U.S. Healthcare – Moving Forward

Last week I gave a presentation to the leaders of some women’s health advocacy organizations about where the U.S. healthcare system is heading, i.e., where we go from the current situation with the A.C.A. We had a great discussion, and the organizer of the event emailed me afterward to say, “Amazing is all I can say. You are the first person who could speak to [the] ACA in which people listened and engaged.”Blog-2-17-Picture

Some of the key points I made included:

  • Focus on the future. Don’t relive the past.
  • Move forward from today’s strengths and weaknesses. The slide below describes health insurance coverage for 2015 showing dramatic increases in coverage in individual insurance and Medicaid, and a decrease in the uninsured. [Note: The Census data indicates any insurance status during the year, which is why the total is more than 100%.]Blog-2-17-Slide1
  • Are we more of less broken? Some “so-called” pundits have characterized the current situation as “broken.” To move forward, it is important to consider whether or not the current system is more or less “broken” than it was in 2010 when the A.C.A. was enacted, or in 2014 when most of its provisions started.Blog-2-17-Slide2

Several of the less broken aspects of the current situation are:

  • The business model for health insurance is now based more on managing risk rather than avoiding risk, which was a major focus before the A.C.A.
  • Access to insurance – particularly for individuals – is now much more reliable and dependable. The A.C.A. created a national floor for insurance practices, with state level implementation and augmentation. This was the focus for the “Patient Protection” part of the A.C.A. i.e., the original title of the law was the Patient Protection and Affordable Care Act.
  • Descriptions of insurance plans are now more standardized and easier for consumers to understand.
  • Medicare’s Hospital Trust Fund is now projected to be solvent for 11 more years than before the A.C.A., and the Medicare Part D benefit was significantly improved, with the coverage gap (a.k.a. “donut hole”) being filled.

Several of the still broken or problem areas in the current situation are:

  • Affordability is still a major problem. This is – and was – a problem for many individuals, as well as some companies that discovered in the midst of the Great Recession (2008-2010) that their healthcare costs were eating deeply into their profits. [Note – polling has long indicated affordability as a priority issue, which is why it was called the “Affordable Care Act.” However, affordability takes much longer to achieve than access, which was the case for the A.C.A.’s model in Massachusetts, where affordability is still being addressed.] Within the A.C.A., affordability for lower income people was addressed with subsidies, but overall costs are slowly being addressed with improvements in healthcare delivery – primarily through public-private alignment in new payment models that are driving greater “value” in healthcare. It is also worth noting that this concept of value is at the core of the new Medicare physician payment framework created in the MACRA law, which had large bipartisan support in Congress.
  • State-to-state implementation has been very variable, with some states doing a good job in creating more stable insurance markets, and others facing low numbers of insurers in their individual markets.
  • Requirements for coverage of certain benefits, and how risks are segmented or shared across populations, are potential areas where changes could be made to address perceived inequities, reduce government spending, and lower costs for some people – but also increase costs for other people. For example, changing the age ratings from 3:1 to 4:1 or 5:1 would expand risk stratification with younger people paying less and older people paying more. Similarly, excluding certain types of benefits from the required “Essential Health Benefits” (which are currently set at the state level within federal guidelines), would decrease costs for people who don’t ever use those benefits (such as contraception or organ transplantation), while increasing costs for people who do use those services. However, such “insurance by body part” practices could also cause insurers (and at risk providers) to build business models around avoiding risk rather than managing it.

Conclusions: The A.C.A. fixed several problems with the U.S. health insurance markets and improved access to health insurance. However, it also accentuated or created some other problems because of its innate structure (e.g., “inartful drafting”), hyper-partisan political advantage seeking, and the normal evolution of insurance business practices. For example, those three factors combined to undermine individual insurance markets in some states because of HHS’ inability to fully make risk corridor payments: The law was not explicit about HHS’ authority, Congress specifically prohibited HHS from shifting funds to make those payments, and many insurers had business plans for the A.C.A. marketplaces with losses in early years to build market share, while expecting to recoup those losses both through the risk corridor payments and higher premiums in later years. The result has been that most of the new non-profit insurance companies created under the A.C.A. (COOPs) failed, and many existing insurers pulled out of markets where they had significant losses, leaving fewer options for consumers. It should also be noted that some insurers have done well in the marketplaces using networks and benefits more similar to Medicaid than large company group health insurance plans, while at least one insurer apparently pulled out of several markets as a positioning strategy to try and bolster their merger plans.

