Health Policy Consultant, Michael Best Strategies
Karen E. Timberlake is senior advisor at Michael Best Strategies LLC, where she focuses on shared value consulting, sustainable community development, and health system innovation. Before joining Michael Best Strategies, Karen was the Director of the University of Wisconsin Population Health Institute and an Associate Professor at the UW School of Medicine and Public Health. She previously served as Secretary of the Wisconsin Department of Health Services and as Director of the Office of State Employment Relations.
The Alliance actively pursues value-based payment strategies as one of the four core drivers on the roadmap to high-value health care. The Alliance also supports a robust platform of health policy priorities, in part because federal and state governments are significant purchasers of health care services and play an essential role in driving value-based payment. Some recent findings highlight the degree to which government purchasers have influenced advancing value-based payment.
Paying for Value – What Does It Mean?
In its simplest terms, paying for value means shifting health care reimbursements from fee-for-service payments that have no direct link to quality or cost-effectiveness, to payments that are tied to the health outcomes of patients. While the transition from fee-for-service to value-based payment has been slow, momentum is picking up.
Medicare Leads The Way
The national Medicare program leads the pack in driving value-based payments, with 75% of payments tied to outcomes in some way. State Medicaid programs lag far behind, with just 34% of payments having some link to value. Commercial payers are somewhere in the middle, and can link roughly 44% of payments to quality or value. Overall, the Health Care Payment Learning & Action Network has reported that approximately 40% of health care services are still purchased under contracts that have no link between payments to providers, and the quality and cost effectiveness of the care received by patients.
Medicare’s leadership in payment innovation was spurred by the creation of the Center for Medicare & Medicaid Innovation, simply known as the Innovation Center. Created under the Affordable Care Act, the center was originally designed to harness the purchasing power of the Medicare and Medicaid programs to drive delivery system reform and payment innovation across the country. In its early years, it funded a wide array of pilot projects to redesign payment and delivery systems, often involving commercial and government payers.
Today, the center is a hub of information and resources on payment and delivery reforms grouped into seven categories. Two of those – bundled payments and paying for advanced primary care – are highlighted below.
Charging a flat fee for a set of health care services – or “bundled payments” – is one of the strategies The Alliance uses to control rising health care costs.
The Centers for Medicare & Medicaid (CMS) first began testing the use of bundled payments to cover specific episodes of care over 10 years ago under the Acute Care Episode Demonstration. Under this approach to value-based reimbursement, flat payments were offered for 28 different cardiac and orthopedic procedures. The Bundled Payments for Care Improvement initiative followed in 2013, and then the Comprehensive Care for Joint Replacement bundled payment program in 2016.
In a recent Health Affairs report, physicians and researchers reviewed the findings of more than 20 studies evaluating these various CMS bundled payment programs. They also provided conclusions and recommendations for future action by policymakers.
Learnings From CMS Bundled Payment Programs
Overall, the CMS bundled payment programs covering hip and knee replacements were most frequently associated with cost savings. These savings derived from patients spending less time in institutional post-acute care settings, which speaks to the importance of building an appropriate period of post-acute care within the bundled payment design. The studies also demonstrated comparable or improved rates of hospital readmission, and patients whose care was covered by a bundled payment did not experience increased rates of complications, emergency department visits, or mortality.
On the other hand, the authors could not find clear evidence of similar cost savings across bundled or episode-of-care payments for procedures other than joint replacement surgeries. They speculated that patients seeking knee or hip replacements may be younger, and therefore represent less medical complexities than patients seeking other types of orthopedic or cardiac care.
Value-Based Payment for Primary Care
The CMS Innovation Center is currently implementing a new payment reform pilot program focused on primary care: Primary Care First. The program’s overall goals are to reduce Medicare spending by preventing avoidable hospital admissions and to improve health care access and quality, particularly for Medicare beneficiaries with complex chronic conditions and other serious illnesses.
Under Primary Care First, Medicare will provide enhanced payments to primary care practices to support:
24/7 access to a care provider who has real-time access to the patient’s electronic medical record;
Integrated behavioral health care in primary care settings;
Risk-stratified care management to ensure patients receive the care they need;
Screening and support for patients’ non-medical, social needs.
Unfortunately, Wisconsin and Illinois aren’t part of the initial cohort of states that will participate in this program. That said, the Innovation Center’s goals and strategies for its new Primary Care First program align with The Alliance’s vision for advanced primary care. This new program offers a tremendous opportunity for learning as it rolls out in more than 26 states across the country.
What’s Next For Value-Based Payment?
Achieving the goal of health care payment tied to the value of services provided, not merely the quantity of those services, will require public and private sector purchasers to commit to payment reform as a strategy. The Alliance and its members can help by continuing to advocate for public policies and public sector health care purchasing strategies that incorporate value-based payment as a piece of the health care transformation puzzle.
