Health, Healthcare, and Government Spending (and a Culture of Health)

Why governments care about health and healthcare, how they are connected to government spending and priorities, and why addressing social determinants of health is so important for making lasting improvements, were the subjects I covered in a presentation at George Mason’s graduate policy school in September. My goal was to provide the soon-to-be policy analysts and advisers with a framework for understanding those issues so they will be able to provide useful recommendations to their future decision making bosses. (See the slide below for the topics covered in the presentation.) Links to videos of the talk are below, along with short descriptions – I think that Part 6 is particularly good. (Embedded views of the videos are at the end.)

I’ve had discussions with policy makers and corporate executives about these issues since their organization’s value propositions increasingly require demonstrating individual and population outcomes with specific metrics. Those requirements are part of the broader rapid movement of the U.S. healthcare system towards more accountability. Consequently, the connections among health, healthcare delivery, spending, community organizations, and social determinants of health are becoming a top priority for healthcare and life science leaders in companies and government agencies as they seek to increase value for their organizations and the people they serve.

Any thoughts you have about this talk, the connections among health, healthcare, spending, and community health factors (a.k.a. social determinants of health), would be greatly appreciated. And if there are any aspects of these issues where I can be of help to you or your colleagues – or you know of organizations or audiences that would also benefit from a similar presentation – please just let me know as I’d be happy to discuss that with you.

GMU - 9-29-16 Overview Slide

Part 1: Introduction. Why Governments care about health and healthcare. What is health. What is healthcare. https://youtu.be/KvDVcBGOePc

Part 2: Insights into healthcare spending with a particular focus on the Medicare and Medicaid programs. https://youtu.be/6Onuae2c0Xw

Part 3: Why spending on (and budgeting for) health and healthcare programs are unlike almost all other Federal programs, and why projecting spending is so challenging. https://youtu.be/lyaAjRzD0ic

Part 4: How government and private payers are seeking greater value and better clinical outcomes from their healthcare spending, and how data and analytics are increasingly important components of developing and evaluating those initiatives. https://youtu.be/7abj14xIcMw

Part 5: Examples of value based pricing initiatives and the importance of data and analytics for managing such programs, determining “success”, and sharing savings with physicians, other providers, or patients. https://youtu.be/MeLZA5wcpG8

Part 6: How health, healthcare, and spending on government health programs (and private insurance reimbursements) connect to each other, and how social determinants of health can drive clinical and economic outcomes, i.e., how a culture of health can be so important for transforming health in a community. This Part concludes with a brief discussion of the Affordable Care Act and the future of that program and the U.S. healthcare system. https://youtu.be/66zt_Rqf9hA

Enjoy. Pass along to your colleagues and friends. And as always, constructive comments are welcome!

Challenges Estimating Future U.S. Healthcare Spending

The challenges of estimating future U.S. healthcare spending (and why projections are so often so inaccurate) is the focus of the third video segment from my guest lecture at George Mason University about Health and Budget Policy – see below. (The first two are in previous blog posts and are on the HealthPolCom YouTube Channel.)

The final two video segments on the topics of Medicaid, and the Changing U.S. Healthcare System will be posted next week. The five subjects covered in the video segments from the guest lecture are:

  1. U.S. Spending on Health and Healthcare
  2. Medicare and U.S. Healthcare Spending
  3. Challenges for Estimating Future Healthcare Spending
  4. Medicaid: Federal and State Fiscal Issues
  5. Changing U.S. Healthcare System: New Payment and Delivery Models

Enjoy. Pass along to your colleagues and friends. And as always, constructive comments are welcome!

Medicaid and State Level Health Transformations

I recently guest lectured on Medicaid and state level health transformation at a George Mason University public policy class.

To start, I led the class through a discussion of how states differ from each other around 14-plus factors related to healthcare delivery, financing, policy, and politics. In this discussion we talked about the importance of policy makers appreciating those factors as they consider how to improve health, and the different routes states have taken for Medicaid improvements and expansion. (See picture of white board below.)

