Policy Support for Cost
Containment
Paul B. Ginsburg, Ph.D.
Presentation to “The Rising Costs of Health Care:
What Can be Done,” Alliance for Health Reform,
June 12, 2012
Urgency for Cost Containment
 At 18 percent of GDP, trend of GDP+2 highly
challenging
 Federal and state fiscal challenges
– Revenue growth roughly in line with GDP
– Expanding fiscal risk for governments as private coverage
less affordable
 Rising drain from cash compensation increases
Vision of Delivery System Reform
 Providers taking responsibility for populations
 Better coordination across care settings and
providers
 More effective management of chronic disease by
both providers and patients
 Greater role for primary care
 Support from both provider and payer leadership
Provider Payment Reform
 Key payment tools
–
–
–
–
Global payment (including ACOs)
Episode bundles
Primary care medical homes
Sharing savings: at least for transition
 Key to pursuing the vision
– Motivate providers
– Support providers
 Importance of coordinating payers
Role of Medicare and Medicaid
 Large enough to engage providers
 Inspire/engage private payers
– Credibility with providers
– Pioneer ACO contracting with private payers
– Essence of Comprehensive Primary Care Initiative
Piloting Provider Payment Reforms (1)
 Current pilots differ from past demonstrations
– Approaches from ACA and CMMI
– Much larger scale
 Importance of current pilots
– Refine approaches to payment
– Engage provider leaders
– Point direction for future payment to provider community
Piloting Provider Payment Reforms (2)
 Constraints of engaging volunteers
– Need to peg rates to provider-specific spending
 Alternative is “adverse selection”
– Limits upside for providers
– Limits on savings that can be achieved by payer
– Not viable for the long term
 What does Round 2 contract look like?
– Avoid pilots for better-developed approaches
 Needed for bundling post-acute care?
– Not an issue with medical home pilots
Transition from Pilots to Policy
 Successful pilots cannot remain as pilots
 Providers will be divided over pace of transition
 Steps to ease transition
– Advance notice
– Blended payment (shared savings)
 Private payers cannot pursue “policy”
– Provider interest in parallel methods
– Option of policy to require uniform methods
Engaging Patients
 Striking contrast between private and public payers
– Private: cost sharing incentives to choose higher-value
providers
 Opportunity to shift provider mix
 Add to provider incentives
 Reformed payments or similar calculations
– Medicare: no patient financial engagement
 Additional barrier: supplemental coverage
 Concern about political risks from lack of engagement
Market Concentration
 Extensive debate around ACO shared savings
concerning concentration
 Forces pushing consolidation much broader
– System of future frightening to small hospitals and
physician practices
 Although IPAs in CA and MA show a model for practices
– Closer alignment of providers important for integration
 Challenge of passing gains in efficiency to private
purchasers and consumers
Expanding Market Approaches
 Narrow network plans and tiered designs
– Tiered designs dependent on “pro-competitive” legislation
 Additional pressure on premiums pushing these
approaches
– Weaker economy
– Anticipation of “Cadillac” tax
– Fixed contribution design of tax credits under ACA
 Success of market approaches will determine
whether direct regulation pursued
Additional Approaches to Costs
 Payment reform the most promising approach
– Consistent with shared vision
– Well-defined path to success
 But other approaches have potential as well
– Avoid putting all bets on single strategy
– Most strategies complementary
– Tax treatment of health insurance most directly related
 Outcomes research
 Health improvement