proposed demonstration would potentially change from $120 to $66.80 for Lucentis, and increase from $3 to $18.05 for Avastin. Under the first payment model, providers were receiving 40 times as much to administer Lucentis instead of Avastin, while under the new proposed payment model, they would only receive 3.7 times as much.

While still a formidable gap, this new policy would have decreased financial reimbursement for providers to administer Lucentis, a costly, clinically similar drug to the much cheaper Avastin. As seen in Exhibit 1, a majority of physicians prescribe Avastin, thus this policy will allow for increased reimbursement in those cases, but in states where Lucentis is prescribed in higher proportions, prescribing patterns might start to change as a result of the proposed demonstration.

Source: Author’s estimates using 2012 CMS Cost Data and Sequestration Estimates from DrugAbacus.org

The proposed demonstration program includes much more than the ASP modifications in its second phase, including:

• discounting or eliminating beneficiary copays,
• indication-based pricing that would vary payments based on the clinical effectiveness,
• reference pricing for similar drugs,
• risk-sharing agreements with drug manufacturers based on clinical outcomes of the drug, and
• creating clinical decision tools for providers to help develop best practices.

This is all at the same time that a new model in oncology care (OCM) is being launched, which could help to draw attention to total cost of care. It is important that CMS try to address rising drug costs, but also be sure to consider all relevant considerations during the comment period to fine-tune the proposal to avoid negative effects on beneficiaries’ care.

We believe CMS should consider offering a waiver for organizations already participating in Center for Medicare & Medicaid Innovation (CMMI) models like the OCM, because financial benchmarks are based on past performance and any savings recognized in the future could be artificial, attributable to this demonstration rather than to better care coordination and some of the other practice requirements that are part of the proposed OCM. Furthermore, because this demonstration sets a new research precedent and because it is mandatory in the selected study areas rather than voluntary, CMS must try to anticipate and avoid unintended consequences related to geographic stratification.

For example, it is possible to imagine organizations with multiple locations directing patients to optimal sites for their business. Also, without a control group, some findings may be unreliable. The proposed rule currently lacks much detail, and there does not seem to be enough time for organizations to evaluate the impact of the proposed rule on their operations. Having said that, it will be important for stakeholders of all types to submit comments to the proposed rule in an effort to improve the final rule prior to implementation.

The critical question for the policymakers and stakeholders is whether this model can align with the multitude of other payment model reforms — unintended consequences could mitigate all the positive outcomes that a CMMI model offers to beneficiaries. Helping beneficiaries is and should be CMS’ ultimate obligation.

The Center for Medicare and Medicaid Innovation (CMMI, or “the Innovation Center”) recently announced an initiative called Comprehensive Primary Care Plus (CPC+). It evolved from the Comprehensive Primary Care (CPC) initiative, which began in 2012 and runs through the end of this year. Both initiatives are designed to promote and support primary care physicians in organizing their practices to deliver comprehensive primary care services. Comprehensive Primary Care Plus has some very promising components, but also misses some compelling opportunities to further advance payment for primary care services.

The earlier initiative, CPC, paid qualified primary care practices a monthly fee per Medicare beneficiary to support practices in making changes in the way they deliver care, centered on five comprehensive primary care functions: (1) access and continuity; (2) care management; (3) comprehensiveness and coordination; (4) patient and caregiver engagement; and, (5) planned care and population health. For all other care, regular fee-for-service (FFS) payment continued. The initiative was limited to seven regions where CMMI could reach agreements with key private insurers and the Medicaid program to pursue a parallel approach. The evaluation funded by CMMI found quality improvements and expenditure reductions, but savings did not cover the extra payments to practices.

Comprehensive Primary Care Plus uses the same strategy of conducting the experiment in regions where key payers are pursuing parallel efforts. In these regions, qualifying primary care practices can choose one of two tracks. Track 1 is very similar to CPC. The monthly care management fee per beneficiary remains the same, but an extra $2.50 is paid in advance, subject to refund to the government if a practice does not meet quality and utilization performance thresholds.