Thus, the A.C.A. transformed what was essentially becoming a two-tiered health insurance market (Medicaid and group health insurance plans) into a three-level system, with a more structured middle tier for individual insurance that looks like a hybrid between Medicaid and large employer health plans. One of the A.C.A.’s successes (although perhaps temporary) was this middle tier, which had been rapidly disappearing in most parts of the country as premiums escalated and people with non-trivial pre-existing conditions were excluded from buying insurance. In 2010, when layoffs were common and the “gig-economy” was expanding, the shrinking supply side of the market for individual insurance not only accentuated the problem of “job lock,” but it also undermined state and federal efforts to control health spending since so many people were “out” of the insurance system.

Are “we” better off than “we” were four years ago? That depends on who “you” are, and what you expect your situation to be in the future.

  • For individuals with health insurance through large groups (such as large companies), things are probably about the same as they would have been without the A.C.A. While premiums and deductibles are almost certainly higher, better information about quality of services is available, and there is more access to things like telemedicine – both of which would have occurred to a similar degree without the A.C.A.
  • For low income individuals, there are now subsidies to buy insurance, or access to Medicaid (in some states).
  • For middle-class people buying insurance on their own, they now have assured access to buying and keeping insurance, although in some cases their costs have increased more than what would have occurred without the A.C.A. in part because they have expanded benefits under the A.C.A.’s requirements. But without the A.C.A., costs for individuals and small groups could have been very dependent upon their age, costly illnesses, or injuries, which could have dramatically increased their premiums, or caused them to lose insurance coverage for specific body-parts or entirely.
  • For people with Medicare, things are better since the Part D donut hole is getting filled, and Medicare is driving new quality improvement initiatives, which are also benefiting people who are not on Medicare since many are being done in conjunction with Medicaid programs and private payers.

Bottom Line:

  • So, are “we” as a nation better off? Overall, we have a clearer picture of the problems and more tools to try and improve (if not totally solve) the problem areas like affordability and quality.
  • Will making productive changes be easy? No.
  • Can positive changes be made while extracting great savings from the health insurance and healthcare delivery systems? Not quickly – but possibly over the long term.
  • Can changes be made in 2017 so that no other changes will be necessary for many years? No. Like trauma surgery, the patient needs to be stabilized, and then multiple surgeries (targeted towards the problems of greatest urgency and long-term benefit) need to be done over time to improve the functioning and long-term capabilities and viability of the patient. Trying to do everything at once can lead to serious morbidity and mortality, and would be more traumatic and expensive, and waste more resources than a measured and planned approach.

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!

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

 

Jimmy Buffett Medicare and Healthcare

The title of Jimmy Buffett’s song “Changes in Latitudes, Changes in Attitudes” is a good description of the fundamental changes occurring in the US healthcare system:  Within the Federal Government – and Medicare in particular – widespread “Changes in Latitudes, Changes in Attitudes” are evident in the implementation of the Affordable Care and HITECH Acts, and the overall leadership of the Department of Health and Human Services.  Healthcare leaders in private organizations – and state and local governments – are embracing these changes, which collectively are leading to better healthcare quality and lower costs…. Or at least slower increases in healthcare costs, a.k.a. a bending of the healthcare cost curve.

