HHS moves forward with game-changing health care innovations

It would be easy to think the flurry of congressional investigations of the White House, the politics of the 2020 presidential campaign, and the paralyzing partisanship on Capitol Hill would combine to make it impossible for anything to get done in Washington. Think again. Flying somewhat under the radar, the Department of Health and Human Services (HHS) has ramped up efforts to move towards a more innovative way to reimburse health care providers, which has caused a flurry of behind-the-scenes lobbying from all sides of the health care industry.

For years, public and private health insurers have been moving away from the fee-for-service reimbursement system toward a payment mechanism that rewards quality of care over quantity of care. Medicare has been moving more slowly than large private insurers in this regard, but that is about to change with a slew of new and modified programs proposed at HHS. Not everyone is happy about it.

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Some physicians have protested the move, claiming so-called value-based reimbursement methodologies are unproven and create unnecessary bureaucratic burdens on medical staff without improving health care outcomes — a charge that is the subject of debate. Chief among their concerns is the fact that many physicians believe they are being forced to participate in these reimbursement programs because the “incentives” that insurers use to entice clinicians are nothing more than a thinly-veiled mandate. There may be more than a little truth in that accusation.

UnitedHealthcare, the largest private health insurer in the country, recently released a report calculating $710 billion in savings for the U.S. health care system if commercially insured patients were treated by physicians meeting quality and cost-efficiency guidelines. United’s own experience has shown these physicians generate a 7.1 percent savings per patient, per episode compared to other physicians. To motivate its contracted clinicians to enter the program, United designates participants as “premium care” physicians in its provider directory, sending a clear signal to plan enrollees which providers United believes provide the highest quality care at the lowest possible cost. Physicians who choose not to participate in the quality-based reimbursement program receive the ignominious distinction of being listed in the directory without United’s seal of approval.

Medicare also chooses to motivate providers with a stick rather than a carrot. Under the new Medicare payment formula, Medicare reimburses physicians through the Quality Payment Program, which is designed to provide higher reimbursement to physicians with the best treatment outcomes. Beginning in 2019, clinicians who choose not to participate will be penalized with a 4 percent reimbursement cut. Likewise, CMS has implemented changes to its hospital-based reimbursement model, the Medicare Shared Saving Program, that provide stronger financial incentives and regulatory flexibility to participating health care organizations.  

CMS also has called attention to the fact that price and utilization increases in specialty and branded medications for high-cost beneficiaries have driven a six-fold increase in Medicare Part D’s prescription drug spending since 2006. In January, the Trump administration announced a demonstration project intended to encourage health insurance plans to more effectively manage drug utilization costs under Medicare. For the first time, participating health plans will be financially penalized when the drug costs of their Medicare Part D patients enter the catastrophic phase — the so-called “donut hole” when costs are largely shifted over the Medicare program.

With the announcement of these and similar quality reimbursement programs, HHS Secretary Alex Azar is moving much more aggressively towards a system where health care providers will have no choice but to participate, whether they like it or not. Although the regulatory aspect of these decisions somewhat shields Congress from the politically difficult trade-offs, it was congressional action in overturning the controversial Sustainable Growth Rate (SGR) formula — the infamous “Doc Fix” legislation — that created the Quality Payment Program in the first place.

The SGR formula, which resulted in recommended Medicare reimbursement cuts nearly every year, was repealed as a direct result of the intense pressure applied to Congress by national physician lobbying groups. It is a classic case of “be careful what you wish for” as the same groups who drove the effort to repeal the SGR formula now are voicing concerns about its replacement.

The debate about whether to repeal the Affordable Care Act appears to be over, as national Democrats have turned their attention to the Medicare for All proposals that are a litmus test for their party’s presidential candidates. For its part, Congress has made substantial bipartisan progress in highlighting the needed reforms in addressing high prescription drug costs and the scourge of the opioid epidemic.

While the debate on those issues rages on, don’t lose sight of the changes being made to the reimbursement system in Medicare and among private insurers. These changes will have the most immediate impact on the way Americans receive their health care and will be the subject of intense debate in the industry. The reforms undoubtedly will be controversial, so it is likely only a matter of time before the issue once again winds up on the agenda of Congress.

Former Congressman Jason Altmire (D-Pa.) served three terms in the U.S. House of Representatives from 2007-2013. He is senior adviser for Avalere Health, a health care consulting firm in Washington, D.C. Follow him on Twitter @jasonaltmire.