Who Us? Providers and the Cost of Care

I came home the other day to a local paper, the News and Observer, sitting on my desk.  “Major Hospitals Pile Up The Cash” blazed across the front page, encircled by pen with a bold exclamation point written to the side.  The article highlighted the inflated costs of major North Carolina hospital networks – more than 10 percent above the national average. 

Large providers leverage their local market share to increase prices without adding any new value in caring for patients.  These aggressive strategies are done while maintaining tax-exemption from their non-profit status.  The higher costs are passed to insurance companies that, after tacking on a profit margin, pass the costs to their patients, the community members for whom the hospitals supposedly exist to serve.

U.S. healthcare spending is at a concerning level.  It is common for patients and providers alike to point to the insurance industry as the villain, insinuating that the implicit self-interest of a for-profit company must be driving costs skyward.  Though third-party payers are a part of the problem, their role is likely that of an enabler rather than a driver.

The complexity of insurance in the U.S. shields consumers and physicians from the horrific levels of spending occurring in the system.  However, payers are probably one of the few major stakeholders that are attempting to restrain healthcare spending.  Every charge from a physician or hospital threatens to eat into their profits.  It is a strange twist to see that in some contexts, our beloved hospitals are driving costs up and our much despised insurers may be fighting to keep costs down.

The Organization for Economic Cooperation and Development (OECD) is a collection of the world’s most industrialized nations; many of the members have comparable economic health to the U.S. and the group provides an appropriate cohort to compare benchmarks for the performance of given industries, such as healthcare.

You may ask yourself “compared to OECD countries, do we really spend that much on healthcare?” Unfortunately, yes we do.  In 2000, the OECD median spending on healthcare per capita was $1,983, the U.S. spent $4,631 – 137% greater than the median and 44% more than the next highest country, Swizterland.  Not only are we spending more in absolute terms, but relatively as well; a greater part of our economy is dedicated to healthcare, 13% of GDP in 2000 compared to the OECD median of 8.0%.¹  These trends have only worsened over time.

In 2000, analysts noted a pattern of convergence.  Countries that were spending more than average on healthcare had lower growth rates in healthcare spending, and those spending less than average had higher spending growth rates.   A global, per-capita price to healthcare was emerging.  The U.S. was the only country that defied this pattern; though it had the highest per-capita cost, its growth rate was still above the OECD median.

The trends from that time have changed very little.  The U.S. remains the most costly system in the world and we have yet to significantly shift the growth curve of spending.  This wouldn’t be a major problem if we received appropriate value for the money spent.  It seems, however, that is not the case. The U.S. averaged 118 hospital admissions per 1000 patients, the average length of stay was 5.9 days, and the acute care hospital days per capita was 0.7;  all of these user indicators were less than the OECD medians: 154 admissions, 6.4 days, and 1.0 acute care days respectively.  We are paying more for less care.

Though inefficiency and higher costs of inputs, such as supplies and labor, play a part, providers are finding ways to increase prices without changing the services they provide.  This brings us full circle to the sensational news headline on my desk; large hospital networks can dominate a geographic region, effectively monopolizing care.  Healthcare is unique in that it must be provided locally – care can never be outsourced abroad or even to another state.  Large nation-wide insurance companies must accept higher rates from locally dominant networks.

It sounds a bit theoretical and cerebral, but the concepts do play out in the real world; the price of a given procedure is significantly associated with the size of the health network offering the procedure.  The News and Observer, in their recent expose, reported that a local hospital charges 3 to 10 times the cost of many common procedures, basically because they can.

The current uncertainty about healthcare reform is driving hospitals to strategically grow, acquiring surrounding physician practices.  As they increase in size, so do they in market leverage.  Physician groups join large networks to partake in the bargaining power – their reimbursements increase with renegotiated contracts but nothing of value is added.  The increased costs are then passed to patients, through insurance companies.

As reform continues, we can expect a heavy focus on the insurance industry; it is already the case with the Supreme Court decision underway.  Many providers will likely support this focus, claiming that reforming insurance is essential to cost control while simultaneously asserting that the stance is in the best interest of the communities they serve.

