The Importance of Independence: Affordable Care Act’s Independent Payment Advisory Board Key to Quality Care at Lower Cost
A year ago this week, President Barack Obama signed into law our nation’s first comprehensive health reform law, the Affordable Care Act, which not only extends health insurance protection to tens of millions of Americans but also actually reduces the deficit—in large part because of measures the law takes to responsibly slow the growth in Medicare and overall health spending. Lowering the projected growth of health care costs is a key promise of the law because these ever-escalating costs drain businesses, government coffers, and individuals’ savings. Yet many who criticize the law as a budget buster are aiming to repeal some of its key cost-containment features.
The Independent Payment Advisory Board is a case in point. The Affordable Care Act establishes this board to serve as a guarantor that the law’s cost-containment goals will actually be achieved. If the government’s main health care program for the elderly and disabled Medicare exceeds its per capita cost-growth targets under the new law, then the Independent Payment Advisory Board is empowered to recommend ways to reduce program expenditures by changing the way Medicare pays health care providers.
The secretary of health and human services must implement these recommendations unless Congress passes an alternative proposal or discontinues the cost-containment review process by the Independent Payment Advisory Board. Some legislators propose to eliminate the board. This would be a mistake.
Understanding the purpose of the board—as part of the Affordable Care Act’s cost-containment strategy overall—makes it clear that keeping and strengthening the independent board makes sense. The new health law’s cost-containment strategy includes both reducing excessive payments to providers under Medicare’s current payment mechanisms and moving Medicare—and, by example, the private sector—away from a payment system that rewards volume of services, without regard to health benefits, to payment arrangements that reward effective care, efficiently provided.
The Independent Payment Advisory Board will reinforce this twin focus on quality care at lower cost.
The Affordable Care Act holds hospitals and other institutional health care providers to productivity gains—something every other sector of our economy has achieved over the past several decades. Between 1995 and 2008 average annual productivity growth across the vast majority of U.S. businesses was 2.4 percentage points—just more than 1 percentage point higher than the previous two decades. In contrast, the health care, education, and social services sectors combined have produced average annual productivity growth rates of negative 0.2 percentage points.
The Affordable Care Act’s push for providers to produce productivity gains on par with other sectors promotes the efficiencies needed to reduce health care costs. But to assure that growth rates actually slow, the Affordable Care Act sets a target for Medicare spending growth and requires the Independent Payment Advisory Board to develop and recommend payment changes to achieve it. Both the Congressional Budget Office and the executive branch’s Centers for Medicare and Medicaid Services predict that explicit payment changes will produce most but not all of the savings needed to realize the independent board’s spending-growth targets through 2019 under the new law.
Avoiding excessive increases in the rates Medicare pays historically slows spending growth across the entire health care industry and can do so in the future. But tightening fee-for-service does nothing to improve quality or efficiency in care delivery—a critical goal of health reform. That’s why the Affordable Care Act includes multiple strategies to promote payment and delivery reform.
First, the new law stops rewarding bad behavior. The law authorizes the secretary of health and human services, without seeking congressional action, to review and alter “misvalued” fees, such as paying more for services than they’re worth, and to reduce payments for clearly undesirable behavior, such as hospital-acquired infections or conditions, inappropriate hospital readmissions, and, even more egregious, outright fraud. These new steps will deliver market-based signals to Medicare health care providers—and by example to the entire industry—that the wrong kinds of services that drive up current costs will no longer be rewarded.
Alongside what might be considered these “sticks” to change behavior come a set of essential “carrots,” or rewards to deliver more effective and efficient care. At the most basic level, these rewards are extra payments to providers for doing “good” things—say, meeting a set of efficiency standards while maintaining quality care. But more importantly, these rewards reside in alternative payment mechanisms to replace today’s fee-for-service payment system.
