Payment Methods

A note on this week's question

Every year, Minnesota employers and tax payers spend approximately $30 billion on health care. The health insurance companies and government programs, such as Medicare, use this money to pay the physicians and health systems that deliver care.

Q.	What is the best payment method to ensure higher-quality health care at a lower cost?

A. Fee for Service
• Pay for each individual treatment, procedure, and test that is provided

B. Capitated payment
• Pay a health system a monthly or yearly capped amount for all patients served

C. Pay for performance
• Pay higher reimbursement to physicians who use evidence-based “best practices” based on the assumption that better care drives down long-term cost

D. Pay for outcomes
• Base reimbursement levels on health outcomes over time, regardless of their use of evidence-based “best practices”

E. Value-based plans
• Base payment on benefit designs that also provide incentives to consumers to engage in healthy behaviors and result in better outcomes

Health Care Experts A. 0% B. 10% C. 33% D. 37% E. 20%

Executives A. 14% B. 0% C. 4% D. 14% E. 68%

Health Care Experts' Comments

>B. “I think a combination is the best way to go. An incentive payment system could be put on a capitated model with the reward centered around the outcomes and processes of the care provided. Consumers should have a value-based plan design to give them the incentives and rewards to pursue healthy behaviors.” >C. “Value-based plans, 'E,' are already starting to gain traction and will continue under the steam of insurance companies trying to drive overall health costs down. Ultimately, we need to get to 'D'—pay for outcomes, but paying for performance is the best first step in what will be a radical shift in payment methodology.” >D. “I believe this would drive ‘best practices’ medicine as well as offering flexibility to develop new practices over time that will offer good outcomes and consider potentially unique requirements.” >E. “More than 75 percent of health-care expenditures in the United States are for treating chronic diseases. Many chronic diseases are caused by unhealthy behaviors on the part of health-care consumers.To successfully address the problem of skyrocketing health-care costs, the consumer needs to be intimately involved in the solution.” >Other “No payment method by itself can ‘ensure’ higher quality health care at a lower cost.Blended payment methods that are devised specifically for different types of services and conditions will be needed. There is no magic payment bullet.”

Executives' Comments

>C. “A combination of ‘C’ and ‘E’ places the responsibility on the provider and the patient. They need to be equal partners in sharing the responsibility of better outcomes at a lower cost.” >E. “Consumers have the responsibility to take charge of their own habits as they relate to health care. Diet and exercise would go a long way in consumer responsibility as it relates to their own health. Making an effort with the entire family would become cost effective.” “You have to create a partnership between the consumer, doctors, and insurance companies, otherwise no one has a vested interest to make it cheaper.”

Summary

Both panels said it loud and clear: If we want to use a payment method to improve health-care quality while lowering costs, we need a new financing mechanism.

In our current financing model, physicians are reimbursed for each procedure they do (fee for service). Few, if any, of our panelists believe we should continue this approach if we want to improve quality while lowering costs. A large majority of the business leaders appear ready for consumers to have more “skin in the game” in determining the payment approach. In stark contrast, the health care experts are split on the best approach to use. Their emphasis is more on influencing the actions of providers.

General Assistance Medical Care

A note on this week's question

The General Assistance Medical Care (GAMC) program in Minnesota provides health insurance to more than 36,000 low-income adults, many of whom live in Hennepin and Ramsey Counties. This program serves adults, ranging from uninsured healthy people, who have an unexpected major injury or sudden illness, to individuals with chronic medical treatment. Many of these individuals first receive care in hospital emergency departments, which retroactively sign them up for GAMC coverage.




Q.	The funding for General Assistance Medical Care will be eliminated early next year from the state’s budget. Which one of these options would be your top recommendation for a long-term solution?

A. To help pay the costs, hospitals should eliminate services and capacities that benefit the general public and the community, such as poison call-in centers, burn units, physician training programs, and mental health crisis centers.

B. The Minnesota Legislature should make cuts in other parts of the state budget, such as transportation and education, in order to restore state funding for the program.

C. Create an expedited application process, enrollment assistance, and financial aid for premiums and co-pays so any eligible resident can have membership in Minnesota Care.

D. Physicians and hospitals, rather than the state, should find innovative, less expensive ways to care for GAMC enrollees and cover the costs as part of their community-benefit obligation.

E. Permanently eliminate the program with no expectations from physicians and hospitals to provide services.

Health Care Experts A. 0% B. 19% C. 64% D. 11% E. 6%

Executives A. 3% B. 7% C. 70% D. 17% E. 3%

Health Care Experts' Comments

>B.
“A tax increase is necessary, in my opinion, as Minnesota is otherwise cutting programs and services in health, education, and transportation that will have various long-term impacts on the quality of life and safety and security for residents of Minnesota.”

>C.
“This is not a complete solution, it gives us time. This is a statewide predicament that also affects Hennepin County Medical Center (HCMC). HCMC is critical for the downtown community, and we need to make sure there is a plan to keep HCMC solvent—and make sure they’re not the organization that will get hurt financially from all of this!”

