GOAL: Get Employers Involved Actively in Improving Quality

Employers and other purchasers of group health benefits are scrambling to comply with the provisions in the new health insurance reform bill signed by President Obama in March, the Patient Protection and Affordable Care Act. Actuaries are working overtime to figure out exactly the costs of the bill, but most employers I talk to are bracing for 5-10% increase in employee premiums by September, plus significant upfront costs reevaluating and revising benefits packages and restructuring benefits programs to adhere to with new mandates.

These compliance costs are only the beginning. The health reform bill qualifies 16 million more Americans for Medicaid, which is the program for low-income families, which traditionally pays providers only a fraction of the cost of care. The bill also counts on reductions to Medicare reimbursement to meet its budget targets. With less coming from Medicare and Medicaid, hospitals will need to find some money somewhere, and they will likely shift the perceived shortfall onto private payors. The result is not insignificant: the average premium for a family of four is already $1788 higher because of this cost shifting.

Still, despite the perils ahead, many purchasers are optimistic about the prospect of reform because they see awful quality problems every day and know how important change is. Purchasers sit in dismay each month as they read their claims reports, the dry bureaucratic language too often masking tragic medical errors and that devastate employees and their families. Purchasers have long been frustrated by the inability of the federal government to show leadership in fixing the problems. Many purchasers tried to take matters into their own hands, starting pay for performance initiatives or other incentive programs to influence providers to improve, but without the weight of federal leadership, even the largest and most active employers haven’t made the difference they would hope for.

The health reform bill includes provisions with great promise for improving quality, and many purchasers advocated for them. For instance, the bill calls for future pilot programs to test ways to organize care more efficiently, and better reward chronic disease prevention and primary care. There is a program to improve how we measure outcomes of care, so in the future we can identify which providers achieve the best results for patients. The bill has some good language holding health insurance plans accountable for performance and cost-effectiveness, and great language around wellness including permitting employer incentives and a long overdue strategic national approach to improving wellness.

Unfortunately, there is a long timing gap between when purchasers pay the bill’s costs (now) and when employees enjoy the bill’s benefits to quality (five to ten years or more from now).

This timing gap between costs and quality is a donut hole that must be filled. Upwards of 100,000 Americans a year continue to die from preventable medical errors: that’s like a jumbo jet crashing every other day and killing all on board. We would not wait five or ten years to crack down on the airline industry if that was happening. According to tracking by Leapfrog, there remain a litany of major problems in hospital quality, including some high mortality rates, persistence of medical errors, documented wasteful spending, and troubling complication rates and infections. Some hospitals perform four, five, or even ten times better than a hospital down the road for the same quality indicator.

Two things need to happen to fill in the donut hole and assure that health reform truly improves the health care all Americans recieve. First we need to encourage Congress to revisit the legislation to accelerate the quality and cost-effectiveness measures in the bill, and add a few more. For instance, purchasers have long advocated increased transparency of health information by provider, so consumers can better compare performance among different doctors and hospitals. That tends to be unpopular with some lobbyists, but it is essential for engaging the public in seeking out the highest quality providers, and crucial in motivating those providers to accelerate their quality improvement efforts.

Second, no matter what happens in Washington, purchasers must step up their demands for improved quality for their employees, and use their purchasing dollars wisely to incentivize change. With the momentum of reform, purchasers have the wind on their back and their leadership could have immediate benefit. Good models exist, and employers should turn to them for next steps in improving quality. Many health plans have pay for performance programs that would benefit from employers’ pushing for their implementation, and other good models are out there: The Premier Demonstration Project, Bridges to Excellence, Institute for Healthcare Improvement, and some Leapfrog initiatives are among those that have showed great progress in improving employee health and well-being—and controlling wasteful costs at the same time.

Policymakers are the first to acknowledge that the reform legislation is built on the very foundation of our nation’s employer-based health coverage—and without that foundation Congress would have to start over. As the core of that foundation, employers have a right and a responsibility to insist that reform address the needed improvements in quality that their employees deserve—and do so now, not later.

Leah Binder,

CEO, The Leapfrog Group

The Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010

The Patient Protection and Affordable Care Act (“act”) is the most ambitious change to the US health care system since the adoption of Medicare in the 1960’s. By changing the nongroup, and small and large group insurance markets, expanding Medicaid, developing state-based insurance exchanges, and barring many current insurance practices, it will dramatically change the face of the entire US health insurance industry. The bill also includes provisions related to quality improvement, patient safety, health system transparency, payment reform, and measure development that will be covered in this blog post.

