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Slow Health Care Spending Growth Moderates GDP Growth In The Short Term And Policy Targets Should Reflect This

October 16th, 2014

Economic growth is most often measured by growth in gross domestic product (GDP), which is the value of all final goods and services produced in an economy. Recent revisions to the first quarter 2014 estimates of U.S. GDP growth have raised concerns over the extent to which the Affordable Care Act (ACA) might be impacting economic growth.

The Bureau of Economic Analysis (BEA) first estimated GDP growth for the first quarter of 2014 to be 0.1 percent on an annualized basis. Then a revised second estimate was made, which indicated a decline in GDP of 1.0 percent on an annualized basis. Finally, on June 25 a second and final revised estimate of a 2.9 percent decrease on an annualized basis was released.

While revisions to initial estimates of GDP growth are not uncommon, one aspect of this second revision was, indeed, uncommon. Nearly two-thirds of the second downward revision (1.2 of the 1.9 percent) was attributed to health care spending being substantially lower in the first quarter of 2014 than was originally forecasted by the BEA.

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Treated Prevalence Versus Spending Per Case: Responding To Starr And Coauthors

June 17th, 2014

I was surprised but pleased to see the Martha Starr, Laura Dominiak, and Ana Aizcorbe article in the May issue of Health Affairs replicating earlier work of Charles Roehrig and David Rousseau. These papers attempt to understand the role that treated disease prevalence and spending per case treated assume in accounting for the growth in average per capita healthcare spending. (Treated disease prevalence can increase when either a disease becomes more common or is diagnosed more frequently.) Starr and coauthors, like Roehrig and Rousseau, conclude that spending per case treated accounts for more of the growth in per capita spending than treated prevalence.

In our own work, my colleagues and I have addressed a different question. Our line of research focuses on changes in total health care spending – as opposed to per capita spending — over time. We have updated this work now through 2011 and our major conclusion remains the same; the rise in treated disease prevalence accounts for a slightly larger share of the growth in total healthcare spending than spending per case treated.

The three research teams employ different methods and use different spending measures. (In an earlier appendix, we described in detail the differences between our approach and that of Roehrig and Rousseau.) For example, our expenditures include home health and dental services, which are excluded in the paper by Starr and colleagues.

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Medicare Integrate: A New Benefit Option For Medicare Beneficiaries

July 23rd, 2013

I. The Need for Medicare Reform

Policy options for making the Medicare program sustainable over the long run will have to identify approaches that reduce costs and improve the quality of care delivered. Effective interventions will be ones that target the key cost drivers in the system, chronic diseases. Since 1987, 10 percent of the growth in Medicare spending is associated with a doubling of obesity among seniors. Moreover, over half the Medicare population receives treatment for five or more chronic conditions during the year, accounting for nearly 80 percent of spending.

My earlier paper, “The Medicare Advantage Experience: Lessons for Reform to Original Medicare,” identified some best-practice approaches for prevention and care coordination derived from Medicare Advantage plans and other private-sector delivery models. Clearly the original Medicare program needs comprehensive care coordination and more effective approaches for reducing the rise in chronic disease incidence and prevalence.

This post outlines a plan to add a new Medicare option featuring evidence-based care coordination and prevention, with the goal of improving the health care outcomes for Medicare beneficiaries while reducing costs for the federal government. Others have set forth related plans, indicating that there is a momentum building behind the goal of more effectively addressing chronic disease in the Medicare program.

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The Current Medicare Debate Will Not Solve The Program’s Problems

February 12th, 2013

The mistake policymakers have long made in debating Medicare (and Medicaid, though that’s a topic for another day) is that they talk about Medicare the same way they talk about Social Security. It’s understandable at some level, since these two programs are the country’s largest entitlement programs and serve similar populations. However, the two programs could not be more different.

Social Security is a relatively simple program of transfer payments. The fundamental issue for Social Security is how to manage the inflow and outflow of funds.

Medicare is an entirely different animal.

