Real Health Reform in Massachusetts

Posted on July 29, 2009 by Michael D. Miller MD

The Massachusetts Special Commission on Payment Reform recently issued its recommendations for shifting the state’s health care system from Fee-For-Service (FFS) to Global Payments over a 5 year period. The Special Commission’s report lays out a good case for making this change, describing why it needs to be adopted by all payers, (although each payer would still pay different rates, they would all use the same fundamental global payment structure), and some of the challenges for successfully navigating a 5 year transition period from the current mostly FFS system to one dominated by global payments.

The report summarizes its recommendations into 9 areas:

The development of Accountable Care Organizations (ACOs). (Health delivery entities that can work as a team to manage the provision and coordination of care so that they are accepting responsibility for all – or most – of the care for their enrollees.)
Patient choice. Patients will be able to choose their primary care physician, and will not be restricted to only clinicians in their ACO – but may have to pay more for services outside of their ACO.
Patient-centered care and a strong focus on primary care. Each patient’s selection of a primary care provider will direct their insurer’s payments to their ACO, which will receive technical support to help develop/create medical homes.
Widespread adoption of the medical home model. (The Special Commission concluded that “medical homes overlaid on the current FFS system cannot achieve its vision for a high-value health care system.”)
Pay-for-performance (P4P) incentives to ensure appropriate access to care, and encourage quality improvement, evidence-based care, and coordination of care.
Sharing of financial risk between ACOs and insurers. ACOs will be held responsible for performance risk—including cost performance and meeting access and quality standards. Insurance companies, (and self-insured companies), will retain the insurance risk for the insurance contracts written to groups and individuals.
Strong and consistent risk adjustment. Global payments will be adjusted to reflect providers’ clinical and socioeconomic case mix, and, as appropriate, geography, so that ACOs will not be financially harmed by accepting high-risk patients with complex or chronic health care needs.
Cost and quality transparency. ACOs will report performance against common metrics measuring health care quality and access to appropriate care.
Participation by both private and public payers to ensure consistent alignment of care delivery incentives and to minimize administrative complexity and costs.

These changes would have tremendous implications for improving quality and controlling costs, and be much more significant than the coverage expansion the state started in 2006 – which could be viewed as the first part of health reform in Massachusetts, with the movement to global payments as the second part. Specifically, the Special Commission’s recommendations could largely accomplish the somewhat wonkishly termed goal of “bending the curve” in health costs that is being bantered about in DC these days. These changes would achieve that aim by shifting the financial incentives for clinicians and provider organizations from providing more care, to providing higher quality and more cost effective care – which should include more preventive services and interventions.

Incentives Need to Be Translated to Small Groups
However, those goals will only be achieved if the incentives created at the ACO level by global payments and P4P are translated to much smaller groups of clinicians and others within each ACO. If clinicians are still compensated based upon a modified FFS system within the ACOs, then their incentives will still be mostly for volume over quality. Similarly, if they are told that their compensation will be based upon the overall performance of the ACO, then they won’t feel that their actions will be significant enough to effect the ACO’s or their own financial success or failure. (This is the reason why Medicare’s Sustainable Growth Rate formula hasn’t constrained the growth in Medicare’s spending for physician services, i.e. why would physicians feel that their individual actions matter when they are pooled in with hundreds of thousands of other physicians across the country?) In contrast, if the incentives and data monitoring are done at the level of the individual clinician, (or small clinical entity), then each individual can understand how that their actions will influence their own success or failure.

Just as creating granular incentives depends upon monitoring the clinical decisions and activities at the same level, there is also a need to monitor the overall operations and quality performance of the ACOs to be able to adjust global payment amounts and methodologies. This is why analyzing data to support individual and ACO decisions, and monitoring the success of movement toward global payments, are two of the major functions (see #3 & #5 below) for the entity the Special Commission recommends be empowered to oversee the transition to global payments across the state.

Special Commission’s Recommended Functions for Transition Oversight Entity:

Establish the methodology for global payments
Establish the parameters defining an ACO
Analyze health system data to support providers, patients, and employers in making coverage and care choices
Recommend the necessary infrastructure support for providers
Establish transition milestones and monitor progress towards those goals
Identify and implement mid-course adjustments as needed

Implications for National Actions and Health Reform Advocates
Up here in my area of neon-blue Massachusetts, the focus has been on how it is essential to have a “strong public plan option” because that will lead to a single payer system. Many community activists have held onto this position despite Massachusetts making significant improvements in coverage without a public plan option, (or single payer), but if the state of Massachusetts can implement the Special Commission’s recommendations for an all-payer global payment system in ways that transform healthcare delivery, it will be the most significant health reform initiative in the United States since the creation of Medicare and Medicaid in 1965.

