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Aetna CEO: New Math for Medicare

October 22, 2014
5:02 pm

(We have made the point often in this space that, even with the private sector’s successes in containing healthcare costs and reducing Medicare per-capita spending to historic lows, the sheer magnitude of baby boomers reaching 65 and reaching Medicare eligibility necessitates significant changes to the program.  Moving away from a fee-for-service model that incentivizes volume rather than value is essential.  As Mark Bertolini, CEO of Aetna (a Healthcare Leadership Council member) points out in this Forbes op-ed column, innovative approaches to Medicare payment and healthcare delivery can achieve better patient health and improved system sustainability.)

By Mark T. Bertolini

The Medicare Part A trust fund will be exhausted by 2030. As 11,000 baby boomers become eligible for Medicare daily, Medicare spending is projected to exceed $1 trillion in 2020. We can’t change the numbers that define our population but, we can apply new math to them.

Focus first on helping the chronically ill

The sickest 5 percent of fee-for-service Medicare patients with chronic conditions drive more than 40 percent of the total cost of health care in the program. We should use the lessons learned in Medicare Advantage and other proven innovations. Encourage Medicare Part A and B enrollees with multiple chronic conditions to participate in new integrated care programs with top-notch physicians to ensure high-quality service. Pay managed care organizations rates that guarantee savings for taxpayers out of the gate.

Use the successes and learnings of this approach to phase out the Medicare fee-for-service payment model

The fee-for-service model has doctors getting paid by the number of procedures they do or tests they run, rather than on how well their patients do. We need to move to a system that pays for quality over quantity.

These two changes alone will mean lower cost coupled with better integrated, quality care for the members of our families that need that care the most.

While the Congressional Budget Office recently reported that estimated costs of Medicare and Medicaid have dropped, our country’s coffers are still being drained by a too-costly health care system. This was reconfirmed in July, when the Boards of Trustees of the Federal Hospital insurance and Federal Supplementary Medical Insurance Trust Funds projected that Medicare costs will grow from their current level of 3.5 percent of the gross domestic product (GDP) to at least 5.3 percent of the GDP in 2035.

Consider this: As baby boomers become Medicare eligible, the number of beneficiaries will grow from 50.7 million in 2012 to 81 million in 2030—a 60 percent increase in less than 20 years. Add to this that the tax base is shrinking: Baby boomers are retiring, leaving the country with a much smaller workforce paying a much higher Medicare tax burden. With average life expectancy projected to reach 81.5 years by 2030, on average those seniors will use Medicare benefits for three times as long as when Medicare was enacted in 1965. Chronic conditions among Medicare beneficiaries also are on the rise, making them a sicker and more expensive population than existed in 1965.

The current fee-for-service payment model unintentionally incentivizes the wrong kinds of behaviors—spending less time with patients, or having more tests and procedures. There is little reward for finding more efficient ways to make people better or for keeping them healthy in the first place.

Bringing innovative collaboration to traditional Medicare

Many programs that have been so effective for caring for Medicare Advantage’s sickest beneficiaries, including enhanced home-based care, care coordination and medication review, are not always covered under traditional Medicare. Our experience in Medicare Advantage shows the promise of these models. For several years, we have worked with health care providers to establish reimbursement models based on risk-sharing that encourages higher-quality performance. Aetna Aetna’s Medicare Advantage Provider Collaboration program, and its work to create accountable care organizations (ACOs), are examples of cooperative arrangements that are improving care quality and health outcomes while also reducing costs. In many instances, these programs have resulted in fewer inpatient hospital days, fewer hospital admissions and fewer readmissions for patients, which can reduce health care costs by as much as 30 percent.

Bringing innovative provider collaborations and managed care approaches to traditional Medicare is a winning proposition for everyone. Patients could get a full team of experts providing customized and focused attention, and be rewarded with incentives for adhering to treatment. Doctors could get greater support, information and resources to help their patients get and stay healthy. Managed care companies could serve a broader Medicare population, as long as they meet the required quality and outcomes results. Taxpayers could get a lower-cost, better-quality healthcare system.