Changes in Attitude

Traditionally government programs have worked at a long-arms distance from private companies and organizations.  For Medicare, this has meant that changes in rules and regulations were conveyed to healthcare providers and clinicians by publishing them in the Federal Register or as updates to the manuals used by Medicare’s bill-paying contractors. Private payers, (e.g. insurance companies), responded to these changes and updates because Medicare is the largest single payer for healthcare services. Providers and clinicians were thus always responding to a shifting quilt of payment rules and provisions – and more recently an additional layer of quality reporting requirements.

CMS and HHS have repositioned the government’s payment practices to serve an aligning leadership role that is minimizing confusion and complexity for providers and clinicians, while also promoting greater transparency and accountability. The government has accomplishing this by working with private payers (to the extent allowable by sunshine and antitrust laws) to give providers and clinicians more consistent guidance on payment policies and quality metrics, as well as incentives for improving the organization and delivery of care.  An example of this is the Comprehensive Primary Care Initiative (CPCI). The goal of this program is to promote higher quality patient-centric primary care. To determine the CPCI locations, CMS used a bidding process where the seven winning regions were those that committed the highest concentration of insured people, i.e., a combination of private payer, Medicaid, and Medicare covered lives. All the payers in the selected locations agreed to work collaboratively to identify the primary care practices that would get incentive payments for improving the quality and the integration of care – with each payer determining the specific level of financial incentives and support for each of their covered lives in these practices.

The key facets for the CPCI program are:

  • Public and private sector payers are truly aligned for comprehensive healthcare transformation.
  • It is using market forces to promote this transformation.
  • It is a community based initiative that is engaging local leaders, and which requires their buy-in and shared ownership of the process and the outcome.
  • It is structured to seek both quality improvements and costs savings.

Other initiatives from the ACA-created CMS Innovation Center are seeking to partner Medicare with local providers and payers for payment mechanisms that will promote better quality and lower costs, i.e. higher value healthcare that achieves the improvements that people and communities want.  Some of these programs involve bundling of payments around certain conditions, and the Innovation Center has explicitly stated a desire to consider providers’ ideas for new models of care and financing outside of the matrix of models it has already proposed.  (It is doing this through Health Care Innovation Awards.)

At the same time, “regular” Medicare is shifting its attitude about poor quality care. For example, last fall new Medicare rules became effective that prohibit hospitals from receiving a second payment from Medicare if a patient with pneumonia, congestive heart failure, or after a heart attack is readmitted to a hospital within 30 days, i.e. a return to the hospital that is preventable with good post-discharge care coordination and follow-up. This is just one of many new financial incentives – both positive and negative – involving actual quality of care that Medicare is moving forward with based upon various provisions of the ACA. (Private payers are implementing similar quality of care related payment policies.)

Changes in Latitude

While Jimmy Buffet was talking about geographic lines of latitudes, Medicare and HHS have exhibited changes in latitude for the requirements placed on many healthcare providers and clinicians – particularly those participating in programs designed to deliver higher quality care.  In addition to the Innovation Center examples cited above, Medicare’s new Shared Savings Program enables Accountable Care Organizations (ACO) to be structured in a wide variety of ways as long as they meet certain requirements and commitments.  And one area where they are permitted full autonomy is how an ACO distributes any shared savings (or other financial incentives) to the healthcare professionals and provider groups within or connected to the ACO.  While Medicare wants to be informed about these internal incentive structures – presumably to guide the development of future value-promoting programs – Medicare is not dictating this crucial facet of an ACO’s operations.

This attitude for considering such wide latitude of ideas illustrates the sea-change shift that has occurred within the government bureaucracy that has traditionally sought to evaluate “new ideas” primarily by comparing differences in existing care delivery models across the spectrum of the US healthcare system. However, CMS’ Innovation Center does not have full autonomy for conducting Medicare demonstration projects since it is required to focus on new models for paying healthcare providers, e.g., doctors and hospitals.  Because of this limitation (and related anti-kickback laws) the Innovation Center cannot do demonstrations that alter benefit structures, or empower ACOs to create new financial incentives for patients by changing co-payments or other cost sharing requirements. In contrast, private payers are implementing financial incentives to prompt patients to use certain providers, select primary care physicians to help guide them through complex care situations, or adhere to medical therapies for chronic conditions, etc. Perhaps in the future, (either directly or as part of the latitude for accountable healthcare systems), Medicare will be able to test modifications of beneficiaries’ cost-sharing to expand how patients are engaged for improving the quality of care and sharing cost savings.

