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Reducing The Growth In Healthcare Spending: Can Massachusetts Be A Model for The Nation. Stuart H. Altman Ph.D. Chaikin Professor of Health Policy Heller School for Social Policy and Management Brandeis University. Even Without Reform Healthcare Spending By Government Will Be A Major Force.

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Reducing the growth in healthcare spending can massachusetts be a model for the nation

Reducing The Growth In Healthcare Spending: Can Massachusetts Be A Model for The Nation

Stuart H. Altman Ph.D.

Chaikin Professor of Health Policy

Heller School for Social Policy and Management

Brandeis University


Even without reform healthcare spending by government will be a major force

Even Without Reform Healthcare Spending By Government Will Be A Major Force

Demographics and The Growing Number of Low Income Are Key Reasons



But This Will Only Put More Pressure On Private Insurance To Make Up Shortfalls In Government Payments


Private insurance payments used to pay for lower government payments
Private Insurance Payments Used To Pay For Lower Government Payments

Hospital Payment-to-Cost Ratios

Source: Avalere Health analysis of American Hospital Association Annual Survey data, 2005, for community hospitals.

(1) Includes Medicaid Disproportionate Share payments.


But large growth of private premiums could be nearing it s end

But Large Growth of Private Premiums Could Be Nearing It’s End

Employers Are Requiring Workers To Absorb More of The Increases In Premiums---AND


Growth In Health Insurance Premiums and Workers Contribution Far Exceed Earnings and Inflation1999-2013


Options for change
Options for Change Far Exceed Earnings and Inflation

  • Let System Move Along It’s Current Course

    • Heading for 20% of GDP and $3.0 Trillion Spending Amount

  • Restructure Market-Based Payment System To Reward Lower Costs and/or Higher Value

    • Supply Side--- Pay Providers Global or Bundled Payments With Quality and Out Outcome Incentives

    • Demand Side--- Incent Consumers To Be Better Shoppers for Value Based Care

      • More Price and Value Transparency

      • High Deductible Plans

      • Limited Provider Networks

  • Introduce Government Price or Spending Regulation at Federal or State Level

    • All-Payer State Systems (Maryland, Vermont)

    • Oversight System (Massachusetts)

    • Restructure Delivery System (Oregon)


Although current spending growth is low most reject option 1

Although Current Spending Growth Is Low Most Reject Option 1 Far Exceed Earnings and Inflation

The U.S. Health System Seems To Be Approaching a “Brown Out”---Less Money Available for Healthcare Services


If markets are to work

If Markets Are to Work! Far Exceed Earnings and Inflation

Need to Foster a “Value-Based” Delivery System


“Value-Based” Services Link Together Services That Improve Quality (Including Positive Outcomes) With Commensurate Costs


Major efforts directed toward option2

Major Efforts Directed Toward Option2 Improve

But Still Unclear Whether Supply or Demand Side Approaches Will Prevail


The federal reform law and some private plans are pushing the supply side option

The Federal Reform Law and Some Private Plans Are Pushing The Supply Side Option

Give Providers a Limited Budget and Let Them Decide How It Should Be Spent


Support accountable care organizations and bundled payments
Support Accountable Care Organizations and Bundled Payments The Supply Side Option

  • They Allow Providers to Decide What is Appropriate Care

  • They Reward Care That is Less Fragmented and Minimizes Duplicative and Wasteful Services

  • They Permit Care Providers To Pay for Services Not Traditionally Considered as Health Care Services


But concerns about supply side approach
But Concerns About Supply Side Approach The Supply Side Option

  • Most ACO’s and Bundled Payments Use “Shared Savings” Approach and Not “Fixed Budgets”

  • Patients Have The Right to Opt Out of ACO’s

  • Both ACO’s and Bundled Payments are Voluntary

  • First Generation “Pioneer” ACO’s Have Thus Far Had Only Limited Success

  • The Need for Big Systems Which Have Used Their Market Power to Extract Higher Prices That Could Outweigh Efficiency Benefits



The errors of the past
The Errors of The Past The Supply Side Option

  • Providers (Physicians and Hospitals) Were Required To Take More Financial Risk Than They Could Afford or Understand--

  • Individuals Were FORCED Into Plans They Didn’t Chose and Didn’t Like--

  • Quality of Care Measures Were Limited So Choice of Plan (By Employers) Was Based Primarily on Costs


The errors of the past1
The Errors of The Past The Supply Side Option

  • For Bundled Payments

    • The Medicare DRG Payment System Only Included Hospital Services

    • The Medicare DRG Bundled Payment System Only Covered Medicare Beneficiaries


Aco s and bundled payments designed to avoid problems of the 1990 s
ACO’s and Bundled Payments Designed To Avoid Problems of The 1990’s

  • Providers Required To Assume Limited Risk

    • ACO’s is a “Shared Savings System”. Each Groups Starts From Their Current Spending Levels and Downsides Risk Limited

  • Patients Will Not Be Locked Into a Delivery System They Don’t Trust

    • Patients Need to Sign Up With PCP But Can Change PCP or Network With No Penalty

  • Attaining or Exceeding “Quality Standards Provider Eligibility for Payment Depends on ”

    • Debate on What Quality Standards to Use Is Ongoing


Aco s and bundled payments designed to avoid problems of the 1990 s1
ACO’s and Bundled Payments Designed To Avoid Problems of The 1990’s