Among the new payment systems the new health law encourages is “bundling” separate fees into a single payment for services associated with a specific condition, such as a hip fracture, which today would include separate fees for diagnosis, surgery, and postoperative care. Another provision of the law promotes the financial and health benefits of primary care and chronic care management through newly created “medical homes,” which coordinate health care for their patients. And yet another new approach to health care promoted by the new law are so-called “accountable care organizations,” which are collaboratives of inpatient and outpatient providers who are rewarded for delivering quality care to a defined set of patients at lower-than-projected costs.
The new law sets a clear timetable for implementing some of these measures and creates the Center for Medicare and Medicaid Payment Innovation to initiate, evaluate, and broadly extend the application of these methods as part of “rapid cycle change.”
The law also recognizes that these efficiencies and the savings they can deliver will not be realized if changes in payment systems are limited to the public sector, and therefore encourages public-private partnerships. Medicare is a large payer, accounting for 20 percent of our nation’s medical bill in 2009. Private payers have historically followed Medicare payment practices. But that outcome is neither automatic nor immediate.
What’s more, inconsistent payment mechanisms across payers discourage providers from changing behavior, impede efficiency improvements, and create opportunities for offsetting one payer’s spending reductions with increases for others. Indeed, a recent study by the Medicare Payment Advisory Commission, an independent congressional agency, finds that hospitals squeezed by both Medicare and private payers changed their operations to become more efficient, yet hospitals with generous private payments ignored Medicare constraints, took losses on Medicare patients, and continued business as usual. Better quality care at lower costs requires that the public and private sectors work in tandem.
The health reform law encourages common action in different ways. The law gives preference to innovations where providers engage with private payers alongside Medicare in adopting new payment incentives Other provisions in the law further support payment reform in the private sector by extending access to Medicare provider performance data to guide private payers’ payment-reform efforts, and requiring private health plans to regularly report on those efforts. These data will inform the Independent Payment Review Board when it uses its authority to make nonbinding recommendations for private-payer reforms alongside binding recommendations for public programs.
This is a key provision of the new law. From 1970 to 2000 the private sector was less effective than Medicare in promoting efficiency, with an average annual growth rate per enrollee of 11.1 percent compared to Medicare’s rate of 9.6 percent. An effort that addresses public-sector but not private-sector health care spending risks limited access for beneficiaries as well as missed opportunities to encourage health care providers to operate more effectively and efficiently. Therefore, the broader the new board’s authority is to influence not only public but also private spending, the more effective it will be.
A focus on policy tools alone, however, obscures the most important element of the Independent Payment Review Board’s potential impact. Payment improvements in the past were stymied by legislators responding to providers’ resistance to change. Provider payment is rarely a partisan issue but it is a political issue. The new law takes the politics out of the equation by giving the independent board the authority to make Medicare payment recommendations that become law unless explicitly overridden by legislative action. This gives a major boost to policy over politics in containing health care costs.
And it’s precisely this boost that special interest groups want to prevent. Opponents of the new board complain it undermines congressional authority and removes from their control an important budgetary lever at a time when the federal budget deficit is rising at an unsustainable rate. But the real concern of many of these critics, who often are the fiercest advocates of fiscal restraint, is that the board’s authority diminishes their influence and their ability to fashion a Medicare budget that benefits the pharmaceutical industry and other special interest groups that are in a position to lose the most from the board’s future recommendations.
Other critics of the Independent Payment Advisory Board fear the Affordable Care Act did not go far enough in granting it authority, leaving too many loopholes for special interest groups to avoid payment adjustments. In making adjustments the board is prohibited from addressing payments to hospitals, skilled nursing facilities, and other health care providers who are scheduled to receive “productivity adjustments” under the Affordable Care Act. Rather than repeal the board, the more sensible option would be to close these loopholes and extend accountability for unacceptable health care cost increases.
In fact, members of Congress and policymakers in the federal government should be thinking of ways to strengthen the Independent Payment Advisory Board given the fiscal reality facing the federal government today. The new board is one of the Affordable Care Act’s most important cost-containment tools. We can’t afford to lose it.
By: Judy Feder, Senior Fellow, Center For American Progress, March 21, 2011
The GOP’s Health Policy Cynics
The health care community is discovering to its shock and dismay that it’s not simply traditional Republican conservatives who have taken control of the House of Representatives, it’s a new group of cynics.
