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The American Journal of Managed Care October 2009
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Bending the Curve: Effective Steps to Address Long-Term Healthcare Spending Growth
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Bending the Curve: Effective Steps to Address Long-Term Healthcare Spending Growth

Joseph Antos, PhD; John Bertko; Michael Chernew, PhD; David Cutler, PhD; Dana Goldman, PhD; Mark McClellan, MD, PhD; Elizabeth McGlynn, PhD; Mark Pauly, PhD; Leonard Schaeffer; and Stephen Shortell, PhD

A group of experts who have spent their careers studying the healthcare system have convened to identify a path for sustainable reform in healthcare cost growth.

Note to our Readers: It is our policy that the Journal publish only original research – not works reprinted from other sources. In light of the importance and timeliness of the topic, we felt it was necessary to make an exception. This report was first published online (www.brookings.edu/healthreform) and is reprinted below with permission from the Brookings Institution.

Introduction

Reducing the growth of healthcare spending is a top priority of Congress and the Administration, but identifying specific, feasible steps that can achieve this goal has proven difficult. While the political debate has focused on several contentious issues, we believe there is a set of sustainable steps that together can slow spending growth significantly while building the high-value healthcare system our nation urgently needs. In combination with steps to cover the uninsured, reforms to constrain spending growth are feasible and essential for the nation’s fiscal stability and economic well-being.

These steps are not meant to be exhaustive, but rather a set of mutually-reinforcing reforms that we collectively agree could lead to significant reductions in costs and spending growth and improve quality of care at the same time. If implemented together, the impact on spending growth could be substantial. Some of these steps will generate reductions in spending in the short run. Others may take more time to have an impact, but hold more promise for reducing the rate of increased spending over time.

Many of these steps work together to address a critical flaw in American healthcare policies today: the lack of accountability for costs and results. Providers, patients, insurers, employers, and governments all participate in a system with little incentive—or often adverse financial consequences—to improve quality or reduce overall costs. Transitioning to a system of greater accountability will require greater flexibility for private and public stakeholders to experiment with programs and measure results, to see what works best.

First, as a foundation for improving value, all stakeholders in the system need better information and tools to be more effective. Second, provider payments should be redirected toward rewarding improvements in quality and reductions in cost growth, providing support for healthcare delivery reforms that save money while emphasizing disease prevention and better coordination of care. Third, health insurance markets should be reformed and government subsidies restructured to create competition and improve incentives around value improvement rather than risk selection. This step requires near-universal participation in insurance markets to succeed. Finally, individual patients should be given greater support for improving their health and lowering overall healthcare costs, including incentives for achieving measurable health goals. Specific steps to accomplish these goals follow.

Building the Necessary Foundation for Cost Containment and Value-Based Care

Rationale:

As an essential foundation for reform, constraining spending growth while improving value requires information and tools like health information technology (IT) systems. But providing these tools is not enough; stakeholders will also need better incentives to use them, including other reforms described in subsequent sections.

Key Reform 1:

Ensure Investments in Health IT Are Effective

• Link “meaningful use” health IT bonuses to achieving better results as part of systems of quality measurement, quality improvement, and care coordination.

• Create interoperability and provider communication standards, with a focus on filling priority gaps in standards for practical exchange.

• Fund technical support programs to ensure providers adopting health IT have access to comprehensive support for overcoming implementation challenges.

Key Reform 2:

Make Best Use of Comparative Effectiveness Research (CER)

• Create an entity to allocate CER funding based on the expected value of the evidence to be developed, including the national burden of disease and the likelihood that the research will lead to real improvements in care.

• Emphasize areas of medical uncertainty, public health interventions, and broader provider practice patterns and the policies that influence them.

• Protect providers and insurers from liability when they follow best practices and implement safe systems, as identified by evidence.

Key Reform 3:

Improve the Healthcare Workforce

• Create incentives for states to amend the scope of practice laws to allow for greater use of nurse practitioners, pharmacists, physician assistants, and community health workers.

• Align Medicare payments to better support the use of allied health professionals.

• Reform graduate medical education payments to promote the teaching of high-value care practices, including training in ambulatory settings, team-based care, quality improvement tools, geriatrics, and complex patient care management.

Reforming Provider Payment Systems to Create Accountability for Lower-Cost, High-Quality Care

Rationale:

Reorienting providers’ financial incentives and support toward improving value is essential and requires both a short- and long-term strategy. Adjustments in fee-for-service payments can rectify some problems initially, but simply reducing payment rates for “overpriced” services is insufficient. Fundamental change is needed through a timely transition to new payment systems that have accountability for reducing costs and increasing quality, reinforced by increasing pressure to make fee-for-service less attractive over time. Because experience with payment reform will lead to important refinements, it is also crucial to promote rapid learning and flexibility in responding to new evidence on the effectiveness of payment reforms.

