Brookings: Experts - Kavita Patel

Advancing Reform: Medicare Physicians Payments

Kavita Patel — Tue, 14 May 2013 10:00:00 -0400

Chairman Baucus, Ranking Member Hatch and members of the Committee, thank you for this opportunity to highlight ways to advance physician payment reforms in Medicare. The Medicare program retains a strong commitment to provide care to approximately 50 million beneficiaries across the country; a key partner in the provision of this care are the 900,000 healthcare providers who see beneficiaries in medical offices, hospitals, skilled nursing facilities and other settings.[1] Each day, providers work hard to deliver the best care for their patients yet our current payment system falls short time and time again, with financing mechanisms that perpetuate fragmented care and volume over coordination and value. Fortunately, there are better ways to pay physicians that can enable them to improve care, enhance the patient experience and potentially achieve greater savings for the Medicare system overall. I am honored to present some solutions from my work at the Engelberg Center for Health Care Reform at the Brookings Institution and our Merkin Initiative on Clinical Leadership, as a Commissioner on the National Commission on Physician Payment Reform and perhaps most importantly, as a practicing internal medicine physician.[2]

Current Payment Policies in Medicare

Currently, Medicare pays physicians primarily by a fee-for-service (FFS) schedule that is informed by relative value units (RVUs). Relative value units are determined from the Resource Based Relative Value Scale (RBRVS) which defines the value of a service through a calculation of physician work, practice expense and practice liability.[3] A relative value unit is assigned to every medical service that physicians carry out during a clinical visit. [4] The RVU is then adjusted by geographic region (so a procedure performed in Miami, Florida is worth more than a procedure performed in Salem, Oregon). This value is then multiplied by a fixed conversion factor, which changes annually, to determine the amount of payment to the physician. As the number of billable service codes have grown over time, an extensive regulatory process was enacted to develop RVU weights and update them year over year.

Over time, the RVU updating system has placed an increasing importance, evidenced by RVU weights, on procedures, scans, and other technical services that fix certain ailments or problems. Emphasis on technologies and interventions have resulted in a marked disparity between reimbursement for specialties which emphasize procedures such as cardiology and gastroenterology and those that do not such as primary care, endocrinology or infectious diseases, thus exacerbating shortages and the hierarchical culture within medicine.

The 1997 Balanced Budget Act exacerbated the problem with the introduction of the sustainable growth rate or SGR. The SGR was intended to keep the growth in Medicare physician-related spending per beneficiary in line with growth in the nation’s gross domestic product (GDP). In the early years of the SGR, this worked fine, as spending growth was lower than the calculated GDP target and payment rates for physician services increased. But starting with the recession in 2002, spending growth per beneficiary began to exceed GDP growth. In 2002, payment rates were reduced accordingly, by 4.8 percent.

Payment Reforms in the Affordable Care Act

The Affordable Care Act included over 100 policy changes in Medicare provider payments, many of which are currently being phased into the current delivery system and affect physicians directly. [5] These reforms include Medicare Accountable Care Organizations (ACOs), Value-based payment modifiers, the Bundled Payments for Care Improvement initiative as well a number of broader efforts for statewide level innovation, multipayer efforts to promote primary care and alignment of payments for Medicare-Medicaid beneficiaries (dual eligibles). These reforms are incredibly effective at encouraging providers to delivery high-quality, coordinated care at a lower cost and enable Medicare to pay for value. As Jonathan Blum, Acting Deputy Administrator and Director of the Center for Medicare recently pointed out in his testimony before this committee, “the Medicare program has been transformed from a passive payer of services into an active purchaser of high-quality, affordable care.” [6] While these reforms will offer a great deal of insight into how we can improve Medicare physician payment through authorities granted in the Patient Protection and Affordable Care Act, they are still largely based on a fee-for-service payment system. We must acknowledge the limitations in implementing payment reforms in the face of a dominant fee-for-service system. One early large-scale Medicare pilot implemented in oncology in 2006 serves as a good example: in conjunction with reductions in Part B drug payments, oncologists received an additional payment to report on whether the chemotherapy care provided by them adhered to certain evidence-based guidelines. This promoted comparisons to the published guidelines and also supported the development of evidence on how widely published guidelines were being followed in practice. [7] However this pilot did not make any changes in the underlying structure of fee-for-service payments and did not explicitly tie payments to measured improvements in performance, resulting in limited feasibility and adoption. In order to move away from our current system and build on the promise of ongoing efforts we must remove the SGR as a constant impediment to true systemic change.

Recommendations of the National Commission on Physician Payment Reform

In an effort to explore new ways that to pay for care that can yield better results for both payers and patients, the Society of General Internal Medicine convened the National Commission on Physician Payment Reform in 2012. Our commission, composed of a broad range of leadership and expertise spanning the public and private sectors, adopted twelve specific recommendations for reforming physician payment:

The SGR adjustment should be eliminated
The transition to an approach based on quality and value should start with the testing of new models of care over a 5-year time period and incorporating them into increasing numbers of practices, with the goal of broad adoption by the end of the decade.
Cost-savings should come from within the Medicare program as a whole. Medicare should where possible, avoid cutting just physician payments to offset the cost of SGR repeal, but should also look for savings from reductions in inappropriate utilization of Medicare services.
The Relative Value Scale Update Committee (RUC) should continue to make changes to become more representative of the medical profession as a whole and to make its decision-making more transparent. CMS has a statutory responsibility to ensure that the relative values it adopts are accurate and appropriate, and therefore it should develop alternative open, evidence-based, and expert processes beyond the recommendations of the RUC to validate the data and methods it uses to establish and update relative values.
For both Medicare and private insurers, annual updates should be increased for evaluation and management codes, which are currently undervalued, and updates for procedural diagnosis codes, which are generally overvalued and thus create incentives for overuse, should be frozen for a period of three years. During this time period, efforts should continue to improve the accuracy of relative values, which may result in some increases as well as some decreases in payments for specific services.
Fee-for-service contracts should always include a component of quality or outcome-based performance reimbursement.
Higher payment for facility-based services that can be performed in a lower cost setting should be eliminated. Additionally, the payment mechanism for physicians should be transparent, and should reimburse physicians roughly equally for equivalent services.
In practices having fewer than five providers, changes in fee-for-service reimbursement should encourage methods for the practices to form virtual relationships and thereby share resources to achieve higher quality care.
Over time, payers should largely eliminate stand-alone fee-for-service payment to physicians because of its inherent inefficiencies and problematic financial incentives.

10. Because fee-for-service will remain an important mode of payment into the future even as the nation shifts to fixed-payment models, future models of physician payment should include appropriate elements of each. Thus, it will be necessary to continue recalibrating fee-for-service payments, even as the nation migrates away from that method of paying physicians.

11. As the nation moves from a fee-for-service system to one that pays physicians through fixed payments, initial payment reforms should focus on areas where significant potential exists for cost savings and higher quality.

12. Measures should be put into place to safeguard access to high quality care, assess the adequacy of risk-adjustment indicators, and promote strong physician commitment to patients.

Moving Beyond the SGR

Eliminating the SGR is a principal recommendation of many expert reports, including our Commission’s Report, MEDPAC, The Brookings Institution, Simpson-Bowles and the Bipartisan Policy Center, but the question remains, repeal and replace with what? [8][9]^,[10]As stated above we (and other clinical groups and societies) recommend a five year transition to newer models of payment which move away from FFS as the dominant payer. But the devil is in the details, and proposals to move towards new models over a period of time leaves policymakers and physicians wondering what their practices will look like next month, next year and beyond. In moving from principle to practice, it is also important to acknowledge that while there will be no one payment model that applies to all physicians, payment models must be relevant to primary care physicians and specialists alike. Additionally, given the growing complexity of caring for Medicare beneficiaries, payment models should encourage collaborations between specialists and primary care physicians rather than focus on a model that is suited for one clinical specialty alone.

Short-Term Steps in Advancing Payment Reforms

To facilitate providers’ transition to alternatives to fee-for-service payments, CMS should harmonize current payment adjustments and quality improvement initiatives and apply those funds towards a care coordination payment which could give physicians more support for broader long-term reform pathways. Medicare has implemented quality reporting systems and payment adjustments for physicians, hospitals, and other providers. But these payments are generally administered as either a flat percentage or adjuster to all FFS payments. In contrast, shifting some existing FFS payments into a care coordination payment would give providers more support in moving toward condition-based, episodic payments, or global payments that allow for management of a population of payments that would otherwise be impossible in the current payment setting.

Table One highlights current efforts within the Medicare to increase value in care; each initiative is important but in isolation results in marginal financial gains and at times and each of these initiatives is limited in scope. For example, quality measures for the Physician Quality Reporting System (PQRS) have flexible annual submission options, with qualification through registries, electronic health records etc. However, the program has suffered from criticism that measures are not as relevant to specialists. And at best, providers will gain approximately an average of $1059 for participation per year, which some might say is not worth the effort, even in a penalty phase of the program. With the passage of the American Taxpayer Relief Act of 2013, a mechanism will be in place by 2014 for specialty specific efforts to satisfy CMS’ reporting requirements for PQRS, which will encourage higher specialist participation in quality improvement efforts and help align clinician-developed quality measures with CMS’ mandate to examine quality of patient care. Applying these measures to help physicians understand how registries can not only benefit their patients but lead to better predictability in a changing payment landscape will facilitate entry into pathways of reform.

