With Health Care Spending Still on the Rise, Payment Models Begin to Change

Earlier this week, Ways and Means Health Subcommittee Chairman Wally Herger (R-CA) held a hearing on delivery system reforms that reward physicians who deliver high quality and efficient care.  At a time when our health care spending accounts for an overwhelming majority of the nation’s $3.7 trillion national deficit, the hearing was a rare, welcomed moment of bipartisan agreement in an environment otherwise fraught with partisan tension. It was clear among the panelists and the Committee members that efforts to move Medicare from a fragmented, fee for service model to more integrated care delivery and payment models like patient-centered medical home are critical reforms to improve health outcomes and reduce costs—particularly in the Medicare program.

Other noteworthy headlines from this week:

  • The New York Times reported on the controversy over covering Medicare payments to doctors, who statistically charge much less for providing the same services as many hospital clinics do. In the absence of an agreement between Republicans and Democrats in the House and Senate, doctor’s fees will be cut by 27 percent next month, making caring for Medicare patients financially unworkable for many doctors.  Both sides want to fix the problem, but deciding how to pay for it is a challenge.  According to the article, “House Republicans want to reduce certain Medicare payments to hospitals [to accommodate reimbursing doctors]. By contrast, Democrats and at least one powerful Republican senator, Jon Kyl of Arizona, want to cover the cost with money saved by winding down the wars in Iraq and Afghanistan.” In contrast, the Medicare Payment Advisory Commission, a federal advisory panel, says the government should pay the same rates for “evaluation and management” services regardless of whether they are performed in doctors’ offices or hospital outpatient departments.
  • Similarly, The Wall Street Journal summarized changes several major health insurance providers – including UnitedHealth, WellPoint and Aetna – are making to their payment models for physicians and hospitals. According to the article, these payment models are being changed to better promote higher quality care and improve efficiency goals, as more industry and policy experts recognize the current fee for service payment system is flawed. Under these changes, compensation and monetary rewards for physicians and hospitals will be tied to various measures such as hospital readmission rates, mortality rates for certain conditions, improved care-coordination, and the total cost of a patient’s treatment.
  • Meanwhile, the National Journal highlighted a new study published by the Altarum Institute on Thursday. According to the Institute’s findings, health care spending grew 4.4 percent from 2010 to 2011, for a total cost of $2.71 trillion and accounting for more than 18 percent of the gross domestic product in the United States, which is higher than the government’s official estimate of a 3.9 percent increase in 2010 spending growth. The article goes on to explain that the forecast is expected to “grow rapidly… so any evidence that growth in health spending may be slowing is welcome.”

At the Partnership to Fight Chronic Disease, we were pleased to see reforms such as promoting quality improvement and advanced care coordination getting recognition from policy makers, stakeholders, and the media this week for their effectiveness in promoting the quality of outcomes over the quantity of services . We’ll continue to monitor for additional announcements and look forward to sharing with you all the progress being made in the months ahead.