Yes, that’s my opinion, but I can defend it for several reasons. First, implementing an all-payer global payment system really can’t be watered down too much. Certainly, for example, the large teaching hospitals – which the report indicates are doing financially better than community hospitals – may continue to do better under a global payment system, but fundamentally global payments, (with associated incentives for quality), will transform FFS incentives for volume of care into incentives for efficiency and quality.

And second, shifting the healthcare delivery system’s fuel source from FFS to global payments should cause clinicians and health providing institutions and organizations to reorganize themselves into forms, (i.e. ACOs and their subsiadary building blocks), that can accept global payments and effectively manage care. (If they don’t then they will likely find that their global payments aren’t covering their costs, or their quality of care falls behind those who do effectively reorganize their care delivery structures and incentives.)

The Commission uses the term Accountable Care Organizations (ACOs) to describe these types of conglomerations, but each ACO will certainly have its own unique structure derived from the components that were woven together to form it. (I like to call these Multiform Accountable Care Organizations or MACOs.)

While health reform is often talked about as if it would create the same structures and options across the country, this variety will be good a thing since it will reflect local cultures, as well as the unique characteristics of the local providers, clinicians, payers, and community leaders, and their relationships.

While Massachusetts has been pointed to as a model for national health reform – and the state should be proud of achieving near universal coverage – shifting the health system’s fuel source from volume to quality will be a much more profound achievement with longer lasting implications. After taking significant steps to increase insurance coverage to >97%, payment reform and delivery system transformation are the next logical tandem steps. Nothing else being discussed at the Federal level or in other states would have as sweeping an impact as going to an all-payer global payment system. (Yes, there are Federal and state demonstrations and pilot programs for medical homes and other more focused types of bundled payments, but they are toe-dipping rather than diving-in initiatives.)

Next Steps
The state legislature is expected to start hearings on the Special Commission’s recommendations in September. At this point the major stakeholders – including insurers, doctors, and hospitals – are supporting the recommendations. Health reform advocates should start paying attention and figuring out how to mobilize support for the legislature to implement these recommendations so that no matter what happens with Federal reform, Massachusetts will be ahead of the curve in taking real steps to bend the spending growth curve. And if there is no Federal legislation this year, Massachusetts will be even farther ahead of the curve and positioned to lead the rest of the nation as well as create a more economically attractive environment for starting businesses and creating jobs – while improving the quality of healthcare.

Health Reform Hyperbole Heightens

Posted on July 21, 2009 by Michael D. Miller MD

With Congress in the midst of considering health reform legislation, the slanting rhetoric about the proposals is escalating. For example, TV shows such as The Daily Show are covering the debate, and Congressional Republicans have put out a graphic showing their view of the health system the proposal from the Democrats in the House of Representatives would create:

What I find very, very, very interesting in this view, (prepared by Republican Congressional staff), is the top line of the graphic showing the US Congress operating on an equal basis with the President in running the Federal Departments of Treasure, HHS, VA, Defense, and Labor. This might just be a liberal reading of the Constitutional powers of different branches of the Federal government – but I thought the Republican viewpoint tended to be more of a literal interpretation of the Constitution. So while the point of this chart might have been to show how confusing the Democrats’ proposals might be, I’m more confused by what it shows about the Republican’s view of the role of Congress in running the government.

Simple v. Complex Solutions for Problems in Complex Systems
Having worked in the House and the Senate, and the White House and a Federal agency (NIH), I find this interpretation of the role of Congress in our government’s operations to be as worrisome as any potential complexity of the health reform proposals. Actually, I would be more worried if our elected officials were saying that they had simple solutions to our health care system’s costs, access and quality problems, since that would violate the general principle of, “if it was simple, someone would have done it already.” I think even the casual observing American would realize that our healthcare system is complex, and simple solutions aren’t realistic in the real world – which, of course, is very different than the political world.

Health Reform Hiatus – or Not

Posted on June 28, 2009 by Michael D. Miller MD

I’ve been reading so much about health reform that the inside of my eyelids are burning with headlines about draft committee bills, CBO scoring, Republican responses, editorials for and against various amorphous proposals, and multiple organizations advocating about a public plan option, a public plan option, a public plan option…….

