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Clinical Nuance: Benefit Design Meets Behavioral Economics

April 3rd, 2014

On Capitol Hill, there’s a growing chorus of support from both sides of the aisle to move the focus of health care payment incentives from volume to value. Earlier this month, legislators introduced proposals that would have fixed the sustainable growth rate in Medicare, as well as made other changes, including allowing for clinical nuance in Medicare benefit designs. The Centers for Medicare and Medicaid Services, too, is embracing this trend, recently asking for partners in a demonstration project to used value-based arrangements in benefit design. These efforts of policymakers and agencies to innovate Medicare’s benefit design are crucial both for the health of seniors and to ensure value in the Medicare program.

The concept of clinical nuance, implemented using value-based insurance design (V-BID), is a key innovation already widely implemented in the private and public payers. It recognizes two important facts about the provision of medical care: 1) medical services differ in the amount of health produced, and 2) the clinical benefit derived from a medical service depends on who is using it, who is delivering the service, and where it is being delivered.

Today’s Medicare beneficiaries face little clinical nuance in their benefit structure. Medicare largely uses a “one-size-fits-all” structure that does not recognize that some treatments, drugs or tests are more important to health than others. Not only does it create inefficiencies in the health system, it can actually harm the health of beneficiaries.

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Nine Questions About My New Medical Home

March 17th, 2014
by Matthew Anderson

Sometime in the past five years — it’s hard for me to say exactly when — I suddenly found myself living in a new home. I must admit I am still a bit disoriented by how this happened. But it did. People keep telling me that everything will be ok but I am not entirely sure.

For example, in my old home we had occasional family meetings; things are different now. We now have weekly (and monthly) meetings. The many new administrators ask us to complete personality surveys. Once we had to figure out what items we should take from a sinking yacht in the South Pacific (hint: the $100 bill will be useful). Another time we had to decide if we were a “Wow” or a “Thinker.” We are asked to figure out how we can do a better job for them. I guess, like all forms of therapy you don’t get better unless you change.

Despite all these meetings there are a series of things I still don’t understand. I am afraid to raise my hand at the meetings and give the impression I’m a bad sport so I have written my questions down. Please, please don’t think I am a Luddite who wants to go back to the old home. In fact, what I dislike most about the new home is precisely the way — even in its differences — it resembles the old home.

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The Dangers Of Quality Improvement Overload: Insights From The Field

March 7th, 2014

Editor’s note: This post is also co-authored by Ksenia O Gorbenko, Catherine van de Ruit, and Charles Bosk of the University of Pennsylvania.

Quality improvement (QI) and patient safety initiatives are created with the laudable goal of saving lives and reducing “preventable harms” to patients. As the number of QI interventions continues to rise, and as hospitals become increasingly subject to financial pressures and penalties for hospital-acquired conditions (HACs), we believe it is important to consider the impact of the pressure to improve everything at once on hospitals and their staff.

We argue that a strategy that capitalizes on “small wins” is most effective. This approach allows for the creation of steady momentum by first convincing workers they can improve, and then picking some easily obtainable objectives to provide evidence of improvement.

National Quality Improvement Initiatives

Our qualitative team is participating in two large ongoing national quality improvement initiatives, funded by the Agency for Healthcare Research and Quality (AHRQ). Each initiative targets a single HAC and its reduction in participating hospitals. We have visited hospital sites across six states in order to understand why QI initiatives achieve their goals in some settings but not others. To date, we have conducted over 150 interviews with hospital workers ranging from frontline staff in operating rooms and intensive care units to hospital administrators and executive leadership. In interviews for this ethnographic research, one of our interviewees warned us about unrealistic expectations for change, “you cannot go from imperfect to perfect. It’s a slow process.”