The Promise Of CPC+

Track 2, the more interesting part of the initiative, is for practices that are already capable of carrying out the primary care functions and are ready to increase their comprehensiveness. In addition to a higher monthly care management fee ($28), practices receive Comprehensive Primary Care Payments. These include a portion of the expected reimbursements for Evaluation and Management services, paid in advance, and reduced regular fee-for-service payments. Track 2 also includes larger rewards than does Track 1 for meeting performance thresholds.

The combination of larger per beneficiary monthly payments and lower payments for services is the most important part of the initiative. By blending capitation (monthly payments not tied to service volume) and FFS, this approach might achieve the best of both worlds.

Even when FFS payment rates are calibrated correctly (discussed below), the rates are pegged to the average costs across practices. But since a large part of practice cost is fixed, it means that the marginal cost of providing additional services is lower than the average cost, leading to incentives to increase volume under FFS. The lower payments reduce or eliminate these incentives. Fixed costs, which must also be covered, are addressed through the Comprehensive Primary Care Payments. By involving multiple payers, practices are put in a better position to pursue these changes.

An advantage of any program that increases payments to primary care practices is that it can partially compensate for a flaw in the relative value scale behind the Medicare physician fee schedule. This flaw leads to underpayment for primary care services. Although the initial relative value scale implemented in 1992 led to substantial redistribution in favor of evaluation and management services and to physicians who provide the bulk of them, a flawed update process has eroded these gains over the years to a substantial degree.

In response to legislation, the Centers for Medicare and Medicaid Services are working correct these problems, but progress is likely to come slowly. Higher payments for primary care practices through the CPC+ can help slow the degree to which physicians are leaving primary care until more fundamental fixes are made to the fee schedule. Indeed, years of interviews with private insurance executives have convinced us that concern about loss of the primary care physician workforce has been a key motivation for offering higher payment to primary care physicians in practices certified as patient centered medical homes.

Two Downsides

But there are two downsides to the CPC+.

One concerns the lack of incentives for primary care physicians to take steps to reduce costs for services beyond those delivered by their practices. These include referring their patients to efficient specialists and hospitals, as well as limiting hospital admissions. There are rewards in CPC+ for lower overall utilization by attributed beneficiaries and higher quality, but they are very small.

We had hoped that CMMI might have been inspired by the promising initiatives of CareFirst Blue Cross Blue Shield and the Arkansas Health Care Improvement initiative, which includes the Arkansas Medicaid program and Arkansas Blue Cross Blue Shield. Under those programs, primary care physicians are offered substantial bonuses for keeping spending for all services under trend for their panel of patients; there is no downside risk, which is understandable given the small percentage of spending accounted for by primary care. The private and public payers also support the primary care practices with care managers and with data on all of the services used by their patients and on the efficiency of providers they might refer to. These programs appear to be popular with physicians and have had promising early results.

The second downside concerns the inability of physicians participating in CPC+ to participate in accountable care organizations (ACOs). One of CMMI’s challenges in pursuing a wide variety of payment innovations is apportioning responsibility across the programs for beneficiaries who are attributed to multiple payment reforms. As an example, if a beneficiary attributed to an ACO has a knee replacement under one of Medicare’s a bundled payment initiatives, to avoid overpayment of shared savings, gains or losses are credited to the providers involved in the bundled payment and not to the ACO. As a result, ACOs are no longer rewarded for using certain tools to address overall spending, such as steering attributed beneficiaries to efficient providers for an episode of care or encouraging primary care physicians to increase the comprehensiveness of the care they deliver.

Keeping the physician participants in CPC+ out of ACOs altogether seems to be another step to undermine the potential of ACOs in favor of other payment approaches. This is not wise. The Innovation Center has appropriately not established a priority ranking for its various initiatives, but some of its actions have implicitly put ACOs at the bottom of the rankings. Recently, Mostashari, Kocher, and McClellan proposed addressing this issue by adding a CPC+ACO option to this initiative.