Meaningful use measures are also quite detailed with important process metrics but physicians will likely also “perform to the measure” and may have difficulty going beyond unless there are linkages to payment reform. This is reflective of the sentiment that many providers express that they are constantly being asked to measure and perform, all while trying to see just as many patients in a day of work with little to no reward for doing less or changing workflows in order to reduce inappropriate utilization of resources. For example, proposed Stage 2 meaningful use measures include 17 core measures and six additional menu objectives from which a physician would choose at least three. This adds up to a total of 20 distinct actions that often involve all office staff. Rather than adding to these measures, CMS should consider how existing measure components could be applied to a payment update overall or a care coordination payment for the care of a patient with a chronic disease.

In the case of a care coordination payment, providers who opt to enter into a care coordination pathway in the first year can receive a lump sum of payment. This payment would be roughly equivalent to the potential bonus payments for all programs in table one. In return they would have to demonstrate that they are improving clinical practice and implementing outcomes-based clinical measures which are germane to their practice. In this example, a cardiologist would receive a population level care coordination payment derived from bonus payments and some FFS payments who does the following:

Participates in a care coordination pathway for chronic cardiac disease (atrial fibrillation, congestive heart failure, etc)
Subscribes to a cardiac specific registry (thus meeting PQRS requirements)
Implements patient engagement tools for electronic care coordination, medication reminders, therapeutic lab monitoring for anticoagulation (meeting requirements for meaningful use, value-based modifier program, e-prescribing)
Implements a significant practice transformation (potentially a new component which allows for a physician in a small, medium or large practice to individualize their approach to innovation)

The cardiologist would satisfy program requirements and would receive the maximum bonus payments.

Implementing this kind of approach involves potentially supporting CMS and additional entities to provide data on performance measures and quality improvement at more regular intervals along with technical assistance to understand how to translate incoming data into practice transformation. This process can begin in the year following a SGR repeal and can be supported through the assistance of existing clinical societies and quality improvement organizations. In this manner, assumption of clinical and performance risk becomes more commonplace for physicians. Simply put, physicians understand that they need to be held accountable for payment in a standard fashion, but want to feel that they can bring some degree of personalization into their practice in order to meet the needs of their populations.

Finally, I encourage CMS to continue implementing important changes through the Physician Fee Schedule including recent changes for care coordination.[11] These changes are an important acknowledgment that while we migrate from a payment system dominated by fee-for-service, we need to also enhance the existing system to be aligned with the expected outcomes of policy changes. Recent calls for evaluating the distribution of evaluation and management codes and determining the accuracy and appropriate valuation are also an important step in the short term.

Movement from The Short Term to Longer Term Sustainable Payment Reforms

As clinicians of all specialty types realize that there is a viable pathway to care for patients and work across silos. The appetite for a more attractive option is evidenced by the overwhelming response to applications for the CMMI Challenge Grants, BPCI initiative, Medicare Shared Savings Program and other efforts. Clearly, physicians want an alternative.

Through my work at the Brookings Institution’s Engelberg Center for Health Care Reform and the Richard Merkin Initiative on Clinical Leadership, we have been meeting with physicians in primary care and specialties as well as other healthcare stakeholders. With iterative feedback from clinicians in practice, we have proposed a longer term payment model that takes into account the currently uncompensated critical elements of patient care, the need for more flexibility in the way physicians are able to use their time and treatment resources in the best interest of their patients’ individual circumstances, and the need to implement care reforms in a way that recognizes the intense and growing cost pressures in our health care system.

Our model, outlined in Figure 2, would build on the short term payment advances above with incorporation of a payment for care coordination that is derived from the programs in Table One and identify additional opportunities to improve care and lower costs that are not reimbursed well in traditional fee-for-service payment systems. For example, a common procedure in the outpatient cardiac practice is the echocardiogram (echo), or ultrasound of the heart. This procedure is sometimes performed in place of preventive counseling or watchful monitoring of a patient in coordination with a primary care physician, in large part because a hospital-based outpatient cardiology practice receives up to $450 for an echo compared to $53 for a visit without the procedure. Imagine paying both the cardiologist and primary care physician a fixed payment of $400 that allows for longer term communication and conservative monitoring in return for reporting on clinical outcomes at a population level. The clinicians are take the financial risk involved in the clinical care of their patient using the investments previously made by clinically driven pathways, registries and care coordination solutions.

Column A represents total spending on health care and reflects the current state of physician payment: exclusive reliance on the FFS model for physician payments, with waste and inefficiency in the form of redundant and unnecessary care, breakdowns in coordination, escalation of preventable complications etc. This leaves the total cost of physician care high.

Column B illustrates total spending in our alternative payment model. First, a set of services currently reimbursed for a particular episode of care or part of chronic care management are bundled together into a single payment to physicians as a case management payment. For example in clinical oncology a case management payment would include after hours phone care for breast cancer or a palliative care counselor for patients with lung cancer. This enables clinicians to focus less on volume and more on tighter coordination among providers and settings for patients. In addition, we continue the aforementioned care coordination payment paid to physicians, which is built on concepts such as PQRS/ MU and actually increases the current level of physician payment relative to the fee-for-service baseline in Column A. Care coordination payments allow flexibility for physicians to invest in clinical practices and infrastructure through practice transformations that maximizes their ability to treat patients in clinically appropriate ways while not reducing their income due to reductions in billable procedures that would otherwise occur. The investments in clinical practice can include infrastructure/HIT investments or in the case of a small practice, an investment in a shared clinical social worker with other small practices with similar patient populations.

Continuous quality improvement resulting from adherence to clinician-driven process and outcomes measures and the increased flexibility in income will push physicians to decrease and ultimately eliminate the waste and inefficiencies that plague the current system. Overall physician payments increases, offset by reductions in total Medicare spending and system wide savings. Care coordination payments that enhance total physician income tied to quality measures would encourage physicians to collaborate and focus on elements of patient care that reduce cost and inefficiencies across the spectrum. In oncology, for example, we do not specify which metrics should be used in which case but comment that target metrics would change over time and as efficiency is maximized in certain areas of care (i.e. ED visit rates) bonus payments would not cease because of lack of room for improvement. Measures would have to be selected with flexibility to accommodate various provider circumstances and changes in the long term improved performance in certain areas.

Physicians who enter into broader accountable care arrangements in which there is a shared savings component will likely find that this model could lead to an increased proportion of shared savings beyond the 2% threshold; therefore our described model would not be mutually exclusive to ACO arrangements, but could enhance them given the decreased reliance on fee-for-service reimbursement.

Tools that Enable Financial, Clinical and Performance Risk

As I have mentioned earlier, physicians will need tools to better understand risk- these are not lessons we had in medical school or in clinical training. Financial metrics (such as those available to ACOs), performance metrics in the form of actionable and regular data feeds as well as peer-led initiatives should be considered essential components of a payment reform package.

Conclusion

Our nation is in a sustained period of constrained finances and while the cost to repeal the SGR has been decreased to $138 billion, finding the offsets and mechanism to pay for such a solution will not be easy. But it is essential that this Committee seize the opportunity to finally dispel the notion that we allow for a system that rewards the balkanization of our patients through a payment mechanism which promotes volume over value. I commend Senators Baucus and Hatch in their recent call for proposals and specific suggestions from the clinical community and look forward to working with the Committee to identify a tangible path forward. Thank you for this opportunity and I look forward to your questions and comments.

[1] Report to the Congress: Medicare Payment Policy. Medicare Payment Advisory Commission. http://www.medpac.gov/documents/Mar12_EntireReport.pdf

[2] Frist W, Schroeder S, et al. Report of The National Commission on Physician Payment Reform. The National Commission on Physician Payment Reform. http://physicianpaymentcommission.org/wp-content/uploads/2013/03/physician_payment_report.pdf

[3] The RBRVS has three components. Physician work accounts for the time, skill, physical effort, mental judgment and stress involved in providing a service and is approximately 48 percent of the relative value unit. Practice expense refers to the direct costs incurred by the physician and includes the cost of maintaining an office, staff and supplies and accounts for 48 percent. Professional liability insurance takes into account the malpractice insurance essential for maintaining a practice and is 4 percent of the calculation. Overview of the RBRVS. American Medical Association. http://www.ama-assn.org/ama/pub/physician-resources/solutions-managing-your-practice/coding-billing-insurance/medicare/the-resource-based-relative-value-scale/overview-of-rbrvs.page

^{^[4]}The Centers for Medicare and Medicaid Services (CMS) uses Current Procedural Terminology (CPT) codes to determine services that it will reimburse for Medicare enrollees and each CPT code has an assigned relative value unit.

[5] Policy Options to Sustain Medicare for the Future. January 2013. Kaiser Family Foundation. http://kaiserfamilyfoundation.files.wordpress.com/2013/02/8402.pdf

[6] Statement of Jonathan Blum on Delivery System Reform: Progress Report from CMS Before the Senate Finance Committee. 28 February 2013. Full transcript available at: http://www.finance.senate.gov/imo/media/doc/CMS%20Delivery%20System%20Reform%20Testimony%202.28.13%20(J.%20Blum).pdf

[7] Doherty J, Tanamor M, Feigert J, et al: Oncologists’ Experience in Reporting Cancer Staging and Guideline Adherence: Lessons from the 2006 Medicare Oncology Demonstration. J Oncol Pract. 6(2): 56–59. 2010.

