Note: This is an unedited transcript. For direct quotes, please see video at allhealthpolicy.org
WELCOME & INTRODUCTIONS
Mary Ella Payne: Okay, I think we are going to get started. Good morning, everyone. Thank you for joining us here today for our summit on healthcare costs in America. My name is Sara Dash. No, actually it is not; but you are probably expecting Sara Dash. Sara had a beautiful baby girl a couple of weeks ago, so I am filling in for her. She will be back later this summer.
My name is Mary Ella Payne. I am the acting presidency of the Alliance for Health Policy. For those who are not familiar with the Alliance, we are a non-partisan organization dedicated to advancing knowledge and understanding of health policy issues. We will be live tweeting at AllHealthLive. For those in the audience, please feel free to join the conversation there as well. This is our first event in our 2018 Opportunities for Progress Signature Series. We created this series to highlight progress of persistent health policy issues and examine prospects for moving forward. This year, we are exploring two critical topics: healthcare costs and aging. In your folder, you have those three events highlighted on a card. Please take note and save those dates.
We would also like to thank our 2018 Opportunities for Progress Signature Series sponsors. We have our visionary level sponsors of Health is Primary and pharma. Our champion level sponsors are Aetna, Anthem, Ascension, Blue Cross/Blue Shield, Cambia Health Foundation, and Glaxo Smith Kline. Our signature sponsor is Bristol-Myers Squibb. I also want to thank the Kaiser Family Foundation for allowing us to use this great space that we are in today. Thank you.
Please remember to fill out your blue evaluation forms throughout the event. We really value your feedback, and it really does help guide our programming in the future. You can hand those in on the registration desk as you leave. If you need to leave early or throughout the day, please do take a moment to fill out your forms. Before we get started, I would like to introduce the new board chair of the Alliance for Health Policy, Dr. Reed Tuckson. He is going to give some opening remarks as well. Reed?
Reed Tuckson: Thank you so much. Thank you all for being here. This is a very special event for us at the Alliance. We really appreciate all of you. Mary Ella, by the way, has pitched in. It is very interesting to have your CEO and your COO both going out on maternity leave the same day. Mary Ella has really been spectacular. It is obvious to all of us that this issue of healthcare cost escalation is the defining issue right now in our field. Everything else derives around this 800-pound gorilla that has got to be dealt with. This is an important point for now for all of us, whether we are public and private purchasers, consumers or patients, providers of care, or whether we are biopharma or device manufacturers, political and policy leaders. We are all in this same boat together.
Let me review very quickly for you the agenda. It is extremely important that you have the opportunity to prepare to participate in this conversation. We will begin with Jessica Banthin who will get us started with her insights from the Congressional Budget Office’s perspective on the healthcare cost trends. Following that, we will have a panel of really diverse scholars and experts who will focus on whether we are spending the money that we do have on the right things and their suggestions for how we might need to reframe what we are doing. We then are funding with the goals that we hold for this healthcare system. After a quick break, we will hear from a panel regarding how consumers and employers view this issue. We will discuss how to best find out what consumers want and need, and the strategies that employers will be implementing or causing their intermediaries to implement on their behalf. Finally, we will wrap up the morning with a conversation between Doug Holdeacan and Tofa Spirow about what all of this means for our industry moving forward, and if there are any areas of political consensus.
To get to it, let me be excited to introduce Jessica Banthin who is the deputy assistant director for health at the Congressional Budget Office. She is focused on health retirement and long-term analysis. She is really, really spectacular. With that, welcome to the podium.
KEYNOTE 1: Where Does the Money Go?
Jessica Banthin: Good morning. I am very excited to kick off our summit this morning on healthcare costs. I am going to talk about CBO’s projections of federal spending on major healthcare programs. The issues that I touch upon I think are relevant beyond the federal sector and apply in some cases to private spending from the private sector. This is as well as of course state and local spending. By the way, my slides will be posted on CBO’s website this morning. My remarks are drawn from two reports: The Budget and Economic Outlook that was released in mid-April this year, which is our latest set of projections. Then it is from a report that was released yesterday afternoon on federal subsidies for health insurance coverage for people under age 65, which focuses on marketplace subsidies among other things. That was released yesterday.
How much does the federal government spend on major healthcare programs? My talk will first examine the level of spending in 2018 and 2028. Second, I am going to talk about projected growth rates over that period of time and what they are composed of. Then finally, I am going to conclude by talking about what this implies for the federal budget as a whole.
CBO defined outlays for the major healthcare programs as spending on Medicare, Medicaid, the Children’s Health Insurance Program, and marketplace subsidies and related spending. These four programs make up more than 40% of mandatory spending in the federal budget. Mandatory spending is governed by statutory criteria such as program eligibility rules and is not normally constrained by the annual appropriations’ process. That means that this spending happens virtually automatically. The other mandatory program that you are familiar with is Social Security. These programs spend automatically. They differ from what we label as discretionary spending, which is subject to congressional action every year. Combined, these four programs enroll about 155 million people in 2018. We project that they will cover 176 million people in 2028.
Net outlays for these major healthcare programs today in 2018 add up to about $1 trillion. Medicare accounts for $583 billion this fiscal year. That is net of premiums collected through Part B and Part D. Medicaid and CHIP together account for $399 billion of federal spending. That, as you know, is only the federal share which is roughly a little more than half. States account for the rest of it. Marketplace subsidies and related spending is much smaller. That adds up to about $55 billion this year.
How do we develop projections? We develop baseline projections under the assumption that current laws that govern spending and revenues will generally not change in the future. We follow certain rules that are specified in law as to how we develop our projections. Therefore, the projections are not intended as an actual prediction of the future because congress will probably change things in the future. Rather, they serve as a benchmark against which the effects of possible changes in law can be measured. Our projections also serve as a warning, you could say. This is what will happen if we do not change the laws.
In 2028, the net outlays for these four programs add up to a little over $2 trillion. They have more than doubled. Medicare accounts for $1,260 billion of that total. Medicaid and CHIP together account for $674 billion. Marketplace subsidies and related spending are expected to account for $89 billion.
This shows how they grow over time starting at about $1 trillion and going up to $2 trillion. The average annual growth is about 6.3% per year in these programs. What are the drivers of cost growth in these major healthcare programs? I think, again, some of the drivers that I discussed are also applicable to private sector spending and state and local spending. I do focus a bit on Medicare here.
Healthcare cost growth can be attributed to two main factors. We first want to account for population change or enrollment change. In the federal budget, a lot of the growth is attributed to older people. Older people use more healthcare than younger people. The number of people over 65 in the population has been growing significantly. It has more than doubled in the past 50 years. It is projected to rise by more than a third by 2028. In 2028, we will have approximately 33% more seniors than we do today. That is a bigger increase than the population as a whole is growing. Second, we look at healthcare costs per person adjusted and even adjusted for the aging of the population. We project that healthcare costs per person are expected to grow more quickly than the economy as a whole.
This is the issue. It is healthcare costs per person. Growth in healthcare spending has slowed in recent years. There was a major slowdown. The reasons for that slowdown are not entirely clear. There are several hypotheses. In CBO’s projections looking forward, spending per enrollee in federal healthcare programs is expected to grow more rapidly than we have seen in recent years. We assume it will grow at about 5% per year in Medicare and Medicaid. It is a little higher in marketplace. We do not assume that growth rates return to the higher rates of growth that were experienced before the slowdown historically. For example, spending per enrollee grew about 8% per year between 1980 and 2005 in the Medicare fee for service program. That included some ups and downs. Over those 25 years, it was about 8%. We do not assume it will return to that high level. We are projecting that it will increase from what we have seen in the last few years.
I am going to pause here. There are various hypotheses about what caused the slowdown. But in our estimation, we do not believe that has been fully answered. One hypothesis is that the recession was responsible for the slowdown in per person spending. Certainly, the recession had more impact on private sector spending than on Medicare. I will use Medicare as my example here. Most Medicare beneficiaries are retired. Their benefits did not change. It is unlikely that the recession had a large impact on that slowdown. It may have contributed. Furthermore, the slowdown preceded. The slowdown in Medicare spending preceded the recession. Other people point to certain provisions in the Affordable Care Act that affected payment rates for Medicare providers.
Find evidence that that may have contributed to the slowdown. We believe that is part of the story, but not the whole story. Yet others talk about a slowdown in the diffusion of new technology that occurred just after 2005. Economists generally attribute healthcare cost growth to new technology. Unlike other sectors, new technology in healthcare tends to increase spending. In other sectors, it tends to be cost saving and reduce spending. People want healthcare. People want longer lives and healthier lives. There is always a demand for new treatments and new technology.
Let us look at Medicare in particular. Here is average annual growth rate we are projecting to average 7.3% over the next decade. We assume that spending growth per enrollee accounts for about five percentage points of that increase. Enrollment growth accounts for the rest. In Medicaid and CHIP, average annual growth between 2018 and 2028 is expected to average 4.8% per year. That is a little misleading because I have combined the two programs. Medicaid grows about 5.5% per year by itself. About five percentage points is, again, per enrollee cost growth. The rest is enrollment increases. CHIP is a little different because of a change in the federal match rate. Federal spending falls over the next several years. Then it starts to rise slowly. On average, it is flat.
Here are marketplace subsidies and related spending. This program as a whole is expected to grow about 4.5% per year. What is happening there is that first of all we include the basic healthcare program, which is very small, in that total. It is expected to grow because of increases in cost per enrollee. However, the number of people who are anticipated to purchase such coverage is falling. If we look at the entire marketplace, both those with subsidies and those without. Add in the basic health place. We are projecting there are about 10 million people altogether in 2018. That will fall to about 9 million people in 2028. That is an average annual enrollment figure. Among the subsidized population, in the market place we expect subsidies to average about 6,300 per person in calendar year 2018. Basically, it will double by 2028 to about 12,450 per enrollee in 2028.
How does healthcare cost growth affect the federal budget over time? This is the problem. I mean healthcare is great. We want more healthcare, as I said. Is healthcare cost growth a problem? It is a problem. Growth in the major healthcare programs can crowd out spending in other programs. They are other programs that we care deeply about. This growth adds pressure to increase revenues. No one likes to pay taxes. Or it can result in budget deficits. That adds to the debt and reduces the flexibility that our government has to respond to emergencies in the future. A large debt ties our hands. Cost growth that exceeds the economy – the growth in gross domestic product – is more difficult to support over time.
Here I have defined spending or outlays as a percent of GDP. This is where you see it in relation to the economy as a whole. We are projecting it to go from a little over 5% of GDP to a little less than 7% between 2018 and 2028. Together with Social Security, here I compare it to Social Security because it is a program you are familiar with. This shows growth as a percent of GDP between 1968 and 2028. You can see that spending on the healthcare programs has increased much faster than spending on Social Security. It is now exceeding. In 2018, it exceeds growth in the amount of the budget devoted to Social Security. It will exceed that even further in 2028.
Finally, in my last slide, I just show total outlays over time. This is all federal outlays for all programs: discretionary, mandatory, the payments, and interest payments on the debt. It has gone from its sort of historical average that hovers around 20%. It is projected to grow nearly to 24% of GDP by 2028. I will just add here that revenues historically average about 19% of GDP. The gap is growing. CBO does not make policy recommendations. When the gap between outlays and revenues grows, you either have to increase revenues, reduce spending, or probably do some of both in order to balance the budget. Thank you very much for listening to me this morning.
PANEL 1: Are We Spending on the Right Things?
Reed Tuckson: Terrific. That was just great. Thank you. Let me welcome to the stage Stacy, Tom, Rachel, and Joe. Why don’t you come on up? Stacy, you can start here. Joe, you are on the end. The rest of you can figure it out. Those of you that were watching the agenda as I went through it, some of you said what happened to Faraseid? Yes, he is coming too. Those of you that came to hear him, I just screwed up. That is all there is. I am sorry about that. He is actually coming.
We will also have an important thing to talk about. There is one housekeeping note. First, turn your phones off. That is easy. Number two, there are different ways of asking questions. There are two ways. It is very important to have your voice in the conversation. There are these little cards in your pamphlets – at least I am told that. You can write your question and sort of hold it up. One of these really terrific people from the Alliance will grab it. The second way is I will be coming out in the audience with a handheld mic, and I will find you. Just do not grab the mic and take it. Then you have a tendency to go forever. We will prevent that.
This panel, as I have introduced it earlier, really is having four really different perspectives on this topic of how we are using the resources that we have and how we might think about using them in different ways.
Let me start with you Stacy Becker. You are vice-president for programs for Rethink Health. It is an organization focused on using a systems approach to examine the culture of health from four key perspectives. They are higher value care, global payments, healthier behaviors, and socioeconomic opportunities. You have a very interesting background with a master’s degree in public policy from Harvard, an MS in city design and social science from the London School of Economics where you were a Bush Leadership fellow. You served as budget director for the city and county of San Francisco, and for the city of St. Paul, as well as public works director for the city of St. Paul. You really do bring a very fresh and unique perspective to this. Tell us about how you use this systems approach to address the healthcare cost issue as well as Rethink’s work to find the best mix of necessary policies.
Stacy Becker: Good morning everyone. It is lovely to be here. Many of you are familiar with system’s thinking. Of course, the idea is to just the cause and effect that we think we might see in policy does not always turn out that simply. In fact, there are many connections and many feedback loops. The human body is a complex system. Just because we take an aspirin does not necessarily mean the headache will go away. We know now too that the production of health is also very complicated. For years and years healthcare creates health. Now we know through the social determinants of health many faceted things. These things create a system of feedback loops. When you want to start to look at things like rising healthcare costs, you have to understand all of the ways that these things interact. Or you might do, let us say, ineffective choices at best or harmful choices at worst.
I am a former budget director. I always have to smile a little bit when I hear people run for office and say I am just going to go through the budget line item by line item. I am going to find all the waste. You might find some that way. But if you think about a kind of systems approach, you will take a very different look. Using three different very unscientific terms, let me give you some examples. I will call these the in-betweens, the unseen, and the refuse to see.
The in-betweens are when you spend here and here. We either do not know or do not care what the right hand is doing and the left hand. For example, we as a federal government subsidize the production of high fructose corn syrup to – I do not know – billions of dollars. Then over here, we pay for the treating diabetes. This is part of a system loop. That, if you think about it, just on the fix how much money is not being spent well there. On the unseen, I would chalk these up to things that we do not see or do not do. A great example that you all know is what happened in Flint. If you take the green eye shade approach, they were trying to balance a budget. They cut what was I figured out to about $150,000 of chemicals that have gone in the water. They cut that out of the budget. What happened as a result? Billions of healthcare cost. It is not to mention probably special ed costs and other sorts of social service costs in the future.
Another example is a Medicaid non-clinical program for prenatal care for moms. This is non-clinical. It is an enhanced care. It would cost taxpayers about $415 per person. It would return by the end of the first year over $800. I would like to invest my money where I can double it in a year. I do not know about you guys. But because it is on this non-healthcare side of the ledger, these are things that we are not yet seeing. Then finally, I would say they refuse to see. Here I am going to put in, for example, I am not sure if you know we spend about $45 billion a year in state and local business incentives. By and large, these enterprise zones and empowerment zones by and large literature suggests that they do not really produce much. It is certainly not their intended outcomes.
Why am I linking that to healthcare? This gets back to the systems thing. Health and economic development – health is economic development. They are linked like this. We know that healthier people are more productive. In fact, the cost of absenteeism and presenteeism was estimated at about $1 trillion in 2003. By 2030, more than $5 trillion. When we have healthier people, we have a better economy. There are all sorts of evidence to that effect. Just summarizing, we did a systems model. It is similar to one built by the CDC that takes into effect all these different feedback loops. What we were able to show is that you can actually cut your healthcare spending, have healthier people, reduce health disparities, and increase productivity all at a smaller cost than if we did nothing. This is why we take a systems approach, and also why I would suggest that we are not spending money on the right things. It is not in total, but certainly on the margin. When you have $3 trillion and growing as we just heard, in healthcare costs those margins are pretty big.
Reed Tuckson: That is an intriguing thought. Let me just follow up really quick with one question. I really get the notion that if we have healthier people then the whole economy does well. The employer environment does well, and so forth. It almost also seems like you are arguing that we are not fully capturing all of the economics that go into health. If we are using the money that is for, let us say the population health stuff, housing, and those things; we are looking at the economic empowerment of communities which creates healthier environments. Those are also assets and resources that might need to be included in what we spend for health. Can we look at it from the other end of the telescope as well?
