Controlling Health Care Spending Growth. Michael Chernew Oct 11, 2012

Transcription

1 Controlling Health Care Spending Growth Are new payment strategies the solution Michael Chernew Oct 11, 2012 Definitional issues matter Definition of spending Cost per service [i.e. Price] Spending per disease or episode Spending at the population (national) level - Spending = Price * Quantity Total spending or government spending Total spending is the most comprehensive measure Government spending causes most alarm Taxes

2 Data Federal Spending on Health as % of GDP: Medicaid, CHIP, and Exchange Subsidies Medicare Source: Congressional Budget Office. The 2012 Long-Term Budget Outlook.

3 Our Debt is Unsustainable: Source: Congressional Budget Office. The 2012 Long-Term Budget Outlook. Consequences of Higher Taxes If finance higher health care spending by taxes: Marginal tax rates of high income earners could rise to 70% by 2060 GDP declines(relative to trend) by 11%. Magnitudes depend on the exact assumptions about tax policy Source: Baicker and Skinner: 2011: Assumes health care spending growth consistent with 2010 CBO long run forecast

4 Concepts and Evidence Slowing spending growth Spending High spending, rapid growth Low spending, rapid growth Low spending, slow growth Time

5 Level vs. Growth Change in Medicare Spending vs. Percentage PCPs

6 Long run spending drivers Medical technology New knowledge (and associated stuff) Less important factors Deteriorating health/ obesity Prices Aging Rising incomes More generous coverage (static effects) Inefficiency Inappropriate use Liability Myth: In Other Industries Technology Lowered Spending Do not confuse price (cost per unit) with overall spending Computers Prices fall: Spending rises Demand is crucial to determine effects of technology on spending

7 Benefits May Justify Cost On average technology has improved health outcomes, often substantially relative to cost Determining when to apply medical technologies is crucial Technology Reflects the System Payment rates Payment methods Patient cost sharing No coverage implies 100% cost sharing Other initiatives Utilization review Delivery system structure Information technology Integration among providers

8 Implications Reductions in the level of spending are important, maybe VERY important, but Controlling spending growth is more important Strategies to control spending growth must be either: Continual one time savings Fundamental environmental change Public spending growth can be controlled by shifting spending to patients Slowing Spending Growth

9 Who Will Slow Spending What will slow spending growth Payment Consumer strategies (benefit design) Organization of medical practice Wellness

10 Payment Reform Payment Reform Pay less Reductions in payment to providers Reductions in payment to plans Bundle payments: aggregate payment across services and providers Episode bundles Patient bundles (global payment)

11 Will payment reform work Impact of lowering fees Will reduce spending Some provider offset Less offset as fees drop Concerns about access/ quality

12 Impact of Capitation Physicians in highly capitated environments spent 3.86% less than salaried physicians both in terms of total spending and costs per episode. a VA Clinics with capitated payment had 4-16% less utilization in most outpatient services and 16% lower total expenditures per patient than VA clinics with salaried payment. b Countries that reimburse physicians by capitation had 17-21% lower health expenditures than those that reimbursed by fee for service. c a Landon et al The Relationship between Physician Compensation Strategies and the Intensity of Care Delivered to Medicare Beneficiaries. Health Research and Educational Trust. 46(6): b Liu et al The Impact of Contract Primary Care on Health Care Expenditures and Quality of Care. Medical Care Research and Review. 65(3): c Gerdtham et al The determinants of health expenditure in the OECD countries: a pooled data analysis. Developments in Health Economics and Public Policy 1998: Alternative Quality Contract

13 Basics Launched in 2009 Contract between plan and provider organization Providers join, not enrollees Provider groups must have at least 5000 BCBSMA patients HMO/ POS patients only Patients must designate a primary care physician (regardless if they are in AQC) PCP must authorize referrals (regardless if they are in AQC) Three Pillars of AQC Global payment Pay for performance Technical support

14 AQC Global Payment Covers all services Inpatient Outpatient Drugs Includes costs regardless of who delivers care Inside and outside of AQC Contract covers 5 years Base payment Growth rate Rates set through negotiation Maintain (or increase) base payment Lower trend to projected CPI rate Global Payment Operation During the year all claims paid FFS Based on negotiated FFS rates Periodic reconciliation with AQC group AQC group determines how any residual monies/ bonuses are divided

