By Frank J. Thompson
The federal government plays a huge role in shaping the US health care system. Medicare and Medicaid alone insure well over 100 million Americans, cost close to a trillion dollars, and, in the case of Medicaid, leverage considerable state funding. An array of other federal programs deliver care, monitor health threats, shape advances in medical knowledge and technologies, and influence the human and physical capital available to the health care system. The new administration may well propose health policy changes. This memo, however, focuses on certain initiatives that the new administration should support which do not require congressional action.
Three core values compete for attention in the health care arena – access, quality, and cost containment. The last decade has witnessed the emergence of federal initiatives that seek to diminish the oft-noted trade-offs among these values. Under the banner of the “Triple Aim,” they simultaneously seek to enhance access to higher quality care while containing costs. A commitment to performance measurement and management has undergirded some of these initiatives as a willingness to use federal waivers to promote state innovation. The three recommendations below call for vigorously implementing and learning from these initiatives.
1. Evaluate and Build Upon Payment-for-Performance Initiatives
Payment-for-performance (P4P) systems have become a pervasive tool in the federal government’s efforts to promote the Triple Aim through the “value-based purchasing” of health care. One of these P4P initiatives seeks to encourage the formation of Accountable Care Organizations (ACOs) – formally recognized networks of hospitals, medical specialists, primary care practitioners, and other stakeholders to achieve greater care coordination while reducing wasteful services. Under this model, these networks apply to be recognized as ACOs. By the end of 2015, federal officials had certified well over 400 Medicare ACOs, which were collectively responsible for nearly eight million beneficiaries (Baseman et al. 2016: 20-22; Shortell et al. 2015: 648-650).
To receive a performance bonus, an ACO must accomplish two tasks. First, it must generate cost savings relative to an expenditure benchmark negotiated with federal officials. Potential Medicare savings substantially derive from opportunities to reduce those tests, hospital admissions, and related services that yield few or no health benefits and may even be harmful. Second, the ACOs must perform well on certain quality-of-care metrics. If an ACO masters these two tasks, the federal government allots a portion of the shared savings to it for distribution among network members (gainsharing). Federal officials reported that the Medicare ACOs qualified for $445 million in shared savings in 2014 (Shortell et al. 2015: 654). Mean scores on the great majority of their quality metrics also rose (e.g., screening for high blood pressure). But success varied considerably among Medicare ACOs with 28 percent qualifying for bonus payments based on shared savings (Baseman et al. 2016: 21-22).
Federal officials have also been willing to approve state requests to establish Medicaid ACOs in jurisdictions such as Maine, Minnesota, New Jersey, Rhode Island, and Vermont. Some research suggests that Medicaid ACOs may achieve significant savings and promote the Triple Aim if they focus on super utilizers – individuals with the most acute health problems who account for a disproportionate share of program costs (e.g., Cantor et al. 2014). Super utilizers, many of whom have mental health and substance abuse problems, drive up costs largely through frequent – and often avoidable – admissions and readmissions to hospitals. Proponents of Medicaid ACOs believe that assertive care coordination that integrates medical care for chronic conditions with behavioral health services, and takes into account the social drivers of poor health (e.g., inadequate housing, poor nutrition) can foster the Triple Aim.
While the efficacy of the ACO initiative in promoting the Triple Aim remains to be seen, it represents a commendable federal effort to foster higher quality care while staunching the tendency of a fee-for-service system to generate services of little value. The ACO model should be fully implemented and evaluated to extract lessons for future efforts to foster the Triple Aim.
2. Prioritize Implementation and Evaluation of Physicians Systems
The value-based purchasing initiative has not only featured P4P for networks and organizations, it has also targeted physicians. Federal policymakers set the pay rates for over 7,000 Medicare services. But they had historically done little to counteract incentives in the fee-for-service system that increase the volume of care Medicare doctors provide. In 1997 Congress responded to this problem by establishing the Sustainable Growth Rate (SGR) formula that lowered physician pay rates if the aggregate volume of their services pushed overall expenditures beyond a targeted figure. Starting in 2002, the formula began to trigger annual proposed cuts in physician pay rates; this in turn fueled intense lobbying by physician groups with Congress voting to override the formulaic cuts year after year.
Policymakers grasped the limits to the SGR incentive system, and a bipartisan majority in Congress responded by approving the Medicare Access and CHIP Reauthorization Act of 2015. The new law forged a P4P template for physician payment into the indefinite future. After receiving an annual increase of a half percent between 2016 and 2019, Medicare doctors would shift to a P4P scheme by choosing one of two paths. One path, the Merit-Based Incentive Payment System, promised to reward physicians with pay rate increases that reflected their performance on metrics related to quality, clinical practice improvements, and use of electronic medical records. The new legislation charged the Department of Health and Human Services with developing a methodology to compute a summary composite performance score for each physician. A second path, the Alternative Payment Model, promised physicians annual rate increases of 5 percent from 2019 through 2024 if they participated in Medicare ACOs or other approaches that federal officials had promoted to foster more cost-effective care (Oberlander and Laugesen 2015).