Stacy Becker: You can. It gets really tricky. We tried to. We had a study a couple years ago where we looked at all the things that the federal philanthropic and private spending on health. If you include all those sorts of spending on the social determinants, what do you end up with? It is pretty much the whole economy, or close to it. This is the point. Everything is so linked to health. Once we open or frame a little bit to ask should that next dollar go into an expensive medicine or a procedure? Or is there something else we might be able to do? Then I think we start to shift our spending patterns. We are going to get much bigger bang for the buck. As I just heard the last presentation, we cannot afford not to start doing that. It kind of becomes a financial model of where you get the money in the short term so that you can have the savings over the longer term. At Rethink, that is something that we are going to start to investigate further.
Reed Tuckson: Outstanding. Thomas Miller, you have some real interesting thoughts on all of these things. You are a resident fellow at AEI, a widely respective conservative healthcare economist with a distinguished record of expertise in healthcare policy especially in regulatory barriers, regarding choice in competition, market-based alternatives to the Affordable Care Act, health litigation, and the political economy of healthcare reform. You have served as a senior health economist for the joint economic committee of the congress. You have been a trial attorney, a journalist, and a sports radio broadcaster which intrigues me greatly. Help us to understand some of the barriers behind why we have not been able to find this right mix of spending. Your thoughts on policy opportunities for the future given what we just sort of talked about incorporating issues of primary care in population health.
Thomas Miller: Thank you Reed. It is good to be here this morning. I am not selling anything in terms of a particular program or intervention this morning. It is mostly a skeptical attitude. We have been here many times before. I am just back from the annual Princeton Conference where the old nostrums were recycled again with slightly altered nomenclature. Bottom line, the sectoral view is it is not our fault. It is someone else’s. The theories and evidence are somewhat cyclical. The proposed solutions are not very new either. Costs are back in the spotlight again mostly because we are tired of talking about coverage. That was solved a couple of years ago I hear. There is also limited interest outside of medical researcher circles on the pure quality of care.
The recent trends in growth rates of healthcare are not actually that bad compared to what they used to be. We are actually focusing more on the high level, which is the baseline, regardless of what has been done recently. Nevertheless, we are not going to suddenly plummet the entire cost structure. We would probably start out by focusing on let us get these zero growths before we talk about reducing it any further. There are some main schools of thought which are somewhat redundant. What is trending now is to control prices, or at least complain about them. The US is a high-priced outlier.
The recession work for a while will need another one to bring prices back down. But in the meantime, things seem pretty expensive. Over-utilization apparently no longer is a significant problem, according to the literature relatively speaking. We can keep track and say we have delivered care smarter and more efficiently. That is more of an endless search with limited progress. Where I live on the political right, most of the short-term solutions end up being suppressed demand. It makes things too costly or hard to get for some people. Delayed effects though you are going to pay for later on.
My bottom line is there are two main opportunities of actually doing something. One is to reduce the real demand flowing into the system. Secondly, it is a little more difficult to accomplish and prove efficiency and effectiveness of how these problems are addressed. The rest is just background noise and the usual food fights.
On the healthcare delivery side, very short hand, if you want to spend less you are going to have to subsidize less. It is a rare thought. Expanded entry and some solutions to our competitive problems are essential. We do not have good tools at the moment to do that. Saying we will just medicalize more social problems, we have done enough of that already. The healthcare sector has enough problems doing its main job without getting to the burden.
Let us get onto the distinction between the upstream and the downstream. There is less attention traditionally paid to the upstream. That is trending recently because we have now at least the buzzwords talking. It is an old term in terms of social determinants. We really need to think about framing it better. What are the traditional barriers to doing so? If we are mostly stuck with a high-cost system, which I think we are, how can we delay entry into it with a less severe acute and chronic set of medicalized problems to address? The short hand to that is morbidity compression.
There is a lot of older literature about the causes of premature mortality and reduced longevity. It keeps saying that healthcare actually contributes depending on which study you look at. It is 10% to 20% of the overall issue. Yet we invest a lot more in it. Why is that? Part of it is the general framing on this. If we are going to engage in other things that can reduce the demand for health. We are going to have to do a couple of basic things. This is oversimplification. You have to start early. Catching up is much less effective. You start early childhood and all the early stages of life. You can do things later on, but they do not mean a whole lot.
Targeting is important. The latest thing in the healthcare sector is to think about substituting rather than adding on. Yeah, we do that too and we can add this on top of it. You are going to have to take things away in order to move them elsewhere. You do not want to just reinvent the welfare state by expanding it everywhere for everything. It has failed in a lot of places. Trying to run it through another set of bureaucracies is not going to make it much more successful. You do not want to overreach trying to remake society at large. You need to have some priorities. What are the building blocks? You can get 20, 30, or 50 depending on what you want to say interventions of social determinants. What matters most is probably families, education, births, mobility, and some ways to shake those dollars use for things that matter more. The only way to do that in our sclerotic system is to decentralize with some flexibility in some outcomes-based accountability and responsibility?
Some shortcuts for that on the right tend to be throwing it to the states in bigger blocks. It does not mean they will do it well. Or actually try bundling it individuals, and then we bundle it with other folks as well. There are limits of all the aggregated data analysis and the international comparisons. But the hardest thing is to shake loose money from the current incumbents. The barriers to this is time horizons are the real killer on this. The stuff that makes the most sense delivers much later. You do not get any political credit for doing it.
We love last-minute fixes. That is why we have the healthcare system we do. You wonder how much we really value our health based upon how much we actually do to make our health better, as opposed to waiting for someone else to fix it. Problems of old versus young and installed base squeezing out investments. All of these are problems. Let me kind of just leave with some conclusions. We are going to be able to, at best, change a balance on the margins from the outside in. A lot of political resistance has been built in antibodies.
We have spent as much as we do. We would like to get more for it. We spend more because we could in the past. Until the money runs out, we will keep doing it. The last year of life I have to say is vastly overrated. Overall, we need to think about our overall well-being which is well beyond healthcare services. I am usually pessimistic, but the Caps won a game seven last night so miracles do happen.
Reed Tuckson: Speaking of miracles, let me ask you a little bit. Why do you have so much confidence? Teach us a little bit about why we should have confidence by pushing this down, early interventions at young ages into the state control, that there are enough resources to do that when they are already struggling so hard just to be able to pay the bill for education?
Thomas Miller: That is one of those things that healthcare has squeezed out. It is education.
Reed Tuckson: Exactly.
Thomas Miller: There are all kinds of proxy measures which do not talk about how you get there. The wrong correlates in terms of have more education, and you have better health. Why don’t we just give everybody a college degree? It is actually what goes into the components of it. It really comes into tradeoffs. If, in fact, there are higher yielding areas of opportunity investment, we do not have the political wherewithal to shake the money loose in places we are currently spending it in order to put it somewhere else. Now all I can say is we can unlock it and have another food fight over getting it there. The hardest part is unlocking it before you even get to move it somewhere else. The idea that we are going to add more to it on top is not the way to go.
Reed Tuckson: Let me ask you a quick question. Unlocking it is – I do not want to be incorrect.
Thomas Miller: We have built-in programs. You say this spending is protection unless you break it loose.
Reed Tuckson: I understand. But unlocking, I think – and you teach me – is easier at the federal level. Unlocking at the state level, they do not have that many options. Do they?
Thomas Miller: The federal does not have the operational ability to do anything at the local level, which is where we always get this mismatch. We can collect the dollars in Washington. We can borrow more money. We can hand them out. We cannot actually operationalize much. At the state level, we learn how to steal money from other states and get higher matches in order to basically get more than we want to spend locally. Everybody has to recognize the resource constraints. If you do, you might spend it on something worth more. Since the current system will not do it, I am suggesting we might want to start with the actual people who benefit from this – the patients and the families. Let them decide who they want to trust to redirect these dollars.
Reed Tuckson: Thank you very much. Rachel, do you know that you are a program officer for the non-partisan Milbank Memorial Fund. It is an endowed operating foundation that works to improve the health of populations by connecting leaders and decision makers with the best available evidence and experience. You have a distinguished record, if you did not know, of consulting with states and non-profit organizations to address issues in innovations and delivery, system and payment models, behavioral health integration, population health improvement, healthcare cost measurement, health information technology, and new multi-stakeholder governance models. You served in numerous roles in CMS, New York State Department of Health, and the New York State Legislature. Would you share with us your ideas and lessons learned from the funds work on implementing primary care models at the state level? Right, it is perfectly timed. This is using tools such as global cost measures, measuring how various payer spaces spend on primary care, and lessons learned from being a convener of the CPC Plus program.
Rachel Block: Thank you very much. I am going to speak to three specific programs that we have been involved in for the last few years that touch on the topics that Reed just mentioned. First, we did a study of four pioneering states that were interested in looking at their population health spending as a whole. Typically, when you are talking about health spending at the state level, you are usually looking at the Medicaid program. Perhaps you might be looking, if you are the budget director, at your state employee costs. Generally speaking, states have not tried to tackle the entire healthcare system or spending around that.
Why were they interested in looking at this? We just heard I think some specific reasons for that. One is costs are growing faster than the economy. Two is these costs are crowding out other spending priorities. These states decided to work towards some form of a limit on total spending growth. First, figure out how to measure their total spending. Second, figure out how they might go about limiting the total spending. Each of these states was different in terms of where they started and the models that they are experimenting with. Taken as a whole, we felt that this was very interesting work.
I will just also say though that you cannot just talk about total spending measures or limiting cost growth without recognizing that there might be other impacts across the system. What are some of the other policy goals that these states had? Pretty uniformly, they were interested in trying to reduce cost shifting. If you have looked at these issues either at the national or state level, there is a lot of finger pointing in terms of who is shifting costs to who. Part one of the potential benefits of looking at this total spending is the opportunity to address cost shifting in a more direct fashion. The other, which I hope is not just a buzz word, is the opportunity to align incentives across the system. This of course is kind of the good witch part of cost shifting. You want to be able to direct funding to the healthcare system in a way that is aligned with specific policy goals. It is likely to be much more effective to do that if you are looking at the system as a whole, instead of just looking at one individual payer or one individual provider sector.
A couple of the key factors in terms of moving forward with these models is the states had to figure out how they would pull together all of the stakeholders to participate in and agree to that model. It is a very steep challenge. We might talk more about that.
The second was there are challenges in terms of putting together the data infrastructure to support this. Basically, we are striving to create what I would call a single source of truth that everybody could buy into. Significant resources plowed into that. This is whether it is most effective to have this done on a state-by-state basis, or whether we could really strive for a truly national healthcare spending dashboard. We could talk about that.
Shifting gears, the fund has been involved in supporting primary care activities in a number of different ways. One specific area that we have been focused on is trying to measure what we are spending on primary care. Everybody recognizes the importance of primary care as a foundation for many of the transformational activities that we are all interested in. There are many different definitions of primary care. We do not have common measures in terms of what we are talking about. What we like to say in introducing this topic is we want to know what is primary care’s slice of the pie? Where is that going over time?
Our strategy to deal with that is to advance a for public discussion some standardized measures for primary care spending. We published a report last year. It primarily focuses on commercial data. We will be publishing a report very soon looking at Medicare fee for service data as well. Standardized measures then get many different organizations to commit to use those measures.
Where does that take us? Then we could start a conversation with a common baseline of not just what we are spending, but what we should be spending. How can we evaluate this whole constellation of different value-based payment models if we do not know what the denominator is or what our goals are in terms of what we are trying to achieve?
Finally, is CPC Plus. It is one of the innovation center programs. It is an interesting model because it requires each of these programs to have some kind of convener or central convening function that brings together all of the different stakeholders in that particular community or region around a common model. This is one of the Achilles’ Heels of many payment models. If they have many different people doing different things, they are saying they are trying to accomplish the same thing. But they are actually doing their own thing. CPC Plus was designed to try to pull all of those different efforts together. It also creates transparency of both process as well as the data that will be used to evaluate how well they are working.
Our role here is we are the convener of the conveners. All of those different entities or organizations that exist at the local level to administer these programs, we bring them together in effect as a peer network to learn from each other and to share their experience. It is the importance of that convening role that I wanted to stress for purposes of today’s discussion.
Reed Tuckson: Let me just follow up on that. We heard Tom again a moment ago talk about this need to unlock at the state level and let some of these resources flow. If you are convening these folks, governance has got to be a huge issue. I mean these are not different stakeholders who are used to working together. Nor do they want to share power oftentimes. How do you solve the governance problem that then allows the data to flow?
Rachel Block: That is exactly what these communities, and many other models that are out there right now, are trying to do. I think the key is to bring enough of the market power to bare in order to be able to influence the system in whatever direction it is. It is whatever measures we are using in terms of quality, safety, care coordination, et cetera. In a way, creating that convening capacity is one of the greatest challenges that these programs face. The technology of changing payment models is not really that difficult in and of itself. But getting people around the table together to agree on a common framework and a common way of looking at these issues, we think that is where the real challenges are. But it is a necessary opportunity if we are going to move forward with things. Going back to the first study, looking at the system as a whole. It is not just looking at individual siloes.
Reed Tuckson: Are you optimistic?
Rachel Block: I am.
Reed Tuckson: All right. Joe Selby, you are the executive director of PCORI – the patient centered outcomes research institute — since 2011. You have had a mandate to improve the quality and relevance of the evidence available in order to help patients first. Then also are caregivers, employers, insurers, and policy makers making informed healthcare decisions. You are very credible. You are a family doc, a clinical epidemiologist with a master’s degree in public health. You are a health services researcher who has run a huge staff at Kaiser Permanente doing research. Can you share with us now your perspective on why it is important that stakeholders give patients and have more information from patients so that we can decide on the right choices of how we are spending our resources?
Joe Selby: Okay Reed. Thanks very much. Thanks for the invitation to be here at the Alliance. I think the four panelists here have shown us how complex, and yet perhaps also how many opportunities there are to address the high cost of healthcare coming from a systems perspective, from a primary care perspective, and from an overall policy perspective. One thing that Tom said I think really bears repeating. It is that we pay more in the US for everything from the medications people take, to the procedures they have, to a day in the hospital, to the salaries of everybody including thankfully me. I mean I make a lot more than my counterparts in Europe make for doing the job that I do. I think I sensed some pessimism from you in terms of changing that very rapidly.
Unidentified Male: Pry it loose from my cold dead hands.
Joe Selby: Me too. In that context, it makes a focus on utilization. Every single item is costly, so it makes the focus on utilization all that much more important. Even if we do utilize the same as they do in Europe, Australia, et cetera. There is a knowledge and there long has been that not all of our utilization has value or has high value. In fact, it is very likely that a good deal of our utilization has no value. Yet it is high priced. That was the thinking behind the creation of PCORI – the patient centered outcomes research institute that we would conduct comparative clinical effectiveness research. Generate the evidence to show which was better and which was.
Regardless of cost, which was better? Oftentimes it would come out that the more costly therapy or approach was not necessarily better. That was the foundation of PCORI. They did not call it the CER institute. They called it the patient centered outcomes research institute. That meant we put a focus on patients. That has been eye-opening. We involve patients in everything we do. They help drive the questions. They participate in the research. They participate in all the review committees. They help us disseminate our findings. When you ask patients what the important questions are, it is surprising how often they come down to questions about relative effectiveness and cost. They worry about cost.
I am going to give you four quick examples of studies that have now been published that were driven by patient’s requests for research. Self-monitoring of blood glucose in Type 2 diabetic patients who do not use insulin. We do it in a large proportion of them. It does not cost a lot per patient per year. But to Medicare when there are millions of patients with diabetes, it is a multi-billion dollar per year outlay for these strips. Out study shows that they do not do anything. They do not benefit people unless the people are on insulin. Those are about eight million individuals.
People go to the emergency room with chest pain. They are low risk for heart attack. They have a heart attack ruled out. The physicians and hospitals say you should probably stay overnight and we will do your exercise test tomorrow. Guess what? The overnight stay costs $5,000 to $10,000 per person. The test that they get the next morning costs three times as much as if they got them as an outpatient. A randomized trial we funded showed that people who went home and had their test three days later as an outpatient did absolutely as well. There were absolutely no adverse events in those people.
A third one is people have colorectal cancer. They get the colorectal cancer treated. A study just published this week in JAMA that we funded shows that doubling the frequency of surveillance – that is colonoscopies, imaging studies, and blood tests – does nothing in terms of earlier detection of the recurrences of cancer. That is another one.
