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Health Care Quality and Medicare: Report from a Commonwealth Fund Quality Improvement Colloquium

It is not often that major legislation such as the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (MMA) comes along. But when it does, there can be a tremendous sense of opportunity. Centers for Medicare and Medicaid Services (CMS) administrator, Mark McClellan, M.D., Ph.D., was among those at a recent Commonwealth Fund Quality Improvement Colloquium ready to pursue the MMA's promise for improvements in health care safety and quality.

"This is such an important time and such a unique set of opportunities for addressing quality issues in Medicare and in our overall health care system," he said. "As you all know, the health policy debates and health policy implementation that should be going on today aren't just about whether we spend more or less, whether we add more benefits or cut prices here or there. They should really primarily be about spending better, about getting more value for what we're spending in the Medicare program."

A close examination of the MMA shows that, beyond the much-discussed prescription drug benefit, it contains some significant quality provisions. These features of the law, according to David Blumenthal, M.D., M.P.P., director of the Institute for Health Policy at Massachusetts General Hospital/Partners HealthCare System, represent a "very important departure from Medicare's historically rather standoffish attitude toward quality of care in the private health care system."

The one-day meeting covered many aspects of the MMA, ranging from the prescription drug benefit to the chronic care improvement program. Despite the potential of its many quality provisions, the discussion ended with more questions than answers. Participants generally agreed that the law could have an important effect on the quality of care available to the American people. How CMS decides to interpret and implement the new legislation ultimately will determine its impact.

Design of the Outpatient Prescription Drug Benefit
Title I of the MMA contains the new voluntary outpatient prescription drug benefit. Under this arrangement, most beneficiaries will pay an estimated $35 monthly premium, $250 annual deductible, and 25 percent coinsurance for the next $2,000 in annual drug costs. There is no coverage from $2,251 to $5,100—the so-called donut hole—and Medicare covers 95 percent of drug costs above $5,100. (Beneficiaries can buy government-endorsed drug discount cards and low-income beneficiaries can receive $600 to defray their drug costs in 2004 and 2005, as the full benefit does not become effective until 2006).

There are several ways that Medicare beneficiaries can access the drug benefit. Those who choose to remain in traditional Medicare can access the benefit either from private, stand-alone prescription drug plans (PDPs) or non-risk, back-up plans, which are expected to consist primarily of carriers paying bills on behalf of CMS, when two private plan choices are not available. Those beneficiaries who choose to enroll in HMOs (formerly Medicare+Choice and now called Medicare Advantage) or new regional PPOs can obtain the drug benefit as part of their overall insurance coverage.

McClellan says that, regardless of what type of plan is providing the drug benefit, they will be held to similar requirements. "While there's a lot of room for actuarial flexibility in how these benefits are defined, the law's pretty clear about laying out some requirements that all of the drug benefits have to meet," he said.

Still, the drug benefit might have a greater impact on the health of individuals covered through Medicare Advantage plans due to what McClellan describes as the relative ease of integrating the coverage into their overall care. "Medicare's traditional program is less integrated and doesn't lend itself well to paying more for results and paying more for integrated care delivery," he said. "But we're definitely interested in finding ways to build onto that basic system."

Private drug plans will be required to have a utilization management program that includes incentives to reduce costs when medically appropriate; quality assurance measures and systems to reduce medication errors, limit adverse drug interactions, and improve medication use; a medication therapy management program; and a program to control fraud, abuse, and waste. However, some have expressed concerns that the requirements for utilization management programs are not very stringent.

The Drug Benefit's Quality Provisions

The MMA, according to William Rollow, M.D., M.P.H., deputy director of the Quality Improvement Group at CMS, "clearly does have a real focus on safety and quality." At the June 30 colloquium, he summarized the provisions he expects will lead to improvements in the health care provided to beneficiaries.

Among them are some that relate to the prescription drug benefit. It substantially subsidizes premiums and cost shares and, "insofar as lower-income folks haven't had the ability to pay for drugs, that potentially can have a beneficial impact on quality of care," said Rollow. PDPs and Medicare Advantage plans have been given an incentive to lower consumer drug prices, because consumers bear some of the cost of the drugs, either through premium level or through deductibles and coinsurance. They also are required to offer medication therapy management services targeted to beneficiaries who have multiple chronic conditions, use multiple prescriptions, and are likely to incur high drug expenses.