In an update to its FAQ published May 27, 2016 (after out blog was put into final form), CMMI eased its restriction somewhat by allowing up to 1,500 of the 5000 practices expected to participate in CPC+ to also participate in Medicare Shared Savings Program (MSSP) ACOs. But the prohibition continues to apply to Next Gen ACOs, the model that has created the most enthusiasm in the field. If demand for these positions in MSSP ACOs exceeds 1,500, a lottery will be held. This change is welcome but does not really address the issue of disadvantaging ACOs in situations where a beneficiary is attributed to two or more payment reform models. CMMI is sending a signal that CPC+, notwithstanding its lack of incentives concerning spending outside of primary care, is a powerful enough reform that diverting practices away from ACOs is not a problem. ACOs are completely dependent on primary care physician membership to function, meaning that any physician practices beyond 1,500 that enroll in CPC+ will reduce the size and the impact of the ACO program. CMMI has never published a priority ranking of reform models, but its actions keep indicating that ACOs are at the bottom.

The Innovation Center should be lauded for continuing to support improved payment models for primary care. Its blending of substantial monthly payments with lower payments per service is promising. But the highest potential rewards come from broadening primary care physicians’ incentives to include the cost and quality of services by other providers. CMMI should pursue this approach.

Editor's note: This piece originally appeared in Health Affairs Blog.

As we explore the social determinants of health, we are discovering some very important things. One is that compared with other developed countries, the United States spends a much higher proportion of resources on medical services to treat people than on social services that improve the prospects for good health. Research shows that countries placing a greater emphasis on social services rather than medical care have better health outcomes. Recent research comparing spending on health and social services among US states also found that spending relatively more on social services is significantly related to better health outcomes.

But getting the health system to “prescribe” social services is hard. Hospitals, in particular, do not easily cooperate with social service organizations in trying to improve community health. There are many reasons for this. Institutional culture can get in the way; the health care sector’s business model is not exactly based on reducing the volume of medical services. Shifting substantial resources from medical services to social services threatens the financial interests of a major industry.

In addition, data systems of medical, educational, and social service organizations often are not compatible, and privacy concerns add to that barrier. Budget and payment systems generally don’t encourage multisector cooperation either, and community organizations often feel their independence is threatened by partnering with a large local hospital.

These problems are not unique to the health care and social services worlds. When 2 sectors seek to cooperate, the ideal is to harmonize all systems so that they can interact seamlessly. But that is an enormous task, usually requiring daunting changes for organizations in each sector.

A Role for Intermediaries

One way to enable collaboration between large institutions and sectors that find it hard to cooperate directly is to introduce intermediaries to serve as bridges. By intermediaries we mean organizations that operate in the space between institutions or people and help link them together. Successful intermediaries have the trust of each institution, and so they fulfill a “diplomatic” function. They provide skills and capacities that are lacking in the organizations they connect together. In addition to helping us achieve a better combination of medical care and social services to produce improved health, they can help health care and other sectors to work together more seamlessly.

As health care institutions seek to work with other sectors to address social determinants of health, we are beginning to see certain types of intermediaries that will be particularly helpful.

Data Intermediaries

Sharing data on patients and households is necessary to coordinate multisector services, but it also raises technical, governance, and privacy concerns. Some intermediary organizations are addressing these issues by making it easier for institutions to share data and cooperate. For instance, to make service data more available to institutions trying to work together, an initiative called Actionable Intelligence for Social Policy (AISP) works with counties and other jurisdictions to address technical and governance concerns. With the assistance of the nonprofit and nonpartisan advocacy organization Data Quality Campaign as a technical intermediary, many states and counties are tackling the privacy and other issues needed to create integrated data systems—or “data warehouses”—that can enable health systems, schools, and other sectors to coordinate services for each student. Meanwhile the National Neighborhood Indicators Partnership (NNIP) helps develop neighborhood-level data to help organizations design policy plans for addressing social and health needs.

