(Almost) Nothing Works

(Almost) Nothing Works

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I will suggest that most of us believe the way to control health care costs, and at the same time maintain or improve quality, is to both use the managed care tools we have developed over the years, and perhaps more importantly, change the payment incentives so that both cost control and quality are upper most in the minds of providers and payers.

The Congressional Budget Office (CBO) has just released an important review of Medicare’s results in testing those ideas. The news is not good.

From the CBO’s blog post:

In the past two decades, Medicare’s administrators have conducted demonstrations to test two broad approaches to enhancing the quality of health care and improving the efficiency of health care delivery in Medicare’s fee-for-service program. Disease management and care coordination demonstrations have sought to improve the quality of care of beneficiaries with chronic illnesses and those whose health care is expected to be particularly costly. Value-based payment demonstrations have given health care providers financial incentives to improve the quality and efficiency of care rather than payments based strictly on the volume and intensity of services delivered.

In an issue brief released today, CBO reviewed the outcomes of 10 major demonstrations—6 in the first category and 4 in the second—that have been evaluated by independent researchers. CBO finds that most programs tested in those demonstrations have not reduced federal spending on Medicare.

Looking at 34 disease management programs and care coordination programs, the research found “little or no effect on hospital admissions.” The CBO went on, “In nearly every program, spending was either unchanged or increased relative to the spending that would have occurred in the absence of the program, when the fees paid to the participating organizations were considered.”

Looking at the Medicare demonstration projects for value based purchasing, “Only one of the four demonstrations of value-based payment has yielded significant savings for the Medicare program. In that demonstration, Medicare made bundled payments to hospitals and physicians to cover all services connected with heart bypass surgeries, and Medicare spending for those services declined by about 10 percent. The other demonstrations appear to have resulted in little or no savings for Medicare.”

The good news here is that when put on a budget, when the payment system was changed to create a downside if results weren’t improved, one of the studies did identify “significant savings.” But only about 10%.

Thirty years into managed care, the stark reality is that we aren’t yet smart enough to get things under control.

Medicare is now about to test the Accountable Care Organization (ACO) concept. In an earlier post, Why ACOs Won’t Work, I argued that this approach couldn’t work unless we change the game–we change how providers are paid so that there is a significant downside if results aren’t achieved. I said, “Here’s a flash for the policy wonks pushing ACOs: They only work if the provider gets paid less for the same patient population.” At least one of the studies the CBO is citing would appear to support that notion–but only one.

When Medicare first announced their ACO demonstration project, the providers all howled–they were being put at too much risk for too little return. The feds then lowered the bar by improving the odds there could only be winners and not losers––eliminating participant risk in the first of two ACO tracks. The second track continues to carry risk but offers larger potential rewards.

Medicare policymakers may have had no choice but to placate the providers in order to entice them into the new system in order to get it off the ground. That said, Medicare’s strategy of overpaying HMOs to entice them into the Medicare Advantage business hasn’t exactly worked out toward the goal of lowering costs.

This CBO study makes it very clear that ACOs with little risk, just layering these tools over the top of the fee-for-service system, is a pointless exercise. When we just provide incentives to do the right thing, we don’t do the right thing.

What we need to be testing and perfecting is the combination of the best tools we have and significant risk–changing the payment incentives for real.

Unless ACOs, or any other managed care scheme for that matter, start out paying less, and the tools we have are then used to achieve a profitable result, there is no evidence there will be savings.

Robert Laszweski has been a fixture in Washington health policy circles for the better part of three decades. He currently serves as the president of Health Policy and Strategy Associates of Alexandria, Virginia. Before forming HPSA in 1992, Robert served as the COO, Group Markets, for the Liberty Mutual Insurance Company. You can read more of his thoughtful analysis of healthcare industry trends at The Health Policy and Marketplace Blog, where this post first appeared.

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49 Comments on "(Almost) Nothing Works"


Guest
Jonathan H
Jan 21, 2012

“I said, “Here’s a flash for the policy wonks pushing ACOs: They only work if the provider gets paid less for the same patient population.” At least one of the studies the CBO is citing would appear to support that notion–but only one.”

Are you giving yourself enough credit here? Your first statement still seems transparently true to me, regardless of the results of the Medicare pilots. The problem was that they didn’t end up paying less for the same patient population after admin was accounted for. I wouldn’t naturally interpret your statement as excluding admin cost.

As for ACOs being pointless if, as invented now, they won’t reduce costs, that is not necessarily true. They could be cost neutral and improve quality of care, which seems in fact to be a likely scenario.