>Due to the wide range of opinions, these comments reflect other solutions the health-care panel provided.

“A temporary fix to the elimination of GAMC has not been achieved for the next six months. Only some GAMC recipients will continue coverage, and the vast majority of GAMC recipients will lose that coverage in less than six months. More importantly, come March 1, there is still no coverage available for people who come to a hospital emergency department and need coverage under GAMC. Because the urgency to find a solution in the first few weeks of the legislative session still exists, a solution (short term and long term) must include the reinstatement of a program designed to cover this population that costs less than the current GAMC program.”

“Health insurance isn’t what they need. It’s health CARE. We should fund community-based clinics and outreach to optimize care up front.”

“It is unconscionable for a community to turn away from the responsibility for those in the greatest need. Most of the GAMC are mentally ill. Our state government both executive and legislative must be accountable and responsible. They should be coming up with a plan not a survey.”

“Continue to fund GAMC the way it's been funded since the program began over 30 years ago, through a General Fund appropriation. If this requires raising revenue through a tax increase as part of a balanced solution to providing care to these low income individuals, then do so.”

Executives' Comments

>B.
“It is better to continue funding for this program through the state budget. Otherwise, the costs fall back onto the rest of the system.”

>C.
“We, as a society, need to prioritize where we will spend our time and resources, and this prioritization will need to happen under the umbrella of what is financially possible and not on a blank sheet of paper devoid of any financial realizations.”

>D.
“Health care is not a right, and the government cannot solve all of the problems that exist in our society. It troubles me that we look to government to solve all of our woes rather than our families, communities, charities, and religious institutions. However, all of us, especially the health-care community, have an obligation to ensure that those who are ill are adequately taken care of.”

>Other solutions

“In no other business can people walk in and must be provided with service by law. The hospitals are then stuck trying to collect payment, and the cost is borne by those that have insurance. Hospitals need to send these bills to the government (state or federal, take your pick) and demand payment. Put pressure on these ineffective politicians to actually do something about the uninsured in this country.”

Summary

For years, most people have not had to think about or know about GAMC. Now, finding funding for the more than 36,000 low-income and very ill adults who do not have health insurance will be the first major health care decision for the state legislature in February.

A clear majority of both panels want an improvement in Minnesota Care—our “public option”—to cover those enrolled in GAMC.

To learn more about the community impact of the uninsured, feel free to attend a United Way Leadership Forum on this topic at the Humphrey institute of Public Affairs Wednesday, December 2 at 3 p.m.

Health Care Reform Legislation

Q.	How confident are you that federal health care reform legislation will lower the cost of health care in Minnesota versus no federal reform?

Health Care Experts Confident 2% Somewhat confident 25% Not confident 73%  > Somewhat confident “In the short term, reducing overall health care costs will take a back seat to reform measures that improve insurance coverage for consumers. In the long run, however, the move to provide more balanced coverage and reimbursement while creating new provider models of care will result in significant change and cost savings in the health care system as a whole.” “Although not as bold as hoped for, there are a number of payment reforms in the various versions of health care reform—such as bundling and demonstration projects for accountable-care organizations—that offer some potential for reducing costs.” > Not confident “It is an attempt at insurance reform rather than health care or health reform. It is more likely going to raise our insurance costs and potentially our health care costs, too.” “Minnesota has subsidized health care in higher reimbursement states like Florida and California for years. I believe we will actually be penalized for being more efficient. Also, we already cover over 90 percent of people, so we’ll not benefit much from expanded coverage.”

Executives Confident 9% Somewhat confident 14% Not confident 77%  > Confident “The insurance industry has created an uneven playing field with the consumer taking the short end of the stick.” > Somewhat confident “I do believe that health care costs will come down for many, but my fear is that the true cost savings is really a shift of burden to higher taxes for many Americans.” > Not confident “I am hard pressed to find any example of federal intervention in a free market that has resulted in lower costs. It can be argued that federal mandates and regulations on health insurance have caused the escalation in health insurance premiums that the current legislation is attempting to fix.” “It seems plausible that the legislation currently under debate could provide some framework to reduce health care cost inflation. It is highly unlikely that implementation of the proposed federal rules will result in deflation of health care costs in Minnesota. At best, costs will stabilize. More likely, the rate of cost increase will slow.”

Summary One of the two major goals of federal health care reform is to contain future costs in our health care system. Annually, $30 billion is transferred from employers and taxpayers to health plans and health systems to pay for health care for Minnesotans. Medicare reimbursements to Minnesota physicians and hospitals are already some of the lowest in the nation. Both our panels this week have little faith that federal health care reform, as is currently being discussed, will do a better job of lowering health care costs here in Minnesota than no federal health care reform legislation at all. I would like to extend my thanks to Julie Brunner, a member of the health care expert panel, for today’s question.