I was hoping that for the July 4th Congressional recess week the public’s and pundits’ attention would go elsewhere, but then I saw this week’s Economist cover picture of President Obama:

(If you look closely you can see that the syringe is graduated in Trillions of dollars from $0.25trn to $1.5trn – indicating that paying for health reform is likely to be the main cause for political pain.)

International Perspectives
International perspectives may be useful in assessing healthcare systems and reform options. Usually people, (and pundits), in the US look to other countries for lessons about how to fix the US’s problems – despite Atul Gawande’s January 2009 New Yorker article that described how other countries’ health care systems have historical roots rather than being based on social contracts or grand political decisions.

Rather than looking outward from the US, the Economist provides the opportunity to see how other countries view the US health care system and out current reform efforts. [Note: the British have no to observe the July 4th holiday hiatus - after all, for them the date doesn't mark a holiday of independence, but rather the beginning of the unraveling of their global colonial empire.]

The June 26th issue has 2 one page columns about the politics of health reform, and a 3 page article that looks at the problems and possible solutions. The article, “Heading for the emergency room,” is particularly interesting since it uses the terminology I adopted several years ago to describe the issues of high cost and limited insurance coverage as symptoms rather than as fundamental problems in the US healthcare system, and to highlight the fundamental problems as actually being the incentives created by the US’s Fee-for-Service (FFS) reimbursement system. As the article two sentence introductory summary clearly states: “America’s health care is the costliest in the world, yet quality is patchy and millions are uninsured. Incentives for both patients and suppliers need urgent treatment.” Although I’m sure that US physicians, (and other clinicians), and hospitals, (and other healthcare institutions), wouldn’t want to be called “suppliers,” the analysis is spot on.

The article also addresses issues of prevention, health IT, and increasing competition information, transparency and accountability, but eventually returns to the conclusion that incentives need to be realigned – “More competition and transparency would help, but the main goal of any reform plan must be to address the perverse incentives that encourage overconsumption [and overdelivery] and drive up costs.”

This is the same conclusion that’s been reached in Massachusetts. The state’s Special Commission on the Health Care Payment System is expected to release their recommendations in July about how to take health care reimbursements in the state from being based upon a FFS system to one that pays physicians, hospitals, accountable care organizations, etc. using global payments – a term that has multiple possible meanings which will get more precisely defined during the legislative/regulatory process in the coming months.

Conclusions
Stat tuned. Following the July 4th hiatus, Congress will be in session for 4 weeks and there will certainly be lots of action.

Congress’ ability to move health legislation towards consensus and closure in July will be very important since when they return in September there will only be 25 legislative days until the October 15th trigger date for using the Reconciliation rules in the Senate. Of course, there is no requirement that Reconciliation be used after October 15th to achieve the President’s goal of health reform this year, but if bipartisan agreement cannot be reached before then, the temptation to go the Reconciliation route requiring only 50 votes to pass legislation will be very hard to resist – despite the fact that it may limit the substance of what can be included in health reform.

At the state level, Massachusetts has been touted as a model for national health reform – having achieved >97% insurance coverage without the use of a public plan. Its actions in the coming months to realign incentives towards quality, value and team-based, patient-centered care rather than volume of services and clinician autonomy, may be even more significant for truly transforming healthcare in the United States – assuming that healthcare in the States are to become united rather than continuing to be segregated across state lines.

Health Reform’s Line in the Sand

Posted on May 27, 2009 by Michael D. Miller MD

The public plan option was expected to be the most politically contentious issue in the health reform debate – and it now clearly is. MoveOn.org has declared it the #1 priority in health reform, and the National Journal’s most recent Insiders Poll has put forth some striking numbers about the clear partisan divide on this issue. The question they asked in the poll published in their May 23rd issue was “What is your view of including a new public insurance plan in health care reform?” And the results are shown in the graph below:

With 62% of Democrats saying they MUST have it, and 83% of Republicans saying they CANNOT have it, the public plan is clearly a partisan line in the sand.

The debate over the public plan option is clearly a political weapon and not just a policy difference, because exactly what the public plan option would be hasn’t been decided or even extensively discussed. For example, would it be modeled after Medicare? Medicaid? The Federal Employee Health Benefits Program? (FEHBP, like many large employer plans, is a menu of private insurance options, none of which are actually run by the government.)

The political nature of the “dialogue” over this issue is evident from the some of the quotes from the Insider Poll participants:

Democrats:
“Without a public plan, it is total capitulation to the insurance industry. And we know what they have done to us.”
“The public deserves the same service that members of Congress and federal employees receive, a public health insurance option.”

