- Compensating children injured by vaccines.
- Healthcare worker shortage in California?
- The 20 best AER papers average 1.3 numbered equations per page.
- Hope?
- Single Payer States?
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Tags: Links
The Affordable Care Act of 2010 includes a number of provisions to study and/or implement value-based purchasing (VBP) programs in the United States’ health care system. These provisions target Medicare payment policies in particular. Today I review a Robert Wood Johnson (RWJ) article which provides an overview of the ACA provisions related to VBP.
There are four Sections of the ACA which I will focus on: Section 3022, 3007, 3013, and 3021. Let’s get to it.
- Section 3022 calls for a Medicare Shared Savings Program, which would provide payments specifically for new accountable care organizations. The legislation specifically requires measurement and assessment of quality as reflected in clinical processes and outcomes, patient and caregiver experience with care, and utilization reflecting efficiency and effectiveness of care, such as hospital admissions for ambulatory care sensitive conditions.
The House also asked the Institute of Medicine (IOM) to study the value issue in two ways. First, the IOM would conduct a study that would explore whether Medicare‘s current geographic payment adjustments for the prices paid to physicians and hospitals, which are designed to reflect differences in input prices, are accurate and to propose specific improvements, if any. At Acumen, I am currently working on designing an alternative approach to calculating geographic payment adjustments for hospitals. Second, and broader in scope, the IOM would conduct a companion study on geographic variations in the volume and intensity of services and recommend how to incorporate “quality and value” metrics into Medicare payment systems.
Because much of the House health reform bill‘s language was lost when Congress decided to use the Senate bill as the basis for final legislation, permitting only a few House amendments to be brought as part of reconciliation bill amendments, the House compromise was not included in the Affordable Care Act. Subsequently, the secretary of the Department of Health and Human Services (HHS), Kathleen Sebelius, committed in writing to congressional members of the Quality Care Coalition (members representing lower-spending districts) that she would commission the IOM study as called for by the House. Recently, the IOM announced formation of the study panel, which has already begun meeting.
The Affordable Care Act includes a Senate provision that would pay for individual physician services based on a “value index” assigned to physicians according to their quality and costs:
- Section 3007 creates a new “value-based payment modifier,” which, starting in 2015, will be used to provide differential payments based on quality and cost of care. Since the payment adjustments are to be budget neutral, some physicians would receive bonuses and others penalties under this provision. Presumably, the IOM‘s study will be influential in determining how CMS might apply a value-based payment modifier.
I am also is also working on this project, evaluating whether episode grouping software can be used to evaluate physician cost efficiency levels. Previous reports I have worked on are available here. Further, the Act continues to advance the notion of bringing value into payments made to physicians, hospitals, and other providers through established payment mechanisms:
- Section 3013 provides for the identification of gaps in quality measures and authorizes (but does not appropriate) funding intended to fill those gaps, relying on collaboration between CMS, the Agency for Healthcare Research and Quality (AHRQ) and the National Quality Forum, which will be primarily responsible for identifying the measure gaps. Priorities are to be given to the following areas: i) health outcomes; ii) functional status; iii) coordination of care; iv) meaningful use of health IT; v) safety; vi) patient experience; vii) efficiency; and viii) disparities.
The RWJ article continues, “While this work proceeds, the current pay-for-reporting and pay-forperformance programs—labeled as value-based purchasing—for physicians and hospitals will be extended and expanded. The most advanced is the program for hospitals; FY 2013 measures will include measures for five conditions and patient experience as measured by the Hospital Consumer Assessment of Healthcare Providers and Systems Survey (HCAHPS). FY 2014 will include measures of efficiency.”
- Section 3021 creates a Center for Medicare and Medicaid Innovation within the Centers for Medicare and Medicaid Services to test payment and service delivery models that reduce costs while preserving or enhancing the quality of care provided under Medicare, Medicaid, and CHIP, and funds it at $10 billion every 10 years. The legislation specifically suggests pursuing models that transition providers away from fee-for-service and toward comprehensive pay
Source:
- Berenson RA “Moving Payment from Volume to Value: What Role for Performance Measurement?“, Quick Strike Series, Urban Institute, Robert Wood Johnson Foundation, Dec 14, 2010.
Logue: They’re idiots.
Prince: They’ve all been knighted.
Logue: Makes it official then.
- From The King’s Speech
The most recent Federal Budget leaves much to be desired. There are spending cuts. The Economist reports that although Mr Obama’s team projects that his budget will cause the deficit will fall “…from a post-war record 11% of GDP in the current fiscal year to 3.1% by 2021. That would stabilise the debt, albeit at a still-lofty 77% of GDP.” However, the CBO believes that a these figures are too rosy, and it is more likely the deficit will only fall to 7% by 2021.
More important, President Obama did little to reduce the looming three-headed budget catastrophe of Medicare, Medicaid and Social Security. Michael Cannon notes in particular that the President did little to correct the “Doc Fix”. To reduce physician payments over time, Medicare implemented the sustainable growth rate (SGR) in 1998. Congress, however, reverses the reimbursement reductions every year. Thus, if the full SGR would go into place next year, Medicare physicians would receive 25% less revenue per service than the year before. This is of course untenable.