While there is much to learn about how to achieve sustainable QI in the environment of patient care, one thing is certain from the growing wisdom of ethnographic studies of QI: buy-in from frontline providers is essential for creating meaningful change. Front-line providers often bristle at expectations from those they believe have little understanding of the demands of their daily work. Requiring health care providers to improve on all mandated measures at once—in an atmosphere of reduced reimbursements and frequent staff shortages—is a goal that risks burnout, discouragement, and apathy – all signs of initiative fatigue.

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Financial Orphan Therapies Looking For Adoption

March 6th, 2014

There exist scientifically promising treatments not being tested further because of insufficient financial incentives. Many of these therapies involve off-label uses of drugs approved by the Food and Drug Administration that are readily available and often inexpensive. Pharmaceutical companies—largely responsible for clinical drug development—cannot justify investing in such clinical trials because they cannot recoup the costs of these studies.  However, without prospective data demonstrating efficacy, such treatments will never be adopted as standard of care.

In an era of increasing health care costs and the need for effective therapies in many diseases, it is essential that society finds ways to adopt these “financial orphans.” We propose several potential solutions for the non-profit sector, pharmaceutical companies, health insurers, patient driven research and others to accomplish this goal.

Drug Development Today

Under today’s drug development model, the vast majority of clinical trials are sponsored by pharmaceutical companies, and the process is lengthy, expensive, and, some have argued, inefficient. The cost of developing a new FDA approved drug is estimated to exceed $1.2 billion, the average time from lead to market is typically over 10 years, and only 1 in 10 drugs entering a phase I study is finally approved. Thus pharmaceutical companies, seeking to recoup this investment, conduct a return on investment (ROI) calculation with attention to both scientific and financial considerations such as the chances of success and whether the therapy will be sufficiently profitable to justify the high cost of clinical development.

These considerations sometimes lead to inefficient outcomes from society’s perspective in which promising and potentially transformative therapies are not pursued because of improperly designed financial incentives. We call such therapies “financial orphans.”

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The Payment Reform Landscape: Pay-For-Performance

March 4th, 2014
by Suzanne Delbanco

Editor’s note: This is the second post in a Health Affairs Blog series by Catalyst for Payment Reform Executive Director Suzanne Delbanco. Over the coming months, Delbanco will examine how different methods of payment reform are being employed and how well they’re working. The first post in the series provided an overview of payment reform; this post examines pay-for-performance.

One of our core beliefs at Catalyst for Payment Reform (CPR) is that we need to move away from fee-for-service, toward new models that pay for care based on value, not volume. And while our National Scorecard on Payment Reform shows these new payment models are spreading, we still don’t know if they are really delivering the value we hope for — higher-quality care at more affordable prices. So we decided to make 2014 a year “all about the evidence,” taking an in-depth look at different payment reform models and assessing whether they are proving to enhance value. We’re delighted Health Affairs Blog is our partner in this journey. This month we examine pay-for-performance.

What is pay-for-performance? Is it widespread?

A pay-for-performance (P4P) model provides what are typically financial incentives to providers to improve the quality of the care they deliver and/or reduce costs. In CPR’s terminology, pay-for-performance is an “upside only” method of payment reform. The model gives health care providers the chance for a financial upside – such as a bonus — but no added financial risk, or downside. Our 2013 National Scorecard on Payment Reform demonstrated that almost 11 percent of commercial payments are value-oriented; approximately 1.6 percent of commercial payments are fee-for-service with pay-for-performance.

Despite the small portion of dollars flowing through pay-for-performance programs, we know it is a relatively popular model of payment reform. According to a 2010 report issued by the National Conference on State Legislatures (NCSL), an estimated 85 percent of state Medicaid programs were expected to operate some type of pay-for-performance program by 2011. Provisions in the Affordable Care Act expand the amount of pay-for-performance in Medicare as well.

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Cesarean Rates: A Global Perspective

February 24th, 2014
by Christine Spencer

As noted in a previous Health Affairs Blog post by Katy Kozhimannil and Ezra Golberstein, there is significant variability in cesarean delivery rates across the United States, but this is also true worldwide. Worldwide cesarean delivery rates have come under scrutiny and criticism since the World Health Organization (WHO) suggested in 1985 that the optimal rate should not exceed 10 to 15 percent.