However, David Schulke, executive vice president of the American Health Quality Association, which represents quality improvement organizations (QIOs), pointed out that "these requirements in the law are pretty loose. Most plans will have very little trouble asserting that they were complying with them and staying out of trouble in terms of any kind of regulatory enforcement provision."

Another concern cited by Schulke centers on whether the Department of Health and Human Services (HHS) has authority under the law to collect enough data to support quality improvement efforts. "Without pharmacy claims, you cannot do much of anything in the quality arena," Schulke said. "There has been some discussion as to whether the plans would have to report claims data for quality purposes."

In addition to affecting access to pharmaceuticals, formularies and benefit caps could limit the quality of drug management under the benefit. "The primary reason for a formulary, in the context of Part D, is to save money. It's not to make drug use better," said Bruce Stuart, Ph.D., director of the Peter Lamy Center on Drug Therapy and Aging at the University of Maryland in Baltimore. Preliminary data on benefit caps, which includes deductibles and the "donut hole," suggest that their greatest effect will be on beneficiaries with medication-sensitive chronic conditions.

There are other areas where quality of care issues might surface. Practical challenges in the administration of the drug benefit might limit the extent to which it can correct underuse of effective medications—known to be a problem nationwide. Because of the "donut hole" in coverage, Stuart adds, seniors will have to pay almost nothing for their medications in some months and they may be paying the entire cost in other months. Depending on their level of prescription expenditures, seniors might attempt to minimize medication costs by choosing not to fill prescriptions in months with high net drug costs and thus limit the potential of the MMA to reduce underuse.

Finally, the law is not clear about what quality standards should be used. In fact, the only provisions specifically related to the quality of the drug benefit give QIOs responsibility for quality monitoring. "This puts substantial and rather poorly delineated new responsibilities in the hands of QIOs," said Blumenthal, who directs the Fund's Quality Improvement Colloquia.

The law charges Quality Improvement Organizations with providing technical assistance to providers, as well as to PDPs and Medicare Advantage plans. "We're not enforcing practice guidelines," said Laurie Feinberg, M.D., M.P.H., a medical officer at CMS. "We're seeking to improve processes of care." Historically, these private organizations have been responsible for monitoring and improving the care provided to Medicare beneficiaries through the traditional, fee-for-service program. (Another part of the law calls on the Institute of Medicine to conduct an evaluation of the QIOs).

As a result, there is likely to be a considerable amount of administrative discretion in determining the basis of "quality" under the MMA. "We've got some requirements but it's going to be very important to think through how would we measure them and, as a result of that, what kinds of evaluative mechanisms would we put in place based on those measures," Rollow, deputy director of the Quality Improvement Group, said. Ultimately, how CMS funds and supports assessments of medication overuse, underuse, and appropriate use will be critical to quality of drug use under the MMA.

New Regional PPOs

Managed care plans, now called Medicare Advantage, get a huge boost in the legislation. After years of annual increases around 2 percent, payments to these plans increased 10.6 percent in 2004 and are projected to increase 6.6 percent in 2005. "We're already seeing health plans that had either taken themselves all the way out of the Medicare Advantage program coming back and then many others expanding the markets in which they are operating, expanding the benefits that they are offering, and lowering or eliminating the premiums," said Richard Sorian, vice president for public policy at the National Committee for Quality Assurance (NCQA).

In addition, "regional" PPOs will be allowed to join the HMOs, PPOs, and other plans already in the system starting in 2006. The HHS Secretary has the discretion to define the multi-county and, often, multi-state areas these plans will serve, limited by the bill to no fewer than 10 and no more than 50 regions.