We, as consumers of healthcare, should be aware that a conflict of interest exists.  Providers historically have charged as much as they can get away with.  It is visible both in local examples and comparative international trends, we should not expect otherwise in the future.  If our political dialogue ignores the  role of providers in the pricing of care, a significant driver to our rising national spending will be preserved.

That is all for now.  Hopefully I have left your emotional state somewhere between hope, fear, and a belief of the infinite.  Until next time…

References

1. Anderson GF, Reinhardt UE, Hussey PS, Petrosyan V. It’s the prices, stupid: Why the united states is so different from other countries. Health Aff 2003;22(3):89-105.

Patient Centered Care and Other Mysteries of Life

Recently, I attended the Institute of Health Care Improvement conference in Washington, DC.  One thing was clear, the concept of patient centeredness is currently at the forefront of primary care, and regardless of the Affordable Care Act’s political fate, the Patient Centered Medical Home (PCMH) is coming into prominence.   However the definition of the PCMH is fluid – over 40 definitions pop up if searched on Google.  This post will hopefully allow you to answer the question “What is a PCMH?” and thus gain social prestige and recognition among your peers.

It could be said that many parts of our current health care system are physician-centered.  Access to the a physician is limited, requiring scheduling significantly ahead of time or long waits for a same day visit.  Additionally, communication amongst physicians is minimal, patients often shuttling documents back and forth between providers.  Finally, care can often be reactive rather than proactive, the system only cares for someone once they present with an acute issue, rather than working actively to keep the person healthy in the first place. (Iglehart 2008)

To be fair, the described scenario is “primary care gone wrong”, many physicians do make a tremendous effort to practice in alignment with the 4 “pillars” of primary care: comprehensiveness, coordination, continuity, and contact. (Harper and Balara )  These values as well as others are incorporated into the definition of the PCMH.  For some, the PCMH is a transformative model of care to others it is merely a label to what is already happening in many clinics; the utility of the term is it brings the existing values of primary care into the folds of a productive political dialogue.

Patient centered care is an umbrella term for a style of care that adheres to specific core values.  PCMH is the name for a provider, usually a primary care physician (PCP), currently practicing patient centered care.  Many primary care physicians are in the process of certifying their outpatient services as a PCMH.  The building is the same and the doctors are the same, but the care process is modified.  Many may mistakenly think that a PCMH is a type of building or a specific arrangement of providers, this is not the case.

The term Patient Centered Medical Home was first coined by the American Association of Pediatrics in the 1960’s who noticed that children with complex illnesses needed a different approach to care - coordinating the many physicians and social services associated with the management of a disease.  Currently PCMH is a term used by the National Committee for Quality Assurance (NCQA) – a not-for-profit company that provides the PCMH certification.

This brings us to the first point; PCMH certification is a business.  There are currently 4 organizations that provide patient centered care certification.  Each organization charges a practice to become certified and each uses its own, slightly different, language to talk about patient centered care.  The NCQA has been certifying practices the longest – 3 years – and uses the terms “certification” and “Patient Centered Medical Home.”  The Utilization Review Accreditation Counsel (URAC), by contrast, has only been “accrediting” practices for the past year and uses the term “Patient Centered Health Care Home” (PCHCH).

Don’t let the language confuse you, all of the certifications fall under the umbrella term of “patient centered care” and the concept of a “medical home.”  Though the details of each certification process vary, they all focus around key values that are central to the medical home.  The NCQA requirements are the most commonly accepted and are presented in several broad categories:

-better access

-coordination of care

-active management of care

-support for self-care

-performance improvement

-use of data systems

So what would a PCMH look like?  Imagine a clinic that had same day appointment slots for urgent visits or could schedule a normal visit within 3 days; the office offered weekend hours and after-work hours as well.  Additionally you could email your physician for easy requests like a refill for a longstanding prescription. 

The care would be comprehensive, allowing a patient to have most or all medical needs addressed in one location – including the management of some complex cases usually in need of a specialist.  In the event a patient must see an outside physician, the PCMH also exchanges information with surrounding providers allowing your primary care physician (PCP) to access clinic notes and tests from other doctors instantaneously. 