Leapfrog Members

The Leapfrog Group was founded by large employers and regional coalitions of employers, who had a collective interest in improving the safety, quality, and efficiency of the US health care delivery system. This interest was, and still is, driven by the employer-based (large group) health insurance model, which dominates the US health care insurance market. Despite the attention on the burden that employers have faced from rising health care costs and the efforts of some Senators, most notably Ron Wyden (D-OR), to change that model, the bill preserves and augments the role of employers in the health insurance system.

Businesses will face additional responsibilities under the new health bill. Most notably, the bill applies financial pressure on employers to cover all of their employees; starting in 2014, a $2,000 per full-time employee fine will be imposed on employers that don’t offer coverage and have full-time employees eligible for a premium credit through a state-based insurance exchange. Employers who do offer insurance will also be required to pay a fee based on the number of employees who are eligible to receive premium credits through the exchange. (Note: individuals and families with annual incomes between 133% and 400% of the federal poverty level (FPL) are eligible for cost-sharing arrangements and/or subsidies.) Employers with low-income employees (below 400% FPL) can offer vouchers, equal to the price of single or family coverage for the employee, to enable the employee to purchase health insurance on the exchange. In an effort to hold down costs, “excess benefits” from “Cadillac” health plans (amount greater than $10,200/year for single coverage, and $27,500/year for coverage for family of four) will be taxed at a rate of 40%. The tax, beginning in 2018, will be assessed to the health plan / self-insuring employer that offers the plan.

Leapfrog’s members and partners, like other employers, will likely see their health insurance costs rise in proportion to the increase in coverage and more generous benefits required by the bill. Companies that already offer substantial benefits to their employees (including low-wage employees and retirees) and have already worked those benefits into their business model will see less of an effect on their bottom line. Some employers have already taken write downs from the bills provisions; Caterpillar and John Deere recently issued statements regarding their filing with the SEC that contained $150 and $100 million dollar write-downs from the change to a prescription drug tax-free subsidy. However, businesses will be given more flexibility with regard to employee wellness programs and benefit design tied to wellness: premium discounts can now reach up to 30% of the cost of a plan, which reflects a 10% increase over previous regulation. The bill also gives the Secretary of Health and Human Services the power to increase that number again to 50%; one would assume employers will fight for that behind closed doors.

Measurement and Practice

The Leapfrog Group’s flagship initiative, the Leapfrog Hospital Survey, is grounded in a standardized evidence-based set of measures, most of which have been vetted and endorsed by the National Quality Forum. This standardized measure set allows both consumers – for purchasing decision purposes – and hospitals – for quality improvement purposes – to benchmark one hospital’s performance against other hospitals across the country. While the health bill does not create a new standardized hospital or provider scorecard for the country, it does take steps to increase the number and depth of quality and resource use measures currently available.

As part of the National Quality Improvement Strategy, the bill sets out a process by which, at least every three years, the Secretary of HHS, in coordination with contracted consensus-based organizations, will identify overall quality measure gaps and gaps in existing quality measures. It prioritizes the development of new measures, with focus areas in health outcomes and functional status of patients, the meaningful use of HIT, and the appropriateness and timeliness of care, among others. Over the next four years, $75,000,000 per year has been allocated to complete this task.

Paying for Value

The rise in health care costs is often attributed to a perverse payment system, which incentivizes providers to deliver more care (volume) over better care (value). Leapfrog strongly supports the shift away from fee-for-service payment, as long as that shift is part of a carefully implemented (does not disrupt patient care), comprehensive, and evidence-based strategy. CMS, as the largest payer, is well positioned to begin this shift, and the act includes some initial steps, such as penalizing hospitals with high levels of readmissions and hospital-acquired conditions. The act also includes funding for a payment innovations center, to research and develop new payment systems, and for projects to pilot specific payment methodologies. These include:

• Medicare: Bundled payment systems, which will be developed and piloted for inpatient and outpatient hospital services, physician services, and post-acute care services for an episode of care that begins 3 days prior to a hospitalization and spans to 30 days following discharge. The programs must be established by 2013, and, if successful at improving (or not reducing) quality and lowering cost, a plan for expansion must be developed by 2016.*