Embedded “Extenders”

Another interesting approach is for institutions, particularly some hospitals, to bring intermediary institutions onto their premises to address social service needs for discharged patients. For instance, the nonprofit organization Health Leads trains and funds individuals to be embedded in hospitals and link patients to an array of social services and community organizations, thereby bringing skills the hospital typically does not possess in-house. Washington Adventist Hospital contracts with Seedco, a national nonprofit focused on work and family supports, to coordinate such services for its patients.

In reverse, some other institutions have an embedded staff that can link them more effectively with the health care system. School-based nurses are an example. In some states, a nonprofit organization called Communities in Schools embeds teams in schools to link students with health care services and with social service agencies that can improve their students’ health and help them succeed academically.

Budget Blenders

Restrictions on who can receive federal and state program money create funding silos that make it hard for health systems to partner with community social service organizations. A 3-track Accountable Health Communities model, which the Obama Administration will be implementing and testing over a 5-year period, may be a step towards resolving that issue. But meanwhile, some intermediaries are helping to address the problem.

One interesting example is made possible by the state of Maryland’s use of Local Management Boards (LMBs). These county-level public or nonprofit entities have the legal ability to deploy certain federal grants and programs administered by the state, as well as state resources, to local organizations with the aim of improving the health and educational success of children. In some cases the boards are governmental institutions, but in other cases, such as the Family League of Baltimore, they are intermediary organizations that coordinate and oversee funds and grantees. In this way, intermediaries that are close to the community and have trusted links with a range of health and social service organizations can help social service and health care institutions concentrate on social determinants of health.

Connectors

Some intermediaries function almost as entrepreneurs, developing creative ways to facilitate relationships between health care institutions and other sectors. The National Collaborative on Education and Health, for instance, brings together multiple organizations focused on steps to create a culture of health within schools. City Health Works, in New York’s Harlem, uses personal coaches to connect households with hospital partners and social service providers to improve health in the community.

This rich tapestry of intermediaries can help the health system collaborate more effectively and seamlessly with social services and community institutions as we focus on social determinants of health. So we can take steps to foster the use of intermediaries. For instance, states can emulate Maryland’s LMB’s, by creating county or city bodies to coordinate funding streams and steer support to innovative community organizations.

Governments and foundations can also provide the modest seed capital needed for intermediaries to develop data systems, so that they can play a more sophisticated role. The federal government can tweak the community benefit requirements for nonprofit hospitals to encourage them to invest in nonmedical services that promote health. Most important and starting at the local level, health plan administrators, health care professionals and facilities, government, school districts, and social service agencies need to sit down together to identify how to improve community health by changing patterns of spending.

Editor's note: This piece originally appeared in JAMA Forum.

As the nation still struggles with high healthcare costs that consume larger and larger portions of patient budgets as well as government coffers, the search for ways to get costs under control continues. Total healthcare spending in the U.S. now represents almost 18 percent of our entire economy. One promising cost-savings approach is called “reference pricing,” where the insurer establishes a price ceiling on selected services (joint replacement, colonoscopy, lab tests, etc.). Often, this price cap is based on the average of the negotiated prices for providers in its network, and anything above the reference price has to be covered by the insured consumer.

A study published in JAMA Internal Medicine by James Robinson and colleagues analyzed grocery store Safeway’s experience with reference pricing for laboratory services such as such as a lipid panel, comprehensive metabolic panel or prostate-specific antigen test. Safeway’s non-union employees were given information on prices at all laboratories through a mobile digital platform and told what Safeway would cover. Patients who chose a lab charging above the payment limit were required to pay the full difference themselves.

Employers see this type of program as a way to incentivize employees to think through the price of services when making healthcare decisions. Employees enjoy savings when they switch to a provider whose negotiated price is below the reference price, whereas if they choose services above it, they are responsible for the additional cost.