We had a great discussion, and I emphasized the importance of both multi-stakeholder alignment, and health information systems that can provide data for transparency and accountability – which together are fundamental to health improvement and reform efforts. Later in the class we talked about how all the state and federal health reform and improvement efforts have transparency and accountability at their core, and how decision making comes down to people and relationships. Continuing that theme, we discussed how healthcare is local, and for most states the relevant geographic “unit” for transformation of healthcare delivery, public health, and the social determinants of health is the city, community, or region – depending upon how each of those terms is defined.

One of my favorite parts of this class was talking with the students about the intersection of policy and politics. We talked about how the baseline for improvement/reform efforts are the 14-plus factors discussed at the beginning of the class, and the need for policy makers and implementers – such as the students in their current and future work lives – to keep focused on what measurable objectives they are trying to accomplish, i.e., not just on processes disconnected from outcomes. (See slide below.)

Thoughts or comments?

Sovaldi® and Curing Hep C – Myths and Other Facts

The introduction of new oral medicines that can cure chronic hepatitis C infections (including Sovaldi®) have led to some intense discussions permeated with misleading information about the pricing of new medicines, how such medicines are “game changers,” and the implications for budget-crunched payers.  Below I summarize some key points about those issues.

1.  Myth #1: How Medicines are Priced

One of the perpetuating myths about biopharmaceuticals is that medicines are priced to recoup research and development costs.1 It’s a myth. As I’ve written about elsewhere prescription medicine prices are set like everything else in a regulated free market: Companies set prices to maximize revenues and profits based upon the market opportunities and the value the new medicine provide compared to the consequences of the disease and other treatment options – including no treatment at all.  (See more about this in #4 below.)

2.  Myth #2: There is A Price

While the price of Sovaldi® has been widely written about in the press, in reality, there is no single price in the U.S. for almost all medicines. Rather, every medicine has a range of prices that include the discounts required by law to Medicaid, VA, DoD and other government programs, and the discounts negotiated by private insurance companies. The widely reported price of Sovaldi®, which is the starting point for those discounted prices, has been widely criticized, but a high-level examination of the situation illuminates a relatively logical picture as discussed below. Furthermore, an understanding of the overall situation with chronic hepatitis C infection and those new medicines leads to a reasonable strategic framework for payers facing significant costs for treating people with chronic hepatitis C infection.

3.  Situation with Chronic Hepatitis C Infection

A.  Most of the roughly 4 million people with chronic hepatitis C in the U.S. were infected before 1992 when a test to screen donated blood started to be used.

B.  Today, the rate of new infections is about 45,000 people per year, and those infections are acquired primarily through intravenous drug use.

C.  The older treatments for chronic hepatitis C infection largely depended on activating the patient’s immune system to clear the virus from the body, which is why the medicines in those treatment regimens, (e.g., interferon) make people feel like they have a bad flu for several/many months.

D.  Assuming patients can tolerate the side-effects and complete their course of therapy, the older treatments for hepatitis C had cure rates2 as low as 20% depending on the strain (genotype) of the virus and certain patient characteristics.

E.  The new medicines for chronic hepatitis C infection are “game changers” since they have reported cure rates of 90-95+%. Ray Chung, MD, a hepatitis C expert, has described these new medicines as a clinical paradigm shift from treating a liver disease to curing hepatitis C infection.

F.  These medicines are also “game changers” because this is the first time biomedical science on earth has developed a cure for a chronic viral infection. (I can’t speak for other planets, galaxies, or other spatial dimensions.)

G.  The low rate of new infections in the U.S. means that if people currently infected with hepatitis C are treated and cured (and the new medicines seem capable of curing people by eliminating the virus from their bodies), then – in theory – hepatitis C infections could be eliminated, or at least driven down to very low numbers.

H.  Physicians (particularly gastroenterologists and hepatologists) were aware that new – and much better – medicines to treat (and hopefully cure) hepatitis C infections were expected to be approved in late 2013/early 2014. Therefore, many patients weren’t started on the older therapeutic regimens that had significant toxicities and low cure rates.

I.  The people who deferred treatment in 2013 were lined up to be treated in early 2014, and this produced a large wave of new patients (and sales) for the new medicines in early 2014.