Electronic medical records would track preventive care measures and actively contact and flag patients for screening or education.  The office would provide an array of materials for patients to manage their own health care which could be accessed online, patients can also view lab results and their medical records online through the clinic’s website.  Finally, clinics would track the health of their patient population, report the results publically, and use the information to improve their care processes.

Clinics are pushing for the PCMH certification because many insurers are starting to reimburse PCMHs better or pay a per-member-per-month flat rate to PCMH certified clinics.  The financial rationale is that PCMHs provide a type of care that reduces emergency room visits and hospitalizations from acute complications of chronic diseases – both extremely expensive types of care.

What stands in the way of us and this utopic vision of the primary care?  One issue is that care often involves many providers; as comprehensive as care may be in the medical home, there will be patients that seek care from other providers – either by need or preference.  Doctors not associated with the PCMH – and not receiving the financial benefits from payers – have no reason to coordinate with the PCHM.   Care coordination is expensive and it would be a poor choice to invest in the infrastructure needed unless there was a financial benefit to offset the cost(Fisher 2008).

Additionally, fee-for-service makes new models of care challenging.  For example, physicians have no way of coding an e-mail contact for reimbursement.  For this reason, some doctors refuse to do email, claiming that it is an uncompensated increase in their workload.  Fee-for-service also doesn’t pay for the additional administrative costs of tracking and coordinating care across providers(Fisher 2008).

There are answers out there, but nothing is certain.  Increased payment for PCMHs in a fee-for-service structure may give the financial buffer for doctors to engage in uncompensated care processes such as coordination and electronic access.  Similarly, a per-member-per-month flat rate can be used to cover the same processes. 

PCPs are also experimenting with additional ways of consulting specialists – such as a tele-consult.  This would allow a PCP to benefit from the expertise of the specialist and the patient can still receive all of her care at the PCMH.    The PCP pays the specialist a per-episode fee in exchange for the consult so the specialist has a financial interest in collaborating.  The arrangement allows a broader array of services to be provided from a single office, far better for the patient in terms of convenience and coordination.

The future of patient centered care is promising but uncertain.  The challenge is that care occurs in teams and in this case, not all players are functioning with the same incentives.  Collaboration, likely bolstered by new financial arrangements - both with payers and specialists - are going to be critical steps to creating an environment in which the PCMH will thrive.

Congratulations, you are one of the few that have survived, still conscious, another journey into the churning waters of healthcare reform.  I bid you farewell and urge you to make an effort to socialize more with your peers rather than reading articles such as mine.  Until next time...

References

Fisher ES. 2008. Building a medical neighborhood for the medical home. N Engl J Med 359(12):1202-5.

Harper MA and Balara JAE. Patient centered medical home. .

Iglehart JK. 2008. No place like home—testing a new model of care delivery. N Engl J Med 359(12):1200-2.

Accountable Care Organizations Demystified

Accountable Care Organizations (ACO), what are they?  Will they work?  Can they be trusted in a dark alley?  This model is an increasing focus of many people’s attention.  Medicare, through policy, embracing the ACO signals a cautious return to the era of managed care and capitated payment structures popular in the 1990’s.  The purpose of ACOs are to reign in healthcare costs while maintaining or even improving care quality.  They are, however, contentious and some question the effectiveness of the model to achieve stated objectives.

Consider this an ACO crash course.  Using some of the more recent academic literature¹ I’ll help explain exactly what an ACO is, why it’s different from things we’ve tried before, and why exactly it may or may not do the things that we hope.  The explanation of ACO’s will be structured by the three attributes that distinguish it from other models of care: shared savings, accountability for quality, and free choice of providers by patients.

The basic model

Referring back to prior posts about reimbursement you may remember the term “capitation” or paying a flat rate to take care of a patient.  Capitation can happen in many flavors and on many levels.  For example one can capitate based on a disease (I’ll pay you a one-time fee of $500 to care for a broken ankle), one can capitate care for a person (I’ll pay you $50/month to care for my aunt), or finally you can capitate on a population level (I’ll pay you $1,000,000 to take care of a population of 5000 patients for one year).  ACOs are a form of capitation that occurs on the population level.

