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Health Payment Changes Might Pay Off But They Won't Be Easy, Experts Caution

By Jane Norman, CQ HealthBeat Associate Editor

May 10, 2010 -- Major opportunities for innovation in health payments are at hand that could pave the way for higher quality care combined with cost savings, but the results may not be clear until years from now, members of a panel on payment innovation in the new health care law said Monday.

The non-partisan Alliance for Health Reform sponsored the discussion among experts examining provisions in the new health care law (PL 111-148, PL 111-152) that aim to cure the multiple vexing problems that dot the current health care payment system.

Those include fragmented care, a lack of coordination of services, variable quality across parts of the country and facilities and high and rapidly growing costs, said Stuart Guterman, assistant vice president for the non-partisan Commonwealth Fund's program on payment system reform.

The goals are to create incentives for providers to assume greater accountability for patients, provide rewards for better coordination among providers, slow the growth in health care spending and establish a structure that will support providers as they improve quality and efficiency, said Guterman.

There's no single correct way for care to be organized or to pay for care, said Guterman. But the results demanded from the system should be consistent.

timeline for system and delivery reform provisions included in the new law and put together by the Commonwealth Fund runs on for 14 pages, beginning later this year when, for example, first-dollar coverage for preventive services must be provided by new health insurance plans.

It includes programs for which there are high hopes, such as accountable care organizations in which providers are encouraged to join together to gain efficiencies and improve the quality of care.

The new law gives the green light to a four-year accountable care organization demonstration project for pediatric providers organized under Medicaid, in which physicians are encouraged to join together to provide care that is more efficient and of a higher quality. In Medicare, providers organized in ACOs who reduce costs will be able to share in savings they generate. A Center for Medicare and Medicaid Innovation within the Centers for Medicare and Medicaid Services will test out innovative ideas.

"This is a big challenge but I think we need to be up to it because the alternative just isn't very pleasant," said Guterman, referring to a meat-axe approach of simply cutting payments.

Gail Wilensky, a health economist, said there's widespread agreement across the political spectrum that the traditional Medicare fee-for-service payment system must be changed. "The problem is while we have an idea about what a better system would look like, we have very little knowledge about how to get there from where we are," she said. Some 75 percent of physicians practice in groups of nine or less, and most are not aligned with hospitals where they practice, she said.

Wilensky headed up the Health Care Financing Administration, the predecessor of the Centers for Medicare and Medicaid Services (CMS). She said that her experience is that a changed payment system takes a long time to develop. It will also take time for it to gain acceptance by both providers and patients and to be assessed.

"It is extremely important to have realistic expectations," she said. Some advocates of the new health care law "seem to express an optimism and enthusiasm that bears no relationship to the reality that I know," believing that major savings will be found in a short time, she said.

It's possible to imagine curbing costs in the second five years of this decade, or more likely in the following decade, if changes made are imaginative and aggressive and good models are picked, she said.

"I'm more worried that when you have unrealistic expectations and they are not achieved, that it then spawns undesirable behavior in its aftermath," Wilensky said.

Mark Miller, executive director of the Medicare Payment Advisory Commission, which advises Congress, said the commission believes fee-for-service is a problem and has been pushing for different strategies, including bundled payments and accountable care organizations. "I think the commission agrees this is the right direction at the right time," he said.

One positive development in recent years is that there's much more linkage between Congress asking CMS to undertake some new responsibility and giving the agency the money to do it, said Miller. There's money set aside for the innovation center, he pointed out. "I think we have to be vigilant. . .that the money is protected and actually used for those purposes," he said, and not diverted for other uses. "I think it will be very important we stay focused that this is what we want to use this money for, to try things."

Medicare also must be "transparent" if it's going to be given the money and the authority to try out programs, and officials will have to be open with lawmakers if a project is not doing well, said Miller, who's also worked at CMS. "Some of this stuff is going to work. Some of it isn't going to work. I think the key will be to keep Congress informed so it won't come as a shock," he said.

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