New path to Medicare cost control

Move over accountable care. A new contender for controlling Medicare costs has entered the arena.

The Better Care, Lower Cost Act of 2014, introduced this month by Democratic and Republican sponsors in the House and Senate, offers an innovative path for the future of Medicare.

Under the bill, Medicare would cap payments for the sickest beneficiaries who enter the program, but set the cap high enough to fund teams that can focus on strategies that reduce hospital admissions and keep overall costs under the cap. It is, in essence, a shared-savings program—even though that term does not appear in the bill.

The proposal also offers a radically different approach to how government initiates changes in Medicare. It's not only a bipartisan bill, but its drafters relied on feedback from the people and institutions that actually provide healthcare services to seniors.

Only one Medicare issue has brought both sides of the aisle together in recent years—the annual “doc-fix” required to forestall sharp physician pay cuts mandated by the sustainable growth-rate formula. Conventional wisdom suggests Medicare changes such as Better Care, Lower Cost have no chance in an environment where an SGR-fix or even repeal effort will consume Congress' collective attention span.

The new “X-factor” in the equation, however, is the political capital that Sen. Ron Wyden (D-Ore.) brings to the table and the possibility that the new program might provide money to help fund the doc-fix. Wyden—slated to replace current Senate Finance Committee Chair Max Baucus (D-Mont.), who has been nominated by President Barack Obama to be the next U.S. ambassador to China—introduced the bill with geographically well-distributed co-sponsors: Sen. Johnny Isakson, (R-Ga.); Rep. Erik Paulsen (R-Minn.); and Rep. Peter Welch (D-Vt.).

“The four of us have been working on this bill for a long, long time,” Wyden said during a news conference. “This is arguably the premiere domestic issue of our time, and those big issues require a bipartisan approach.” Echoed Isakson: “The coincidence of Max Baucus becoming the ambassador to China and Ron Wyden ascending to the chairmanship of the committee is irrelevant compared to what we've done with this bill.”

The coalition rejects the “false choice” between either cutting service to beneficiaries or slashing payments to providers—a theme they hear repeatedly from major providers in their regions. Paulsen, for instance, said he received input from Minnesota's Mayo Clinic. The Republican representative said the approach offers a chance to bend the cost curve with its flexibility, alignment of incentives and focus on chronic-care management.

The model follows the strategies deployed by the healthcare delivery systems that registered the most success in Medicare's Pioneer ACO program. They say legislators incorporated their ideas into the bill. “I think what you're looking at today is what responsive government looks like,” said Dr. Andrew Racine, senior vice president and chief medical officer at Montefiore Medical Center in New York.

The Pioneer ACOs that made money, such as Montefiore and Phoenix's Banner Health, did so by focusing on the small percentage of the sickest patients who accounted for the biggest portion of Medicare spending. The strategy was driven by Medicare's decision to simply assign patients to the ACOs.

The proposed Better Care program builds on the lessons learned from the ACO experience. Supporters note that the BCP concept, which would require beneficiaries to receive an individually tailored care plan, also borrows ideas from Medicare Advantage and the Patient-Centered Medical Home practice model.

“If you keep people out of the hospital, as Willie Sutton said, that's where the money is,” Racine said. Montefiore's Pioneer ACO saved Medicare $23 million in 2012 by reducing admissions by 10% and all-cause 30-day readmissions by 35%.

The Pioneer ACO patient attribution process goes away under the BCP. Also, once patients choose a BCP, they would be incentivized to stay within the BCP network—the same as in Medicare Advantage plans but not ACOs.

“ACOs are having difficulty coordinating care because they don't know who their patients are and, if patients see providers outside of your network, it's hard to control cost and quality,” said Chet Speed, vice president of public policy with the American Medical Group Association. “The problem with ACOs is that you have care-management requirements overlayed on a very imperfect fee-for-service system.”

The BCP also will risk-adjust payments for patients who require the most complex care, another incentive for providers to participate in the program, said Dr. William Bornstein, CMO and chief quality officer for Atlanta's Emory Healthcare. This will encourage some systems and physician practices to actually recruit Medicare patients with multiple chronic conditions by specializing in caring for that particular patient population and building the necessary infrastructure.

ACOs, by contrast, get a mix of very sick and relatively healthy patients. Those that lost money or broke even in the program may have lacked the resources to focus on the very sick, Bornstein said.

The fact that the program provides for shared savings—anything under the cap stays with the provider—should focus hospitals and physicians like a laser beam on reducing waste and providing targeted services aimed at keeping people out of the hospital. Dr. A. Mark Fendrick, director of the University of Michigan Center for Value-Based Insurance Design, called Wyden's bill the first legislation to include “clinically nuanced” principles that acknowledge a healthcare service has different value depending on who's receiving it, who's delivering it and where.

Payers such as Cigna Corp. also have stood up to support the Better Care, Lower Cost Act. “We know that better management of chronic illness is essential to helping Medicare customers avoid complications and remain independent and active,” said Graham Harrison, spokeswoman for Nashville-based Cigna-HealthSpring.

But there are still numerous design pitfalls that could undermine the program. Setting appropriate global payments “is critical to ensuring providers have the resources to provide the range of care envisioned in the bill,” said Dr. Lee Sacks, executive vice president and CMO for Downers Grove, Ill.-based Advocate Health Care, who is generally supportive. “Sens. Wyden and Isakson are proposing the next generation of an alternative payment model—taking the strengths of accountable care and care coordination and adding the flexibility and market-based provisions of the Medicare Advantage program.”

Many inside-the-Beltway lobbyists remain far from bullish on the bill's prospects. AARP, the nation's largest and most powerful senior citizen lobby, supports the opt-in feature of the legislation and lauds its incentives for improving health and holding down costs. But “I think it's very hard in the current environment to pass a healthcare bill given the contentious issue healthcare has been in this Congress,” said David Certner, legislative counsel and legislative policy director for the group.

It might fare better if it is attached to the SGR fix legislation, which is certain to consume Congress in the next few months. While conventional wisdom says that's unlikely, much will depend on how the Congressional Budget Office scores the legislation. Wyden claimed it has the potential to save $25 billion a year—more than enough to fund the doc-fix.

If the Hill's official bean-counting agency confirms his back-of-the-envelop estimate, the BCP could gain traction. “SGR is the engine driving the train, and how that turns out may determine how any other healthcare bills get dealt with,” said Julius Hobson, a former American Medical Association lobbyist now at the Polsinelli law firm.

Follow Andis Robeznieks on Twitter: @MHARobeznieks