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The Way Forward

Posted Jun 30 2011 12:26pm
The rising cost of the Medicare program has suddenly gone from the concern of a handful of Cassandras like the distinguished biomedical ethicist Daniel Callahan and the former Congressional Budget Director Peter Orszag to a central preoccupation of the US Congress. Gutting Medicare, as the Republican Congressional leadership has proposed, has proved decidedly unpopular: Americans like their government-run health insurance. So how will we put the brakes on Medicare spending? Surprisingly, we may have something to learn from Massachusetts?surprising because health care reform and health care cost containment efforts in Massachusetts focus exclusively on the private sector.
Massachusetts rolled out universal health care coverage in 2006 and began trying to address costs two years later. This month, the Attorney General's Office issued a report analyzing trends in cost control so far. The bottom line is that costs are still spiraling upwards but perhaps more importantly, we have a sense of what strategies might work and which will not.
Before embarking on cost control, Massachusetts commissioned a study to lay out the leading potential cost containment options. Using sophisticated analytical models, the researchers estimated which strategies had the greatest chance of working and just how much of an effect each was likely to have. State government then advocated utilizing selected options from each category, but extended varying (some would say very limited) direct financial support for each of those identified as promising. The Governor publically endorsed bundling payments, an approach that research indicated would have by far the largest effect on reining in costs.
Fundamentally, cost savings arise from either lower prices or a lower volume of services (or both). Possible strategies can be lumped into 4 principal categories: reforms of the payment system, redesign of the health care delivery system, reduction of waste, and promotion of consumer engagement. What has worked, what didn't and what are the obstacles to success?
In the category of reforming the payment system, the technique strongly encouraged by Massachusetts was bundling payments. The most widely touted version is the Accountable Care Organization (ACO), in which provider groups, hospitals, skilled nursing facilities, and other health care groups band together to provide all the types of care a patient might need. The insurance company pays the ACO a single capitated payment for each patient who receives care through the organization. The members of the ACO are forced to "manage" the care and to share the risk. One example of this approach is the "Alternative Quality Contract," in which Blue Cross/Blue Shield offered participating physician practices a global payment for each enrolled patient. The innovative features of this model included providing extra payments for achieving quality and insurance against the high costs from outliers. BC/BS claimed that the project was a resounding success. The Massachusetts Attorney General's Office is not convinced, arguing that while the goal was to decrease the rate of rise of costs, and there was indeed evidence this occurred, total costs went up and not only that, but they did so to a greater extent among physician groups participating in the program than among those that did not. The moral, the Massachusetts report concluded, is that bundled payment strategies might work, but the overall payment has to be small enough to give physicians an incentive to decrease utilization or refer patients to low cost hospitals.
In the realm of redesign strategies, Massachusetts endorsed the "medical home." This is a new name for an old idea: ensuring that all patients have a primary care physician and expecting that physician (perhaps together with a larger team of clinicians) to coordinate care. The problems, as the report reveals, are that certain organizational structures such as a Physician Provider Organization (PPO) do not require that patients have a primary care physician. Coordination of care in such a non-system (there is no structure linking those clinicians who are ostensibly part of a PPO) is impossible. Another difficulty is the shortage of PCP's in the state; even if patients had a financial incentive to designate a PCP, say a premium reduction, there are simply not enough primary care doctors to go around.
In the area of value-based decision-making, the state is attracted to tiered or restricted network health insurance plans. The idea is to make patients "have skin in the game" by structuring their co-payments, say for physician services, according to whether they select an "efficient" clinician or an "inefficient" clinician. The expectation is that market forces would drive patients towards use of physicians who have shown they can achieve good outcomes at a low cost. Similarly, restricted network plans limit the patient's choice of hospitals or physicians to those that are "efficient." The health plan determines who is efficient and who is not using very blunt indicators: no outcome measures are used for evaluating physicians and a handful of standardized "quality indicators" are used to measure hospital performance. Only a few companies have developed such insurance products, but they may be catching on.
The final arena is reduction of waste. The most interesting idea in this category, using cost effectiveness analysis to decide what tests and treatments insurance companies will cover, was dismissed out of hand in the preliminary report commissioned by the state because of a paucity of empirical studies or other data to inform the analysis. Given that none of the other strategies is proving dramatically effective, perhaps it's time to examine this idea more closely.
The assumption underlying a focus on cost effectiveness analysis is that the high cost of medical care is driven to a large extent by technology, a claim supported by numerous studies . Technology, whether a screening test such as cardiac computed angiography, a monitoring test such as a positron emission tomography (PET) scan, or a treatment such as targeted cancer chemotherapy, sometimes improves patient outcomes and sometimes does not. Once a technology has been approved for use (whether based on the FDA's "safe and effective" criteria or Medicare's "reasonable and necessary" criteria), physicians often use it with impunity, typically in a variety of situations for which it was never approved. It's time to recognize that placing the responsibility for cost control on physicians is problematic as long as the culture of medicine (often buoyed by the incentive structure) promotes widespread use of the latest and ostensibly greatest tests and procedures. Placing the onus of cost control on patients is problematic because patients rely on the professional expertise of their physicians to recommend tests and procedures. Moreover, the very nature of health insurance defines the true consumer as the physician, not the patient. Health plans will need to start making more rational decisions about what they will cover. They can choose to pay for the least expensive, proven treatment and patients can opt to pay the difference between the cost of the covered treatment and the unproven therapy their physician recommends. Only when we start rationalizing physician prescribing can we expect to make progress in constraining medical costs. And rationalizing physician behavior will require payment reform, delivery system design, and health plan coverage decisions.
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