Conservatives, like liberals, have a more-or-less coherent set of ideas. They use political power to push preferred policies, whether related to health care, housing or a hundred other possible issues. William F. Buckley Jr., one of the fathers of modern American conservatism, “had a way of … making conservatism a holistic view of life not narrowed to the playing fields of ideology alone,” as one admirer put it.
Although cynics may claim conservative credentials, their view of government is really nothing more than a quarrel about its cost. It brings to mind Oscar Wilde’s immortal phrase, “The cynic knows the price of everything and the value of nothing.”
The contrast between the two viewpoints was on stark display at two recent marquée meetings, AcademyHealth’s yearly policy conference and the sprawling Health Information and Management Systems Society — HIMSS – Health IT Conference and Exhibition.
AcademyHealth’s “Running of the Wonks” (my term, not theirs) is a magnet for researchers and policy mavens who are inured by long experience to most political rhetoric. Yet at the general session featuring a bipartisan dialogue among congressional staffers, the harsh rhetoric from the GOP participants stunned the crowd. The new federal health law, it seemed, was evil incarnate, and the rhetoric of “repeal and replace” was wielded with a fundamentalist zeal.
“The bureaucracies that administer ObamaCare” must be cut, declared one aide to a powerful congressional leader, setting the tone. And in case anyone didn’t get the point, the word “ObamaCare” was deliberately repeated every few syllables in a tone of disdain combined with wonder at how such a monstrosity had ever come to be. (AcademyHealth meeting rules said the staffers could not be quoted by name.)
The audience of wonks quailed, then quietly queued up for the question-and-answer period. They knew, after all, that the health law’s fine print incorporates a generous helping of initiatives championed by both conservatives, and those on the left. Besides, these were staffers speaking, not politicians playing to the press. Surely, gentle reason would triumph. Alas, it was not to be.
The Prevention and Public Health Fund? “You mean, the prevention health slush fund, as we like to refer to it?” replied a GOP staffer.
The Innovation Center at the Centers for Medicare & Medicaid Services? “An innovation center at CMS is an oxymoron,” responded a Republican aide, before adding a personal barb aimed at the attendees: “Though it’s great for PhDs who come to Washington on the government tab.”
There was also no reason the government should pay for “so-called comparative effectiveness research,” another said.
“Everything’s on the chopping block,” said yet another.
Everything? At HIMSS, where GOP staffers also spoke, attendees were chagrined to learn that “everything” applied to them, too. The subsidies for health information technology that were part of the American Recovery and Reinvestment Act were targeted in legislation introduced in late January by Rep. Jim Jordan, R-Ohio, chairman of the Republican Study Group. His bill would repeal this funding and eliminate all remaining stimulus spending, including about $45 billion in unspent health IT funds.
Those focused on the substance of health policy might be forgiven for feeling blindsided. After all, the McCain-Palin health policy platform in the 2008 presidential election called for coordinated care, greater use of health information technology and a focus on Medicare payment for value, not volume. Once-and-future Republican presidential candidates such as former governors Mike Huckabee (Ark.), Mitt Romney (Mass.) and Tim Pawlenty (Minn.), as well as ex-Speaker of the House Newt Gingrich, have long promoted disease prevention, a more innovative federal government and increased use of information technology. Indeed, federal health IT “meaningful use” requirements can even be seen as a direct consequence of Gingrich’s popularization of the phrase, “Paper kills.”
Ah, but that was back before the Republican cynics swept into power. It was back before traditional GOP conservatives — worried that any suggestions outside a single-minded focus on slashing spending would be seen as disloyal — eschewed ideas in favor of ideological declarations.
This column was filed just days after a two-week compromise was signed into law to avoid a federal government shutdown. It allowed funding for health reform to continue, but instituted other budget cuts. Obviously, the cynics yielded a bit, at least for the moment, to the conservatives, and the liberals and centrists have given ground to both.
