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After 25 Years, AJMC® Looks to the Future: A Q&A With Michael E. Chernew, PhD, and A. Mark Fendrick, MD

The American Journal of Managed CareDecember 2020
Volume 26
Issue 12

To mark the 25th anniversary of the journal, each issue in 2020 includes an interview with a health care thought leader. The December issue features a conversation with the journal’s co-editors-in-chief, Michael E. Chernew, PhD, and A. Mark Fendrick, MD.

Am J Manag Care. 2020;26(12):497-498. https://doi.org/10.37765/ajmc.2020.88536


AJMC®: As you both know, this is the last interview in 2020 that the journal will run as part of a monthly series. We didn’t expect 2020 to turn out the way it did, and 2021 will start off with a new president taking office in January. What would be your priorities for President-elect Joe Biden in Medicare, Medicaid, and managed health care overall?

Chernew: The first thing, whether they want to or not, there’s going to have to be some attention to the Part A trust fund. It’s scheduled to be depleted in 2024, and some strategies are going to have to be undertaken to figure out how to maintain the solvency of the trust fund. The second thing that I think is going to be particularly important for the new administration is to chart a path for promoting alternative payment models. There’s been a lot of movement in the area of alternative payment models; some things have worked and some things have not worked. I’d like to see a strategy for beyond [this administration] to be developed as we begin to transform the health care system. The third thing that I think you will see from this administration is that it would be a priority to strengthen where the Affordable Care Act (ACA) is in its implementation. There are a number of actions taken largely by executive order in the current administration that I think the new administration will revisit, and I think it’s important to lay out a path for the ACA for the next 4 years and beyond.

Fendrick: First off, it’s really great for Mike and I to be the finishing touches of the 25th anniversary celebration for AJMC®. I think there are a lot of us who actually want to see the year 2020 come to an end for a variety of reasons. But as we turn to a new year and a new administration, I think my points would be to continue to grow on our bipartisan work, emphasizing that there is more than enough money in the US health care system. We need levers, like Mike just mentioned, like alternative payment models, that will hopefully shift some of the money more to the services that make Americans healthier and away from those that don’t. More specifically, as we first published in AJMC® in 2001, not quite 25 years ago, but getting close to 20 years, the idea of value-based insurance design (VBID), which aligns out-of-pocket costs with the value of services as opposed to setting consumer cost sharing at the price of the service, was included in the Biden platform. It has been used in both Republican and Democratic administrations. So it’s our hope, particularly with a split government with no major health care policy changes on the horizon, that there will be continued attention to aligning health care costs with the essential nature of clinical services, that not only will barriers be removed for coronavirus disease 2019 (COVID-19) vaccines and COVID-19 treatments, but hopefully this would extend to other high-value services that are particularly used in the area of chronic diseases, and that we could pay for the added generosity of that coverage with the identification and reduction of low-value care, as put forth by Mike and I in a template called VBID X, a benefit design that lowers cost sharing on certain high-value services and is paid dollar for dollar by increasing cost sharing on either specific services or line items of services like high-cost imaging and nonpreferred branded drugs.

AJMC®Dr Chernew, do you want to talk more about alternative payment models, particularly some of the efforts that the current administration has made in chronic diseases?

Chernew: My broad thought is that we need some coherence in the alternative payment models, that we’re running too many of them, that they’re often conflicting, and that we haven’t projected where they are going. So, although I think there are some particular clinical areas of interest, I would rather see some statement about the role that, for example, population-based payment models like [accountable care organizations] will play relative to episode-based models that you see a whole series of. I think it’s been very challenging to be successful with the number of new models introduced, and I actually think we’ve gotten to the point where we’re introducing too many new models. And the new models, even if a model itself would be good standalone in this environment, are actually being counterproductive, because they’re distracting people given the range of choices of models they might be in or not be in and how they run. I would encourage the administration, with the Center for Medicare and Medicaid Innovation (CMMI), to just slow down in terms of the number of models instead of finding new and interesting ones.

AJMC®: Dr Fendrick, when you talked about VBID and VBID X, does that require any sort of political will to get consumers and patients to accept it?