Although currently there is no expert agreement on a single optimal level, a general consensus has emerged that extremely low rates (less than 5 percent) suggest underuse and higher rates (greater than 10-15 percent) suggest overuse. Globally, the average rate sits slightly above that recommended level at 16 percent. However, the mean value masks the underlying variability that exists across countries and the different issues inherent in the variation. Of countries which report at least some cesarean deliveries, the range of use runs from 1 percent (Niger) to 52 percent (Brazil) of live child births.

Middle and High-Income Countries

Cesarean rates in middle and high-income countries have continued to increase over the last decade (most are significantly over 15 percent). The average rate among the Organisation for Economic Co-operation and Development (OECD)-member countries is 26.9 per 100 live births (range: 14.7 to 49.0). Comparatively, the United States has a very high rate of cesarean delivery (31.4 per 100 live births). In Switzerland, for example, cesarean section rates varied in 2010 from less than 20 percent to over 40 percent in a region. Within a region, the rates also varied by hospital. A study in France found more cesarean sections were performed in for-profit hospitals than in public hospitals, which treat more complicated pregnancies, suggesting that financial incentives may also play a role in explaining excess cesarean deliveries.

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Jeffrey Brenner On GrantWatch: The Future For Population Health

February 21st, 2014
by Tracy Gnadinger

In a recent GrantWatch Blog post, Jeffrey Brenner raises the question, “What if Thomas Edison had to write grant proposals to invent the light bulb?” Brenner is a MacArthur fellow, medical director of the Urban Health Institute, and executive director and founder of the Camden Coalition of Healthcare Providers.

Brenner uses the Edison analogy to look at current grant funding and population health.

Since 1945 the National Institutes of Health (NIH), a federal government agency that funds medical research, has spent $547 billion dollars to cure disease and push the frontiers of medical knowledge. This spending has been supplemented by funding from private foundations. Sadly, despite all of this spending we have little understanding of how to deliver better care at lower cost to every American. At best, in the field of population health, we have a few light bulbs that stay lit for an hour or two, but we lack even basic knowledge to drive this field forward.

With 85 million baby boomers in the midst of retiring and a health care system that consumes 18 percent of our economy, it is not a small problem. We do not understand the fundamental drivers of health care utilization; the basic rules for designing and implementing effective interventions; the best ways to use data to plan, implement, manage, and evaluate interventions; nor how to train staff to run and lead these interventions. Why the lack of progress?

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Health Affairs “Community Development And Health” November 2014 Theme Issue: Announcement

February 18th, 2014
by Chris Fleming

Health Affairs plans to publish an issue on the topic of “Community Development and Health” in November 2014. Details on the upcoming issue are available here. The deadline for submissions is June 1, 2014.

Papers will be competitively reviewed by editors, and, for those that are selected for external review, outside experts. We will make publication decisions based on these selection processes.

If you are interested in submitting a paper, please review our submissions procedures and guidelines. Contact senior deputy editor Sarah Dine ( or executive editor Don Metz ( with any questions.

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If A Drug Is Good Enough For Europeans, It’s Good Enough For Us

February 14th, 2014
by Paul Howard and Yevgeniy Feyman

Note: This post is coauthored by Paul Howard and Yevgeniy Feyman of the Manhattan Institute.

Meningitis is a terrible disease that can kill its victims in a single day. About 4,100 new cases are diagnosed annually in the U.S., with a mortality rate of more than 10 percent. Even with treatment, survivors are often left with serious side effects that can include brain damage and limb loss.

