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State involvement in controlling health rev 7.8.


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State involvement in controlling health rev 7.8.

  1. 1. The Importance of State Involvement In Controlling Health Spending Stuart H. Altman Sol Chaikin Professor of Health Policy The Heller School for Social Policy and Management Brandeis University
  2. 2. Involvement Need Not Mean REGULATION But It Might!!!
  3. 3. States Being Pushed to Be Concerned About TOTAL (Not Just Medicaid) Health Care Spending--Why--- Problem of Rising Private Insurance Premiums
  4. 4. The Cost-Shift Issue---
  5. 5. Private Insurance Payments Used To Pay For Lower Government Payments 180% Hospital Payment-to-Cost Ratios 157.4% 160% 140% 130.0% 138.0% 120% 100% 92.0% 80% 85.0% Medicare Medicaid(1) 2006 2004 2002 2000 1998 1996 1994 1992 1990 1988 1986 1984 1982 1980 60% Private Payer Source: Avalere Health analysis of American Hospital Association Annual Survey data, 2005, for community hospitals. (1) Includes Medicaid Disproportionate Share payments.
  6. 6. State Regulation of Health Care Spending Not New All But Maryland Dropped All-Payer Rate Regulation Because of PushBack By Hospitals and More Liberal Medicare Payments
  7. 7. While Past Efforts Failed--We Cannot Give Up---Failure Has Serious Consequences
  8. 8. High Premiums Limiting Worker Compensation and Employment!
  9. 9. Cumulative Increases in Health Insurance Premiums, Workers’ Contributions to Premiums, Inflation, and Workers’ Earnings, 2000-2010 16 0% 147% 14 0% 12 0% 103% 114% 10 0% 88% 80 % 60 % 36% 40 % 24% 20 % 0% 27% 21% 20 00 20 01 20 02 20 03 20 04 20 05 Notes: Health insurance premiums and worker contributions are for family premiums based on a family of four. Source: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 1999-2011. Bureau of Labor Statistics, Consumer Price Index, U.S. City Average of Annual Inflation (April to April), 1999-2011. Bureau of Labor Statistics, Seasonally Adjusted Data from the Current Employment Statistics Survey, 1999-2011 (April to April). 20 06 20 07 20 08 20 09 20 10 Healt h I nsur an ce Pr em i um s Workers' Con t rib ut i on t o Pr emi um s Workers' Earn in gs Ov er all I nf lat i on
  10. 10. The Primary Issue--Should States Promote More Effective Market Activities or Develop “All Payer” Regulatory System
  11. 11. If Markets Are to Work! Need to Foster a “Value-Based” Delivery System
  12. 12. “Value-Based” Services Link Together Services That Improve Quality (Including Positive Outcomes) With Commensurate Costs
  13. 13. Concerns About Current System • Care Often Delivered in an Uncoordinated and Fragmented Way – – – – Lack of Information Sharing Duplicative Testing Poor Care Coordination Mismanaged Care Transitions • Limited Use of “Cost Effectiveness” in How We Use and Pay for Services • Few Constraints on Prices for New Drugs and Devices
  14. 14. Accountable Care Organizations (ACO’s) and Bundled Payment System Being Promoted to Change Current System
  15. 15. ACO’s and Bundled Payments Offer Some Real Opportunities --• They Encourage Integration of Care • Where Possible Substitute Less Expensive for More Expensive Care • Reduce the Use of Marginal and Ineffective Care • Limit the Stockpiling of Substitutable types of Services – They Facilitate the Working Together of Hospitals, Physicians , Post Acute Care and Other Health Professionals – They Lower the Cost of Expensive Treatments – Bundled Payments Can Be an Interim Step To a Global Payment System
  16. 16. Why ACO’s and Bundled Payments • They Allow Providers to Decide What is Appropropriate Care • They Reward Care That is Less Fragmented and Minimizes Duplicative and Wasteful Services • They Permit Care Providers To Pay for Services Not Traditionally Considered as Health Care Services
  17. 17. But To Succeed We Need to Avoid The Errors of The Past?