In the past, we have shied away from making significant changes to Medicare, since the issues seemed to be so far down the road. That is no longer the case. Our Medicare spending has a tremendous impact on our economy now, and that will only increase over the next decade. Our population is aging too quickly and our nation’s Medicare costs are growing too rapidly for us to be timid. We need to take dramatic action now, and revolutionize how we approach the problem. The numbers can work if we are ready to adopt a new model. We can achieve a result that includes both healthier seniors and a lower tax burden.

The Burwell Direction

September 08, 2014
3:22 pm

If her first public address as Health and Human Services Secretary is any indication, Sylvia Burwell has her department headed in a positive and much-needed direction.

Speaking to an audience at George Washington University, Secretary Burwell made it clear that she has no interest in maintaining the partisan strife that has characterized the handling of healthcare issues in recent years.  In describing her governing philosophy, she said “What’s central to all of this is not politics.  It’s progress:  setting aside the back and forth and continuing to move forward.”

Secretary Burwell also emphasized the need for transparency in HHS actions and decisionmaking, bipartisanship and listening to stakeholders.

The last of those points is going to be particularly important given the challenges facing HHS in the coming months.  All parties hope that the next open enrollment period for the Affordable Care Act will go more smoothly than the initial sign-up efforts.  Making that happen will, by necessity, involve listening to the expert, hands-on perspectives of healthcare insurers and providers.  The Healthcare Leadership Council has, in fact, developed and provided a number of recommendations, generated from the insights of its member companies, on how to improve upon the previous open enrollment period.

Also, there is rulemaking scheduled this fall related to the Medicare Part D prescription drug program.  I like to think that the regulatory controversy over Part D earlier this year – when the Centers for Medicare and Medicaid Services ceased action on aspects of a proposed rule because of strong response from hundreds of healthcare and patient organizations over the prospects of fewer Part D plan choices and higher drug costs – could have been avoided with more communication between federal authorities and those groups working to preserve a strong, affordable Medicare prescription drug benefit.

With such important issues on the horizon, we strongly applaud the direction Secretary Burwell has set for her department and welcome the opportunity to work with her in achieving shared goals for American healthcare.

The Medicaid Standoff and the Need for Flexibility

July 02, 2014
11:55 am

The White House’s Council of Economic Advisors released a report this week that is clearly intended to intensify the pressure on the 24 states that have, thus far, refused to expand their Medicaid programs, as provided for under the Affordable Care Act.  As we recall, the U.S. Supreme Court ruled that the federal government cannot compel states to go along with the Medicaid eligibility expansion and many, predominantly with Republican governors and/or legislatures, have elected to pass.

In its report, the White House’s economic advisors make the point that almost 5.7 million more Americans will have health coverage in 2016 if these currently non-compliant states embrace expansion.

We’ve made clear in this space the Healthcare Leadership Council’s view that Medicaid is not the best option for reducing America’s uninsured rolls.  Medicaid’s reimbursement rates for doctors and hospitals, significantly lower than private insurance and even Medicare, underscore the point that coverage does not necessarily equal access.  Nonetheless, less-than-ideal coverage is better than no coverage for the millions of Americans who need healthcare but can’t afford to pay the providers who are delivering that care.

But, while it’s easy to blame states for not getting on board, the Administration needs to recognize its own responsibilities in this area.

It is fortuitous timing that the White House report was released in the same week that the state of Indiana submitted its proposal to the Department of Health and Human Services for an expansion of its Healthy Indiana program as an alternative to enlarging traditional Medicaid.  As Indiana governor Mike Pence wrote in an op-ed, Healthy Indiana 2.0 is a better fit for the sensibilities of his state in that in that enrollees can take greater control of their own healthcare decisions through contributions to private accounts that are not unlike health savings accounts.

As he put it, “As national leaders in healthcare innovation, Hoosiers understand empowering people to take greater ownership of their healthcare choices is better than government-driven healthcare.”  Pence backed up his rhetoric with metrics showing that Healthy Indiana participants use preventive health services at a high rate while making less use of expensive emergency room care.