The last one is kids who are in the hospital with infections go home. For the last 40 years in the US, we have put PICC lines in. They are IV lines that go into the right arm up to the heart. Tell a 2-year-old to lay still for six weeks and not move their arm. Nurses have to go to the hospital. Parents have to take time off work to administer the antibiotics. The lines get clotted. The lines get infected. The lines break and go to the heart. Studies that we showed for three major infections show absolutely no benefit of the IV lines versus taking the medications orally. In fact, in one case the oral medication did better. And 16% of the kids with the lines wound up back in the hospital or in the emergency room. And 0% were in the oral antibiotics.
Patients ask questions that help point to low value and no value utilization. There are two last things. One is precision medicine. We are told, and we firmly believe, that the right thing is not the same for everybody. Our research is directed at finding the right thing for the right people. A very costly new therapy may be wonderful for very high-risk people. Spread it out to the whole population and you are wasting billions of dollars.
The final thing is new technology as I mentioned earlier. Probably people though PCORI was studying more new technologies than we do. It is very hard because CER takes three, four, or five years to actually get conducted. As PCORI faces re-authorization next year, we need to find ways to link us up with others in the healthcare space and the research space. It is to get started earlier on these studies, or to even put some of the comparisons pre-approval. Before things get in the market we have some sense of how they compare and what their value truly is.
Reed Tuckson: Thank you Joe. Those are great specific examples. Let me ask you to go back up a little higher level again. How do you view the statement that many people in the system have or beliefs that we have? It is that everybody wants everything all the time.
Joe Selby: That is not our experience. We get patients with cancer, multiple sclerosis, rheumatoid arthritis; and they are not convinced that the answer is the next big molecule around the corner. They are much more interested in getting care that is effective, and not getting care that will harm them more than help them. The questions that we get asked by patients and their clinicians are much more reasonable than that.
Reed Tuckson: I am going to ask you one more question. I want to get the audience ready. There are those cards somewhere. If you had them, you can hold them up. Or you can sort of just wave at me as I start to come around and get. The reason we do this is for you, not for ourselves. Get ready for your questions. As they get ready for their questions, I have given them as much time as you could possibly give them. Precision medicine – Joe, precision medicine is statistics. It is probabilistic. It is how you make choices with the new genomic era around your likelihood of getting disease. There are 4,500 genetic counselors in the country. The American people have not had courses in statistics or genetics, but this is the big thing. What is going to happen?
Joe Selby: First of all, precision medicine is a lot more than genetics. Reed, I know you know. Physicians have been trying to practice precision medicine for centuries trying to find the right treatment for the right patients. It is not just genetics. I do believe that there are ways. Shared decision making is a great way. We have to work harder at taking the evidence from the studies and putting them into visuals, graphics, and decision tools that both patients and their physicians can actually understand. Not everybody is going to make the same choice because people are different. But we have already shown in multiple cases, shared decision-making leads oftentimes in this country to lower utilization.
Reed Tuckson: That is great. Jessica, by the way, you may want to take my seat in case anybody has a question for you as well.
Dionne Brown: Good morning. Dionne Brown, independent healthcare consultant. My question is for Rachel Block. Can you please share the four pioneering states that you mentioned?
Rachel Block: Sure. It is Maryland. Many of you probably saw the news that Maryland just had their all-payer model waiver renewed for an additional five-year period. But under their first five-year all-payer model, that was one of the states that we included in our study. There is Massachusetts. Massachusetts has set up a new entity called the Health Policy Commission which was really given two responsibilities. One was to set up the data capabilities to measure healthcare spending. The other was to implement both policies as well as educational activities directed to the public around healthcare spending in Massachusetts. Vermont is working their way towards a single ACO model for the whole state. It is being implemented on an incremental basis. The goal is ultimately to have something that is pretty all-inclusive. Finally, we included Oregon. Now Oregon, at that time, was in the process of implementing their new Medicaid waiver for the coordinated care model that they have implemented statewide. At the time, Governor Kitzhaber had indicated his interest that if the model proved to be successful, he wanted to then bring it to the state employees, public employees, and ultimately consider whether that could become an all-payer model. They have not quite gotten there in terms of that aspect of the original plan, but that was why we included Oregon. They are Maryland, Massachusetts, Vermont, and Oregon.
Reed Tuckson: That is great.
Unidentified Female: Thank you. Thank you to all the panelists this morning. My question is actually specifically for Tom. As a liberal, I found your arguments both compelling and rather intuitive. My question is given the stagnation of effective policy and healthcare, how do you propose the organizations such as AEI help move forward and reduce the divisiveness between liberal and conservative organizations that are presently working in opposition to each other and perpetuating the cycle of inaction?
Thomas Miller: I do not know what you would talk about divisiveness. I am just a calm, reasonable person. I had a big inclusive conference on this about ten years ago beyond health insurance. We brought in everybody. We all agreed on everything, but it does not change the system. We can recommend. We can suggest. We can provoke. What we need is action. Politics has pretty much stalled. I am suggesting that we spring loose the levers of where the dollars are and redirect them before it affects them. I will start with destruction. We will go to creative indestruction the next time around. We are not going to change very much.
We have had this circular conversation going on for decades. I mean I can give you all the clichés and buzzwords about it. We are always on the next step for it. It funds a lot of conferences and has a lot of discussions. He does not change the operational realities on the ground. Until control of spending at the first stage is actually controlled by patients and consumers, then they find out who they want to trust. It is who their allies and people they want to deal with are. It is going to go through the existing channels again and again. We are going to have other efforts that say we are trying real hard, but it is going to look about the same as what we currently have.
Reed Tuckson: Stacy, how do you sort of think about this issue of changing spending patterns? How do you sort of think that we should approach the movement of dollars around this system to be more effective?
Stacy Becker: It’s obviously complicated, but I think we just heard a couple of examples of – so first of all we know it’s doable, right. Joe just gave us a bunch of examples of where we spend money that we probably shouldn’t in health care. I gave you an example of tax incentives that we could move over and get a much bigger bang for the buck. So the question, and I like really what Rachel was saying, these almost aren’t technical questions. They’re the will and how we get together and agree that these sorts of things should happen and that’s one of the things we talk about at _____[00:00:47] Health is, in additions to systems, is what we call stewardship. And it’s different from leadership in recognizing that we together, collectively, are responsible called this resource called health, and that we have to make some joint decisions. I think that recognizing, and there is a lot of evidence, so step one is I would encourage you, we sometimes talk on the population health side about oh what’s the ROI. Go, for example, to the Washington State Institute for Public Policy and you will see, and there are many other databases, there’s a lot of evidence out there of how we could be spending differently. And once we’re all convinced of that, now we can start to have the kind of conversations that Rachel talks about, and identify how and where we can start to move the money over. I’m not Pollyanna’s, I don’t think it’s an easy conversation, but it is not so technical as much as really the desire and the political well.
Unidentified Male: Please.
Unidentified Female: So one of the resources I think in your packet, provided some links to our reports. And one of them had to do with a report many of you are probably familiar with, Elizabeth Bradley who has also written and spoken a lot to these kinds of issues. And we asked her and a colleague to talk to some states who are trying to grapple with these exact issues. Tom may not agree that states are the right ones to lead this process, but they were interested in essentially the same kinds of questions. And what they cited as the challenges were, how could they have the conversation about how to prioritize health as opposed to just talking about health care, the alignment of incentive, as I mentioned before, and then figuring out who is responsible, and what roles do they have in terms of this new eco system. And, the prescription, if that’s the right word to use, were four things. You needed leadership from the top down to start the conversation, you needed political will to scramble the eggs in a different way, if you will, you need evidence to go by, in terms of how you would go about reallocating resources, and you need an operational capacity to target those resources. I think these are some of the same things that Tom mentioned.
Unidentified Male: Let me just ask Jessica real quick. From the CBO perspective, if we are going to look at not health care but look at health, can you score that?
Unidentified Female: I’m not mic’d up.
Unidentified Male: Oh hold on, I’m sorry.
Unidentified Female: So we have looked at – we did a long study on tobacco taxes because we wanted to look at the effect of a policy, a prevention policy that reduced smoking, and what were the downstream effects of that on the federal budget. And there is enough evidence in that area, so people stopped smoking. Their health improves. Some of them therefore worked longer, that’s a good thing, they contribute to Social Security. They live longer, they get on Medicare, so they use benefits and health care. So in the end, it is a good policy, but it doesn’t have as large an effect on the federal budget as you might think. And in some cases, it can add cost to the federal budget because people retire, they live longer, they use Social Security and Medicare. That doesn’t mean you shouldn’t try to improve health, but that’s – I mean we have to look at it from the federal budget perspective.
Unidentified Male: I sure want to follow-up on that, but – I mean it was great, we’ve opened up a big can here, so hopefully we’ll have a chance.
Unidentified Male: Hi, I’m Dan Fine from the PM Foundation. So you’ve been talking about population health, which makes sense when you’re talking about overall cost. But how do you balance the needs of seriously ill patients and access and out of pocket costs when you’re trying to look at overall costs and come up with a solution that may be good for the population in general, but often times is counterproductive for people with serious illness?
Unidentified Male: I would say that any approach that attempted to reduce spending in that area without, in a non-evidenced based way would meet with huge opposition. But I think that’s where, compared to clinical effectiveness research really needs to be applied most intensely is to understanding what of those extraordinary numbers of expenditures, we invest in treatment of chronic care and advanced illness really do have value. And value has to be defined by the patients, but again, patients don’t – patients are not that irrational energy force that drives wasteful care. I think that’s just not our experience and not anybody’s experience. The whole advance care planning initiative, those kinds of efforts, really resonate with patients and really resonate with those who worry about wasteful expenditures near the employ.
Unidentified Male: Since you have the mic, there’s a question from the audience. Someone is focusing in on the recent study from UCSD reporting that the 528B program goes to non-optimized medication, that is medication that is wrong that makes people sicker or is the wrong dose. This is not an adherence problem, it’s an issue of getting the medication right. Any thoughts on appropriateness in this regard?
Unidentified Male: I’m not familiar with that study, I just think, in general, we – a lot of our practices drive us towards medications that haven’t been shown to be better than alternatives. So, I mean I’ll just say, Reed, that I think as you get into a habit of starting to compare outcomes across different treatments, you realize that we ought to be studying a lot more of the regular, every day care than we do. I mean that’s why we set up support for example, one of the cultural changes that we need I think, is to be much more attentive to the outcomes of our actions on a large scale.
Unidentified Male: So you’re saying that studies that _____[00:07:33] needs to be doing in the future and that you’re being up for reauthorization, is that your point?
Unidentified Male: Stacy, they want to know what you think about that Stacy.
Unidentified Female: What I think about that, or what I think about this?
Unidentified Male: The 528.
Unidentified Female: Oh, the 528.
Unidentified Male: Appropriateness of medications. Are there systems that can change?
Unidentified Female: Let me give you a slightly different example from the same region of the country. I was working with some folks in San Diego, and they have a CMS Grant to look at adherence of meds for high plus or all in cardiac. An amazing, nonclinical program, amazing results, and the literature shows that if you can increase adherence, you can reduce heart attacks, huge savings within anywhere from one to seven years. And, they did a study, show that they had these amazing results, they went to the pairs and they all said well that’s great, but we don’t care. Because, I’m not sure that my patients will be here tomorrow, because you might have those savings, this is another system thing, right. The system might have those savings but I might not. If they got together, of course we would all do this and save a lot of money and have a lot healthier patients. But, we don’t have that way of getting together yet or acquiring these sorts of things so that we might do programs like that.
Unidentified Male: Good, thank you.
Unidentified Male: Hi, I’m Dr. Peter McPhantom in the Health _____[00:09:14] since 1972, and recently retired. I have a comment that may help understand healthcare increases. Basically, believe it or not, the boomers are going to die. Everybody talks about people aging into Medicare, but Medicare is not the roach motel, they will check out and leading edge of the boomers will hit 80 in 2021. That’s not very far away. Excuse me, 2026. What happens is that the number of people dying in this country each year, is going to more than double by the end of the century, and death is expensive. So if PACOR (?) is doing something and I don’t know whether it could be doing it fast enough, because so many people will be dying, much more than in the past, if there’s something that can be done to reduce the cost of dying, that would actually have a possible impact. Otherwise –
Unidentified Male: We, in fact, are because patients came to us in large numbers and said palliative care and care around death is very important, so we’ve got seven or eight major studies underway on how to both treat symptoms and also how to affect planning in those years, so I couldn’t agree with you more.
Unidentified Female: Kenny?
Unidentified Male: Amplify, one of our problems in doing the right things is dealing with the installed base. We’ve got a lot of problems already built into the system which are very expensive, and we can’t really reengineer them and get out of them. So, we are paying for that and therefore not able to invest in the healthier future generations, and that’s where you get caught in that mismatch. In your running a little short in working both ends against the middle, we’re going to have to stop investing in effect, what is the past and more in the future.
Unidentified Male: Well how much data are you going to need and how much economic scoring are we going to need to make those kinds of shifts? This comes back to that CBO kind of question, and I think obviously, you focus on that. Are you intimidated by the challenge of trying to be able to have enough math that will lead to rational policy choices?
Unidentified Male: Well rational policy choices requires stories and anecdotes had a nice little fable. It has nothing to do with math. So let’s deal with that to start out with. You know, you could have all the equations you want in the world, then data is limited on the front. Well Jess was pointing out that it shows the other limitations, it’s not only in terms of the budget scoring. It’s, I’m in political office, do I have a program I can sell or claim credit for? Some of these interventions are beyond politics and almost beyond government, but they need to get some credit for it. So we have to put it in a vocabulary which lets them say look what we did for you, even though it’s mostly other people and the rest of society accomplishing the progress.
Unidentified Male: We’ll go real fast with a few quick ones.
Unidentified Male: Yes, I’m Rich Brennan, I’m with the National Association for Home Care and Hospice, and their Home Care Technology Association of America. And I would say, as far as the death, or whatever you want to call it, there’s predictive algorithms that have actually been recently out that are pretty accurate as to a predictor of death. So, this is my theme as far as just the technology. Jessica Bentham said that economists have traditionally attributed new technology to additional spending and cost in CBO scoring. And Stacy Becker mentioned that the cause effect of different programs, not spending on the right things. All of this, all of you also mentioned the important need for evidence in whether or not we were actually focusing on our evidential priorities correctly. So, I was wondering how this would all affect these we’re spending, we spent over $38 billion on health IT in this country in the last 10 years, in building these systems to collect data, and also attribute them to a value based payment model. If you have any specific examples evidence of possibly the changes in the theories of whether or not technology can be actual savings and not a spent?
Unidentified Male: Great, great question. Reed?
Unidentified Male: In answer to that?
Unidentified Male: Yeah, who wants to – I’m sorry.
Unidentified Male: Yeah well I alluded to that at the end of my comments that new technologies, as certainly Jessica, new technologies are a big concern, they are tough to study in the current environment in the US because they hit the market without any evidence. They hit the market with minimal evidence of efficacy maybe. We have invested in PCORInet, which is one very large national effort to harness electronic health record and other data. But, as I was saying, I think it’s going to take both, probably some legislative fixes and then a real appreciation that, as technologies are approaching approval, we need to launch these studies so that we can get a handle and don’t have to wait for five years until there are no longer new technologies to understand their relative effect.
Unidentified Male: Mary Ella, let’s make sure when Far Side comes that we re-ask that question. Where you at man? So I can’t, your turn. You’ll take this, right?
Unidentified Female: Oh yeah, no problem.
Unidentified Male: Hi, Joyce Frieden from “Medpage Today.” Sort of on a related note, I wanted to ask about the role of things like Polypharmacy and duplicative testing, and whether you foresee electronic health records and interoperability as may be a way to help control some of the costs in those areas?
Unidentified Male: Maybe, I mean they are two-edged, but there are possibilities in that area. But it takes will as well.
Unidentified Female: Sally Stearns, University of North Carolina Chapel Hill, so the high rate of high deductible health insurance among the privately insured population has been increasing substantially, yet research evidence indicates that higher costs sharing doesn’t necessarily reduce lease of low value care. So what can be done to help ensure that high deductibles don’t prevent use of high value care? Especially in terms of reducing future disease?
Unidentified Male: Whoever wants to take it on.