Republicans:
“Why on earth would we want another health care program modeled after Medicare and Medicaid? Because they are such stellar models of well-run, top-notch health care? Not!”
“The ultimate goal of a public insurance plan is to create a single-payer system.”
“Please, please push for this, Madam Speaker, Leader Reid. Beating you over the head with government-run, rationed health care is pure joy.”

Is Compromise Possible?
Some of the interesting compromises around a public plan option include having the public plan be a “fall-back” that would only be created if certain benchmarks for choice, (and possibly cost), are not met. (Such a fall-back provision was included in the Medicare Part D law to ensure that there were sufficient choices of Medicare Part D plans in all parts of the country.) And FEHBP, which as noted above has been mentioned as a model for the public plan option, might not face the same level of criticism about it leading to a national single payer plan, because – like the Commonwealth Connector in Massachusetts – it is comprised of choices of private insurance plans….and I don’t recall hearing Republican Members of Congress calling for eliminating FEHBP.

Healthcare Policy and Healthcare Politics – Summer 2009

Posted on May 26, 2009 by Michael D. Miller MD

As Congressional Committees appear to be steadily walking towards the starting line for considering health care reform legislation next week, I’ve been thinking about various healthcare policy and political events and activities that will influence the substance and process for these efforts over the coming months – and perhaps years.

Because a complete examination of all the important events and documents from the last several months and years would be too long for a single post, summarized below are some of my observations and thoughts about the meaning of 5 touchstones that people will likely reference in the coming months as part of the health reform dialogue:

Massachusetts’ health coverage and reform initiative
The Senate Finance Committee’s 3 Policy Option Papers
Frank Luntz’s health care talking point paper for Republicans
The May 11th letter from 6 national groups to President Obama
The Democratic Party’s development of Organizing for America

As discussed below, each of these activities and documents has dual (or dueling) policy and political goals, (i.e. changing policy to improve the healthcare system, or designed to win political points), that may be aligned or in conflict.

1. Massachusetts Health Coverage and Reform Initiative

The original legislation was a political compromise that included:
- The use of private insurance to expand coverage
- An individual mandate
- An employer penalty for not having all their workers insured (a.k.a. play or pay)
Single payer is discussed and supported in Massachusetts, but wasn’t part of the state’s health reform initiative
The state’s Commonwealth Connector insurance exchange doesn’t include a public plan choice/option
Despite not being a single payer system, nor including a public insurance plan option, the state’s initiative expanded insurance coverage to more than 97%
With the success of increased insurance coverage has come expanded demand for primary care services and subsequently longer waiting times for those services
The state is looking at various processes for controlling costs as a second outcome to be achieved
The state’s ability to control health care spending will likely require Federal regulatory and/or legislative cooperation from programs such as Medicare, Medicaid, and ERISA

2. Senate Finance Committee’s Policy Option Papers

Between April 29 and May 20th the Senate Finance Committee released 3 papers describing options for health delivery system transformation, expanding coverage, and cost savings and revenue raising. (The Committee also held hearings on these papers.)
The overarching theme in these papers is transparency and accountability
Several issues are notable for their absence from the papers:
- Discussion of a single payer option for overall reform
- Cost savings estimates for a public plan option
- Changing or repealling Medicare Part D’s “Non-Interference” provisions as a source of revenue
The only mention of ERISA is in the savings and revenues paper – It is not discussed in the context of health delivery transformation or expanding coverage
Medicare’s physician payment formula problem is discussed, and the cost of a 10 year freeze is cited as $285 billion
Accountable care organizations (ACOs) and care coordination are frequently mentioned goals, but the papers generally only propose demonstrations or pilot projects rather than definitive programmatic changes

3. Frank Luntz’s “The Language of Healthcare 2009″ Paper

This paper advises Republicans how to talk about healthcare in a purely political context. It doesn’t substantially address policy aspects of health reform issues, and it is all about winning as many Republican and moderate hearts without considering their minds
The goal of Luntz’s talking points are to paint Democrats’ health reform plans as leading to government bureaucrats making health care decisions, rationing of care, and denying access to necessary care
The paper builds upon the premise that patient-doctor relationships are good and that government bureaucrats are bad. It specifically states that the Democrat’s “government takeover” of the healthcare system will result in a bureaucrat putting “himself between you and your doctor, denying you what you need”
Luntz’s paper leverages people’s fear about loss of control and autonomy, but it doesn’t address people’s immediate and real concerns that high costs are denying people access to the insurance or care they need – in effect rationing based upon the ability to pay for the ~49 million people in the US without health insurance and the millions more who are underinsured because they can’t afford their co-payments or deductibles