4.  Rationale for Pricing of Hepatitis C Cures

I stated above that companies price new medicines to maximize revenues and profits.  That’s only sort of true. New medicines are really priced to maximize the value the company will get from selling the medicine over the entire effective life of the product.  Economists refer to this as the “Net Present Value” (or NPV), which takes into account expected revenue in future years, discounted by how much less a dollar in the future will be worth than it is today because of inflation, and other factors such as competition from other treatment options. For Sovaldi® the most significant factors are competition and substitution due to other medicines expected to be approved in 2015 and beyond, AND the limited number of people with chronic hepatitis C infection.

The relatively finite pool of patients means that NPV calculations for Sovaldi® do not look like other medicines to treat chronic diseases or to keep cancers in remission, because those types of medicines have large (and probably growing) patient populations that will be taking those medicines on an ongoing basis. Therefore, the “value” of Sovaldi® in the latter years of its 14-year effective patent life3 will be much, much, much less compared to those other medicines. This front-loaded fiscal/value situation means that setting a ceiling price at the higher-end of the comparable range for treatments for a serious illness that will be taken as a single course for a shrinking population is a logical outcome.

5.  Path Forward for Budget-Crunched Payers

Because Medicaid programs, the VA, and state/local prison systems have significant numbers of people with chronic hepatitis C infection – and they have fixed or semi-fixed budgets – treating everyone infected with hepatitis C all at once would be a significant budget buster. Below I describe a framework for logically approaching this situation.

But first, it is also important to recognize some other factors about chronic hepatitis C infections and Sovaldi® and other medicines that are expected to be approved to treat/cure hepatitis C in the coming months/years:

A.  Of the estimated 4 million people in the U.S. with chronic hepatitis C infection, most do not have significant liver disease characterized by changes in the structure and function of the liver that ranges from various degrees of fibrosis and cirrhosis to full liver failure or liver cancer.

B.  People with more advanced disease are already costing the health system significant amounts and have the most health and quality of life problems.

C.  While the exact percentage of people with chronic hepatitis C who have advanced disease is unknown, a reasonable guess might be about 20-30%.

D.  People who do not have advanced disease will most likely progress to advanced disease, and there are known risk factors that increase the likelihood of more rapid progression.

Given those factors, a reasonable approach for payers with limited resources would be to put those people with advanced disease in the front of the queue for the cure. Other people who should be included in this “first to treat” group would be individuals who have certain criteria that increase their risk for rapid progression of liver problems, or are having health problems from the infection outside the liver (i.e., extra-hepatic manifestations) such as renal, hematologic or rheumatologic problems, or are symptomatic.

Other groups that could be considered for priority treatment could include people in prisons (or being released from prisons) who might be at increased risk of transmitting the virus to others.  (People who are cured of their chronic hepatitis C infection can be reinfected.)

After this first group’s treatment is addressed, the next group of individuals with risk factors for more rapid progression to advanced disease (such as longer time since their estimated date of infection) could be eligible for treatment.

This “triaging” of priorities would spread costs out over a longer period of time in a rational way. In addition, because of real-world barriers to identifying and engaging all potential patients, not all the people in those first to treat categories would get treated in the first few months or year. Therefore, the actual first year costs would be below the results from a simple calculation of the number of people multiplied by the treatment costs per person.

Such triaging would give budget-crunched payers time to plan for future budget years with the realization that the number of people with chronic hepatitis C infection will be decreasing over time.  After a few years of treating people with chronic hepatitis C infection (depending on how the triaging/staging is done, along with the effectiveness of public health outreach and screening) the annual costs for medicines for people with chronic hepatitis C infections should become relatively low even before generic versions of the new medicines are available.

6.  Cures for Chronic Hepatitis C Infection Are Not Game Changer

Some people have angsted about how the new treatments for chronic hepatitis C are harbingers of more expensive, budget-busting medicines. However, looking at the pharmaceutical industry pipeline, there are not medicines in clinical development to cure other chronic viral diseases.  Nor are there medicines to cure other serious chronic diseases.  I certainly wish there was a $100,000 cure for MS, Parkinson’s, Alzheimer’s, ALS, HIV/AIDS, or many other debilitating or degenerative conditions – but there aren’t, and there don’t seem to be any on the near horizon. Thankfully, there are compounds in clinical trials to better treat those conditions by preventing or slowing progression, as has already happened for rheumatoid arthritis and some other autoimmune diseases. Therefore, while the new cures for chronic hepatitis C are game changers for people with that specific condition, unfortunately, cures for other serious chronic illnesses do not appear like they will be available very soon.

