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Comprehensive State Reforms Address Health Care Quality and Efficiency

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State legislatures and governors are increasingly proposing or implementing comprehensive health care reform plans that extend beyond coverage expansion to address the quality of care, health promotion, and cost containment. These multifaceted plans aim to improve the overall performance of the health system—recognizing the imperative to increase the value of care obtained for the dollars spent. Maine, Massachusetts, and Vermont have passed and are implementing such comprehensive reforms, and governors and legislators in many other states, including California, Maryland, Pennsylvania, and Wisconsin, are introducing variations of these reforms as well as new strategies. Since others have written about the coverage aspects of reform plans, this profile focuses on their efforts to address health care quality and efficiency.

Most of the quality and efficiency strategies are related to chronic care management, wellness and prevention, patient safety, and transparency through data collection and health information technology. Proponents of these strategies emphasize that these measures to improve the quality of care and health status are integrally tied to cost containment. They argue that practices that help people achieve healthier lives, help providers reduce errors, and help purchasers make better, more informed decisions also generate savings in the long run. The reform plans include both incentives and mandates, both "carrots" and "sticks."

A primary focus of many of these comprehensive reform plans is chronic care management, particularly for asthma, diabetes, and heart and lung disease. Policymakers cite data illustrating that the majority of health care costs are attributed to a minority of patients with chronic disease, and that these patients are not receiving the right amount or best kind of care. For example, Pennsylvania's Governor Rendell points out that, "Even though 75 percent of health care costs can be traced to the 25 percent of patients with chronic disease, these Pennsylvanians received only 56 percent of the care they need." [1] The reform proposals seek to increase use of nationally proven models or "best practices" for treating chronic disease through pay-for-performance and other incentives to providers.

The reform plans also promote prevention and wellness, with a particular focus on tobacco use and obesity. They feature nutrition counseling, smoking cessation, and exercise programs, provided through such mechanisms as telephone help lines, schools, and community partnerships. Some reform proposals would establish insurance plans that reduce premiums or copayments if enrollees engage in healthy activities.

Comprehensive reform plans also include provisions to support health information technology that promotes patient safety (e.g., electronic medical records, e-prescribing), data collection, and public reporting. Proponents expect that making comparative performance information available to purchasers of health care, including state agencies, employers, and consumers, will enable them to make better choices. Such data could also encourage providers to improve the quality and efficiency of the care they provide.

Vermont's Blueprint for Health
Vermont's 2006 Health Care Affordability Act pursues coverage expansion through the creation of comprehensive and affordable private insurance ("Catamount Health" plans) and through premium assistance to low-wage workers. But the legislation's overriding goal is to control steeply rising health care costs. To achieve this, the act focuses on managing chronic care, which accounts for 70 percent of the state's health care spending. The state is establishing a chronic care management system available to all residents based largely on the state's "Blueprint for Health." [2] Features include:

  • an extensive care coordination system including early and coordinated screening for diabetes, asthma, and other chronic conditions; the state is targeting 1,200 of the highest-need Medicaid beneficiaries annually, and field staff are being hired and trained;
  • reimbursement to providers that encourages care management and high quality (versus quantity), such as home visits, appointment reminders, and follow-up work;
  • patient self-management educational tools, as well as education of providers and other stakeholders in promoting self-management;
  • Medicaid and Catamount Health and the state employee health plan contract for disease/chronic care management, which is designed to reduce costs;
  • community grants to develop physical activity programs; and
  • development of a multi-payer database of claims information to help the state analyze the efficiency and effectiveness of the health care system.

California Governor's Health Care Proposal
In addition to incorporating measures that would cover virtually all Californians—through an individual mandate, premium assistance, State Children's Health Insurance Program (SCHIP) expansion, and a new purchasing mechanism—Governor Schwarzenegger's recent reform proposal places a strong emphasis on prevention, health promotion, and wellness. It includes:

  • "Healthy Action Incentives/Rewards" programs in the public and private sectors to offer enhanced benefits and/or reduced insurance premiums to participants who engage in healthy activities;
  • promotion of patient safety through: requirement on health facilities to reduce medical errors and hospital-acquired infections by 10 percent over four years, technical assistance to implement evidence-based safety measures, and creation of a "reengineering" curriculum to improve safety and streamline costs;
  • statewide diabetes initiative to implement proven interventions for screening, primary prevention, and self-management; this would reduce health costs by reducing the incidence of diabetes and improving the health of people with diabetes;
  • obesity prevention activities including media campaigns, community-based activities to promote healthy food and physical activity, employee wellness programs, and school-based strategies; and
  • tobacco use reduction, by increasing access to the California Smokers' Helpline smoking cessation services and maximizing use of cessation benefits.

