Payment Reform and the Centers for
Medicare & Medicaid Programs:
A Discussion of Coordinated Care & Indian Health Programs
Submitted to:
Rodger N. Goodacre
Tribal Affairs Group/CMS/OEABS
7500 Security Blvd. S1-20-20
Baltimore MD 21244
410-786-3209
rodger.goodacre@cms.hhs.gov
Submitted by:
Kauffman & Associates, Inc.
South 165 Howard St.
Spokane, WA 99201
Contact: michael.meyer@kauffmaninc.com
Prepared by Edward Fox, PhD
July 21, 2011
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Table of Contents
Health Care Reform: Access, Quality, and Cost .............................................................................. 3
Payment Problems and Waste and Inefficiency in Health Care Spending .............................. 3
Payment Reform ............................................................................................................................. 4
Indian Health Program Experience with Payment Reform in CMS Programs ............................ 4
Recent Indian Health Program Experience with Payment Reform 2011 .................................... 4
Payment Reform Under Health Care Reform ............................................................................. 5
Affordable Care Act and CMS Initiatives to Coordinate Care ......................................................... 5
Other Coordinated Care Initiatives ............................................................................................. 6
Federally Qualified Health Centers.......................................................................................... 6
Medicare Shared Savings Program and Accountable Care Organizations .............................. 6
Blending of Payment Streams (Medicare, Medicaid, and CHIP) ............................................. 7
Do Indian Health Programs Have the Same Incentives that Lead to Overspending and
Inefficiencies? .............................................................................................................................. 7
CMS and Indian Health Programs ............................................................................................... 8
Coordinated Care Principles ........................................................................................................ 8
Indian Health Programs and Coordinated Care Principles.......................................................... 8
Recommendations for CMS Support for Innovative Accountable Indian Health Programs .......... 9
Conclusion ..................................................................................................................................... 10
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Health Care Reform: Access, Quality, and Cost
Health care reform is broadly defined as all recent legislation and programs that intend to
increase access to health care services while controlling costs and ensuring quality. The
Affordable Care Act is one way to achieve this vision. The first goal in the Affordable Care Act,
increased access to health care services, is largely accomplished with insurance market reforms,
Medicaid expansion, health insurance exchanges, and a mandate to obtain health insurance.
The goal of controlling costs is the object of payment reform. This report focuses this
multifaceted attempt to lower costs while maintaining or improving the quality of care by
changing how providers are paid to deliver health care services with new modes of health care
delivery that coordinate care across all providers.
Payment Problems, Waste and Inefficiency in Health Care Spending
It is widely believed that there is enough money spent in the U.S. for health care services to
provide all Americans the best health care in the world. Although the U.S. does provide the best
care to many, its overall population statistics are poor and give strong evidence that there are
inefficiencies.1 Regional variations, highlighted by the
What is the payment problem
Dartmouth Atlas, point to dramatic variations in
to which payment reforms
expenditures without concomitant variations (in the
are considered a solution? It
expected direction) in quality. That is, spending in some
regions of the country is two or three times more per
is waste and inefficiency in
capita than other areas with similar or worse results in
health care spending caused
quality of care. This evidence has resulted in the consensus by perverse incentives to
that if efficiencies can be gained, quality can actually be
“over-doctor” patients and
improved with little or no increase in expenditures.
neglect care coordination.
Some of the inefficiencies in health care services are listed
in the text that follows.
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Perverse incentives that reward volume
Fee-for-service payment encourages more services regardless of medical need
Profit motive when providers share profits (also encourages more services)
Quality is not measured or tied to payment
Fear of lawsuits results in unneeded costs for lab test, x-rays, and other screening
Minimal coordination across the spectrum of care (medical, behavioral health, dental)
Minimal coordination between primary care, hospitals, and specialists
Accountable care organizations and other payment reforms will make changes in the delivery
system likely if certain conditions are met. A corollary is that improvements in efficiency for the
care provided for the most expensive patients, those with chronic conditions (and often dualeligible for Medicaid and Medicare), is the best target for early attempts to promote this new
1
Docteur, E., & Berenson, R.A. (2009). How Does the Quality of U.S. Health Care Compare Internationally? Urban
Institute.
3
provider type. For example, dual-eligibles are a priority for early attempts at payment reform to
test methods and innovations.2
Payment Reform
Payment reform is not new. Prior to 1983, Medicare and Medicaid paid all claims according to
usual and customary or cost-based fee schedules. The development and subsequent
refinement of the Diagnostic Related Group (DRG) payment rearranged incentives that research
has proven improve quality and lower costs. In the mid-1990s, many states began utilizing
managed care for their basic Medicaid programs. Managed care organizations were given a set
amount per person (per capita payments) for a defined set of benefits and assumed the risk
that costs would not exceed their estimate of the amount needed to operate their programs.
