Can Congress tackle chronic illness in Medicare patients?

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The raw data are devastating. Chronic illness — maladies such as arthritis, diabetes and heart disease — is the biggest single driver of medical costs. An estimated 68 percent of Medicare recipients suffer with multiple chronic conditions; chronic illness accounts for 93 percent of the program’s spending. Most of Medicare’s hospital readmissions are attributable to patients with chronic conditions.

{mosads}In the case of diabetes, for example, the American Diabetes Association reports that the total cost of that debilitating disease amounted to $245 billion in 2012. This includes $176 billion in direct medical costs, and $69 billion in lost productivity.

Chronic illness is the busiest intersection where our distorted healthcare financing collides with substandard healthcare delivery. Medicare Advantage plans have pioneered case management and care coordination for Medicare beneficiaries with chronic illnesses. But traditional, fee-for-service Medicare remains inflexible, with bureaucratic benefit setting and its complex administrative pricing and price controls. As Rep. Tom Price (R-Ga.), a physician, recently noted, diabetic seniors enrolled in traditional Medicare still do not have access to continuous glucose monitors (CGMs), a medical technology today covered by 95 percent of private health plans. Because Medicare financing does not enable a person to take the plan they like into retirement, persons can experience an absurd discontinuity in their coverage simply because they turn age 65.

The costly epidemic of chronic illness is generating serious congressional interest. Sen. Ron Wyden (D-Ore.), along with Sen. Johnny Isakson (R-Ga.), and Reps. Erik Paulsen (R-Minn.) and Peter Welch (D-Vt.), have introduced the Better Care, Lower Cost Act (S. 1932 / H.R. 3890). The bill would establish a “Better Care Program” to allow for a new subset of Medicare plans and provider groups to focus on integrated care for the chronically ill. These arrangements are expected to deliver high quality care and economically efficient service to complex and difficult patients and secure long-term cost savings.

This bipartisan bill has certain attractive features. Financing for chronically ill patients would be on a per-capita basis, with an adjustment for the patient’s health risk and income. Such adjustments not only reflect a person’s health costs, but also make coverage and care affordable for patients. To be qualified as a Better Care Program, an organization must demonstrate that it “meets person-centeredness criteria” with personalized chronic care plans for enrollees. This laser-like focus on the individual is particularly welcome.

These special plans and groups will also assume risk and participate in gain-sharing, which means they are rewarded for efficiency and better medical outcomes. Unlike the Medicare Accountable Care Organizations (ACOs) set up under ObamaCare, where patients are passively assigned (“attributed”) to Medicare providers, this proposal would have patients actively sign up for these services.

Good intentions and policy can, however, be undone by bad implementation and unintended consequences. For example, Congress should maintain a healthy skepticism of Medicare risk-sharing models as a source of significant savings. The ACO experience thus far has been unimpressive. In 2014, 72 percent of the ACOs participating in the Medicare shared savings program did not generate enough savings to earn a bonus.

And Congress has good reason to doubt the ability of the Medicare bureaucracy to establish “quality performance standards.” Right now, physicians are struggling to adapt to the Medicare payment reforms enacted in 2015, and under proposed Medicare rules, 87 percent of small medical practices would likely face penalties.

Also, Congress must avoid imposing yet another layer of administrative costs on frustrated members of the medical profession. The bill language specifies that reporting requirements not be “overly burdensome.” Whether that happens, or not, remains to be seen. Writing in Health Affairs, researchers revealed that the hundreds of hours already spent tracking and reporting “quality” measures for Medicare, Medicaid and private health plans amounts to an average cost of $40,069 per physician, or $15.4 billion a year.

Medicare Advantage, as noted, has indeed pioneered care coordination and case management. But for the Medicare patient, that’s still not enough. As Wyden argues, “It’s time to make the rules more flexible so that he can get a Medicare Advantage plan tailored to his unique needs.”

Of course, the best way for Congress to achieve this ambitious goal is by building on the best features of Medicare Advantage, securing a level playing field, and allowing for a wide variety of healthcare options, plans and providers through a defined-contribution (“premium support”) approach. This arrangement currently funds the prescription drug program and Medicare Advantage’s integrated plans. It can be expanded to cover the entire panoply of Medicare benefits. That approach would allow more personalized care in a new environment characterized by transparency of performance and price and genuine competition among providers — exactly the environment needed to control cost and reward superior service for Medicare’s large, growing and complex population.

Moffit, Ph.D., is a senior fellow in the Heritage Foundation’s Center for Health Policy Studies.

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