Although the MMA raises the potential for growth in the PPO market, some question the value of this type of coverage. "When I think about the PPOs, I ask 'What is their value-added relative to HMOs and what is their value-added relative to fee-for-service?'" asked Karen Davis, Ph.D., president of The Commonwealth Fund. "PPOs don't have the presumed continuity of care of HMOs nor are they subject to the same requirements as HMOs for quality improvement and performance reporting. And they don't get the advantage of traditional Medicare's lower provider payment rates and lower administrative costs. My main concern is that providers may opt to participate in PPOs where they will be paid higher rates and drop participation in traditional Medicare."

There also is a fear that Medicare Advantage HMOs might seek PPO status to avoid the more onerous quality regulations required of HMOs under Medicare Advantage. "I don't know why anybody [remains an] HMO," said L. Gregory Pawlson, M.D., M.P.H., executive vice president of the NCQA. "HMOs have very extensive reporting requirements in the MMA. If they just declare themselves a PPO, and essentially that's what some have done, the requirements are fairly modest."

So, what are the quality standards for these regional PPOs? After reviewing the legislation, Earl Steinberg, M.D., M.P.P., president and CEO of Resolution Health Inc., concluded that "there aren't any quality standards for PPOs." However, he identified some quality-related requirements. PPOs must have a quality improvement program that includes, but is not limited to, chronic care improvement. They also must collect, analyze, and report data that permit the measurement of health outcomes and other indicators of quality. The HHS Secretary has been charged with establishing these requirements, which cannot exceed those in place for the local PPOs on November 1, 2003. In addition, the HHS Secretary must submit a report to Congress in order to change the requirements.

Traditional Medicare and Quality

Congresswoman Nancy L. Johnson (R, Conn.) pushed for a chronic care improvement provision in the legislation, which goes into effect later this year. The provision will allow beneficiaries enrolled in traditional, fee-for-service Medicare to join programs supported by pharmacist groups, nursing groups, academic health centers, and disease management companies to help them manage their care.

The three-year initiative is considered a pilot program, to be implemented upon completion, rather than a demonstration project that may or may not be continued.

The pilot program will take place in 10 regions and involve about 15,000 to 30,000 beneficiaries in each area. The goal, according to Sorian, is to test whether chronic care improvement programs can increase clinical quality and beneficiary satisfaction, as well as save money.

"This is true pay-for-performance," said McClellan. "These entities do not get paid unless they, number one, reduce overall Medicare costs; number two, deliver improvements in clinical measures of care for patients like better hemoglobin A1C controls for diabetics; and number three, deliver better patient and provider satisfaction. These care management programs don't work unless providers and patients feel like it's helping them follow the plan of care that the physician intended."

The pilot program is targeted at beneficiaries with congestive heart failure and/or complex diabetes, but it has the potential to have much broader influence. "One thing that's important about the chronic care improvement program is that it seems to be one of the first attempts to try to figure out how to manage populations in a fee-for-service program," added Karen Milgate, M.P.P., research director responsible for quality and access issues at the Medicare Payment Advisory Commission (MedPac). "I actually think that's at least as important as how it works for the chronically ill. Because some of the performance measures, for example, that you might look at in ambulatory care, they're looking at a population basis in chronic care improvement program instead of an individual doctor level. So it's an interesting experiment in managing populations in the Medicare program."

Voluntary Hospital Reporting

Another pay-for-performance provision in the legislation is the full market basket (MB) update in Medicare inpatient payments for hospitals that participate in the National Quality Voluntary Hospital Reporting Initiative. Those that choose not to participate receive MB minus 0.4 percent. (The hospital market basket is the cost of goods and services, including personnel costs but excluding nonoperating costs, that comprise routine, ancillary, and special care unit inpatient hospital services.)

The impetus for the Hospital Reporting Initiative came out of the recognition on the part of American Hospital Association (AHA) board members that their member institutions were facing numerous measurement demands from various groups. Beginning in December 2002, hospitals that voluntarily sign up for the program report on up to 10 measures focused on three conditions: acute myocardial infarction, congestive heart failure, and community acquired pneumonia. Other pieces of this initiative include supporting the development, testing, and implementation of a Patient Experience of Care Survey; collaborating for performance enhancement; and expanding public measurement reporting based on the Institute of Medicine's Crossing the Quality Chasm report. Since the financial incentive for hospitals to report data was included in the MMA, the number of institutions participating in this "voluntary" program has grown from 1,870 in November 2003 to 3,653 in June 2004. "The MMA basically provides a certain stimulus along the evolutionary road to performance measurement and public reporting, said Donald M. Nielsen, M.D., senior vice president of quality at the AHA.