The percentage of Medicaid beneficiaries in managed care rose from 10% in 1999 to 71% in
2009.3 It is important to note, however, that the 71% of beneficiaries in managed care
represent just 20% of overall Medicaid spending. That means most aged and disabled
beneficiaries with chronic conditions are not in managed care in state Medicaid programs.
Indian Health Program Experience with Payment Reform in CMS Programs
Medicare is an important but small part of revenue for Indian health programs. In addition,
since there are only two tertiary care hospitals in the Indian health system, the move to DRGs
was of very limited consequence for Indian health programs and the estimated 169,000 users of
the Indian health programs funded by the Indian Health Service (IHS). There are an additional
300,000 American Indians and Alaska Natives (AI/ANs) who are not IHS users or Urban
Programs users who are Medicare beneficiaries.4
Medicaid managed care, however, was extremely disruptive to Indian health programs when it
rolled through the states from 1995 to 2000. States did not consult with tribes prior to
development of managed care programs, and the result was lost payments to Indian health
programs. In addition, many patients were automatically assigned to or given no choice but to
choose a managed care program. Despite this involuntary assignment, most still sought and
received care in the medical home: their Indian health program. Unfortunately, that program
no longer received payment for services provided. At great cost to tribes in time and effort, a
multi-year (1995-2000) and nationwide campaign coordinated by regional health boards, the
National Indian Health Board (NIHB), and tribes ultimately modified the worst aspects of the
managed care payment reform.
Recent Indian Health Program Experience with Payment Reform 2011
In 2011, Indian health programs became much more familiar with payment reform efforts in
their states’ Medicaid programs. Six states stand out as aggressively pursuing payment reform
2
Nine million Medicare-Medicaid enrollees accounted for $120 billion in spending in 2007-twice as much as that
spent on all 29 million children covered by Medicaid and CHIP in that year. (Testimony of Melanie Bella before the
Committee on Energy and Commerce, Health Subcommittee, House of Representatives, June 21, 2011.)
3
Martin, Lorie. (2011, May). Eight Key Lessons for Managing Care in Medicaid in 2011 and Beyond. Center for
Health Care Strategies, 1.
4
Author’s analysis of American Community Survey. (2009).
4
in their Medicaid programs: Arizona, California, Minnesota, New Mexico, Oregon, and
Washington. It is no mere coincidence since each state has far higher than average use of
managed care in their Medicaid program. The potential impact on AI/ANs is great since each of
these states has a large Indian population.
It is important to note that for the most part Indian health programs and AI/ANs are exempt
from managed care. It is very likely that it will be relatively easy to extend current exemptions
to the expanded managed care programs that will now cover the aged and disabled. In fact,
Oregon and Washington have both indicated that this year’s initial steps toward managed care
for these groups will exempt AI/ANs. There is some evidence that there was no substantial
effort to include AI/ANs or Indian health programs in these important expansions. This pattern
of tribes being brought into the discussion of managed care follows the earlier pattern of 1995
to 2000. That is, tribes were more of an afterthought and were only included after much of the
planning and development of proposed changes was completed. 5
Payment reform under Health Care Reform
Payment reform from 2011 to 2014 will affect all aspects of revenue for Indian health
programs, including Medicare, Medicaid, and the Children’s Health Insurance Program (CHIP).
In addition, the principles of payment reform are likely to be as common in private insurance. It
is important that the IHS, Tribes, and Urban Programs pay careful attention and become active
participants in payment reform debates. Although often presented as a well-accepted practice,
payment reform is, in fact, controversial, often described in platitudes rather than hard
evidence, and it is deserving of careful analysis in order to make this reform a benefit instead of
a harm to Indian health programs.
Affordable Care Act and CMS Initiatives to Coordinate Care
The Centers for Medicare and Medicaid Service (CMS) have a number of initiatives relating to
payment reform. Two new centers have been established to promote new payment and
delivery system models. The two centers are the Center for Medicare & Medicaid Innovation
and the Medicare-Medicaid Coordination Office, sometimes called the Office of Duals.
The Center for Medicare & Medicaid Innovation: The Innovation Center has
the resources and flexibility to rapidly test innovative care and payment
models and encourage widespread adoption of practices that deliver better
health care at lower cost.
Medicare-Medicaid Coordination Office: The Federal Coordinated Care
Office funds programs that seek to improve quality while reducing costs by
promoting coordinated care for those who are eligible for Medicaid and
Medicare. Often disabled or with chronic conditions, this population is
thought to be the highest priority for payment reform.
5
April 19, 2011, letter from the Northwest Portland Area Indian Health Board to Bruce Goldberg, MD, Director,
Oregon Health Authority.