Initial Reforms:

Adjust Medicare and Medicaid Fee-for-Service Payment Systems

It will take time to reform value-based payments and delivery systems; however, some payment adjustments within fee-for-service programs can be made more quickly. These can support providers in transitioning to more effective payment systems, and include:

• Broaden bundled payments, such as hospital and post-acute care, hospital and physician services, high-cost episodes of care.

• Expand the use of pay-for-performance, ideally using health outcome and patient experience measures, when evidence demonstrates that such reforms do not increase costs.

• Increase payment rates for primary care, offset by reductions for specialty care.

• Provide additional payments during this transition period to physicians whose practices serve as “patient-centered medical homes” responsible for first contact and coordination across all care received.

• Ensure Medicare payments support the use of allied health professionals.

• Reduce payments for care of low value relative to cost
—for example, by reducing clearly inappropriate utilization and overpayments, as identified by the Medicare Payment Advisory Commission (MedPAC).

• Increase spending on programs to reduce waste, fraud, and abuse in Medicare, including provider education and guidance programs.

• Enable Medicare Prescription Drug Plans (PDPs) to share in overall cost savings created by more effective use of prescription drugs.

• Establish a regulatory pathway for follow-on biologics.

Key Reform 1:

Build New Payment Systems for Provider Accountability


In conjunction with adjusting fee-for-service, new payment systems are needed that promote accountability for health outcomes and overall costs. The following are the most promising ideas that—because they are not yet well developed— should be rapidly piloted, refined, and expanded if effective:

• Pilot Accountable Care Organizations (ACOs), which integrate a group of physicians, hospitals, and other providers around the ability to receive shared savings bonuses by achieving measured quality targets and reducing overall spending growth for a population of Medicare beneficiaries. Advanced ACOs could also receive partially capitated payments with quality bonuses, as in the “Alternative Quality Contract” model developed by Massachusetts Blue Cross/Blue Shield. The Centers for Medicare & Medicaid Services (CMS) would facilitate public-private collaborations in which private plans adopt payment incentives for ACO providers based on consistent measures. Expedited processes for exemptions from Stark and anti-gainsharing laws are necessary for ACO pilots to work.

• Pilot “enhanced episode-based payment” systems and other promising payment systems. Payment rates for certain types of episodes of care would be set through competitive bidding with risk-adjustment, with public reporting of provider outcomes and quality bonuses. On the beneficiary side, tiered copayments should be implemented, to encourage use of providers that deliver more efficient bundles of services. Other promising reforms that might be piloted include new pay-for-performance models or care-coordination bonuses. These payment reform pilots must be accompanied by an effective measurement capability, so that the impact of each reform on improving quality and reducing costs for a population of patients can be demonstrated quickly and reliably.

• Incorporate other bonuses into a transition to accountable payment systems, including health IT payments, medical home payments, pay-for-reporting bonuses, pay-for-performance bonuses, and other payment reforms described above in Initial Reforms. These multiple payment reform initiatives should all be aligned to the common goal of measurable impact on quality and costs.

Key Reform 2:

Apply Pressure to “Non-Accountable” Medicare Payments

As accountable payment systems become available, traditional fee-for-service payments should be made less attractive through reduced payment updates:

• Establish “Virtual ACO” incentives several years after implementing reforms, in which providers outside of accountable payment systems would be grouped based on the utilization patterns of the Medicare beneficiaries that they treat, and virtual ACOs with high cost growth or poor quality would receive market basket update penalties.

• Freeze market basket updates for two years—several years after reforms are implemented, for example, 2013-14—for providers not participating in accountable payment systems.

Key Reform 3:

Improve Payment/Coverage Flexibility and Rapid Learning to Achieve Lower Costs and Better Quality

• Expand and streamline CMS’s piloting authority and resources to support the rapid testing, evaluation, and expansion or elimination of new payment models in Medicare and Medicaid, through the availability of timely and meaningful quality and spending measures and resources for enhanced evaluation capacity. With compelling and timely measures of cost and quality impacts, CMS would have a greater capability to expand payment and coverage changes that improve care while reducing costs.

• Support public-private regional collaborations with Medicare, Medicaid, and private payers using consistent quality and cost measures for payment, in order to increase providers’ incentives for value improvement and delivery reform.

• Empower an entity to improve the value and ensure the long-term sustainability of Medicare and Medicaid by proposing policy changes that are subject to fasttrack, up-or-down votes in Congress.

 
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