[8] Antos J, Baicker K, McClellan M, et al. Bending the Curve: Person-Centered Health Care Reform. April 2013. Full report here: http://www.brookings.edu/research/reports/2013/04/person-centered-health-care-reform

[9] Bowles E, Simpson A, et al. A Bipartisan Path Forward to Securing America’s Future. Moment of Truth Project. April 2013. Full report available here: http://www.momentoftruthproject.org/sites/default/files/Full%20Plan%20of%20Securing%20America's%20Future.pdf

[10] Daschle T, Domenici P, Frist W, Rivlin A, et al. A Bipartisan Rx for Patient-Centered Care and System-Wide Cost Containment. Bipartisan Policy Center. April 2013. Full report available here: http://bipartisanpolicy.org/sites/default/files/BPC%20Cost%20Containment%20Report.PDF

[11] Bindman A, Blum J, Kronick R. Medicare's Transitional Care Payment — A Step toward the Medical Home.N Engl J Med 2013; 368:692-694

Authors

Kavita Patel

Publication: U.S. Senate Committee on Finance

Discuss Mental Health in the State of the Union

Kavita Patel — Fri, 08 Feb 2013 11:02:00 -0500

The State of the Union Address is often used to highlight the condition of our nation but also allows the president to outline legislative agendas for which he might need the cooperation of Congress. The Affordable Care Act deserves an acknowledgment in the speech namely because the nation is still in a state of frenetic planning and implementation for the addition of approximately 31 million new people who will have health insurance beginning this fall and building over the subsequent years.

Gun violence also should be mentioned in light of not just the tragedy in Newtown but also due to rising homicide rates in some major cities like Chicago and other gun-related fatalities that are too numerous to count. Let us hope these incidents compel both the president and Congress to action.

Mental health should be an important part of any national discussion. The State of the Union will likely address some of the president’s actions as well as recent efforts from a bipartisan group of legislators to expand access to mental health facilities and raise standards for mental health services. But such an approach should be applied with caution: laws which require mental health professionals to report names of patients who are likely to harm themselves or others to a state or local authority could unintentionally exacerbate stigma and the great chasm in seeking mental health treatment. Furthermore, expansion of the very same mental health care services will not be as effective as efforts to truly integrate behavioral and mental health services into other aspects of care delivery such as primary care, which is often an entry point for many patients. Such efforts are underway now. The president will have to balance the need for action with the need for credible and informed mental health models which can truly transform care. This does not meant that we should delay action—quite the opposite—patients and families have been waiting for too long. But we should apply a critical eye as well as offer perspectives from public health and other social determinants of health and primary care.

Authors

Kavita Patel

Image Source: © Shannon Stapleton / Reuters

Using Innovation to Reform Medicare Physician Payment

Kavita Patel — Wed, 18 Jul 2012 10:00:00 -0400

Introduction

Chairman Pitts, Ranking Member Pallone and Members of the Subcommittee - as a practicing physician and Fellow at the Engelberg Center for Health Care Reform at the Brookings Institution, it is a privilege to participate in this hearing today. I commend the Committee for its willingness to confront the difficult issues surrounding Medicare payments to physicians by looking to innovative clinical practices, ideas and solutions.

The current problem of physician payment is not new. Its history can be found in a series of bipartisan legislative efforts aimed at creating a stable system of Medicare physician payment rates and yearly updates to keep health care spending in line with overall economic growth year over year. First, legislation creating the Resource Based Relative Value Scale (RBRVS) was enacted in 1989 and led to the development of relative value units, or RVUs, for each of the physician-related services paid for in the traditional Medicare program. As the number of billable service codes grew over time, an extensive regulatory process was enacted to develop RVU weights and update them year over year. The goal of these updates was to keep the (relative) payments made by Medicare to accurately reflect the value of services.

The problem with this approach is the development of the term “relative.” Over time, the RVU updating system has placed an increasing importance, evidenced by RVU weights, on procedures, scans, and other technical services that fix certain ailments or problems. This has resulted in an emphasis on volume over value and the maintenance of silos in health care, which have eroded the quality of care we deliver to our patients. Non-technical or nonprocedural physician services, including for example “cognitive” services such as spending time with a patient reviewing the risks and benefits of a treatment course or a counseling session to understand health promotion behaviors, have not received significant RVU weight increases over time. Additionally, new services such as email consultations and new approaches to care such as nurse or pharmacist-led care management trams may not be included at all in the list of covered services. These omissions in the RVU system are even more significant as we head into an era of more personalized medicine where the right treatment at the right time for each patient is increasingly individualized-where some patients with heart disease may benefit from a certain imaging procedure but others may not.

The 1997 Balanced Budget Act inadvertently exacerbated the problem with the introduction of the sustainable growth rate or SGR. The SGR was intended to keep the growth in Medicare physician-related spending per beneficiary in line with growth in the nation’s gross domestic product (GDP). In the early years of the SGR, this worked fine, as spending growth was lower than the calculated GDP target and payment rates for physician services increased. But starting with the recession in 2002, spending growth per beneficiary began to exceed GDP growth. In 2002, payment rates were reduced accordingly, by 4.8 percent.

Every year since then, the scheduled SGR payment rate reductions have not taken full effect. Instead, because of concerns about access to care and the sufficiency of payments, Congress has headed off the full payment reductions on a short-term basis. Typically, this has involved offsetting at least some of the budgetary costs with payment reductions affecting other Medicare providers. These short-term patches have not kept up with inflation: between 2000 and 2010, the total cumulative increase in physician payment rates in the Physician Fee Schedule was 8 percent, while the “market basket” for physician services (the Medicare Economic Index) rose 22 percent.[i] As Figure 1 illustrates, actual updates as well as the SGR formula update still grow at rates far below input costs (MEI) and payment rates for other providers, thus exacerbating systemic flaws. The system is broken.

Figure 1: Percent (%) Change of Payment Update Under Multiple Scenarios

So here we are today, facing yet another possible physician payment cut of 27 percent, and we ask ourselves, “What can be done?” First, we must achieve a long-term vision for payment reform that will help chart a path towards clinician-driven, evidence-based medicine that preserves the autonomy of the physician-patient relationship while moving the profession towards greater accountability. Then, we must look to current innovations, especially those that are clinician-led to help us achieve broader system wide savings.

A Long-Term Vision for Innovation in Physician Payment

The goal of any meaningful Medicare physician payment has to have three essential elements. First, payments must incentivize coordination between providers and across different provider settings. The treatment and management of chronic diseases, acute illness, and prevention and health promotion does not occur within a single physician office or with a single physician or other provider for most individuals. It occurs between specialists in the hospital, in outpatient and rehabilitation facilities, in pharmacies, in community-based organizations, and in the home. The payment system must recognize that incentivizing providers to work together across these divisions is crucial to both the improvement of care for patients and the reduction in unnecessary, redundant, and sometimes harmful or deadly care. Up to $45 billion dollars in health spending each year are attributed to failures in coordination, up to $226 billion in overtreatment and up to $389 billion in administrative complexity.[ii]

Second, payments must inject flexibility into physician practices and clinical processes to remove the sole reliance on the provision of services, tests, and drugs as sources of income. The current fee-for-service model (FFS) incentivizes behaviors that are not in the best interest of patients in many cases and places the emphasis on volume over value and patient-centeredness. In addition, in the era of accountable care—that is, providers being held accountable for the cost and quality of the care that they deliver to patients through financial means—there are numerous elements of care that do not currently fit into the FFS model and are thus uncompensated. Services such as extended office visits, email correspondence, end-of-life counseling, comprehensive treatment plan development and tracking, and critical health IT infrastructure are not part of any fee schedule. Yet these elements of care have been proven to improve the quality of care and lower the overall total cost of care for patients. Any savings from investments made in these areas by providers goes straight to payers.

Third, payments must be tied to appropriate performance and quality measures and embedded into continuous quality improvement programs. This ensures against providers withholding care or providing cheaper care at the expense of patient needs to increase their income. This also reinforces incentives for physicians to adhere to established guidelines, practice evidence-based medicine, and treat patients individually.

With those three elements in mind, it is also important to reinforce that the transition to a new payment system for physician services must occur in stages. A switch to a complete non-FFS system cannot possibly happen in the short term. But it is critical to put into place a process to begin the transition away from a pure volume based, FFS system toward a flexible, blended payment system with payments tied to quality and performance measures, and aligned to coordinated care processes.

At the Engelberg Center for Health Care Reform at Brookings, we have been working with physicians, clinical societies, and other provider groups to start defining the pathway forward, and as a practicing physician, I understand how critical it is to work directly with these groups to make significant progress on this path. We also highlight several key efforts across a variety of specialists with tangible reductions in cost and improvements in quality.

