Health Care Payment Reform

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.

The American Hospital Association is examining how health care payment reform can actually happen. In an interview on the Health Affairs blog, AHA CEO Rich Umbdenstock says fee-for-service must go away in favor of some type of fixed payment.

A draft report has been prepared by a task force on payment reform:

And basically it doesn’t argue whether or not that’s the direction in which we’re headed.  What it examines is how we build the bridges to get from here to there.  And how can we figure out how it’s going to work in different communities because different communities are more or less integrated than one another already, and certainly the vast majority of communities are less integrated.

Exactly where payment is headed is not clear to AHA (or anybody), but the general direction is becoming obvious:

We do believe we’re going to move toward more of a fixed payment system, whether it’s bundled payments per procedure, or whether it’s something broader on an episode or time basis, or potentially all the way back to where we were in the nineties with capitation.

It is frustrating for many people to watch health reform debate sidestep address cost containment in a meaningful way, but big changes are often best accomplished in incremental steps.

In a post on Commonhealth, Richard Lord, president and CEO of Associated Industries of Massachusetts, laments that Congress has not learned an obvious lesson from his state’s 2006 health reform: If coverage expands without cost containment, the result is unsustainable.

He points to the importance of scrapping fee-for-service medicine:

Maybe Massachusetts will have to lead the way on the cost issue after all, just as we did with access. I am heartened by the near total consensus here that we need to move away from our current “fee for service” payment system, which rewards providers for volume, toward global payments that would providing greater incentives for efficiency and quality care. Obviously there would be significant advantages to a national approach to reshaping our health care payment system: apart from competitiveness and consistency issues, federal action would avoid Medicaid and ERISA constraints. But if Washington lacks the political determination to confront this issue head on, I am hopeful that Massachusetts will once again lead the way on cost containment – without which all of our great accomplishments will not be sustainable.

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.

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 hand-wringing over the cost of the proposed elimination of the Sustainable Growth Rate formula seems ridiculous in light of the fact that the problem has been well-known for years.

Congress has been refusing to deal with it for so long that no Congress member can escape responsibility for the thorny mess; all hands should be on deck, figuring out the smartest way to address this problem.

But we’re talking about Congress here, where “consensus” does not mean consensus. As reported in Los Angeles Times:

While there is consensus in Congress that the payment system should be fixed, Republicans and some conservative Senate Democrats have said they won’t support a bill that adds to the nation’s red ink. The proposed change would cost about $245 billion.

“They’re doing it so they can say their healthcare plan doesn’t add to the deficit,” Senate Minority Leader Mitch McConnell (R-Ky.) said Monday. “It’s a gimmick, and a transparent one at that.”

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.

Francis Crosson, a top executive in the Kaiser Permanente system and the vice chair of the Medicare Payment Advisory Commission, is an important advocate for the accountable care organization model of health care delivery.

Writing in the Oct. 1 New England Journal of Medicine, Dr. Crosson reiterates his call for a “stepwise” approach to increase the prevalence of integrated delivery systems:

…two interacting sets of changes need to occur: movement away from fee-for-service payment of physicians toward prospective payment, and multispecialty integration of physicians combined with hospitals to form new “accountable” systems of care.