A recent meningitis outbreak at Princeton University was unique, however, because the vaccines typically required by universities don’t protect against the particular strain (serogroup B or “MenB”) of the outbreak. Luckily, Swiss drug manufacturer Novartis has developed a vaccine — Bexsero — that specifically targets this strain of meningitis; the drug has already been approved for use by the European Medicines Agency (EMA), the European Union’s equivalent of the Food and Drug Administration (FDA). And within about nine months the FDA allowed Princeton University to offer the vaccine on campus to its students.

Problem solved, right? Not so fast.

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Health Affairs Web First: Positive Results For Value-Based Insurance Design Plans

February 12th, 2014
by Tracy Gnadinger

One of the provisions of the Affordable Care Act calls for the creation of guidelines to facilitate the broader use of Value-Based Insurance Design (VBID) plans. Existing VBID plans have been structured in a variety of ways, and these variations could influence their effectiveness. A new study, “Five Features Of Value-Based Insurance Design Plans Were Associated With Higher Rates Of Medication Adherence,” being released today as a Web First by Health Affairs, evaluated seventy-six VBID plans introduced by a large pharmacy benefit manager (CVS Caremark) during 2007-2010.

Authors Niteesh Choudhry, Michael Fisher, Benjamin Smith, Gregory Brill, Charmaine Girdish, Olga Matlin, Troyen Brennan, Jerry Avorn, and William Shrank found that after adjusting for the other features and baseline trends, VBID plans that were more generous, targeted high-risk patients, offered wellness programs, did not offer disease management programs, and made the benefit available only for the medication ordered by mail had a significantly greater impact on adherence than plans without these features.

The study sample consisted of 274,554 patients provided by thirty-three unique plan sponsors. The majority of VBID plans did not have generous benefits, used copay tiers, and had a disease management program for the condition that the plan targeted. The authors noted that the positive association between wellness programs, patient targeting, and mail-order prescriptions was significant, considering that all these interventions are very low cost and easily implemented.

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Cesarean Rates: Shifting The Focus From Increases To Variability In Use

January 15th, 2014
by Katy Kozhimannil and Ezra Golberstein

At 1.3 million procedures each year, the Centers for Disease Control and Prevention (CDC) lists cesarean delivery as the most frequently-performed inpatient surgery in the U.S. Both public and private insurance programs pay more to hospitals for childbirth than for any other condition, and Medicaid programs fund nearly half of all U.S. births.

Cesarean delivery is a potentially life-saving intervention that can hasten delivery in order to avoid adverse outcomes for women or infants, but it carries distinct risks as compared with vaginal delivery, including infant respiratory illness and maternal complications in future pregnancies. Cesarean rates increased dramatically from 20.7 percent in 1996 to an all-time high of 32.9 percent in 2009, but have since remained stable. New data from the CDC indicate a shift in gestational age for cesarean births between 2009 and 2011, with a decrease in births at 38 weeks gestation and an increase in births at 39 weeks, consistent with the increasing policy focus on avoiding non-indicated delivery before 39 weeks gestation. The use of cesareans is changing, and clinicians, policymakers, and researchers should now shift from a sole focus on the “relentless rise” to additionally considering unwarranted variations in cesarean rates.

What We Know

Three notable patterns emerge from the available data on cesarean rates. 1) Cesarean rates are highly variable; 2) changes in cesarean rates are not correlated with changes in infant mortality; and 3) prior research shows that patient and clinical factors do not account for variation in cesarean use.

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Workplace Wellness Programs: Continuing The Discussion With Ron Goetzel

October 30th, 2013
by John DiNardo and Jill Horwitz

We imagine that reading a point-by-point reply to Professor Ron Goetzel’s lengthy rebuttal to our previous reply, which responded to a previous lengthy rebuttal by Professor Goetzel to our original article, would try the patience of even the most dedicated readers of Health Affairs. Therefore, beyond reminding readers of the original article’s scope, here we use Professor Goetzel’s last response as a touchstone to summarize our difficulties with the arguments by advocates of workplace wellness programs based on financial incentives. We ask weary readers who do not wish to continue with this exchange, but are interested in workplace wellness, to look at the evidence we provide in our appendices, and make their own judgments.