Innovation in the Public Sector

A significant number of important steps to achieve meaningful payment reform have started within the Center for Medicare and Medicaid Innovation (CMMI), including models for bundled payments, coordination among multi-payers in comprehensive primary care and Pioneer Accountable Care Organizations, but I will focus on reinforcing our long-term vision for physician payment by also highlighting where transformation is taking place outside of CMMI. These innovations are noteworthy since in some cases, they have been in place for years with little recognition and acknowledgement by public or private payers. In terms of advancing CMMI’s initiatives, there is broad consensus that the Secretary should advance payment reforms as quickly and responsibly as possible in order to create force multipliers that can achieve the long-term vision outlined above. In particular, I encourage CMMI to identify mechanisms to further their multi-payer efforts such that the important work will transform the delivery system. Finally, the recently announced Challenge Grants offer great insights into clinical innovation. A proposal by Dr. Barbara McAneny of New Mexico Cancer Center (NMCC) was awarded a CMMI grant to expand staff and hours of operation NMCC’s staff and hours of operation to provide an alternative to expensive and inconvenient emergency department services. Under the grant, NMCC will be comparing its quality of care and the cost of care with control-group practices and hospital-based systems. By the end of the third year, Dr. McAneny and her practice colleagues will have a better understanding of all facets of cancer care costs so they can provide a bundled payment mechanism. There is indeed great promise in these examples that should be brought to scale for the nation.

Innovations Informed by Clinical Leadership

Frustrated by the growing cost of care and the scarce time with patients to address important issues, physicians and other clinical leaders are already moving to implement delivery system transformations that are improving care and reducing the total cost of care, many of which are unfunded or uncompensated by payers but still offer the best promise for better care everywhere. Several of my fellow panelists will highlight these efforts.

For example, teams of physicians and health system leaders in Portland, Oregon have implemented an innovative cardiology program led by Drs. Xiaoyan Huang and John Peabody aimed at improving quality, lowering costs and advancing the patient care experience. Known as the Accelerating Clinical Transformation for Cardiovascular Disease (ACT-CVD) Program, the team is redesigning the care of cardiovascular disease by bringing together cardiologists, hospitalists, and primary care providers in a dense urban population in Oregon. Working toward a full-scale system transformation, they have changed care in two general areas: clinical and business. The clinical work has centered on identifying disease specific quality improvements, determining care coordination between specialists and primary care providers, streamlining workflows for high-risk patients, and adoption of appropriate use criteria. The parallel stream of business activities has led to the creation of a large cardiac disease episode of care/bundle to aggregate all cardiovascular costs (approximately $15,000 per patient per year for the high-risk population), the generation of budget expectations for the population, and new physician contract language that incorporates quality and the patient experience. Quality and savings opportunities identified include the following:

Chest pain phone triage to reduce unnecessary ER referral and utilization
Congestive Heart Failure Nurse Practitioner and Physician Assistant case management
Use of comparative effectiveness research to ensure appropriate use of stress testing and teaching aids for students, residents and fellows to better understand true cost of care
Tele-medicine consulting including live chat with cardiologists and electronic medical record review
Co-management of high risk patients between cardiology, surgery, hospitalists, and primary care physicians

The Oregon ACT-CVD program estimates a potential savings of approximately $49.4 million in a target patient population of 77,000 lives connected by hundreds of cardiologists and primary care physicians. But the program still struggles to achieve broad scale largely due to competing incentives in the current reimbursement system—simply put, it is very hard to do this work when the innovations are not recognized by codes, claims, or payers.

Innovation led by physicians is also helping to shape interactions between the multitudes of specialists involved in medical decision-making around cancer care. Dr. John Sprandio, a medical oncologist in Pennsylvania, has changed his practice to promote the concept of a patient-centered medical oncology home (PCMOH). The concept advocates investments in electronic health records, standardization of documentation, physician document review processes, referring/consulting physician access to records, current and longitudinal data reporting, assessment plan development and customization, telephone triage, palliative care programs, and a number of patient tracking processes as the bedrock of their enhanced oncology provider model.[iii] Participation in quality efforts advanced by professional oncology societies gave Dr. Sprandio specialty specific quality metrics to ensure that his care was consistent with the latest guidelines and clinical pathways.

In just five years, Dr. Sprandio’s practice saw significant reductions in both ED visits and hospital admissions leading to significant savings to the system overall, but he faced a dilemma—he was still practicing in a RVU driven, FFS environment that did not necessarily reward any of these innovations, and as a result, there were times when Dr. Sprandio found it challenging to subsidize the coordinated care. Despite this, he persevered. Imagine if payment mechanisms were aligned to incentivize this type of coordination.

Innovation is also occurring in the fields of primary care and other specialties as physicians are consistently voicing concerns that the lack of support for meaningful communication between primary care and specialties results in a breakdown in the management of patients.[iv] A perfect example of an innovative solution to deal with this is in the field of behavioral health care. Patients suffering from depression often fail to seek treatment and primary care physicians often feel overwhelmed with cases that might require more intense monitoring or involvement of an already time constrained and often inaccessible mental health specialist. A multisite effort in the states of Washington , California, Indiana, Texas, and North Carolina (known as the IMPACT Project) aimed to deal with these issues began over a decade ago led by a team of clinicians and quality improvement experts. Primary care practices in eight FFS and capitated settings agreed to engage several depression care managers and a consulting psychiatrist who could electronically review charts and speak with the PCP regarding complex patient treatments. Cost of the care manager and consulting psychiatrist as well as research to study the program’s effects were subsidized by philanthropic foundations and internal resources. The care manager would ensure that close follow-up was scheduled and that care did not “fall through the cracks” as they often do in transitions between primary care and specialties. The consulting psychiatrist worked virtually, covering multiple practices at a time and working over weekends if necessary. Savings of approximately $896 per patient per year were sustained along with demonstrable improvement in mental health outcomes and other indices of chronic disease. Diabetics with depression improved their glucose control. The potential for scale is great, but incentives to change the system are few and far between and all too often, great cost saving opportunities go unrealized.

There are many more examples in additional specialties and primary care—all with the theme that reinforces the need for a payment system that is flexible to innovation but provides a path towards better coordination of care and quality improvement. There will be elements of the FFS system that will need to be retained in this transition and potentially beyond but that should no longer delay progress to achieving better care at a lower cost.

The Importance of Data in Driving Innovation in Medicare Payment

Physicians and other clinicians believe in data informed by evidence and are driven to improve their performance based on high quality data. Perhaps the biggest tool we can give physicians to drive care quality and cost savings is relevant, timely, transparent and actionable data about their patient populations—both clinical and financial. The current state of quality and performance measurement suffers from a few deficiencies. All too often, measures mandated by CMS and other payers are heterogeneous and do not accurately reflect the nature of an individual specialty or population of patients. For example, many of the CMS Physician Quality Reporting System (PQRS) measures are not necessarily broadly applicable to specialties such as oncology or orthopedic surgery, yet these are important specialties which play a significant role in both cost and quality. Expanded efforts to allow registries to qualify for PQRS are a good step, such as those proposed in the recent 2013 Proposed Physician Payment Rule, but must be accelerated to facilitate broader participation and deal with some of the boundaries of claims-based data. The same is true for stage one Meaningful Use Measures—they are essential to usher medicine into the technological age but are largely process measures and not necessarily relevant across health care disciplines. Stage Three Meaningful Use will potentially address outcomes in a more direct manner, but that is yet to be determined. Reporting back to clinicians must also be timely and actionable—this is a promising aspect of the CMMI Pioneer ACO program that is engaged in timely data feeds to clinicians. Receiving patient outcomes data even one to two months much less years later does no good.

An attempt to strengthen significant quality measurement has propelled clinical societies to develop quality improvement programs using unique, clinically vetted, peer-reviewed quality and performance measures. These programs are often completely self-funded, and voluntary from an implementation standpoint, yet have shown incredible promise as vehicles for uniform care improvement and cost reduction. Clinicians developing the measures draw clear lines around conflict of interest and transparency is of the utmost importance. The American Society of Clinical Oncology has developed and refined their Quality Oncology Practice Initiative (QOPI), a clinically approved high-performing set of oncology related practice quality and performance measures. The Society of Thoracic Surgeons (STS) has been a vanguard in developing registry-based quality metrics that have largely moved the profession from great variations in quality and cost to a model for others to follow. Cardiology is doing the same with the National Cardiovascular Data Registry (NCDR), a comprehensive, outcomes-based quality improvement program representing approximately 11 million patient records that can support quality improvement in patients undergoing cardiac catheterization. More examples can be found in other clinical disciplines; a payment system that acknowledges this important work can be paramount in ensuring that a transition from our current payment system to a broader vision can be done with high expectations around quality and measurement reporting.

Supplying Medicare data on these clinician-developed measures and creating a payment system based on performance on these measures over the long term will drive cost reductions and care improvements. Additionally, there are efficiencies of scale to be gained from promoting consistent measures that are developed, collected and reported in a more homogenous manner—practices having to juggle six to eight different quality reporting streams to achieve payment bonuses only exacerbates waste and the silos in health care.

We need to move to a system of quality and performance measurement and reporting that takes advantage of the leadership already shown by many primary care and specialty groups to define unique, clinically approved, appropriate measures; incentivize participation in reporting programs; and, ultimately, move over time to a payment system that rewards high performing providers on these issues and penalizes those who do not.

