1. Michael Chernew June 7, 2016

2. Variation in Value of Services Not all services improve health Choosing wisely Schwartz, A et al. (2014) –42% of beneficiaries received one low-value services detected by more sensitive measures –About 2.7% of spending Variation in price for same service –Site of care

3. Tools to Promote Value Payment Reform Benefit Design

4. Payment Reform

6. HHS Targets 2016 30% of FFs linked to APMs 85% of all FFS linked to quality or value 2018 50% of FFS linked to APMs 90% of all FFS linked to quality or value

7. Payment Need not Rise with Value

8. Sovaldi example Sovaldi is a novel treatment for Hepatitis C –Better quality –Cost effectiveness was estimated at $47,304/QALY  Should we pay more? Source: http://nvhr.org/sites/default/files/.users/u27/Clin%20Infect%20Dis.-2015-Rein-cid_civ220%281%29.pdf

9. In FFS providers do not capture downstream savings ACOs do capture downstream savings  If primary care lowers spending higher payment may be needed in FFS but maybe not in ACOs  Measures need not be aligned across programs Scope of payment matters

10. Barriers to Payment Reform in Medicare Uniform national rules –Cannot negotiate or tailor programs Different programs bump into each other –ACOs and episode payment Political concerns –Integrating supplemental coverage Laws/ rules –Free choice of physician

11. Benefit Design

12. Standard Benefit Design Options Deductibles –Patient pays full amount up to a deductible amount Coinsurance –Patients pay a percentage of the price Copayment –Patients pay a fixed amount

13. Medicare Benefits Structure Incomplete Significant gaps in coverage –No coverage for long term care services, dental care, eyeglasses, hearing aids, etc. (KFF, 2014) No limit on out of pocket costs (Cubanski et al, 2014) Separate deductibles for Parts A, B, D

14. Alternatives Medicare “Essential” (ie: “Part E”) –Comprehensive benefits to beneficiaries _ lower deductibles and limit on out-of-pocket costs (Davis et al, 2013) Combined Parts A and B with a single deductible and OOP max (Ginsberg and Rivlin, 2015) Integrated Medicare plan with options to incorporate a supplemental plan

15. MA “uniformity” requirement  a plan’s benefits and cost sharing must be uniform across plan enrollees MA-VBID model allows plans to offer supplementary benefits to enrollees with CMS-specified conditions to encourage use of high value services  targeted enrollees can never receive fewer benefits than other enrollees MA-VBID Model Source: https://www.cms.gov/Newsroom/MediaReleaseDatabase/ Fact-sheets/2015-Fact-sheets-items/2015-09-01.html

16. Role of Medicare Advantage Advantages –Greater flexibility –Local knowledge –Flexibility in benefit design Disadvantages –Inability to set prices –Patient churn

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