7.  Caveats & Other Notes

I apologize for this rather lengthy post – particularly after the long time since my last post.  But there are a few other points to note:

  • These thoughts are my own, nobody has paid me to write this, and only one person reviewed it for gross factual correctness.
  • My projections and estimates of infection and cure rates etc. are derived from conversations with knowledgeable people and reading the literature, but there is clearly a significant level of uncertainty about many of those estimates, including the numbers of people infected and their stages of disease.
  • Even the best projections are off by some significant percentages.
  • The price of other medicines for chronic hepatitis C infection that are expected to be approved in the next 6-36 months are unknown, but the price range for Sovaldi® should set an upper limit based on a course of treatment to achieve a cure. Therefore, for example, if another compound is approved that achieves a similar cure rate with similar side-effects, etc., but only needs to be taken once a week for 8 weeks (i.e. 8 pills), it would likely have a higher per pill price than Sovaldi®, but a lower total cost for a course of treatment.

 Footnotes:

  1. While, the risk of biopharmaceutical R&D is borne by companies, they cannot bake the R&D costs of individual medicines (and dead ends) into the prices of those medicines.  Rather, a company’s profits are the source of funds for future R&D. Specifically, companies makes decisions about how to use their financial resources (primarily derived from profits) for R&D and other activities. R&D opportunities are evaluated based upon the projected market potential combined with the company’s expertise and capabilities that would enable the company to successfully develop a new medicine in a specific disease area of need, i.e., where there is a market opportunity.
  2. Cure is defined as no detectable virus six months after the conclusion of treatment.
  3. http://www.accessdata.fda.gov/scripts/cder/ob/docs/patexclnew.cfm?Appl_No=204671&Product_No=001&table1=OB_Rx

Health Reform and Transformation in San Diego & California

I recently sat down with Kevin Hirsch, MD, President of Scripps Coastal Medical Group* to talk about health reform and transformation in the San Diego region. (See video below.)

Dr. Hirsch’s insights are interesting and timely because California often precedes the rest of the country in adopting new approaches to healthcare delivery and financing problems.  An example of this may be California’s 2006 Hospital Fair Pricing Act, which addressed very high hospital bills for the uninsured. This month’s Health Affairs includes an article that analyzes the impact of this law, and the authors’ findings contrast markedly with Steven Brill’s Time magazine article, “Bitter Pill: Why Medical Bills Are Killing Us.”

The California law is a significant step, and the Health Affairs authors describe it as a “detailed and well-structured approach.” The Act did have  limitations: it only protects uninsured people with incomes under 350% of the FPL, the state has minimal enforcement activities, and it only covers hospital bills and not those from physicians or outside services. (Note: In 2011 the law was expanded to include bills from ED physicians.)

Since the ACA will leave many people without health insurance, the Health Affairs authors conclude, “Policy makers and health planners in other states searching for options to protect the uninsured should be encouraged by our findings and should seek to learn more about California’s approach and determine how they might adapt similar laws to their own state’s health care system.”


(Disclosure: I’ve known Dr. Hirsch for many years – and aside from out obvious East Coast-West Coast attire differences, we continue to share a similar hairstyle and are both working to improve healthcare quality and efficiency.)

 

*Scripps Coastal Medical Group includes more than 140 family medicine, internal medicine, obstetrics and gynecology, pediatrics, physical medicine and rehabilitation, rheumatology and general surgery clinicians practicing throughout San Diego County, and exclusively provides medical services through Scripps Health, a nonprofit integrated health system, under the Scripps Coastal Medical Centers brand.

Health Reform and Low-Income People in Washington DC

I recently sat down with George Jones, Bread for the City’s CEO, to talk about health reform and the challenges low-income people in Washington DC have accessing healthcare. The video of our discussion is below.  A couple of notes: 1. George’s title changed from Executive Director to CEO about a year ago.  I’ve known George for more than 15 years, so my bad when I introduce him as the Executive Director. 2. Please excuse my verbal stumbles and be impressed by George’s answers – we filmed this in one take in his small, hot office at Bread for the City.  I’m confident there will be improvement in future videos – and of course, your feedback is always welcome!

