Health Care Payment Reform

The idea of an independent Medicare commission to set rates for health care providers –but not physicians or hospitals–seems wacky to me. In yesterday’s New York Times, Albert R. Hunt makes a good case of why the commission concept should be strengthened during the Senate-House compromise on health care reform:

One constructive action lawmakers could take is to put some teeth back in the Obama proposal for a Medicare commission that would be empowered to set rates for hospitals, doctors and other providers, subject to congressional veto. The House killed the idea outright, and the Senate diluted it, exempting hospitals and doctors. Nancy Pelosi, the speaker of the House, and other liberals argue it infringes on congressional prerogatives. They also worry about a commission someday controlled by Bush or Reagan-type appointees.

Even then a congressional vote still could either block action or frame a political argument for the next elections.

The best case for infringing on congressional prerogatives may be the way this bill has been written. The hospitals, drug companies, doctors, insurance industry and device makers all carved out their special provisions. Everyone is for curbing health care costs; just don’t make cuts that affect powerful interests, which is almost every sector of the health care industry. History is clear: Congress will bow to those interests rather than make the tough decisions required to bend the cost curve.

Mr. Obama’s budget chief, and health care expert, Peter Orszag, calls a commission one of the “game-changers” that “would make sure that there is someone always on the beat, looking for ways to bend that curve.” The Democratic leaders, ideally with more effective pressure from the White House, have leeway in fashioning the final particulars. The measure would have a lot more credibility if this commission concept were strengthened, not diluted even more.

It’s obvious that, to be truly effective in lowering costs and improving quality, payment  bundling must include outpatient services as well as inpatient services, but the logistics of doing so are daunting. Geri Aston discusses this in today’s amednews.com

One model to consider is that used by Mount Auburn Hospital in Massachusetts. The bundled payments from Massachusetts Blue Cross and Blue Shield go  to Mount Auburn’s independent primary care physicians for distribution according to a contractual arrangement. Read about it in Leadership magazine published by Healthcare Financial Management Association.

RAND researchers writing in the New England Journal of Medicine give a big thumbs-up for bundled payments to replace fee-for-service medicine.

In an article titled “Controlling U.S. Health Care Spending — Separating Promising from Unpromising Approaches,” the researchers estimated the likely impact of 12 policy options:

Bundled payment provides a mechanism for reducing both the volume of services and the prices charged for them. We estimate that under optimistic scenarios and with broad use of the Prometheus model³ of bundled payment for six chronic conditions and four acute conditions or procedures requiring hospitalization, national health care spending could be reduced by 5.4% between 2010 and 2019.

Writing in today’s Wall Street Journal, Dr. Herbert Pardes, president and CEO of New York-Presbyterian Hospital, brings up a topic that has not received enough attention in the health care reform debate: the shortage of physicians.

Of course, an overhaul of the health care delivery system could decrease the demand for physician services as a team-based approach to care supplants the current physician-centric model. But the legislation currently being considered will not transform the industry in that way, so the greater number of insured patients is likely to increase demand for physician services.

The law of supply and demand suggests that physician pay will have to increase to assure an adequate supply of  physicians. On its face, an overall increase in physician pay would appear to be in conflict with the goal of decreasing health care costs.Do you think Dr. Pardes is right with this comment?

To address the shortage of doctors and the incentives that compel young doctors to eschew primary care, Congress needs to think about how to increase doctor pay, institute malpractice reform, and provide subsidies to reduce the amount of debt doctors have to take on. Residency caps should also be raised so teaching hospitals can train more doctors. Without these actions new doctors would be foolish to enter primary care, and thankfully our medical schools do not recruit foolish people.

The reality that health care reform will not solve America’s Medicare and Medicaid crisis is beginning to sink in, and the idea of creating a commission to face that challenge–and the Social Security crisis to boot–appears to be gaining traction, according to a story by Kaiser Health News.

The federal government is on track to his a $9 trillion deficit by 2019, according to KHN.  Part of that comes from the recession and government’s response to the economic meltdown, but much of that amount reflects the growing cost of  entitlement spending on Medicare, Medicaid and Social Security.

Christina D. Romer, chair of  President Obama’s Council of Economic Advisers, said the aging population is only part of the problem; the bigger culprit is health care costs that are rising more quickly than the gross domestic product.

“It is simply not a problem that can be kicked down the road indefinitely,” she said.

All eyes on Massachusetts, please! That state has already gone where the rest of the country is headed, so look there for lessons borne of experience.

