Health Care Payment Reform

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.

Price transparency alone does not lead to lower prices for health care services, according to an analysis of the New Hampshire HealthCost transparency program by the New Hampshire Insurance Department and the Center for Studying Health System Change.

..the study found public price reporting had no impact on price variation across providers, a result attributed in part to the lack of competition among providers and few incentives for consumers to compare providers based on price.

This isn’t surprising, but it does underscore just how many things have to work together to create a health care market in which patients shop for value, defined by the combination of efficiency and quality. The study’s authors wrote:

Whatever the extent of provider competition in a particular community, price transparency efforts are unlikely to spur significant price shopping by consumers as long as insurance benefit designs continue to contain little incentive for consumers to choose low-cost providers. In New Hampshire, as well as nationally, financial pressures on both public and private employers may result in more widespread adoption of high-deductible plans, tiered-provider networks and other benefit designs aimed at making consumers more cost-conscious when choosing providers. As more employers aggressively pursue such strategies, more consumers will find incentive to use price transparency tools like HealthCost.

However, there are limits to the extent to which increased patient cost sharing can be expected to lead to more active shopping by consumers. Some New Hampshire stakeholders suggested making HealthCost a more useful shopping tool by adding information about more “big-ticket items” such as heart bypass surgery and hip replacements. However, prices for expensive services often exceed a patient’s deductible even under a high-deductible plan, which would reduce that patient’s incentive to shop for price; in some cases, prices may exceed a patient’s annual out-of-pocket maximum as well, which would eliminate the price-shopping incentive altogether.

Everyone interested in the future of health care watches Geisinger Health System to see how its innovations in health care payment and delivery are working.

Paul Levy, CEO of Beth Israel Deaconess Medical Center, posted a blog entry based on a Philadelphia Inquirer article about policymakers’ interest in Geisinger. He posed an important question designed to tease out the system’s success:

Question: How much is due to the common bottom line between the MDs and the hospital, and how much is owning the insurance company? Also, how much of this is transferable to other settings that do not have the dominant market position enjoyed by Geisinger?

The Department of Health and Human Services, building off work started by private insurers and Medicaid in Vermont, finally is starting its medical home demonstration.

It will be interesting to see if universal alignment of payment systems achieves the efficiencies and care improvement that we are all hoping for.  According to HHS press release:

This demonstration will mark the first time Medicare will be a full partner in these experiments and the practice model would, for the first time, align compensation offered by all insurers to primary care physicians.  Instead of each third party payer and public program adopting different approaches, using different ways of measuring performance and creating different payment incentives, multi-payer programs will join together to work toward common goals to improve the delivery of care.

This news from today’s Wall Street Journal, while not surprising, might give some health care reform opponents pause to consider where this trend will end if nothing is done to change the way health care is delivered and purchased.

According to the story:

In 2010, nearly two-thirds of employers plan to shift more of the cost of care to workers and their families through higher premiums contributions, deductibles and copayments. One out of five companies plans to cut out higher-cost health plan options in favor of less generous coverage, according to the preliminary findings from a survey by Mercer.

We have not been hearing enough about what physicians think about the health care reform debate, so yesterday’s New England Journal of Medicine was especially interesting to me.

I was surprised by the survey results that a solid majority of physicians support a public option to increase competition competition for private insurers. I probably should not have been; physicians are getting increasingly frustrated with dealing with private insurers–apparently so frustrated that they are willing to take lower rates from Medicare (or other public insurance) than bear the costs of dealing with private insurers.

Even more interesting was another Perspective piece in yesterday’s New England Journal. The findings of another survey suggest to me that physicians’ low profile in the health care debate does not indicate apathy. Some interesting findings:

• 78 percent of respondents said that addressing societal health policy issues is in the scope of professional obligation of a physician.

• About 73 percent  said physicians are obligated to care for the uninsured and underinsured.

• 54 percent said they were morally opposed to using cost-effectiveness as a factor in deciding which treatments a patient should receive.

Mercer’s annual survey to find out what employers plan to do with their insurance coverage is out, and the consumer-directed health plan movement seems to be a big winner.

If employers kept employee medical plans in 2010 as they were in 2009, costs would rise by almost 9 percent, Mercer found.  That’s not happening in this economy. Employers are going to hold cost growth to 5.9 percent in 2010 by various cost-cutting strategies, including the reduction in benefits that come with CDHPs.

In a press release issued this morning, Mercer partner Linda Havlin says:

We’re expecting to see a real spike in 2010 in both the number of employers offering CDHPs and in the number of employees enrolling in them, as more employers become comfortable with the concept of offering a high-deductible, account-based plan as one choice or their only choice Employers see them as a way to provide more value to employees while at the same time managing cost.

The new issue of Health Affairs tackles the topic that should be on every American’s mind: health care costs. Figuring this out is the moral imperative of our time, but anyone who has an easy pat answer is someone who is not paying attention.

As editor Susan Dentzer puts it:

A MODERN TWIST on Greek myth would feature not Sisyphus, but a health policy-maker condemned to an eternal punishment of trying to tame health care costs. During rare work breaks from rolling the rock up the mountain, she’d read the report of the Committee on the Costs of Medical Care, formed in 1927 and chaired by a member of President Hoover’s cabinet.

As Daniel Fox described in the Milbank Memorial Fund’s Centennial Report, the committee tackled what it termed “‘the one great outstanding question before the medical profession’: how to deliver adequate medical services to all Americans at a reasonable cost.” Then, at her next work break, our suffering policymaker would watch President Obama on television, vowing that “the [health care reform] bill I sign must reflect my commitment…to slow the growth of health care costs over the long run.”

I don’t always understand how Congressional politics work, but Eugene Robinson does. This is the first time I’ve felt hopeful about health care insurance reform in several days. http://tinyurl.com/p6sp78

Remember when the consumer-directed health plan was supposed to create a rational marketplace that would save America’s health care system?

The 2008 Consumer Engagement in Health Care Survey conducted by the Employee Benefits Research Institute found that 3 percent of the population was enrolled in a CDHP in 2008, up from 2 percent in 2007 and 1 percent in 2006.  Enrollment in high-deductible plans–that is, a plan with a high deductible where the individual is not enrolled in a health savings account or health reimbursement account–remained at 11 percent.

Together, enrollment in a CDHP or HDHP represents 6.6 percent of the market for adults between the ages of 21 and 64.

Does this suggest that the promise of CDHP is not going to be realized? Paul Fronstin, director of the Health Research and Education Program at EBRI, doesn’t see it that way.

The fact is, you’re looking at about, as of last year, 10 million adults in a market that didn’t exist 10 years ago. You throw in the children and easily you’re at 15 million. And the number has been growing, and I think it will continue to grow.

The expectation shouldn’t be that this is something we’d see happen overnight. The fact that we’ve gone from zero to 10 million -plus, when you throw in dependents – in such a short period of time–leads me to believe it’s too early to say that these things aren’t catching on.

Details of the consumer engagement survey can be found here.