Guest
Jonathan H
Jan 21, 2012

“invented” should be “incented.” Danged auto-correct.

Guest
MD as HELL
Jan 21, 2012

ACO’s conceived by government in its own image, will fail to control costs for the same reason government itself has failed to control costs in anything at all, ever.

The only way to control costs is for Congress to grow a set and tell its direct beneficiaries they are on their own. Congress has no way of paying off its lavish reckless “entitlements”.

Young people have had enough and will vote old people out of the checkbook.

Guest
Jonathan H
Jan 22, 2012

MDH, you mean like how the VA doesn’t control costs? Or the Netherlands? Or the UK? Or hundreds of other cases?

We don’t control costs here because of culture and politics, not because of any essential limitation of government.

Guest
MD as HELL
Jan 22, 2012

Sorry, Jonathan.

i should have said “our government”.

And if the VA cuts costs, it is because we in the private sector see the VA patients when they are sick and canot transfer them to the VA until they are accepted, which is when they are not sick.

“Hundreds of other cases?” Write a book.

Guest
Jonathan H
Jan 22, 2012

So our private sector is doing a bang-up job? I don’t see the alternative.

As for writing a book, many have been written already. Some good ones, even. Another is not needed.

Guest
Jan 21, 2012

I normally wouldn’t turn this into a vehicle for self-promotion, but if you’d like to buy an advance copy of my new book (in pdf form) Why Nobody Believes the Numbers, from my website dismgmt com , you’ll see it says exactly the same thing, not just about ACOs but about every other voluntary program — PCMH, DM, wellness, MTM — wtih math to back up these assertions. I would classify ACOs as “voluntary” in the sense that providers had to be enticed into this model.

There are simply too many mouths to feed for arrangements that require enticing people into them with subsidies to every work.

Guest
Jan 21, 2012

Your “why_nobody_believes.pdf” preview will not open.

Not exactly encouraging for a $60 book.

Guest
Jan 21, 2012

file seems to be opening on both my devices just fine but I don’t like to have dissatisfied customers so how’s this for a makegood: email me at alewis@dismgmt.com and I’ll send it to you gratis, and you only pay for it if you read it and tell me you like it?

What the heck — ANYONE on this site can do the same. It’s yours to keep and you only pay if you like it. (In both cases you’ll also get the hardcopy when published.)

Guest
Jan 21, 2012

I just wanted to read your preview for now. Tried everything to open it. (I have the full Adobe Suite. iMac user). Thanks for the reply.

Guest
Jan 21, 2012

Yikes! How many people read this site, on a Saturday no less? I’ve already gotten four requests for the free copies. I gotta end this offer or no one will be left to actually buy tjhis book when it comes out.

So the offer will end at 2:30 PM Eastern. After that, if you have any trouble downloading the free intro just ask me and I’ll send the free intro.

Admin
Jan 21, 2012

Good to see that THCB readers are pushing Al to the poorhouse…

Guest
Jan 21, 2012

I will suggest that most of us do not believe that managed care tools and changing payment incentives, either separately or combined can reduce costs and improve quality of care simultaneously. By “us” I do not mean expert consultants, policy makers, academia, etc.

I will also suggest, speaking for myself only, that constantly ignoring evidence and proceeding headlong into a faith based solution because it looks good on paper is not going to prove any more effective this time around.

The current push for provider consolidation is destroying primary care, destroying both patient and doctors autonomy, and handing over the oversight for medical care to revenue driven organizations, which the government hopes to be able to regulate into providing a superior product at a lower price.
This mass produced superior product is of course intended for mass production, not for the fortunate few, and it will look exactly like the superior products sold at Walmart, at which point all is left to do is convince people that plastic forks are superior to silverware.

On second thought, maybe the “most of us” referred to above are correct.

Guest
Jan 21, 2012

Nice post, Robert.

I’d sure like to see Joe Flower and JD Kleinke add their thoughts.

From the last GOP “debate,” btw –

MR. ROMNEY: “… So — so we’ll make it work in the way that’s designed to have health care act like a market, a consumer market, as opposed to have it run like Amtrak and the Post Office. That’s what’s at risk — (applause) — at stake here.

Problem solved. It’s no different than buying shoes or sheets or HDTVs or yachts or undervalued companies.

Next?