The New England Journal of Medicine (online only) reports on a poll of Massachusetts physicians regarding their perspectives on the state’s 2006 health care reform legislation.  The main result of the legislation is increased insurance coverage; state legislators are currently trying to figure out how to control the  higher costs associated with that achievement.

Important findings: 70 percent of physicians support the 2006 legislation.  Almost half (46 percent) want to see additional changes; of those who want additional changes, expanding coverage (34 percent)  is the most frequently cited priority, followed by addressing costs (23 percent) and increasing reimbursement (13 percent).

I was encouraged to see that 37 percent of physicians believe the law has improved the quality of care provided in MA, while only 12 percent feel that quality has declined.

Lead author for the article–full text is available free–is Gillian Steel from Harvard School of Public Health. She and her co-authors write:

Massachusetts has the lowest proportion of uninsured residents in the United States. Our results show that there is widespread support among Bay State physicians for the law that led to this high level of coverage. At the same time, physicians believe that it has contributed to some problems with health care in the state.

Examination of physicians’ views on care for their patients provides little evidence to support criticisms that the law is negatively affecting the quality of care that most physicians deliver. With regard to their own practices, a sizable minority of physicians indicate that the legislation has increased their administrative burden.

Physicians’ views concerning the effect of the law on the state’s health care environment are more mixed. Most believe it is helping the formerly uninsured, but that positive view is coupled with a majority belief that the program is driving up the cost of health care in the state. In addition, physicians are divided about whether it has imposed pressures on the state’s primary care capacity.

Taken together, these findings suggest that it is possible both to provide near-universal coverage of the population and to have a system that most physicians believe improves care for the uninsured without undermining their ability to provide care to their patients. At the same time, the Massachusetts experience provides evidence of trade-offs in other areas of the health care system, including rising health care costs and, for some patients, challenges in obtaining access to primary care.

Although the idea of paying hospitals, physicians and other care providers for defined episodes of care makes intuitive sense, working out the details of how to do so is not for the faint of heart.

In the current issue of Health Affairs, RAND researchers point out the key problem with episode-based payment: the fragmented nature of the health care delivery system:

The array of trajectories a patient could take through the health care system—potentially touching multiple providers located in different settings—highlights the challenges of delivering coordinated care. Medicare beneficiaries receive care from a median of seven physicians,⁵ and the typical primary care physician must coordinate with 229 other physicians working in 117 practices.⁶ Typically, no single provider or set of providers claims responsibility for managing a patient’s care from the start to finish of a care episode. Episode-based approaches seek to remediate these problems by strengthening incentives for greater coordination among the array of providers involved in a patient’s care.

Check out their analysis of the research that needs to be done and the consensus-building that must occur before episode-base payment can occur.

Check out a great case study of  Mount Auburn Hospital and the Mount Auburn Cambridge IPA in the current issue of Health Affairs.

The report suggests that Massachusetts, which is considering global payments to replace fee-for-service medicine for all payers in the state, may have found the way to align physicians’ and hospitals’ financial interests with those of the payers. However, patients have not yet been brought into the alignment:

…since patients don’t pay more if they seek care outside Mount Auburn, they face no disincentive to go outside the system—even though a new doctor or hospital may repeat tests or miss something in the patient’s history or prescription list.

The current issue of Health Affairs addresses an important precursor to health care payment reform: the need to change Medicare governance so that the nation’s largest health care payer can make changes without undue political influence.

The article, “Medicare Governance and Provider Payment Policy,” written by Hoangmai Pham and Paul Ginsburg from the Center for Studying Health System Change and Mathematica’s James Verdier points out:

It is… appropriate for political debate to drive major policy directions in Medicare—such as when hospital prospective payment replaced cost reimbursement. But constituencies such as particular subgroups of hospitals can exert disproportionate influence, in turn spurring detailed legislation or rule making that is inconsistent with broader policy goals. Whether through Congress, the White House, or directly through lobbying CMS staff, such activity can undermine the integrity, equity, and predictability that new and complex payment reforms require to garner buy-in from stakeholders and work effectively.

The authors consider two options for changing Medicare governance:

• creation of a new Medicare payment policy board
• elevating Centers for Medicare & Medicaid Services to Cabinet status and requiring the Medicare Payment Advisory Commission to analyze “the implications for costs, access, and quality of any legislation directly affecting Medicare payment policy that is reported from committees of either House, just as the CBO provides budget cost estimates on spending legislation”

Both ideas are worth exploring, and the time is now.

The current New England Journal of Medicine features a roundtable discussion of some very smart people talking about health care cost control. I like Meredith Rosenthal’s starting point:

…I think looking at reforming the health care payment system would be number one on my list for ways to start approaching cost control.

Check out the video or read the transcript.