Health Promotion, Prevention, Wellness, and Government Fiscal Policies

I recently had the opportunity to give guest lectures at Georgetown University and the University of Virginia. At Georgetown I focused on employer’s perspectives on health promotion and disease prevention. (Videos of portions of that discussion are below.) At UVA’s Batten School of Public Policy I discussed fiscal issues and policies for government healthcare programs, e.g. Medicare and Medicaid. (A few slides from that discussion are below….. sorry no video.)

The opportunity to talk with our future clinicians, health system administrators, and policy makers was heartening and a bit terrifying. While the students are eager and passionate, I wonder about their historical understanding of our complex healthcare systems and the policies, programs, and initiatives that got us to where we are today. Too often I’ve seen proposals that are trying to resurrect a failed wheel, or undo something that solved a problem so effectively it no longer has a vocal advocacy. As Edmund Burke said, “Those who don’t know history are destined to repeat it.” And the US healthcare system(s) have enough challenges without spending resources on false paths.

Video Segments: Georgetown Univ. Health Promotion & Disease Prevention Guest Lecture

Part 1:

Part 2:

Selected Slides from UVA Batten School of Public Policy Guest Lecture

US Healthcare Spending 1990-2011US Healthcare Spending 2011US Healthcare Funding Sources - 2011US Health Insurance Coverage - 2011

US Healthcare Spending Distribution Across Population

 

Health Spending: For What, To Whom, and Where It Is Heading

The data for 2011 US healthcare spending was reported in the January issue of Health Affairs.  Below are some graphs showing how spending was distributed across the different categories of healthcare services in the years 2000, 2007, and 2011, as well as who paid for the spending.  (My analyses and commentary follow these graphs. The source for all graphs is Health Affairs, 32, no. 1 (2013):87-99)

What Healthcare Spending Went For:


Where Healthcare Spending Funds Came From:
Three highlights from the Health Affairs article are:

  • The distribution of healthcare spending for various services and providers has been relatively constant despite significant growth in total and per capita spending. (See chart below)
  • Growth in hospital spending slowed in 2010 and 2011 after bumping up in 2009. (Y/Y increases were 6.7% in 2009, and 4.3% and 3.9% in 2010 and 2011, compared to 3.9% for total National Health Expenditures for each of these years over the prior year.) The Health Affairs article notes that “The growth in use of hospital services remains low, with the number of inpatient days declining by 1.1 percent in 2011, following a decline of 1.6 percent in 2010, and the number of outpatient visits increasing by 0.7 percent, a slowdown from the increase of 1.5 percent in 2010.”
  • The percentages of healthcare spending coming from private businesses and households has decreased. This probably reflects higher government spending for the new Medicare prescription drug benefit and increased Medicaid enrollment during the economic downturn being only partially offset by private insurers shifting costs to individuals.

Effects of Health Reform (ACA)

While only a few of the ACA’s provisions went into effect during 2010 and 2011, there has been much speculation as to how (and how much) the ACA has or will change healthcare spending.  The Health Affairs article includes data about changes in private insurance enrollment from the requirement that companies offer coverage for dependents up to age 26. But it also points out that this age group is relatively inexpensive to insure so it probably didn’t produce great changes in spending.  However, Medicaid coverage and spending did change significantly, with more people in Medicaid programs due to the economic downturn, and the states’ costs increasing with the end of the temporary bump in Federal matching rates.

The Health Affairs authors don’t speculate about is how healthcare providers and organizations are shifting their operations and attitudes in anticipation of various of various new Federal programs, such as the Shared Savings Program for ACOs, value based payments, EMR Meaningful Use incentives/penalties, and penalties for avoidable adverse events. With private payers expanding clinical and economic accountability for healthcare providers through various payment innovations that are aligned with Medicare’s policies, the acceleration of system-wide transformations may be greater than projected – and lead to greater and earlier cost savings.  I have written about the factors that may be moderating healthcare spending growth, and believe that the relatively slower rate in hospital spending  and inpatient days reported in the Health Affairs article are the leading edge of this trend.  However, as hospitals purchase physician practices they may establish local market power that limits competition, and the prices charged to Medicare by these acquired practices could increase as they shift from the category of clinicians’ office to hospital outpatient facilities. Conversely, to the extent that these integrated healthcare systems assume risk for savings and quality performance – probably with payments involving episodes or bundles of care – then these concerns will be diminished, although not eliminated if they can still limit price and quality competition and comparisons.