Michael Cannon explains how President Obama addressed the ‘Doc Fix’ in the FY2012 Budget.
“Rather than propose a permanent ‘doc fix,’ the Obama administration proposes a temporary and dishonest one. As shown by the blue bars in the below graph, the administration proposes to delay these cuts until 2014 at a cost of $54 billion. As shown by the black line, the administration proposes to pay for this additional spending by reducing the rate of spending growth in other areas of Medicare by $62 billion over the next 10 years. Note that only 6 percent of these Medicare ‘cuts’ will occur in 2012 and 2013. The other 94 percent of the ‘cuts’ will come after the administration has spent the $54 billion it wants to spend. Note also that the vast majority of the ‘cuts’ would take effect after Barack Obama is no longer president. Finally, the president offers no proposals to deal with the cuts in physician payments during the last eight years of the 10-year budget window (as shown by the purple bars).”
Tags: Budget, Public Policy, SGR
Where do we spend our health care dollars? A paper by Conway et al. in Health Services Research examines this question using data from the Medical Expenditure Panel Survey (MEPS) from 2007. Typically, statistics break down health expenditures by payer (e.g., Medicare, Medicaid, private insurance) or setting (e.g., inpatient, outpatient, nursing home). “However, this is not how patients experience care. Patients have a chronic disease, pregnancy, trauma, or some other life event.”
Instead, Conway and co-authors use a “patient-centered” hierarchy to organize health care costs. The chart below gives a breakdown of costs into Conway’s 7 patient-centered categories.
It is clear that chronic conditions make up the greatest share of health spending. This finding is especially true for older individuals. In fact, fifty one percent of health spending for Americans aged 45-64 goes to treat chronic conditions and for seniors 65 and older, this figure rises to 56 percent.
Source:
- Conway, P., Goodrich, K., Machlin, S., Sasse, B. and Cohen, J. , Patient-Centered Care Categorization of U.S. Health Care Expenditures. Health Services Research, no. doi: 10.1111/j.1475-6773.2010.01212.x
The latest edition of the Cavalcade of Risk is up at Free Money Finance.
Tags: CoR
- Is Medicare’s risk adjustment methodology accurate?
- Wisconsinites don’t like budget cuts.
- Redd alert.
- Memory magic.
- Employer-based health insurance hurts entrepreneurship.
- The effect of China’s rapid urbanization on health.
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Medicare spending changes over time for multiple reasons. First, for any cohort of individuals, these individuals the age as time passes. As their age increases, expected medical expenditure will also rise. Second, the individual will likely received different medical services as the standards of care change over time. The standards of care can change due to improved technology, policy, cultural factors, medical education, and other causes.
On the other hand, one could examine trends in Medicare spending for a certain age group over time. For instance, how much did Medicare spend on care for 70 year-olds in 1970, 1990 and 2010? In this case, medical expenditure change as the standards of care change over time. In addition, certain cohorts may be more or less healthy than others when the reach a certain age, or the cohort may have difference preferences over medical treatment.
The post today review a method for describing differential growth rates in Medicare Expenditures. For cohort c at age α, the following equation describes medical expenditures y.
- y(c,α) = g(c,α) + uc,α
Oftentimes, researchers use dummy variables to determine how observations classified into different categorical groups affect the dependent variable of interest. One drawback with this approach is using too many dummy variables can create small cell sizes, creating an identification problem. Alternatively, using broad groupings for dummy variables may give the appearance that the effect of the covariate is homogenous within the category when this is not the case.
An alternative to using simple categorical dummy variables is to use overlap polynomials. For instance, Lakdawalla, Goldman, and Bhattacharya have a working paper where they rely on the difference of normal cumulative density functions (CDF) to create a flexible form to build these overlapping polynomials. In particular, they use the following specification:
- g(age;β) = Σj=0 to K {Φ[(agei-kj+1)/σ]-Φ[(agei-kj)/σ]} * pj(agei;β)
Here is the equation from the paper in larger type.
Below I decribe how this function works in practice.
Tags: Dummy Variables, Splines
What type of workers does a boss really value? The answer will vary depending on the boss, industry and specific job each worker has. Today we consider one unique group of workers: polar explorers. These men generally value the following in their peers and subordinates:
‘After all is said and done,’ said Wilson one day after supper, the best sledger is the man who sees what has to be done and does it—and says nothing about it.’ Scott agreed. And if you were ‘sledging with the Owner’ you had to keep your eyes wide open for the little things which cropped up, and do them quickly , and say nothing about them. There is nothing so irritating as the man who is always coming in and informing all and sundry that he has repaired his sledge, or build a wall, or filled the cooker, or mended his socks.
- Excerpt from The Worst Journey in the World by Apsley Cherry-Garrard, p. 341.
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