4. May 11th Letter to the President from 6 National Groups

The 2 page letter from AdvaMed, AHA, AHIP, AMA, PhRMA, and SEIU is mostly political posturing
The letter uses all the right phrases:
- “access to affordable high quality health care”
- “transform the health care system”
- “transparency that supports effective markets”
- “aligning quality and efficiency incentives”
- “encouraging coordination of care”
- “adherence to evidence-based best practices”
Karen Ignagni deserves big kudos for pulling together the other 5 groups and getting agreement for the letter, but herding their collective seagull-like members into agreement for specific reform proposals – other than an individual mandate to have insurance – will be a much bigger challenge, as Paul Krugman recently discussed in his recent column
Getting all these groups to the same side of the same table is a success of process, but not a successful outcome. A collective meeting of minds of similar groups was necessary for the enactment and implementation of Massachusetts’ coverage expansion law, and it is also being used in the state’s efforts to control the growth of healthcare spending

5. Organizing for America (OFA)

The Democratic National Committee (DNC) is working to develop OFA as a program to capture the grassroots energy and organization of the Obama campaign, with the goal of using OFA to support the Administration’s policy initiatives – the first of which is healthcare, to be followed by energy and education
On May 16th I attended an OFA-MA organizing meeting – along with about 500 other people from around the state. The open Q&A and my discussions with individuals made it clear that single payer has strong and wide support in this group, despite candidate and President Obama’s consistent message that if we were designing a system from scratch, single payer would be an attractive option, but given our immediate needs and problems, other significant targeted changes are needed to improve people’s lives by increasing coverage and controlling costs quickly and effectively. (Not too mention that such targeted changes face much lower political hurdles than a single payer reform option.)
OFA is gearing up for Congress’ consideration of heatlhcare legislation by organizing house parties across the country on June 6th to gather individual stories and prepare the OFA grassroots rooters to engage their elected representatives, the media, and whoever else they can reach on healthcare reform

Conclusions

How to pay for health reform still hasn’t been determined, and this summer Congress will also have to “fix” Medicare physician fee schedule – which will cost about $20 billion/year
The most difficult aspects of health reform, (outside of paying for it), are how to do risk/severity adjustments for payments and quality analyses, how to measure the success of initiatives using a blend of process and outcome measures, and how to estimate, (or “score”), costs or savings from many of these initiatives – particularly for those that involve behavior change, disease prevention or health promotion, or are expected to act synergistically with other initiatives, such as patient-centered medical homes or other care coordination intensive models
Agreement on principles is easy, but agreeing to specific proposals is difficult because one person’s waste is another person’s income
ERISA is the 500 pound gorilla-issue sleeping in the corner
Massachusetts is different than most other parts of the country – both in terms of policy and politics – but its experience presents valuable lessons about the process for bringing stakeholders to the same table and for creating a health insurance exchange with low-income subsidies
Politics will be required to enact national health reform legislation, but the specific policies put into new laws will be important for determining their success or failure upon implementation, because a disconnect between politics and policy can result in legislation that produces outcomes different from what are intended. For example, the Balanced Budget Act of 1997 changed the Medicare managed care program, (and renamed it Medicare+Choice), with the goal of expanding managed care options for people enrolled in Medicare. However, following BBA ’97 Medicare+Choice options decreased rather than increased. In addition, success or failure of one initiative sets the environment for the next, e.g. the failure of BA’97 to expand Medicare+Choice enrollment created the context for the development of the Medicare Part D prescription drug program in 2003. Similarly, the success of Massachusetts’ expansion coverage law has enabled the state to explore options for controlling overall health spending as a next step – something that would not have been possible if the expansion law had failed or been derailed…… as it had been twice before.

Footsteps

Health Reform Deja Vu All Over Again

Posted on May 15, 2009 by Michael D. Miller MD

On Monday the President announced three basic principles for health reform:

“First, the rising cost of health care must be brought down; second, Americans must have the freedom to keep whatever doctor and health care plan they have, or to choose a new doctor or health care plan if they want it; and third, all Americans must have quality, affordable health care.”