Storms Ahead

While the changes occurring within CMS, private payers, and healthcare deliver organizations across the country are very exciting and have great potential, not every initiative or transformation will be 100% successful.  This is to be expected, and it will present the opportunity to learn from whatever shortfalls occur – as well as organizations that exceed expectations.  This knowledge will be important for creating new initiatives and modifying existing ones as they move forward.  Hopefully, other organizations committed to improving care and lowering costs in the public’s interest will be on board with CMS’ new attitude, support the inevitable challenges that law ahead, and seek to calm the waters of public discourse rather than whip the storms like Thor.

Cutting Employer Healthcare Costs

Over the past 20+ years larger companies have tried many tactics to control the growth of their healthcare spending, including HMOs, consumer-directed healthcare, wellness programs, value-based insurance design, selective contracting for high-cost procedures, personal health assessments, etc.  While some of those efforts temporarily reduced employers’ healthcare spending, they did not change the long-term trends, in part because they only targeted employees and did not focus on high or very high cost individuals – many of whom are not active workers. [A recent Health Affairs article analyzing conditions associated with employee healthcare spending reflects this “searching under the streetlamp” phenomenon.]

Company Health Benefit Costs Do Not Equal Employees’ Healthcare Spending

The cost of providing health benefits for most larger companies includes not only the health benefits for employees, but also costs for retirees, and spouses and dependents of active workers. In addition, these “other” groups represent a disproportionate amount of health benefits costs because they are generally older and/or in poorer health. The importance of this factor is depicted in the chart below that illustrates how healthcare spending is not uniform across a group of people, e.g., all the individuals covered by a company’s health plan, or Medicare beneficiaries. While the actual spending per person changes significantly depending on the specific group, the general shape of the curve remains the same with about 5-10% of the people accounting for 20-40% of all the spending. For companies’ health benefit programs – as mentioned above – retirees, spouses and dependents make up a disproportionate share of individuals in the yellow and red zones.


[Y-Axis = Percentage of spending;  X-Axis = Percentage of people in the group]

In addition, these high cost individuals are also the people who have the most complicated (and usually chronic) healthcare problems, and thus whose healthcare quality and health status can be improved the most.

Challenges in Targeting High Cost Individuals

Companies have typically focused health improvement and wellness initiatives on active workers because they were the individuals the company had the greatest direct interaction with, i.e., they were the people seen in the workplace. This situation reflects the analogy about potential analytical biases where a person will search for dropped keys under the streetlight because that is the only visible area, i.e. information about what is outside the arc of the streetlight is unavailable.*

[Source: “Fixing the US Healthcare System,” 2008 – Unpublished]

While some employers are starting to focus initiatives on high and very high cost individuals, they face several challenges in creating and implementing these programs.  For example, since these individuals are more likely to be spouses, dependents or retirees under the age of 65, it can be more difficult for companies to reach them.  Other challenges that companies’ health benefits programs face in interacting more closely with these people are:

  • HIPAA privacy concerns.
  • For retirees under the age of 65, expecting that they will soon by on Medicare, and thus the company may not see any economic benefits.
  • Lack of potential benefits to the company by improving health and productivity for people who are not active workers. (However, improving the health of high cost dependents and spouses of active workers can reduce the employees’ absenteeism by decreasing the time they spend providing caregiving and care-assisting help to their family members.)

How to Improve Health Delivery and Control Spending for High Cost Individuals

Controlling healthcare spending for high cost people is not easy, nor is it inexpensive. Actions to control spending for these individuals generally involves making care more efficient and reducing errors and complications – which also improves the individual’s health status, i.e. it is a Win-Win situation with improved clinical and economic outcomes.

