Gail R. Wilensky Project HOPE April 9, 2008

1. “Paying for Performance” Starting with MA Gail R. Wilensky Project HOPE April 9, 2008

2. Pay for Performance Remains Controversial ♦ Really Mean “Rewarding Excellence” that is quality and efficiency and ♦ “Encouraging Improvement” Besides –getting what we pay for now and don’t like it!

3. What’s the Problem? ♦ Spending growth rates are unsustainable - 2.5% annual growth faster than the economy (1960-2004) ♦ Lots of problems with patient safety 95,000 medical errors ♦ Lots of problems with quality On average, about half of what’s appropriate

4. Different Types of Fiscal Pressure For Medicare: ♦ Trust Fund Insolvency projected in 2019 ♦ General Revenue Pressure on other gov’t spending For rest of health care: Pressure on wages Less for non-health spending

5. Long Term Pressures are Huge! If Medicare/Medicaid grow at GDP + 2.5% By 2030: will account for 11.5% of GDP (With Social Security: 17%) If Medicare/Medicaid grow at GDP + 1% By 2030: will account for 8.4% of GDP (In 2005: 4.2%)

6. How Big A Problem? Some historical facts --- ♦ Overall tax rate last 50 years: 18.5% of GDP ♦ Allowing tax cuts to expire adds (only) 2% to rev: 2030 ♦ Previous in entitlements handled not by ing taxes Major budgetary challenges ahead!

7. Incentives Are A Big Problem Medicare -- 20+ years getting it exactly wrong! Same reimbursement for best in class and worst in class (DRGs, RBRVS, Home Care, Nursing Homes and MA) Physician fee schedule is even worse penalizes efficient docs Private sector hasn’t been much better

8. “First Things First”…Need a National Measurement System ♦ Coherent, goal oriented system to access/report performance ♦ Need a National system to reach National goals ♦ Information must be transparent/available ♦ Begin with “starter set”/ then comprehensive measures

9. 2006 IOM Report on P4P “Start now, go slow, active learning” ♦ Phased approach ♦ Start with “pay for reporting” ♦ Initial funding from existing funds – except docs ♦ Initially use provider-specific funds; move to consolidated pool – “shared accountability”

10. Fortunately, MA Already Has Reporting System ♦ HOS - Health Outcomes Survey ♦ HEDIS -- Healthcare Effectiveness Data and Information Set ♦ CAHPS -- Consumer Assessment of Healthcare Providers and Systems Unfortunately, not all MA plans report; MSA’s and PFFS exempted

11. How to Proceed? Slowly -- in terms of $ at risk Quickly -- in terms of start time “Sooner rather than later” is best Don’t need new legislation (I think)

12. Budget Neutral Strategies can Vary Use a portion of the MA premium that is above FFS -- Pay out differentially if meet certain HEDIS levels -- Pay out according to HOS or CAHPS measures Continue public reporting as well as P4P

13. Going Forward Need to bring in other MA Plans Need to make quality information available for FFS in the market area Begin P4P in other areas of Medicare Hospitals -- ready as well as MA Physicians -- critical but harder

14. Many Areas Need Further Research ♦ Most of the focus has been on quality measures need more effort on efficiency ♦ Assess impacts of weighting strategies quality/efficiency; improvement/attainment ♦ How big an incentive to change physician behavior? ♦ How to adjust for “social” compliance differences

15. Biggest Worry… “Unintended Consequences” ♦ Patient selection ♦ Widening performance gaps ♦ Increasing disparities ♦ “Teaching to the test”

16. Bottom Line: Going Forward ♦ Need to realign financial incentives ♦ Reward/plans/institutions/clinicians who provide high quality/efficiently produced care ♦ Also need to involve consumers “value-based” insurance; reward healthy lifestyles And better information on comparative effectiveness would help!

17. Will These Changes “Bend the Curve” ♦ Don’t know how much difference better information and better incentives will make ♦ “Easier” politically to imagine these changes ♦ Alternatives get “really ugly, really quickly”