The degree to which the new Medicare P4P system for doctors will advance the Triple Aim is an open question. Success in this regard will depend heavily on the capacity and skills of those responsible for implementing these measures as well as the support they receive from congressional leaders and the top-levels of the executive branch.
3. Prioritize Learning from Federal Waivers
Medicaid waivers have emerged as a major policy tool for executive branch action – as a vehicle for a presidential administration to leave its particular thematic stamp on the program. The incoming administration will have a golden opportunity to learn from waivers granted to states to pursue alternative approaches to the Medicaid expansion authorized by the Affordable Care Act (ACA) of 2010. Granted to states that would otherwise be ideologically resistant to the expansion, these initiatives stressed a market-oriented, or “neoliberal,” approach to health reform -- private insurance, market competition, individual choice, consumer empowerment, patient cost sharing, and personal responsibility.
The neoliberal waivers granted to states fall into two thematic buckets. One is individual choice and personal responsibility. This theme stresses a consumer driven model that incentivizes patients to take greater ownership over their health care decisions through health savings accounts, cost sharing and other means. Proponents of this theme believe that Medicaid enrollees will behave more “responsibly” if they have some “skin in the game” when making health care choices (e.g., by paying premiums or copayments). They seek to discourage “inappropriate” care by imposing greater cost sharing when enrollees rely on hospital emergency rooms for “non-emergent” services. They also seek to use economic incentives as carrots, rewarding enrollees if they engage in certain desired health care behaviors (e.g., by waiving premiums if they get an annual wellness exam) or search for employment. Indiana, Michigan, and (recently) Montana have received this kind of Medicaid expansion waiver.
A second major theme of the neoliberal waivers is premium assistance. Under a conventional Medicaid expansion, states typically pay providers a fee to serve beneficiaries or contract with managed care organizations to provide care. In contrast, a premium assistance approach spends Medicaid monies to subsidize an enrollee’s employer insurance or the purchase of individual coverage on the ACA’s newly created insurance exchanges. Proponents of these waivers believe that subsidizing healthier.
Medicaid enrollees to purchase insurance on the exchanges will stimulate competition among carriers that limit cost increases. They also believe that the waivers will afford Medicaid enrollees greater access to “mainstream” medical care since insurance companies on the exchanges tend to pay providers more competitive rates than the traditional Medicaid program. These waivers may also enhance Medicaid take-up rates for the expansion population and continuity of coverage by reducing stigma and churning among enrollees. In the conventional expansion model, considerable churning and lapses in coverage derive from shifting eligibility among enrollees for Medicaid and the exchange insurance plans as their incomes fluctuate around 138% of the poverty line. Waivers in Arkansas, Iowa, New Hampshire, and (at one point) Pennsylvania have stressed the premium assistance approach.
Fortunately, the personal responsibility and premium assistance waivers all require external evaluations by sophisticated research organizations. These evaluations along with other research should provide valuable lessons about the relative efficacy of the two types of neoliberal waivers relative to the traditional Medicaid program. The incoming administration should seize this opportunity for learning by assuring that the evaluations are fully implemented.
The P4P and waiver initiatives discussed in this memo should command the attention of the next administration. This is not because we can be certain that they will effectively promote the Triple Aim. For instance, it remains to be seen whether the P4P reforms can escape the pitfalls that often bedevil this approach – gaming, goal displacement, and more. So, too, it is an open question whether the individual choice and personal responsibility waivers will undercut the enrollment of newly eligible poor people in Medicaid. Whatever the potential limits of these initiatives, however, they represent serious governmental attempts to improve the balance among access, quality, and cost in the health care system. They afford a splendid opportunity for policy learning. These initiatives therefore need to be fully tested through committed, skilled implementation and rigorous evaluation. Pursuit of this pragmatic, evidence-based approach will require moving beyond the symbolically charged, all-or-nothing partisan polarization that has engulfed the roll out of the ACA and inhibited policy learning.
Baseman, S., Boccuti, C., Moon, M., Griffin, S., & Dutta, T. (2016). Payment and delivery system reform in Medicare. Washington, DC: Kaiser Family Foundation.
Cantor, J. C., Chakravarty, S., Tong, J., Yedidia, M. J., Lontok, O., & DeLia, D. (2014). “The new Jersey Medicaid ACO demonstration project: Opportunities for better care and lower costs among complex low-income patients.” Journal of Health Politics, Policy, and Law, 39(6): 1185-1211.
Oberlander, J., & Laugesen. M. J. (2015). “Leap of faith – Medicare’s new physician payment system.” New England Journal of Medicine, 373(13): 1185-1187.
Shortell, S. M., Colla, C. H., Lewis, V. A., Fisher, E., Kessell, E., & Ramsey, P. (2015). “Accountable care organizations: The national landscape.” Journal of Health Politics, Policy, and Law, 40(4): 647-668.