Guest
Dr. Mike
Jan 21, 2012

Nothing works because those in charge keep trying the same thing but expecting different results. “This time will be the time…”

Let’s see how this works in other industries:

Government slaps a tax or penalty on some product or service, or conversely they provide a financial incentive or tax rebate, and the industry passes the extra cost or savings on to consumers, and the consumers change their behavior.

But in healthcare:
Government or insurance slaps a penalty or restriction or incentive on providers, but providers are prohibited by law or contract from passing the savings or costs on to the consumer, and consumer behavior stays the same. But the providers, whether they are receiving less or more per each service, now have the incentive to either provide more of that sevice in the same timeframe to preserve income (thus dropping quality) or to provide more of that service in lieu of less profitable (less costly) services. Either way, the end result of the attempts to manipulate the provider of the service instead of the consumer of the service results in the same or higher costs.

If the powers that be would simply stop for minute and ask themselves – is there a way to incent the consumer to consume the services they need, while decreasing the consumption of services that don’t add value, all the while minimizing the impact on their family finances? If they would think on this instead of trying to think up more ways to control providers, they might actually have a breakthrough.

Guest
Dr. Mike
Jan 21, 2012

I’ll add that if you insist on working only on the provider side, your time would be better spent looking at the hospitals rather than physicians, as hospitals are where most of healthcare spending occurs. The recent MedPAC recommendation to place medicare payments to hospital outpatient clinics on par with private practice clinics is a good start. (a very disruptive change that will have widespread repercussions).

Guest
Jan 21, 2012

Dr. Mike, I am not sure what you mean by consumers.
Half of all Americans use almost no health care, while 5% or so use half of all resources. Is this a typical distribution in “other industries” where slapping and incenting consumers is working well?
The overwhelming majority of consumers have no ability to affect any significant change. Those very sick individuals who are using most of our health care dollars will not respond to slapping for many obvious reasons. They have been shown to respond to more primary care from physicians. Why aren’t we concentrating on evidence based policy changes? Beats me, but it may have something to do with hospital corporations not wanting to lose all that revenue, and with payers of all stripes desiring to control their environments. It could also be that bureaucracy, like entropy, is governed by the second law of thermodynamics.

Guest
Dr. Mike
Jan 22, 2012

“half of of all Americans use almost no health care” Maybe in any given year, but that certainly is not true when the time frame is expanded a bit.

Inpatient care is obviously the most expensive, and consumes the majority of health care dollars, and yet the most intense debate is about outpatient care – prevention, insurance for all, SGR, medical homes, etc. Even the debate about ACOs often centers around the outpatient side of the equation. Patients, before they become part of that 5% that uses half of all resources, are for the most very capable of responding to both positive and negative consequences, but so far, IMHO, both government and private insurers have gone about it in the wrong way. Every working American is capable of making good choices when provided with the tools to do so. Providing insurance and/or health care to millions of Americans who have previously gone without is going to change the cost equation in ways that make it ever more important to get the incentives right for everyone. But you won’t get any more primary care out of me, and others like me, unless the incentives start to change from what they are now.

Guest
steve
Jan 21, 2012

We know how others control health care costs. Every other OECD country has done a much better job than we have. We are unwilling to try adapting programs from other countries. We are even unwilling, for the most part, to adopt some of the basic principles that have been shown to reduce costs.

Steve

Guest
Jan 21, 2012

And there are certain powerful interests for whom the continuation of this circumstance as long as possible will be just fine.

Guest
Barry Carol
Jan 21, 2012

In fiscal 2011 ended 09/30/2011, Medicare spending net of offsetting receipts (beneficiary premiums mainly) increased about 4% from the prior year which was less than what was expected at the start of the year. For the first three months of fiscal 2012, ended 12/31/2011, Medicare spending was actually down 11.9% from the prior year. After adjusting for the timing of payments due to calendar shifts, it was up 1.1% but actually down slightly on a per capita basis. Data is from the CBO’s Monthly Budget Review.

So, even if the demonstration projects discussed in the post were not successful in reducing costs except for bundled payments for heart bypass surgery, it looks like there are some promising developments with respect to overall program spending. The practitioners out there can probably speak to this a lot better than I can. However, I keep hearing that hospitals are more interested in learning how to operate more efficiently at lower costs to get ahead of some of the payment changes coming down the pike. Perhaps more people are choosing hospice care sooner at the end of life and maybe more are executing living wills or advance directives that call for no heroic measures. The increasing percentage of the Medicare population enrolled in Medicare Advantage plans which all limit provider choice may be receiving less inappropriate care from more cost-effective providers.