Fendrick: That’s a really good question. I think one of the reasons Mike and I would say we’ve had the amount of success we’ve had with [VBID] is its intuitiveness and its bipartisan and multistakeholder support. I mean, on the surface, who’s not going to support more of the good stuff and less of the bad stuff? So what we feel is that with the COVID-19 pandemic, lots of pain, lots of hardship, but as colleagues of mine from Tufts and I published in the September issue of AJMC®,1 there might be a silver lining in the fact that the dramatic reduction in both high- and low-value care that Mike and his colleagues from Harvard have continuously updated us on allowed us this ability to really inform all stakeholders that we could realign payment, benefit design, and other levers to increase efficiency, in that, while I’ve not been overly sympathetic to the provider community over my career, I’ve written in multiple venues that it’s time to start paying clinicians and delivery systems more for some of these high-tech services that provide great value and hold them accountable for the services that might be very expensive and profitable but that don’t make Americans any healthier. We have seen some movement, like all things VBID, modest to this effect. But I’m hopeful that given the dramatic decreases that we saw in high-value care and sadly are likely to see again with a second COVID-19 surge, we’ll prioritize not just access but actually be clinically driven in how we spend our dollars moving forward.

AJMC®Some people we’ve talked to this year have talked about the amount of waste in the health care system, and that if we cut out waste, that would be enough to create some of the solutions that we’re looking for. Would you agree with that, looking at waste in staffing, procedures, inefficient processes, and those sorts of things?

Fendrick: Yeah, I’ll jump in here, because Mike has been very consistent over the 20-plus years that I’ve known him, and the 15-plus years we’ve worked on AJMC®, to remind me that almost all the services that we’ve recommended to increase access to are cost-effective and not cost-saving, and it means that if you continue to push depression management, blood pressure management, diabetes management, better cancer care, and even rare disease [treatments] that are cost-effective, your total cost of care will go up and not go down, nd particularly as we’ve been pushing to have lower consumer cost sharing, the purchaser had to actually pick up a greater portion of that total spend. And I’ve finally succumbed to Mike’s recommendation 5 years ago, with great chagrin, to become a low-value care guy. The good news is that for select high-value services, not the whole gamut, there’s enough low-value care, if we were to have the courage to get rid of it, that we would be able to provide increased affordability. But as Mike reminds me, the pipeline of high-value but not cost-saving services is so great that we really need to not only focus on “increasing volume, good” and “decreasing volume, bad,” but we have to start paying attention to prices. When all the waste is gone, then I hope to be retired, because that’s going to turn over entirely to Mike, because that’s when it gets really hard.

Chernew: I want to echo everything that Mark said. I do believe that reducing waste is important. I believe that there is a lot of waste in the health care system. I also believe that we are currently able to get our hands on only a small amount of that waste. Because waste, as Mark will tell you, is quite nuanced. It’s not as if you could cut a particular service for everybody and get rid of the waste. It’s really who the service is delivered to that matters, and that is complicated to get at. In fact, my affinity for alternative payment models is because they set the financial preconditions for efforts for organizations to actually begin to go after waste. So if you look at what they’re doing in Virginia, for example, with Beth Bortz and Smarter Care Virginia, you will see delivery systems really working on getting rid of waste, but at least right now, there is not enough money there to fund all the things that we would broadly want to fund in terms of high-value services. And more to the point, independent of that, prices are an increasing problem, particularly in the commercial sector, with industry consolidation, and there’s growing work that suggests that the variation in prices is enormous, with relatively little evidence that the high end is providing high quality. There are a lot of specific examples and things one might do, but it will take a lot of effort for the government to go after those prices. Frankly, I don’t think much of that’s going to happen. At the federal level, you asked my priority to the administration in terms of Medicare and Medicaid, and managed care in general, but I will add, there are other priorities, like getting rid of surprise billing, for example, that would be very high on my list of things to do that might not fit into the first question and addressing really excessive pricing by consolidated organizations. I think those are important things, but they transcend the government’s role as a purchaser more into the government’s role as a regulator.

AJMC®One thing that hasn’t been mentioned by either of you yet is drug prices, which started out with a big splash early on in the Trump administration but have not come to any sort of solution as of this moment.

