Bending the Curve Through Health Reform Implementation

Authors from The Brookings Institution update their recommendations by focusing on 3 concrete objectives to slow spending and improve quality of care within the next 5 years.

Published Online: November 19, 2010
Joseph Antos, PhD; John Bertko; Michael Chernew, PhD; David Cutler, PhD; Francois de Brantes; Dana Goldman, PhD; Bob Kocher, MD; Mark McClellan, MD, PhD; Elizabeth McGlynn, PhD; Mark Pauly, PhD; Leonard Schaeffer; and Stephen Shortell, PhD
Executive Summary

In September 2009, we released a set of concrete, feasible steps that could achieve the goal of significantly slowing spending growth while improving the quality of care. We stand by these recommendations, but they need to be updated in light of the new Patient Protection and Affordable Care Act (ACA). Reducing healthcare spending growth remains an urgent and unresolved issue, especially as the ACA expands insurance coverage to 32 million more Americans. Some of our reform recommendations were addressed completely or partially in ACA, and others were not. While more should be done legislatively, the current reform legislation includes important opportunities that will require decisive steps in regulation and execution to fulfill their potential for curbing spending growth. Executing these steps will not be automatic or easy. Yet doing so can achieve a healthcare system based on evidence, meaningful choice, balance between regulation and market forces, and collaboration that will benefit patients and the economy (see Appendix A for a description of these key themes).

We focus on three concrete objectives to be reached within the next five years to achieve savings while improving quality across the health system:

1. Speed payment reforms away from traditional volume-based payment systems so that most health payments in this country align better with quality and efficiency.

2. Implement health insurance exchanges and other insurance reforms in ways that assure most Americans are rewarded with substantial savings when they choose plans that offer higher quality care at lower premiums.

3. R eform coverage so that most Americans can save money and obtain other meaningful benefits when they make decisions that improve their health and reduce costs.

We believe these are feasible objectives with much progress possible even without further legislation (see Appendix B for a listing of recommendations). However, additional legislation is still needed to support consumers – including Medicare beneficiaries – in making choices that reduce costs while improving health.

Objectives for Moving Forward Health Reform

OBJECTIVE 1: Speed payment reforms away from traditional volume-based payment systems so that most health payments in this country align better with quality and efficiency.

Our previous report emphasized that reorienting providers’ financial incentives and support toward improving value is essential. Medicare fee-for-service (FFS) payments are becoming steadily less generous. Reductions in payment updates for most providers, in addition to lack of funds to provide longer-term updates for physicians, creates rising pressure for policymakers, private payers, and especially healthcare providers to find better alternatives to current payment models. FFS payments may be the best payment strategy in some circumstances and adjustments to make FFS payments more accurate and efficient can help. But reducing payments for “overpriced” services, combating fraud, and reducing administrative costs are insufficient to solve the fiscal challenges facing the healthcare system. Moreover, reducing payment and administrative costs will not address other shortcomings of the healthcare system such as fragmented care, the lack of evidence-based care, and the lack of accountability for improving quality and efficiency in the US healthcare system.

The ACA offers a number of opportunities to develop evidence on alternatives to traditional FFS provider payments to transform our health system. It grants broad new authority to reform Medicare payments, and for Medicare to support private-sector payment reforms. Still, there is high uncertainty as to whether these initiatives will successfully address the issues associated with controlling spending growth and increasing quality; payments are still largely disconnected from quality and the use of unnecessarily costly services. There is also no clear path yet to identify and quickly implement effective combinations of payment reforms or to scale effective reforms quickly. Furthermore, political pressure has repeatedly undone past efforts to reform Medicare provider payments, making it essential to take steps now to build momentum to use these new opportunities effectively.

Specific Recommendations for Bending the Curve

1. Design Medicare payment reform pilots, demonstrations and programs, including accountable care organizations (ACOs), to achieve rapid innovation, synergy, and scalability. The overall aim is to move toward payment for a broader set of services for a patient, with shared savings and losses based on prospective budgets for total spending, partial or full capitation, or bundled payments.

• Pilot a range of ACOs in Medicare before 2012, accommodating the diversity of market characteristics across the country; use the new Center for Medicare and Medicaid Innovation (CMMI) as a vehicle for accelerating these pilots.

• Implement bundled and related payment reforms for hospital, physician, and other clinical services for important episodes that cover enough of the medical costs in aggregate (eg, chronic conditions as well as hospital-based episodes) to change behaviors across the health system.

• Promptly introduce downside risk to ACOs, as well as episode and bundled payment pilots, even at early stages of implementation.

2. Coordinate CMMI and other Medicare pilot initiatives to promote collaboration with private and state payers, as well as across federal initiatives.

• Ensure that the private sector is an active partner in the research and design of payment reforms, building on concepts that have been proven to work at the state, regional, or federal level. Specifically, Medicare should give preference to multi-payer initiatives to test reforms.

• Clarify regulatory guidance and policies that are essential in a FFS environment but that could stifle public and private sector innovation around value-based payments. Further guidance and opinions may be needed to address potential anti-trust concerns related to provider collaboration, as well as anti-kickback concerns.

• Implement consistent methods to measure improvements in performance across pilots, and across the public and private sectors. Tracking the evolving combinations of payment and other reforms that achieve maximum impact is essential. Trying to evaluate individual payment reforms in isolation, rather than focusing on combinations of reforms that achieve the largest effects, may lead to overly narrow and slow reform, without full understanding of unintended consequences, complementary incentives, and reinforcing organizational and community contexts.

3. B uild comparable data collection, aggregation, analytics, and reporting capabilities to more rapidly develop consistent evidence of the impact of reforms on cost and quality. This involves making better use of existing data sources and supporting incremental, progressive improvements in electronic data, instead of waiting for full electronic records.

• Develop timely and consistent data feeds from Medicare, private payers, and other data sources. This will give providers the information they need to take steps to improve care for beneficiaries, as well as to support better performance measures.

• Adopt standardized performance metrics by leveraging measures already endorsed as consensus standards (such as through the National Quality Forum). Measures should be both timely enough to enable action by providers and broad-based enough to reflect the experience of the entire US population and the full spectrum of care. Measures should also be outcome oriented and widely available to facilitate knowledge transfer to all populations, communities, and consumers.

4. Strengthen and clarify the authority and capacity of the Independent Payment Advisory Board (IPAB). Doing so will enable the IPAB to effectively apply pressure to transition away from the current FFS payment model.

• Recruit knowledgeable representatives of the entire health system and other experts, particularly those of provider groups. Attracting the right talent pool will require sensitivity to time commitment and avoidance of overly broad conflict of interest disqualification.

• Assure IPAB’s mandate allows a broad range of payment reforms beyond reductions in payment rates for particular services in achieving its “GDP 1%” goal for per-capita spending growth. In the short term, this should include many reforms considered by the Medicare Payment Advisory Committee (MedPAC) – which are available now and have already been tested by states and the private sector. Doing so could provide a pathway for IPAB to take action before its “due date” of 2014.

• Empower IPAB with tools (eg, performance measures and clinical, economic, and actuarial expertise) to identify emerging treatment and payment trends quickly.

These steps focus on using the broad authority in the reform law for Medicare and other public programs to implement effective payment reforms. Additionally, they stress opportunities for government programs to complement and promote effective private sector reforms. The following objectives provide much stronger accountability and incentives for private payers to implement payment reforms that reduce costs and improve quality as well.

OBJECTIVE 2: Implement health insurance exchanges and other insurance reforms in ways that assure most Americans are rewarded with substantial savings when they choose plans that offer higher quality care at lower premiums.

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