I know that the managed care insurers are very interested in bringing more and better care coordination to the expensive dual eligible population which consists of fewer than 10 million people eligible for both Medicare and Medicaid. As a group, this population costs about $300 billion per year to serve or roughly one-third of the combined cost of the two programs even though a sizeable percentage of them are not seriously ill. Interestingly, though, people from the lowest segment of the income distribution who also have deeply held religious beliefs are more likely than the rest of the population to insist on receiving the most aggressive and costly treatments at the end of life. Exactly why this is I have no idea nor do I know if this is also the case in other countries or not.

Guest
Jan 21, 2012

….or maybe this recession is more like a depression, particularly for Medicare/Medicaid folks.

Guest
Dr. Mike
Jan 22, 2012

My medicare and medicaid folks have been untouched by the recession. Why would they be?

Guest
steve
Jan 22, 2012

Mine have not. There are still co-pays. Many of the Medicare group work, at least part-time, and are afraid to take time off.

Steve

Guest
Jan 22, 2012

Health spending is down across the board, not just Medicare. It isn’t the “promising developments” that caused this reduction, any more than failure of those “promising developments” led to higher costs in earlier years. Fact is, all this fun social-engineering policy stuff stuff other than making consumers or providers pick up much more of the cost has only a marginal impact one way or the other.

Anything that relies on exhorting voluntary behavior change falls into the category of “almost nothing works.”

Guest
Barry Carol
Jan 22, 2012

Dr. Mike –

I agree about hospitals being a huge healthcare system cost driver. In a recently published Brookings Institution primer about the premium support concept, it was stated that approximately 25% of Medicare spending is for care during the last year of life, much of which is hospital based care. This is why I keep pounding away about end of life care, both the need for more widespread use of living wills and advance directives and for doctors to take into account the need to be good stewards of society’s finite resources when they make their treatment decisions and recommendations. I also agree about the need to get the incentives right throughout the system for both providers and patients.

Separately, the private insurers note that hospital inpatient care is where they are seeing the most upward pressure on unit costs. Utilization of services has been fairly flat but the hospitals with a dominant local or regional market share are driving unit prices up considerably faster than general inflation. Hospitals, for their part, attribute at least part of that effort to inadequate payments from Medicare and, especially, Medicaid.

Margalit –

Approximately 90% of people with standard Medicare have Medigap plans as well which insulates them from copays and deductibles for services, tests and procedures covered by Medicare. The Part D plans do have copays, however. Medicaid patients don’t pay copays. I can easily see Dr. Mike’s Medicare and Medicaid patients not being affected at all by the recession. Moreover, I haven’t seen any stories about such patients dying before they normally would have because of the inability to afford care due to the recession.

Guest
Dr. Mike
Jan 22, 2012

I will admit to a wee bit of hyperbole in my statement implying that none have been affected – and, if I were still accepting new medicaid into my practice, I would have noticed the effect of the recession in causing some previously privately insured to now be on medicaid. But for the most part (? >70%) my medicare and medicaid patients do not work, and seem oblivious to the recession. It really chaps my hide to be made to sound like I am attacking this group of patients just because I don’t buy into the falicy that they are poor and ignorant. By international standards the majority most certainly are not impoverished, and I have had enough interesting conversations with these patients to know they aren’t stupid. They “get it” a lot more than they are given credit for. They “get it” well enough that I believe they would respond very nicely to incentives for them to think about end of life care. I believe you could structure a small simple incentive program that patients would respond to by having an end of life document completed. Why would you design an incentive (or disincentive) for me? It defies logic and ignors human nature to target anyone other than the patient when attempting to modify the desire for futile end of life care. You can ask any doctor about the “a-ha” moments they see happen in their patients – years of haranguing them about their diabetes, etc never make a dent, but then something happens to them, TO THEM – THE PATIENT, and they suddenly have a desire to make the same changes you have been asking them to make for years. Disimination of information without the desire on the part of the intended audience to learn the information is pointless. The idea of benevolent stewards guiding the ignorant masses into the right path is itself ignorant. Ignorance is not the issue – it is desire, and desire can be created.

Guest
steve
Jan 22, 2012

“By international standards the majority most certainly are not impoverished, ”

By international standards, you and I are way overpaid. If you want to use international standards, at least be consistent. As to the end of life issue, the Wisconsin experience suggests that people respond quite well to even minimal discussion of the issues. I would like to see physicians get paid for having these talks. It will not happen if the current iteration of the GOP is in office.