Still, one wonders what the urbane Buckley would think of a movement that seems intent on ignoring the real-world context of its actions. Buckley launched his lifetime crusade against liberalism with God and Man at Yale, a book that took aim at the academics who’d taught him as an Ivy League undergraduate. Alas, the GOP cynics are cocooned instead in an underground bunker of their own design, as impervious to realities they’d prefer to ignore as the ivory tower academics they’ve come to scorn.
By: Michael Millenson, The Health Care Blog, March 9, 2011. Post Originally appeared in Kaiser Health News.
School of Glock-Get Your Graduate Degree Here
It’s been nearly nine weeks since that tragic shooting in Tucson, and you may be wondering whether there’s been any gun legislation proposed in the aftermath.
Well, in Florida, a state representative has introduced a bill that would impose fines of up to $5 million on any doctor who asks a patient whether he or she owns a gun. This is certainly a new and interesting concept, but I don’t think we can classify it as a response to Tucson. Jason Brodeur, the Republican who thought it up, says it’s a response to the health care reform act.
A sizable chunk of this country seems to feel as though there is nothing so secure that it can’t be endangered by Obamacare. It’s only a matter of time before somebody discovers that giving everyone access to health insurance poses a terrible threat to the armed forces, or the soybean crop, or poodles.
Brodeur’s is one of many, many gun bills floating around state legislatures these days. Virtually all of them seem to be based on the proposition that one of the really big problems we have in this country is a lack of weaponry. His nightmare scenario is that thanks to the “overreaching federal government,” insurance companies would learn who has guns from the doctors and use the information to raise the owners’ rates.
However, it turns out that the health care law has a provision that specifically prohibits insurers from reducing any coverage or benefits because of gun ownership. A St. Petersburg Times reporter, Aaron Sharockman, looked this up. I had no idea, did you? Apparently Senate Majority Leader Harry Reid himself stuck this in to make the gun-lobby folks happy.
Which they really aren’t. The gun lobby will never be happy, unless the health care law specifically requires every American to have a pistol on his or her person at all times.
Great idea! thought State Representative Hal Wick of South Dakota, who tossed in a bill this year requiring every adult citizen to purchase a gun. Actually, even Wick admitted this one wasn’t going anywhere. It was mainly a symbolic protest against the you-know-what law.
Actual responses to the Tucson shooting — that is, something that might actually stop similar tragedies in the future or reduce the carnage — seem to be limited to a proposal in Congress to ban the sale of the kind of ammunition clip that allowed the gunman to fire 31 shots in 15 seconds. That bill is stalled at the gate. Perhaps Congress has been too busy repeatedly voting on bills to repeal the health care law to think about anything else. But, so far, the gun-clip ban has zero Republican supporters, which is a problem given the matter of the Republicans being in the House majority.
Meanwhile in the states, legislation to get more guns in more places (public libraries, college campuses) is getting a more enthusiastic reception.
The nation’s state legislators seem to be troubled by a shortage of things they can do to make the National Rifle Association happy. Once you’ve voted to allow people to carry guns into bars (Georgia), eliminated the need for getting a permit to carry a concealed weapon (Arizona) and designated your own official state gun (Utah — awaiting the governor’s signature), it gets hard to come up with new ideas.
This may be why so many states are now considering laws that would prohibit colleges and universities from barring guns on campus.
“It’s about people having the right to personal protection,” said Daniel Crocker, the southwest regional director for Students for Concealed Carry on Campus.
Concealed Carry on Campus is a national organization of students dedicated to opening up schools to more weaponry. Every spring it holds a national Empty Holster Protest “symbolizing that disarming all law-abiding citizens creates defense-free zones, which are attractive targets for criminals.”
And you thought the youth of America had lost its idealism. Hang your head.
The core of the great national gun divide comes down to this: On one side, people’s sense of public safety goes up as the number of guns goes down; the other side responds to every gun tragedy by reflecting that this might have been averted if only more legally armed citizens had been on the scene.
I am on the first side simply because I believe that in a time of crisis, there is no such thing as a good shot.