Medicare notes how much money an organization spent in a year to care for a large group of patients.  Using that number as a benchmark, Medicare promises to share any savings the organization manages to generate in the following year.  In other words if the organization’s spending for the group is less than the prior year, it splits the difference with Medicare.  In this way an organization can financially benefit from doing less (or being more efficient).  To ensure that organizations won’t “stint” on care, quality measures are put in place.  An organization only gets the full savings if it maintains a specified level of quality.

Shared savings

Many health management organizations (HMO) in the 1990’s approached cost reduction by attempting to control the flow of services.  Insurers required physicians to get pre-approval for more expensive services and also made attempts to control patient’s access to specialists.  This model was often frustrating for doctors who felt that insurers were trying to dictate how to practice medicine.  ACOs place care decisions back in the provider’s hand but construct financial arrangements which encourage judicious use of resources.

The ACO falls into a spectrum of different forms of risk-sharing between payers and providers – risk meaning who will have to pay if a patient gets sick and/or if care is expensive.  To understand better why ACOs are unique, discussing the range of payment approaches is useful.

Fee-for-service: the provider has no risk in this arrangement.  The payer pays a fee to the provider for every service performed.  In this model the provider is incentivized to do more rather than less.

Shared-savings: The provider is given a portion of savings – as measured by performing a service or group of services for less than a benchmark number.  If the provider spends over the benchmark number nothing happens.  In this way providers are incentivized to control costs through the potential of a bonus.

Shared-risk: Similar to shared savings, the provider gets a bonus for performing services for under a certain amount.  In this model, should the provider go over the benchmark amount, she must pay back a portion of the excess spending back to the payer; this is also called “two-sided risk”.  Cost-savings is incentivized through both the “carrot” of a bonus based on shared savings and the “stick” of a fine for overspending.

Capitation: Proper capitation is paying a provider a fixed amount for care before the care is delivered.  If the provider spends less than the amount then she keeps the entire savings – rather than just a portion as in the shared-savings model – and if the provider goes over the amount then she must shoulder the entire excess cost – as opposed to only a portion of the excess in the shared-risk model.

Generally speaking, the closer towards complete capitation a payment model becomes, the more powerful its ability to catalyze cost saving.  Many, if not most, organizations are deeply entrenched in fee-for-service relationships.  Insisting that those providers flip instantaneously to complete capitation is unrealistic – the ACO is a compromise.  ACOs allow various iterations of savings sharing and risk sharing, providing some of the benefits of capitation without being entirely unpalatable to organizations.

 

Both shared-risk and shared savings are layered on a base payment structure of fee-for-service.  Critics claim that the incentives generated by an ACO won’t be strong enough to meaningfully alter spending.  The findings of the Physicians Group Practice Demonstration (PGP), a 5 year ACO pilot program, are mixed.  Some participating providers achieved consistent savings, some only achieved savings a few years of the study, and still others achieved no savings for all five years.

Quality

As mentioned in the previous post, measuring quality was a trait of the leading HMOs but was not ubiquitous; some HMOs delivered low quality care as a way to gain more cost savings.  ACOs are unique in that all organizations are tracked on numerous quality metrics.  Only by maintaining a high level of quality can an ACO reap the “shared savings” manna. 

Most PGP participants consistently improved the quality of care across all measured metrics suggesting that ACOs are effective at improving quality of care.  There is concern that the quality metrics are inadequate to ensure appropriate care is being delivered; though the quality metrics were selected to represent a broad spectrum of care the theoretical possibility remains that providers may be able to selectively improve measured aspects of care while allowing other non-measured aspects slip.  Not enough quality measures and the metrics won’t meaningfully change care, too many quality metrics and providers may find the requirements overly burdensome and take a pass on forming an ACO.  Recently the required metrics were reduced from 64 to 32.