Specific actions to control spending for high cost individuals includes initiatives such as:

  • Case management e.g., nurse case management and/or tele-medicine
  • Team based care e.g., patient-centered medical homes
  • Integrated care e.g., quality monitoring and fiscal incentives for quality and economic performance

The common theme among these actions is that they are all designed to ensure that nothing falls through the cracks leading to very expensive cascades of poor clinical outcomes and complications. An additional benefit is that these initiatives can also help direct care for people with costly chronic conditions towards the places/locations/providers that are more efficient and higher quality – and often less costly. (Some companies are doing this for elective surgeries, and incentivizing individuals to use specified providers by offering reduced or zero cost sharing, as well as paying their travel costs.)

Does Better Care for High Cost Individuals Pay Dividends?

Financial calculations can quantify the direct value of these efforts. For example if high and very high cost individuals are costing the company more than $10,000 or $25,000 per year, an investment of $1,000, (such as for intensive case management), that reduces spending by 10% provides at least a break-even ROI.  Spending reductions of this magnitude are very achievable for people with complicated diabetes or congestive heart failure. And some healthcare innovations have been shown to reduce spending by 20-30% for people with those conditions. However, not all “case management” or “disease management” programs are the same. As a general rule, “you get what you pay for,” i.e., programs that are less expensive and/or not integrated into the patient’s healthcare team-flow, tend to not benefit individuals with serious chronic illnesses – or deliver a positive ROI. (This was evident in the Medicare Case Management Demo I referenced in a 2009 article on this blog.)

Of course, not all people who fall into the high cost category can have their spending easily controlled through better case management or integrated team-based care. Thus, companies will not see a positive ROI through better healthcare management for all high cost individuals. Some diseases and conditions are just unexpected, inherently expensive, or have long lag times before positive benefits are seen. For example, cancer rates (and spending) can be reduced through exercise, nutrient and smoking cessation – as well as early detection – but the timeframe for those improvements can be long.

Accidents outside the workplace are also frequently cited as high cost medical cases that cannot be prevented. However, alcohol (or abuse of other substances) and/or mental health conditions are often contributing factors for accidents – factors which can be addressed through the healthcare system.  Unfortunately, because of the fuzziness of the ROI calculations, privacy issues, or other concerns, these areas have not generally been a focus for employers.  In addition, in some professions, these medical problems can lead to loss of employment or advancement opportunities, making them especially difficult to address as part of a person’s comprehensive medical care.

Identifying High Cost Cases

Before value-producing interventions can help high cost individuals, these people need to be identified so that they can be engaged to participate in these programs. Fortunately, there are increasingly sophisticated and efficient ways to identify high cost people:

  • Claims analysis conducted by the employer’s insurance company.  (Having the insurance company analyze the claims data creates an important information firewall to address HIPAA privacy concerns. Because of privacy issues, an insurance company – or managed care company – is also in a better position to directly contact and engage individuals for participation in any programs.)
  • EMR database analysis by individual health systems or large provider groups.
  • Asking physicians to identify their medically fragile and high utilizing patients, and then engaging/enrolling them in the appropriate care management programs.  (However, this approach works best for community-wide initiatives rather than individual employer populations since it could be inefficient and unusual for physicians to separately analyze or engage their patients by employer.)

Preventing High Cost Situations

A related set of challenges is identifying people who are not yet high cost individuals, but are sliding toward that end of the scale, (e.g., pre-diabetes, unrecognized diabetes, high blood pressure, smokers, etc.), and preventing them from becoming high cost cases. Some individuals may be easy to identify, (particularly with a high quality EMR system that can do practice-wide analyses), but changing an individual’s potential healthcare trajectory is hard. Changing community norms and expectations for smoking, exercise, and nutrition can be effective foundational actions – and are good initiatives for reaching non-workers such as retirees and spouses.  However, changing personal behaviors on a shorter time frame generally requires one-on-one engagement and encouragement.  This can start with the person’s medical care team, with a non-physician clinician, (such as a diabetic educator, nurse specialist, or health coach), who can provide on-going support as well as referrals to services and resources in the community through organizations such as the YMCA.