First, we must remind Professor Goetzel that we wrote our original article to address the assumptions underlying workplace wellness programs based on substantial financial incentives — those encouraged by the Affordable Care Act — and not any of the other types of programs. That article did not comment on the myriad other public health interventions that might take place at the worksite, although some of our arguments could be applied to those programs as well. Unfortunately, many of Professor Goetzel’s comments are directed at claims we never made about those other programs, and we find his continued advocacy for those programs in the guise of a response to our work distracting.

Second, Professor Goetzel’s most recent posting helpfully outlines ACA wellness regulations that were released after we published our article. Like other commentators, he is right to highlight the new, expansive “reasonable alternative standard,” because it may mean that many more employees can access alternatives to the program standards. Once again, however, he is more optimistic than we and other researchers are that such protections will be easily accessed by employees. We are skeptical that it will be nothing more than a simple matter for an employee to exempt themselves from the general program. Among other things, the employee needs to know about the possibility of an alternative and to feel that asking for an alternative will not harm her, and her employer must be willing to comply.

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Facilitated Quality Competition As A Driver Of Health Care Value

September 30th, 2013
by Dan Krupka and Warren Sandberg

A front-page article in the April 16, 2013 issue of the New York Times announced that “[h]ospitals make money from their own mistakes because insurers pay them for the longer stays and extra care that patients need to treat surgical complications that could have been prevented.” That conclusion came from a study by Sunil Eappen and his co-authors, published in the April 17 issue of The Journal of the American Medical Association. Eappen and his colleagues were not alone in reporting this finding. Last year, we along with William Weeks came to the same conclusion. The two studies demonstrate that hospitals that set out to compete by reducing complication rates face a negative financial impact, and thus raise a policy challenge: how to create effective incentives to improve hospital quality.

Well before the two articles appeared, hospitals appeared to act as though they lacked incentives to compete on low complication and mortality rates. Consider the following evidence. (1) Fewer than 10 percent of the nation’s hospitals participate in the American College of Surgeons’ National Surgical Quality Program (NSQIP). Yet, the program allows them to compare their risk-adjusted results to their peers’ and to learn from the best practitioners in the program. (2) Fewer than 45 percent of programs that received three stars – statistically above average in a rating scheme based largely on outcomes – for performing coronary artery bypass grafting (CABG) from the Society of Thoracic Surgeons mention the rating on their web sites; even fewer emphasize its significance. (3) Arguably the best known effort to reduce central line associated blood stream infections (CLABSIs) in acute care settings is the development of a standardized protocol for inserting central venous catheters. The protocol, developed and pioneered at Johns Hopkins University in 2001, was subsequently introduced with great success to Michigan statewide at the invitation of its hospitals. Yet, fewer than 5 percent of Michigan hospitals mention their CLABSI rates on their web sites.

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A National Initiative To Reduce Central Line-Associated Bloodstream Infections: A Model For Reducing Preventable Harm

September 23rd, 2013
by Peter Pronovost

Editor’s note: A full list of coauthors and their affiliated institutions appears at the end of this post.

The work to prevent central line-associated bloodstream infections in intensive care units is one of few national efforts to use empiric data to document a decrease in patient harm across the United States. A notable contributor was the On the CUSP: Stop BSI national initiative, which built upon the work at the Johns Hopkins Hospital and in the state of Michigan. This initiative spread to 1100 hospitals in 44 states, the District of Columbia, and Puerto Rico. The rate of an infection fell to 1 infection per 1000 line-days in the majority of hospitals, a rate deemed impossible just a few years ago.

In this post, we summarize the fractal infrastructure and overall results of the initiative, explore lessons, and offer policy recommendations for other national efforts to reduce preventable patient harm.