Looking Forward to Future Health Spending

The Health Affairs article speculates a bit about where healthcare spending is heading in the near future. And, as is typical when trying to predict the future, the article doesn’t completely agree with what others have written. Not to be critical of the Health Affairs authors, (or professionals at the Congressional Budget Office or other organizations), but modeling is hard. To illustrate how difficult this task is – and how it can lead to different predicted outcomes even with lots of historical data to work with – below is a map showing the multiple predicted paths for 2012 Hurricane Sandy.

Communicating the meaning of the latest data can also be confusing. For example, the New York Times and the Wall Street Journal delivered significantly different verdicts on the meaning of the Health Affairs article. The Times’ headline declared, “Growth of Health Spending Stays Low” and quoted the Medicare agency’s chief actuary as saying “’I am optimistic.  There’s lot of potential.  More and more health care providers understand that the future cannot be like the past, in which health spending almost always grew faster than the gross domestic product.’”  Conversely, the Journal’s headline was “Health-Cost Pause Nears End,” and the article noted that the Health Affairs article, “…showed that the amount of spending to treat individuals, as opposed to spending on administration and insurance premiums, began to rise in 2011.” It then concluded that this was “signaling that cutbacks in health spending hadn’t become permanent.”

Predicting the Future is Easy

Predicting the future is easy. Accurately predicting the future is difficult. 2014 will almost certainly bring significant changes to how many people in the US get health insurance, how healthcare organizations deliver care, and how Medicare and Medicaid operate.  Like CMS’ chief actuary, I am optimistic, even though I also recognize that he is also correct in that, “The jury is still out whether all the innovations we’re testing will have much impact.” But I also see his actuarial caution as a reason for optimism because I believe that modeling based upon few precedents causes projections to be overly cautious, which should mean that actual savings will be greater than expected.

Era of Accountable Care

For many months I’ve been talking about the array of health transformation initiatives the Department of Health and Human Services has been deploying as both demonstrations and programmatic changes.  I’ve been characterizing this strategy to create more accountability as an evolving menu, buffet, or map – sort of like those magical Harry Potter maps where the lines keep appearing on the parchment to create a recognizable image.

As part of releasing the final rules for the Medicare Shared Savings Program, HHS also put forth a document subtitled “Menu of Options for Improving Care,” which is a list of some of the landmarks in the future map of an Era of Accountable Care. This document listed “options for healthcare providers of all sizes, types, all across the country” to work together to coordinate patient care, improve quality and lower costs. Besides the Medicare Shared Savings Program for Accountable Care Organizations (ACOs), these options include:

  • Partnership for Patients ($1B over 3 years)
  • Bundled Payments for Care Improvements (4 models proposed and 4 more planned)
  • Comprehensive Primary Care Initiative (Medicare partnering with Medicaid and private payers in 5-7 local markets to support primary care improvement)
  • FQHC Advanced Primary Care Practice Demonstration (with HRSA)
  • Advanced Payment Accountable Care Organization Model (pre-funding for physician groups wanting to form ACOs for the Shared Savings Program)
  • Pioneer Accountable Care Organization Model (demonstration program for advanced ACOs)
  • Financial Models to Support State Efforts to Integrate Care for Medicare-Medicaid Enrollees

The Menu document clearly indicates a coherent strategy for doing what the Medicare Payment Advisory Commission recently recommended: “Medicare payments should strongly encourage providers to move towards [ACOs, bundled payments, capitated models, shared savings programs] and make FFS less attractive.”

HSS’ Menu document is an initial description of the map HHS is drawing for providers about these more attractive options.  In contrast, in all the debate about health reform and Medicare there has been very little discussion about the future of Fee-for-Service payments or how to make FFS more sustainable –  except for the $300B budgetary hole and pending 30% fee reduction in  Medicare’s physician payment system’s Sustainable Growth Rate formula.  However, making “FFS less attractive” is certainly one of the transformational “sticks” Medicare has been wielding based upon provisions in the Accountable Care Act* and through other Medicare initiatives such as Value Based Purchasing, not paying for Never Events, and using Competitive Bidding for certain products and services.  And the future will see more and expanded use of these types of initiatives to “make FFS less attractive.”