Moving Forward Now

The path forward is not easy but the opportunity cost of doing nothing is no longer tenable. I hope that I have illustrated that it is feasible to start moving now from payments based on FFS to payments that instead give providers more flexibility to improve the efficiency and quality of their own services, and also to support better coordination, with potential additional support and savings from overall system wide savings. These system wide savings have been well documented and are found in reductions in unnecessary care, administrative simplifications that allow for streamlined quality measurement and transitions in care, timely data reporting, and cost transparencies. It is important to note that while I have focused on examples led by physicians, these are interdisciplinary efforts that reflect the depth and breadth of a great deal of health professions, some of which face significant shortages and supply issues that are significantly affected by disparities in reimbursement.

Thank you again for allowing me to participate in this hearing today and I look forward to further dialogue on this issue.

[i] Centers for Medicare and Medicaid Services Office of the Actuary, accessed July 14, 2012

[ii] Berwick DM, Hackbarth AD. Eliminating Waste in US Health Care. JAMA. 2012;307(14):1513-1516. doi:10.1001/jama.2012.362

[iii] Sprandio J. 2010. Oncology-Patient Centered Medical Home and Accountable Cancer Care. Community Oncology. 7(12):565-572

[iv] Referral and Consultation Communication Between Primary Care and Specialist Physicians: Finding Common Ground. Arch Intern Med. 2011;171(1):56-65.

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Kavita Patel

Publication: U.S. House Committee on Energy and Commerce, Subcommittee on Health

Advancing Health Care Payment and Delivery Reform through Clinical Leadership

Wed, 16 Nov 2011 09:00:00 -0500

Event Information

November 16, 2011
9:00 AM - 4:00 PM EST

Falk Auditorium
The Brookings Institution
1775 Massachusetts Ave., NW
Washington, DC

Addressing rising health care costs is an increasingly urgent problem, even as emerging medical innovations hold new promise to improve health. Physicians, nurses, and other clinicians have unique abilities to lead the way in addressing these fundamental challenges. Yet policy attention to higher value clinical care that would substantially improve quality and lower costs has been overshadowed by fixing Medicare’s “sustainable growth rate” for physician payment. Overcoming these challenges will require leadership by clinicians, both in implementing meaningful improvements in how care is delivered, and in identifying ways to reform policies to help achieve these improvements.

On November 16, the Engelberg Center for Health Care Reform at Brookings held a discussion to highlight how clinicians can both drive innovation in health care payment, and transform the delivery of care. The meeting will also launch a new initiative at the Engelberg Center to support clinician leadership in achieving health policy reform and health care delivery reform.

After each panel, speakers will took audience questions.

Transcript

Uncorrected Transcript (.pdf)

Event Materials

20111116_clinician_leadership

Participants

Panelists

Rep. Michael C. Burgess (R-Texas)

U.S. House of Representatives

Rep. Allyson Y. Schwartz (D-Pa.)

U.S. House of Representatives

Bruce H. Hamory

Executive Vice President and Managing Partner
Geisinger Health System

Ann Hendrich

Vice President of Clinical Excellence Operations and Executive Director of Patient Safety
Ascension Health

Eliot J. Lazar

Chief Medical Officer, Quality and Patient Safety
New York-Presbyterian Hospital

Barbara L. McAneny

Co-Founder and Managing Partner
New Mexico Oncology Hematology Consultants

Kevin Schulman

Professor of Medicine and Professor of Business, Associate Director of the Duke Clinical Research Institute
Duke University School of Medicine

Paul Casale

Chair, American College of Cardiology Payment Reform Workgroup
Chief of Cardiology and Medical Director of Quality, Lancaster General Hospital

Thomas James III

Corporate Medical Director for National Network Operations
Humana

Eugene Lindsey

President and Chief Executive Officer
Atrius Health, Harvard Vanguard Medical Associates

Greg Schoen

Vice President of Medical Affairs, Fairview Northland Medical
Center and Director, Fairview Health Services

Richard J. Baron

Group Director, Seamless Care Models, Center for Medicare & Medicaid Innovation
Centers for Medicare & Medicaid Services

Jeffrey Brenner

Founder and Executive Director
Camden Coalition of Healthcare Providers

Barbara B. Tobias

Medical Director, Health Collaborative and Professor
University of Cincinnati College of Medicine

Elly Yost

Director of Nursing
Nurse-Family Partnership

Donald Casey, Jr.

Vice President of Quality and Chief Medical Officer
Atlantic Health System

Jack Cochran

Executive Director
The Permanente Foundation

Patrick Conway

Chief Medical Officer
Centers for Medicare & Medicaid Services

Maureen White

Director
North Shore-Long Island Jewish Health System

Around the Halls: Forging a Compromise on the Debt Limit

Fri, 22 Jul 2011 00:00:00 -0400

President Obama and congressional leaders are rushing to craft a compromise deal that will avert a government debt default on August 2. The two sides remain split over the scale of spending cuts, revenue increases and tax reforms. Brookings experts offer their recommendations and analysis on the issues, including: William Gale on debt limit basics; Ron Haskins on why Republicans had better seize the opportunity to cut a deal; William Galston on the likelihood of an interim agreement; Bill Frenzel on the urgency of increasing the limit; Robert Pozen on Social Security reform; Jonathan Rauch on why Republicans must raise taxes to shrink the government; Kavita Patel on the impact on health care policy; Tracy Gordon on how states will be affected; and Michael O'Hanlon and Peter Singer on military budgets and the deficit.

Debt Limit Basics
William G. Gale, Senior Fellow, Economic Studies

With all of the confusion surrounding the talks regarding a prospective debt limit increase and a prospective debt reduction—two issues that are almost completely unrelated in substantive terms but have been linked politically—it seems like it might be helpful to emphasize some basics.

First, the Obama administration cannot spend, tax or borrow without congressional approval. The reason there is a “debt limit crisis” right now is simple but almost never stated: the amount of money that Congress has told the administration it should spend exceeds the sum of the amount of money that Congress has told the administration it can raise in revenues plus what Congress has authorized via borrowing. It’s as if (making up the particular numbers) Congress has said the administration should spend $100, raise $60 in taxes and raise $30 in borrowing, but has not authorized the administration to raise the last $10 in any form. So the underlying issue is the inconsistency of congressional policies.

Second, raising the debt limit is a completely ordinary event, which happens in both Republican and Democratic administrations. The limit has been raised 74 times since 1962, including 10 times since 2002.

Third, raising the debt limit is about paying for past choices—it is not about resolving the future budget problems the country faces. Put differently, raising the debt limit is needed to accommodate the cost of prior congressional commitments, not to enable new or additional federal initiatives.

Fourth, the debt limit can be raised without enacting a serious fiscal reform package. A serious package would be a huge plus, of course, but the political obstacles to reaching a significant deal seem immense at this stage. Republicans have ruled out tax increases—almost every Republican member of Congress has signed the “no new taxes” pledge—and have also set the requirement that spending cuts be double the size of any increase in the debt limit. While Democrats strongly prefer not to cut spending too much, they have not signed pledges en masse the way Republicans have.

There is a lot more to say, of course, about tax reform, the unsustainability of our fiscal policy and the commonly held myths that have made this debate so lengthy and polarizing. But the two key factors at this moment seem to be, first, to do no harm—that is, to extend the debt limit—and, second, to remember that politics is the art of the possible—that is, to accept that a short-term deal that makes a small dent in future budget deficits is a constructive next step, even if it falls short of more ambitious goals.

The Budget Crisis of 2011: The View from 2021
Ron Haskins, Senior Fellow, Economic Studies

Ten years from now when analysts look back on the deficit crisis of 2011, they will cite two major causes of the long standoff that brought the nation to the brink of disaster. President Obama, who appears to be getting the benefit of the doubt from the public now, will be seen as a major cause of the crisis because he waited so long to put a specific plan on the table that included major cuts in entitlements. Even now, less than two weeks from the debt ceiling drop dead date, he still has not made public a specific plan to reduce entitlement spending. In past budget agreements, presidents have always provided leadership that has often been politically difficult given their governing philosophy and base of voters—symbolized by the willingness of Republican Presidents George H.W. Bush and even Reagan to raise taxes, something that has been far less evident during the crisis of 2011.

The second cause analysts will emphasize is the refusal by Republicans to accept a compromise deal. They will cite five reasons why the Republican position defied both reason and history. The first is that although Republicans held that the propensity of Democrats to spend money was the major cause of the nation’s deficits, the record shows that Republicans have also been responsible for major increases in spending. The Medicare Part D benefit and the wars in Afghanistan and Iraq, all major initiatives of the Republican Party, contributed in a major way to increased spending. Arguing that all three initiatives were good policy does not obviate the fact that even a dollar wisely spent increases the deficit if it is not accompanied by a dollar of additional revenue.

Read the full opinion piece »

The Likelihood of an Interim Agreement
William A. Galston, Senior Fellow, Governance Studies

During the past 48 hours, negotiations over the debt ceiling have taken on the trappings of a three-ring circus. In one ring, the majority and minority leaders are working on a agreement to raise the ceiling enough to get by the 2012 presidential election. Democrats would not have to accept significant spending cuts. Not would Republicans be required to support taxes increases. But the Senate leaders’ deal is structured to ensure that Democrats, including President Obama, would have to accept 100 percent of the responsibility (and presumably the blame) for three unpopular increases in the debt ceiling.

