With large scale health insurance reform looking doomed with Nancy Pelosi’s claim on Friday that she doesn’t have the votes to pass the Senate health care reform bill, it is time to return to the black board for incremental reforms. One of the most promising areas could be payment reform, particularly Medicare payment reform.
Payment reform was the unspecified part of the bill that was supposed to provide long term cost control. Unlike some backroom deal for the Nebraska Medicaid population, there was a valid reason for payment reform to be unspecified: nobody has a clear idea about what will work. The key problem is how do you measure non-events? How do you reward care providers for not having to perform services in the first place?
For an individual provider, this can be difficult. A provider may see only a few people with a particular condition, so the individual circumstances of a few patients may drive whether a provider looks like he or she has provided quality care. Further how do you measure outcomes when care is divided among multiple providers? These questions are difficult to answer for providers but can and should we ask them of an insurance company?
Insurance companies main argument in the health insurance reform debate was that modern health carriers do more than just pay claims. The carriers argue that their care management function provides social benefit beyond the profit to their shareholders. If care management actually provides improves the health of members then this is clearly true. But once again how can measure improvements in health?
The Medicare Advantage system already measure health status in its prospective payment system. Based on the previous year’s claims members are given risk score. A higher score indicates worse health and Medicare Advantage plans are paid more to care for this member since the assumption is that member will cost more to care for. The rationale for this system is that it avoids Medicare Advantage plans cherry-picking the healthiest members. But if health plans are actually improving the health of members the average risk of the population under their care should be going down right?
Not quite. In practice the incentive for plans is only to increase the risk score or make it appear that the population under management is sicker. If the plan is able to show that the member has a chronic condition then as long a the member re-enrolls the plan will earn more revenue so all of the incentive is to increase the risk scores of the population. In other words show that the population has gotten sicker while under the plan’s management, the opposite of one of the major stated reason for the health plan’s profits.
But what if Medicare were to pay the plan for actually improving the health status of the member’s? By comparing the increase in risk scores between Medicare members who are managed by the government, fee for service (FFS) members, and those managed by Medicare Advantage plans, we can determine if plans are actually improving the health of their members. Using the FFS member’s as a control means that factors outside of the plan’s control are accounted for. For instance any changes in the general health of the population from swine flu would affect both the FFS and Medicare Advantage members.
We can incentivize the plans to by sharing half of the difference between the plan’s risk score growth and the FFS risk score growth. This would mean that a plan that improved the health of it’s members earned more than one that didn’t. If this was made a true risk sharing and plans that had higher risk growth actually had to pay Medicare back for the higher costs of their mismanagement, the Medicare trust fund might even stay in the black a few more months longer.
If health carriers are serious about stating their business is managing health and not claims let’s measure them on their claim.
Disclaimer: I am employed by Ingenix a subsidiary of United Health Group and these are my views and not the views of Ingenix or United Health.