5
Other Coordinated Care Initiatives
Three examples of federally supported innovation promise to extend support to smaller
practices and safety net programs, including support for federally qualified health centers, the
Medicare Shared Saving Program, and the request from states to CMS for approval of the
blending of the Medicare and Medicaid payment streams.
Federally Qualified Health Centers
The Department of Health and Human Services (HHS) Federally Qualified Health Center
Advanced Primary Care Practice (FQHC APCP) demonstration project is a new Affordable Care
Act initiative that will pay an estimated $42 million over 3 years to up to 500 FQHCs to
coordinate care for up to 200,000 Medicare patients.
The FQHC APCP demonstration will show how the patient-centered medical home (PCMH)
model can improve quality of care, promote better health, and lower costs. Participating FQHCs
are expected to manage chronic conditions and actively coordinate care for patients. To help
participating FQHCs make these investments in patient care and infrastructure, FQHCs will be
paid a monthly care management fee for each eligible Medicare beneficiary receiving primary
care services. In return, FQHCs agree to adopt care coordination practices that are recognized
by the National Committee for Quality Assurance (NCQA). CMS and Health Resources and
Services Administration (HRSA) will provide technical assistance to help FQHCs achieve these
goals. Whether Indian health programs will participate in this initiative is not yet clear;
however, they might because Indian health programs have FQHC status.
Medicare Shared Savings Program and Accountable Care Organizations
Accountable care organizations (ACO) consist of providers who are jointly held accountable for
achieving measured quality improvements and reductions in the rate of spending growth for a
defined population of patients.6 ACOs are a new Medicare provider type. In addition to
hospitals, physicians, nursing homes, and Indian health programs, Medicare will pay ACOs for
provided services. There are many mechanisms to choose from to establish ACOs to achieve the
triple aim of quality care, reducing costs, and improving population health.
6
McCllellan, M., McKethan, A.N., Lewis, J.L., Roski, J., & Fisher, E.S. (2010, May). A National Strategy to Put
Accountable Care into Practice. Health Affairs, 29(5), 982-983.
6
Examples of the Main Payment Reforms: Payments to Providers
Full capitation: Patients are locked in and a per-person payment is made for all services.
Risk is borne by the health provider/program/health care organization.
Partial capitation: Provides up-front payments but requires accountability only for
services/providers that fall under partial capitation.
Bundled payments for episodic care: Promotes efficiency and care coordination within an
episode. Typically used for hospital care, it encourages coordination across providers for a
duration of care that typically extends 30 to 60 days post discharge.
Primary care medical home: Supports primary care physicians’ efforts to improve
coordination.
Accountable Care Organizations (shared savings): Like full capitation, it makes providers
accountable for total per-capita costs and promotes more coordination and lower costs.
Blending of Payment Streams (Medicare, Medicaid, and CHIP)
States are seeking CMS approval to blend Medicare, Medicaid, and CHIP funds to transform the
delivery system for patients for whom the state purchases care. Some states are even including
state government workers, dependents, and state retirees in the purchasing pool. This blending
allows states and the federal government to target the high-cost, dual-eligible (Medicaid and
Medicare) population. Washington and Oregon are examples of states proposing such blending
of funding. Although some have assumed all federal funding might eventually be “blended,”
there are no current proposals to include IHS funds at this writing.
Do Indian Health Programs Have the Same Incentives That Lead to Overspending and
Inefficiencies?
In order for CMS to promote improvements in the value of the care they purchase from Indian
health programs and expenditures they make for AI/ANs (and others who use Indian health
programs as their medical home), it would be wise to start with a review of their characteristics
as they relate to coordinated care initiatives.
Indian health programs do not have the commonly cited characteristics that promote
overspending for the following reasons.
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All Indian health providers are government employees; they have no private, pecuniary
interest in the health program.
Overspending threatens the viability of a tribe’s health program, and with global
budgets Indian health programs and their providers understand that their patients will
get less if they provide more than is medically necessary.
There are no direct financial incentives to the provider that would promote unnecessary
procedures, prescriptions, or appliances for the provider’s personal or monetary gain.
Indian health program providers have federal tort claims act coverage, do not purchase
their own medical liability, and have little reason to “over-doctor” based on the fear that
they will be sued.
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Indian programs already operate under global budgets—the payment mechanism
proposed for ACOs. IHS funding is determined annually and programs maximize services
under a typically severe budget constraint.
CMS and Indian Health Programs
Although a majority of Indian health program funding is from the IHS ($4.4 billion in 2011),
Medicaid, CHIP, and Medicare expend at least $2 billion for patients of Indian health programs.
Medicaid averages somewhere between 20% to 35% of the total revenue of Indian health
programs and some programs receive over 50% of their revenue from CMS payments for
Medicaid/CHIP. Medicare is seldom more than 5% of the revenue of Indian health programs.