Steve

Guest
Dr. Mike
Jan 23, 2012

I must have hit a nerve for you to accuse me of an inconsistency that is no where to be found in what I have written.
Compared to doing nothing, most any intervention is likely to show a response. I would be very interested in seeing if compared to paying me for doing something (I am overpaid afterall) you instead spent the same amount of money on an incentive program for the patient. I would wager the patient’s incentive program would have dramatically better results. This of course will not happen if the current iteration of the, er, um, never mind, doesn’t matter who’s in office.

Guest
steve
Jan 23, 2012

“I must have hit a nerve for you to accuse me of an inconsistency that is no where to be found in what I have written.” If by international standards the majority are not impoverished, then by international standards, if those are the ones you choose to use, we are overpaid. It’s pretty straightforward.

“you instead spent the same amount of money on an incentive program for the patient.”

Maybe, and I would not oppose a large scale pilot to see if it could work. However, we know that most spending is by a small percentage of patients. What incentives are you planning for the newly diagnosed cancer patient? They are going to go way over any reasonable deductibles/co-pays. Most of our patients simply are not that able or willing to move to new facilities or new docs. There may be room for incentives to whittle down some costs at the margin, but I think it unlikely to work for the majority of our health care spending. (Also, we know that when we increase deductibles, patients will often drop the most cost-effective care.)

Steve

Guest
Dr. Mike
Jan 24, 2012

Again, you said I was inconsistent. But, I never said I wasn’t overpaid. Just because you can use logic to deduce from one of my statements that another statement could be true, the fact is I never said one way or another, therefore there is no inconsistency to point out. You can make a point, but to call me inconsistent is a distraction. Thanks for playing though.

Guest
Jan 22, 2012

Hooray for Jonathon H and all others who point out those vested interests who have learned to do well under the present lack of oversight will continue to lobby against any “big government” looking over their shoulder to see how they are doing well enough to pay millions to their executives and shareholders. Who in the government gets $100,000,000 to run what surely are some of the most important institutions of our society, Oops I forgot about the lobbyists, maybe they are making the millions.
Where are the advocates for transparency? Publish the cost per patient per year or total payments for those providers seeing hundreds of patients a day for all those who are being paid by you and me, that is government programs. Put this on the internet by Zip and type of provider or specialist and let the investigative reporters help us sort out how wisely we are spending our health care dollars. We cannot correct or address this problem until we know where the money is going and if that is how we want it spent. Certainly many of us see hundreds of thousands spent on care and procedures of questionable value promoted by the “medical industrial complex” , hospitals, imaging centers, free mobility devices, pharmaceuticals promoted on TV. All of this is supported by our dollars for health care, insurance Medicare, Medicaid and most is uniquely American if not in quality certainly in quantity.

Guest
MG
Jan 22, 2012

“In America, the implicit belief system promoted by marketing is that you can eat anything you want in whatever quantity you want, and if anything goes wrong with your body or mind, there is a pill or procedure to fix it”

Pretty much sums it up. I am always baffled that in healthcare there an overwhelming amount of energy and focus on the delivery system with everything else generally much attention, research, and funding. Like becoming obsessive-compulsive about just a single room in the house while the rest of it literally fails apart around you.

Guest
MG
Jan 22, 2012

It shouldn’t surprise people either that the vested interests in heatlhcare largely resist changing the status quo much either:

I hate focusing on just income vs. wealth because it presents a pretty clear distortion of what actually matters but it is pretty clear people especially physicians are making out really well with the status quo:

http://www.nytimes.com/packages/html/newsgraphics/2012/0115-one-percent-occupations/index.html?ref=business

Also reflected in the undergrad majors that are making the big bucks:

http://economix.blogs.nytimes.com/2012/01/18/what-the-top-1-of-earners-majored-in/?smid=tw-nytimeseconomix&seid=auto#h%5BBiaIow,1%5D

The largest percentage of 1% (by income) by their undergrad college major are ‘Health and Medical Preparatory Programs’ at 11.9%. Biochemical Sciences, Zoology, and Biology are #3, #4, and #5.

While the healthcare lobby doesn’t have the firepower in terms of reps, clout, and contributed dollars that finance does, it is no slouch either:

http://www.opensecrets.org/industries/index.php

They come in at #5 in funding from 2011-12.

People who are wealthy, affluent, and have a relatively safe and secure lifestyle will act vehemently and strongly against any outside forces that attempt to change this especially political ones.