Robinson’s results show substantial savings to both Safeway and to its covered employees from reference pricing. Compared to trends in prices paid by insurance enrollees not subject to the caps of reference pricing, costs paid per test went down almost 32 percent, with a total savings over three years of $2.57 million – patients saved $1.05 million in out-of-pocket costs and Safeway saved $1.7 million.

I wrote an accompanying editorial in JAMA Internal Medicine focusing on different types of consumer-driven approaches to obtain lower prices; I argue that approaches that make the job simpler for consumers are likely to be even more successful. There is some work involved for patients to make reference pricing work, and many may have little awareness of price differences across laboratories, especially differences between those in some physicians’ offices, which tend to be more expensive but also more convenient, and in large commercial laboratories. Safeway helped steer their employees with accessible information: they provided employees with a smartphone app to compare lab prices.

But high-deductible plans like Safeway’s that provide extensive price information to consumers often have only limited impact because of the complexity of shopping for each service involved in a course of treatment -- something close to impossible for inpatient care. In addition, high deductibles are typically met for most hospitalizations (which tend to be the very expensive), so those consumers are less incentivized to comparison shop.

Plans that have limited provider networks relieve the consumer of much complexity and steer them towards providers with lower costs. Rather than review extensive price information, the consumer can focus on whether the provider is in the network. Reference pricing is another approach that simplifies—is the price less than the reference price? What was striking about Robinson’s results is that reference pricing for laboratories was employed in a high-deductible plan, showing that the savings achieved—in excess of 30 percent compared to a control—were beyond what the high deductible had accomplished.

While promising, reference pricing cannot be applied to all medical services: it works best for standardized services and where variation in quality is less of a concern. It also can be applied only to services that are “shoppable,” which is only about one-third of privately-insured spending. Even if reference pricing expanded to a number of other medical services, other cost containment approaches, including other network strategies, are needed to successfully contain health spending and lower costs for non-shoppable medical services.

Editor's note: This piece originally appeared in JAMA.

International volunteer service is defined as an organized period of engagement and contribution to society by individuals who volunteer across an international border. There is growing interest in the potential of international service to foster international understanding between peoples and nations and to promote global citizenship and intercultural cooperation. Studies suggest that international service develops skills, mindsets, behaviors and networks that prepare volunteers for living and working in a knowledge-based global economy. Many believe that even short-term experiences abroad can begin to prepare participants for longer-term engagement and future international service.

International service may be growing in prevalence worldwide. In the United States, more than one million Americans reported volunteering abroad in 2008. Despite the scale of international service, its impacts are not well understood. Although there is a growing body of descriptive evidence about the various models and intended outcomes of international service, the overwhelming majority of research is based on case and cross-sectional studies, which do not permit conclusions about the impacts of international service. Scholars and practitioners in the field have called for rigorous research that documents impacts.

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High unemployment, the Gulf oil spill, and mounting fiscal worries clouded our July 4th celebrations. Yet, one patriotic highlight in President Obama's first year was bipartisan support of the Serve America Act, which expanded opportunities for Americans of all ages to meet urgent domestic challenges through community and national service. In the process, Americans who otherwise would have been unemployed are engaging in productive work, at low cost to taxpayers, to meet problems like the high school dropout epidemic. Similar efforts can expand volunteer service abroad.

As President Obama made clear in his first major policy speech to the international community in Cairo, Egypt, the world must unleash its collective imagination through social innovators, entrepreneurs and citizen diplomats to contribute to global development, respond to natural disasters, and initiate interfaith action to tackle preventable diseases like malaria. The moment is now.

Fifty years after John F. Kennedy's call for a Peace Corps, we might reconsider our obligations to meet needs around the world. President Kennedy said that the Peace Corps would be serious when 100,000 Americans were serving abroad each year. Although the Peace Corps is America's flagship international service program, today less than 8,000 volunteers are spread across 77 countries. Since 1961, America has sent and returned nearly 200,000 volunteers, a number significantly less than the millions Kennedy envisioned by his Peace Corps' 50th year. Had the Peace Corps grown at the rate Kennedy envisioned, the course of our country's foreign policy, diplomatic strategy and global awareness over the past 50 years would be very different.