In the second ring, we have the “Gang of Six” proposal, cobbled together by a bipartisan team of senators—three Democrats, three Republicans. This proposal represents the culmination of a lengthy, off-again on-again effort to translate the recommendations of the president’s bipartisan fiscal commission into legislation. It builds on the principle of “balance” that the president has repeatedly invoked, incorporating cuts in defense and domestic programs, changes in large “entitlement” programs such as Social Security and Medicare, and revenue increases, mostly through reducing or eliminating some of the special deductions, exemptions, and subsidies that now honeycomb our tax code.

And now, in the third ring, the newest act—the backdoor negotiations between the president and Speaker of the House John Boehner. Democrats who learned of these discussions through news leaks were not pleased. Not only had party leaders, especially in the Senate, been kept in the dark, but also the alleged outlines of the deal—spending cuts up front, revenue increases through tax reform down the road—were even less palatable than the Gang of Six approach, about which many of them had serious reservations. They vented their wrath on the director of the Office of Management and Budget. But no one doubted their real target—a president whose political interests and policy preferences appeared to be diverging farther and farther from their own.

It’s anyone’s guess what will happen next week, the last before D(efault) Day. Most observers believe that even this highly polarized political system will recoil from the prospect of imperiling the good faith and credit of the United States. And as a technical matter, it’s too late to translate any comprehensive agreement into legislative language in time to vote on it before August 2. So we are likely to see an interim agreement, either as a time-buying bridge to something larger, or as the latest but not last installment of our long-running fiscal melodrama. The rest of the world is watching the deliberations of the “world’s greatest democracy” with mounting disbelief, tinged with outright fear.

However It Is Done, the Debt Ceiling Must Be Extended
Bill Frenzel, Guest Scholar, Economic Studies

The Debt Ceiling Chicken Game is going down to the wire. The best possible outcome, a Grand Scheme featuring entitlement cuts and a smaller portion of revenue “enhancers” to bring the debt ratio down to 60% within a decade, cannot be achieved. Congress had plenty of time, but not enough will.

Neither the Republicans, who have put no revenues on the table, nor the Democrats, whose entitlement offers have been small and fuzzy, were willing to ante up to get into real negotiations.

Any solution that avoids expiration of the debt ceiling becomes the next best choice. Avoiding default is the prime mission now. Two possibilities remain: (1) a McConnell-Reid type proposal, and (2) a short term extension tied to the Gang of Six plan. Both would prevent expiration and default.

The Gang of Six plan follows the Bowles-Simpson deficit commission proposal, but it would require a multi-step operation in which the debt ceiling would be extended for 60-90 days, while its $3.7 trillion debt/deficit reduction would be approved.

It would require a down payment on spending reductions, but leave major decisions to committees, buttressed by targets and triggers. Nobody knows whether it could pass the House, or even the Senate for that matter. Fraught with uncertainty, it is the best remaining option, but a still a long shot.

The other possibility, McConnell-Reid, is essentially a cop-out, but it dodges default. It defers fiscal decisions, which should be made now, until after the election. With default looming, it, too, could be the savior, but, again, the House is a problem.

At this point, avoiding default has to be the main goal.

Social Security and Debt Ceiling
Robert C. Pozen, Nonresident Senior Fellow, Economic Studies

As I recently suggested, if Congress wants to enact a $3 or 4 trillion deal on the debt ceiling, it should include Social Security reform. While Medicare involves more dollars, the two parties fundamentally disagree on its structure.

By contrast, we know how to make Social Security solvent; it is a question of whether Congress has the political will to do so.

We can choose among several different packages combining three elements -- slowing benefit growth for higher earners, increasing normal retirement age beyond 67, and expanding the payroll tax base. However, all of these elements involve "pain" for voters; we need a political "sweetener" to attract middle class support for Social Security reform.

The best "sweetener" would be a $250 federal match for every $500 contribution to a 401k or IRA by any worker with annual earnings below $85,000. This would provide a way for these workers to make up for most of the reduced benefit schedule that would be needed to restore Social Security to solvency.

For example, if a worker earning the median wage of $37,000 in 2011 contributed $500 to an IRA for 36 years, he would receive a match of $250 per year or $9,000 in total. If that match were invested in a balanced fund -- half in US Treasury bonds and half in the S&P 500 -- with a real annual return of 5.8%, that could fund (assuming a 5.8% interest rate) a lifetime annuity at retirement of over $250 per month.

Such federal matches would not take away one penny from the Social Security program; they would cost roughly $850 billion in Congressional appropriations over the next 75 years -- the standard measuring period for this program. But this would be a small price to pay to eliminate the current unfunded obligations of Social Security -- which exceed $13 trillion over the same period. The federal match and Social Security reform together would reduce long-term federal spending by more than $12 trillion.

Republicans Must Raise Taxes If They Want to Shrink Government
Jonathan Rauch, Guest Scholar, Governance Studies

According to the New York Times, "Conservatives have been increasingly divided over how far to go in sticking to their no-taxes principles if it means walking away from progress toward restraining the growth of government." It’s dawning on Republicans that they can significantly shrink government, or they can hold the line against tax increases, but they can't do both. This is progress.

Despite their anti-government rhetoric, Republicans who oppose all tax increases are Big Government's best friend. What they are telling the public is, "No matter how much Washington spends, you'll never have to pay any more in taxes than you do right now." By capping the cost of government, conservatives are feeding the demand for it. When you discount something, after all, people buy more of it. What would you do if you could spend as much as you wanted at Macy’s but would never be billed more than $1,000?

Opposing all tax increases might be justifiable if it reduced the supply of government. But we have had three decades to test the so-called “starve the beast” hypothesis, and it has failed conclusively, because the beast has a credit card. (Chapter and verse on that from me here and from Bruce Bartlett here. The IMF weighs in here.)

In fact, including tax increases in a major deficit-reduction package has a double-whammy downward effect on the size of government. First, the tax increases buy spending cuts which otherwise would be unacceptable to Democrats and liberals. Second, voters get more serious about restraining spending when they pay something closer to the true cost.

The debt-limit negotiations provide a good example of this dynamic in action. With tax increases in the deal, Republicans can get some breathtaking spending cuts, including reductions in popular entitlements. Without tax increases, entitlements continue on their merry way. If Republicans are serious about controlling government spending, they’ll strike a hard bargain but, in the end, agree to raise taxes.

Shared Responsibility, Shared Consequences in Health Care
Kavita Patel, Fellow, Economic Studies

As the Senate, House and White House face a deficit showdown, there is no doubt that there will be shared responsibility among Democrats and Republicans alike. There will be responsibility for arriving at some compromise and given the proposals on the table, there will likely be shared unintended consequences that will reach beyond the details. In health care policy, the ones to watch closely are:

Repeal of the CLASS Act - the voluntary public long-term care program certainly had flaws, but it was an important step in dealing with our country’s growing aging population and the stressors which are placed on the Medicaid system which picks up approximately 40% of the long term care costs in the United States. Repeal of this program will only result in neglecting an inevitable fiscal crisis as more seniors lean on Medicaid for costly nursing home care and policymakers scramble to consider drastic options such as catastrophic coverage for long term care, similar to those being considered in Japan, the United Kingdom and other countries facing the reality of an aging population.
Funding cuts to public health, the FDA, and health research - The Bipartisan Senate Plan has a placeholder for the Health, Education, Labor and Pensions (HELP) Committee to find $70 billion in savings - this will largely come in the form of steep cuts to agencies under the HELP jurisdiction such as the National Institutes of Health, public health agencies at the Department of Health and Human Services, and the Food and Drug Administration. At a time when the U.S. needs to be the engine for innovation and biomedical competitiveness, cuts to any of these agencies will only result in delayed surveillance (monitoring our nations threat of disease and our supply of medications and health supplies to deal with those threats), programmatic backlogs (delays in processing applications, appeals and claims) and potential exposure to Americans to deadly diseases and viruses during a pandemic or natural disaster.
Targeting federal health care spending at GDP+1% starting in 2020 - this is not a surprising goal; it has been cited in various forms in virtually all of the deficit reduction proposals. However, previous attempts to compel policymakers to make difficult choices have been ineffective: repeal of Gramm-Rudman-Hollings, timing a shift in program spending, and moving entities off-budget or shifting deficit targets. The result is the high likelihood for program cuts at the expense of vulnerable populations, such as Medicaid. However, cuts to programs for the poor and underserved do not remain limited to those populations; they are often met with cost-shifting to the private sector in the form of increased premiums and price negotiations. In other words, cuts to federal spending on the poor and elderly affects everyone.

Indeed, our current political system is very much in need of electric cardioversion: an electric jolt that shocks both parties into reality. It is likely that such a shock will come from voters and beneficiaries who realize that shared responsibility comes with shared consequences.

What the Federal Debt Limit Has to Do with States (and Not)
Tracy Gordon, Okun-Model Fellow, Economic Studies

Much has been written about how a failure to reach agreement on the federal debt limit would affect the economy and global financial markets. Lately, attention has turned to state and local governments. Moody’s warns that a federal credit downgrade would immediately lower ratings for 7,000 state and local issuances and possibly affect even some gold plated AAA states. At the same time, backers of a federal balanced budget amendment point to states as an example where such rules have worked.

What’s going on? Will a federal default doom state and local governments? Are states the new model of fiscal probity?