“Police, on average, for every 10 rounds fired, I think, actually strike something once or twice, and they are highly trained,” said Bill Bratton, the former New York City police commissioner.
Concealed Carry on Campus envisions a female student being saved from an armed assailant by a freshman with a concealed weapon permit. I see a well-intentioned kid with a pistol trying to intervene in a scary situation and accidentally shooting the victim.
And, somehow, it’ll all turn out to be the health care reform law’s fault.
By: Gail Collins, Op-Ed Columnist, The New York Times, March 9, 2011
Put-up-Or-Shut-up Time For Republicans On Health-Care Reform
It’s put-up-or-shut-up time for Republicans. They managed to make it through the health-care debate without offering serious solutions of their own, and — perhaps more impressive — through the election by promising to tell us their solutions after they’d won. But the jig is up. They need a health-care plan — and quickly.
The GOP knew this day would come. In May 2009, Republican message-maestro Frank Luntz released a polling memo warning that “if the dynamic becomes ‘President Obama is on the side of reform and Republicans are against it,’ then the battle is lost.” Repeal, Luntz argued, wouldn’t be good enough. It would have to be “repeal and replace.” And so it was.
That, however, is easier said than done.
To understand the trouble the Republicans find themselves in, you need to understand the party’s history with health-care reform. For much of the 20th century, Democrats fought for a single-payer system, and Republicans countered with calls for an employer-based system. In February 1974, President Richard Nixon made it official. “Comprehensive health insurance is an idea whose time has come in America,” he said, announcing a plan in which “every employer would be required to offer all full-time employees the Comprehensive Health Insurance Plan.”
In a moment of historically bad judgment — Ted Kennedy later called it his greatest political regret — Democrats turned him down. They thought they could still get single payer. They were wrong.
By the 1990s, they had learned from their mistake. Bill Clinton took office and, after a wrenching year of negotiations, announced legislation similar to Nixon’s.
”Under this health-care security plan,” Clinton said, “every employer and every individual will be asked to contribute something to health care.”
But Republicans again balked, calling instead for a system of “individual responsibility.” Senate Republicans quickly offered two bills — the horribly named Health Equity and Access Reform Act and the Consumer Choice Health Security Act — based on the idea that every person who has the means to buy health insurance should have to do so. We now call that concept “the individual mandate.”
Both bills attracted 20 or more co-sponsors. Neither passed, as Republicans yanked their compromise legislation the moment Democrats became desperate enough to consider it. The individual mandate, however, didn’t go away. It kicked around conservative health-care policy circles, racking up endorsements from the conservative Heritage Foundation and the libertarian magazine Reason. A year later, the mandate showed up in a law that then-Gov. Mitt Romney signed in Massachusetts. And then it was in the bipartisan proposal that Utah Republican Bob Bennett and Oregon Democrat Ron Wyden introduced in the Senate. And next, it was the centerpiece of the Democrats’ health-care reform push. Consensus, it seemed, was at hand.
Or not. Republicans turned on the individual mandate again. Senators who’d had their names on a bill that included an individual mandate — Orrin Hatch, Chuck Grassley, Bob Bennett, Mike Crapo, Bob Corker, Lamar Alexander, Olympia Snowe and Kit Bond, to name a few — voted to object, calling the policy “unconstitutional.” Romney had to explain away his signature accomplishment as governor of Massachusetts. And Republicans found themselves without a fallback.
The party’s current mood on health-care policy is perhaps best expressed by the efforts that Michael Cannon, an influential health-care wonk at the libertarian Cato Institute, has made to enlist members in his “anti-universal coverage club.”
Enter Wyden-Brown, an Affordable Care Act amendment that the White House has made a big show of endorsing: It says that any state that can produce a credible plan to cover as many people, with as comprehensive insurance, at as low a cost as the Affordable Care Act can wriggle out of all the law’s mandates but still receive all the law’s money. Vermont’s governor, for one, is stoked: He wants to try a single-payer proposal.
