With Obamacare in limbo, the transition toward value-based care faces big challenges

Published on
January 24, 2017

The recent election has dramatically changed the political landscape and opened up a major debate on the direction of health policy. All sides agree that the nation must find new ways to limit the growth of health care costs while also stimulating new efforts to improve quality and service. The main thrust of health policy in recent years has focused on health care “value” — developing incentives that reward better health outcomes at the same or lesser costs.

Congress and Medicare have created many payment and delivery programs to measure and reward value, including paying hospitals more for limiting readmissions and infections, creating financial incentives for organizing into Accountable Care Organizations (ACOs) and bundled payments, and now paying doctors more for measurably improving quality.

But there are signs that the new Congress and Administration may diminish this emphasis on value. Some Congressional and physician leaders have said that they believe fee-for-service is a superior means of paying doctors, and a group of Congressional members has challenged Medicare’s support for bundled payment pilot programs. As policymakers are considering the repeal and replacement of the Affordable Care Act (ACA), employers will advocate to save these policies that promote high-value care.

For example, a complete repeal of the ACA would eliminate programs that provide incentives to improve quality and patient safety, and reduce unnecessary hospital readmissions. A repeal would also eliminate the Center for Medicare and Medicaid Innovation, a catalyst for the design and testing of new payment and care delivery models. These government programs have been effective and have received bipartisan support. If they were eliminated, the private and public sector effort to improve health care quality and affordability would be weakened. While the private sector will continue to innovate, a rollback of Medicare’s value agenda would seriously impede the pace of change and improvement in our health care system.

Some critics of the ACA have advocated for a reliance on “market forces” rather than “government intervention” to drive improved health care quality and lower costs. The reality is that reliance on today’s market environment by itself is unlikely to get the results we want. Large employers agree that competition among hospitals and providersis the best way to drive innovation and improvement, but regulatory and legislative action is needed to ensure that the health care marketplace is truly competitive.

Ultimately, we all want to see better quality and more affordable health care. As the debate over how to achieve these goals continues, it is essential to consider what has actually worked and what lessons early efforts can teach us. And there are lessons to be learned from innovative programs that failed, or did not fully achieve their goals.

Policymakers and journalists should look for evidence for or against value-based approaches in markets across the country where employers and public agencies have experimented with all of these approaches – often with large populations involved.

Public and private health care purchasers need to work together to boost quality, lower cost of care

Today there is an important public debate about continuing coverage for the 20 million people covered through Obamacare, but we should also be worried about the access to and quality of care for the other 300 million, which may also be in jeopardy. Ultimately, the U.S. won’t arrive at affordable health care without redesigning the care system itself, and stimulating real competition based on value to patients. Providing insurance to every American is important, and engaging consumers in their care decisions is important, but these strategies have not yet prompted deep re-engineering of how we use health care resources to improve health.

Working with health insurance plans and health care providers, some employers have implemented innovative payment and delivery models, including accountable care (ACO) plans, bundled payments for episodes of care, centers of excellence, high-deductible health plans, and value-based insurance designs. These models have produced important lessons for policymakers. For example:

  • ACOs can produce improved health and efficiency — but only if they are held to high standards and full accountability for quality outcomes, patient experience and total cost of care. For example, see reports on the ACOs at Intel and Boeing.
  • Bundled payments for episodes of care can lead to better outcomes, fewer complications, and lower costs — but only if there is effective coordination across the care continuum.
  • High-deductible health plans can increase cost-consciousness among consumers and reduce utilization — but only if they are designed so that people don’t save money by skimping on needed care, as well as avoiding excessive care.

Employers have also learned that no single employer, by itself, can implement these kinds of changes at a large enough scale to trigger meaningful redesign of the entire health care system. That’s why they must work with other employers in their community, and with large public sector health care purchasers — such as state employee programs and even Medicaid agencies — to change the incentives that shape hospital and physician behavior. Private and public purchasers need to agree on similar goals and standards if they want to see improvements in value. This new form of collaboration is a key element of effective policymaking.

Straight ACA repeal may increase costs for workers and employers

The ACA’s primary purpose was to help the uninsured afford coverage. Without an alternative replacement, a straight repeal of the ACA provisions that expand Medicaid and provide tax subsidies to low-income families would result in an increase of nearly 30 million in the number of people without health insurance, according to the Urban Institute.

Employers in every community will feel the impact of increased numbers of uninsured Americans: Hospitals are likely to increase prices for commercially insured patients, placing additional financial burdens on employers and their employees.

Furthermore, the success of American business depends upon a healthy and productive workforce. If new employees have not been able to afford coverage previously, they are likely to begin work with deferred health care needs. New employees with chronic medical conditions, such as diabetes, may have significant health problems that were not managed effectively without coverage. Any policy change that increases the number of uninsured would not only hurt the families involved, but will drive up the overall costs for employers as well.

Opportunities for journalists to explore these issues

The risks summarized here will play out differently in each market and are best explored on a regional basis. Here are three opportunities to dig deeper:

  • Aligning the interests of public and private health care payers: Many states have leveraged federal State Innovation Model grants or Medicaid waivers to align strategies with private employers and health plans, including Washington, Tennessee, Ohio, Oregon, Arkansas, Minnesota, Vermont, and Arizona. Reporters should talk to their state officials to see what they’re doing to implement these models in their state. How are they collaborating with insurance plans and employers to promote changes in their health care system?
  • Risk of increased insurance costs for workers and employers: Beyond the academic and actuarial studies that have examined “cost shifting” from public insurance programs and uncompensated care to private workers and companies, journalists should talk directly with employers about their interests in maintaining a healthy workforce and avoiding higher health care costs.

As Congress and state officials put forward new proposals to improve quality and reduce costs through public policy, they should be expected to explain to constituents how the strategies they endorse will lead to better value for American taxpayers and patients. 

David Lansky is the president and chief executive officer of the Pacific Business Group on Health.