Questions have arisen due to the language of the legislation. It refers to a "set of 10 indicators" but "there was no specification as to what those 10 indicators were going to be at that time," Nielsen said. Further, if it is interpreted to be the 10 original measures developed by the Hospital Quality Initiative, there is concern that "the legislation basically froze the measures. Clearly, they need to evolve," Milgate added.

Other measurement issues have been raised. The Hospital Quality Initiative has used Joint Commission on Accreditation of Healthcare Organizations (JCAHO) and CMS measures, which are "aligned but not identical," said Nielsen, leading to a great deal of frustration in the field. The National Quality Forum (NQF) is currently working with the JCAHO and CMS to jointly publish a set of measure specifications, said Kenneth W. Kizer, M.D., M.P.H., president and chief executive officer of the NQF. "The agreement that has been reached is that if they can't agree, they will ask the NQF to arbitrate and, whatever the NQF decides, they will live with."

There also is a need to have measures that are relevant to rural hospitals, children's hospitals and psychiatric hospitals. In addition, useful consumer information-the ultimate goal of the initiative-has yet to be developed.

Looking Forward

Information technology, which could result in improved quality, was given a boost by the legislation. It grants funds to physicians to defray the cost of implementing electronic prescribing. The MMA also instructs the HHS Secretary to promulgate standards for the transmission of this data and conduct a demonstration program that pays physicians to adopt and use health information technology and evidence outcome measures.

"The drug benefit shouldn't just be about paying for drugs, and how much we're paying for particular drugs, but how to get a more efficient and effective prescribing system in place in this country," said McClellan. "And done right, electronic prescribing can be a big help in that regard."

The administration's current challenge is to provide more affordable care and, at the same time, continue to encourage innovation in both the development and use of better treatments, said McClellan. "There's no question the Medicare Modernization Act provides some real opportunities for us to do that, both from the provisions in the law itself and from the opportunities that a major change in Medicare like this one affords for us to take a fresh look at how we're influencing care for our beneficiaries and how we're influencing the health care system. . . . But we need to start acting."

Of course, it will take some time to implement the quality-related provisions in the legislation, many of which will expand the Medicare program's involvement with the private sector and private entities. "Some of the operational implications of trying to get these things to happen in the [proposed] timeframe are enormous," said Stephen Jencks, M.D., M.P.H., director of the Quality Improvement Group, Office of Clinical Standards and Quality, at CMS.

Yet, many feel that the bipartisanship that lead to the inclusion of these quality provisions in the MMA should ultimately help to facilitate their adoption. "Whatever the outcome of the election, a lot of these things have some momentum that will carry them through," Sorian said. "Maybe [you'll need to] tweak it here and there. But the direction seems to have been established by a group of people who will continue to push it."

As CMS begins to implement these and other provisions, its actions ultimately will determine the impact of the new law on quality improvement in the following areas:

  • QIOs are responsible for managing the quality of the prescription drug benefit. This will require them to expand their mandate and expertise to include safety and quality issues pertinent to drug administration and use. To do this effectively, the QIOs will need sufficient guidance, authority, and funding from CMS.
  • The new regional PPOs will be subject to fewer quality requirements than the existing Medicare Advantage plans. Administrative action or further legislation might be necessary to bring equivalent quality standards to these PPOs, which also would serve to prevent HMOs in the program from changing their status to PPOs in order to avoid more onerous quality standards.
  • Finally, the Hospital Quality Initiative needs to determine which 10 measures are referenced in the legislation. It also will need flexibility to change these measures or add more measures so that the program can continue to evolve.

Publication Details



Health Care Quality and Medicare: Report from a Commonwealth Fund Quality Improvement Colloquium, Vida Foubister, The Commonwealth Fund, September 2004