Last week, ServiceWorld, an international service coalition of more than 300 non-profits, colleges, corporations and faith-based institutions, released a bold plan to meet President Kennedy's goal of mobilizing 100,000 Americans every year - and one million over a decade - to serve abroad. The proposed Sargent Shriver International Service Act calls for doubling Peace Corps to 15,000 by 2015, lowering costs per volunteer, and forging partnerships with the hundreds of non-profits that have emerged since its creation. Doubling of the Peace Corps is a goal that both Presidents George W. Bush and Barack Obama have embraced.

Volunteers for Prosperity will tap 75,000 skilled Americans for flexible term assignments to work on international challenges Congress and many Presidents have made priorities, such as HIV/AIDS, malaria, and clean water. Global Service Fellows will enable Members of Congress to nominate top talent from their districts and states, as they do for the military academies today, to serve for up to one year abroad. Together with the Peace Corps, these efforts will meet John Kennedy's goal of mobilizing 100,000 Americans to serve abroad each year.

The Service World plan focuses on multi-lateral partnerships and exchanges so Americans serve side-by-side with people from other countries, including in the United States. Under the plan, both skilled and non-skilled volunteers of all classes and ages will serve abroad for both long- and short-term assignments and veterans have specific opportunities to utilize their many skills in a civilian capacity. We believe an inclusive and mobile model of volunteering will contribute to the development of a new generation of global leaders, provide skills for U.S. citizens to compete in a global economy, increase international awareness, strengthen development, and improve the image of America abroad.

Volunteer service by people of all nations should become a common strategy in meeting pressing challenges in education, health, the environment, agriculture and more. By having national policies that engage more Americans in international service at every stage of life, we will be sharing our most valuable assets - the skills, talents and perspectives of our people - to make a significant difference in communities and nations throughout the world.

INTRODUCTION

Over the past decade, the focused attention of African nations, the United States, U.N. agencies and other multilateral partners has brought significant progress toward achievement of the Millennium Development Goals (MDGs) in health and malaria control and elimination. The potential contribution of these strategies to long-term peace-building objectives and overall regional prosperity is of paramount significance in sub-regions such as the Horn of Africa and Western Africa that are facing the challenges of malaria and other health crises compounded by identity-based conflicts.

National campaigns to address health Millennium Development Goals through cross-ethnic campaigns tackling basic hygiene and malaria have proven effective in reducing child infant mortality while also contributing to comprehensive efforts to overcome health disparities and achieve higher levels of societal well-being.

There is also growing if nascent research to suggest that health and other humanitarian interventions can result in additional benefits to both recipients and donors alike.

The social, economic and political fault lines of conflicts, according to a new study, are most pronounced in Africa within nations (as opposed to international conflicts). Addressing issues of disparate resource allocations in areas such as health could be a primary factor in mitigating such intra-national conflicts. However, to date there has been insufficient research on and policy attention to the potential for wedding proven life-saving health solutions such as malaria intervention to conflict mitigation or other non-health benefits.

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I’m late to the conversation about whether or not Republican efforts to insist on sixty votes for cloture on Chuck Hagel’s nomination as Secretary of Defense constitutes a filibuster. Bernstein’s earlier piece ("This is what a filibuster looks like") and Fallows’ recent contribution provide good, nuanced accounts of why Republican tactics amount to a filibuster, even if some GOP senators insist otherwise. In short, the duck test applies: If it looks like a duck, swims like a duck and quacks like a duck, then …. it’s a filibuster!