15 Pay for Performance 64 measures Half ambulatory Half inpatient based Each has absolute scale from low (gate 1) to high (gate 2) Each scored 1 5 based on linear interpolation of performance within the range Performance half way between top and bottom is a 3 Scores for all measures are summed Output measures are triple weighted Bonus (up to 10%) based on non-linear function of total score History 7 groups joined in 2009 Very diverse Some had some prior risk with AQC Some large integrated groups Some diffuse IPA models Different relationship with hospitals 4 more joined in 2010

16

17 AQC Quality Process Measures 2009 AQC Cohort vs. Non- AQC Between-Group Difference Between-Group Difference By Year Avg effect Year-1 (2009) effect Year-2 (2010) effect % p % p % p Chronic care management (aggregate) Adult preventive care (aggregate) 3.7 < < < <0.001 Pediatric care (aggregate) 1.3 < < Payment Reform Summary Can slow spending If payers hold the line in payment increases Quality could be a concern Couple with pay for performance Measures are imperfect

18 Benefit Design Benefit Design Options Higher co-premiums/ premium support Higher copays, co-insurance or deductibles Reference pricing Tiered networks Value Based Insurance Design (VBID) Align copays with value

19 Will Benefit Design Changes Work Can clearly solve the public spending problem Simply shift spending to patients Will reduce utilization HIE participants in the large-cost sharing plan (95% coinsurance) plan used 25-30% fewer services than those in the free-care plan a a J.P. Newhouse and the Insurance Experiment Group. Free for All? Lessons from the RAND Health Experiment. Cambridge, MA. Harvard University Press: 1993 Benefit Design Concerns Reductions in appropriate use same as for inappropriate use (Sui et al. 1986) Copays reduce use of preventive services Copays reduce use of valuable pharmaceuticals How much risk do we transfer? How does this affect disparities?

20 Value-Based Insurance Design VBID: Align copays with value The value of any service depends on who it is delivered to. Any VBID program will not be perfect. Sources: Fendrick et al A Benefit-Based Copay for Prescription Drugs: Patient Contribution Based on Total Benefits, Not Drug Acquisition Cost. American Journal of Managed Care. 7(9): Chernew et al Value-Based insurance Design. Health Affairs. 26(2):w195-w203. Chernew et al Impant of Decreasing Copayments on Medication Adherence Within a Disease Management Environment. Health Affairs. 27(1): Defining Value Cost Saving Cost Effective Not Cost Effective $0 $100,000* Cost effectiveness ratio ($/Quality adjusted life year) Always relative to next best alternative * This should be higher ($250,000), but decline as overall spending rises

21 VBID Variations Targeting Simple VBID: Target a service Blood pressure medication for everybody More complex VBID: Target services only for selected patient groups Blood pressure medications for patients with diabetes Copay lowering only or aligning? Target increase vs across the board increase VBID Merits Uses insurance design to increase efficiency (health gain per dollar spent) of the health care sector Not all care is subsidized, only valued care Cost sharing used to discourage low value care Supports consumer oriented cost containment and quality initiatives

22 Increase in Adherence Impact of VBID on Adherence 14% 12% 10% 8% 6% 4% 2% 0% ACE/ ARBS Beta Blockers Diabetes Statins Steroids Drug Class SOURCE: Chernew ME, Health Affairs. Impact of Decreasing Copayments on Medication Adherence Within a Disease Management Program. January Offsets Medicare (broad copay increase) About 20% offset on average 177% offset in group with Charlson index of 4+ 43% offset in those with chronic illness Non-Elderly VBID Approximate break even from societal perspective Payer spending likely rises. Medicare source: Chandra, Gruber, McKnight. AER Employed population source: Chernew et. al. Health Affairs, 2008.

23 Financing Offsets Lower costs due to fewer adverse events do not fully offset employer spending may offset total costs Productivity gains Increase costs for other services Specifically low value services VBID practitioners... 46

24 Next Generation VBID Expand diseases with VBID designs Beyond diabetes and heart disease To services other than prescription drugs Develop VBID implementation strategies, while considering system complexity Synergize VBID with other cost containment initiatives Tiering Payment reform Summary of cost containment Bundled payments could work Broad enough programs Strict enough update rules Politically sustainable Cost sharing strategies could work (particularly at reducing payer spending) May transfer a lot of risk (or just shift premium cost) Exacerbate disparities VBID may mitigate some concerns Other strategies may be good, but small impact

25 End