Choice

Patients, if assigned to an ACO, are still free to seek care from any provider they wish.  This is a contrast to a traditional managed care model with “in-network” and “out-of-network” providers – charging more if a patient seeks care out of network.  Why does this matter? 

How physicians are paid can dictate the style with which they practice.  Theoretically, a physician that is a part of a managed care system will be more judicious with resources and may be more likely to recommend against seeing a specialist, getting a high-tech test, etc. 

However, our prevailing cultural perception leans towards the “more is better” side of the equation and some patients want the high-tech test, specialist, etc. regardless of medical necessity.  Patients can seek care directly from specialists, regardless of what their primary care physician suggests. An out-of-network specialist may operate under entirely different financial incentives and lean towards a maximal approach to testing and care – which, though perceived as ideal by the patient, is costly and often inappropriate.

Managed care networks deal with this problem by creating a financial barrier; a patient that seeks care out of network needs to pay more thus encouraging patients to seek care from resource-conscious network providers.  In leading managed care programs, where care is responsive and quality focused, patients are often more than happy to make this trade – limited choice for more affordable care.  However, when HMO’s exploded, the new HMO breed lost the delicate cultural balance of economy and quality and patients felt locked into networks providing inadequate care; it’s one of the reasons why “HMO” is a bad word for some people and also the reason why ACOs have steered clear of limiting patient choice.

The flip-side of this coin is the provider who has no leverage in controlling how a patient consumes health care resources but is financially accountable for any care the patient seeks.  For example, if a patient bruises her knee but, instead of going to her primary care doctor, seeks care directly from a non-ACO orthopedist – who then orders a $1500+ MRI - the orthopedic billing is taken out of the ACOs shared savings potential.

Architects of the ACO fear that limiting a patient’s choice of providers will condemn the model to knee-jerk unpopularity.  Providers are concerned that very little leverage exists to control patient use of medical resources which limits the ACOs ability to significantly change patient use of health care resources.  Both are right.

Conclusion

The ACO, at this moment, is a game of carrots.  Many components are voluntary, the choice of providers to form an ACO and the choice of patients to seek care from their ACO physicians.  Medicare has to ensure that the deal is sweet enough – in terms of potential shared savings and ease of achieving quality benchmarks - to lure provider networks into forming ACOs.  Similarly, it seems that providers must do the same for patients; unable to require patients to see “in-network” providers, ACO’s may need to ensure accessible, efficient, and high quality care to keep patients from straying to other providers.  If done well, care may rise in quality and accessibility.  If done poorly, the ACO name may be tarnished as patients go elsewhere for care.

References

1. Berenson RA. Accountable care organizations in medicare and the private sector: A status update. 2011.

Capitation: Health Insurance Continued

The problem with capitation, some argue, is that Jenny and her doctor are now at odds.  Jenny wants care and the doctor is reluctant to give care.  Often patients expect a level of care that is, in reality, excessive; a little incentive for  restraint on the physician side is good but too much can put the physician in an ethical dilemma, directly pitting patient care vs. financial benefit.

How do we make sure Jenny gets good care?

A natural incentive is if Jenny gets regular care she will have less emergent episodes requiring costly treatment.  One acute exacerbation can skyrocket the cost of care - costs that would come out of the physicians pocket.  It becomes in the financial self-interest of the physician to keep Jenny healthy.  Ideally, the healthier Jenny is, the less resources she uses, the more money the physician gets to keep.

The physician benefits the most by keeping Jenny as healthy as possible while using the fewest resources as possible.  Ideally these two forces are balanced just right to encourage the delivery of cost-effective and adequate care.  For the skeptics, other mechanisms can also be used to ensure adequate care.

The most direct way is to create criteria that constitute "good" care of asthma and ensure that the physician is fulfilling at least those criteria.  The measurement of quality of care is all the rage right now and something that was sorely missed in the HMO days.  To be fair, the flagship provider networks that pioneered the HMO model, such as Kaiser Permanente, understood the importance of measuring quality.  The delicate balance between business-savvy, efficiency minded administrators and the practicing, in-the-trenches clinicians, produced a model of care that delivered higher quality at a lower price.