Fendrick: Most Americans don’t care about drug prices; they care about what it costs them. And I’m not sure how many of our listeners are familiar with the Hundred Acre Wood in Winnie the Pooh, but I’ll give the more Tigger message before Mike follows up with the Eeyore one. I’ll say that there is bipartisan support; there is multistakeholder support around more marginal initiatives, and I agree with Mike that they’re marginal, that would continue to reduce out-of-pocket costs for high-value services beyond prevention. As I mentioned earlier, Americans are thrilled about the prospect of no cost for FDA-approved COVID-19 vaccines and the Medicare announcement that certain antibody therapies will be made available at no cost to those who are clinically indicated. But our view is, that should be the same for high-value services like those we’ve listed in our VBID X template, in our high-deductible health care plan reform work, as well as our early writings about the Medicare Advantage Value-Based Insurance Design demonstration. I think that we were very fortunate at the V-BID Center to host CMS Administrator Seema Verma, just 2 weeks ago, when she announced a new rule requiring increased transparency for patients be able to see not what their health plan pays or their employer pays, but actually what they will need to pay out of their own pockets in real time. And while I think there will be a lot of changes and philosophies between the Trump administration and the Biden administration, I do believe that removal of surprise billing, lowering of out-of-pocket costs, and increased transparency will persist, and I support those things. Net prices of drugs are above my paygrade, so I’m more than happy to have my co-editor-in-chief take that on.

Chernew: Yes, so first of all, Americans may care about out-of-pocket prices more than they care about total prices, but they should care about total prices, because they’re paying the total price as well. They’re just paying for it differently in a way that they don’t see it, but it gets spread across premiums in a bunch of ways that they should care about. Of course, they should also care about the introduction of new innovative medicines, and nothing like the COVID-19 pandemic has illustrated how important innovation is, so it’s a difficult decision how to deal with large prices and affordability. But let me add, there are areas that are not about such complex, controversial tradeoffs where I think progress can be made, particularly around things like the role that rebates are playing, and individuals paying out of pocket based on gross price instead of net. So sometimes they might actually be paying more than the actual net price of the drug, because their co-pay is based on the gross price. There are some other nuances about programs like 340B and things that I would consider quite weedy for this discussion that I think one can think about reforming in the prescription drug space. I think the biggest challenge is going to be how to maintain the environment for innovation that we want and still meet the goals we are going to face around affordability. My recommendation for the new administration would be that while it is reasonable to go after some of the bigger-picture affordability issues, it’s useful to start with trying to get rid of some of the obvious areas where there are market failures or inequities, and they might be able to do that. The previous administration tried as well, and I do think it is a complicated political and technical issue about how to do that, but I think some of the things are getting to the point where failure to act is just not going to be tolerated, given what people are paying out of pocket. I don’t think the solution is more government money to fund the out-of-pocket holes, but instead trying to find ways to make the system transition to a more efficient market mechanism.

AJMC®Are there any takeaway lessons from the experiences that we’ve had in trying to get a COVID-19 vaccine to market that can be used in the future to balance innovation and affordability?

Chernew: Well, my view of the COVID-19 vaccine has been that this is a life-altering, economy-altering cataclysmic action. We basically shut down the economy. And so I think the core issue in many ways is that we were willing to spend a lot of money to get innovation in this targeted area, way more than we would spend in other areas. I think we could do a lot if we throw all the resources we threw toward this particular challenge; I’m not sure that’s what we want to do in all medical areas.

Fendrick: Just to briefly add to that, most people do not have a lot of confidence in government, whether it be the executive branch or the legislative branch. But the fact that there was bipartisan political support this spring to include in the Coronavirus Aid, Relief, and Economic Security Act to mandate 100% coverage of the COVID-19 vaccine, using the section of the ACA that implemented value-based insurance design principles as the guide, suggests that there is an openness to not only making the investment to create a very important innovative medical intervention, but also thinking about how to both distribute it, which the military is taking over, and make sure there are minimal barriers to individuals who are interested in receiving the vaccine.

AJMC®You’ve both talked about strengthening the ACA in the future. Do either one of you want to comment on the actions that you would like to see happen there?

