AS Massachusetts implements a major health reform law to expand access to affordable health insurance for hundreds of thousands of uninsured and underinsured residents, one of the greatest challenges is controlling healthcare costs. The group "Health Care For All" is to be commended for proposing a substantive set of 17 proposals to help address the cost control issue. This commentary is intended to add to the discussion of what is practical and how great an effect might be obtained by several of the proposals.
BACKGROUND
Most observers agree that several major factors are the primary drivers of increasing healthcare costs. These include general unit cost inflation (ie, increases in costs driven by salaries, cost of utilities, etc), increasing utilization of services (eg, more people can be treated for diseases like cardiac conditions and an increase in the number of people diagnosed), new technology (such as new drugs or new interventions), and a lack of incentives to provide only appropriate levels of care or better care coordination. Many of these factors are deeply embedded in the US healthcare system and will take major efforts to change.
A full discussion of the various factors and their relative magnitude is well beyond the scope of this commentary, but other writers have made cogent assessments of the situation.
DISCUSSION
In spite of these enormous challenges, many parties are intensely interested in beginning to make the changes needed to better control healthcare costs. This commentary looks at some of the issues involved with just 2 of the 17 proposals from Health Care For All.
Proposal 3. Change financial incentives to avoid potentially preventable hospital readmissions. Changing hospital financial incentives will press hospitals to take actions to improve quality and prevent readmissions.
Comment: It seems to go against common sense to pay a hospital "full rates" to restore the health of someone who has had a clearly avoidable readmission. So, a new payment policy that would provide a clear penalty for poor clinical performance would appear to be a good idea. Perhaps a penalty that reduced reimbursement for theoriginaltreatment (during the first admission) to 50% of allowable charges might be appropriate.
But-what incidents would be characterized as "avoidable readmissions?" Clearly, there are a few readmissions where an obvious surgical error or similar egregious event occurred but would the original hospital be held accountable for a postacute infection? For lack of follow-up care? For the patient not following discharge instructions?
Then, the next issue might be-who decides what is an avoidable readmission? Is there an organization in Massachusetts with this charter?
Another issue involves a readmission, but to a different hospital-does the second hospital receive full payment while some organization (the Commonwealth or an insurer) goes after recovery of funds from the original hospital? What is the time period to which the readmission payment penalty applies-15 days, 30 days, or longer after the original admission?
Next-although a strong policy case might be made to change the readmission payment policy, how much is it worth for an under-65 population? In the general employed population (including dependents), only around 6% of the population has an admission in any given year. Let's assume that only 5% of that hospital admission group have an "avoidable readmission" (noting that this percentage is only for illustrative purposes-no one has yet defined what an "avoidable readmission is"). If the annual cost of insurance coverage for an adult is approximately $4000, then the average inpatient hospital bill is approximately 20% of that, or $800. Then, the amount attributable to the theoretical "avoidable readmission" is 5% of $800, or $40. A 50% penalty would be a recovery of $20, or only 0.5% of the annual insurance premium bill.
Thus, while nearly everyone would likely agree that changing incentives to improve quality and prevent avoidable readmissions is a very good idea, we should be realistic about the work needed to develop the mechanism and the likely financial effects.
A more far-reaching proposal is contained in Proposal 17, developing a plan to "rescue and revive primary care." The writer has been a strong advocate of the need to better support primary care, but the issues involved are nearly overwhelming and need to be pragmatically addressed.
Proposal 17. Establish a state special commission to develop a statewide plan to rescue and revive primary care. The crisis in primary care requires a comprehensive examination of options to increase the availability of primary care practitioners, including recruitment, payment incentives, and licensing policy.
Comment: The imbalance in the United States of the number of primary care physicians (PCPs) versus specialists entering the medical workforce should be frightening to policy analysts and policymakers. Recent medical school statistics indicate that perhaps less than 10% of graduating U.S.-trained physicians are entering primary care, with much of the void being filled by foreign-trained physicians who are arguably vitally needed in their own countries.
An extremely strong financial case can be made for trying to manage care more through PCPs. Actuarial analyses show that treatment costs for ordinary illnesses by PCPs are substantially lower for many conditions, due to using the appropriate level and sites of care-fewer expensive tests, avoidance of expensive emergency room visits, and other good care management techniques.
But when it comes to actually creating incentives to increase the number of PCPs, the problems are daunting. According to physician educator friends, some of the problem is cultural-in the United States, there is something of a bias against "remaining in primary care practice" rather than going into a more "widely respected" specialty field. Similarly, the lifestyle of a specialist (eg, a dermatologist) may be easier-greater financial rewards, more control over office hours, etc.
The largest problem undoubtedly involves compensation-arguably, PCPs are not paid sufficiently for the care coordination that we would like them to manage. But, here just adding more compensation to the system cannot be the answer. If we (collectively) are to be "good stewards" of our healthcare dollars, then increasing pay for PCPs must be done in a budget-neutral manner. Inevitably, this means examining also how much we are willing to pay specialists. Some observers already argue that the commonly used coding system, Resource Based Relative Value Schedule, continues to reward procedures by (among other things) paying more for intensive new procedures while very infrequently being reduced to recognize labor efficiencies gained over time with older, standard procedures. [In plainer language, specialists can make more money by billing the same amount per procedure as they become much more efficient and perform, say, 10 procedures a day in year 5 of practice versus a maximum of, say, 5 procedures a day they could perform at the start.]
Another issue in granting greater compensation to PCPs is what we should expect in return. Although Pay For Performance (P4P) means many different things to different people, the Commonwealth may want to require greater "accountability" for managing patients if PCP compensation is increased substantially (eg, by 20% or more). Here, lessons may be learned from the experience in Britain of granting higher pay to PCPs there-who almost all achieved targeted levels of care.
Last-can a change in PCPs be accomplished in the Commonwealth without the participation of the federal government? Because of the huge impact of Medicare on patients and providers, any efforts to "rescue and revive" primary care must be coordinately closely with CMS and Medicare policy.
What might be the financial impact? In the short run and if done in a "budget-neutral" manner, the direct impact would be zero-primary care physicians would be paid more and specialists would be paid less. This writer's guess is that the secondary impact would be significant-by directing more care to PCPs, unnecessary and inappropriate care would be reduced and the 30% to 50% of care delivered and managed by physicians might be reduced by 10%-20% (well under the levels of inappropriate care cited by Fisher and Wennberg). This has the possibility of reducing healthcare insurance premiums by 3% to 10%. But again, the challenges of creating and implementing such an approach are daunting.
Other actions not included in the 17 proposals might also be considered. For example, building on the work of Jack Wennberg of Dartmouth looking at the variation in use of services across small market regions, aggregating data on all healthcare services has the potential for facilitating actions to reduce inappropriate care. While Massachusetts has a great start in this data aggregation on the inpatient sector, data on all services (professional, prescription drugs, ancillary services, etc, in addition to inpatient costs) should be collected and made available in secure form (with careful removal of patient identifiable information) but which would allow analysis of provider efficiency and quality. By making determination of, say, which physicians efficiently provide services using episode grouper software for all types of conditions (not limited to only a few chronic conditions, as cited in Proposal 6) and which are outliers, there is the potential to provide a "report card" that would provide feedback to providers to improve quality and efficiency and transparent information to beneficiaries and payors. Payors could then use these data to better construct networks that could reduce the use of inappropriate or unnecessary care.
SUMMARY
The proposals of Health Care For All are important parts of the healthcare reform discussion. As a society, we must continue to look for solutions that provide necessary care while reducing inappropriate or unnecessary services. All of these actions, however, should be considered with a view toward actually accomplishing cost control and not just be rhetoric.