Medicaid typically pays for services as an encounter rate that state Medicaid programs
characterize as fee-for-service. There is some question about whether or not Indian health
programs capture diagnostic codes since this is not required for the encounter rate; however, in
fact, most do. Indian health programs that previously did not utilize diagnostic codes are
increasingly doing so as they implement electronic health records. Resource Patient
Management System (RPMS) contains a large majority of the health records for the IHS user
population (approximately 1.5 million); most health patients’ diagnostic codes are entered
whether or not payment is by encounter rate or procedure code.
Coordinated Care Principles
Coordinated care substantially changes the payment and delivery system in order to reduce
incentives to overspend. The dilemma is how to maintain or improve quality while constraining
expenditures through devices such as global budgets with shared savings and bundled
payments for episodic care (with risk adjustments). To ensure quality, it is important to:
1.
2.
3.
4.
5.
6.
7.
promote value over volume;
provide incentives for quality and efficiency;
require local accountability;
allow for variation;
ensure greater transparency for consumers;
promote patient participation (e.g., patient directed care); and
focus on population and individual patient health indicators.
There is ample evidence that Indian health programs are well aligned with these coordinated
care principles. Most programs actually exceed current integrated care providers in ensuring
local accountability, patient participation, and a focus on population health indicators. This
assertion deserves further examination, but at least it is clear that the current practice of Indian
health programs in not at odds with these principles. The following is a preliminary review of
how Indian health programs align with these principles.
Indian Health Programs and Coordinated Care Principles
Indian health programs have many of the features that ACOs seek to achieve.
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Indian health programs have a well-defined population of patients.
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Quality is carefully monitored in that all or most patients are community members
creating strong incentives to providers to deliver quality care, even under global
budgets.
The health of the community (or population) is measured as well as the health of
individual patients.
Rationing, one response to global budgeting, is formalized with well-understood
priorities.
Providers are held jointly accountable for the health of their patients.
IHS standards of care are practiced by all IHS programs and many Tribal and Urban
Indian health programs.
Nearly every IHS program measures results through a health information system, RPMS,
which is certified for meaningful use criteria. Tribal programs either use RPMS or are
planning to implement electronic health records with reporting capabilities.
Case management is highly developed in Indian health programs and providers have
well-developed (sometimes familial or personal) relationships with patients.
Wrap-around care or enabling services such as housing and transportation are highly
developed. Many tribes include employment services, Temporary Assistance for Needy
Families (TANF), and a full range of social services within a comprehensive social and
health services program.
Tribal governments are very attentive to their health programs, more so than nonIndian governments.
Community support for the health program is strong and nearly all community members
participate in at least one of the health program’s services.
Patients increasingly feel empowered to direct their care with providers (often with
family members’ support).
This tentative list of Indian health programs’ characteristics is evidence that with a consultative
process these programs have a strong base for inclusion in coordinated care initiatives. In fact,
Indian health programs offer many innovations for coordinated care that should be considered
by any coordinated care reform.
Recommendations for CMS Support for Innovative Accountable Indian Health Programs
Recommendations for CMS will come from tribes and the Tribal Technical Advisory Group, but
the following are offered as suggestions that are presented in this report on payment reform.
1. Ensure consultation with states and tribes occurs prior to approval of payment reforms
for dual-eligibles and the aged and disabled population in the Medicare and Medicaid
programs.
2. Provide support for IT infrastructure at the clinic level.
3. Provide support (not just an invitation to participate) for Indian health programs’
participation in the development of health record data banks and regional health
information exchanges in order to promote coordination of care across the spectrum of
care.
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4. Require that CMS-participating hospitals and specialists be available to Indian health
programs.
a. Provide support for innovative proposals that integrate Indian health programs
with specialists and hospitals.
5. Provide training in quality improvement.
a. States need to work with tribes to integrate the systems used by Indian
programs with state approved systems.
b. Evidence-based medicine should be tailored to Indian health programs.
6. Provide financial support for research on successful coordination of care in Indian health
program and dissemination.
7. Provide support for leadership development in coordinated care for Indian health
programs.
Conclusion
It is very likely that Indian health programs are in agreement that there needs to be
improvement in the coordination of care for their patients. The all-inclusive encounter rate
used by tribes for over 15 years has wide support in the Indian health system. Tribes, having
wrestled autonomy and control from the IHS over the past 35 years, are not likely to look
favorably at giving up that autonomy to ACOs or managed care plans. That is, they are likely to
want to participate in coordinated care in a way that still preserves their autonomy. Indian
health programs are not opposed to change, only change that does not include their views or
threatens the right to operate their own health programs. The promise of coordinated care
improvements makes tribes willing partners in a collaborative effort to work toward higher
quality care as long as the risks of unintended consequences are addressed with meaningful
consultation.
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