Health care affordability is gaining steam as a topic not just on the presidential debate stage but also among state and federal policy makers. Researchers at Altarum, a nonprofit health care consulting group, decided to dig into the relationship between the relative affordability of health care in each state and the public policies states had adopted that have been shown to affect affordability. The results of this analysis have been published in a new “Healthcare Affordability State Policy Scorecard.”
“Affordable”… for Whom?
What does it mean for health care to be affordable? The researchers looked at consumers’ self-reported answers to survey questions asking whether, in the past 12 months, they:
Needed but couldn’t afford medical care;
Delayed seeking medical care because of concerns about cost;
Made changes to a treatment plan, including prescribed medications, because of cost; or
Had trouble paying medical bills.
In the states served by The Alliance, nearly 41% of Illinois residents, 39% of Iowa residents, and 37% of Wisconsin residents reported at least one of these concerns.
What Policy Choices May Make A Difference At The State Level?
The researchers then considered policies that, if adopted at the state level, are expected to lead to more affordable health care coverage options. Those policy buckets were:
Extend coverage to all residents. The uninsured are more likely than those insured to delay or forego needed medical care. Cost is the #1 reason consumers don’t have health insurance. States can promote coverage by implementing programs that fill the gap between Medicaid eligibility and the cost of private health insurance for low-wage workers.
Make out-of-pocket costs affordable. The researchers looked for evidence that states were promoting strategies to control consumers’ out-of-pocket expenses, including protecting consumers from surprise medical bills and waiving or reducing cost-sharing for high-value services. Illinois, for example, recently passed a law capping out-of-pocket expenses for insulin at $100 and a similar bill has been introduced in Wisconsin.
Reduce low-value care. The report notes it is difficult to gather data on the amount of low-value health care provided in any state given limited publicly available data. The need to compare care provided against nationally accepted benchmarks is one of the reasons The Alliance is a strong supporter of the Wisconsin Health Information Organization, and the Wisconsin Collaborative for Healthcare Quality, along with other efforts to collect and share information about variation in health care services, costs, and outcomes.
Curb excess prices. “Excess,” like “affordable,” is a relative term subject to a great deal of interpretation and variation in its definition. Even “price” is a broad term that sweeps in premiums, co-pays, and deductibles, and of course, unit prices for individual medical services or prescriptions. In an effort to validate the data on pricing, Altarum looked at a study conducted by RAND on the degree to which prices paid by private sector plan sponsors and insurers varied from the amounts paid for the same services by Medicare. The Alliance participated in this RAND study, along with other employer coalitions from around the country. Altarum cites transparency strategies, including all-payer claims databases, as an important tool in curbing unnecessary health care costs.
Additionally, the report also ranks states based on their outcomes in each area. This “outcomes” analysis looks at the uninsured rate, the percent of resident-reporting affordability concerns, the rate of low-value care, and the extent to which average prices paid by private-sector insurers and other payers are above the national median.
How Did Wisconsin, Illinois and Iowa Fare Overall?
Wisconsin ranks 18th overall out of the 42 states (plus Washington DC,) evaluated in this report. While the researchers looked at all 50 states, only states with data available in all four of the report’s focus areas were evaluated.
Wisconsin scored best on its polices to extend coverage to all residents and reduce low-value care, however, needs to adopt policies that will make out-of-pocket costs more affordable and curb excess health care prices.
On outcomes, Wisconsin ranks high compared to other states on overall measures of health care coverage and low-value care. The state is ranked the worst – 41 out of 42 – on having private payer prices above the national median.
Illinois ranks 19th and gets higher marks than Wisconsin for efforts to make out-of-pocket costs affordable, but needs to adopt policies that will reduce low-value health care, and has also not made progress in adopting public polices to curb excess prices. Looking at outcomes, the state is about average on out-of-pocket costs and low-value care.
Iowa, ranked 21st., gets good marks for its efforts to reduce low-value care but also has a long way to go on excess prices. They are ranked 13th in the nation on keeping private payer prices below the national median.
Adding to healthcare affordability’s national attention, this report will be presented at a National Press Club event in Washington DC on February 12.
Closer to home, the team at Michael Best Strategies will work with The Alliance’s Health Policy Committee to review the report’s focus areas and assess where we are today in the WI, IL and IA policy landscape. From there, we will consider possibly advocacy priorities that will advance our goal of making high quality health care more affordable for The Alliance members and their employees.
Summer 2018 brings the conclusion of the state legislative process in both Wisconsin and Illinois. This is a good time to recap the major discussions and developments in health policy that Michael Best Strategies has been following for The Alliance.
Prescription drugs are often singled out for blame on the rising cost of health care. Do the critics have their facts right? And if so, what can employers and policymakers do about it?