On October 5, 2016, the National Institute for Healthcare Management (NIHCM) Foundation hosted a Capitol Hill briefing entitled “The Future of Healthcare in America.” NIHCM brought together a distinguished panel of healthcare thought leaders to discuss what they viewed to be the most important healthcare issues for the next Administration and Congress, as well as to highlight their experiences in transforming healthcare.
NIHCM Foundation President & CEO Nancy Chockley facilitated the discussion, which included:
Gov. Mike Leavitt Former U.S. Secretary of Health and Human Services
Bob Kocher Former Special Assistant to President Barack Obama on Health Care and Economics
Uwe Reinhardt Professor of Political Economy, Princeton University
Jeff Roe President and CEO, Premera Blue Cross
JD Hickey President and CEO, BlueCross BlueShield of Tennessee
Governor Leavitt opened by stressing the importance of making sense of “weak signals” as the key to predicting future events. These signals lead him to believe that in the short term, the most pressing issues facing the next Administration and Congress will be the fragility of the individual market for health insurance, Medicaid expansion and state innovation waivers, and the often-in-the-news crisis of pharmaceutical pricing.
Long-term, Gov. Leavitt sees the primary healthcare question of our time as whether the fee-for-service model will truly transform into a value-based payment paradigm, and believes that we are approximately 25 years into a 40-year transition cycle to that effect. The signals leading to his conclusion include the increase in the prevalence of ACOs over the past 5 years, with an estimated 105 million lives covered by an ACO in 2020. He believes that, absent the passage of MACRA, this figure would be only 68 million lives, and views that legislation as a bipartisan affirmation that value-based care is the eventual destination of US healthcare payment.
Bob Kocher is significantly encouraged by the potential for healthcare improvement as evidenced by the interest of technology companies in its transformation. The explosion of health data over the past five years has created tremendous opportunities for both startups and established players to improve access, cost, and quality in new and innovative ways. Kocher presented four policy priorities and made specific recommendations that he believes will be crucial as America’s healthcare system continues to shift toward value-based care:
- Improving exchange marketplaces
- Extending reinsurance and funding risk corridors
- Establishing 4:1 age bands and increasing subsidies for older healthcare consumers to purchase insurance
- Creating larger exchanges based on regions rather than counties and even multi-state exchanges
- Increasing the individual mandate penalty and subsidies
- Mitigating hospital market power
- Require commercial payors to pay equal to Medicare rates if they reach a local market share threshold
- Enact site-neutral payments
- Link 340B pricing to patient income
- Use ZIP codes rather than hospital referral regions in approving hospital mergers
- Impose large penalties on hospitals for failing to achieve promised quality benefits
- Designing Alternative Payment Models smartly
- Require movement to two-sided risk models
- Cap losses at 100% of Medicare revenue
- Move to regional benchmarks after a period of three years
- Make upcoding criminal and use coding intensity adjustment to fully offset it
- Reward patients for engaging in their own care
- Saving more money faster
- Increase labor productivity (especially administrative labor)
- Simplify administrative requirements
- More bundles and risk models
- Behavioral health
- Medical malpractice reform
- Alternatives to hospital-based care
In closing, Kocher stated that the Affordable Care Act is working better than expected, and that focusing on long-term bending of the cost curve should be the highest priority. He believes that healthcare will “keep getting better faster,” thanks to ACA, HITECH, and MACRA.
JD Hickey highlighted Tennessee’s rebalancing of its long-term care system, which in 2006 spend 99 percent of its funding on institutional-based care. By 2014; and after implementing its CHOICES program which includes fully-capitated managed care, robust caregiver supports, and a uniform and comprehensive statewide package of services; home and community-based services accounted for 73 percent of LTC spending, with a net reduction in spending of $12 million annually.
Tennessee, through its Medicaid Managed Care provider BlueCross BlueShield, has begun to offer an expanded community-based LTC program for its residents with intellectual and developmental disabilities which it calls Employment and Community First (ECF). Designed to decrease the 6,000-person waitlist for LTC services, ECF focuses on implementing a person-centered service plan to provide supports for employment and community living as an alternative to institutionalization. The program also focuses on early educational interventions and the transition from education to employment with an aim of improving lives and saving money.
Jeff Roe shared his opinions of how healthcare would be significantly different if it were run by the likes of Amazon, Starbucks, and Microsoft, and what can be learned from these companies in order to improve existing systems.
Amazon would, in his opinion, bring their “obsession” with customers, basing decisions on real customer data and forcing suppliers to compete aggressively for customer’s business. He noted that the current healthcare system has no price transparency and competes solely on proximity to providers, rather than quality or service. In addition, while Amazon considers a phone call to represent a failure in their customer experience, health insurance companies still transact the majority of their business in phone calls and even faxes. He believes that an Amazon-led health system would provide an integrated marketplace that would connect patients with their providers and give them the information they need to make decisions about their care.
Starbucks, which Roe noted sells a commodity product at a price twice that of its competition, can do so as a result of their relentless focus on customer experience. Although each Starbucks location is run at an extremely high level of efficiency, this is never the public focus of the company, which views operational excellence as merely a foundation upon which a customer-centric experience can be built. The variation in healthcare experiences from provider to provider would never be acceptable to Starbucks, which prizes consistency from one location to the next and avoids confusing customers as to whether they’re receiving the best coffee from a particular location. Drawing on Starbucks’ near-ubiquitous store positioning, he believes that in the future hospital-based care will be reserved solely for trauma and complex emergencies, with all routine care occurring at convenient neighborhood settings.
Finally, from Microsoft’s grand vision of harnessing the power of the personal computer to place one on every desk and in every home, Roe stressed the importance of harnessing the flood of healthcare data into tools that actually help consumers to make decisions in their own lives.
Uwe Reinhardt questioned the very premise of value-based care, acknowledging that while it is a particularly popular thing to discuss, a distinction must be made between the subjective value of healthcare to the patient and the objective value that a payor is willing to exchange for that care. This is particularly complex in the healthcare market, since the consumer (patient) and payor (usually insurance) are rarely the same person.
Dr. Reinhardt posited three possible definitions for value-based pricing:
- Not paying for “junk” (i.e. unnecessary services that produce little or no benefit)
- The ability of a treatment to reduce the overall cost of a medical condition
- The maximum payment an individual (or insurer) is willing to make in order to provide additional quality-adjusted life years
He referred to this final definition as “heresy,” as the American healthcare system is uniquely unwilling to confront the question of how much to pay for an additional quality-adjusted life year, but stated that the national conversation around the cost of care would improve if policymakers were more willing to engage in such a discussion.
Applied Policy can help make sense of what the future of healthcare will mean to your organization. Leave a comment or email us at jscott@appliedpolicy.com if you have questions.