Still, I think there’s more to be said about the politics and implications of the Hagel nomination. A few brief thoughts:

First, let’s put to rest the debate about whether insisting on sixty votes to cut off debate on a nomination is a filibuster or, at a minimum, a threatened filibuster. It is. Even if both parties have moved over the past decade(s) to more regularly insist on sixty votes to secure passage of major (and often minor) legislative measures and confirmation of Courts of Appeals nominees, we shouldn’t be fooled by the institutionalization—and the apparent normalization—of the 60-vote Senate. Refusing to consent to a majority’s effort to take a vote means (by definition) that a minority of the Senate has flexed its parliamentary muscles to block Senate action. I think it’s fair to characterize such behavior as evidence of at least a threatened filibuster—even if senators insist that they are holding up a nomination only until their informational demands are met.

Second, there’s been a bit of confusion in the reporting about whether filibusters of Cabinet appointees are unprecedented. There appears to have been no successful filibusters of Cabinet appointees, even if there have been at least two unsuccessful filibusters against such nominees. (On two occasions, Cabinet appointees faced cloture votes when minority party senators placed holds on their nominations—William Verity in 1987 and Kempthorne in 2006. An EPA appointee has also faced cloture, but EPA is not technically cabinet-level, even if it is now Cabinet-status). Of course, there have been other Cabinet nominees who have withdrawn; presumably they withdrew, though, because they lacked even majority support for confirmation. Hagel’s situation will be unprecedented only if the filibuster succeeds in keeping him from securing a confirmation vote.

Third, using cloture votes as an indicator of a filibuster underestimates the Senate’s seeping super-majoritarianism. (Seeping super-majoritarianism?! Egads.) At least two other recent Cabinet nominations have been subjected to 60-vote requirements: Kathleen Sebelius in 2009 (HHS) and John Bryson (Commerce) in 2011. Both nominees faced threatened filibusters by Republican senators, preventing majority leader Reid from securing the chamber’s consent to schedule a confirmation vote—until Reid agreed to require sixty votes for confirmation. The Bryson unanimous consent agreement (UCA) appears on the right, an agreement that circumvented the need for cloture. Embedding a 60-vote requirement in a UCA counts as evidence of an attempted filibuster, albeit an unsuccessful one. After all, other Obama nominees (such as Tim Geithner) were confirmed after Reid negotiated UCAs that required only 51 votes for confirmation, an agreement secured because no Republicans were threatening to filibuster.

Finally, what are the implications for the Hagel nomination? If Republicans were insisting on sixty votes on Senator Cornyn’s grounds that “There is a 60-vote threshold for every nomination,” then I bet Reid would have been able to negotiate a UCA similar to Sebelius’s and Bryson’s. But Hagel’s opponents see the time delay imposed by cloture as instrumental to their efforts to sow colleagues’ doubts about whether Hagel can be confirmed (or at a minimum to turn this afternoon’s cloture vote into a party stand to make their point about Benghazi). Of course, it’s possible that the time delay will work to Democrats’ benefit if they can make headlines that GOP obstruction puts national security at risk. (Maybe Leon Panetta should have jetted to his walnut farm to make the point before the cloture vote.) Whatever the outcome, the Hagel case reminds us that little of the Senate’s business is protected from the intense ideological and partisan polarization that permeates the chamber and is amplified by the chamber’s lax rules of debate and senators’ lack of restraint. Filibustering of controversial Cabinet nominees seems to be on the road to normalization—even if Hagel is ultimately confirmed.

Announcements of new federal regulations on the use of program-related investments (PRIs) and the launch of a groundbreaking fund in Chicago are the latest signals that impact investing, once a marginal philanthropic and policy tool, is moving into the mainstream. They are also illustrative of two important and complementary paths to institutional change: fast-moving, collaborative local leadership creating innovative new instruments to meet funding demands; federal regulators updating policy to pave the way for change at scale.

Impact investing, referring to “investment strategies that generate financial returns while intentionally improving social and environmental conditions,” provides an important tier of higher-risk capital to fund socially beneficial projects with revenue-generating potential: affordable housing, early childhood and workforce development programs, and social enterprises. It is estimated that there are over $60 billion of impact investments globally and interest is growing—an annual JP Morgan study of impact investors from 2015 reports that the number of impact investing deals increased 13 percent between 2013 and 2014 following a 20 percent increase in the previous year.

