nichols_missouri foundation for health _december 9_2010

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Beyond Health Reform:

Two Roads Diverged in a YellowWood

Len M. Nichols, Ph.D.

Director, Center For Health Policy Research and EthicsProfessor of Health Policy

George Mason University

Missouri Foundation for Health

December 9, 2010

Chesterfield, MO


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Overview

Why

What

Whats Going On?

What do we do NOW?


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Percent of median family income required to

purchase family health insurance

Source: Authors calculations, using KFF and AHRQ premium data, CPS income data, plus projections from Carpenter and Axeen, The Cost ofDoing Nothing, 2008.


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Medicare is unsustainable now

(percent of GDP

, projected)

3.2

4.5

7.3

0

1

2

3

4

5

6

7

8

2008 2020 2035

4

Source: Medicare Trustees Report:, 2009.


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5

Source: CBO


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6Source: Council of Economic Advisors, CBO.


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Why Not Just Cost Containment

First ?

Delivery system could not stand it 3/4 of hospitals lose money on Medicare

Need embrace of new payment models, not circle the

wagons in defense of the status quo

Cost containment with coverage expansionis more likely to succeed

Repeal and do nothing => ? Imploding Medicaid programs, brute force caps onMedicare

Coverage expansion buys time for inefficient toadjust


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What is Reform REALLYAbout?

Signaling that Business As Usual is over

We Cannot Afford It

The Chinese will want their money back We are weaker as more families fail to cover

themselves

Changing obsolete business models

Risk Selection helping allfind value

FFS pay for volume pay for value

New business models reinforce each other8


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Incentive Alignment is Multi-

Dimensional

Patient

Employer/PayerProvider

Wellness +

Co-Payments

Decision

Support


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What Was Left Out

Bi-partisan support

Malpractice reform

SGR fix Primary care expansion incentives

Memo on how to explain it to the people

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Coverage Parts of Reform

Pre-2014

Modest Insurance market reforms

2014

Medicaid Expansion

Exchanges + major insurance market reforms

+ subsidies for private insurance

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Delivery System Parts of Reform

Business as usual will end MA overpayment reductions + bonus payments

Market basket update reductions

Address mis-priced procedures

Independent Payment Advisory Board

Patient Centered Outcomes Research Institute Quality and accountability throughout

Change incentives where Fed govt has jurisdiction Center forMedicare and Medicaid Innovation

Payment pilots Incentives to adopt pay for value systems of future

Secretary can expand duration and scope

Excise tax on high cost plans

Evolution of ARRA incentives for HIT viaMeaningful Use carrots/sticks


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What We Think We Want

P

ay for value, not volume Value = quality + patient experience + resource use

Variations on capitation, 3.0

Changing the unit of payment, Bundled payments

up to full cap eventually Patient Acuity-Adjusted cap with quality rewards

Providers gain from:

Participating in a coordinating organization

Improving health, patient experience, efficient resource use Patients gain

Health, better experience, and share of savings

Payers

Share savings, productivity gains from improved health and

patient experience 13


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Problem: There is no Scotty!

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This Will Not All Be Smooth Sailing

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Close Up of Not Smooth Sailing

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Whats Going On March - Nov

Hospitals buying physician practices

Especially cardiology and primary care

Hospitals studying ACO tea leaves

Physicians angry about SGR

Insurers tired of being whipping boys

Drug companies quietly happy enough

Device companies scared to death

States are starting to think hard about

implementation17


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Politics August of 2009 Tea Party election

Economic change and turbulence

Distrust/rejection of Obama

Employers turned reflexively negative

Conservative tidal wave, REPEAL!

States reconsidering 18


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Two Roads to Health Care

Future

19

CELEBRATE

MARKET

POWERRE-ALIGN

INCENTIVES


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Competing World Views

FREEDOM

FFS is moral

Regulation is evil

People get what theydeserve

Redistribution should

be voluntary

Triple Aim

Channeling self-

interest to serve

social ends is moral

Regulation is a tool

Markets are notperfect

Voluntary

Redistribution will

never be sufficient 20


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Dangers of Regulatory Fascism

One size fits all turns health stakeholders

into public utilities

Stifles innovation

Many hospitals go broke, or costs dont

fall, or quality suffers, docs reallyangry

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Cant We All Just Get Along and

Make It Work with Midcourse

Corrections??

Honesty and Trust (transparency)

Listening and Collaborative Learning

Core difference over use of government isactuallylinked to

Ideology

Distrust/lack of transparency 24


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