Unidentified Male: Let me just – I want to challenge the premise of that question. We’ve been – folks in the health policy community like to bang away at high deductibles, everybody’s flustered, out-of-pocket costs are exploding. It’s happening to some extent, and the employer sector, mostly among large employers, self-insured and they actually do it better than it would be done by kind of a smaller operation. But if you look at the mega statistics, it keeps showing up year after year in national health expenditures, we actually are having less out-of-pocket, first party spending, as a share of health spending we have had before, it keeps going down year after year. We are below the OEBC average in this part. So what’s happening is, we’re filling in the hole in other places, the uninsured are getting covered, Medicaid is pretty comprehensive for what it does, Medicare is_____[00:16:55]. So, you look at one part of it, that’s the overall aggregate in terms of what’s driving force. We are actually, an outlier in having less money being spent out-of-pocket compared to other nations than being one extreme. Now in the employer experiences, it is generally brought down costs to some degree, and they are not one time costs, and it depends on how well it’s done. But a lot of the criticisms of it, have not been proven out to be valid.
Unidentified Male: I would only add that I think there are thoughtful and thoughtless ways of applying cost-sharing. And cost-sharing, applied to low value care more precisely, like emergency department visits when you have an alternative, actually drive down costs lead to better utilization patterns, and actually have better health outcomes as well. So there are ways to use cost-sharing thoughtfully.
Unidentified Male: So let me give a fair warning, this will be the last question here. But, I’m going to do a lightning round for each of you, where you get one minute, no I’m sorry, you get thirty seconds to make the point that you didn’t get to make, or the point that you want to emphasize that you did make. So you can think about that while you answer this question.
Unidentified Female: Hi, I’m Laura Worbey, I’m a family nurse practitioner working in a fairly qualified health center here in DC. No one has mentioned the entities that are making profits hand over fist in the current systems. So I’m wondering if you could address, a little bit, pharmaceutical companies and other big healthcare entities that lobby to Congress, and what their contribution is to the high cost of healthcare.
Unidentified Male: Who wants to take that one on?
Unidentified Male: Well certainly I did mention high cost period. And that extends to pharmacy as well as all the rest of it.
Unidentified Male: Well, I think that will let your question be a rhetorical flourish for the excitement of the end of this panel, and just to make sure that each of our panelists have absolutely had a chance to make the one point that they want to leave with you, we will give them that opportunity, you’ve done a wonderful job so your immune. And Stacy, take it away.
Unidentified Female: I think there’s a question about why aren’t we spending on the right things and there’s many answers to that. But one that I really want to stress is that it seems odd to me that we are willing to spend, when we get sick and we get why because we’re in pain and we’re afraid and we’re vulnerable, we will spend anything. But why, as we in a society, won’t spend something to not get sick in the first place? We still think that’s that persons reason that they got sick, it’s their fault. And I would ask us all to start thinking about that. Because, once we start to go, are we willing to spend something to not be a six nation in the first place, we might find an inroad to start doing some of the things the panel has been talking about.
Unidentified Male: The cost of mega mistakes, they can blow everything out of the water. Obesity, nutritional advice, takes you into a whole level of costs which has nothing to do with all the things we just talked about. Opioids, is that on someone’s horizon, low birthweight babies, there are things in terms of social maladies in a broader sense, which can get put into our healthcare system. We need to think about how to keep the next one from happening. So why don’t we spend on the right things, I would still say that often times it’s because we can’t separate the right things from the absolutely wrong things. As PCORI and others begin pointing this out more and more, and we’re not the only ones that do comparative effectiveness research now, my biggest concern is how we actually disseminate and implement this evidence and PCORI’s pay a lot of attention to that, but it will take, ultimately, as Stacy said it will.
Unidentified Female: There’s probably a lot of different policy levers, market force driven, more regulatory. We have a lot of evidence that we are not using, so I think one way to deal with this is to, I would not necessarily call it low hanging fruit because they may be very complex issues. But sure, more evidence needs to be built in some of these areas, but I think we could put a little more emphasis on using the evidence that we have. And I think we would argue that there is valuable experience from the kinds of peer networks that we’ve worked with that have emerged, all led by states. But also, frankly, a source by their communities to bring people together, because they recognized they can’t solve those problems alone. So I just want to make another pitch for my Pollyanna statement that some attention to the governance, the convening, the bringing people together in a trusted environment to focus in on how we can, together, try to solve a common problem that affects everybody.
Unidentified Male: And as your Moderator, I have to say that I, that unexpected lightbulb in my head from this panel, has really been this conversation around with Jessica, about how do we actually score these things. How do you actually do the math in a way that implements policy where people can agree on policy? And when I keep emphasizing Jessica, it’s because she’s about – I mean there’s not a lot of people in your department, there’s Jessica. So, we really are going to need to bring her back, and if we really want to get serious about this conversation about money, we’re going to have to talk about math, and how do you account for this, and what’s in the system and what’s not in the system, and how do you have a conversation. Would you please thank these wonderful people?
Unidentified Male: We pride ourselves at the alliance of running a tight ship, so we are right on time, there’s going to be a brief break, don’t fool around because we’re going to start on time. Otherwise you won’t come back to our next briefing, so everything runs like clockwork, see you in a minute.
PANEL 2: What Do Consumers Really Want?
Mary Ella Payne: All right so I’m actually just going to welcome you back for the second half of our morning. We have some other great sessions lined up, so you’re not going to want to leave yet. But I am pleased to introduce one of our sponsors to give some quick remarks. _____[00:23:02] is the Deputy Vice President of Policy and Research at Pharma. Thank you for being with us here Michelle, and then she will introduce our next Moderator, Kiersten Sloan.
Michelle Drozd: Thanks Mary Ella, Pharma’s happy to sponsor panels like discussions like this one that focus on priorities that matter to patients, the most important consumers and stakeholders in our health care system. The pharmaceutical industry works every day to bring innovative medicines to market. These efforts have led to remarkable advances, including reduced mortality from chronic conditions like cardiovascular disease and the development of more than 140 personalized medicines, which treat and increasingly cure complex diseases like cancer. As a result of competition and rebating, costs of medicines are growing the slowest rate in years, only 6/10 of a percent in 2017 according to IQVIA. Yet, too often, patients are not benefiting from these discounts, as they are paying a greater share of their medicine costs. We are committed to working towards solutions to problems like this.
We also support solving broader challenges that face our healthcare system like rising costs driven by consolidation in the provider market. Hospitals are rapidly purchasing physician groups, increasing overall costs. Drug costs are a great example. Data shows that hospital outpatient departments are often paid twice as much by commercial payers for administering the same medicines as community physicians.
There are also opportunities to better manage the country’s biggest cost driver, chronic disease. Optimizing the use of medicines can lower the cost of conditions like diabetes and asthma, while reducing the death, disability and suffering that they can cause. As an example, IMS Health has estimated that the potential savings from better use of medicines could be $213 billion annually. We appreciate discussions like today’s because they don’t focus merely on one part of the healthcare system, but consider questions about cost and affordability holistically. We think this is the right approach and one in which the many benefits of innovative medicines will shine through. With that said, I’m pleased to introduce the moderator of the panel Kirsten Sloan. She is a member of the Alliance for Health Policies Board of Directors, and is Vice President for Policy at the American Cancer Society’s Cancer Action Network. Thank you.
Kirsten Sloan: Good morning, thank you Michelle, and good morning everyone. I want to thank Reed for setting the bar so high for moderators. I wore the wrong shoes to jump off the stage so we’re going to have a little different model this morning. You started this morning looking at where healthcare dollars go, and then are we spending on the right things? So I want to continue the conversation this morning by looking at what’s at the heart of healthcare spending, and that’s the consumer and the patient. I think we can talk theoretically all we want about healthcare dollars and are we spending the right percentage, but at the end of the day, it’s the person that uses those healthcare dollars and what they need and want from that and whether they can afford those. So we’re joined this morning by three wonderful panelists, expert in their field. And let me just give you – what I’m going to do is give you a little bit of background on each one of our speakers. Then I’m going to turn it over to them to do a five minute overview of some of the issues that they are looking at, and then we’re going to quickly get into Q&A.
So, first on our list is Molly Ann Brody, good morning Molly Ann. she is the Senior Vice President for Public Opinion and Survey Research here at the Kaiser Family Foundation. And, Molly is going to provide some insights from the Kaiser Family Foundation’s surveys and polls about what consumers know and don’t know about healthcare costs. And then, some of their ideas, particularly ideas around transparency.
Next is James Gelfand. James is the Senior Vice President for Health Policy at the Orissa Industry Committee. He brings a valuable view of employers to this panel and is going to be speaking a little bit about how programs like care coordination, centers of excellence and health IT actually help employers achieve some of their goals.
And then last but not least, is Robin Gelbert. Robin is the President at Fair Health, and she’s going to be talking a lot about how Fair Health works with consumers on health literacy both at the individual level and at the health system level. So Molly, why don’t I start with you.
Mollyann Brodie: Good morning, thanks for having me. It’s fun to be in my building in a different role. So, you know, this conversation about healthcare, a lot of people are appropriately talking about the role of consumers, the role of the public in this. And so that’s what I spend my time doing, I talked to the American public every month. I hear a lot about what’s on their mind and what they think, and I have some very good news for you. There is a really great opportunity to engage the public in this conversation because, surprise, surprise, the top public priority in healthcare is healthcare costs. Is the thing they care most about, it’s something they’ve always cared most about, this is a historical finding, I can find data back 20 years. When they say healthcare is important to them, what they mean, when you do a follow-up question, is healthcare costs. And, there is another sort of important opportunity here, in that this is one of the only areas in politics today, where Democrats and self-identified Republicans agree. So, partisans of all stripes agree that dealing with healthcare costs and having candidates talk about healthcare costs, and having this discussion is a top priority. So that is the great news.
And then, after that, I was really glad that Tom went first because he was even more of a skunk then I’m going to be, but I’m definitely about to turn into a skunk because, once we get past the fact that it’s a priority for them, things get a little tougher to think about how the public thinks about this issue. So, the first thing I want to remind everybody is, unlike all of you, the public mostly does not have pay issues in health economics, they don’t have pay issues in health policy, they haven’t been studying this issue. As somebody said earlier, they have very likely not even taken a statistics course. And so they don’t think about healthcare or understand healthcare costs the way we do. First, I’m going to give you some examples. They believe that the healthcare costs, their own healthcare costs are rising at an absurd rate right now. We all know, and we saw earlier that we are at one of the slowest growths in our history in terms of healthcare cost. People don’t understand that, in fact, they don’t even care about slowing the rate of growth. When we see a slowing the rate of growth, their paychecks are still saying an increase, right? It might not be $10, it might be $5, but in their mind it is still more, and they can’t afford more because their wages have not been keeping up.
The other thing is that when they talk about what they’re worried about in terms of healthcare costs, they are worried about what they are personally paying, not what the nation is paying. In fact, when we asked them about whether they want to have the nation pay less, they think that they want Medicare, we want to pay more and Medicare we should pay more to Medicaid, there’s a 20 point gap in their worry about their own personal cost growth as opposed to the US’s cost. We also don’t use the same terms, right. The new buzzword in healthcare these days is value in healthcare. Well, when we ask people about that term, 28% said that was a positive, they had a positive reaction to the term value in healthcare, 33% had a negative reaction and the other third had no reaction. When we followed up and said what is the term value in healthcare mean to you, the people who had a positive reaction said things like oh, it would mean reasonably priced, it would be affordable, it would be payment based on quality of care, exactly as some of the previous panel has talked about. The people who said that it had a negative connotation, it’s a scam, it shows I’m going to be screwed, it’s an oxymoron, it’s across the board.
Now, the other thing you need to know is that the public actually believes they already get value in their healthcare. Seven in ten say they are getting value in the healthcare services they need, so they’re not even sure that they need value, they’re getting that, they just need help paying, and they want the prices to go down. People blame different reasons than the economists in this room for rising healthcare costs, the public thinks it’s all a matter of fraud, waste, and abuse, and high profits. They believe that under treatment is a bigger problem than overtreatment. I know my friend Corey would argue with that one. And, what’s important to recognize is these misunderstandings can be easily politicized. You all remember the death panel rumor from a few election cycles ago, well still, over half of Medicare beneficiaries believe that the government has an incentive – doctors are paid an incentive to talk to them about – to have a death panel in existence. So this rumor is still alive and well in the American frame of mind.
The other challenge we face, besides their lack of understanding and lack of using the same terms that we use, is just based on the fundamentally fractured nature of our healthcare system. People don’t interact with the healthcare system very often, unless you’re sick. And we’ve heard before about a lot of how patients think about it, but the average consumer, their biggest interaction with the healthcare system is through their prescription drugs, or they are not interacting on a yearly basis at all. When they do interact, it’s for a scary reason. Somebody that they love, or themselves, is sick, they’re hurt, it might be serious, and that is exactly not the moment when they want to shop for prices and value, they just don’t. They just want to get the care they need at that moment. We also know that people’s preferences change when they are sick. The public has also told us they’ve tried to figure out the price of things, they can’t figure out the price. There is no price transparency, so how can they help try to pick a good procedure or good doctor or something. And then again, the last thing about our healthcare system, many of the choices that the public needs – would want to make to make a good value based price sensitive choice, those choices are already made for them. The employers choose their health plans, the health plans choose their networks, they don’t have some of the options to even shop and get the best price for the best value even if there was perfect information.
So, I’m going to leave it right there, what it means is despite the fact that we do have the public’s attention on this topic, I think it’s going to be hard to rely on them to drive any changes in this conversation. They think we need to work through their trusted mediators, their employers, their local networks. I think some of the things that were said on the panel before, getting local groups together, is a much more promising way than to think that the public is somehow going to change the nature of healthcare cost in this nation. You know, the hardest conversations we have in our political system, our conversations about redistribution, and that’s what you are talking about when you’re talking about dealing with
Kirstin Sloan. Thank you Molly. James.
James Gelfand: I have so many responses, everyone’s doctor is the best doctor, right. Anyways, so what we hear from our employees and our plan beneficiaries, it’s really pretty simple. They want the absolute best care at the absolute best prices, and port to be super, super convenient. So, basically they want a Ferrari for the price of a Kia and they want an algorithm to tell them what are the one or two that they should choose from, and then for Amazon to deliver it. The bad news is that’s really complicated, and it’s a really tough task to go about trying to ensure that what we are offering, and there’s about 178 million people who are relying on this part of this system, that we’re offering them what they want in a way that we can afford to do so. And that the system is, or at least some day becomes, sustainable. But the good news is that employers in the groups and networks that employers have built and work through, are in a position to do that, and actually can do that. And more and more finds that by shaping our network in such a way that we do steer and we do make arrangements with the absolute best providers, it does save money, it is cheaper. In fact, if you work for forward thinking companies like say Walmart or Lowe’s, and you need a hip for a knee replacement, not only will they pay for it for you as long as you go to the center of excellence, they’ll pay to ship your spouse along with you. And, you will get the best care because you are going to one of their four centers of excellence, which is the best hospitals to treat these conditions in the country. In order to get where we need to go, it’s very true that the consumer needs some sort of transparency, both to price and to quality. And the problem, so far, is that you can give consumers a lot of info, but unless they immediately feel boom, I understand this, this makes sense to me, they are not going to use this. I mean this is not Field of Dreams people, if you build it they do not come.
We have many, many companies who have invested many millions and millions of dollars in creating transparency tools. And then, people do studies of those tools and utilizations, and what they find is that the average employee uses it once or never. So, that’s obviously going to take a lot more finessing to make that part of the system work.
We do have some barriers though that are preventing us from getting where we want to go and having these good integration and these good steerage to the best systems for the best prices. And the two that I’ll cite, number one first and foremost, is _____[00:36:38] Health Care System. I have companies that will go to a healthcare system and say, we want to do bundling with you, we want to do accountable care organizations with you, we want to pay you more for doing better service, and all you have to do is do a little bit of reporting to us. And they say back to the company, no thanks, we’re not interested because even though you’re a giant company, and you have 500,000 employees in the United States of America, those 500,000 employees don’t come to my hospital. The biggest group that comes to my hospital are Medicare patients. And Medicare doesn’t do anything, all right. Medicare, they have a very limited degree of reporting that we have to do for them, which is completely different from what you’re asking us to do. There’s no downside risk, so anything in there that – we could get bonuses so we could make even more money, but we’re not having to take on like we might lose money if we get bad service. So no, they don’t want to do it, and we have, sometimes, had success with their forward thinking hospital systems. And you guys, everyone in this audience can name the top five or six systems that are out there saying hey, our doctors are on contract, our goal is to provide the best treatment, not necessarily to increase our reimbursements to maximize that, but it’s a long haul, and it’s going to be a serious process. And we’re going to have to drag the government with us, even though the government usually 10 or 15 years behind where we are, in terms of innovation.