Most conservatives have been actively hostile. They make some fair technical points. The law envisions the secretary of Health and Human Services handing out the waivers, while the Heritage Foundation’s Stuart Butler would prefer to see a bipartisan commission in charge. But most take aim at the proposal’s basic goals: that care has to be as universal, as good and as cheap.
Cannon, for instance, frets that there’s no conservative policy that “would cover as many people as a law that forces them to buy coverage under penalty of law.” Butler worries that it “locks the states into guaranteeing a generous and costly level of benefits.”
But as the New Republic’s Jonathan Cohn points out, under the Affordable Care Act, a family of four could shell out $12,500 out of pocket for medical costs. How much stingier should the insurance be?
And Cannon is right that conservatives don’t have solutions to provide coverage as universal as what the Affordable Care Act would. But whose fault is that?
Conservatives once offered solutions competitive with what the Democrats were proposing, but over the past 30 years, they’ve abandoned each and every one of them to stymie Democratic presidents. Confronted with a challenge to provide broader access to better health care at a lower cost, they’re reduced to complaining that those aren’t the right goals for health-care reform. But we’ve yet to see how “less comprehensive insurance for fewer people” would play in Peoria. My hunch is it wouldn’t play very well.
For decades, Republicans have chosen stopping Democratic presidents over reforming the American health-care system. Now that reform has passed, the solution for members of the GOP is to press the rewind button. They’re about to find out that it’s not enough.
On that much, Luntz and I agree: If the public comes to see the GOP as opposed to reform, “the battle is lost” — at least if you believe “the battle” is to beat the Democrats rather than provide quality health insurance to every American.
By: Ezra Klein, Columnist, The Washington Post, March 8, 2011
Whatever Happened To Uncertainty?
With the House passing a two-week funding extension and Harry Reid promising the Senate will do likewise, it looks like we have at least until March 18th before any federal agencies have to shut their doors. But then there’s a shutdown risk. And there’s another one coming as early as April 15th, when the Treasury bumps into the the debt ceiling and needs Congress to lift it in order to avoid default. Federal budget policy over the next few months is going to be like a weekend with Charlie Sheen: A constant effort to avoid blackouts (yes, Wonkbook went there).
Prior to winning the election in November, the GOP spoke often about the pressing need to reduce “uncertainty” in the economy. This was a core principle of their plan to restore economic confidence and create jobs. As Rep. Paul Ryan put it to me in July, “uncertainty is a new economic buzzword, but for good reason: If we can reduce it, we’ll unlock capital.” If businesses and individuals could be confident about what government was doing, what taxes would look like, and what regulators would ask of them, they could start investing again.
So are they succeeding at their own promise of reducing uncertainty? It’s hard to see how. Budget experts on both sides of the aisle have sharply upgraded their estimate of how likely a government shutdown is in the next few months, either over the continuing resolution for 2011 or the debt limit or both. There’s an ongoing effort to starve health-care reform of implementation funds and a promise to “replace” it with some policy that hasn’t yet been written — no one in the health space would say that the shape of health-care policy over the coming years looks more certain now than it did six months ago. The GOP chose a tax deal that lowered all rates for two years rather than a tax deal that lowered most rates permanently, so there’s uncertainty over future tax rates. The tax and health-care policies would both do much more to increase the deficit than anything else on the list would do to reduce it, ensuring that concern continues to loom. So for what definition of “uncertainty” has the GOP succeeded in reducing its prevalence in the economy?
In each case, of course, the GOP has a good argument for the choice it’s made: Lower tax rates on large estates and income over $250,000 were judged more important than tax certainty or deficit reduction. The health-reform law is so unwise that repealing it should be a top priority. The prospect of a government shutdown and/or default provides leverage to extract spending cuts, which are more important right now than assuring the market that there won’t be some sort of shutdown or default. It’s all fair enough, at least on its own terms. But it’s meant that the post-election GOP takes the risk of uncertainty a lot less seriously than the pre-election GOP did. It’s a tension I’d like to hear more of them comment on.
By: Ezra Klein-The Washington Post, March 2, 2011
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