Read the full opinion piece »

Authors

Image Source: ï¿½ Jason Reed / Reuters

The President’s Deficit Reduction Plan: Implications for Health Care

Kavita Patel — Thu, 14 Apr 2011 11:23:00 -0400

First, some deficit basics:

Deficit 101

	2011 CBO Estimate	2021 (ten year window) CBO Estimate	President's Goals

Publicly Held Debt (mostly in the form of Treasury Department issued securities to cover outstanding cost)	9 trillion dollars=62% of Gross Domestic Product (GDP)	Scenario 1: 77% of GDP Scenario 2: 97% of GDP	Reduction of 4 trillion over 12 years

Deficit	9.8% of GDP	Scenario 1: 2.9-3.4% of GDP Scenario 2: 6.6% of GDP	2.8% by 2016

Scenario 1: Current Law (assumes laws that are supposed to expire will be allowed to and that we will cut physician payments according to Sustainable Growth Rate)

Scenario 2: Based primarily on following possibilities:

Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 or modified estate and gift taxation do not expire on December 31, 2012
Alternative minimum tax is indexed for inflation after 2011
Medicare's payment rates for physicians are held constant at their 2011 level (no cuts through the SGR)

Figure One: Breakdown of Current Federal Spending (Overall, Mandatory, Medicare)

President Obama stated that the Affordable Care Act will reduce the deficit by a trillion over the next ten years. The Congressional Budget Office (CBO) estimates a reduction of $210 billion but does state that there could be more savings depending on appropriations. President Obama proposes building on these savings with additional Medicare and Medicaid savings of $480 billion over the next 12 years. He does so by employing the following levers of action for health spending reduction:

Accountability by reducing waste and abuse and strengthened regulatory/enforcement mechanisms.
Accelerated Delivery System Innovation through an emphasis on safety and quality.
Revisiting the Federal-State relationship in Medicaid and the Children's Health Insurance Program (CHIP).

Accountability and Strengthened Regulatory/Enforcement Mechanisms

Strengthened Independent Advisory Board with a more ambitious spending target of GDP per capita + 0.5% (note that the Presidential commission set the target at GDP + 1%). The plan also includes additional enforcement powers for IPAB. The proposal is light on details and it is not clear if this can be done through Executive/Administrative action or if legislative action would be required.
Speed availability of generic drugs and prohibition of "pay for delay" (this was also included in the President's 2012 budget proposal)
Promote accountability in Medicaid by clamping down on States' use of provider taxes to lower their own spending and establish upper limits on Medicaid durable medical equipment
Recover erroneous payments from Medicare Advantage

Accelerated Delivery System Innovation

Earlier this week, Don Berwick premiered the patient safety initiative that the President highlighted today and building on the vision of reducing hospital acquired infections and preventing medical errors will help to cross the quality chasm identified by the Institute of Medicine many years ago. The Administration is estimating that an emphasis on safety and quality will save $50 billion over the next ten years in Medicare and billions more in Medicaid as well
IPAB will also accelerate some innovations through promoting value-based benefit design to emphasize prevention- details on this are sparse but likely to follow work done by Chernew and others in this area.

Revisiting the Federal-State Relationship

In a bold but necessary move, the President proposed to replace the current Federal matching formulas with a single matching rate for Children's Health Insurance Program and Medicaid spending that rewards States for efficiency and automatically increases if a recession forces enrollment and State costs to rise. This has generally been an area that the federal government has not been able to master- that is, finding an approach to work with states that acknowledges their unique economies yet adopts a more standardized mechanism for calculating the match contribution. Given the unprecedented activity at the state level in health reform (development of exchanges, etc) , the reforms around CHIP and Medicaid are well timed to emphasize the federal-state relationship. Details around the match rate have not been released and will be important in determining whether costs can be contained.
In addition, the President is calling on an enhanced Federal-State partnership by asking the National Governors Association (NGA) to make recommendations for ways to reform and strengthen Medicaid with an emphasis on dual eligibles which is a huge cost driver in Medicaid and Medicare.

Opportunities to Build On the President's Vision

The President acknowledged that there won't be agreement on everything he proposed and he welcomes new ideas. Here are a few for consideration:

The Independent Payment Advisory Board

Some of the ideas, especially around improving the IPAB have been reflected in other bipartisan consensus efforts, such as Bending the Cost Curve II in which Mark McClellan and others advocated for an IPAB which is not seen as the punitive body of last resort but rather a catalyst of real delivery system change. In their report they describe some improvements to the current IPAB which would be worth heeding including:

Expand membership criteria to recruit knowledgeable representatives of the entire health system and other experts, particularly those of provider groups. Attracting the right talent pool will require sensitivity to time commitment and avoidance of overly broad conflict of interest disqualification.
Authority to advance proposals which will move our payment system away from the current fee for service, relative value unit (RVU) dependent reimbursement model- this expansion might be alluded to in the President's vision to promote value-based benefit design but it is not clear from the available information.

Additionally, in order to be fair and equitable, IPAB should be able to make recommendations on hospitals- this point specifically was highlighted by the Presidential Deficit Reduction Commission.

Emphasize Payment Reform through Health Care Professionalism

The President alluded to the desire to move away from some of our current perverse financial incentives:

"We will change the way we pay for health care - not by procedure or the number of days spent in a hospital, but with new incentives for doctors and hospitals to prevent injuries and improve results. "

But there is room to improve; allow for health care professionals to have some flexibility within Medicare and Medicaid to demonstrate their ability to bend the cost curve through innovation in payments. By building on some of what was included in the Affordable Care Act around pay for performance, etc, the Administration should consider allowing for health care professionals to come forward (much like they are encouraging ideas from Governors) with payment models that will incentivize every clinician's innate desire to be their best. Encouraging the Center for Medicare and Medicaid Innovation to partner with professional organizations, for example, to leverage their clinical registries and promote episodic/bundled payments around certain high volume procedures/conditions will in turn lead to clinical peer review and adjudication that is centered in the notion of professionalism and patient-centered care. Cardiologists working with primary care physicians to prevent patients form suffering an acute myocardial infarction will move from fiction to reality when we remove the perverse financial incentives that prohibit team-based care and clinical collaboration.

While these payment reforms are piloted, Medicare could alter benefits over time (without reducing actuarial value) based on evidence of better quality and lower costs. For example, beneficiaries who participate in high-value ACOs or beneficiaries with serious illnesses who choose providers that offer a bundle of services (surgery, chronic disease management) at a lower cost should share in the savings. This model could satisfy a bipartisan effort towards truly patient-centered care in which consumers have better options and clinicians deliver their best care.

The Future

There is plenty more out there and surely in the days, weeks and months to follow, more ideas will flow. Hopefully there will be some lessons learned from some of the other members of the Federal health care family such as the Department of Defense (Tricare) and the Department of Veterans Affairs where we have a great deal of knowledge around quality of care, electronic health record implementation, changing provider behavior through nonfinancial incentives.

Beginning in May, Vice President Biden will start meeting what will inevitably be characterized as the Gang of 16 or the Sweet Sixteen or some other moniker- Four members of Congress selected by Senators Reid, McConnell and Speaker Boehner and Minority Leader Pelosi. It will be up to this group to help give some legs to the President's proposal and I am certain health care will be a popular topic of discussion for the newly minted task force; certainly an opportunity for inspiration, innovation and ingenuity.

Authors

Kavita Patel

Publication: Health Affairs

Around the Halls: President Obama Addresses the Federal Budget Crisis

William A. Galston, Ron Haskins, Kavita Patel and Isabel V. Sawhill — Wed, 13 Apr 2011 15:16:00 -0400

In a speech at The George Washington University this afternoon, President Obama addressed the politics behind the federal budget problem and his plan for the future of America's fiscal policy. Isabel Sawhill, William Galston, Kavita Patel and Ron Haskins provide their take on the president's speech and plan for dealing with the federal budget problem.

Help Wanted: A Left-of-Obama Voice on the Federal Budget
Isabel Sawhill, Senior Fellow, Economic Studies

President Obama has a habit of arriving at an event a little bit late in the game. Whether on health care reform, Deepwater Horizon, Libya, the Bowles-Simpson plan, or the government shutdown, his style is to hang back, position himself above the fray, and then be the Great Compromiser. Now he has just done it again, finally responding to the Republicans 2012 budget plan with one of his own. But it’s not only a little late; it’s also so middle-of-the road that it risks a compromise that is well to the right-of-center.

As a radical moderate, I don't mind a middle-of-the-road solution. But even I have a hard time swallowing $4 trillion in deficit reduction over 12 years in which the balance between tax increases and spending cuts is $1 of tax increases for every $3 in spending cuts; in which the growth of Medicare is severely constrained to GDP plus half a percentage point; and in which despite rhetoric about protecting low-income families, they are almost surely going to suffer.

Read the full piece »

President Obama's Long-Term Fiscal Policy: A Vision of Hope for America's Future
William Galston, Senior Fellow, Governance Studies

In a forceful speech on long-term fiscal policy, President Obama offered his vision of America’s future, described how our fiscal situation deteriorated to the point that we must change course, and laid out his plan for reducing the deficit by $4 trillion over the next 12 years through a combination of spending cuts and revenue increases. Acknowledging that most Americans do not understand the composition of federal spending, he began the task of public education by outlining how little of the public’s money actually goes to favorite whipping-boys such as foreign aid.