The other problem is rules that we take partial responsibility for help inventing 15 years ago. I mean you’ve seen the numbers, there’s 22 million Americans with health savings account, there’s twice that many who have some other form of HDHP, why do many people have a high deductible health plan, but they do not have a health savings account? Well oftentimes it’s because the plan sponsor says well you know what, it’s such a high priority for me that I want to be able to make sure that my people can still get first dollar coverage when they go to primary care more than once a year, that I’d rather do an HRA then an HSA. Or, it’s such a high priority for me, that my employees have access to on-site clinics where they do not have to pay the full freight of the cost prior to hitting the deductible, or tell health services prior to hitting the deductible, that were just not going to go to the HSA. And until we start to fix the rules that force them to make these choices, we’re kind of stuck. But the numbers are going up every year, double digit percentages of people who are moving from these PPO or POS plans into an HDHP plan. And until we start to fix those that we can start injecting value into high deductible health plans, we’re going to be stuck kind of where we are, and we’re going to plateau. So I’ll stop there.
Kirsten Sloan: Right, thank you James, Robin.
Robin Gelburd: All right, he left me on a plateau. So without minimizing the complexity of the challenge before us and educating consumers about healthcare costs, I am going to be a little bit optimistic, because Fair Health actually is living proof of a social experiment that is trying to move the dial. And it results from what was talked about in the earlier panel. Change really has to come from the patients themselves, but also a partnership in sort of a collective understanding of where the dial has to be moved. So for those or you who don’t know Fair Health, we were created back in 2009 because citizens all around the State of New York were questioning the values on their EOB’s and on their medical bills. They didn’t understand why their level of reimbursement was being calculated in the way that it was. So the New York State Attorney General took up that question and started asking insurers how are you calculating, particularly this was with respect to out-of-network reimbursement, how were those values being determined. And they determined it was being – they were being calculated with certain data products and as they sort of poked more deeply, they found that those data products really were – they were pervasive conflicts of interest associated with the data that was being disseminated. So it was agreed, by all parties in this investigation that a new paradigm should be created. A new, independent, not-for-profit should be created. That’s their health, we are not governmental, we are completely independent, and even though it was a New York investigation, we became a national remedy overnight.
And really, we had three key mandates, and the one I’ll focus on, obviously, impacts the consumers. But you really need to understand the other two mandates to see why it’s almost like an aspen forest in terms of the interconnected quality of the healthcare system. We were tasked with creating a data repository of healthcare claims that were robust, that was really geographically rich, that was current, that was transparent and informed by the best thinking of statisticians and economists in terms of the way in which it was organized and aggregated and validated. That data was intended to be used in data products and solutions, for all stakeholders to use to gain an understanding about the healthcare system, and to make smart decisions.
Next, as a 501c(3) independent not-for-profit, we were tasked with informing policymakers, federal state and local officials, about the nature of the healthcare system to help them to make policy whether public health or growing benefits reform, reimbursement reform and so forth. And lastly, which was considered the crown jewel of the settlement, was to bring a level of transparency and understanding to consumers through brief portal that allowed consumers to really elevate their understanding about health insurance, and allow them to navigate the healthcare system. All of those now rest upon fast forward to today, we have the largest private healthcare claims collection in the country. We have over 25 billion healthcare records from both the self-insured and the fully insured market. And obviously self-insured is important, given the recent decision by the Supreme Court, and then _____[00:42:21], we get that data voluntarily, and thankfully to really help inform that level of transparency. And essentially, what it is, is this ocean of claims that we take stakeholders out on, really on a glass bottom boat to look down and understand.
For policymaking, obviously, whether it’s about the opioid crisis, Lyme’s disease, concussions and so forth, or designing benefits, but for consumers that was really our focus. To create this living laboratory to understand what is it that consumers really need to know, and how to package that information. So, in effect, what we tried to do, if you think about the UN when they wear headphones so everyone with a different language can understand what’s being said, obviously what’s being understood at PCORI or different types of institutes or agencies, they are not looking at data the same way that a consumer would. As we said the consumer looks through their own lens, and they do look at it from a cost perspective. But they really need help even at that level, because when they think of cost, what we learn is they think about what the premium is for the health plan. They are not necessarily thinking about the co-pay, the coinsurance, they are not necessarily thinking about the different reimbursement formulas for out-of-network care. They are not necessarily thinking about the difference between a tiered network and a narrow network. They are not necessarily thinking about what the implications would be if I go to an urgent care center versus an emergency room, or about the vast array of new venues that have emerged, like retail clinics, tele-help, home health, urgent care centers, that’s where Fair Health comes in. We are not only, sort of electrifying or powering our consumer tool with the data that everyone is using, and that what connects that aspen forest into ground. Because, states are using our data as an official source whether in workers comp or the liability, employers are using it to reimburse claims, researchers are using it, consumers are – we are unlocking it for consumers.
There is a long way to go but they are first starting to understand they can engage with providers on the conversation with respect to cost. They don’t have to think about looking at their EOB form and say what is this learning how to be an advocate on behalf of themselves. And so, I would even disagree though PhD’s even in health economics, come to us with questions, because they don’t even understand health insurance. It is amazing how this has become so arcane and so locked in. And so, we have really welcomed being handed the baton to help consumers around the country while we work on the macro level with policymakers, stakeholders, and industry leaders so we can all be speaking the same language, even if you do need headphones.
Kirstin Sloan: That’s great, thank you. Let’s stick with transparency for a minute, because I think we hear about transparency all the time as one of the silver bullets. If you just give consumers enough information, they’ll make the right choices, they’ll choose lower-cost care, and everything’s going to be great. But, I’m going to play devil’s advocate here and I’m going to ask each one of you to address this. What’s the effectiveness of transparency if consumers only have limited choices. So in other words James Ford, an employee who may only have access to one health plan, how do they use transparency as a tool? You want to address that?
Unidentified Female: Sure, I’ll address transparency from a policy perspective in terms of that, in terms of limited choice. Another social experiment that’s been fascinating, and for those who maybe have been following it around the country, there is an enormous movement right now. Over 30 states are now grappling with, and some have already passed consumer protection legislation with respect to surprise avid network build emergency services. And that goes to a lack of choice because even when I went to have my sons at a hospital that was in network, I had no choice with my anesthesiologist, I got an epidural and I was charged thousands of dollars. Legislation is now starting to address it from a policy perspective to say with that limited choice, the person really holding the downside, that should not be the consumer. The equity should be in favor of the consumer, hold them harmless to their in network amount, even if they have to be exposed to at network services. So that’s an example again, where were starting to understand and look through the lens of the consumer to see what has been unfair with the lack of choice, and through transparency in education about these consumer protection laws, that’s one way in which we can start to at least just that very sore point we’ve all been exposed to.
Kirstin Sloan: And James, how do employers use transparent – help consumers use transparency?
James Gelfand: Well so, I think on the subject of choice and transparency and what’s the point of having transparency if there is not enough choice building a network is really hard, especially when you’re talking about, you mentioned anesthesiologists. I’m thinking of one that I happen to deal with lately has been in the mental health sector where increasingly provider or like I only take cash. And I’m going to bounce Bill you people whatever the hell I want to, so what can an employer even do about that? Well if we want them to use the tools, and we want them to go on the website, and we want them to look at who is in the network and what are the prices going to be, you’ve got to nudge them. You’ve got to create an incentive for them to do so. And the way that I look at it is think about some of these really great services that almost all of my member companies, this is 100 of the very biggest companies in the country, they almost all offer a second opinion service for certain procedures or diagnoses or indications. You can go on the website and you can be connected with a provider who will have a look at the records that you’ve been given so far and the data, and say may be you do need this maybe you don’t, maybe you should consider this maybe you should do that. They almost all follow the same scheme of evolution. So, when they first began, it’s completely optional, like hey, we have the service. And then the plan sponsor realizes hey, nobody used it. So next year they say, tell you what, we have this service and if you use it we will lower your co-pay for the indication regardless of whether or not you follow the advice that they give you. And they say well, you got a little bit more, that’s an improvement, and then they get into their full final form when they say, this is how it is. If you have indications of this, this, or this, you use a second opinion service. If you choose to follow it, you get a major discount, if you choose not to follow it more of the money is going to come out of pocket as opposed to being paid for by the plan. That’s where transparency is going to have to go, there’s going to have to be incentives in their that the plan is making people aware of that say, you need to use this tool, it’s in your and everyone’s, best interest.
Unidentified Female: Well I think one of the additional challenges here is, in our survey, there’s only 6% of people say they’ve ever seen comparative prices. But now imagine you’re in your doctor’s office. Let’s say somehow you have magically negotiated your plan, found the best high quality doctor, you’re in the doctor’s, the value doctor’s office, and he’s giving you three options of treatments that you can have. He doesn’t know the price difference on all those. And even if he might know the maybe, the proportionate price difference, he doesn’t know what your plan’s paying on it, or she, and is it the doctor’s job. So you’re in a conversation, and we’ve asked people, have you tried to talk to your doctor about prices. And they say they would like to, but the doctor’s not in a position to help have them make a cost effectiveness decision in their office. And the question is really, should it be their job, is that how we want our doctor spending their time, and how can the doctor negotiate all the different payers and all the different payment rates. There is no one price for a knee replacement versus not surgical intervention and all these things. And so, I think that it does come down to, these are complex decisions and complex choices at so many different levels. And you’re talking about choices and information and transparency that need to happen at so many different levels in order to really have an informed consumer making these kind of choices.
Unidentified Female: On the last panel, Dr. Selby you talked about consumers not always choosing the highest cost service. And in my line of work, we found that to be true as well. Consumers don’t necessarily go to high tech, they go to high touch. But what’s behind all of that is an issue of predictability. Tell me how much I’m going to have to pay for this service so that I can plan according. And when you talk to consumers about affordability, it’s really about understanding how much they have to pay. We see this in the Medicare program quite a lot. The vast majority of Medicare beneficiaries in fee for service, have a Medigap supplemental plan. Why do they do that, because they do it for predictability. Talk a little bit, if you would, each of you, about the importance of predictability in terms of affordability for consumers in healthcare. You want to start?
Unidentified Female: Sure, one of the things that we’ve learned to cite on the cost side as I mentioned when they think of premium without looking at all the different components, is on the care side. And there is not an appreciation on the part of the consumer which we’re trying to educate them in favor of, is the three dimensional nature of care. So, for example, when you are thinking about having a colonoscopy or a procedure such as that, they’ll think about their gastroenterologist, but they’re not thinking about all of the other components, whether it’s the anesthesia or some of the other follow-up that may occur. And toward that end, what we’re trying to do is bring consumers along with vocabulary and the conversation of episodes of care and bundling. And understand what the various items are associated with it, so they can properly plan for their care. And one of the things I’ll say though, Molly brings up a good point about in terms of how much we engage the physicians in this conversation, another glimmer of hope for the first time, we have had several medical schools ask us whether us they can license our consumer website for purposes of educating their students about these questions that are plaguing consumers as they are navigating the health care system. So they may not have all the price list of everything and all the comparisons, but they are now understanding the questions and concerns of consumers, and maybe helping to frame some of those issues for them and point them in the right direction. It’s the first time we’re seeing that and we’re, again, I think that’s a positive side.
James Gelfand: Bravo to those medical schools. This idea of that doctors only have to worry about treating you and it’s someone else’s problem how you afford that treatment. Those days are coming to a rapid, rapid end. You know, you want to talk about who cares about predictability, the individual patient and a family absolutely, an employer who is paying 75% of the cost for a billion employees and beneficiaries and retirees, yeah, we care about predictability too, and that’s why we’re engaging more and more in these bundling programs. Or we’re trying to engage centers of excellence and accountable care organizations. It’s why employers essentially invented some of these arrangements where we had care coordination. And we would pay Nurse Practioners to say hey, we know that we’re paying to fill all these prescriptions. Can someone please find out if anyone is actually taking those pills? Or hey, we don’t want this person to have to go to the hospital, so can you check in with them every so often, and that way they’re much less likely to have an inpatient incident. We’re going to have to go times 10 in direction that we’ve gone so far, but baby steps, we’re getting there.
Unidentified Female: Well, I would just say that we really have to think – go back to first principles about the wage and income of most Americans. When we ask people if you’ve got a $400 medical bill, how would you pay it. The vast majority, over 50%, said they couldn’t pay it without putting it on credit card or taking out a loan or something, $400 is enough money to put a family in some sort of financial crisis like situation. And this is fundamentally part of your question about predictability. And the question about even before we were talking about how out of pocket costs are rising, and are in fact, much greater than other countries, that may be, I think it is, it’s true from the evidence, but what is also true is that wages are going up and that families are struggling to pay all their bills and health care is often one of their biggest bills. And it does cause them to make very tough decisions and decisions to not seek care and to not get care and to cut their pills in half and to not take pills as prescribed. And a lot of things that, as we were talking before in a systems approach, may actually be negatively impacting not only their health, but the long-term cost of the health care system.
Unidentified Female: James, you mentioned that employers are trying new innovations. How do they know that those are innovations that employees want and need. What are employers doing to kind of test the waters?
James Gelfand: And so much like CMMI, employers do pilots too. And so we have pilots that are going all over the country with various employers trying various things. I’ve got an employer who just rolled out a direct primary care model in Arizona, where they are paying the doctors a capitated rate, a per member per month. And they say the doctor handled all of the beneficiaries primary care. You know, yeah there’ll be probably cost outside of the primary care, but that’s a way for them to create some predictability for the member and for the company. And also to say well, let’s see if this works. And if it works, maybe we’ll blow it up. ACO is another one where, I have companies who had ACO’s in the 90’s in the Pacific Northwest. It took I guess 20 years to convince the federal government that they should try it too maybe. But, in trying it in those limited populations, we were able to not only figure out do people like this, and is it working, but also to figure out what are the challenges that we didn’t think about. What are the things that needed to be changed there. And if we’re going to roll this out on a much broader scale, a nationwide scale, what are we going to have to do to address volume and address that kind of thing. So, certainly there’s that aspect of everybody’s a guinea pig, you are whether you know it or not. Whether you’re on feed or DC Health _____[00:56:10] with one of my giant companies, everyone, they’re trying something on you right now. But that’s actually a good thing, it’s a good thing. Because only by trying new things, by implementing new offers and new models and new options that you can try. Can they find out, will people do it, if they do do it, will it be useful, will it save any money, will it improve health. Luckily, I think in the past probably since the affordable care act, everybody in the system has gotten a lot better at measuring data and outcomes and keeping track of it. And no more do we have these situations where someone is like let’s trying something and then you’re tried it for two years, and you come back and say well how did we do, I’m not really sure, we could try it again. And maybe next time with some metrics. But no, I think that that’s kind of – we’re past that, so it’s all about figuring out and then sharing those findings, avoiding antitrusts and other concerns, and making sure that everybody is interested in being forward thinking has that option.
Kirsten Sloan: Great, thank you. We’re going to turn to the audience now. We’ve got colleagues with microphones who are walking through and you also have green card that were in your folders. So if you have a question, just raise the card or raise your hand.
Kirsten Sloan: And if not, we’re going to keep on with questions. Here, we’ve got a question right here. Go right ahead, don’t wait for the mike.
Joyce: Oh, sure. [Off mic] Joyce _____ [00:00:11]. I wanted to ask James what happened to the ACO experiment. Did people [inaudible]? How did that go?
James Gelfand: We learned a lot from those pilots, right? We learned, for instance, that if you don’t tell someone that they’re in an ACO or give them some kind of opportunity to say, “Oh, that sounds good, I want to do that,” that oftentimes, you don’t get nearly the benefits that you would otherwise. We learned that plenty of hospital systems are just not interested and you’re going to have to wait until there are market pressures on them to get them to participate. And we learned that certain parts of the country are ripe for this – or at least they were back then, I’m sure the situation has changed – and certain parts just weren’t. They just weren’t ready. There were parts of Texas, for instance, that _____ [00:01:01] has written about where they’re like, “ACO? No, thanks.”
So, it was a learning experience. But those learning experiences are now in practice in much larger programs that have been rolled out in more recent years.
Kirsten Sloan: Other questions? Yes.
Lynn Quincy: Lynn Quincy with the Healthcare Value Hub at Altarum. And I guess I’d like the panel to address this question. To me, if we’re going to understand what consumers really want, we have to go meet them where they are. We can’t talk about shoehorning them into a pricing pool that doesn’t work for them or educating them about health insurance when it’s completely convoluted and no one in the entire nation understands how health insurance works.
And I really feel like the panel has shied away from going a lot further. How are we going to give them the Ferrari that costs the same as the Kia and is delivered by Amazon? That, I felt that was almost a bit of a disparaging comment. But to me, it’s like just like consumers deserve clean air and clean water, why can’t they have a healthcare system that they can afford and works for them every single time?
