OP-ED

(Almost) Nothing Works

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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Tyler DecapotTom AlbrechtPeter@selfpaymri.comDeterminedMDVikram C Recent comment authors
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Tyler Decapot
Guest
Tyler Decapot

Operational and financial decisions are made every day. Still, how are they made? What is it that leads to specific decisions being made and particular paths being chose over other available options? The answer is quite simple; information and data, of quality, is required, so that whoever is making the decisions can be most informed and make the most efficient decision for everyone involved. Even with a particular mind set turned towards the healthcare industry and hospitalization, few people will argue that making haphazard choices, without appropriate attention being paid to the quality data and details, can simply lead to… Read more »

Tom Albrecht
Guest
Tom Albrecht

If we really want to reduce health care costs we need a paradigm shift from a sickness based system to a wellness based one by focusing on nutritional and lifestyle changes, and in so doing we will all be much healthier!

MD as HELL
Guest
MD as HELL

Please listen carefully as our menu has changed:

For dialysys near death click “no way”

For lift chairs and scooters click, “not a snowball’s chance”

For feeding tubes in the nursing home click, “what have you been smoking.”

For all other insane expectations from a broke and broken loser government program, please leave your name and number, and one of your former Congressmen will get back with you in their political lifetimes.

NOT!

Peter@selfpaymri.com
Guest

Just a few thought from Tampa, FL. Encourage price transparency and comparison will get us a bit closer to where we want to be. Most patients in the FFS Medicare program play by the same rules.. Maybe using big data to tier these folks into different programs with incentives, affiliations, etc. would help. A 65 year old is much different than a 75 year old, 85, etc.. Why are we treating them all the same? Throw out the PAR Medicare fee schedule and allow SOME price competition pointed at the Medicare population. Leave in the limiting charge to cap the… Read more »

DeterminedMD
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DeterminedMD

Maybe if we started by being honest about end of life decisions and choices, we might see expenses drop a bit. Oh yeah, like being honest about the same lame and dishonest people most of you vote back into public office every 2-6 years. Change is just a word to so many who write here. Just like Hope. Just like the loser voted into the White House 3 & 1/2 Years ago. And just like the winner of the election in November 2012. You all want real change and hope for health care choices? Walk into the nearest room with… Read more »

BobbyG
Guest

Are you Dr. Kevorkian’s brother? Your Johnny-one-note schtick has gotten way beyond old.

DeterminedMD
Guest
DeterminedMD

Gee, taking a break and reading the same lame ad nauseum rhetoric from you and other people is so empowering. With the level of vision and opportunity spewed here, it is such a wonder health care has catapulted to such new heights. You all are finally reaching ground level now!

Barry Carol
Guest
Barry Carol

Dr. Motew and Margalit – In 2008, Health Affairs published an extensive interview with Germany’s Health Minister, Ulla Schmidt, conducted by Uwe Reinhardt and Tsung-Mei Cheng, both of Princeton University. There have been a number of significant reforms to the German system over the last ten years or so. Importantly, regarding pricing of health services, Ms. Schmidt states that regional associations of sickness funds negotiate prices with regional groups of physicians and all sickness funds pay the same price for the same services. The associations of sickness funds negotiate with each hospital individually and all pay a given hospital the… Read more »

steve
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steve

Go to Frakt’s site, The Incidental Economist and go to the FAQ section.

Steve

Vikram C
Guest
Vikram C

I doubt if there is any good study to show European care is better than US. Higher life expectancy doesn’t reflect of procedure driven care.

However the costs are clearly higher and my assertion is that as long as consumer equate price to quality, high price tag is what we will get. No cheap treatment will survive the cultural and scientific scrutiny.

bob hertz
Guest

I missed the section of the Ten Commandments which stated that intensive care had to reimbursed at $3000 or more per day. What if we cut the standard ICU fee to $1500 a day instead? What many other countries do is not necessarily mysterious. They have global budgets with no allowance for volume. The hospitals get their $80 billion – or whatever – and virtually no more. They can give patients four EKG’s a day and three blood gasses an hour, and their total is still $80 billion. The $80 billiion probably comes in four or twelve large predictable checks.… Read more »

Barry Carol
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Barry Carol

Back in 2003, Princeton professor, Dr. Uwe Reinhardt, published a paper in Health Affairs titled “It’s the Prices, Stupid.” I suspect that if Germans had to pay U.S. prices for their utilization of health services, tests, procedures and drugs, their spending as a percentage of GDP would be comparable to the U.S. and maybe even higher. In today’s New York Times, Phillip M. Boffey published an article titled “The Money Traps in U.S. Healthcare.” In it, he compares the prices for a number of different procedures across five countries – U.S., U.K., Canada, France and Germany. Data is from the… Read more »

SJ Motew, MD
Guest
SJ Motew, MD

German drug and device prices are controlled by their backbone social insurance program. Prices are capped, and new drugs highly regulated and/or discontinued after one year if not showing significant benefit over current drugs. Malpractice tort is very limited as damages are paid from social insurance with regulation of physicians handled separately. Germany is FFS but the prices are set for all comers and providers based on a formula simpler but not that much different from the US (ie amount of work, complexity and a government ‘correction’) This single fee schedule is a main driver in cost containment.

Margalit Gur-Arie
Guest

I don’t really understand your reasoning here, Barry. You start by correctly pointing out that we spend a lot more per service unit than any other OECD country, and proceed by suggesting that we change reimbursement methods to reduce utilization. Utilization is not the problem. Fee for Service is not the problem. American don’t use that much more health care than other countries, and in some cases they use a lot less. End of life care may mildly affect Medicare costs, but it does not affect private payers which keep hiking up premiums year after year. Capitation and bundling are… Read more »

MG
Guest
MG

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… Read more »

MG
Guest
MG

“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.

hu williston
Guest

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… Read more »

Barry Carol
Guest
Barry Carol

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… Read more »

Dr. Mike
Guest
Dr. Mike

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… Read more »

steve
Guest
steve

“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

Dr. Mike
Guest
Dr. Mike

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… Read more »

steve
Guest
steve

“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… Read more »

Dr. Mike
Guest
Dr. Mike

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.

Barry Carol
Guest
Barry Carol

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… Read more »

Margalit Gur-Arie
Guest

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

Dr. Mike
Guest
Dr. Mike

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

steve
Guest
steve

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

Al Lewis
Guest

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.”

steve
Guest
steve

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

BobbyG
Guest

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