After reading this, I was struck how this statement sounded similar to the principles for health reform in 1993 – So I dug out of my archives the “Health Security Cards” I’d gotten while working on that health reform effort:

(Paper card is on the left, and plastic card is on the right)

Comparing the two sets of principles it is clear that cost, choice and guaranteed access have continued to be top priorities. Interestingly, in 1993, “Preserve Medicare,” and guaranteeing benefits “at work” were also specified, and the first bullet on the paper card guarantees “private insurance” – which may be different than the current push for a public plan option, which MoveOn.org declared in an email to be “the most important part of Obama’s plan.”

While I believe the current Administration is committed to Medicare, the solidity of support behind employment-based insurance has slipped in the last 15 years because outsourcing and offshoring have reduced the employment rolls of large employers, and a few major manufacturers have turned health benefits over to employer organizations. (Note: some of these VEBAs have suffered greatly because of the auto industry’s troubles.) In addition, some Congressional leaders have talked about changing the tax treatment of employer subsidized health insurance – although I think this is based on both policy and fiscal grounds because reducing the tax deductibility of such benefits could raise significant amounts to fund other parts of “health reform.”

This comparison also shows that it is important to understand the historical context for these issues, and that there are only so many words to describe the type of health system we want to guarantee: access, affordability, choice, compassionate care, quality……

What will happen with health reform this time around remains to be seen, but two things are clear. First, the process this time is much more collaborative among Congress, the Administration, and private sector groups. And second, whether health reform involves new laws, regulations, or private sector voluntary actions, the details won’t be printed on the back of a card, and considerable effort will be required to guarantee that these changes improve access, affordability, choice, compassion, quality……

30% Off Health Care

Posted on April 27, 2009 by Michael D. Miller MD

I get lots of emails. Some are interesting. Others are Spam – such as the one offering to double my gas mileage by showing me how to run my car on water. (Don’t they know that cars run on air not water!!!!!)

And last week I got one promising to cut health care expenses by 30%. Not just my health care expenses, but the entire countries spending on health care. (See their promotional coupon below.)

As you can see, this is really a call for people to support a public plan as part of health reform. This is a great message and marketing gimmick, but the problem is that nobody has agreed on the definition of a “public health insurance option.” For example, Nancy-Ann Deparle, (Director of the White House Office of Health Reform), has said that a public plan could be like the Federal Employees Health Benefits Plan, which offers government employees a range of private insurance and managed care options. But I haven’t heard anyone suggest that the FEHBP has reduced costs or premiums by 30%.

The 30% figure probably came from the Lewin Group’s analysis of how many people might go into a public plan option and how much it could save. Their report put some numbers around the obvious conclusions that the lower the prices the government plan paid for healthcare products and services, the less it would cost and the number of people going into such a plan would be greater. They specifically found that, “If Medicare payment levels are used in the public plan, premiums would be UP TO 30 percent less than premiums for comparable private coverage. [emphasis added.]

Another factor that could influence the structure of a public plan, (if one is created in this thing we’re calling health reform), is that paying for healthcare care based upon each service, (a.k.a. fee-for-service), is being widely blamed as a prime cause for healthcare inflation. And many payers – including the state of Massachusetts – are looking for other ways to pay for healthcare, such as making payments based upon quality or complete episodes of care….basically anything but fee-for-service (FFS). Thus, the long term viability and cost savings of a public plan based upon Medicare-like FFS reimbursements is questionable. However, creating a public plan based on payment systems that aren’t yet widely used – such as global payments – also seems problematic. And going the route of Massachusetts, (whose Connector is very much like FEHBP), seems too simple and probably won’t produce significant near term savings.

All this leaves me wondering what will happen, and if there are fourth, fifth, or sixth options?

Culture of Health Reform

Posted on April 13, 2009 by Michael D. Miller MD

One of the challenges for health reform legislation is the culture of the policy and political community.

Massachusetts’ insurance and coverage initiatives have been cited as lessons for health reform at the Federal level and other states. However, while observing a meeting of the state’s Special Commission on the Health Care Payment System last Friday, I was struck by how the culture of this group was very different than what I have often seen in Federal processes or within other states.

The Commission had agreed at their previous meeting that global payments should replace fee-for-service as the main payment route for medical services and products. At Friday’s meeting their discussion about what that system of global payments should eventually look like – and how to get there – was not confrontational, even though the Commission’s representation includes a wide range of stakeholders, including doctors, hospitals, two insurers, the state employees’ insurance plan and two elected representatives.