So, I guess I encourage the panel to go a lot further. Meet them where they are, not where you want them to be.
Unidentified Female: Yes, absolutely. Great question, Lynn. So, we totally agree that you have to have your ear to the ground with respect to what consumers need so, we do that in a variety of ways. We have a number of consumer focus groups that we bring in the consumers to us to do consumer surveys. We have the survey imbedded directly on our website.
Unfortunately, we were very concerned to have a consumer tool because it’s such a new paradigm. We didn’t want it to be a tree in the forest that nobody heard. So, we spent as much time in working with consumer literacy experts with our own heuristic designs. We really put in a lot of attention to the way the data were presented with the promotion of the site. So, let them know there’s a welcome mat out there. Don’t be afraid. And we have had thousands upon thousands of visitors to the site.
We also get responses directly on the site from the consumers. I personally have never filled out a survey when asked online. I completely exit out. I’ve been shocked that we have had hundreds and hundreds of responses – people letting us know the value of what they found on the site. Did it meet their needs? What else they would like see. Really trying to touch into what their experience has been so, we can continue to iterate and evolve and really make it as actionable as possible.
And one of the things that’s been fascinating, we don’t ask for any identifying information when people come to the site. Obviously, this is a confidential search for them. But we do ask one important question. We ask at the front end, “Are you planning to stay in-network, go out-of-network? Are you uninsured? Or are you not sure whether you’re going to stay in-network or out-of-network?” Just to really help us design the content for that.
What’s been fascinating is there’s been really an equal breakout in terms of in-network and out-of-network, which explains to us why it’s been important we both included the negotiated amount that helped consumers understand what their out-of-pocket deductibles will be if they have a high deductible health plan because they’re having trouble finding that information. As well as the non-negotiated amount, which allows them to plan for and evaluate whether they want to go out-of-network.
So, everyone sort of has sort of an appetite for some information. And I agree, you have to keep listening and understanding.
One of the things we did was we translated the entire CPT code set into Spanish because the Hispanic population was not able to understand whether their EOBs or medical bills were correct because the AMA had never translated into Spanish. So, they could not even see if the procedures matched what they had done. So, we asked for permission from the AMA on our own dime to go ahead and do that. Again, listening to understand where are the gaps out there in terms of making the data actionable and clear for the consumer.
Kirsten Sloan: So, let me build on that a little bit and ask each one of you what you think some of the policies are that would be most effective in helping consumers afford their healthcare. Molly, we can start with you.
Mollyann Brodie: Well, I mean, I think that every effort to have trusted mediators help the consumer understand the prices and their cost is important. So, anything that the employers can do because it is a trusted mediator for them. It’s amazing when I hold focus groups or look at the survey data how thankful people are for their employer-based coverage. They are so thrilled and pleased and they understand that the employer is still going out on a limb, basically, to bear those costs.
And so, anything that the employers can do to help them, understand that the plans can do, anything that, you know, in the billing that can be done to make the billing more clear to people when they’re getting their bills. I think that whether they’re policy solutions or efforts by these trusted mediators, I think all those things can help people gain better understanding of why their healthcare costs are what they are.
Kirsten Sloan: James?
James Gelfand: Alright. So, first and foremost, I think for those 22,000,000 people who have health savings accounts and for the other 20-some million more who probably would if not for the rule problems, we should pass the Bipartisan HSA Improvement Act, which would allow them to get free insulin for diabetics prior to them hitting the decision or free telehealth for onsite clinics prior to them paying that high deductible that they have to pay.
Second, interoperable health information technology. I’m not a computer person so, I don’t understand why it’s still not done after ten years of it being promised that we’d all have EMRs but it’s not. And because of that, we have major care coordination problems.
And then, number three, the number one barrier to affordable healthcare for Americans is high healthcare costs, okay? We can beat around the bush as much as we want to but high healthcare costs are the reason why we can’t afford to buy our drugs, why we can’t afford certain inpatient treatments. And so, we can complain about the way that supply chain works or some of the practices of providers. But unless and until we find a way to get those costs to come down whether it’s the list price or the price that’s being asked out-of-pocket, it doesn’t make a difference. High costs are a major barrier and we have to do whatever we can in that space to make some progress.
Kirsten Sloan: Robin, you had mentioned a few things. Anything else you wanted to add?
Robin Gelburd: Sure. I think that there are some laws and regulations that it would be worth reevaluating. Because as we’re seeing the dramatic revolution going on in the healthcare system in terms of new venues for care whether it’s telehealth, retail clinics, so on and so forth, there are some access issues in terms of primary care and some other services. And some of those laws and regulations were written many, many years ago and are not keeping pace with some of the need and appetite for convenience, for access, and they would be worth revisiting by looking at some evidence-based studies in terms of what kinds of services are being done in those other venues.
Because it also goes to cost. There are real variations, as we see on the claims, having the same exact service in some of these different venues. So, I think it’s an area worthy of additional study.
Kirsten Sloan: Thank you. We have time for one more question from the audience. Yes?
Mike Miller: Thank you. Mike Miller, I’m a health policy physician. And I wanted to just get back to the data issues. I’ve done a lot of work with some big companies and governors and it gets – the challenge of finding out exactly what kind of part of the system you’re trying to focus on is critical. For example, 5% of people represent 50% of healthcare costs. So, just looking at it as one big amorphous blob is really a mistake. And similarly, in the employer-based insurance community, some big companies retain employees for a long, long time, they can take investments. Whereas other kinds of industries – maybe retail or service industries – there’s a lot of turnovers. They want different incentives.
So, I think – can you talk – panels talk a little bit about using the data to understand the niche that you’re trying to address and the problems you’re trying to solve to reduce cost and improve quality? Thank you.
Kirsten Sloan: James, do you want to start?
James Gelfand: Yeah. So, I love the 5-50. We used to talk 80-20 all the time. One of the most interesting things that the data has taught my company is that if you spend all your time worrying about the 5% or that 20% that has all the claims right now then, the rest of the people in your plan are going to become part of that 5% or that 20% and you have to invest in both and find ways to keep the healthy people healthy, to manage the chronic conditions, but to prevent that erosion of people from going into the high-cost sites. And you’re right. Different kinds of employers and different industries, totally different strategies for how to do that but same concept.
Kirsten Sloan: Holly? Robin? Any other closing thoughts?
Mollyann Brodie: Oh, I mean, all I’d say is that this is also part of the problem when we’re talking about having a conversation with all Americans, right? You’re talking about all Americans. All Americans represent lots of different types of Americans and lots of different families who have lots of different needs and priorities and issues.
And so, I think you’re exactly right that we need to think about what’s different about their local community, what’s different about their family, what’s different about their income situation, what is their political ideology, all sorts of things as we’re thinking about how to have conversations.
Robin Gelburd: Just one final thought. I mean, so, this is where I love what _____ [00:10:30] health on the macro and micro level. While we love helping Ann and John Smith help find their care and their cost, on the macro level to what you’re speaking to, that’s where data can be very helpful. So, for example, you know, we’ve done studies on pediatric obesity and diabetes looking at middle school children with hyperlipidemia and hypertension. Feeding that data to public health officials and educators and healthcare providers so they can start addressing that in public education, through nutrition, through making sure there are appropriate screening devices. So, really using that data to trickle down to the field so that you can build upon what we know and what is happening. And everyone is different and it’s taking those differences and it’s changing and developing.
Kirsten Sloan: Robin, thank you. And thank you all, panelists. Help me thank our panelists for a robust conversation. [Applause]
KEYNOTE 2: What Are Some Emerging Trends and Disrupters?
Mary Ella Payne: Okay. So, thank you so much, Kirsten, for that. That was another great panel this morning. And we do not have a break so, we’re all going to just stay put for our next speaker who has 15 minutes to share. And we basically are letting him share it as you would like. So, whether he’s going to take questions, we’ll just have to figure that out.
But I’m really excited to introduce Dr. Mostashari who, as everyone knows, is the former national coordinator for Health IT at HHS. And he’s also the cofounder and CEO of Aledade – Aledade?
Unidentified Female: Aledade.
Mary Ella Payne: Aledade, okay. Anyway, you have the full bios of all of the speakers in your folder so, I’m not going to waste any more time and turn it over now. Thank you.
Farzad Mostashari: Thanks. Yeah, I’ll do the road mike. Thank you so much for inviting me. This has been great sessions so far and I’m really glad I was able to listen in on some of it.
Just some background on me. I’m an internist by training. I remember vividly being in the primary care clinic at Mass General Hospital and a patient asking me that question that was just talked about on the panel. “How much is this going to cost, Doc?” And I remember saying, “I don’t know.” But I also remember the feeling that I had. What do you think I felt when I said to the patient, “I don’t know?” Anxiety, inadequacy. I should’ve [laughter], for many reasons – greed, pity. No, what was so messed up is I felt a little tinge of pride. Can you imagine that? I was like, “I make medical decisions regardless of money. You know, that’s the billing department’s thing. Like I’m going to recommend to the patient what is best for them. The best medical knowledge, the best randomized _____ [00:13:55],” right? Was I serving my patients? No. That was foolish pride.
Many years later, I was running the – I was the National Coordinator of Health IT. And I had a guest, Rick Gilfillan, who was running the Innovation Center. And he came by and he said, “Farzad, what’s your mission statement?” And I was like, “Ooh, I got this. I don’t need to look at something bad, right? I remember this, right?” I said, “To improve health and healthcare for all Americans through the use of health information technology.” And he said, “Well, what about cost?” Because I had said, “Improve health and healthcare,” right? That’s two of the three parts of the triple A. He said, “What about cost?” And I said, “Oh, we don’t – you know, that’s not my problem.” But you know, if we improve health and healthcare then, it will naturally reduce costs and so, right. And I didn’t feel pride then. I felt a little bit like, “Ooh, should I be thinking about this?”
Because in fact, the question that came earlier, “Is technology – is health information technology the same as every other kind of technology that has had the net effect on American healthcare of increasing costs?” Right? Every new surgery, every new device, every new machine, every new medication seems like it does good sometimes. That’s why PCORI’s important. Sometimes it doesn’t. Sometimes it does harm, right? But one thing has been for damn sure is it increases costs. And I said, “Health IT is different. Health IT is different.”
Now, there may be some evidence that as we went from 9% of hospitals on health IT to 95% of hospitals on health IT in five years, right? Like we actually did that. Did costs go up during that time period? It was actually kind of the lowest growth time. Now, it could just be that everyone was too distracted putting in the systems that they messed up on their billing. Actually, that is a valid hypothesis that part of the dark, the black space, right? That our friends at CBO talk about of like, “We don’t know why healthcare slowed down exactly but it did.” It happened to coincide with that period of a lot of people are spending a lot of time and attention thinking about how to put in those health IT systems. I don’t know. It’s conjecture.
But what I had gotten backwards was health IT isn’t going to do anything unless the people doing it are trying to use it to achieve that goal. I’ll say that again. If you don’t have the right goal, the right tools ain’t going to help you.
So, the question of, “Is health IT going to reduce cost?” gets it backwards. Without directing the mission towards aligning what the people implementing and using the health IT are with societal goals, we’re not going to get any benefit from it in furtherance of those societal goals.
So, you know, we did some good things. Yes, even on interoperability. And you asked me today, “Why isn’t it that people who are sharing data – surely, it was the government. They didn’t put enough standards in.” No, that’s not the problem with interoperability. The problem with interoperability is people don’t have a business model where they make more money sharing data.
So, I left the federal government in 2013, went to Brookings, loved it. Got to think a lot about this question. Here’s the question, right? They asked me to speak about emerging trends and disruptors. Here’s the question you need to ask yourself and it’s an awesome question. I spent nine months at Brookings thinking about this question. Who makes money in America preventing bad things happening to patients? How can you make money – get rich, grow your company, become an entrepreneur, right? How can you make a lot of money preventing people from getting sick and going to the hospital and needing dialysis? We know how you can make money giving people dialysis. We know how you can make money doing ICU services and caps and all the other stuff that we do once people get sick. Who makes money? How do you make money saving lives?
That’s the question. You want to align policy so that individual profit-seeking furthers societal goals. Most of American healthcare policy is set up so that it’s in the opposite direction. People making more money means that why do we need to have all these people doing utilization management saying it’s not good for society? It’s not even good for the patient oftentimes, right? We’re at odds with each other. We’re ripping apart each other. So, of course, we’re not getting good value. Of course, we’re not. But if you set policy so that individual profit motives are aligned with what society wants and what’s good for the patient then, you can step back. That’s the beauty of it, right? That’s the beauty of this idea, right? You create the rules of the playing field then, you let the players play.
I’m going to come back to one case where that sounds great but it can’t happen, and that’s monopoly. Come back to that.
So, I looked at the landscape four years ago and I said, “I spy with my eye one space here, which is physician-led accountable care organizations.” That was the thing I chose. I was like, “I get it. Here, if you save money, you get to keep some of it.” Okay? Who had that incentive before? Did the hospitals have that? Did the doctors have that? No. Who had that – who has that incentive and can do something about it? Because the employers have the incentive but they’re not very – with all due respect to my friend from the previous panel – they’re not very good at doing something about it. Their instruments are really blunt.
So, who can have the right incentives and the ability to influence? Who’s not making a lot of money in the current system, right? Because if you go from the current system to this new system, from volume to value, you go through this valley of death of less revenue, less stuff, right? And then, maybe you pull up on the other end. Who knows, right?
But if I said Primary Care docs, they’re kind of getting screwed in the current system. It’s not like they’re getting paid a lot. You can ask them, “Can you think of the last ten hospital admissions? Could you have prevented one of them?” “Well, yeah, but you know.” I’m like, “What if someone paid you 1,000 bucks for that? 2,000 bucks? 3,000 bucks? What if that was the same – if you could put the same amount of work into preventing one hospitalization as you do right now on 50 office visits, could you do it?” And they’re like, “Of course I could do it. But who’s paying me for that?” And I’m like, “Oh, now, someone could be paying you for that.”
So, that was my cut. And I was like, “Okay. Now, once you decided some primary care, accountable care, and value-based contracts where you share with the employer, with the payor, any savings that you generate.” And that’s grown tremendously. We’re now in 25 states, we have over 1,500 physicians, there’s about two and a half billion dollars of medical costs that we’re managing. Next year, it’s going to be three and a half billion.
So, that’s one example, right? And I sure as heck hope that we make a lot of money so that there’s going to be a ton of capital invested in other people trying to repeat what we’re doing. Because that’s how you change the system, right? You say, “This worked and there’s capital investments to replicate it.” That would be great.
What are some of the other – just in the past few days, what have we heard, right? We’ve heard Aspire got bought by Anthem. What does Aspire do? That’s another example of the disruption. What does Aspire do? Anyone know? [Inaudible response] Palliative care at home. So, they do home palliative care, right? We talked about patient preferences and do we actually spend more or less money at the end of life. If you actually listen to what people want, turns out you spend a lot less money.
Why did we need a startup to do this? Because who was being paid more to go and sit with the patient and treat the patient well and make sure that they’re comfortable and they can live the way they want to live and die the way they want to die, right? Who in American healthcare are Aspire’s customers? ASO health plans? No. Who are they? Medicare Advantage. This is really interesting. I don’t know how deliberate this was but Medicare Advantage – that is a $200 billion market, right? Out of three trillion. It’s $200 billion. But so much of the really, really interesting disruptive innovator companies that have come out of saying, “How do we save money? How do we make money by saving money?” have been really almost entirely in the Medicare Advantage space. Fascinating.
Why? Because in that market, you get a fixed dollar amount for that patient. If you come in below that, you get to keep the rest. And now, there’s a whole bunch of stuff that you get to do that makes – just makes sense. Telemedicine. Who’s doing telemedicine? MA. My model used to be, when I was thinking about this stuff five or six years ago, I used to say Kaiser and the VA. Kaiser and the VA are where the incentives are aligned, right? And that was like one way of doing things where you have top-down command and control, you own everything. That doesn’t scale in America’s fragmented healthcare system.
And the question is one idea maybe was if we just let these health systems get bigger and bigger and bigger, they’re all going to become Kaiser. Not really. They didn’t really become Kaiser. They said, “Why do I need to be more efficient? I can just tell the health plan what my cost is and they will pay me because they have to.”