However, the early to mid-90's marked a rapid expansion of the HMO model. During the expansion, the cultural components, critical to a well functioning managed care model, were compromised.  In many cases less focus was placed on ensuring quality care, or appropriate access to care.  Though care was being delivered at a low price, it was done at a lower quality than acceptable for most patients.

Another, more general, concept to consider is risk to the physician.  Capitation involves a prediction on how much care for a person will cost in the future.  Jenny may get sick regardless of her doctor's actions.  What if, like many adolescents with a chronic disease, Jenny decides she doesn't need medicine any more and continually requires acute, expensive care?  The physician has to keep paying out of his pocket and has very little control over Jenny's actions.

We can apply this idea more broadly, what if the physician was provided capitated payments for the general medical care of any person.  It makes sense then for the doctor to find the healthiest most responsible people possible - as he would be paid the same for a distance runner as he would for an older obese diabetic smoker.  The process of selectively caring for healthier people in a capitated system is called "cherry picking".  It notably occurred in the 90s and was a natural consequence of paying a single rate for the care of a person, regardless of health status.  Newer forms of capitation have responded by "risk adjusting" their rates.  Physicians get paid more when they care for riskier - more expensive - patients.

Another domain to examine capitation is the level of capitation.  Individual physicians form groups which, in turn, form networks; one could capitate payments on a network or group level and still reimburse physicians with fee-for-service.  This discussion leads naturally into a description of Accountable Care Organizations (ACOs), as an ACO is essentially network-level capitation.

Next week we'll delve into the mystical beast that is an ACO, understand its most devious inner workings, and then celebrate our genius...

The Anatomy of Paying for Health Care: Capitation

Our country's experience with capitation was the HMO craze of the 1990's.  At first it was hailed as the answer to cost control; but it grew big, strong, and eventually uncontrollable.  Physicians hated it for telling them what they couldn't do, patients hated it for telling them what they couldn't do, and, in general, businessmen congratulated themselves for their brilliance.  However, it became so unpopular and politically unsavory among the general population that the attempt was abandoned by most and the system reverted back to fee-for-service (FFS).

"HMO" has, to many, become a dirty word.  Why?  What was the promise, why did it turn out so badly, and why should we care now?  Capitation, I assure you, is reemerging.  It persists because it is a potential solution for two critical problems: controlling the cost of care and coordinating care between providers.  Understanding the concept and the lessons learned with HMO's will not only make you seem smart - and thus gain the respect of your peers - but also better understand experiences with your own physicians.

Capitation, in the broadest sense, is the process of paying a fixed rate for an agreed upon set of services.  There are many iterations of capitation, each with their own consequences.  We will work from simple to complex using asthma care as an example.

In the first example, an imaginary patient with asthma, Jenny, gets all care from a single physician.  You get the role of the insurer.  You have a FFS relationship set up with the doctor; he is seeing Jenny often and also has a tendency to use a lot of expensive tests and technology.  The bills from this doctor are killing you so one day you call up and make a deal.  You will pay the M.D. $60 per month to take care of all of Jenny's needs.  If the cost of Jenny's care is less than your payment, the doctor keeps the difference; if the cost of care is over the amount, he has to pay out of his own pocket and take a loss.

How does this change things for the physician?  Now he thinks twice before getting an expensive test or telling Jenny to come in for a checkup.  Now the provider, the stakeholder that has the greatest ability to control the cost of care, has an incentive to reduce costs.  The risk is that the incentive may be too strong and perhaps the physician will give inadequate care, trying to keep Jenny out of the office and not doing the necessary tests to keep her well.  Remember, every test and act of care is now money out of his pocket!

What is the answer?  Will little Jenny make it?  Will the vision of an endless shower of money corrode our good doctor's moral fortitude?  Will the author of this blog ever overcome his social awkwardness?

Maybe.

Next post we get into the nitty gritty...

The Anatomy of Paying for Health Care: Fee-for-service

How do we pay for health care?  How does it change what doctors do?  Why do we care?  These, among many other questions that have never spontaneously entered your mind while staring in a mirror, vex me;  How money flows, in my humble opinion, shapes most (if not all) aspects of health care.