Fendrick: Strengthening the ACA could be looked at 2 different ways, one of which is looking at the law that was passed in 2010 and how to improve upon that. I think in the short term, particularly with a mixed government that we’ll mostly see at least early on in the Biden administration, not legislative fixes, but reversals of some executive orders that were put in place or other decisions like administration. As Yogi Berra said, predictions are dangerous, particularly those about the future, but some of my predictions would be that there will be a restoration of funding regarding communication and other educational efforts to inform Americans about the individual marketplace and the open enrollment periods such as the one we’re going through now. I think there will be some consideration about the removal of the work requirements and other waivers that were put in place for the Medicaid program. I do also think Mike could speak about other innovations that will occur directly through CMS or CMMI to fortify the Medicare program, both from a clinical perspective, as well as a financial one, but I do think that, not ACA-based, a restoration of trust in and the need for science [is necessary]. And this is where Mike and I feel particularly proud to be involved with AJMC® because we feel that, with the help of our staff at MJH Life Sciences, we have continued to produce high-quality, relevant information for clinicians, for managers, for policy makers, and for other health care stakeholders. Because in the end, while there will be changes from Washington, DC, and state capitals, I believe most of the innovation will continue to come from organizations outside of government.

Chernew: That was a broad overarching answer. I will focus more on the ACA—Mark was making predictions, I think many were right—but I will have a little bit more of a wish list. I think you’ll see changes to things like the marketing rules that Mark mentioned, at least more emphasis on them. I suspect, although I’m not sure, you would see changes to the executive orders around short-term duration plans, for example, and association plans; I suspect they’ll be looking at reversing the current administration’s rule on cost sharing with the silver loading and a bunch of things of that nature. I suspect you’ll see some attention to the public charge rule, which discouraged participation. So I think there’ll be a lot of things to encourage participation.

One of the more interesting things will be how many states decide to expand Medicaid. It’s a good deal financially for the states that expand Medicaid, and a small set now have not. I think given the financial pressure that providers are under, there may be renewed interest for states to expand their Medicaid programs, because that federal money will be all the more attractive given the fiscal situation that states find themselves in and the fiscal situation that their providers find themselves in. So that’s the type of thing that I think you will see going on in the ACA. I don’t think, given the anticipated makeup of Congress, you will see some of the more aggressive aspects of the Biden platform implemented; I don’t expect, for example, to see a public option. That would surprise me. I certainly wouldn’t expect to see Medicare for all, but that was never part of the Biden platform in the first place. Nevertheless, I think that you will see a series of analyses and efforts to bolster the insurance market writ large, and I think they will use the existing ACA framework to do that.

I don’t know if it would happen, but I could see an effort, for example, to increase the generosity of the subsidies so that you get something that’s better than an existing silver plan. I think there’s going to be a concern that people are moving to lower-generosity plans, plans with more cost sharing, bronze plans, etc. And I think there’ll be some effort to address issues of underinsurance, even within the context of the ACA, but there will be limits as to what you’re going to be able to do in that spirit.

AJMC®Also, the economy will still be struggling to recover during as the pandemic continues, and people have lost their insurance through work. So maybe there will be political pressure.

Chernew: Yes, that’s right. Again, all of that is true, although it turns out political pressure is much stronger when you’re about to come into an election. So, it depends who’s feeling political pressure to do what. I think it is important to at least be explicit that Mark and I, when we started looking at VBID, were motivated by desire to make sure that people got the care that they needed, the high-value care. And I continue to believe that, although I think it’s important to understand that a lot of what’s going to happen in the health care space over the next several years is going to be driven by fiscal concerns. The federal government is running a large deficit; there’s a lot of stimulus that was put in place; there may be more stimulus put in place, so there’s not going to be a lot of money there. The states are facing a very difficult financial situation. Private employers are facing a generally difficult financial situation. And so, while we want to make sure we can improve access, I think going forward, we have to make sure that our approaches to meeting our fiscal challenges don’t diminish access and quality. Of course, this brings us back to the theme of low-value care. Although it is hard to get our hands on all of that waste and, frankly, it’s hard to find ways to lower prices, even when we know they’re too high because of anticompetitive reasons. those are the 2 ways to find resources to allow us to preserve access and quality without spending more money than we have.

AJMC®Do you want to talk about Medicare and what’s going to need to happen there?