The Indiana case, as well as the movement toward innovative Medicaid plans in Iowa, Arkansas and other states, emphasizes the argument that flexibility is critical in bringing Medicaid expansion to all 50 states.  It’s simply a political reality that many states with conservative-leaning leaders do not like ‘Obamacare,’ don’t necessarily trust the federal government to keep its promises in regard to financial support for Medicaid expansion and are not going to change their current programs.

On the other hand, granting flexibility to make better use of private health plans and to incorporate patient engagement and responsibility can help resolve a situation in which we’re essentially two separate nations when it comes to Medicaid.  HHS approving the Indiana proposal would be an excellent step in this necessary direction.

Debating the Future of Biomedical Research: A Guest Post

April 07, 2014
12:57 pm

Wing of Zock is the blog for faculty, students, administrators and other stakeholders connected to medical schools and academic teaching hospitals.  Recently, the blog carried a post that I think is well worth publishing in this space.  While a debate is ongoing concerning the value and advisability of private philanthropic investment in medical research, more attention needs to be paid to the anemic pace of federal funding for the foundational biomedical research that leads to new treatments and cures.

Ann Bonham, Ph.D, the chief scientific officer for the Association of American Medical College elaborated on this point eloquently and effectively in her Wing of Zock post.  We’re pleased to repost it here….

On March 15, 2014, The New York Times Sunday edition published a front page story by William J. Broad, “Billionaires with Big Ideas Are Privatizing American Science.” The piece drew nearly 500 comments on the Times’ website in 24 hours, debating the pros and cons of philanthropic support for research.
Philanthropic investment in research is most welcome, but I was struck that this story made the front page, over a much less flashy yet far more important story: that the nation’s entire biomedical research enterprise may be in peril from a lack of federal investment. However generous, philanthropy cannot begin to substitute for a national commitment to medical research.

Between 1998 and 2003, the federal government essentially doubled the funding for biomedical research through appropriations made to the National Institutes of Health (NIH), the largest funder of basic biomedical science in the world. That significant investment led to breakthroughs in the diagnosis or treatment of many diseases in the past decade that were derived from basic science funded, at least in part, by the NIH.

Basic science is a high-risk investment. It can be serendipitous and unpredictable, and requires a large upfront commitment of time and energy. Some of the most major breakthroughs begin with small, unglamorous steps that require unimaginable commitment of time and energy, yet can eventually result in innovative new diagnostics, treatments, and sometimes cures.

As one example, in the 1960s, Dr. Osamu Shimomura and colleagues examined the properties of bioluminescence—the biochemical emission of light by living organisms—in jellyfish. He asked the question: How do these organisms biochemically emit light? An interesting question, although it would hardly have made the front page of the New York Times, or otherwise garnered much attention. The team identified a key protein, named aequorin, and elucidated how it worked chemically to make light emission possible. The finding eventually led to the identification of “green fluorescent protein” or GFP.

Shimomura did not work alone; other investigators made critical contributions to developing GFP as a biochemical marker that makes it possible to monitor gene expression and track the resultant protein movement within individual cells. GFP is now one of the most widely used scientific tools, enabling many other remarkable discoveries of how genes, proteins and cells function in health and disease. For the development of GFP, Shimomura and others were awarded the 2008 Nobel Prize in Chemistry, nearly five decades after his original discovery.

I have previously noted my favorite example: Dr. Elizabeth Blackburn and collaborators performed experiments, more than three decades ago, on Tetrahymena (or “pond scum”), a single-celled protozoan,to answer a fundamental question: How do cells overcome an inherent biological step that shortens their DNA molecules each time the cell undergoes normal replication? Given this phenomenon, the strand of DNA could become so short with repeated cell divisions that part of the genetic blueprint would be lost, and humans would lose their ability to develop normally. Another interesting question, but the future impact on medicine and science was still to come.

As it turns out, discoveries made using this seemingly unremarkable pond-dwelling organism uncovered the existence of a protective cap on the ends of the pieces of DNA, “telomeres,” that essentially protects the DNA during cell division. That discovery triggered thousands of additional experiments in laboratories around the world that continue to this day. And because of those studies, each one building on prior work, we have an advanced understanding of cells that serves as the basis for innovative treatments for neurodegenerative disorders and cancer. Dr. Blackburn and her colleagues were awarded the Nobel Prize in Physiology or Medicine in 2009.

