PA 574: Health Systems Organization Session 4 – April 24, 2013

 Collecting resources  Distributing Resources  Both should seek to support and not driving the system – i.e. reflect system goals, not create them…

 Goals: Protect against financial risk (income and/or health based) Provide health services to populations  Purpose Risk: Economic fairness Services: Population health  Mechanisms (generally) Risk: More individual/market justice/private good Services: More population/social justice/social good

 Broad public taxes (income) Generally progressive and least related to health states (risk)  Specific public taxes (wages) Less progressive, may have some relation to health states  Specific private “taxes” (insurance premiums) Not progressive, tied to health states (groups or individual)  Direct payment (out-of-pocket) Regressive(?), directly linked to health states  Any of these can be mixed together…

 Means of collecting resources can be used to define system types Finance aligns with and supports system goals and underlying structure Direction of determinism is important – support or driver?  Universalism as important goal Universalism requires “fair” collection policy Guard against selection – avoiding unhealthy or letting people use without contributing

 Beveridge Classic – Broad public tax based collection tied to public run universal system  Beveridge Neo-Classic – Broad public tax based collection disbursed through private universal system  Bismark Classic – Specific public tax based collection run through private universal collection and disbursement systems  Bismark Neo-Classic – Specific public and private tax based collection run through private universal collection and disbursement systems  Mixed systems – combinations of above  “Not-so-classics” – versions of above, or mixed but not universal and usualy very limited

 Beveridge Classic – Broad public tax based collection tied to public run universal system  Beveridge Neo-Classic – Broad public tax based collection disbursed through private universal system  Bismark Classic – Specific public tax based collection run through private universal collection and disbursement systems  Bismark Neo-Classic – Specific public and private tax based collection run through private universal collection and disbursement systems  Mixed systems – combinations of above  “Not-so-classics” – versions of above, or mixed but not universal and usually very limited

 Beveridge Classic – British NHS, Norway/Sweden(?)  Beveridge Neo-Classic – France, Canada, New Zealand  Bismark Classic – Germany, Austria  Bismark Neo-Classic – Netherlands, Switzerland  Mixed systems – US, Australia  “Not-so-classics” – Many developing countries and parts of US system (market?)

 Beveridge Classic – VA  Beveridge Neo-Classic – Medicaid  Bismark Classic – Medicare  Bismark Neo-Classic – Most large businesses, PPACA  “Not-so-classic” – US individual/small business market before PPACA?

 Universal coverage through: Individual mandate to purchase insurance Tax based support for insurance purchase up to 400% FPL Works through existing private insurers/providers  Looks mostly like Bismarck Neo-classic model (as would Massachusetts)  Vermont looking to do Beveridge Neo- Classic  Overall upgrade for individual/small business insurance market from “not-so- classic”?

 Not much discernible difference  All (but not-so-classics) can accommodate universal coverage  No clear differences in Triple Aim outcomes France has been rated best and its Beveridge Neo-classic Use of private provider systems seems to have some edge in patient experience of care Single payer (Beveridge) seems to have slight edge in cost  Slight differences in approaches regarding fairness/equity Beveridge really only income based (general taxes, little direct pay Bismarck is generally income & health status based, with more direct payment  Bismarck may be more administratively complex Example: Health insurance exchanges under PPACA – price of individual satisfaction(?)

 Two considerations: “Fair” payment to provider Best “value” to payer/consumer  History: “Natural”/”Open” approach to reimbursement “Fair” payment = pay providers based on what they decide to do (“open”) and what they see as “fair”. Best “value” determined by “natural” system of professional ethics. Cost inflation with limited value challenges this How to create reimbursement that embraces Triple Aim?

 “Piecemeal” Payment – Fee-for-Service: Payments for increments of treatment process Based on use of “structure” – process piece done by whom/where Retrospective – based on what was done  Examples: “Natural” – Usual and Customary Charges (UCC), market/contract based fees “Rational” – Resource Based Relative Value Units (RBRVU) – establish fee based on constructed average efficient provider/practice financials  Medicare did RBRVUs – raised primary care fees and lowered specialty fees

 Episode or Case Rate Payment: Payments for discrete but locally complete pieces of care Combines pieces of treatment into “whole” cases or episodes of care Prospective – based on what you should do in specific case/episode  Examples: “Natural” – place/process specific – Diagnostic Related Groups (DRGs) for inpatient care, Resource Utilization Groups (RUGs) for nursing home care, Pre-natal global fees – single fee for all pre-natal care “Rational” – Place/Process spanning – “true” episode – “bundled” payments – single fee for knee/hip replacement that includes pre- and post-surgical care

 Global Budgets/Capitation Payments Payments for comprehensive care of specific population Payment per individual whether they use services or not (capitation), sums to total payment (global budget) Prospective – based on expectation of population/individual outcomes – not specifically what is done  Examples: “Natural” – personal health specific – private insurance premiums “Rational” – community health based/income neutral – “universal” (whole group) coverage – large business model, Medicare/Medicaid, managed care/ACOs/CCOs

 Achieving Triple Aim requires reimbursement that embraces, incentivizes, and supports all three aims Fee-for-service worst – doing more means more money regardless of value Case/episode better – doing more likely is better Global budget best – doing more (or less) isn’t the issue – doing better is…

 But..organization/system & payment interrelated, so must be aligned: Need orgs that can “handle” new, better payment methods Need new data and measurement effort – identifying episodes, populations, and actual outcomes Need numbers – larger orgs – prospective payment based on risk Need boundary spanning orgs/relationships Whole system perspective – how one thing effects other things across system (“true” value assessment)  This is where we are going – or trying to – Triple Aim orgs/systems supported by appropriate financing and reimbursement