Chernew: Well, again, I think the challenges with Medicare are going to be how to maintain solvency of the trust fund. I think there are some places where Congress will look: I think they’ll look to Medicare Advantage for some savings; I think they’ll look to prescription drugs for some savings. I think there are other aspects of the fee schedule where there may be opportunities to save some money. I don’t think they will be able to solve all of the fiscal problems with Medicare through those types of fee cuts, and I think that’s for 2 reasons. The first one is that the core problem Medicare faces is the ratio of the number of beneficiaries to the number of workers; it’s a demographic problem that is changing, and so we have to think about how we’re going to manage that portion of the problem. And the particular trust fund problem, at least 2 years of the trust fund problem is because of a loss of revenue due to the economic collapse because of COVID-19. So it doesn’t strike me that the right policy response to a revenue reduction is to lower the fees to all the providers; now it might be we want to lower fees for other reasons, more efficient payment, get the efficiencies we can if we were overpaying in places, but I do think we’re going to have to think about some of the revenue side for parts of Medicare. That’s a very complicated thing to say; I am not an expert in how one might begin to solve Medicare’s revenue problems. But I think that in the long run with the demographic trends that we’re facing, we have to be as efficient as we possibly can. And if those efficiencies don’t hit the fiscal needs that we have, and again, I’m not sure how much we will actually be able to harvest on the spending side, then we’re going to have to think about revenues, or we’re going to have to have a much broader debate about how much debt we want to have in this country, which transcends my area of expertise.

AJMC®As we talk about inefficiencies and emphasizing higher-value care, is there anything else that you spend most of your time thinking about when you think about COVID-19 extending into next year and the impact it’s going to have beyond that?

Fendrick: There are real challenges in terms of choosing high-performing providers and understanding the risk-benefit tradeoffs, whether you should see your clinician in person or virtually or not at all. But one of the things that keeps me up at night, and Mike knows this, is that there was this belief that in some type of global budget or capitated model, low-value care would go away, because if the money was coming out of your own pocket, you’d be unlikely to do that. It turns out that there have been lots of studies in situations where clinicians are not paid fee for service, and they just behave badly. And I think a lot of that has to do with the culture in which American physicians were trained, which is they’re afraid to be right, as opposed to being afraid to be wrong. So they order every test, understanding they might glean something clinically valuable, and completely underestimate the negative implications from a clinical standpoint, as well as a financial standpoint, about the utilization of services that do not have a clinical indication. One thing that even makes it more complicated is that even with artificial intelligence (AI) and big data, and really good health services researchers like Mike, we find that the clinicians who tend to behave badly on low-value services are very frequently those clinicians who perform very, very well on high-value services. So it’s not like there are people who are only doing bad stuff and only doing good stuff. And to understand the levers we need to get to where you want to be is going to be challenging, which is why in AJMC® we wrote that one is we’ve got to pay people well for doing things that are going to make individuals and populations healthier and no longer pay for those situations that don’t. Another area where I think AJMC® has been a leader is discussion of innovative technologies like electronic medical records and more recently telemedicine and about how we could use these innovative technologies to get us to a post–COVID-19 new normal. But I think in the end, we now have the ability to use clinically driven approaches to both pay providers and encourage or discourage consumers to get the right mix of care. I’ve called this, as Mike knows, peanut butter on the provider side and jelly on the demand side or the patient side, suggesting that I think the only path forward is that we make it easy for clinicians and patients to do the things that make them healthier, and harder to [do the things that do] not. In the situations that we pay doctors like myself to get their patients with diabetes to the eye doctor, we increasingly enroll diabetics in plans with high deductibles that don’t allow them to go to the eye doctor. I use the peanut butter and jelly analogy because I believe it’s the best example of the sum being greater than the individual parts. I believe the academicians and the behavioral psychologists and economists would support the idea of aligning incentives for both provider-facing and consumer-facing initiatives. So I could only hope that as we think about coming out of the COVID-19 pandemic and putting new processes in place, they will at least slightly lean on better payment, increased technologies, and encouraging consumers to do more of the right stuff and less of the wrong stuff.

