Medicare Bill Focuses on Treating Chronic Illnesses

January 30, 2014

A new bipartisan bill in Congress proposes a bold, even whizbang approach to caring for Medicare's sickest, most expensive patients — those with multiple chronic illnesses.

The Better Care, Lower Cost Act resorts to traditional managed-care tools such as risk-adjusted capitated payments to clinicians, but also promotes the use of high-tech tools, including telemedicine in rural areas, remote monitoring, and smartphone apps that help patients better manage their conditions. Healthcare providers would voluntarily form multidisciplinary teams — possibly partnered with hospitals — that would enjoy important advantages over accountable care organizations (ACOs) in rendering coordinated, cost-effective care to seniors with chronic illnesses, according to the bill's sponsors.

Sen. Ron Wyden (D-OR) and Sen. Johnny Isakson (R-GA) introduced the bill in their chamber on January 15 while Rep. Erik Paulsen (R-MN) and Rep. Peter Welch (D-VT) sponsored identical legislation in the House.

"Medicare is now dominated by cancer, diabetes, heart disease, and other chronic conditions," Wyden stated in a news release. "Medicare reform must be built around offering better quality, more affordable care for these seniors. Fortunately, there are pioneering practices and plans that are paving the way."

The lawmakers cite data from the Centers for Medicare & Medicaid Services showing that 68% of Medicare beneficiaries have more than one chronic illness, and that this group accounts for 93% of Medicare spending. They also point out that 98% of what they call costly hospitalizations involve such beneficiaries.

Keeping the chronically ill healthy enough to avoid a trip to the hospital is the Holy Grail of Medicare cost-cutters. Accordingly, the bill calls quality and cost-containment "interdependent goals."

The Better Care, Lower Cost Act is so ambitious that it directs the US Department of Health & Human Services (HHS) to work with medical schools to rewrite their curriculum so that future doctors are trained in team-based care, chronic care management, palliative medicine, healthcare information technology, and care practices apropos of rural and underserved areas. Teaching hospitals that do not comply with the new curriculum requirements risk having HHS cut their graduate medical education payments.

The Upside and Downside of Financial Risk

The Better Care, Lower Cost Act is one more sign that fee-for-service (FFS) reimbursement is surrendering ground to pay-for-performance.

In the case of the new bill, pay-for-performance takes 2 forms. Multidisciplinary clinical teams certified as qualified Better Care Programs (BCPs) will receive capitated payments for Medicare beneficiaries with multiple chronic illnesses that are risk adjusted for health status just as they would be in a private Medicare Advantage plan. A health plan or one or more healthcare provider organizations can field such clinical teams. If a BCP reduces the need for inpatient care and comes in under its capitation budget, it gets to share in the savings. If a BCP exceeds its budget, it must make up Uncle Sam's loss.

The extent of the savings or loss determines the reward or risk for providers. A BCP that saves more than 5% gets to keep the entire 5%. If the savings are less than 2%, however, the BCP's share is only 50%. The same principle applies to budget overruns. These payment terms apply only to the first 3 years of the new program.

In addition to shared savings, BCPs earn quality-of-care bonuses based on measurements of clinical processes and outcomes, clinical processes, care coordination, and utilization, such as rates of hospital admission for "ambulatory-care sensitive conditions." The legislation also states that HHS will align these bonuses with other pay-for-performance initiatives in Medicare such as the Physician Quality Reporting System.

To be qualified for shared savings and quality bonuses, a BCP must take responsibility for a patient's full continuum of care, be it skilled nursing or psychological counseling (long-term care is excluded). Accordingly, the legislation states that the BCP team will include physicians, nurse practitioners, registered nurses, social workers, pharmacists, and behavioral health providers.

The bill's backers note that providers will be able to practice "at the top" of their licenses. Such statements about licensure can be read as code language for greater independence for nurse practitioners and other nonphysician clinicians.

A BCP must develop a care plan for each patient that, when appropriate, will include the use of digital technology — telemedicine, remote patient monitoring, smartphone apps — "that promote(s) patient engagement and self-care while maintaining patient safety." The care plan itself must be easily integrated into electronic health record systems.

Unlike ACOs, BCPs Can Specialize in the Sickest Patients

The BCPs envisioned in the legislation borrow significantly from the playbooks of other new forms of healthcare delivery and reimbursement such as medical homes and, on a larger scale, ACOs. The Congressional sponsors of the bill take pains to explain that by design, BCPs will outperform ACOs to the benefit of physicians and patients alike.

One key difference between the two organizations is that BCPs are free to target and enroll the sickest Medicare patients in their area, which allows them to specialize in such patients and their multiple chronic illnesses. In contrast, ACOs must obey an "attribution rule" that prevents them from catering just to patients with complex medical needs — they must accept all Medicare patients assigned to them.

And although they eventually can become eligible for shared savings based on how well they control Medicare spending, ACOs continue to operate largely in the FFS mode, which encourages volume rather than quality, and does not pay anything extra for care coordination, the lawmakers said. BCPs do not face these perverse incentives.

Competing for Attention With SGR Repeal

The new Medicare bill has received strong endorsements from several leaders in the healthcare industry.

John Rother, president of the National Coalition on Health Care (NCHC), called the bill "a solution that millions of seniors and disabled Americans with chronic conditions badly need — personalized care tailored to their needs and preferences delivered by collaborative teams of healthcare professionals."

"Whatever other divisions plague Congress, this is one solution that all senators and representatives should be able to support," Rother said in a news release. NCHC members include medical societies such as the American Academy of Family Physicians and the American College of Surgeons.

Rod Hochman, MD, chief executive officer of Providence Health & Services, a Catholic healthcare system in 5 western states, said the bill would "advance the sustainability of the Medicare program" while promoting individualized care.

The nonpartisan Congressional Budget Office has not yet calculated whether the bill would decrease federal spending, but Wyden and his Congressional allies claim that it could save $25 billion a year if it knocks down costs by a mere 5%.

How far the Better Care, Lower Cost Act will advance remains to be seen. Passing major legislation like this challenges a Congress that has until the past few months been paralyzed by partisan gridlock. The legislation also must compete for attention with efforts under way to repeal Medicare's sustainable growth rate (SGR) formula for setting physician reimbursement.

However, the bill has this in its favor — Wyden is expected to take the helm of the powerful Senate Finance Committee, which oversees the Medicare program. President Barack Obama has nominated the committee's current chair, Sen. Max Baucus (D-MT), to be ambassador to China.

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