CMS Has Already Been Transformed

Another significant distinction between HHS’ current actions and what they have traditionally done is that HHS is not moving forward alone by modifying Medicare and Medicaid.  Instead they are actively seeking to work in alignment – if not outright partnership – with private payers.  This is clearly stated in the CPCI and the Multi-payer Advanced Primary Care Initiative, which has already started in 8 states.

I have previously written about Accountable Care, (and how it is fundamental for successful health reform), and with the unveiling of the menu from HHS I am encouraged that we are on the way to an Era of Accountable Care – because that is what people really want and society needs, i.e. Accountability for Clinical Outcomes and Accountability for Economic Results.  It is only through those two avenues of accountability that we will achieve my version of the 3-Part Aim:

  1. Saving Lives
  2. Cutting Costs
  3. Creating Jobs

Health Reform is Essential for Creating Jobs

“Creating Jobs” doesn’t usually appear in lists about the goals for health reform, but it is really a fundamental reason for fixing our fractured healthcare system: By reducing the financial bite healthcare is putting on families and companies – as well as creating security for access to health insurance for individuals – health reform will pour capital and confidence into the economy leading to the creation of jobs.  That will be an era of healthcare that we can all count on.

——————————
* The given name for the health reform legislation is the “Patient Protection and Affordable Care Act,” and it is often referred to as the Affordable Care Act or the ACA.  However, I believe the transformational components of the ACA are its features that will create accountability for the clinical and economic outcomes our healthcare system produces, and thus I call it the Accountable Care Act.  In the context where others are referring to this law as Obamacare, or as a government take-over of the US healthcare system, or portrayed voluntary counseling as death panels, then I am very comfortable nick-naming the ACA the Accountable Care Act.

Accountable Care Now

If all arrows in Washington pointed to the same spot for solving the healthcare and Federal spending problems could the politicians, pundits and policy people agree?  Or would it take some new and powerful force to shine a spotlight and focus the collective vision on this solution, and what would that force be?

These are the two questions I’ve been asking myself as the battle over Federal spending has become near white-hot, and as it has become increasingly clearer that long-term Federal solvency and deficit reduction will require addressing the growth in healthcare spending – particularly Medicare.

Federal Outlays and Spending - Medicare - 2010 Pie Chart[Source: Kaiser Family Foundation “Medicare Spending and Financing,” February 2011]

To summarize the highlights of this situation:

  • Cutting non-defense discretionary Federal spending can’t produce the reductions needed to significantly impact the deficit – contrary to the general misunderstanding about how the Federal budget is spent. (See this recent Washington Post article, and the bullet below from an associated poll.)
    • “There are widespread misperceptions about the state of the federal budget. A majority of voters incorrectly believes the federal government spends more on defense/foreign aid than it does on Medicare and Social Security (63%). Also, a similar majority (60%) incorrectly believes problems with the federal budget can be fixed by just eliminating waste, fraud and abuse. Voters do not casually agree with these untruths- at least 40% strongly agree. Further, less than half (44%) believe Medicare and Social Security costs are a major source of problems for the federal budget (49% disagree).”
  • Medicaid spending is high but counter-cyclical, so improvements in the economy and employment will reduce those costs by cutting the number of people using the program
  • Social Security is a straight numbers issue – while the Baby Boomers are increasing the program’s numbers, the per person cost growth is close to CPI
  • Medicare is not counter-cyclical, its growth is a combination of the Baby Boomer influx and the per person growth rate, which is projected to be about 7%.  The result is that since Medicare accounts for about 15% of total Federal spending, the Medicare program is the keystone to solving the Federal fiscal puzzle

