Increase Fees Only for Those in Innovative Delivery: New Proposal

Marcia Frellick

January 10, 2013

Among the core strategies of a proposal released yesterday to slow healthcare spending by $2 trillion over the course of 10 years is a policy that would increase future Medicare fees only for those physicians participating in innovative delivery or payment systems such as patient-centered medical homes, accountable care organizations, and bundled payments.

The approach outlined by the Commonwealth Fund Commission on a High Performance Health System is designed to promote team-based, high-value care with better patient outcomes by providers accountable to the populations they serve. Physicians and other providers not participating in such models would continue to receive 2013 Medicare fees.

"The commission thinks it's time to get across the message very strongly that staying in the current system is no longer a viable option," said Stuart Guterman, vice president and executive director of the commission, in a conference call yesterday with reporters.

The payment system would replace the widely denounced sustainable growth rate formula with a system that rewards improved outcomes and would reduce fees for services deemed "overpriced" or not clinically justified. The plan also calls for Medicare to institute competitive bidding for commodities such as drugs, supplies, and equipment. Cost reductions from these measures would more than cover the costs for repealing the across-the-board sustainable growth rate cuts to physicians' fees, the report said.

The report, "Confronting Costs: Stabilizing U.S. Health Spending While Moving Toward a High Performance Health Care System," outlines a plan to attack escalating costs from 3 sides: reforming provider payments, educating consumers so they can better understand costs of healthcare and make smarter choices, and reducing healthcare market costs, including reforming the malpractice claims system.

Total spending on healthcare in the United States was $2.7 trillion in 2011, and without intervention it is on track to more than double that, with total spending pegged at $5.5 trillion by 2023, the report states.

The commission's goal is to keep spending on healthcare no greater than the growth rate for the gross domestic product. Most of the savings would come from accelerating the move to innovative delivery systems across Medicare, Medicaid, and other public programs and private plans that are part of the new insurance exchanges. Savings would also come from simplifying fragmented reporting requirements to cut insurance-related administrative costs. Because private insurers have different reporting requirements, benefit designs, and payment policies, the complexity has boosted administrative costs in the United States well above those in other countries, including countries with multiple payers and private insurance markets, according to the report.

Integrating administrative records, submitting claims electronically, and sharing enrollment and credentialing systems are among the improvements that would free physicians to spend more time on patient care, the report says.

Authors of the report note that the United States spends twice as much on healthcare per capita as other industrialized nations do but does not see the same benefits of universal access, longer lives, and quality of care.

Achieving the $2 trillion in savings is calculated on the basis of federal and state policymakers and private-sector healthcare leaders enacting policies this year that would take effect in 2014 to coincide with the expansion of access to care with the new healthcare reform law, the Affordable Care Act, and accelerate in effect over time.

The breakdown of savings under the proposed changes compared with projected trends over the course of 10 years are $1.04 trillion for the federal government, $242 billion for state and local governments, $189 billion for employers, and $537 billion for families in the form of lower future premiums and out-of pocket costs.

David Blumenthal, MD, MPP, chair of the commission and president of the Commonwealth Fund, said during the conference call that given the more painful solutions currently being debated regarding sequestration and the debt ceiling, the commission's plan will likely get the bipartisan attention of legislators.

"In comparison with what some of those proposals advocate, we think that some of what we're proposing will look like an escape valve, because this results in better value rather than pain and suffering for either beneficiaries or providers," Dr. Blumenthal said.

The report is available on the Commonwealth Fund Web site.