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.

Writing in a web-first article in  Health Affairs, Dr. Robert Wachter,  professor and associate chair of the Department of Medicine at the University of California, San Francisco, reviews the past decade of patient safety and gives it a B- score.

In updating a five-year review, Wachter examines the role of health care payment in promoting patient safety:

The “no pay for errors” policy, launched in 2008, has increased hospitals’ focus on preventing certain adverse events (despite relatively trivial payment cuts to date). However, concerns have beenraised about fairness (particularly since many of the events on the list are not known to be substantially preventable)  and unintended consequences (such as keeping hospitalized elderly patients in bed in a misguided effort to prevent falls).

For now, I give this category a C+, with some points awarded to Medicare’s new policy for being a clever way to begin reshaping the reimbursement system to promote patient safety.

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.

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.

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.

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.

Senator Max Baucus’s health care proposal would provide financial incentives to hospitals and physicians willing to work together as accountable care organizations. Here’s what is required, according to his proposal:

To qualify as an ACO, an organization would have to meet at least the following criteria: (1) agree to become accountable for the overall care of their Medicare fee-for-service beneficiaries; (2) agree to a minimum three-year participation; (3) have a formal legal structure that would allow the organization to receive and distribute bonuses to participating providers; (4) include the primary care physicians for at least 5,000 Medicare fee-for-service beneficiaries; (5) provide CMS with information regarding primary care and specialist physicians participating in the ACO as the Secretary deems appropriate; (6) have arrangements in place with a core group of specialist physicians; (7) have in place a leadership and management structure, including with regard to clinical and administrative systems; (8) define processes to promote evidence-based medicine, report on quality and costs measure, and coordinate care; and (9) demonstrate to the Secretary that it meets patient-centeredness criteria determined by the Secretary, such as use of patient and caregiver assessments or the use of individualized care plans.

And here is how incentive payments would be determined:

To earn the incentive payment the organization would have to meet certain quality thresholds. In determining the quality of care furnished by an ACO, the Secretary would be required to use measures such as: (1) clinical processes and outcomes; (2) patient and caregiver perspectives on care; and (3) utilization and costs (such as rates of ambulatory-sensitive admissions and readmissions).

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.

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.

Medicare’s never-event policy was a good way of announcing CMS’ intent to pay for value, but the more scrutiny it gets, the more difficult it is to believe this is the best way to proceed.

Check out Bob Wachter’s take on the matter.