The collegiality and non-confrontational atmosphere of this Commission compared to national discussions of similarly broad groups – such as the Health Reform Dialogue – may provide important insights for other health reform efforts. The reasons why health reform in Massachusetts has this type of culture is probably a long list, but some of them might be:

The stakeholders realize that payment reform is part of longer-term cost containment efforts that will be necessary for the overall success of the state’s insurance expansion program
Despite the overall economic downturn, the state and its healthcare system are generally better off than other states and healthcare operations
The state has a generally progressive bent, and is somewhat culturally aligned, e.g. almost everyone is a Member of Red Sox Nation

Whatever the reasons for the agreeablity within the Commission and the state, progress thus far has been a significant achievement, and could lead the way for significant reforms at the Federal level or within other states – particularly if they can replicate a similar culture of cooperation and agreement.

Next Challenging Steps
Of course, the Special Commission won’t be making all the detailed decisions necessary for actually reforming payments, such as:

How quickly the new system will be initiated
How much the global payments will be
Who will get the global payments, e.g. hospitals, integrated delivery systems, physician groups, or some combination of providers
What types of quality information those receiving the payments will have to provide
What levels of cost containment will the new global payment system be expected to meet – and what measurements will be used to determine if costs are being constrained appropriately

Those types of decisions will be made by the state legislature and a government agency – or para-governmental entity created for these purposes. These upcoming decisions and their implementations will be where the even harder challenges await. However, given the Special Commission’s progress so far – and the state’s ability to implement and sustain the insurance expansion program – the likelihood that these harder steps will at least be partially successful seems good. So while critics have been predicting the downfall of the Massachusetts insurance coverage expansion experiment because of rising costs, that’s not the future I see.

The political and policy leadership in Massachusetts seem to have a sustainable group-think and desire to keep on the path they’ve started on rather than veering off into another direction to achieve immediate cost savings or politically expedient gains. The ability of the state to do this will be aided by some of the factors postulated above, as well as the political clout the state has in Congress, and the Governor’s relationship with the President. But those factors may change with time, so the ultimate ability of the state to sustain ongoing reforms and improvements to the healthcare system within the state may very well depend upon its momentum of success. They’ve had great success in reducing the number of people without health insurance. Now cost containment via payment system reform is the next success that must be achieved.

Health Reform With a Public Plan or Not?

Posted on April 9, 2009 by Michael D. Miller MD

National Journal’s cover story last week (“The Deal Busters“) was about the 4 issues that could kill health reform. And first on the list was creating a public health insurance plan option to compete with private insurers in the push for increasing coverage.

The National Journal does a great job of describing the stakeholder groups’ political pros and cons around a public plan, but it doesn’t delve too deeply into the policy implications of expanding health insurance coverage with or without a new public plan option. That issue was recently discussed in Charlie Baker’s blog – which included several key points about public versus private insurance plans:

Public plans often set the standard that private plans follow, and thus are not neutral actors in the market – Medicare is often ascribed such a market tilting role
Public and private plans face different financial pressures, i.e. private plans need to at least break even, while public plans can get financial infusions from their larger government entities
Public plans “can set provider prices at pretty much any level they like, while private organizations need to reach a mutually agreeable number,”[quoted from Charlie Baker's posting], which can lead to cost shifting from public plans to private payers – as happens today with Medicaid (and probably Medicare)
Public plans are required to go through administrative processes, (such as publishing rules for public comment, etc.), which makes changing their benefits structure or operations an extremely time consuming process

The discussion also included a number of factors that would be necessary for a public plan to actually compete on a level playing field with a private plan, including:

Premiums reflecting all administrative costs, including those performed by other government agencies
Medical claims and administrative costs being covered by premium revenues
Provider reimbursement rates being negotiated rather than unilaterally set
Providers being able to refuse to accept the public option for the under 65 population, while continuing to be able to accept Medicare patients
The regulating/marketing operations and the purchasing/selling roles for the public plan need to be separated and not done by the same entity
Payments need to be risk adjusted – this is necessary in any restructuring of insurance markets whether there is a public plan or not

Adding to the analytical information mix about the effects of a public plan option in health reform, the Lewin group just published a paper on this subject – “The Cost and Coverage Impacts of a Public Plan: Alternative Design Options.” This paper looks at several options for how a public plan could be structured, e.g. open to everyone or just individuals and small employers, and using Medicare or private sector payment levels.

