Medicare Delivery Reform Mark E. Miller, Ph.D. Executive Director October 21, 2008

2  17 national experts  Nominated by Comptroller General for 3- year terms; can be renominated  Make recommendations to the Congress and the Secretary of HHS  Vote on recommendations in public  Two standing reports to Congress; also various mandated reports Medicare Payment Advisory Commission

3 Payroll taxes Premiums Tax on benefits State transfers General revenue transfers HI deficit Projected point at which general revenues reach 45% of Medicare outlays Projected Percent of GDP Source: 2008 annual report of the Boards of Trustees of the Medicare trust funds. Total Medicare spending Medicare faces serious challenges with long-term financing

4 Medicare beneficiaries are already facing growing financial liability Note: COLA (cost-of-living adjustment). Source: Social Security Administration and Medicare trustees’ report.

5 MedPAC: Seeking better value for Medicare  Price accuracy and equity  Accurate valuation of physician and hospital services  Coding and payment for imaging  Payment adjustment for primary care  Service volume and quality  Measuring resource use  Pay for performance  Comparative effectiveness  Medical home  Bundled payments (hospital/physician; ESRD)  Quality standards for imaging

6 Importance of primary care  Research suggests that increasing the use of primary care services relative to specialty care can improve the quality, efficiency, and coordination of health care delivery.  Kravet et al. 2008; Fisher et al., 2003; Baicker and Chandra 2004; Starfield and Shi 2002  Yet, primary care services are undervalued and at risk of being underprovided.  Passive devaluation of E&M  Beneficiaries access issues for primary care providers  Trend for physician subspecialization

7 Fee schedule adjustment to promote primary care  MedPAC Recommendation (June 2008): Increase payments for subset of E&M services provided by practitioners who focus on primary care  Budget neutral  Major departure from current structure of the fee schedule

8 Testing the concept of a medical home  General goals of medical home programs  Increase care coordination  Improve efficiency of resource use  Enhance primary care practice and access  MedPAC recommendation to initiate a medical home pilot project (June 2008)  Sufficient size to achieve statistically reliable results with a relatively short testing cycle  Stringent criteria for qualifying as a medical home  Focus on beneficiaries with multiple conditions

9 Traditional Medicare rewards volume over quality  No financial incentive to work cooperatively to manage patients’ care over time  Providers paid in silos  No longitudinal accountability  Does not penalize for poor quality or reward good quality  Pays more generously for some high tech services than for low tech services

10 Policies to encourage joint accountability and efficiency Medicare should  Share information on service use around hospitalization episodes with providers  Reduce payments for hospitals with high readmission rates  Permit shared accountability (i.e., gainsharing)  Test bundled payment for hospitalization episodes of care

11 MedPAC recommendations related to changing payment policy for readmissions  Inform providers of their risk-adjusted readmission rates; later, publicly share this information  Reduce payments to hospitals with relatively high readmission rates for select conditions  Allow shared accountability between physicians and hospitals

12 Recommendation on bundling  Bundling payment can improve incentives for efficiency  Report resource use around hospitalization episodes  Launch a voluntary pilot program to test the feasibility of bundled payment for select conditions