Historically, legislative changes to the program have attempted to mimic the Social Security focus on budgetary inflows and outflows by adjustments to benefits and provider reimbursements. While expanding coverage has largely been an attempt to be more inclusive of vulnerable populations and allow access to needed services to improve overall health (while simultaneously lowering beneficiaries’ cost burden), it has always come at a price, literally. Similarly, while provider payment cuts — and in some cases increases — have often been critical to increasing access or controlling spending in the near-term, they have done nothing to address the structural reforms desperately needed to sustain the program over the long-term.

Unfortunately, while there remain budgetary questions to consider, the opportunities and demands inherent in future structural changes to Medicare are an order of magnitude more challenging.

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Reforming How We Pay For Health Care: The Role Of Bundled Payments

December 13th, 2012

Structural reforms to the Medicare and Medicaid programs will be on the table as the debate over entitlement reform intensifies. There are three areas of opportunity for changing our entitlement programs: adding prevention initiatives that truly slow or reduce the growth in chronic disease prevalence; introducing care coordination into the original Medicare program; and reforming how we pay health care providers.

On November 30th, the Centers for Medicare and Medicaid Services (CMS) provided additional information regarding the implementation of the Bundled Payment for Care Improvement (BPCI) initiative. The CMS released a preliminary list of 48 “episodes of care” where providers would be paid a targeted rate lower than actual fee for service payments. The extent of the episodes is notable since they would cover approximately 70 percent of all Medicare expenditures if applied to all providers and to all 48 episodes. Under the initiative, participating providers could identify which of the 48 conditions they were interested in testing.

These reforms could replace the clearly flawed sustainable growth rate formula and provide strong financial incentives to integrate inpatient and post-acute health care services. Over 75 percent of spending in the Medicare program is associated with patients under treatment for 5 or more medical conditions and virtually all the growth in Medicare spending since 1987 has come from patients with multiple chronic health care conditions. Despite these fiscal facts, original Medicare does not provide coordinated care for chronically ill patients. Such care requires “team-based care” that includes transitional care, comprehensive medication management, health coaching, and a care coordinator among other elements.

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Assuring Post-Acute Care Treatment for Medicare Beneficiaries

October 31st, 2012

A federal judge in Vermont may soon act to approve a proposed settlement in a national class action suit, Jimmo v. Sebelius. In the case, the plaintiffs argue that Medicare contractors and administrative officials have been denying nursing and therapy services for patients who were not expected to show long-term improvements in their medical conditions. Patients with chronic conditions like multiple sclerosis, Parkinson’s disease, paralysis, cerebral palsy, skilled nursing visits for insulin injections for diabetics, and Alzheimer’s were denied Medicare and Medicare Advantage benefits under this so-called “Improvement Standard,” the lawsuit alleged.

The “Improvement Standard” refers to a standard that Plaintiffs have alleged, but that Defendant denies, exists under which Medicare coverage of skilled services is denied on the basis that a Medicare beneficiary is not improving, without regard to an individualized assessment of the beneficiary’s medical condition and the reasonableness and necessity of the treatment, care or services in question.

The agreed-upon changes would alter the Medicare manual to say that eligibility for skilled-nursing, home healthcare and outpatient physical therapy services coverage “does not turn on the presence or absence of beneficiary’s potential for improvement from the therapy, but rather on the beneficiary’s need for skilled care,” the settlement says. The proposed settlement would result in changes from the Centers for Medicare and Medicaid Services to its subregulatory guidance contained in the Medicare Benefits Policy Manual to clarify that therapy services in home health, skilled nursing facilities, and outpatient physical therapy are covered so long as the patient is eligible for the services regardless of their clinical prospects for improvement.

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Creating the Virtual Integrated Delivery System

October 5th, 2009

Preventing and more effectively managing chronic illness are critical national health priorities. Patients with chronic disease currently account for three-quarters of overall health spending. Multiple morbidities are common: More than half of Medicare beneficiaries are treated for five or more chronic conditions yearly. Nine chronic ailments account for nearly 60% of the recent rise in […]

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