Those are two examples. There are thousands of others. Based on current investment trends, it is unlikely that philanthropic donors or private sector research and development would have been interested in funding the original exploratory research on pond scum. Historically, the federal government has been the primary funder of this sort of high-risk basic science, because of both the proximal outcomes—fundamental discoveries that lead to clinical breakthroughs—and the distal outcomes—a stronger, more competitive and productive nation. These basic breakthroughs taking place in laboratories across the nation, and the public support that makes them possible, rarely are covered in the news or seen in the public eye.

Despite vocal bipartisan support for fundamental biomedical research, the commitment to federal funding does not match the rhetoric. We are now in the middle of an “un-doubling” of the NIH budget. In 2014, the federal appropriations for NIH—while nominally about $30 billion—is closer to the year 2000 level ($20 billion) when inflation and costs of doing research are considered. This year’s appropriation fell far short of simply breaking even with 2012. As a result, there are far fewer NIH-funded research project grants. Some of the brightest scientists in the nation have lost federal support and are shutting down their laboratories and laying off skilled technicians, unable to support their research teams and forced to put bold new ideas on hold. Even the most committed of our younger scientists are thinking twice about beginning a career in research in the public interest. This lost momentum and collapse of research infrastructure stifles potential breakthroughs from high-risk basic science that will take decades to recover, or may not be salvageable at all.

All this leads to one question: Now what? As the GFP and pond scum stories illuminate, we can start by turning our basic science breakthroughs into headlines that will captivate the public, and better explain the time lag between discoveries and clinical translation. But most important, we should rethink altogether how Congress allocates funds for biomedical research.

Current funding for NIH is in the discretionary spending category, which makes it subject to an annual appropriations process by Congress. What if Congress, while honoring the annual appropriations process, committed to a multi-year, predictable, modest increase in funding for biomedical research? The relative risk of committing to a steadily increasing funding scheme over the current annual appropriations process, which has resulted in the sobering and unrelenting decline in federal dollars, seems quite low—especially when considering the impacts of federal support on the health of our citizens who make our nation more productive, more competitive, and more innovative.

So let’s not be diverted into arguing the pros and cons of philanthropic funding for research. Instead, let’s focus on preserving the much larger and essential public investment that saves lives.

The High Costs of Ill-Considered Cost-Cutting

March 11, 2014
4:51 pm

If I had the ability to make anything required reading for the powers that be in Washington, D.C., it would be Dr. Marc Grodman’s blog post on The Hill’s website.  Dr. Grodman is CEO of Bio-Reference Laboratories, Inc., a New Jersey-based clinical lab and is also a member of the Healthcare Leadership Council.   In his post, he explains clearly and compellingly that simply cutting healthcare spending is not inherently synonymous with achieving a more cost-effective healthcare system.

Dr. Grodman uses the Medicare reimbursement cuts faced by clinical laboratories as his example, pointing out that simply chopping away at Medicare payments for lab services will undermine the advancements laboratories have made in developing genetic testing “that precisely identify disease, (enabling doctors) to select the best treatment for each patient,” speeding the healing process and reducing overall healthcare costs.

If reimbursement cuts hamper this progress, he writes, physicians must rely more on trial and error, leading to greater redundancy, higher cost and reduced quality.

This is true for clinical labs, but it speaks to a larger issue surrounding healthcare policymaking.  Even though per-capita Medicare spending is at historic lows, many on Capitol Hill insist there’s a healthcare spending problem.  In part, they are right because the aging of the baby boom population and the rapid growth in new Medicare beneficiaries will lead to a rise in utilization of healthcare services.  We can’t address this rapid growth in patient numbers and demands, however, by enacting healthcare budget cuts that have no correlation with healthcare value.

As Dr. Grodman writes, “We have yet to establish the balance between managing the cost to provide and access healthcare with maintaining the ability for development at all levels of the care spectrum.”

Finding that balance is imperative if we’re to meet the daunting healthcare challenges that are inevitable and that can’t be addressed without health innovation.