  18. 18. The Errors of The Past • Providers (Physicians and Hospitals) Were Required To Take More Financial Risk Than They Could Afford or Understand-• Individuals Were FORCED Into Plans They Didn’t Chose and Didn’t Like-• Quality of Care Measures Were Limited So Choice of Plan (By Employers) Was Based Primarily on Costs
  19. 19. The Errors of The Past • For Bundled Payments – The Medicare DRG Payment System Only Included Hospital Services – The Medicare DRG Bundled Payment System Only Covered Medicare Beneficiaries
  20. 20. ACO’s and Bundled Payments Designed To Avoid Problems of The 1990’s • Providers Required To Assume Limited Risk – ACO’s is a “Shared Savings System”. Each Groups Starts From Their Current Spending Levels and Downsides Risk Limited • Patients Will Not Be Locked Into a Delivery System They Don’t Trust – Patients Need to Sign Up With PCP But Can Change PCP or Network With No Penalty • Attaining or Exceeding “Quality Standards Provider Eligibility for Payment Depends on ”
  21. 21. ACO’s and Bundled Payments Designed To Avoid Problems of The 1990’s • The Medicare Bundle Will Include Physicians Services and Post Hospital Care In Addition to Hospital Services (It does Not Include Pre-Hospital Care) • Medicare is Encouraging (But Not Requiring) Non-Medicare Patients to Be Included in Future Bundled Payment Systems
  22. 22. Key To Success of ACO’s An Effective Primary Care System (Many Specialty Groups Wary of a Return to the 1990’s) 1990’s
  23. 23. The Key To Making Bundled Payment Work Control Post-Acute Care Spending!!!
  24. 24. Avg. 2008 Medicare Payment for In-Hospital Care for Select DRGs Source: RTI Inc, Post-Acute Care Episodes: Expanded Analytic File, June 2011 24
  25. 25. 2008 Medicare Acute and Post-Acute Payments for Inpatient-Initiated 90-Day Episodes Source: RTI Inc, Post-Acute Care Episodes: Expanded Analytic File, June 2011 25
  26. 26. Major Concerns of Current Environment • ACO’s and Bundled Payments Use “Shared • Savings” Approach and Not “Fixed Budgets” • Both Approaches are Voluntary • Patients Have The Right to Opt Out of ACO’s • Many Important Systems Not Participating
  27. 27. Nevertheless States Need To Be Active Participant In Promoting These New Delivery System Options Limit Regulatory Hurdles and Provide Financial Assistance to Financially Stressed Systems (Because of Unfavorable Payer Mix)
  28. 28. But States Need to Guard Against Big Integrated System Using Market Power To Extract Higher Private Payments
  29. 29. Letting Private Market (Commercial Insurers and Individual Providers) Set Rates Can Lead to Significant Differences in Payment Amounts Are They Justified? 29
  30. 30. The Massachusetts Story Brandeis University 30
  31. 31. Relative 2008 Massachusetts Blue Cross Hospital Payment Rates Source: BCBSMA data submitted to the attorney general. Red = teaching hospitals. 31
  32. 32. Massachusetts First State To Pass Universal Coverage Legislation Commonwealth Has Long History of Expanding Coverage and Regulating Health Spending Brandeis University 32
  33. 33. Private Sector (Insurers and Providers) Join Government Efforts to Reform Health System 33
  34. 34. Expanded Activity In Private Insurance Market • After State Set Limits on Premium Increase (Could Be Below Underlying Health Service Trend) – Insurers Restructure and Toughen Payment Models – Introduce Limited and Tiered Network Plans – Increase in High Deductible Plans 34
  35. 35. Major Healthcare Providers Promote Reform Delivery System Changes 35
  36. 36. Massachusetts Enrollment in Global Payment About 22 Percent of State Residents Pioneer ACO* Medicaid & Commonwealth Care Medicare Advantage Other Tufts HPHC Commercial Members Blue Cross Source: The Boston Globe, February 13, 2012. Figures for Pioneer ACO are estimated.
  37. 37. Massachusetts Legislature Passes Compromise Cost Containment Legislation (August of 2012) Includes Many Pieces 37
  38. 38. Chapter 224: Cost Control & Payment Reform Alternative Payment Models Medicaid Payment Reform Annual Spending Targets Health Workforce Support Review Provider Price Variation New State Oversight Bodies Health IT Requirements Administrative Simplification Brandeis University ACO Certification & Oversight Health Planning Transparency & Reporting Requirements Infrastructure Support 38
  39. 39. Spending & Delivery Reform Oversight Health Policy Commission* (11-member board) Distressed Hospital Fund $135M Executive Director and Staff Payment Reform Fund $11.5M Center for Healthcare Information and Analysis * In EOHS but not subject to EOHS control. Exempt from state civil service requirements and pay scales.