Many efforts contributed to the national decline of central line-associated bloodstream infections (CLABSI) in intensive care units (ICU). (See here, here, here, here, here, and here.) Instrumental in these efforts were the Centers for Disease Control and Prevention’s (CDC) guidelines and infection control strategies, and hospital epidemiology and infection control. This impressive change offers an example of how the collaborative efforts of many, which were informed by evidence, research and valid measurement, can achieve widespread reduction in preventable harm.

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Reform The Doctor Recertification Process To Create A Better Health Care System

September 17th, 2013
by Alan Muney and Peter Orszag

Editor’s note: Peter Orszag coauthored this post with Alan Muney.

There’s a lot of talk about creating a better health care delivery system based on value, not volume. Much of the focus is on insurers rewarding doctors financially for improving patients’ health in a cost-effective way. But there’s more to creating a sustainable model for health care that improves quality and lowers costs, and it’s something we can start right now to see results within the next decade: reform the recertification process for doctors.

Currently, doctors are recertified based exclusively on their book knowledge. Wouldn’t it be better to base medical certification at least in part on how doctors actually practice medicine? If doctors knew their clinical practices would influence their recertification chances, the resultant accountability would help to improve quality and reduce costs within the 10-year cycle that medical specialty boards generally require for recertification.

As an analogy, would you drive differently if your actual driving habits were retrospectively reviewed as part of a license renewal process? Probably. How many fewer accidents and deaths from speeding might there be, and how much more affordable might insurance be as a result? And wouldn’t you rather drive with someone you actually knew followed speed limits rather than someone who just passed a written test demonstrating knowledge of those limits?

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System Transformation Intensifies Demand for Evidence: The Trust Conundrum

September 10th, 2013
by Lisa Egbuonu-Davis and Tanisha Carino

Although we have witnessed historic lows in the rate of growth of healthcare spending, the implementation of the Affordable Care Act and secular trends have created fundamentally new dynamics in how providers, clinicians, and patients are exposed to the cost of care. New payment and delivery models being tested by the Center for Medicare & Medicaid Innovation are shifting the financial risk for managing population health to providers and clinicians. In addition, state health insurance exchanges are poised to introduce new insurance products targeted to meet the needs of price-sensitive consumers. In Silver Plans, designed to have lower premiums, the out-of-pocket payments for brand named pharmaceuticals could be $70 per prescription.

At the same time, specialty pharmaceuticals are the fastest growing sector in healthcare. ExpressScript’s Drug Trend Report estimates 22 percent growth in spending for specialty products in 2014. These dynamics have resulted in heightened demand for evidence on the safety, effectiveness and value of pharmaceuticals by health plans, clinicians, and patients. Further, these decision-makers desire real-world evidence demonstrating durable patient benefits and cost savings from use of pharmaceuticals.

Simple enough. Clear demands to an industry with billions invested in research. What’s the problem? Trust. The current level of trust in biopharmaceutical and medical products industry-funded research and credibility of industry-sponsored study results is extremely low. Some of this is a result of highly publicized fines and corporate integrity agreements (CIAs) levied for off-label marketing, inappropriate financial arrangements with providers/researchers, and lack of transparency about trial results. The resulting loss of trust in industry and its research weakens the role of a key player in meeting the demands for more evidence.

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Workplace Wellness Programs: Continuing The Discussion With Dinardo, Horwitz, And Kelly

August 21st, 2013
by Ron Goetzel

This is a response to the DiNardo, Horwitz, and Kelly Health Affairs Blog post in which the authors replied to my previous commentary, “Structuring Legal, Ethical, and Practical Workplace Health Incentives: A Reply to Horwitz, Kelly, And DiNardo.” In my prior post, I highlighted my disagreements with many of the points made by Horwitz et al. in their Health Affairs article entitled “Wellness Incentives in the Workplace: Cost Savings through Cost Shifting to Unhealthy Workers.” This post continues that dialogue.