Chernew: My addition to that is that we spend a lot of time thinking about financing and prices and what services are delivered, all of which is important. I think the other area that I’m increasingly pondering is what I would call broadly the production of care and the extent to which we can produce the care that we’re getting more efficiently and thereby spend less, so there’s a lot of discussion on telemedicine. We haven’t talked about it much, but I think one of the enduring changes from the pandemic may be the role of telemedicine. Certainly there are likely to be changes in the regulations around the use of telemedicine. I don’t think it will take over the way in which some have predicted. I think if you look, you see a huge increase in telemedicine when no one was allowed to go to the doctor; that is actually pulled back some, so I do think there are some natural limits of telemedicine. But I think there are other broad potential changes in the delivery of care—things like digital clinics, which aren’t quite the same as telemedicine, or other sites of care that may be used more efficiently. We’re going to have to think through how we can build a delivery system that can deliver high-quality care that’s responsive to consumers’ needs for less per-unit cost, and one of the advantages of different payment reform models, of course, is that they incent that type of innovation. I think you’ll see more [artificial intelligence] targeting of people so we can focus the services to get used on the people that will benefit most; I think you’ll see a broader set of alternative providers, there might be scope of practice changes that might enable care to be given better. There are certain clinical areas I worry about a lot. I’m very worried about mental health, for example. We have real problems in the workforce from mental health and a lot of mental health problems, even prepandemic. So I think we have a lot to do with thinking about an efficient mechanism for delivering care at a price that people can afford, and we’re not quite there yet, but I do think you’ll see work in those areas, and I think that will only proceed if we can create incentives for organizations to find those efficiencies.

AJMC®: Do you think we’ll still be having this discussion in 25 years?

Chernew: I probably won’t be on the other end of Zoom, but I think that almost every country in the world, no matter what their health care system is like, has a version of this discussion. I’m involved in some work in the United Kingdom, for example, which is having different versions of this discussion. I think it’s part of the human condition that we age and we face illness and death, and so I think we will continue to spend time as a country as individuals trying to figure out how we can get the longest life possible and the healthiest life possible. Some of that will be through medical care; a lot of it will be through social determinants of health and a broader set of services that extend beyond those traditionally thought of as health care. They will be brought into the discussion; they are being brought into the discussion. And I think, as long as we are interested in our health and in some related medical services to improve our health, we will continue to be having discussions about how those services are financed and who pays for them. So in that sense, I think all of that is true. When AJMC® was founded, managed care was a new thing, and so there was sort of traditional care and managed care. Now everything is managed care, and it’s just a question of how within that big field of managed care we do the best job of financing and delivery.

AJMC®And 25 years ago, we weren’t talking about social determinants of health as broadly as we are now. Dr Fendrick, do you think 25 years from now those will become even more integrated into what we do?

Fendrick: I think it’s very interesting. I wasn’t on the editorial board at the journal’s inception but came on very early on. And I want to reiterate this point that AJMC®, we hope people know it as much as the acronym as “The American Journal of Managed Care®,” because our managed care that we’re talking about is small-m small-c managed care, because I completely agree with Mike that we’re not talking about the managed care of 25 years ago. I think it’s not only interesting and worthwhile to scroll back at some of the highlighted AJMC® papers that we could find on the 25th anniversary page, but I also want to give a shout-out to the amazing AJMC® editorial staff in putting together the 12 Q&As for this year: a remarkable combination of clinical leaders like Eric Topol and Mandy Cohen, who is the secretary of health in the state of North Carolina; people who are currently in government or previously had high-ranking positions in both Republican administrations like Gail Wilensky and Democratic administrations like Don Berwick and Sherry Glied; and really interesting insights from policy insiders like Larry Levitt and Kavita Patel. And I do want to especially note, I don’t know how they did it, a really fascinating Q&A with now everyone’s favorite American, Dr Anthony Fauci. It’s been really a pleasure to work with Mike and the AJMC® team as they celebrate 25 years. I hope that I’m passing the baton, so to speak, to others to carry on the research activities and the policy activities, and trying our best to provide relevant, timely information to decision makers who are on this, as Mike says, timeless journey to figure out how to keep individuals and populations healthy and not bankrupt their countries or their private industries.


1. Kim DD, Ollendorf DA, Neumann PJ, Fendrick AM. Crisis into opportunity: can COVID-19 help set a path to improved health care efficiency? Am J Manag Care. 2020;26(9):369-370. doi:10.37765/ajmc.2020.88412

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