Changing the architecture of reimbursement to health care providers has been a constant theme of increasing importance over the past 30 years.  I am currently reading a book "Innovators Prescription" that described fee-for-service (FFS) payment as a runaway nuclear reactor in our health care system - I did a fist pump as a read this.  I cannot guarantee you will descend to my level of nerdy wonkishness but I can say, with confidence, that you will understand the power of that statement by the end of the post.

FFS is a style of payment in which a provider is reimbursed per action or procedure.  For example, if you see a doctor for a cold, she will make more money if she does a strep test, takes a chest x-ray, and prescribes antibiotics than if she just told you it was viral (which it likely is), that medication wouldn't make it better (which it won't), and sent you home with instructions to rest and drink hot tea.

A physician that gets paid per "thing" has a strong financial incentive to do more "things".  What are the pros and cons?   The upside is patients are more likely to get too much medicine than not enough medicine.  The other upside - for physicians - is that FFS is an extremely profitable way to bill for medical care.

The downside?  Too much medical care can be harmful, actually very harmful, and routine excessive care drives up medical costs globally.  Higher costs of care eventually lead to higher insurance premiums for you and me.  Some estimate that 50% of all health care spending is supply driven by physician and hosptials rather than the needs of patients.

FFS was the style of payment used in the early 20th century when medicine was simple and relatively cheap.  Physicians, concerned with preserving autonomy and reimbursement levels, have historically advocated to maintain FFS.  This, until recently, has worked out pretty well for doctors.

Times have changed however, one person is no longer treated by one doctor - the average patient has 2 primary care providers and 3 specialists.  What happens now when each member of the "team" only gets paid per thing and we have a plethora of expensive tests at our disposal?  Everyone does tons of stuff and efficiency goes out the window.

Let's take it further.  Let's say we want physicians to collaborate, and make care more cost-effective.  Collaboration requires money up front to invest in technology and administrative infrastructure.  What happens if it works?  People will be healthier and visit the doctor less.  The doctor makes less money.  Essentially, with FFS reimbursement, a doctor working on coordinating care needs to pay money up front with the hope of eventually make less money.

What can we expect out of a health care system if doctors only stand to make money when patients are sick?  With FFS ill patients are profitable patients.  The more sick a patient is, the more tests can be run, and the more money a provider makes.  Shouldn't physicians make money by keeping people healthy?

The truth is that money does matter in medicine.  We must be aware of how it moves because it shapes even the most intimate diad of medicine: the physician patient interaction.  Coming up is a discussion of capitation: its promise, how we learned to hate it, and why we could learn to love again.

Enjoy, be informed, and above all, cultivate an intelligence intimidating to your peers...

Affordable Care Act: Health Care Reform in 10 Minutes

After a brief hiatus I have returned to share the manna of a public health degree - to those who consider such knowledge valuable.  I would like to continue the discussion of the Affordable Care Act.

I initially presented the PPACA in terms of its titles.  However, for the sake of both brevity and clarity I'm going to change my approach for this post.  Addressing each title individually is unwieldy; instead, the discussion will be organized into broad categories of reform, all pertinent to our experience as patients and consumers of healthcare.

There are three major themes to the reform: mandates, subsidies, and insurance reform

Mandates:

We have discussed the individual mandate previously and why the mandate is a complement to health insurance reform.  The individual mandate requires a person to pay 2.5% of their income or $695 dollars, whichever is greater.

Also in place is an employer mandate in which companies above 50 persons are penalized for not providing insurance or placing too much of the cost on the employee.  The penalties range from $2,000 to $3,000 per person and are a considerable source of planned revenue to support the subsides of the ACA.

Both mandates are set to begin in 2014.  The individual mandate will initially begin with diminished penalties, the penalties will increase over the following year to the full amount.

Subsidies:

With the mandate in place, how are we going to get health insurance?  The government helps out in three ways: Medicaid reform, Insurance Exchanges, and Tax Subsidies.