I begin this commentary with some hesitation. I want to be clear that my intent in posting these blogs is not to “dig in my heels.” In fact, I fully understand, appreciate, and empathize with DiNardo et al.’s positions. They are rightfully concerned about protecting poor, minority, and disenfranchised workers whose rights may be threatened by unscrupulous employers who wish to place the onus on employees to “become healthy” or “else” — the “else” meaning paying a higher health insurance premium than their “healthy” counterparts. I appreciate that DiNardo et al. are protecting the interests of workers who, through no fault of their own, have become ill and are now faced with the prospect of paying more for health care coverage because of their illness.

Let me unequivocally state that paying more for health insurance because you are ill or have certain health risk factors is not the goal of workplace health promotion (wellness) advocates. Quite the opposite is true. Our intent is to keep workers healthy for as long as possible so that they can be spared the human and financial burden of paying for health care services that might otherwise have been avoided. The point of workplace wellness programs is to inspire people to improve their health behaviors and biometric measures so that they do not suffer from illnesses that are to a large degree attributable to lifestyle practices — e.g., lung cancer, type-2 diabetes, chronic obstructive pulmonary disease (COPD), and coronary heart disease (CHD).

In my previous post, I highlighted ways to structure incentive programs so that they are fair and contain provisions to guard against abuse. Here, I address additional challenges to workplace health promotion programs posed by DiNardo et al.

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The Slowing Of Health Care Spending: Have We Turned A Corner?

August 9th, 2013
by Kenneth Kaufman and Mark Grube

The news in recent years has been good: Overall U.S. spending for health care in 2011 again grew only 3.9 percent. This represented the third consecutive year of a relatively slow growth rate, down from rates as high as 11 percent in 1990 and 7.6 percent in 2007. According to a report covering through last year, per-beneficiary Medicare spending grew at 1.7 percent annually from 2010 to 2012, down from growth of 4.3 percent between 2008 and 2009, and 5.3 percent between 2007 and 2008.

What accounts for the recent flattening of the cost curve and is it a transient phenomenon? The answers have significant implications for the nation’s current and future fiscal challenges, so the debate has been vigorous and particularly well reported in the recent press.

Sustainable or Not

Some economists argue that the lower rates of health spending growth reflect a prolonged economic slowdown and that once the economy returns to a more normal growth rate, the health spending growth rate could be expected to rise. This thesis is based on historical relationships between changes in economic growth and health spending growth.

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Medicare Integrate: A New Benefit Option For Medicare Beneficiaries

July 23rd, 2013
by Ken Thorpe

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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Doctors Should Be Rewarded For Quality Care — Not For Cutting Corners

July 19th, 2013
by Jeffrey Binder

The current Medicare fee-for-service system has been criticized for rewarding practitioners in the health system for doing more — more tests, more procedures, more expensive care — that may not be beneficial. The Affordable Care Act (ACA) sets up new payment systems, including Accountable Care Organizations (ACOs) and bundled payment initiatives, that are intended to fix the problem by rewarding providers for reducing healthcare costs while maintaining quality.

But there’s a big potential problem that few health policy analysts have noted. The incentives to cut costs are strong, but the individual quality measures chosen by CMS to assess quality in the new programs are limited in scope, and that can adversely affect patient care. These measures are focused on processes of care, rather than clinical outcomes, and do not measure quality for most complex diseases and conditions, including major heart procedures, neurological conditions, orthopedic procedures, or cancer treatments. Policymakers need to fix this problem without undermining the goals of the new systems.

As the CEO of a company that makes innovative, high-quality implants, such as artificial hips and knees, I am particularly concerned about these improperly balanced incentives. For millions of Americans, our products mean the difference between a life of pain and restricted mobility and the ability to lead a normal life — to climb stairs, to walk, to work. Studies have shown that replacing arthritis-damaged hips and knees not only improves people’s ability to function, but is associated with a dramatically reduced likelihood of mortality compared to osteoarthritic patients who did not receive joint replacement.

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