• Medicaid: Episode-based bundled payments for episodes of care that include hospitalizations (funding available from 2012 through 2016), capitation-based (“global”) payment for safety net hospitals (funding available from 2010 through 2012), and gainsharing opportunities for pediatricians who form accountable care organizations (funding available from 2012 through 2016).*

• Medicare: Accountable Care Organizations (ACO’s): The act will allow providers who agree to meet certain quality thresholds to merge into ACO’s. Participating providers will be eligible for a gainshairing arrangement with Medicare. Funding for these demonstration projects will become available in 2012.*

• Medicare Value-Based Purchasing Project: The act will create a hospital value-based purchasing program in Medicare to pay hospitals based on performance on quality measures and extend the Medicare physician quality reporting initiative beyond 2010. It also requires plans to implement value-based purchasing programs for skilled nursing facilities, home health agencies, and ambulatory surgical centers. These plans will be detailed in a report to Congress due January 1, 2011.*

There has been extensive debate on global payment and the development of large integrated health systems (ACO’s). While there may be organizational benefits (both clinical and administrative) for the health system, health economists often express worry that insurance companies will have to deal with consolidated provider groups wielding even greater market power. California’s experience with HMO’s and large physician groups substantiates this concern, and the Massachusetts Attorney General recently issued a report that said the rise in insurance premiums is due to both rising health care costs and the disparity of reimbursement rates that paid some providers substantially more than other providers. Furthermore, a rapid departure away from fee-for-service could disrupt both payor and hospital function, including patient care. As Robert Galvin from General Electric detailed in his talk at the 2010 NBCH conference in Phoenix, many of these proposed payment methodologies, such as capitation, have been tried in the past, and, for both political and economic reasons, largely failed (except for a few cases).

Transparency

Since its inception, Leapfrog has been a leader in pushing the envelope of public reporting of health care outcomes. Leapfrog firmly believes that reporting incentivizes providers to make “leaps” in the quality of care and that arming consumers with more information is a powerful method to create a more robust and efficient health care marketplace. As an addendum, transparency of provider quality outcomes is not the only area where light needs to be shined. Payors also need to join in this effort, making pricing information and details about insurance products more readily available and actionable. There are several portions of the act related to provider and payor transparency:

 Starting in 2012, individuals and groups purchasing insurance must be provided a detailed summary of benefits written in a “culturally and linguistically appropriate manner using terminology understandable by the average enrollee.”*

 Group plans must develop annual reports on wellness programs, provider reimbursement models that improve quality, and other health promotion activities. These reports have to be made available to plan participants and the Secretary of Health and Human Services, who will publish them on the Internet.*

 Quality measures on the meaningful use of health information technology (HIT) will be integrated into the “physician quality reporting system.” It is not clear if or how these measures will be publicly reported.*

 Long term care hospitals, inpatient rehabilitation hospitals, hospices, and certain cancer hospitals will be expected to start reporting quality measures (as defined by the Secretary of HHS) in 2014. These measures will be publicly reported on CMS’s website.*

 As part of a national quality improvement strategy, HHS is mandated to create processes for the development of quality and resource use measures involving input from a multistakeholder group. Some of these measures will be reported on new “Performance Websites,” which will account for the “differing needs of hospitals and other institutional health care providers. (National strategy due to Congress by January 1, 2011).*

Standardizing language in insurance policies is a good step forward in the process of engaging the general public in making decisions about their health care. Last summer, research by the Rhode Island Insurance Commission found that most insurance policies offered in their state were written at a graduate-school level, while the general public typically read at an 8th grade level. This conflict produces much inefficiency, including the lawsuits and bankruptcies that we occasionally see in the media; it should not come as a surprise that upwards of 70% of the families that enter into bankruptcy because of health care expenses have insurance.

Congressional leaders missed a key opportunity to broaden the public-reporting requirements of health care practices and outcomes, effectively kicking the can down the road by assigning the development of a “quality strategy” instead of taking bold action to implement a new (or, augment existing) public reporting programs. While the act will require the development of new quality and resource use measures, those measures are not required to be used for public reporting; new “Performance Websites” will be set up to display some information, but it is still unclear what specific measures will be reported, whether hospital- or provider-specific data will be included, and precisely how that information will be communicated to the public. Based on the status of CMS’ Hospital Compare site, it will require a dramatic departure from HHS’ current public-reporting practices (i.e., catering to the needs of providers, rather than consumers) to develop a tool that provides timely and actionable information to consumers and payors.

- - Will Robinson, The Leapfrog Group

*www.kff.org Side-By-Side Comparison