Policy Support for Cost Containment Paul B Ginsburg

Policy Support for Cost Containment Paul B. Ginsburg, Ph. D. Presentation to “The Rising Costs of Health Care: What Can be Done, ” Alliance for Health Reform, June 12, 2012

Urgency for Cost Containment § At 18 percent of GDP, trend of GDP+2 highly challenging § Federal and state fiscal challenges – Revenue growth roughly in line with GDP – Expanding fiscal risk for governments as private coverage less affordable § Rising drain from cash compensation increases

Vision of Delivery System Reform § Providers taking responsibility for populations § Better coordination across care settings and providers § More effective management of chronic disease by both providers and patients § Greater role for primary care § Support from both provider and payer leadership

Provider Payment Reform § Key payment tools – – Global payment (including ACOs) Episode bundles Primary care medical homes Sharing savings: at least for transition § Key to pursuing the vision – Motivate providers – Support providers § Importance of coordinating payers

Role of Medicare and Medicaid § Large enough to engage providers § Inspire/engage private payers – Credibility with providers – Pioneer ACO contracting with private payers – Essence of Comprehensive Primary Care Initiative

Piloting Provider Payment Reforms (1) § Current pilots differ from past demonstrations – Approaches from ACA and CMMI – Much larger scale § Importance of current pilots – Refine approaches to payment – Engage provider leaders – Point direction for future payment to provider community

Piloting Provider Payment Reforms (2) § Constraints of engaging volunteers – Need to peg rates to provider-specific spending § Alternative is “adverse selection” – Limits upside for providers – Limits on savings that can be achieved by payer – Not viable for the long term § What does Round 2 contract look like? – Avoid pilots for better-developed approaches § Needed for bundling post-acute care? – Not an issue with medical home pilots

Transition from Pilots to Policy § Successful pilots cannot remain as pilots § Providers will be divided over pace of transition § Steps to ease transition – Advance notice – Blended payment (shared savings) § Private payers cannot pursue “policy” – Provider interest in parallel methods – Option of policy to require uniform methods

Engaging Patients § Striking contrast between private and public payers – Private: cost sharing incentives to choose higher-value providers § Opportunity to shift provider mix § Add to provider incentives § Reformed payments or similar calculations – Medicare: no patient financial engagement § Additional barrier: supplemental coverage § Concern about political risks from lack of engagement

Market Concentration § Extensive debate around ACO shared savings concerning concentration § Forces pushing consolidation much broader – System of future frightening to small hospitals and physician practices § Although IPAs in CA and MA show a model for practices – Closer alignment of providers important for integration § Challenge of passing gains in efficiency to private purchasers and consumers

Expanding Market Approaches § Narrow network plans and tiered designs – Tiered designs dependent on “pro-competitive” legislation § Additional pressure on premiums pushing these approaches – Weaker economy – Anticipation of “Cadillac” tax – Fixed contribution design of tax credits under ACA § Success of market approaches will determine whether direct regulation pursued

Additional Approaches to Costs § Payment reform the most promising approach – Consistent with shared vision – Well-defined path to success § But other approaches have potential as well – Avoid putting all bets on single strategy – Most strategies complementary – Tax treatment of health insurance most directly related § Outcomes research § Health improvement