Conclusions

Controlling the long term growth of the cost of employers’ health benefits programs, (i.e., bending the “cost curve”), requires focusing on individuals who are costing the most, as well as preventing individuals who are smoldering with early-stage or unrecognized conditions from exploding into expensive complex chronic disease situations.  For self-insured companies, investing in disease and case management programs, tools, and services requires resources, spine, and compassion, but the financial and human-value returns (including company loyalty and appreciation) can be significant. Few smaller companies can marshal the time and resources for these programs, but as technology improves and health insurance markets become more efficient, these services should become more readily available through purchased insurance products – including those offered through the ACA created state-based insurance exchanges.  This should happen with the next 2-5 years since, “it’s where the money is.”

 

* The parable about looking for lost keys on a street at night illustrates the pitfalls of operating with limited information while trying to solve a problem.  The tendency is to look under the streetlights because that is the only place where you can easily see, i.e., this is where there is easy access to the “data” about what is on the ground to see if the keys are there or not. However, it is also possible that the keys are outside of the corona of the streetlights.  But looking outside those circles takes both imagination to realize that the street exists outside the circles of light, having access to data about what lies outside the circle of light, (possibly with “technology” such as a flashlight), and making the effort to seek and understand this “new” data. [Source: “Fixing the US Healthcare System,” 2008 – Unpublished]

Health Insurance Security Creates Jobs

People feeling secure that their health insurance will continue (or be easy to get) creates an often overlooked societal benefit, i.e., it promotes job creation – particularly for entrepreneurs. Because this value is hard to quantify, it is seldom seen in policy or political rhetoric. (It is also overshadowed by the general “job lock” phenomenon of employment-based health insurance.)

This week’s National Journal has a great article on this topic (“The Other Jobs Bill”) that examines Massachusetts’ experience with their insurance reforms and coverage requirements: The expert consensus is that these reforms have boosted Massachusetts’ economy and job growth compared to other states. Two quotes from the NJ article highlight the impact:

“Massachusetts, despite the confounding effects of the recession, can now offer aspiring entrepreneurs the freedom to leave large companies and start small ones – and give dissatisfied workers the freedom to change jobs, freelance, or scale back their hours without worrying about depriving their families of health coverage.”

“Despite some initial concern from the business community, companies have largely embraced the law as a benefit, not a burden.”

Implications for the Supreme Court’s Ruling on the ACA

Driving home how interstate commerce is affected by health insurance coverage, the article tells the story of a start-up company’s Founder recognizing the business value of guaranteed access to health insurance through the state’s exchange: It was the factor that “finally snagged her several talented staff members from bigger, established companies out of state.” [emphasis added]

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.

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* 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.

Health Law Is Reforming System Via Market Forces

All the controversial rhetoric about the new health reform law is missing a huge reality:  The law is driving dramatic changes in the real world.  Almost every major health delivery system is preparing to reorganize how they provide care to hundreds of millions of Americans by becoming Accountable Care Organizations (ACOs).

Health Systems are Voting With Their Wallets
The magnitude and level of financial interest in ACOs – and proof that it is not just cautious planning – were dramatically illuminated by recent actions and a Washington Post article:

  • On Thursday, HHS released the long anticipated proposed rule for ACOs and Medicare “Shared Savings.” For the rest of the day the Federal Register’s website was nearly shut down by people trying to download the 429 page document.
  • Today’s Washington Post article, “Complicated health-care law leads to payday for consultants,” includes figures about the tens of thousands of dollars consultants are charging for strategy sessions about how to think about ACOs, and the millions of dollars in fees they are getting for actually helping health systems to become ACOs. Health systems were signing consultants up for these engagements before the draft regulations were released because of their expectations of how dramatically competition among ACOs will change their financial incentives and structures. And some of the phrases in the article highlight the level of importance being placed on ACOs: “ACO frenzy,” “Oversubscribed,” “Glittering high fees” and, “I have never seen anything quite like this in my 35 years in this business.”