Aspire, bought by Anthem. Aetna-CVS, right? They’re saying, “We’re now going to have more and more delivery sites of care in the community.” Humana and maybe Walmart, what part of the healthcare field is Humana-Walmart targeting? Medicare Advantage. Iora just got $100,000,000 investment from, among others, Humana. Iora had tried direct primary care. Do you guys know about Iora? Fantastic model, fresh new models of primary care. They can deliver better care, lower hospitalizations. They tried being a direct primary care provider working for labor unions. Didn’t work. They tried setting up a plan on the Exchange, Harken Health with United Health Care. Didn’t work, they lost $60,000,000. They pulled the plug after a year.
Why did they just attract $100,000,000 of investment? Because they finally found their thing. I could’ve told them that maybe a while ago. What is that thing? Where did they find their success? Medicare Advantage. Is it an accident that all of these great ideas about how to lower healthcare, make money by lowering healthcare costs, are taking place in the $200-billion-dollar-a-year sliver that is Medicare Advantage? It’s not an accident. You set the right payment policies and a market will emerge.
The head of CMMI who’s been charged with doing this is phenomenally suited to think about that question. Why? Because he is an entrepreneur who founded a company that lowers healthcare costs and makes money. In what space?
Multiple speakers: Medicare Advantage.
Farzad Mostashari: That was easy. Landmark Health. And here’s the other interesting thing. There’s a lot of things that people are not – they’re not trying to solve the bigshot problem, right? They have this narrow application, right? “I’ve got this telemedicine thing for physical therapy.” The number of different innovators who’ve come up to me and said, “Ooh, I have a better mousetrap to do this little thing. I’ve got a diabetes thing, an obesity thing, a PT thing, you know, renal failure thing,” right? And they’re all trying to find a way to get paid. And they’re all saying, “Medicare should pay for my thing.” And Medicare says – or any payor – is going to say, “Well, that’s just going to increase my healthcare costs. How do I know you’re substituting an existing cost I have with – I know it’s going to be a new cost,” right? It’s a new service.
And particularly, this most disruptive type of stuff we’re talking about is stuff that is not supervised. It’s in someone’s home. How do I know they clicked that app on their phone? You want me to pay you for someone clicking an app on their phone? How do I know that that happened? That fraud-induced potential is massive in fee-for-service.
But once the providers are at risk for the total cost of care then, you have that alignment. I am not – I’m responsible for two-and-a-half billion dollars year in healthcare costs. So many people come to me and pitch me on their thing. Do I willy-nilly go out and say, “Oh, sure, I’ll pay for that tele-app thing?” No, I’m stingy as hell because it’s got to work. It’s got to actually reduce costs if I’m going to do it.
So, how do we go from $200 billion a year to $600 billion a year being under these models? You extend it to Medicare fee-for-service. And that’s the ACO concept. And the big question mark that’s going to come is do we force people after a while to go to two-sided risk? That’s going to be a fascinating discussion. In my view, if you reduce the regulatory risk associated with two-sided risk, if you make it more predictable, if you make it more like MA – if you make two-sided ACOs more like MA, I know groups, physician groups, who are taking full cap risk on Medicare Advantage. Full cap. 100% downside risk on Medicare Advantage. And they’re like, “There’s no way we’re going to go to two-sided ACO risk.” Why? Because of the regulatory, the unpredictability of the benchmarks in how it’s developed. If we made the $400 billion in Medicare fee-for-service more like risk-taking there, if possible, more like Medicare Advantage $200 billion, that would massively open up the amount of potential disruption and these other ideas of how do you make money by saving money.
There’s a fly in this ointment, folks? What is it? I hinted at this earlier. What’s the problem? [Inaudible answer] I did say monopolies, didn’t I? So, we’re seeing more and more and more consolidation and there’s a few problems with – you know, once you’re big, you don’t have to be good. When you’re big, you don’t have to be good. That’s a problem. It’s a problem for patients, it’s a problem for the healthcare system, it’s a problem for cost, it’s a problem for quality. You don’t have to compete anymore. And it would be great, it would be fine if people were consolidating but they weren’t doing anti-competitive behaviors but they are.
So, here’s a few things that we – we did this piece with Marty Gaynor, Paul Ginsberg, who are wonderful authors and I just tagged along with them on this thing for Brookings on making markets work. And we have policy recommendations in three domains, right? One is stop digging the damn hole, right? We have payment policies that are actively promoting consolidation. Stop it. When you pay an independent practice – primary care practice – $.75, $.80 on the Medicare dollar as a commercial payor and $1.50 if they join the health system, you’re digging the hole. You’re laying the seeds for your own demise. When we pay facility fees that double or triple the cost of the same thing done in the same place by the same people, once they got bought by the hospital, we’re digging the hole. When you do 340B pricing, “Ooh, I shouldn’t have gone to 340B. Move on.” [laughter] So, one is make sure that your payment policies aren’t making consolidation.
Second is make sure that if we want to have integration without consolidation, coordination without consolidation, it’s possible but information has to flow. And the reason why we don’t have interoperability is not because we don’t have the technical standards to do it. It’s because we don’t have the business case to do it. Or in many cases, we have people feeling like they can, in furtherance of their business model, they can actually block the flow of information.
This is not a hypothetical for me. We are in 25 states and in a lot of those states, hospitals are not giving their primary care doctors notice when they discharge their patient from the hospital. Could they? Yes, they could. Is it an interoperability problem? No. One hospital said to our primary care doc, “Well, if you want to join our ACO then, you can get access to this data.” See where I’m going with this?
So, Medicare recently asked, “Should it be a Medicare condition of participation? You want to participate in Medicare? That’s great. You’ve got to share data with the patient’s primary care docs and the other providers to help coordinate care.” I ask you all, please, just like write in and say, “Yes. Yes, it should be a condition of Medicare participation.”
And then, finally, on the policy side, we had a new entry, right? So, you don’t want to get people to get too big. If they get too big, you don’t want them to be anti-competitive. But even if you have the first two, as long as the third thing happens, you can still have competitive markets. What’s that third thing? New entry. You’ve got to be able to have new competitors coming in – new entry, new market entrants. We wanted to start an MA plan in a state I’m not going to mention. Why? Because I’m afraid. Think about that for a second, right? I’m afraid – I’m still afraid – of what this dominant health system can do to my docs if we cross them.
We wanted to start an MA plan, a small MA plan. This hospital had a condition – certificate of need from the state for one service line. Meaning they have a state-granted – what’s the word again? Monopoly – for that service line. And they said, “We want docs to join our ACO, not your ACO. So, we are not going to – on this other line of business – we’re not going to accept a Medicare Advantage contract that has anything to do with you even if you pay us more than Medicare.”
So, anybody in America, any hospital or health system that has one out of 400 service lines, a block on that county can have a veto vote on a new MA entry. And we just talked about how amazing MA can be as an engine for this sort of innovation and we can’t get new MA entry. And MA actually is less competitive than the exchanges. People worry a lot about the exchange markets and how few choices we have. MA is much less competitive.
So, one final piece of advice for the administration is extend the idea of being in a central hospital so that any hospital that has a monopoly that you try to negotiate with has to be in-network for a new entrant MA plan.
That’s part of the thinking. I got the hook. Thank you, everybody. But think like someone who wants to start a business making money by saving money. Alright. [Applause]
PANEL 3: What Are Feasible Policy Goals?
Mary Ella Payne: Okay, we’re going to keep moving right along. We’ve got one fabulous final panel. And thank you, Dr. Farzad, that was terrific. But we’re moving on now to our next panel and Julie Rovner is going to be our moderator and she’ll do the introductions for the speakers. And so, I’m going to – well, I guess I should introduce Julie.
Julie’s the Robin Toner Distinguished Fellow and Chief Washington Correspondent at Kaiser Health News and she’s going to moderate our discussion on some feasible policy goals. Thanks.
Julie Rovner: Thank you. Can you guys hear me? Thank you all for hanging in. I know it’s been a long morning. Mary Ellison, I’m Julie Rovner, Chief Washington Correspondent for Kaiser Health News and host of the policy podcast What the Health? which I hope you all subscribe to. I am honored to be here today for this wrap-up panel with two very thoughtful panelists. We’re going to try to synthesize what we’ve talked about here and suggest some possibly doable goals for addressing the seemingly insoluble problem of rising health spending. I’m going to introduce our panelists, each will make some opening remarks then, the three of us will chat and then, I’ll open it up for your questions.
Our first panelist to my right is Douglas Holtz-Eakin. Doug is President of the American Action Forum, a free market policy shop here in DC and former Director of the Congressional Budget Office where I pestered him a lot and he graciously answered most of my questions. Doug was also Chief Economist for President George W. Bush’s Council of Economic Advisors and taught Economics at Syracuse University.
On my far right is Topher Spiro who is Vice President [interruption] – only physically. Topher Spiro is Vice President for Health Policy and a Senior Fellow for Economic Policy at the Center for American Progress, a progressive policy shop here in DC. Before coming to CAP, Topher worked in the US Senate on health and economic policy for a number of senators including Senator Ted Kennedy and Tom Harkin and the various committees that they shared.
So, I want each of you to take about five minutes to react to what we’ve heard here this morning to the extent you’ve managed to hear it, and lay out where you think we should go next. Doug, why don’t you start?
Douglas Holtz-Eakin: Thanks. So, I didn’t get to hear the whole presentation. I gather the opening remarks talked about the outlook for mandatory spending in federal health programs. As a former CDO director, it is my job to stand up in public and say apocalyptic things about the budget outlook. I’m going to do that briefly and just sort of point out that the federal budget is on an unsustainable trajectory, that we have an increasing divergence between revenue and the spending. And at the core of that are the big entitlement programs including Medicare and Medicaid Affordable Care Act, the federal health programs.
And here’s the numerical point. The numerical point is that revenues ultimately, once the tax system is fully phased in, grow at about the rate of the nominal economy. And even if everything that the administration dreams comes true and they grow at 3% as far as the eye can see and you have 2% inflation, that’s 5%. And that’s going to be the resource roof.
And then, there’s the demand for those resources and that’s Medicare growing at about 8%, Medicaid growing at about 5.5%, ACA growing well above that over the next ten years. So, the sort of demand for those resources is badly outstripping the access that – the growth of the resources. And that’s the budget problem and it has to be dealt with. It’s dangerous to our economy. If the economy is damaged, we can’t take care of any of our social safety net needs.
So, for that reason, I think the fundamental thing from a budgetary point of view is to put these programs on a budget. To no longer give them an unrestricted draw in the US Treasury unless the US taxpayer – this might sound radical but it’s actually something that the Democrats did in the ACA. They put Medicare on a budget through the Independent Payment Advisory Board, which had instructions that said if Medicare gets too big of a fraction of GDP, make it smaller. That’s a budget. Republicans have done this in their proposals for payment support because they say, “Find a senior, figure out their income and their health status. They get a certain amount of money, a defined contribution.” That’s a budget. And doing what would have the beneficial impact of saying to the entire provider beneficiary sector that there is only so much money for this senior. Take good care of them with it and focus your attention on doing that instead of getting more money out of the Treasury. And I think that’s a threshold decision that has to be made.
And then, inside that, you still have a lot of work to do with incentives and alignment incentives and things like that. But I think it would be beneficial for the broader economy in which the health sector inhabits. It would be beneficial for the incentives in these programs. And it’s one of those things where often, you don’t do things you want to do, you do things you have to do. And we’re going to have to do this.
And so, on that upbeat note, I’m going to close and let Topher talk [laughter].
Topher Spiro: So, let me start by agreeing with Doug that we should do everything we can to reduce healthcare costs and healthcare spending but I think for slightly different reasons. For me, it’s not really about the budgetary problem and the deficit problem because I’ll just show one chart here. But if you look at where the US stands in comparison with other countries – you probably can’t see this but I’ll explain what it shows. The US is right here in terms of revenue as a percentage of GDP and so, it’s very low compared to all other developed countries. And this dotted line here is where revenue could be to make the debt stable as a percentage of GDP. So, the US could easily increase revenue by just a few percentage points of GDP and still be right here in comparison with other developed countries.
So, for me, it’s not necessary to attack healthcare spending for budgetary purposes. That said, I think it’s important to do for consumers, for state budgets, and to make room for paying for covering the uninsured that we haven’t covered yet to make room in the budget for investments in infrastructure, universal prepay, and other priorities.
And I agree, also, with Doug that we should put healthcare on a budget. But let me return to that later because I think it should be structured very carefully.
So, with all that said, how do we go about reducing healthcare costs? I think it’s important to deconstruct the drivers of healthcare costs. In Medicare, the driver – the research is pretty clear – is the variation in spending on post-acute care. This was the conclusion the National Institutes of Medicine. And for that problem, I think it’s a pretty easy solution that we need to have bundled payments that bundle together the cost of hospital care with the costs up to 90 days after discharge. And for me, I would phase in bundles so that they apply to half of Medicare spending.
And I think, you know, this is something that Doug, I think, has supported the concept of bundled payments in the past and so, I think that’s something we can explore further in the discussion.
So, that’s Medicare. Medicare doesn’t have a problem with healthcare prices because it sets prices administratively. The main driver of healthcare costs for commercial payors is, of course, prices. And I was a student of Uwe Reinhardt. Everything I learned, I learned from him. And he always used to say, “It’s the prices, Stupid,” for many years. I think recently, the consensus in the empirical literature, in the research, has shown him to be right after all of these years. We’ve had a recent JAMA study that compared the US with other developed countries and found that the prices are the major difference, not utilization between us and other countries. And we’ve had the important research from the Healthcare Cost Institute data by Marty Gaynor and Zach Cooper – I apologize if I’m leaving out one of the other authors – but that shows that the variation within the United States in healthcare cost is driven by prices and by the consolidation of hospital systems and market dominance that leads to higher prices.
To address this issue, I think ultimately, we’re going to need some kind of regulation of healthcare prices, of provider payment rates. And you know, that is suggested by a system like Maryland’s that has all-payor rate setting. And so, I think that’s what’s going to be necessary in the long run.
I don’t think Doug is going to agree with that today [laughter]. So, let me throw out some ideas about how we can address prices where there might be some area for common ground or overlap.
One, I think Farzad was talking about when we came in, which is that there are differential payment rates for the same service depending on whether it’s in a freestanding physician office or in a hospital setting. And that really encourages hospital systems to gobble up physician offices and I think that leads to a lot of consolidation that can drive up prices. So, I think we should have site-neutral payment.
Another area that I’d suggest that we explore today would be administrative costs. I think ultimately, again, the bulk of administrative cost is from providers having to deal with many, many, many payors and the billing that’s associated with that. So, again, in the long run, that’s only going to be solved by something like all-payor rate setting.
However, we could talk about ways to save on administrative costs by having, for example, one set of quality measures, one set of credentials that physicians have to submit. Having claims and payment information automatically transmitted electronically. So, I think there are some opportunities there.
And then, lastly, antitrust. There could be much more aggressive enforcement – antitrust enforcement – of hospital mergers and consolidation. I’d be interested in Doug’s views on this but to me, it is consistent with sort of more market principles that we not allow this to happen. I think at the end of the day, there’s still going to be a need for rate-setting because there has been so much consolidation already that it’s tough to go and break up hospitals. But we can certainly take steps to prevent it from happening even more.
So, I’ll stop there and then, hopefully, there’s more questions where I can talk about more stuff.
Julie Rovner: So, I, too, have been a student of Uwe Reinhardt and one of the things he liked to say other than, “It’s the price, Stupid,” is that every dollar we spend on healthcare is someone’s income. And you know, you both, you mentioned bundles and IPAB and premium support. One thing that those three things all have in common, in addition to being ideas that could try to limit health spending, is that they would reduce someone’s income and those someone fought back. And in the case of the bundles and IPAB, they were canceled. In the case of premium support, hasn’t gotten off the ground.
I mean, that seems to be the biggest barrier to overcome is reducing health spending is taking away somebody’s income, is it not?
Douglas Holtz-Eakin: Yes. I mean, it’s the hardest part about reforms. I mean, I can remember sitting on a stage much like this with Christie Romer and her touting the President’s healthcare reforms and the $600 billion that were going to go away. And that was $600 billion of someone’s income and they said no.
So, that is fundamentally the problem. But you know, in all these things, it’s which problem’s the bigger one? And I believe we are now at the point where the larger problem with the federal budget is going to dwarf that and demand some action.
And I want to just emphasize something [interruption]…
Julie Rovner: I think Keith [overtalking] Garman was the first person who told me that in 1989.
Douglas Holtz-Eakin: Yes, I know.
Julie Rovner: It’s going to get so bad the baby boomers are going to start to retire in 2010 and then, we’ll have to do something.
