Thursday, June 12, 2014

Michael Leavitt on State-level healthcare reform

Beneath the furious passions aroused by the Affordable Care Act lurk broad areas of bipartisan consensus regarding healthcare reform in the United States. Lawmakers in both parties want to move payment for healthcare away from fee-for-service and toward managed care, "bundled" payment by the patient or treatment episode, and risk-based payment, in which providers are rewarded for keeping costs under target and penalized for exceeding it. Both parties also accept the premise that high deductibles and co-pays help control costs -- with lip service at least usually paid to giving patients viable choices by providing information about providers' pricing and quality.

The bipartisan zone is mapped out in a report produced under the auspices of the University of Virginia's Miller Center by a commission co-chaired by Michael Leavitt, former Republican Governor of Utah and Secretary of Health and Human Services under George W. Bush, and Bill Ritter, former Democratic governor of Colorado. Cracking the Code on Healthcare Costs, released in January 2014, focuses on the role of state governments in containing healthcare costs while improving delivery, emphasizing that states have powerful levers on both fronts.  Those levers include administration of Medicaid, state employee health programs, and the state health exchanges established by the ACA, as well as the state regulation of insurance mandated by US law and "state laws affecting market competition and consumer choice, such as antitrust enforcement and requirements for providers to report price and quality information."

The report's working assumption is that, Republican cries of "federal takeover of healthcare" notwithstanding, both the ACA and existing Medicaid rules afford governors and state legislators and administrators ample scope to shape the healthcare markets in their states. Key recommendations include setting annual overall state spending benchmarks, as Massachusetts has done; promoting "coordinated, risk-based care to the disabled and dual-eligible population" -- the most expensive Medicaid beneficiaries; and also promoting coordinated, risk-based plans in the ACA exchanges -- as well as pricing transparency and quality ratings for participating plans.

ACA is here to stay

Does the ACA significantly constrain state innovation, or encourage it? I spoke about current and potential state efforts to transform healthcare delivery with Michael Leavitt and with Professor Raymond Sheppach, project director for Cracking the Code, whose comments I'll relay in a followup post.

Looking back at his three-term tenure as governor one of the nation's most conservative states, Leavitt counts effective administration of the expansion of Medicaid under the Children's Health Insurance Program (CHIP) as a major accomplishment. As HHS Secretary under George W. Bush, he oversaw the rocky rollout of the Medicare prescription drug benefit --  and has evinced considerable empathy with the administrators struggling late last year to get the ACA going. As CEO of a health consultancy, Leavitt Partners, he has bid to help states design their ACA exchanges, coming under considerable GOP fire for urging them take control of their own state exchanges rather than cede the effort to the federal government.  This spring he also helped convince Arkansas legislators not to ditch the state's just-implemented "private option" alternative to Medicaid, telling them that the state's provision of private health plans to the Medicaid-eligible "is not just pioneering, it is truly transforming."

In short, evangelist for federalism though he is, Leavitt is willing to work within the framework of existing federal programs, the ACA as well as Medicaid, to transform healthcare delivery on a state level.

I asked Leavitt whether there were any recommendations in the "Cracking the Code" report that couldn't be accomplished within or alongside the framework of the ACA.  He emphasized that the report was written in the context of the ACA. "Repeal is not likely," he said. "There's going to be a lot of changes and people are going to learn to navigate within that."  He emphasized that "health reform is dependent on state action, and the states have lots of tools. The leaders in implementation of health reform should be governors."

That illustrates a more general truth about the way government works in the U.S., Leavitt suggested. "The federal government's primary lever is the ability to collect money and tell the states what to do when they take the money." Of itself, "the federal government doesn't have the capacity to implement much. We can tell people what to do, but in terms of boots on the ground, people who can actually get things done" -- they are primarily in state government.

Critics of the ACA have trained fire on its coverage rules, including the mandated "actuarial values" -- the percentage of the average patient's annual healthcare costs covered by the plan --  which begin at 60%  for the cheapest bronze plans. One ACA reform proposed by five red-state Democratic senators (and independent Angus King) would create a new lower-cost band, a "copper" level in which plans would have an actuarial value of just 50%. I asked Leavitt whether he would like to see red state governors seek "innovation waivers' to allow sale of lower value and therefore plans within their state markets.

He made it clear that  he was personally comfortable innovating within a framework of "actuarial equivalence" to the current standards, as he did in Utah when implementing a Medicaid expansion in accordance with the Children's Health Insurance Program (CHIP). "When CHIP first passed, states were given a choice: adopt Medicaid, or create your own plan, as long as it was the actuarial equivalent" of one of four benchmark options, including the state's most popular managed care plan. "We chose to create our own, and we were able to provide insurance to a substantially larger population because of the way we constructed our benefits. I learned that flexibility within actuarial equivalence is important."

A broad defense of narrow networks

Leavitt believes that governors can leverage similar flexibility to promote cost-effective options within their state exchanges.  He flags "narrow networks," in which insurers provide access to a relatively limited roster of doctors and hospitals, as an important lever to hold prices down, emphasizing that consumers should have a choice between wider access and lower premiums.

I pointed out that the ACA was taking some heat in the press over the prevalence of narrow networks in the exchanges. Leavitt acknowledged that the government might have to respond to such complaints, but "somehow we have to strike a balance without destroying that economic lever. There's nothing new about people wanting the lowest price and all the providers. But that contradicts reality. We can't just have the government come in and demand that everyone have everything at the lowest possible price because that won't work."

National standards, neighborhood solutions

I asked about the scope for more sweeping changes afforded by the innovation waivers provided for by Section 1332 of the ACA, allowing states to develop alternative means to meet the ACA's coverage and affordability goals, starting in 2017. ACA requirements that can be waived under Section 1332 include essential health benefits and required actuarial values of qualified health plans  (Sect. 1302), cost-sharing reductions for lower-income exchange participants (Sect. 1402), and tax provisions relating to the individual mandate and eligibility for subsidies.

Leavitt said that while the scope of allowable changes "will be very much subject to the discretion of the secretary," with respect to the letter of the law, "I don't see many limits to the authority."

He added, "The more flexibility states have to innovate, the more innovation you'll get. There will be some things that won't work, but states and employers need to have the flexibility to try things. Fundamentally, if you give people high quality information and let them make choices they'll make better decisions for themselves than the government making all the decisions for them."

I asked whether he would prefer less prescription from the federal government with regard to the Essential Health Benefits mandated for every plan nationally. He responded,"The more flexibility states have in trying different configurations, the more likely we'll find the combination that works best. I'm not arguing that it should be completely free of definition or standards. You can have national standards, but you need neighborhood solutions."

State by state, a good deal of experimentation is in progress now. Stay tuned for Part II, in which Professor Raymond Sheppach, director of the Cracking the Code project, surveys current and likely future reforms.

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