As we hyperventilate, a quiet healthcare revolution?

Healthcare wonks were understandably a-twitter yesterday over the unveiling of the first substantive "repeal and replace" legislation -- a bill from Senators Coburn, Burr and Hatch that would re-remake the individual insurance market, semi block-grant Medicaid and take a big bit out of the employer's health insurance tax deduction.

The bill is important. Some of its core provisions could be enacted within the framework of the ACA. Some of those provisions -- e.g., replacing the individual mandate with a combination of continuous-coverage protection and default auto-enrollment -- are palatable to some progressives, and others -- capping the employer's tax deduction at 65% of the cost of an average plan -- might be downright attractive to them.  Others, not so much. But as a framework for possible compromise with ACA proponents -- e.g.,  if, say, Democrats have the Senate and Republicans the House and presidency in 2017 -- it has potential.

Under the radar, meanwhile, are two bipartisan efforts that could potentially have a more profound impact on healthcare costs, and therefore on healthcare delivery, as well as on the nation's long-term fiscal outlook.  Both are attempts to move government payment for health services away from fee-for-service. Both seek to foster a combination of coordinated care and pay-for-performance (as do pilot programs in the ACA).  Significantly, amazingly, this potentially revolutionary effort has not yet taken on strong partisan markings.

The most recent effort on this front bears the imprimatur of Congress's most creative and informed healthcare legislator, Senator Ron Wyden (D-Ore.), in concert with Sen. Johnny Isakson, (R-Ga.); Rep. Erik Paulsen (R-Minn.); and Rep. Peter Welch (D-Vt.). The bill, the Better Care, Lower Cost Act of 2014, hones in on the sickest Medicare patients, a small percentage of whom account for the majority of costs.  Modern Healthcare's Andis Robeznieks explains:

Under the bill, Medicare would cap payments for the sickest beneficiaries who enter the program, but set the cap high enough to fund teams that can focus on strategies that reduce hospital admissions and keep overall costs under the cap. It is, in essence, a shared-savings program—even though that term does not appear in the bill.

The bill aims to avoid weaknesses alleged by some in the Accountable Care Organization programs launched by the ACA:

The proposed Better Care program builds on the lessons learned from the ACO experience. Supporters note that the BCP concept, which would require beneficiaries to receive an individually tailored care plan, also borrows ideas from Medicare Advantage and the Patient-Centered Medical Home practice model.

“If you keep people out of the hospital, as Willie Sutton said, that's where the money is,” Racine said. Montefiore's Pioneer ACO saved Medicare $23 million in 2012 by reducing admissions by 10% and all-cause 30-day readmissions by 35%.

The Pioneer ACO patient attribution process goes away under the BCP. Also, once patients choose a BCP, they would be incentivized to stay within the BCP network—the same as in Medicare Advantage plans but not ACOs.

“ACOs are having difficulty coordinating care because they don't know who their patients are and, if patients see providers outside of your network, it's hard to control cost and quality,” said Chet Speed, vice president of public policy with the American Medical Group Association. “The problem with ACOs is that you have care-management requirements overlayed on a very imperfect fee-for-service system.”

The BCP also will risk-adjust payments for patients who require the most complex care, another incentive for providers to participate in the program, said Dr. William Bornstein, CMO and chief quality officer for Atlanta's Emory Healthcare. This will encourage some systems and physician practices to actually recruit Medicare patients with multiple chronic conditions by specializing in caring for that particular patient population and building the necessary infrastructure.

ACOs, by contrast, get a mix of very sick and relatively healthy patients. Those that lost money or broke even in the program may have lacked the resources to focus on the very sick, Bornstein said.

The other pending bipartisan legislation is a pair of so-called "doc fix" bills in the House and Senate that would replace the "sustainable growth rate" for Medicare payments implemented in 1997, which has proved unsustainable (fixing payments too low) and has to be "patched" every year.  Both bills, H.R. 2810 and S. 1871, would offset a freeze in physician payment rates with incentives to move to alternative payment models  that vary pay according to patient outcomes. 