Medicaid Reform


Recall from a prior post that Medicaid provides coverage for those in poverty.  However, Medicaid isn't available to everyone without means; instead there is "categorical eligibility" meaning only certain sub-groups of the impoverished are able to receive coverage: pregnant women, children, the aged, and disabled individuals.  Children are actually covered under a similar but separate program, the State Children's Health Insurance Program (SCHIP).

It sounds complicated but don't worry, you can forget it.  PPACA has gotten rid of SCHIP and then expanded the coverage for Medicaid.  Under new law, anyone under 138% of the poverty line is eligible for Medicaid.  It is an impressive move to increase coverage and a focal point of controversy.  Some view it as a positive move toward ensuring coverage for our entire population others see it as the expansion of an already costly system.

Insurance Exchanges


I'm going to refrain from re-explaining insurance exchanges (see the last post) and will just say that they are a state run program which allow individuals and small groups to purchase health insurance for a reasonable price.  More interesting is the subsidy system in place to ensure that individuals can purchase insurance through exchanges.

First, the ACA divides insurance plans into four tiers based on actuarial value - the percentage of health care costs covered by the insurer.  The document categorizes them as "bronze" (covers 60% of medical costs), "silver" (70%), "gold" (80%), and "platinum" (90%).

I want to submit the request for a platinum coated platinum plan in which the insurance company actively pays me for seeking health care...just a thought.  In all seriousness though, this scale is important because financial support for purchasing insurance is based on the pricing of "silver" plans.

Exchange subsidies are available for those citizens whose income is up to 400% of the federal poverty level ($93,700 for a family of 4 in 2014).  One is responsible to contribute at least 2% of household income to the purchase of health insurance.  As income levels approach the 400% mark, the percentage contribution increases in steps to 9.5%.  If you are below 138% of the poverty level, the entire cost is subsidized.

Tax Subsidies


Small business receive tax credits as an incentive to provide insurance to employees.  The maximum credit is 50% of the employers cost of insurance premiums.  The amount of credit declines as a businesses approaches 25 people or an average wage of $50,000 annually.  Small businesses are not penalized for not offering insurance but, as mentioned previously, larger businesses must pay a fine for offering no or inadequate insurance.

Insurance Industry Requirements:


The regulation of the insurance industry was the central theme of the past post.  This portion, particularly the part mandating coverage regardless of pre-existing conditions, is seen as one of the major humanitarian victories of the ACA.

Recently insurance premiums have been rising.  Many insurers claim that premium increases are a result of the requirement to cover patients with pre-existing - and expensive - conditions.  The administration's stance is that many premium increases were planned beforehand and the bill is being used as a convenient rationale.

Regardless, insurers will be subjected to increased regulatory scrutiny for increases over 10% and be required to provide public justification for any such increases.  Existing rate review process are spotty, some states not even having a regulatory mechanism in place.  The ACA provides funding to bolster existing programs and create new programs in states without.  Historically, state level regulation has been poorly organized and ineffective.  The ACA does not change the state run model but rather expands and supports it, leaving uncertainty if the insurer rate review process will be substantive.

Other Provisions:

There are several other components of the bill that are yet to be addressed.  The ACA invests in public health interventions, creates a third party entity to research which treatments are best, expands the role of non-physician providers, and experiments with new ways of paying for medical care.  Many of these topics deserve their own discussion and will be addressed in the near future.

Conclusion:

In describing the PPACA, initially in terms of its structure and then later in terms of conceptual themes, we have a conceptual framework on which to build and understand future discussions of health policy. Obviously, the exploration of the bill was truncated - as is any attempt to discuss a 2000+ page document in about 10 minutes - but in subsequent writing I will continue to revisit the ACA both to provide legislative context as well as incrementally develop a more thorough understanding of what the bill means to us as citizens.

For those wonks chomping at the bit for more, the following are excellent resources for exploring and understanding PPACA on your own:

Kaiser Family Foundation's Health Reform site

Commonwelth Fund's Health Reform Resource Center

Robert Wood Johnson Foundation's Health Policy site

www.healthcare.gov

Enjoy, be informed, and, above all, cultivate an intelligence intimidating to your peers...