Transcript Healthcare Across the Nation: Reducing Variation in

Health Care Reform in 2009:
Expanding Coverage and Reforming
Health Care Delivery
Aaron McKethan, Ph.D.
The Engelberg Center for Health Care Reform
The Brookings Institution
May 28, 2009
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Presentation Overview
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Context of national health care reform
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Common options to expand coverage and fill financing gaps
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Reforming health care delivery, moving toward accountable care
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One promising model: accountable care organizations
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Context for Reform
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Government already plays a huge role in health care
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Local, state, and federal government spending accounted for 46% of the
estimated $2.4 trillion spent on health care in 20081
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$461 billion on Medicare, $361 billion on Medicaid
Medicare and Medicaid spending alone is projected to account for as much as
13% of GDP by 2040, if these program continue on current trajectory
Income and payroll tax exclusions for employer-provided health insurance
accounted for another $250 billion per year in foregone federal revenues2
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Health care spending has risen about 2.7% faster than the overall economy for
the past half century4,5
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Total health care costs are projected to increase from 16% to nearly 20% of GDP
in the next decade
Sources: 1. Keehan, Sean et al, “Health Spending Projections Through 2017: The Baby-Boom Generation Is Coming To Medicare,” Health
Affairs 27 (2008): w145–w155 (published online 26 February 2008).; 2. Steuerle, C. Eugene, “Is Health Spending Out of Control?” National
Center for Policy Analysis Brief Analysis No. 586, 17 May 2007.; 3. Office of Management and Budget, Analytical Perspectives: Budget of
the United States Government, Fiscal Year 2009 (2008).; 4. Centers for Medicare and Medicaid Services. “National Health Expenditure
Projections 2007-2017.” 5. Congressional Budget Office. “The Long-Term Outlook for Health Care Spending.” November 2007.
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Projected Health Care Spending as a
Percentage of GDP, 2007 – 2082
Source: Congressional Budget Office, “The Long-Term Outlook for Health Care Spending” (November 2007).
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Context for Reform
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Coverage and payment/delivery system reforms together
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Failure to realize improvements in both cost and quality will render efforts
to expand coverage neither feasible nor sustainable.
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Incremental delivery reforms not enough; must be integrated around
accountability for results/
Tentative bipartisan approach, “engagement” among stakeholders
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Emphasis on “tentative”
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Including but not limited to recent “agreement” for 1.5 percent
slowdown/10 yrs
Bipartisan concern about long-term fiscal impacts
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First, do no harm; “paygo” within 10-year window
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Second, steps to bend the curve over time
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Emerging Reforms/Packages
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Senate Finance Committee
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Congressional Budget Office/Joint Committee on Taxation
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President’s Budget
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American Recovery and Reinvestment Act of 2009
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Patients’ Choice Act
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Common Infrastructure Reforms
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Health information technology
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Improve quality measurement infrastructure
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Needed to: (a) support providers in improving care; (b) move toward
payments for value; and (c) evaluate payment/delivery system
reforms
Comparative effectiveness research
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Build on HIT provisions in ARRA to ensure that “meaningful use” is
meaningful
Beyond head-to-head treatment studies; including practice patterns
and analysis on subpopulations
Infrastructure subtotal: ~($20-$30B) over ten years
Note: Numbers are illustrative based on a range of reforms being discussed.
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Common Components of Coverage Reform
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Individual responsibility/mandate for health insurance
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Medicaid/SCHIP Policy
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Interactions with insurance exchanges
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Expansions of mandatory or optional populations up to ~100-250% FPL
Insurance Exchanges
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Non-group and small groups get a range of plan options via actuarial
equivalence, possibly including public plan
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Risk adjustment, modified community rating with age bands, no pre-existing
condition restrictions, etc.
Targeted Subsidies
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Range of definitions of “minimum creditable coverage” and enforcement
strategies
Ideas: Low-income subsidies/tax credits, subsidies for max spending-to-income
thresholds, small firm tax credits, early retiree credits, etc.