Traditionally, foundations have split their impact investments into two pots, one for mission-related investments, designed to generate market-rate returns and maintain and grow the value of the endowment, and the other for program-related investments. PRIs can include loans, guarantees, or equity investments that advance a charitable purpose without expectation of market returns. PRIs are an attractive use of a foundation’s endowment as they allow foundations to recycle their limited grant funds and they count towards a foundation’s charitable distribution requirement of 5 percent of assets. However they have been underutilized to date due to perceived hurdles around their use–in fact among the thousands of foundations in the United States, currently only a few hundred make PRIs.

But this is changing, spurred on by both entrepreneurial local action and federal leadership. On April 21, the White House announced that the U.S. Department of the Treasury and Internal Revenue Service had finalized regulations that are expected to make it easier for private foundations to put their assets to work in innovative ways. While there is still room for improvement, by clarifying rules and signaling mainstream acceptance of impact investing practices these changes should lower the barriers to entry for some institutional investors.

This federal leadership is welcome, but is not by itself enough to meet the growing demand for capital investment in the civic sector. Local innovation, spurred by new philanthropic collaborations, can be transformative. On April 25 in Chicago, the Chicago Community Trust, the Calvert Foundation, and the John D. and Catherine T. MacArthur Foundation launched Benefit Chicago, a $100 million impact investment fund that aims to catalyze a new market by making it easier for individuals and institutions to put their dollars to work locally and help meet the estimated $100-400 million capital needs of the civic sector over the next five years.

A Next Street report found that the potential supply of patient capital from foundations and investors in the Chicago region was more than enough to meet the demand – if there were ways to more easily connect the two. Benefit Chicago addresses this market gap by making it possible for individuals to invest directly through a brokerage or a donor-advised fund and for the many foundations without dedicated impact investing programs to put their endowments to work at scale. All of the transactional details of deal flow, underwriting, and evaluation of results are handled by the intermediary, which should lead to greater efficiency and a significant increase in the size of the impact investing market in Chicago.

In the last few years, a new form of impact investing has made measurement of social return to investments even more concrete. Social impact bonds (SIBs), also known as pay for success (PFS) financing, are a way for private investors (including foundations) to provide capital to support social services with the promise of a return on their investment from a government agency if some agreed-upon social outcomes are achieved. These PFS transactions range from funding to support high-quality early childhood education programs in Chicago to reduction in chronic individual homelessness in the state of Massachusetts. Both the IRS and the Chicago announcements are bound to contribute to the growth of the impact bond market which to date represents a small segment of the impact investing market.

These examples illustrate a rare and wonderful convergence of leadership at the federal and local levels around an idea that makes sense. Beyond simply broadening the number of ways that foundations can deploy funds, growing the pool of impact investments can have a powerful market-making effect. Impact investments unlock other tiers of capital, reducing risk for private investors and making possible new types of deals with longer time horizons and lower expected market return.

In the near future, these federal and local moves together might radically change the philanthropic landscape. If every major city had a fund like Benefit Chicago, and all local investors had a simple on-ramp to impact investing, the pool of capital to help local organizations meet local needs could grow exponentially. This in turn could considerably improve funding for programs—like access to quality social services and affordable housing—that show impact over the long term.

Impact investing can be a bright spot in an otherwise somber fiscal environment if localities keep innovating and higher levels of government evolve to support, incentivize, and smooth its growth. These announcements from Washington and Chicago are examples of the multilevel leadership and creative institutional change we need to ensure that we tap every source of philanthropic capital, to feel some abundance in an era where scarcity is the dominant narrative.

Editor's Note: Alaina Harkness is a fellow at Brookings while on leave from the John D. and Catherine T. MacArthur Foundation, which is a donor to the Brookings Institution. The findings, interpretations and conclusions posted in this piece are solely those of the authors and not determined by any donation.