Bottom Line
I could write more about the proposed ACO rule, my interactions with health systems looking to become ACOs (and the organizations helping them), and how ACOs will very likely produce significantly more savings for Medicare than the Congressional Budget Office has projected, but the bottom line looks like this:

  • ACOs are happening.
  • The Medicare ACO/Shared Savings rule will shape their form, but not their creation.
  • ACOs – and their quality/efficiency incentives payments – will fundamentally transform health care in the US.
  • This transformation will be like an avalanche as health systems compete locally to demonstrate how much more Accountable they are to patients and payers, i.e. how they provide higher quality at lower costs than their competitors down the street or across the river.
  • While the official title of the new health law is the “Affordable Care Act,” it very easily – and perhaps more accurately – should have been called the “Accountable Care Act” because it is that part of the law which will actually lead to more affordable care for more people.

As always, stay tuned and keep your seat belts tightly fastened for the upcoming wild ride. Like a roller-coaster, the fun is just beginning.

Roller Coaster

Regulating Insurance: States v. Federal Roles

One of the fascinating issues within the health reform debate is how to improve the insurance market by changing government regulations.  While large employers who self-insure are except from state regulations, (and must only conform to limited Federal rules under ERISA), individuals, small groups, and others who actually purchase insurance have their policies regulated by individual states.

Both Democrats and Republicans agree that the current system of insurance regulation creates job lock and other socially undesirable effects, and that insurance companies should be able to sell policies across states lines.  However, their solutions are quite different.

Democrats favor national regulation to create a single playing field, and Republicans prefer permitting insurance companies to sell in multiple or all states if they are licensed and regulated in any state.  The insurance industry’s trade association (AHIP), doesn’t seem to take a firm position on this issue – at least from looking at their website.

However, I was surprised to see a full page ad from an individual company on the back cover of a recent issue of National Journal advocating for national rules to replace state insurance regulation.  This interesting ad included the following phrases:

“Something’s wrong when…. innovation surpasses…. insurance regulation.”

“Here’s something to bristle at: the regulatory system that shapes our…. insurance policies hasn’t changed much in the last century.  Yet everything …. has changed dramatically…… Chrome and steel have given way to thermoplastic and fiberglass.”

And the company’s recommendations for solutions focus on increasing national regulations:

“Today there are 50 different sets of insurance regulations in 50 states.  This makes it difficult to introduce innovative new products.  But with a modern system of national regulation, consumers would get to choose from the best products available nationwide.”

“National regulation would help spread risk more fairly across similar geographic areas.”

“Modern regulation is the kind of protection Americans deserve.”

However, the caveat here is that this ad is talking about regulation of car insurance and not health insurance.  In fact, the specific company doesn’t even sell comprehensive health insurance – so they don’t have a dog, cat or Cadillac plan in that fight.

What is also interesting is the parallel developments and history in the State of Massachusetts with health and auto insurance. Everyone following the debate about health reform has certainly heard what Massachusetts has done with health insurance reform and mandates to achieve near universal coverage.  However, in roughly the same time-frame the state also reformed its auto insurance regulations to enable national insurers to enter the market.  This increased competition resulted in dramatic decreases in premiums – but the insurance plans are still regulated by the state.

How changing the regulation of selling health insurance would change costs and affect consumer protections is open to debate.  Unfortunately as an “issue” it has been overshadowed in the health reform discussions by other aspects such as the so-called public option, abortion coverage, coverage of immigrants, costs to individuals, effects on the Federal deficit, and mandates for having insurance. Thus Federal v. State insurance regulation – which is really a core part of health reform – hasn’t been a big part of the national political debate, even though changing insurance company practices has been a large part of the Democrats’ messaging.  Despite that, there are several interesting points to consider:

  1. Insurance companies operate on a business model very similar to financial institutions, such as banks, in that they seek to manage risk and they make most of their money on the “float” – or interest earned – based upon having large amounts of money for a period of time between collecting premiums and having to pay for covered benefits… and deductibles also adds a delay to these payments, which creates a cushion to the float.  Therefore, because their revenues are tied to their interest earnings, the lower the prevailing interest rates the lower their earnings – and thus the more they need to raise premiums… and vice versa.  (I did an analysis several years ago showing that premium increases were directly correlated with interest rate fluctuations, but delayed a year or two.)  This parallelism with banks raises the question about why it is OK to Federally regulate banks, but not health insurance companies? How much more important is it to protect people’s money than their health insurance coverage?
  2. National insurance regulation would help address both job lock for individuals within companies that purchased insurance directly, and location lock for small businesses and entrepreneurs – particularly those operating service businesses where location may not be as crucial as manufacturing or retail operations.
  3. Permitting the selling of insurance across state lines based upon licensing in one state would probably result in reduced consumer protections since some states have less oversight and requirements than others about marketing, coverage guarantees, etc.
  4. And neither national rules from the Federal government or allowing selling across state lines would significantly affect the growth in health case costs or insurance premiums, i.e. they wouldn’t really bend the cost curve.  Although allowing selling across states lines could reduce premiums in certain higher cost states, but that would be due to people being able to by insurance policies with less coverage or intrinsic protections.  In some ways this would follow the old saying, “you get what you pay for.”
  5. And since the consensus is that bending the cost curve will require changing how health care is actually delivered to patients, (which makes sense since ~80+% of health care spending goes to pay for health care goods and services), this discussion makes me wonder how differential state regulation of doctors and healthcare providers fit into this equation?  While laws and legal procedures may vary among states, presumably the practice of medicine shouldn’t vary dramatically…. Although many studies have shown that it does so in ways that can’t be explained by demographic differences or regional variations in disease states such as Lyme disease. I’m not certain how changing the way clinicians are licensed would improve healthcare delivery or costs, but it is another aspect of State v. Federal regulation that is becoming an increasingly contentious issue – as was pointed out in an article in today’s New York Times.

High Costs of Cancer Treatments for Patients Not on Medicare

Last week I wrote about the challenges of people with Medicare getting the best treatments for cancer.  Today, the Kaiser Family Foundation released a report examining the challenges people who get insurance through the private system, (i.e. employer based or individually purchased),  have affording their cancer treatments. And how the public insurance programs, (i.e. Medicare and Medicaid), have waiting periods or other enrollment requirements that delay or prevent patients from being covered immediately – something which is of particular concern for patients with cancer.

The Kaiser Family Foundation’s report presents an excellent mix of data analysis and individual patient examples.  The report’s conclusions are that our health system has a significant number of holes (or cracks) that people can slip into causing them to suffer clinicall and/or financially.  This situation clearly exists not only for patients with cancer, but also for other serious and costly diseases, which is why it should be one of the priority foci for health care reform in the coming years.

The specific aspects of our healthcare financing system that the Kaiser Family Foundation’s report identified as potentially causing problems for cancer patients are: [empahsis added]

  1. High cost-sharing, caps on benefits and lifetime maximums leave cancer patients vulnerable to high out-of-pocket health care costs.
  2. People who depend on their employer for health insurance may not be protected from catastrophically high health care costs if they become too sick to work.
  3. Cancer patients and survivors are often unable to find adequate and affordable coverage in the individual market.
  4. While high-risk pools are designed to help cancer patients and others who are uninsurable, they are not available to all cancer patients and some find the premiums difficult to afford.
  5. Waiting periods, strict restrictions on eligibility, or delayed application for public programs can leave cancer patients who are too ill to work without an affordable insurance option.

These features of our “crazy quilt” health financing system are not new discoveries, nor are they unique to patients with cancer.  But the report highlights the importance of understanding them, and if these issues are not addressed in our nation’s ongoing “health reform” efforts, then the specific proposals produced by those efforts are unlikely to gather enough public (and political) support to actually become law and improve people’s lives.