This is a joint post with Rachel Silverman.
The Innovation Center at the United States Centers for Medicaid and Medicare Services, created under the umbrella of the Affordable Care Act, represents a new and encouraging approach to address this problem, an approach that we think has important lessons for global health.
As a quick introduction, the Innovation Center is using structured, institutionalized innovation and experimentation to search for a better way. Through its iterative and risk-tolerant experimentation with a range of payment models for US government-funded healthcare programs, the Innovation Center aims to improve health and health-care at lower costs for Medicare, Medicaid, and the Children’s Health Insurance Program (CHIP). And while “institutionalizing innovation” may sound like an oxymoron, the Innovation Center suggests that there can be tremendous benefits to doing so.
First, institutionalization can facilitate a systematic approach to trying new ideas and models, potentially with more discipline and rigor than ad hoc experimentation. Recognizing that innovation is less about a stroke of genius and more about careful and systematic hard work and persistence, the Innovation Center focuses on tackling any given challenge (e.g. lower costs while improving quality of care) by piloting a wide range of plausible new models and approaches. It implicitly recognizes that certain challenges, such as controlling health-care costs, are so complex that there is likely to be more than one viable solution.
A second benefit is that institutionalization of innovation can, to some extent, protect against the disincentives of failure. It is a well-known cliché that failure is an inevitable companion to innovation and invention. Yet failure is often discouraged or punished, particularly within governments and the non-profit sector, even though we all know that failure is necessary to improve. For example, many are citing the “Oregon Study” as confirmation of their own pre-existing assumptions about the broad inefficacy of government spending, rather than as evidence to inform tweaks and modifications of the program. Rarely do institutions readily welcome such vulnerabilities – but if innovation is institutionalized, there may be more space and protection to take risks with a high probability of failure but tremendous upside potential. Indeed, the Innovation Center is somewhat analogous to a venture capitalist for Medicare and Medicaid; it is willing to put down seed funding up front on a broad portfolio of high-risk, high-reward challenges, with the expectation that it (i.e. the US government) will accrue the enormous benefits if even one innovation succeeds at scale. Moreover, an institution focused on innovation will have a nuanced understanding of what is meant by ‘success’ and ‘failure’—that it is not simply black and white, but rather a continuum. Large failures are less likely with accumulating daily success which require strong measurement and information systems for constant learning.
A third benefit is that, at least when housed within a large implementing organization (such as the Centers for Medicaid and Medicare), the scale-up of successful models to the national level is more easily attainable. One ongoing challenge of innovation and experiments is that even with a successful idea or model at the pilot stage, scale-up may be impossible without an existing institutional structure. Many good or great ideas never reach scale for lack of institutional adoption or dissemination. By explicit linkage within a larger organization, and by giving the larger organization a mandate to adopt and scale-up evidence-based practice, the potential for systematic change is far more likely.
The very existence of this humble, still-young Innovation Center has much to offer and teach the global health community –including countries and governments who seek to improve their national health systems. For example, as South Africa works towards developing a national health insurance program, it will undoubtedly need to experiment to figure out what insurance arrangements will work best in the country – and it should consider establishing an innovation center for this purpose. Similarly, as India pursues a strategy to improve child survival, the country could experiment with a set of interventions to drive improvements in its worst-performing districts. Many other countries pursuing universal health coverage or specific health goals will need to experiment and learn systematically from trials and errors.
The Innovation Center also has much to teach the global health funding agencies such as the Global Fund and PEPFAR. For example, the recent multi-country experiment of the Affordable Medicines Facility for Malaria (AMFm) seems to be a one-off experience for the Global Fund and global health donors. But much was learned from this experiment, and there could be tremendous positive potential from regular experimentation within the Global Fund’s core institutional model. Under the leadership of the Global Fund’s Executive Director Mark Dybul, wouldn’t it be terrific if the Global Fund could experiment with a range of different payment schemes or other global-level financing strategies, and then incorporate the most effective models into its worldwide grant-making? For example the Global Fund could experiment with its results- or performance-based financing (see here and here for related options) to drive greater effectiveness and efficiency of its investments.
With a budget of $10 billion through FY2019, the Innovation Center is small potatoes relative to the ~$500 billion annual budget for the Centers for Medicaid and Medicare Services. But the $10 billion is quite a significant sum to enable large-scale research, with big sample sizes and multiple study arms. In contrast, the Global Fund’s total disbursements in 2011 were a relatively paltry $2.7 billion (per IHME estimates; total development assistance for health was $28 billion). The difference in scale is potentially important, and will help to define the scope of experimentation within an analogous innovation center in the Global Fund.
The bottom line is that while the Innovation Center is an incredibly encouraging model for those of us who believe in evidence-based, forward-looking health practice and constant learning – and for those who believe American health expenditure can and should lead to better health. We hope global health funders are paying attention.
Victoria Fan is a research fellow and Rachel Silverman is a research assistant at the Center for Global Development.
CGD blog posts reflect the views of the authors, drawing on prior research and experience in their areas of expertise. CGD is a nonpartisan, independent organization and does not take institutional positions.