  40. 40. How Is The Commission Organized
  41. 41. Sub-Committees of Commission Cost Trends and Market Performance – Quality Improvement and Patient Protection Establish the annual health care cost ▪ Conduct annual cost trends hearings and issue a final report on health care trends. Examine the impact of health system changes on the quality of health care in the Commonwealth, including the impact on patient access to care, and on the providers of health care, including front-line practitioners and health care workers. ▪ Establish the role and responsibilities of the Office of Patient Protection. ▪ Track the progress of efforts regarding mental health coverage parity and ensure the integration of mental health, substance abuse disorder and behavioral health services with physical care in the development of new care delivery and payment models. ▪ Develop guidance relative to the prohibition of mandatory overtime for hospital nurses. growth benchmark for total health care expenditures in the Commonwealth. – – – 41 Conduct cost and market impact reviews of health providers and health plans proposing significant market changes to the health care industry, considering the impact of these changes on cost, access, quality, and market competitiveness. Oversee the development and implementation of performance improvement plans for certain providers and plans.
  42. 42. Sub-Committees of Commission Care Delivery and Payment System Reform – – – Establish a provider organization registration program. ▪ Develop and administer a competitive grant program to enhance the ability of certain distressed community hospitals to implement system transformation. Develop and implement standards for a certification program of PatientCentered Medical Homes (PCMH) and Accountable Care Organizations (ACOs) and develop model payment standards to support PCMHs. ▪ Develop strategies for engaging with various Administer a competitive grant program to foster the development and evaluation of innovative health care delivery, payment models, and quality of care measures. ▪ Develop strategies for helping consumers – Coordinate the advancement, adoption, and measurement of alternative payment methodologies. – Coordinate with the DOI regarding the development of regulations relative to the certification of risk-bearing provider organizations. 42 Community Health Care Investment and Consumer Involvement constituencies and a communications plan for educating providers, businesses, consumers, and the general public regarding the implementation of Chapter 224. navigate health care cost and quality. ▪ Conduct an investigation relative to increased adoption of flexible spending accounts, health reimbursement arrangements, and health savings accounts. ▪ Work with other state agencies to minimize duplicative requirements.
  43. 43. Reaching The Goal of The Law---
  44. 44. Massachusetts Statewide Heath Care Spending Targets (All Payer) Billions 5.9%/yr 3.1%/yr 6.2%/yr 3.6%/yr Source: Author’s calculation based on historical state spending estimates and projected national health spending growth from the CMS Office of the Actuary and targets set forth in Chapter 224. Brandeis University
  45. 45. States Must Also Be Mindful of What Is Happening in National Market
  46. 46. Average Annual Percent Change in National Health Expenditures, 1960-2011 Source: Kaiser Family Foundation calculations using NHE data from Centers for Medicare and Medicaid Services, Office of the Actuary, National Health Statistics Group, at (see Historical; National Health Expenditures by type of service and source of funds, CY 1960-2010; file
  47. 47. Slow Down May Be Permanent • David Cutler (Harvard) Believes Many Small Positive Changes In Market – Providers Becoming More Efficient • • • • Less Hospital Acquired Infections Reduced Re-Hospitalization More Patient Cost Sharing Greater Use of Limited and Tiered Insurance Networks • States Becoming More Active In Slowing Total Spending
  48. 48. The Recession is Only About One-Third of the Slowdown Real, per capita medical spending In 2005 dollars Actuary Forecast Gap Actual + Recession Actual Source: Authors’ calculations based on data from the Bureau of Economic Analysis and the Centers for Medicare and Medicaid Services
  49. 49. Past Efforts To Control Spending ---Regulation in 1970’s ---Managed Care in 1990’s Strong Negative Reactions To Both
  50. 50. Current Improvements Likely To Be More Positively Received
  51. 51. But---Most Policy Analysts Still Very Skeptical !!! What Happens If Strong Inflationary Pressures Return?
  52. 52. Health Policy Commission Not a Regulatory Body--- Ultimate Responsibility Still Within Private Sector! Brandeis University 52
  53. 53. HPC is Like The Health Systems Mother--- We Keep Reminding The System to Eat It’s Vegetables
  54. 54. BUT--- If Rates Shoot Up Again What Could Happen?
  55. 55. What Could Be Next? 55
  56. 56. Which Would You Prefer?

Editor's Notes

  • Lets start with some DRGs that are probably pretty common in your hospitals
    And here’s what Medicare pays … and most of you are probably not making much of a margin on these – particularly the medical DRGs.
    Guess what … these rates aren’t going to go up much. So how are you going to maintain your margins?
    Bundled payment is one opportunity