These efforts to promote a healthier lifestyle are expected to reduce health spending growth. But the governor's approach also contains other cost containment measures, such as:

  • eliminating the "hidden tax" that results from shifting costs from uninsured and Medicaid patients to privately insured individuals, estimated to drive prices 10 percent higher; [3]
  • enhancing efficiency by requiring health plans, insurers, and hospitals to spend at least 85 percent of each premium/health spending dollar on patient care;
  • removing barriers to lower-cost models of care delivery such as the use of nurse practitioners and physician assistants;
  • developing a technology assessment process to promote evidence-based care;
  • advancing the adoption of health information technology (expected to enhance long-term affordability) to achieve 100 percent electronic health data exchange in the next 10 years, universal e-prescribing by 2010, accessible and portable personal health records, and use of telemedicine and telehealth, particularly in underserved areas; and
  • investing resources to measure, collect, integrate, and publicly report data on provider quality, outcomes, cost, prices, and utilization to help inform providers, purchasers, and consumers and drive their decision-making.

Governor Rendell's "Prescription for Pennsylvania"
Governor Rendell introduced a similar comprehensive health reform plan in January intended to provide access to affordable, quality health care for all state residents. It features an individual mandate on those with income above 300 percent of the federal poverty level, and a "Cover all Pennsylvanians" (CAP) program that offers basic, private health coverage to small businesses and the uninsured, with subsidies for lower-income people. [4] Following are the quality improvement features:

  • requirement that hospitals adopt system-wide quality management/ error reduction systems and interoperable electronic medical records;
  • pay-for-performance initiative led by the state and other major payers, and eventual cessation of payments to providers for care related to hospital-acquired infections and medical errors;
  • alignment of payments to support the use of the national chronic care model;
  • development of an integrated model of care for individuals with co-occurring disorders, including substance abuse or mental disorders;
  • expansion of palliative care specialists and promotion of advance care directives (presumed to reduce use of expensive and unnecessary end-of-life treatments);
  • greater availability of home- and community-based long-term living services and promotion of long-term care insurance;
  • smoke-free workplaces, restaurants, and bars, as well as incentives rewarding healthy behaviors;
  • expansion of wellness education and access to nutritious foods in public schools; and
  • data collection from providers and creation of a consumer-friendly Web site providing information on costs and quality of care and prescription drug costs.

Additional measures to enhance affordability and contain costs include:

  • a commission to recommend criteria for determining annual regional and statewide dollar caps on aggregate capital expenditures, based on regional health need and technology assessments;
  • adjusted community-rating, rate bands, and a standard of 85 percent or higher loss ratios in the individual and small group insurance markets; and
  • greater use of advanced nurse practitioners, midwives, physician assistants, pharmacists, dental hygienists, and other licensed health care providers to both improve access and reduce the cost of care.

Many of these quality and efficiency measures proposed and implemented by state policymakers could have public health benefits, which could reduce health cost growth in the long term. But most of the cost containment measures are indirect, and many of them require investments that will increase costs in the short term—such as building information technology infrastructure and providing prevention and disease/care management services. Even in situations where short-term savings are assumed to occur (e.g., less "free care" provided when uninsurance rate declines), it is difficult to measure and "capture" the savings to pay for other strategies.

States might learn that significant cost containment will require a national effort to address the major cost drivers, such as virtually unlimited access to expensive technologies and end-of-life interventions. However, the rising number of multifaceted state-level reform plans reflects a growing understanding among state policymakers that health care access, cost, and quality are interrelated and must be addressed comprehensively.

[1] Prescription For Pennsylvania Changes How We Pay For Health Care To Focus On Improving Quality, Enhancing Patient Safety And Promoting Wellness.
[2] The Vermont Blueprint for Health was launched by Governor Douglas in 2003 and endorsed in 2006 by the General Assembly under Act 191. It has been implemented and is reportedly making good progress in many communities.
[3] A recent report by the Peter Harbage and Len Nichols found that the "hidden tax" is $1,186 per California family and $455 for individual health insurance policies. P. Harbage and L. Nichols, A Premium Price: The Hidden Costs All Californians Pay in Our Fragmented Health Care System, (Sacromento, CA: New America Foudation, December 2006).
[4] Premiums are subsidized for lower-income uninsured adults with income up to 300 percent of the federal poverty level and employees of small businesses with below-average wages.

For More Information
See: Vermont 2006 Health Care Reform Act
California Governor's Health Care Proposal
Pennsylvania Governor's Health Care Proposal and Rx for Quality
National Conference for State Legislatures 2007 Universal Health Care Bills

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