Earlier today, Health and Human Services (HHS) Secretary Sylvia Mathews Burwell announced that HHS is doubling down on the historic shift taking place across the health care industry towards value-based care, and is setting a target of having 50 percent of Medicare payments under value-based care arrangements by 2018.
This would mean that in less than three years, around a quarter of a trillion dollars of health care spending would be made to providers who are being compensated not for ordering more tests and more procedures, but for delivering better outcomes – keeping patients healthier, keeping them out of the hospital, and keeping their chronic conditions in check.
This shift will address a central problem of the US health care system, one that lawmakers and policy experts on all sides of the issue agree is a key contributor to runaway medical inflation.
The logic is straightforward: by simply paying for the volume of services delivered, every provider has a strong incentive to do more — more tests, more procedures, more surgeries. And under this system, there is no financial incentive to maintain a comprehensive overview of patient care – to succeed by keeping the patient healthy, and health care costs down.
In making this announcement, Secretary Burwell took a step that many within HHS had been advocating quietly for years, and which many outside it have advocated more loudly.
Skeptics may ask: what does this accomplish? And why announce it now, when health care costs are already rising at the slowest rate in decades?
When CMS approved Solvadi, Gilead’s $84,000 drug for hepatitis C, the stakes were raised in drug price wars. Two opposing forces, one, a financial push toward lower costs came up against an opposing force of public sentiment. The FDA’s goal of getting 90% of patients moved from costly branded prescriptions to generics met with an an large outcry in social and traditional media for providing the best available care, rallying around the story of a patient. The wave of sentiment seems to have won over CMS.
Granted, CMS was likely considering the reversal in its policy on Solvadi, but it was the May 12th coverage by the Kaiser Family Foundation and NPR of the patient who was denied treatment, and the amplification across social media that turned the tide toward coverage.
Solvadi had not been approved by the patient’s prescription drug carrier, so physicians lobbied CMS for coverage of Solvadi and the life of the patient. Solvadi appears to cure liver cancer in 90% of the patients who take it as recommended. CMS agreed. As a single payer, they have the incentive to balance drug costs and benefits with other costs and benefits, and new therapies often win the fight for coverage.
Getting Covered: The decision to pay for drug combinations is often quicker than FDA approval of the drug combinations
Objective health policy observers such as KFF note that in the early days of successful antiviral drug treatment for HIV, payers allowed doctors to “mix and match” medications in “off-label” or unapproved combinations as they thought best. Medicare is often slow to approve the physician-driven cocktails, so getting CMS to adopt the strategy was a win for many very sick people in this country, as it sets a precedent for “exceptions.”
One doctor at Beth Israel Health System in Boston has a trial that has shown that combining Solvadi with another high-cost treatment, Olysio (by Janssen, cost $66,000 for a course of treatment) resulted in 90-100% cure rate.
The CMS statement in this case noted that that “the new policy will apply broadly to hepatitis C patients whose doctors prescribe the combined use of the two drugs because they meet certain criteria laid out in January by the Infectious Diseases Society of America and the American Association for the Study of Liver Diseases.” Those guidelines recommend the combined use of the two drugs in patients with advanced liver disease who have failed to be cured by earlier drug regimens – even though the FDA has not yet approved the combination—because Medicare guidelines say a patient must have access to a therapy if his or her condition warrants it.