Coverage reform subtotal: ~($1,000B-$1,400) over ten years
Numbers illustrative
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Common Financing Options
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Changes to tax treatment of employer-sponsored insurance
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Employers must make a creditable commitment (pay or play)
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Range of options, including caps, exceptions, income but not payroll
taxes, etc.
Most firms must offer/contribute to insurance coverage
Other revenues or offsets
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Alcohol, cigarettes, sugar-sweetened beverages, etc.
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Re-directing some DSH payments
Financing subtotal: ~$500-$700B over ten years
Note: Numbers are illustrative based on a range of reforms being discussed.
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Health Reform Subtotals
Category
Budget range
(10-year estimates)
Infrastructure
~($20-$30B)
Coverage
~($1,000-$1,400B)
Financing
~$500-$700B
Gap
~($520-$730B)
Note: Numbers are illustrative based on a range of reforms being discussed.
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Filling the Gap: Common Payment/
Delivery Reform Options
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Prevention/wellness
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Reduce payments for lower-value care
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More bundled payments
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Targeted pay-for-performance
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Coordinated care programs, benefits
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Transitioning to accountability-based payments
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Delivery system reform subtotal: ~$300-350B
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Remaining gap: ~($220-380B)
Note: Numbers are illustrative based on a range of reforms being discussed.
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Key Elements of Delivery System Reform
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Local accountability for quality and cost across the care continuum
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Feasible across diverse practice types/organizational settings
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Reforms should be flexible to allow for variation in the structure and
strategies of local health systems
Shift payments from rewarding volume and intensity to increasing
value
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Reforms should “build in” expectations of cost containment and quality
improvement
Payments should encourage collaboration and shared responsibility
among providers and consistent incentives/measures from payers
Help consumers make better decisions
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With increased accountability on the part of providers must come
greater transparency and decision support for consumers
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Accountable Care Organizations
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ACOs are collaborations to assume responsibility for overall patient care,
across providers and care settings.
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Key features of ACOs:
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Voluntary provider participation
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Local accountability for cost, quality, and capacity across the
continuum of care
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Payment incentives (e.g., shared savings) and related organizational
support gives providers the support needed to improve care and slow
cost growth
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Performance measurement to ensure that appropriate care is being
delivered and that cost savings are not attributable to limitations on
necessary or appropriate care
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Some ACO Issues
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ACO Structure: Established governance structure and broad (voluntary)
physician and payer participation. Ideally participation by Medicare.
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Measures: Well-established performance measures relevant to multiple
payers/populations. Included measures become more sophisticated over
time.
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Payment Incentives: Participating payers agree to adopt their own
provider payment incentives that at a minimum involve QI and may
include cost savings and efficiency; incentives based on performance
across specified populations.
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Over time, ACO payment incentives can transition from “one-sided”
shared savings to two-sided risk, partial capitation, and further reforms
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Beneficiary incentives also possible (e.g., differential copays)
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Performance reporting: Providers, payers, and consumers receive
regular, risk-adjusted reports about performance with benchmarks.
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Complementary reforms: ACOs are compatible with, and can be
reinforced by, other reforms including bundled payments, care
coordination, chronic disease management, pay-for-performance,
incentives to prevent re-hospitalizations, etc.
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Initial Shared Savings Derived from
Spending Below Benchmarks
Projected Spending
ACO Launch
Spending Benchmark
Shared Savings
Spending
Actual Spending
Time
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Steps for Initial ACO Implementation
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Local providers and payers agree to pilot ACO reform
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ACO provides list of participating providers to payers
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Patients are “assigned” to ACOs (e.g., based on preponderance of E&M
codes)
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Actuarial projections about future spending are based on last 3 years
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Determine/negotiate spending benchmark and shared savings
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ACO implements capacity, process, & delivery system improvement
strategies
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e.g., reducing avoidable hospitalizations, coordinating care, health IT
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Progress reports on cost and quality are developed for ACO beneficiaries
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At year end, total and per capita spending are measured for all patients
(regardless of whether they received care from ACO providers)
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Savings under the benchmark is shared between providers and payers