Lowering Health Care Costs

Q.	Who should play the lead role in lowering health care costs?

Health Care Experts Legislators  6% Physicians/Health Care Delivery Systems  36% Citizens  12% Employers and Purchasers  24% Insurance Companies  9% All of the Above  12%  > Legislators “Legislators must take the lead since they currently own the payment system and methods.” > Physicians/Health Care Delivery Systems “Although the other groups have potential to lower costs, physicians and health care delivery systems . . . have proven that, even without a comprehensive national plan, costs can be lowered while delivering a high level of care.” > Citizens “First, each individual citizen can do a ton to solve this crisis by living better. . . . Most avoidable health problems are far more dependent on lifestyle than health care. So the question of ‘what can you do for your country’ could be answered by making healthy life choices and doing all you can to help your neighbor do the same.” > Employers and Purchasers “Health systems can’t change until the payment systems do.” > Insurance Companies “The health insurance industry has the data, broad perspective, and management skill base to lead this effort. In addition, this would be an exceptional opportunity for this industry to do good things and repair its image.” > All of the Above “Lowering health care costs will require all parties to play a role.”

Executives Legislators  21% Physicians/Health Care Delivery Systems  33% Citizens  15% Employers and Purchasers  21% Insurance Companies  9% All of the Above  0%  > Legislators “Everyone has an axe to grind in this debate, but at least legislators are getting counsel from all of the other groups. I just hope that the group that speaks the loudest . . . hasn’t clouded the vision of too many of our legislators.” > Physicians/Health Care Delivery Systems “In our manufacturing business it is not our customers that will lower our costs. We ourselves have to take the responsibility to make that happen. Our customers may push us and ask for lower costs or more services for the same money, but if we the manufacturer don’t work at cutting costs it just will not happen.” > Citizens “It’s easy to say that each of us should be responsible for our own health care, particularly understanding the value of it, but extremely difficult in practice. . . . But if each one of us doesn’t take more responsibility, health care will continue on its parlous path.” > Employers and Purchasers “By demanding innovative, cost-effective products and services delivered by physicians and insurers, they will have the most influence over what will work long-term because they are paying for it.”

Summary At a time when our nation is about to change how 17 percent of our gross domestic product functions, there is no agreement on who should take the lead in lowering health care costs. It is the most fundamental question Congress is facing—no wonder they can’t get agreement on a bill! The group getting the largest number of votes is physicians and their health systems. Has anyone told the physicians our nation wants/needs them to take the lead in lowering health care costs? Have we trained them to do this? Most physicians are not even fluent in what a procedure or drug costs their patients. Furthermore, asking physicians to take the lead in lowering health care costs will likely directly lower their personal income—again, no wonder this is our nation’s number one domestic dilemma.

Electronic Medical Records

Welcome to Pulse Check, a new poll that addresses the pressing issues in health care. The poll brings together health care experts and business executives in dialogue about what is most needed to modernize health care, control costs, and provide coverage, among other issues. As always, we encourage you to share your opinion in the comments section below. Also, we owe a special thanks to the Kaiser Family Foundation for this week’s question.

Q.	How would a shared online system of electronically stored medical records (EMR) influence the cost of health care?

Health Care Experts  Go up  11%  Go down  67%  Stay the same  22%  > Go up “The investment in EMRs will be passed along to purchasers and the government which will ultimately increase costs.” > Go down “More accessible medical information should lead to less ‘do over work’ simply because a provider doesn’t have good information.” “I believe health care costs across the system would go down over the long run; however, costs may initially rise as provider organizations make their initial investments in technology , training, and redesigning workflow.” > Stay the same “Cost reduction will require economic incentives and dynamics in how health care organizations compete. If they were in place, then EMRs would be a useful tool in getting to more efficient care. EMRs by themselves will have little effect on the cost of care.” “Electronic records and interconnectivity alone are not sufficient to impact the cost of care. We need to change the way we pay for care, to reward value and not just volume.”

Executives  Go up  13%  Go down  60%  Stay the same  27%  > Go up “I believe the cost would go up, but it is an important step in improving the quality of care for the individual and ensuring that the physician has important medical information that he/she may not have had access to before . . .” > Go down “I believe its adoption will result in fewer medical mishaps, reduce fragmented care when people see multiple providers, and provide opportunities to increase quality.” “Initially costs would go up, given the investment medical providers would need to make in hardware and software—but in not too many years, the costs should go down, significantly.” > Stay the same “While EMRs may be a good idea, I do not expect that they are a cost-saving measure, particularly in the short term. A great deal of money must be invested in the infrastructure and implementation of an EMR system before it yields improved medical care (if ever) and certainly before it yields cost savings.” “Most health care providers have already established [EMR] systems within their own organizations, leaving the challenge of adapting the data to a uniform system.”

Summary Similar responses from both health care and business experts are a significant result: both groups overwhelmingly anticipate that electronic medical records will lower the costs of health care—even if implementation expenses cause a short-term rise in health care costs. Overall, both groups of experts take the stance that potentially high investment costs will pay off in the long term. Even those who do not believe that health care costs will go down still said that EMRs are a good idea because they are a better way of working.