The president sharply criticized the plan Rep. Paul Ryan (R-WI) offered last week on behalf of the House Republican majority. The Republican cuts, he declared, “tell us we can’t afford the America we believe in. And they paint a vision of our future that is deeply pessimistic.” Their vision, he charged, is “less about reducing the deficit than it is about changing the basic social compact.” He contrasted Republicans’ vision for the nation with “the America I know,” which is “generous and compassionate; a land of opportunity and optimism,” a country in which we “take responsibility for ourselves and each other.”

Read the full piece »

The President's Deficit Reduction Plan: Implications for Health Care
Kavita Patel, Managing Director for Clinical Transformation and Delivery, Engelberg Center for Health Care Reform

President Barack Obama took the very symbolic gesture of delivering his much anticipated speech on fiscal reform and deficit reduction from a podium at George Washington University, an institution of higher learning, including schools of medicine, public health and nursing. By doing so, he signaled the desire to infuse a sense of responsibility in the next generations- those who will ultimately inherit our fiscal woes if we continue on our current path. The auditorium was packed with students who probably have not yet contributed significantly to Medicare or social security much less had any experience with entitlement programs, but the President appealed to their sense of patriotism and national identity by recalling the great ability of Americans to come together around a set of problems, find common ground and once again be the envy of the world’s eye. The message was simple: if we don’t make some tough decisions now we will pay for it dearly in the future. And the future isn’t that far away.

Read the full piece >>

The Budget Hawks are Winning
Ron Haskins, Senior Fellow, Economic Studies

Six months ago, budget hawks were grounded. Like other budget hawks, our hawk cabal at Brookings, often in cooperation with other groups, had been writing books, traveling around the country yelling “FIRE,” meeting with members of Congress and two administrations, organizing public events, writing op-eds – in short, doing all the things those with little power do to get the attention of those in power. And we had been engaged since 2004 with modest impact.

Now, as Senator Moynihan used to say, "of a sudden," the sky is full of budget hawks. The American public awakened to the problem and ultimately became engaged in the electoral process, in part because of the Tea Party. Over the summer and fall of last year, a platoon of deficit reports also appeared, all of which carefully analyzed the deficit and proposed reasonable solutions. The most important of these was from President Obama's own commission, co-chaired by a Republican and a Democrat, that recommended cuts in the military, in Medicare and Medicaid, and in other programs, as well as reforms of the tax code that would produce additional revenue while making the code fairer and less complex.

Read the full piece >>

Authors

Publication: Brookings Institution

Web Chat: First Anniversary of the Health Care Law

Kavita Patel — Wed, 23 Mar 2011 00:00:00 -0400

On the first anniversary of the health care law, Brookings expert Kavita Patel reviewed the steps taken thus far toward implementation and answered your questions about the prospects for more action on Capitol Hill.

The transcript of this chat follows.

12:30 Seung Min Kim: The health care law has had quite a year since President Obama signed the bill one year ago today. Here with me now is Brookings expert Kavita Patel to answer your questions on the law's implementation so far and upcoming congressional action on it. Welcome, Kavita.

12:31 Kavita Patel: Thanks for having me!

12:31 [Comment From Paula: ] Have individuals seen any benefits from the law?

12:32 Kavita Patel: Great question- people have already seen benefits- folks with pre-existing conditions now have access to health care as well as young adults who can join their family plans.

12:32 [Comment From Andrew (DC): ] Many states are seeking waivers. Can you explain?

12:33 Kavita Patel: Insurance laws vary state to state and that can create some discrepancies which are being worked out with waivers; in addition, some states are much smaller than others and might have different market forces which also affect the dynamics requiring a waiver.

12:33 [Comment From Erica: ] In terms of more action on Capitol Hill, what do you expect to see happen in the coming months?

12:35 Kavita Patel: Capitol Hill will likely engage in a great deal of oversight as well as thinking through the issues of implementation that might still require further Congressional action. For example, physician payment reform issues are still being dealt with as well as all of the activity to appropriate money for various programs within health reform.

12:35 [Comment From Amy P.: ] Hi Kavita! Thanks for taking my question. Why has this law been so divisive among Americans? Do you think we have a "spin" problem, or is the law really that flawed?

12:37 Kavita Patel: The law has not been well understood, which is not a surprise to me, but that means that the people who provide health care everyday need to have an opportunity to digest it and then be part of the community that helps to explain it to their patients and others. So it isn't really "spin" but more that change can take some time to process and explain.

12:37 [Comment From Frank G.: ] Do you think health care should be a state rather than federal issue?

12:39 Kavita Patel: The Affordable Care Act is both a state and federal issue - in order for it to succeed, one can't be done without the other. State agencies and federal agencies are speaking to each other with a frequency we have not seen in a long time and lots of folks are working at local, regional and state levels to think through the implementation.

12:39 [Comment From Brian R: ] About ACO 's -- providers appear confused or reluctant when discussing implementation plans -- what is the difficulty here?

12:42 Kavita Patel: I am a provider myself and I just went to a national meeting of my primary care colleagues and the room was packed with doctors wanting to learn more about accountable care organizations and how they can be part of leading the effort, so I am finding more and more people eager to discuss it. The confusion in part might be from understanding where they have a role in framing the discussion. I am hoping that more providers will express a desire to be clinical leaders in delivery system reform.

12:42 [Comment From Ross Kinzler: ] How does the individual mandate’s fine work on the Form 1040 if one spouse is covered by health insurance but other spouse is not?

12:44 Kavita Patel: Not sure if i completely understand the question but if one spouse is covered through an employer or a plan in the exchange, the other spouse (as long as they are recognized as a U.S. citizen or legal resident) also needs to show proof of coverage through your tax return. The fine is to the individual, not the couple.

12:44 [Comment From Sally: ] As a doctor, how do you feel about the new requirement that everyone buy health insurance? And when does that provision kick in anyway?

12:46 Kavita Patel: As a doctor, I have seen the effects of people who need care and cant get it; I want to make sure that they have access to high quality health care and that is what I am excited about. The provision for insurance goes into effect in 2014 and there is a great deal of activity at the state level right now to get awareness and education out there.

12:46 [Comment From Pam: ] My son is in college and I'd like to keep him on my health insurance plan. Can I do that now?

12:47 Kavita Patel: Yes you can- the best thing to do is contact your insurer directly. As long as your son is in the same state, it should be easy to do.

12:47 [Comment From Ben - NOVA: ] Can you address how this law will impact small business owners?

12:48 Kavita Patel: Small business owners will receive a tax credit if they offer their employees health insurance; they do not have to offer this; so doing so is entirely voluntary.

12:49 [Comment From Wes: ] While the ACA is going to help get millions of Americans insurance who are currently uninsured, there will still be a gap of several million without insurance. How can we close this remaining gap?

12:51 Kavita Patel: Great question- we know that while there will be people without access, the Affordable Care Act is a start to making sure that we have improved access to care. The next steps will involve looking at:

1. why people are still uninsured;

2. what are the barriers;

3. what solutions do we need- congressional action (perhaps if we are thinking about immigration issues), executive branch, etc.

12:51 Seung Min Kim: Kavita, can you talk about the legal challenges facing the health care law -- more specifically, when/if the Supreme Court will address the issue and how you think they'll rule, considering the current makeup of the Court?

12:54 Kavita Patel: The Supreme Court calendar is set pretty far in advance so I am not sure we will see any action this year. I think it is fairly obvious that it will come before the Supreme Court at some point. The composition of the court has been a large source of discussion, but the argument before the court is really about the merits of the mandate from the legal basis of the commerce clause etc. I do feel that the mandate will stay in place.

12:54 [Comment From Tom: ] Why is there still so much confusion about health care law still even a year later?

12:56 Kavita Patel: Good question. There are several issues at work here - it is one of the biggest domestic policy laws we have seen in several decades, and that is not easy to digest in one year. But we also know that until people start seeing the effects in their day-to-day lives, they will probably not really understand what is in the law that affects them. So I have been trying to help other providers understand what is in there and hopefully then they can talk to their colleagues, patients, etc.

12:57 [Comment From Susan in Maryland: ] Why did Maine insurers get to reduce the amount of money spent on health care?

12:58 Kavita Patel:The issue with Maine is about a waiver to look at how the money is spent. It allows the state's insurance commissioner to have flexibility with the insurance plans (there aren't that many in the state) in Maine to ensure that people don't lose insurance or access to care as a result of provisions around the medical loss ratio. This is a good thing- the federal government working with states to ensure that patients don't experience unintended consequences.

12:59 [Comment From ron: ] Is it too soon to tell whether the health care law is performing as expected, if it's reducing the cost of health care, and if it's expanding the availability of health care?

1:01 Kavita Patel: There are certainly many provisions which haven't been implemented yet and some that deal with helping to change the way we pay for health care, so the cost pieces are still coming. We do know that millions of young adults and others with pre-existing conditions or high risk health conditions now have access to health care that they didn't have before. So we are seeing an expansion in availability.

1:01 Seung Min Kim: And that's it for today -- thank you all for such a lively discussion! And a special thanks to Kavita for her answers and insight.

Authors

Kavita Patel