Solving the Medicare Puzzle
Wouldn’t it be great if there were a way to reduce Medicare long-term spending, and one that most politicians and policy people agreed was the right solution?  Fortunately there is.  And it’s already in Federal law: It’s a concept that many Democrats and Republicans have repeatedly endorsed because it increases local control and decision-making, while shifting incentives from quantity of services to quality of care.  This new model is called Accountable Care Organizations (ACOs), and it was included in the new health reform law, (a.k.a. Patient Protection and Affordable Care Act, or “Obamacare”).  This short provision in the law adds ACOs as a fundamental change to Medicare, (i.e., not just a pilot or a demonstration), and it enables Medicare to pay ACOs in any way that both Medicare and the healthcare provider (or delivery system) agree to.  Further, it encourages Medicare to work with private payers to enhance the motivations for creating successful ACOs. [See 1899(i)(3) and 1899(j) of Title XVIII of the Social Security Act (42 U.S.C. 1395) as added by Public Laws 111-148 & 111-152.]

So why isn’t there a collective multi-partisan and multi-stakeholder rally of support for ACOs?

  • Making healthcare delivery systems and providers into effective ACOs won’t happen quickly – it will require a stepwise transition.  (However, many, many hospitals, health systems, group practices and others are gearing up for the transition – which will likely involve bundled payments and focused bonuses for achieving desired outcomes – but the roads to becoming a full ACO will be varied and lead to many different successful structures.)
  • The proposed rules for the ACO provisions of the health reform law haven’t been issued yet, so there is still significant uncertainty about how Medicare will implement their new authority.
  • Political philosophy against government programs – particularly on the national level – is now a very strong force focused on repealing “Obamacare” like college students during spring break fixated on a blinking “Free Beer” sign.
  • The ACO provisions lack the specific payment formulas or dollar amounts that fiscal forecasters desire for building models and developing multi-year estimates.  As a result, the savings projections, (a.k.a. scoring), have estimated only very modest reductions in Medicare spending since there is significant uncertainty about how ACOs will develop and evolve.

Solutions
Here’s why those savings projections are too conservative, and what can be done to swing the political tide the other way:

  • Hospitals, healthcare systems, other providers, and other organizations are already preparing to become ACOs.  That is, rapid movement towards ACOs is happening across the country, and it needs Medicare to be a positive – and maybe even aggressive – supporter.  This private sector movement is similar to the reaction health providers and payers had to the potential national health reform legislation in 1993-95 – (see chart below) – but this time the reform is actually in law, and the private sector responses are much broader and intense…. From what I am seeing, this activity is about 10 times greater in terms of resources being committed, and plans being developed and implemented.
    US National Health Expenditures 1960-2007
    [National Health Expenditure Increases: Actual and Adjusted for CPI]
  • The other “solutions” to reducing Medicare spending are the typical “cuts” in payments to hospitals and doctors, or reducing benefits to seniors…. But for either of those to significantly reduce long-term spending would require politically and socially untenable changes to Medicare. In addition, these changes would involve much greater Federal government intrusion in actual care delivery decisions than would effectively implementing the ACO provisions of the ACA.
  • For Americans to be receiving UnAccountable Care as the norm is no longer acceptable – just as driving cars without seat belts or dumping raw sewage into rivers is also not acceptable today, even though it was the norm in the past.  Just as the standards of care for medical practice change, so should the overall structure of care delivery. For example, high blood pressure in the elderly used to be accepted and not treated because the thinking was that the high pressure was a good thing and needed to push blood through hardened arteries.  That idea is no longer accepted, and not treating hypertension today would be UnAcceptable care.
  • There needs to be a public groundswell for “Accountable Care Now.” This can be true grassroots support, grass-tops advocacy from opinion leaders, and even “astro-turf” campaigns from national advocacy organizations and companies.  The end result needs to be getting public opinion and voices to be coherent and loud for change.  What matters is that the chorus for “Accountable Care Now” sound something like:

What Do We Want?

Accountable Care!

When Do We Want It?

Now!

Bottom Line
If Medicare beneficiaries, organizations paying for healthcare, (including Medicare and Medicaid programs), and everyone else – including leading healthcare professionals – start a drum-beat for “Accountable Care Now,” it will become UnAcceptable to be delivering or paying for UnAccountable Care. And elected officials across the spectrum, pundits, and policy leaders will have to – and want to – start looking under the Accountable Care spotlight and put their efforts toward making Accountable Care a reality Now – or at least ASAP.