Gail R. Wilensky Project HOPE April 9, 2008 “Paying for Performance” Starting with MA

Pay for Performance Remains Controversial ♦ Really Mean “Rewarding Excellence ” Besides –getting what we pay for now and don’t like it! ♦ “Encouraging Improvement” that is quality and efficiency and

What’s the Problem? ♦ Spending growth rates are unsustainable - 2.5% annual growth faster than the economy ( ) ♦ Lots of problems with quality On average, about half of what’s appropriate ♦ Lots of problems with patient safety 95,000 medical errors

Different Types of Fiscal Pressure ♦ Trust Fund ♦ General Revenue Insolvency projected in 2019 For rest of health care: Pressure on wages Less for non-health spending Pressure on other gov’t spending For Medicare:

Long Term Pressures are Huge! If Medicare/Medicaid grow at GDP + 2.5% By 2030: will account for 11.5% of GDP By 2030: will account for 8.4% of GDP If Medicare/Medicaid grow at GDP + 1% (In 2005: 4.2%) (With Social Security: 17%)

How Big A Problem? Some historical facts --- ♦ Overall tax rate last 50 years: 18.5% of GDP ♦ Allowing tax cuts to expire adds (only) 2% to rev: 2030 ♦ Previous in entitlements handled not by ing taxes Major budgetary challenges ahead!

Incentives Are A Big Problem Same reimbursement for best in class and worst in class Private sector hasn’t been much better 20+ years getting it exactly wrong! ( DRGs, RBRVS, Home Care, Nursing Homes and MA) Physician fee schedule is even worse penalizes efficient docs Medicare --

“First Things First”… Need a National Measurement System ♦ Need a National system to reach National goals ♦ Coherent, goal oriented system to access/report performance ♦ Information must be transparent/available ♦ Begin with “starter set”/ then comprehensive measures

2006 IOM Report on P4P ♦ Start with “pay for reporting” ♦ Phased approach ♦ Initial funding from existing funds – except docs ♦ Initially use provider-specific funds; move to consolidated pool – “shared accountability” “Start now, go slow, active learning”

Fortunately, MA Already Has Reporting System ♦ HEDIS -- Healthcare Effectiveness Data and Information Set ♦ HOS - Health Outcomes Survey ♦ CAHPS -- Consumer Assessment of Healthcare Providers and Systems Unfortunately, not all MA plans report; MSA’s and PFFS exempted

How to Proceed? Slowly -- in terms of $ at risk Quickly -- in terms of start time “Sooner rather than later” is best Don’t need new legislation (I think)

Budget Neutral Strategies can Vary -- Pay out differentially if meet certain HEDIS levels -- Pay out according to HOS or CAHPS measures Use a portion of the MA premium that is above FFS Continue public reporting as well as P 4 P

Going Forward Need to make quality information available for FFS in the market area Need to bring in other MA Plans Begin P 4 P in other areas of Medicare Hospitals -- ready as well as MA Physicians -- critical but harder

Many Areas Need Further Research ♦ Most of the focus has been on quality measures need more effort on efficiency ♦ Assess impacts of weighting strategies quality/efficiency; improvement/attainment ♦ How big an incentive to change physician behavior? ♦ How to adjust for “social” compliance differences

Biggest Worry… “Unintended Consequences” ♦ Patient selection ♦ Widening performance gaps ♦ Increasing disparities ♦ “Teaching to the test”

Bottom Line: Going Forward ♦ Reward/plans/institutions/clinicians who provide high quality/efficiently produced care ♦ Also need to involve consumers “value-based” insurance; reward healthy lifestyles ♦ Need to realign financial incentives And better information on comparative effectiveness would help!

Will These Changes “Bend the Curve” ♦ “Easier” politically to imagine these changes ♦ Alternatives get “really ugly, really quickly” ♦ Don’t know how much difference better information and better incentives will make