  • The Medicare Bundle Will Include Physicians Services and Post Hospital Care In Addition to Hospital Services (It does Not Include Pre-Hospital Care)

  • Medicare is Encouraging (But Not Requiring) Non-Medicare Patients to Be Included in Future Bundled Payment Systems


Many employers and private health plans supporting demand side approaches

Many Employers and Private Health Plans Supporting Demand Side Approaches

Fastest Growing Private Insurance Are High Deductible and Preferred Provider (PPO) Plans That Use Fee-for-Service Payments


Distribution of health plan enrollment for covered workers by plan type 1988 2012
Distribution of Health Plan Enrollment for Covered Workers, by Plan Type, 1988-2012

NOTE: Information was not obtained for POS plans in 1988. A portion of the change in plan type enrollment for 2005 is likely attributable to incorporating more recent Census Bureau estimates of the number of state and local government workers and removing federal workers from the weights. See the Survey Design and Methods section from the 2005 Kaiser/HRET Survey of Employer-Sponsored Health Benefits for additional information.

SOURCE: Kaiser/HRET Survey of Employer-Sponsored Health Benefits, 1999-2012; KPMG Survey of Employer-Sponsored Health Benefits, 1993, 1996; The Health Insurance Association of America (HIAA), 1988.


Demand side approach push consumers and payers to find lower cost providers

Demand Side Approach Push Consumers and Payers To Find Lower Cost Providers

Penalize Providers That Voluntarily Cut Use of Expensive Services


But Confusion About The Different Incentives Could Lead to Total Shutdown By Providers To Lower Costs


Need to develop a common approach

Need to Develop a Common Approach Total Shutdown By Providers To Lower Costs

Although Many Use PPO Insurance and Fee-for-Service Payment--- Offer Bonuses For Providers That Spend Less Than Target


States can help private insurance expand the use of the ppo attribution global payment system

States Can Help Private Insurance Expand The Use of The Total Shutdown By Providers To Lower Costs“PPO Attribution Global Payment System”

The Massachusetts Story


Healthcare in massachusetts highest in u s

Healthcare In Massachusetts Highest In U.S. Total Shutdown By Providers To Lower Costs

Quality of Care and Access Also Better In Massachusetts But Systems Need To Become More Efficient


Massachusetts Continues To Spend a Greater Proportion of State Income on Healthcare In Comparison To U.S.

Personal health care expenditures* relative to size of economy

Percent of respective economy†

MA (CMS NHE)

US

MA (estimated)‡

15.2%

12.2%

*Personal health care expenditures (PHC) are a subset of national health expenditures. PHC excludes administration and the net cost of private insurance, public health activity, and investment in research, structures and equipment.

† Measured as gross domestic product (GDP) for the US and gross state product (GSP) for Massachusetts

‡ CMS state-level personal health care expenditure data have only been published through 2009. 2010-2012 MA figures were estimated based on 2009-2012 growth rates provided by CMS for Medicare, ANF budget information statements for MassHealth, CHIA, and pre-filed testimony from commercial payers.

Source: Centers for Medicare and Medicaid Services; ANF; CHIA; pre-filed testimony from commercial payers for 2013 annual cost trends hearing; HPC analysis


Massachusetts legislature passes compromise cost containment legislation august of 2012

Massachusetts Legislature Passes Compromise Cost Containment Legislation(August of 2012)

Stops Short of Regulating Payments


Chapter 224: Cost Control & Payment Reform Legislation

Health Workforce Support

Health Planning

Administrative Simplification

Alternative Payment Models

New State Oversight

Bodies

Review Provider Price Variation

Health IT Requirements

Medicaid Payment Reform

Transparency & Reporting Requirements

Annual Spending Targets

Infrastructure Support

ACO Certification & Oversight

Brandeis University


Spending delivery reform oversight
Spending & Delivery Reform Oversight Legislation

Community Hospital Improvement Fund

Executive Director and Staff

Payment Reform Fund

Center for Healthcare Information and Analysis

Health Policy Commission*

(11-member board)

* In EOHS but not subject to EOHS control. Exempt from state civil service requirements and pay scales.


The role of the health policy commission
The Role of The Health Policy Commission Legislation

  • Help Providers of Care Find Ways to Lower Costs Through Efficiencies

  • Help Payers Change The Way They Pay To Promote Value-Based Care

  • Help Consumers and Patients Know What The Need and What Insurance and Care Costs

  • Assure That Any Restructuring or Consolidation of Healthcare Market Helps The Public


Commission Is Committed To Working With Health Plans and Providers To Develop Payment Systems That Reward Value


But commission is not a regulatory body

But---Commission Is Not a Regulatory Body--- Providers To Develop Payment Systems That Reward Value

Ultimate Responsibility Still Within Private Sector!

Brandeis University


Reaching the goal of the law keep future growth in line with state growth in inco me

Reaching The Goal of The Law- Providers To Develop Payment Systems That Reward Value --Keep Future Growth In Line With State Growth In Income


Massachusetts statewide heath care spending targets all payer
Massachusetts Statewide Heath Care Spending Targets (All Payer)

Billions

5.9%/yr

3.1%/yr

3.6%/yr

6.2%/yr

Source: Author’s calculation based on historical state spending estimates and projected national health spending growth from the CMS Office of the Actuary and targets set forth in Chapter 224.

Brandeis University


Hpc is like the health systems mother

HPC is Like The Health Systems Mother--- Payer)

We Keep Reminding The System to Eat It’s Vegetables



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