The Wyden-Isakson acute care bill, the doc fix bills, the ACO pilot programs in the ACA, aspects of  Medicare Advantage, and various state Medicaid managed care programs all represent efforts by the government-as-payor to combine coordinated care and payment that focuses incentives on outcomes rather than on the volume of services.

In all such experiments, the devil is in the details, and lobbying interests may manage to skew the incentives.  I want to learn more about these efforts, including potential pitfalls:

• The drive for coordinated care may be giving birth to a new monster, or rather catalyzing a new growth spurt for an old one: provider consolidation. Hospital systems are consolidating like mad, and also buying up physician groups, which are also consolidating.  One study, cited by the New York Times' Eduardo Porter, found that hospitals raise prices by about 40 percent after the merger of nearby rivals. The momentum seems unstoppable. Are there means of countering its ill effects?
  
  
• If providers are to be paid for results and quality, how to avoid gaming of the results, or creating new skewed incentives? Hospital administrators are paid in large part to identify procedures with high profit margins and find ways to perform lots of such procedures. If cutting down on readmissions is a goal, I suspect there may be bad as well as good ways to get this done. Incentives are made to gamed, and lobbyists are good at rigging them.  On the other hand, as with statistics, they may be manipulable, but they're also indispensable.


• A flip side of coordinated care is lack of patient access to physicians and hospitals outside the network.  Insurers and ACO administrators speak piously of the need to control quality and coordinate care, but there's a cartel aspect to this drive as well. While it may be a disappearing benefit, many Americans are used to being able to pick whatever provider they think will give them the best care -- e.g., a top-notch heart or cancer surgeon (that includes me).  The loss of that extremely valuable "right" is a much more real and present likelihood facing tens of millions of relatively privileged Americans than the "death panels" that inspired such hysterical fear during the ACA's drafting and passage.
  

All that said, a move away from fee-for-service seems both inevitable and promising. Notwithstanding GOP howls about the ACA constituting "government-controlled healthcare" and GOP attachment to market-based solutions, the drive to move Medicare and Medicaid off fee-for-service seems so far to be bipartisan (and sometimes compatible with privatizing options within M&M). If there is real cooperation on this front, that cooperation, by bending the healthcare cost curve, could outweigh all the high-profile gridlock and combat over budgeting more generally. As Peter Orzag used to intone (with Larry Summers joining the chorus), "Healthcare reform is entitlement reform" -- if healthcare costs can be controlled, the nation's long-term fiscal outlook is good. If not, not.

Relatedly, the doc fix nominally increases the deficit, because the federal budget is nominally committed to an unsustainable Sustainable Growth Rate (SGR) for Medicare that would radically cut payment and is therefore patched every year.  But a fix that slows payment growth from the current baseline would secure the country's long-term fiscal health. Given the rapid shrinking of the federal deficit and the improved short-term picture, why is necessary to "pay for" a doc fix that only costs imaginary savings? Since the need does exist under current political conditions, however, it's important that Wyden's acute care bill purports to save enough money to cover the doc fix. If the CBO agrees, the two might be combined. And that would be a real bipartisan miracle.

Update: Loren Adler of the Committee for a Responsible Federal Budget points out (via Twitter) that enrollees in Wyden's Better Care Plans would not be penalized for going outside the coordinated care network, citing this CRFB report:

BCPs would be given some flexibility to design a benefit package that would better encourage the use of high-value services through lower cost sharing requirements. However, the option for value-based insurance design would be limited to incentives for high quality care and would not allow BCPs to increase cost sharing requirements for non-BCP providers or low value services above the current Medicare cost-sharing requirements.

Update 2: Re coordinated care, capitation, etc.: Austin Frakt summarizes a literature review of studies of Medicaid managed care programs that finds that such programs are unlikely to lead to savings and that the evidence that they improve care is mixed at best.