Douglas Holtz-Eakin: I, for example, it’s settling one thing my entire career, it’s just finally arrived. So, [laughter] it’s fantastic.
But I want to emphasize something that Topher said quickly that is actually super-important about the budget. It’s not just the top line mismatch between revenues and the spending. It’s that the spending’s all wrong. Like the mandatory spending programs have just steadily pushed out of the budget the annual discretionary spending. And then, we codify it with these budgets caps and stuff like that. But it was happening anyway on a regular basis. And the annual discretionary spending is a; what the founders thought of as the role of government. It’s national security, basic research, _____ [00:50:52] education, and it is the only place where the federal government invests in the future and makes the future better.
And so, we’ve got these legacy programs from the past crushing our future. It’s all wrong. And so, I think it’s really important to get this under control for that reason. Even if you’re happy to raise taxes to deal with the top line problem, you should worry about the conversation with the federal budget. It’s really not a good thing for this country. So, I think that’s a very important issue.
The second thing I want to say is, you know, I’m a big fan of dealing with this problem not with price controls because that’s what we do now and it’s not working. So, we’ve run that experiment. Medicare’s a huge price control system and it’s getting ported over into every other price in the system and that’s a bad thing. I would like to have price discovery by competitive entities. And I’m a big fan of Medicare Advantage. I loved the keynote speaker teeing up my remarks. But to get that right, to have the many, many, many MA plans that are out there that are tailored to the population health problems in the place where they operate that have financial incentives to deliver the whole bundle of care, right?
I like bundling. MA is just one big bundle. Deliver it, be it financial risk for delivering it effectively. You have two things you absolutely need. Number one, you have to have good quality metrics. Because you have to hit the quality metric and then, have the financial incentive to do it at least cost. So, I endorse this issue of getting the quality that you start out. And this has been, you know, 50 years of doing metrics and things and it’s not yet resolved. It probably won’t be in the near term but that’s an important issue.
Second thing you need is effective competition. And I am deeply worried about the quality of competition in some of these regions and local areas. It is a genuine concern.
Unidentified male: Well I mean it’s just a question of political will. So I think that – it’s not an analytical problem.
Unidentified female: But it’s a serious political problem.
Unidentified male: It’s a serious political problem.
Unidentified male: It’s a serious political problem. I think you know if a Democrat is elected president that here’s going to be a push for Medicare for all or Medicare for more, Medicare option for all and that these kind of cost controls that we’re talking about will be part of that coverage expansion. And you know whether that is politically feasible or not, I don’t know. Right now if you pull Medicare option for all, it pulls at 75 percent. Including a majority of Republications. That’s before it’s attacked. It’s before people like Doug talked about it.
Unidentified male: Okay let me begin.
Unidentified male: You talked about Medicare Advantage and sort of a capitation that is – there’s a fixed amount for Medicare Advantage. I mean so would you support Medicare Advantage for all or you know the Medicare program for all as an option where Medicare Advantage is part of the choice there. Doesn’t that achieve what you want to achieve?
Unidentified male: So I’m going to avoid that question for a second and then answer.
Unidentified female: That was going to be my next question too.
Unidentified male: So number one, I wouldn’t support that because I think you have to have incremental changes. The sort of massive let’s write it down in DC and toss it out there and do it completely differently is never going to work. And that’s my concern about those things.
My second concern, this goes in the category of cheap shot is if I look at the Medicare Extra you offer free chronic care for every American. That’s all the spending; so that’s not going to work.
Unidentified male: Well recommended treatment so –
Unidentified male: I have my reservations and this is the serious point. Think about what happened with the ACA, take all the politics – it was essentially a coverage expansion with the hope that there would be some bend the cost curve in there as well, people talked about that. And what happened? People said coverage expansion, that’s great, that’s more income for us. Let’s kill all the cost _____ [00:02:49]. I think we’d see that all over again. I think you have – if you’re going to do this in the big picture you have to do the – bend the cost curve, free up resources, expand and do the delivery system first. Because I just think – we’ve run the experiment; I don’t think it will work very well. So what was the original question there? Medicare –
Unidentified female: Medicare Advantage for all.
Unidentified male: I’m more incrementalist. I think the right thing to do is you know we’ve got this capitated thing for MA, might be the wrong amount. And why is it the wrong amount? What’s tied to the fee for service benchmark? So let’s just generally run the experiment. I am happy to let Topher take the fee for service system. I’m happy to let him bundle whatever he wants in it. I’ll take the MA system. Make them bid against each other in a generally competitive fashion, find the genuine price discovery on what it takes to cover those guys. What prices you can pay providers and still cover those guys, get some pressure on prices that’s genuine and not hooked to an administrative pricing system and then let people pick; that is the grand tradition of how the US has become the best economy on the planet. Individual choice drive again and that’s ultimately where value has to be determined. We’re not going to have value determined by insurance companies or bureaucrats. It’s going to be people and that’s the way to deliver that sort of exploration to what’s value in coverage; so that’s what I would do.
Unidentified male: Including the non-elderly population?
Unidentified male: They’ve got options too.
Unidentified male: Would you give them the option to choose these plans that are so great –
Unidentified male: No because they already have – because they’re not great right now. The point is they’re failing us and we can’t afford them. So we have to change them but if the first change you always want to make is let’s expand the coverage of everything, then we don’t actually drive down the cost; you’ve made the problem worse. And that’s what happened with ESA and that’s what I think would happen if you went your way.
Unidentified male: Well let me address the ESA point because this is a chart, again you can’t see it but I’ll follow it; I’ll explain what it means. So there was a projection of —
Unidentified male: It won’t matter, they can’t see it.
Unidentified male: We will not have power points, okay? CVO did a projection of Medicare spending over 10 years in 2009 before the ACA went into effect. And then they did another projection in 2017 of the same time period. And what they found is that this line is the original projection, it’s higher – much higher than the revised projection. And the Delta there, the space between the lines is 2.3 trillion. So the ACA you know it’s hard to draw causation –
Unidentified female: Is that Peter Orszag’s bent cost curve?
Unidentified male: This is from a Cap paper.
Unidentified female: I know but I’m asking –
Unidentified male: Peter Orszag would argue that – I think Doug would argue it has to do with broader –
Unidentified male: No, I want to hear Peter’s argument, because I have to debate him tonight in New York.
Unidentified male: So you know I think Peter Orszag would say because we’re talking about Medicare here it’s – Medicare spending is relatively immune from broader economic forces, so there’s something else going on here. You could say it’s not all related to the ACA but there’s got to be some of it that’s related to the ACA. And so I dispute the notion that the ACA didn’t result in any cost savings. I think it resulted in a lot.
Unidentified female: I want to move on for a second to consumers because we talked a little bit about stakeholders who obviously have a resistance to reducing healthcare spending because it’s their income. Consumers at this point I think are more confused than anything else. The consumer panel Molly Ann was talking about when they asked in the Kaiser Tracking Poll about value. A big chunk of people thought value was not necessarily a good thing. They have no concept what value means when it comes to healthcare. So I mean how do you bring along consumers? I mean how do you convince them that this is something that’s not going to hurt them, which of course it might depending on what you cut or that this is something that’s good beyond sort of the big picture, oh my God we’re going broke.
Unidentified male: I think it’s really hard. I think you and I had this conversation probably 10 years ago, exactly the same one.
Unidentified female: Some things in healthcare don’t change.
Unidentified male: There has been this sort of culture assumption in the US that people can’t understand healthcare and someone else should make these decisions. And it’s not up to them, neither the cost nor the course of treatment or anything. Certainly they’re not responsible for their lifestyles that put them in positions that require treatments and things like that. That’s slowly changing. I don’t think where we were 10 years ago on that front, but we’re not yet at the point where the American family feels that they have a responsibility for knowing about this and taking care of it. And they have trusted advisors and the tools available to find out what their options are and what the prices might be and to make decisions that they do in all other aspects of their life. They buy homes –
Unidentified female: Yeah but we don’t have the tools in healthcare.
Unidentified male: I’m 100% agreeing with you. But you know for the system as a whole one of the things the ACA did was just say to everybody how much it costs does matter in healthcare. No one ever thought like that before and that’s – I think that’s part of what goes on in the day is everyone woke up and say “Whoa”. And now we can go to the doctor and they actually explain sometimes if you know what the options are on things. So I think ultimately this is going to be a big cultural change and we are going to need better tools. This sort of notion of a gazillion different prices and no transparency. Genuine price transparency means I know what I’m going to buy and what it’s going to cost me and we’re not there. We are everywhere else and it works.
Unidentified female: Back in the early 2000’s when we were talking about HAS’s you know the argument was we’ll have these high deductibles but people will know how to find out much stuff costs, so they’ll spend their money wisely. So now we have these huge deductibles, much higher and no one has a clear –
Unidentified male: I think that’s a problem.
Unidentified female: So how do you bring the public along?
Unidentified male: Well I think just on that point, you know it was Kenneth Arrow who won the Nobel Prize for – in part for a paper he wrote 40 years ago saying that healthcare markets aren’t really markets, and I think that’s for two reasons. One is that you know consumers don’t really shop around for healthcare like they would for a TV. If you need a coronary bypass surgery you’re not going to look for a bargain basement price, right? So that’s one thing. The other is that the cost is so much compared to ordinary consumer goods, cost of a surgery or whatever that you’ve got to have insurance, which means third party payment, which means that it’s not a true consumer market. And you know I think maybe people like Doug would say well, we should scale back the insurance then and have a lot of skin in the game. And that would be one solution is just have no insurance or have something like the repeal bills from last year drastically cut back the generosity of insurance. But that of course, has a cost to it, which is that it leaves patients exposed to tremendous financial burden. So once you decide that’s not acceptable, once you decide that insurance has to be you know, generous enough that it makes the healthcare affordable to the consumer, then you’re not dealing with the true healthcare market.
And so things like transparency or competition is not going to work in the normal sense. That’s why I think the ultimate solution is that you have to have some regulatory power over the prices that are charged. And that solution flows from Kenneth Arrow’s diagnosis and analysis from 40 years ago.
Unidentified female: So I want to ask you both about things that you see that are working. But before I do, sometime – it must have been in the mid like 2005, 2006 Atul Gawande and Mark McClellan and I forget who else, had a session that might well have been in this room, where they brought in people from around the country who were in places where they had high value, high quality, low cost care. And I think the issue was, as far as Ed was saying there are places like that but it’s not necessarily scalable. So are there anything that you see that’s working that you think maybe could be scalable?
Unidentified male: I’m always nervous about this sort of temptation to scale everything. I prefer Medicare Advantage as the route for delivery system reform is that you don’t attempt to scale it. It operates in our place, it operates in a local economy with local providers and the population and their health. And you don’t pretend that that’s going to look exactly the same 3,000 miles away in another part of the United States. I think that’s an enormous mistake that we make again and again. That’s what’s wrong with the top down approaches; so don’t scale. Let the scale be dictated by the success of the entity and then you’ll be fine. You’ll also don’t create a lot of monopolies that way; so that’s a good idea, monopolies are bad.
Unidentified male: I agree with that. I think that there are, to your question there are examples of reforms that are working. And I’ve got another prop here. Okay. So and this isn’t top down. This is looking at what states, laboratories of democracy have done, so what I would say is scaling based on evidence in the real world, which to me is not really top down. It’s using evidence from the ground up. This is a Cap paper, Center for American Progress paper that we published in April evaluating state innovations to reduce healthcare costs. And it’s available on our website. And we do case studies of Arkansas, Oregon, Massachusetts, Maryland. And I’ll just pick out Arkansas for sake of discussion because we might have most overlap there. Arkansas did something interesting. They did bundled payments across payers, across Medicaid and commercial insurance, including self-insured employers like Walmart. They had the same bundled payments and they did it for I think a dozen procedures. And the results so far have been pretty good. You know nothing totally dramatic; see if I can pick out some examples here. Something like 5-6% reduction in costs for hip/knee replacements. There was reduction in C-sections due to their prenatal bundle. So I think there is something there that could work, could be replicated in other states. And you know we can talk about the other states too if you want, but that’s just an example.
Unidentified female: All right, well I’m going to open it up to the audience because we only have a couple minutes left. I assume there are many questions. Please tell us who you are when you ask your question.
Jim Hahn: Jim Hahn with Congressional Resource Service, and a quick question for Doug. This idea that you brought up between competition between fee for service and MA. How do you solve the problem selection, because most of the evidence, most of the science shown that even now there is a bias for healthier individuals, both on the part of the insurers as well as the individuals themselves, just like for managed care. So how do you solve the selection bias or is it the intent the fee for service would just price itself out of existence? And I hope you don’t say risk adjustment because that science is not there yet.
Unidentified male: I was going to say risk adjustment. But what I was going to say is that the Achilles Heel thus far of all this are the risk adjusters. And that’s not a sexy topic. Because it’s not a sexy topic we hold a whole day symposium on it in AAF with _____ [00:16:44]. And really for these bundles to work at whatever scale, you have to risk adjust what’s going in. And that’s proven to be problematic to date but you can’t dodge that forever. We just have to keep working at that science and make it as good as possible. It’s an important part of getting the composition on the right metric and not competing. We’ll have some trouble, I agree but you know I refuse to believe that the fact next step is going to be imperfect is a good reason to stay where we are, and I can’t accept that.
Unidentified female: Okay.
Kim Zabarek: Kim Zabarek with the American Academy of Nursing. Back to the question of its somebody’s dollar, so therefore we’re not going to make that change. I just put this question out to you. A lot of “average” Americans who worked on construction lines etc. had to lose their job for technology to advance. How come it’s not okay for more powerful players in our society to have to also take the fall so to speak for advancements to be made?
Unidentified male: I think it’s perfectly okay. I really do but I was born without a soul.
Unidentified female: I think it was more of a political question, not a moral question.
Unidentified male: That’s one of the political economy calls you have to make. And one of the reasons I like bottom up stuff is it’s not the President of the United States or a coalition of Senators saying “You are going to lose your income. We’re going to use more low priced providers instead of you, the high priced guy”. It happens, right? The market drives those decisions and it’s not done in a political fashion. I think it’s easier to get done in that way. But it will happen. I think that’s exactly right.
Unidentified male: I mean what can’t continue forever, won’t. But I think on the political question it’s important why you’re doing it. So if you’re doing it to just reduce the budget deficit that’s not going to get people really excited.
Unidentified male: I think we’ve proven that.
Unidentified male: If you’re doing it to pay for Medicare option for all or if you’re doing it to pay for universal pre-k or something like that, that is I think how you get the political will, or if you’re going to get political will that’s how you’re going to get it.
Unidentified female: I think we have time for one more question.
Unidentified female: So the topic of this forum is feasible policy goals and we’ve been talking about some pretty big broad ideas for the last 30 minutes or so. I wanted to know from each of you in terms of feasibility if we could describe that as policy that’s potentially rolled down at the state level within the next two years what do you see as actual feasible policy goals that could be implemented out of state. Just as an example, something that I don’t think we talk about enough would be loosening regulations on mid-levels and perhaps seeing more of those flood the landscape market. So I wanted to know from each of you what you think something like that might look like.
Unidentified male: In the issues of full disclosure, _____ [00:20:28] sent me some questions that would include things like what could be done legislatively and the answer is none. What can be done administratively? Was there a consensus about the fact that we’re not going to get anything done legislatively; so that’s why we didn’t talk about those things?
Unidentified male: But I think that you’re right, over the next couple years the – if anything is going to get done the action is going to be at the state level.
Unidentified male: I agree.
Unidentified male: There you know, that’s why I like to talk about the state models. Because Arkansas is a red state. And you can see – and I think Tennessee did something similar. You could see other states doing the kind of bundle payment model that Arkansas did. You could see states doing things like transparency, you could see them doing things on scope of practice. And that will be driven probably by state budgetary pressures more than anything else. So I think that there’s some possibility there.
Unidentified male: I just want to concur. I think I’ve talked for a while that the next big round of healthcare reform is at the state level and it is the scope of practice, the competitive landscape and some of these state initiatives on the state health programs.
Unidentified female: That would be a good place to stop because it’s a good topic for next time.
Mary Ella Payne: It’s nice to end on an agreement between both of our panelists. We thank them and Julie. And again I just want to briefly ask everyone to fill out the evaluation forms and I just want to emphasize again, the Alliance for Health Policy, our job is really to convene and educate, inform and continue the conversation. So I think we learned a lot today with a variety of different viewpoints, so thanks again for everyone for coming today. We have more summits and briefings scheduled, so just keep on our website and take a look at what’s in your packet. Thanks again.