Not surprising, the study found that using Medicare’s lower payment amounts to hospitals and physicians, and making the public plan available to everyone results in the lowest premiums for the public plan option and the greatest shifting of individuals from private insurance to the public plan. HOWEVER, the Lewin plans analyses are based upon several assumptions that other coverage expanding reforms proposed by President Obama in the 2008 campaign are also created:

Mandate for children to have coverage
Medicaid is expanded for all adults below 150% of the Federal Poverty Level
Tax credits are provided to people with incomes between 150-400% of the FPL who buy private insurance
Tax credits are provided to small employers with low-wage workers to offset some of the cost of health insurance
Large employers are required to offer insurance or pay a payroll tax
Medical underwriting and health status rating is eliminated, but rating by age is permitted

These changes are designed to increase insurance coverage, and are certainly individually and collectively important for fundamentally reshaping the health insurance market – particularly the last bullet. Therefore, the operations and influence of any public plan would be very different with those changes than in today’s insurance environment, and that needs to be considered in discussing the political and practical pros and cons of a public plan option.

Conclusions:
The conclusion I draw from all this – and which I’m paraphrasing from my comment on Charlie Baker’s blog – is that government programs serve a valuable social role, but the differences between public and private operations need to be recognized as they each carry specific benefits and limitations. Therefore, the real conundrum about whether a public plan in health reform is part of the right answer depends upon how the question is asked and whether it’s put into a policy or political context. Unfortunately, those two contexts are not separable in the real world, so the challenge in this debate is to connect the two in the legislative process, and see if a compromise can be reached to realistically increase insurance coverage and contain costs, but that won’t cause any stakeholder group to fall on their sword.

Health Reform Challenges and Prospects

Posted on February 19, 2009 by Michael D. Miller MD

The prospect for Federal health reform legislation remains high because of the growing need, Democratic control of Congress, and a lower barrier to major actions because of the economic situation. However, opposing these positive factors are the apparent unraveling of broad coalitions supporting fundamental health reform, and lower expectations for bipartisanship in Congress.

Growing conflicts within health reform coalitions was reported in Tuesday’s Chicago Tribune, (and discussed on the HealthBeatBlog), but this dis-cohesion was very predictable when it came time to talk specifics. Unfortunately, the prospects for bipartisan action on health reform also seem to have faded sooner than one would have hoped. This was seen in the recent National Journal’s Insider’s Poll which asked the question -

“Have events of recent weeks made you more encouraged or less encouraged about prospects for bipartisanship this year on major issues that Congress has yet to tackle, such as health care reform and energy legislation?” [emphasis added]

The responses to this question from 36 Democratic and 35 Republican Insiders was:

The fight over the stimulus legislation clearly has driven a hammer down on bipartisanship in Congress. This will make passing health reform legislation harder, since health reform is never easy and the one bipartisan example of major health legislation in recent decades was HIPAA. The development and passage of HIPPA demonstrate the value of bipartisan leadership for moving a substantive and complex piece of legislation through the process. (For HIPAA, that bipartisan leadership came from Senators Kennedy and Kassebaum – who retired in 1997 after the law’s passage.)

Conversely, examples go back months, years and decades, showing that narrow, partisan voting has been the norm in health legislation. For example, the recent SCHIP reauthorizations were subject to multiple rounds of partisan wrangling, the Medicare Modernization Act in 2003 passed by 1 vote, with 9 Democrats voting in favor and 19 Republicans voting against, and the 1993-94 health reform initiative dissolved, in part, because of lack of leadership and partisan maneuvering.

Agreeing on a Second Choice
While faltering coalitions and partisanship certainly present real hurdles, the overarching challenge for overcoming these barriers will be to see if Stuart Altman’s well known insight about health reform can be turned on its head. That is, while it is unlikely that there will ever be broad consensus about the structure for health reform, Professor Altman has observed that everyone’s second choice has been the status quo. However, if everyone’s second choice can be flipped to “anything but what we have now,” then with adequate leadership and a reasonable plan, significant reform may be possible.

Economy as a Catalyst?
The economic situation may be the catalyst to drive people to support “anything but what we have now.” But agreement on that second choice option won’t itself determine the substance for health reform legislation. To actually pass a law and implement the reforms it contains, the proposal must be explainable as to how it will both work and benefit individuals, society, and the economy. This will clearly take leadership – and likely some level of bipartisan agreement in Congress. While the prospects for bipartisanship seem bleak now, if it changes, and a health reform proposal is developed that is practical, defensible, and addresses the cost, access and quality concerns that are worrying patients, families and businesses, then real health reform is possible.

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