Cost and Quality Relationship Memo Essay

Many of the reforms contained within the Patient Protection and Affordable Care Act (PPACA) are aimed at reducing health care costs and improving quality without rationing care, cutting benefits or reducing eligibility. Starting with the populations that suffer from the most difficult health conditions and have the most medical expenses makes sense. If designed and implemented properly, these reforms hold the potential to transform not only their lives, but also to serve as models for other populations. However, this promise cannot be realized without the informed and meaningful participation of patients, families and their advocates. The problem: our fragmented system There is widespread acknowledgement that our current health care system is fragmented, failing to consistently deliver high quality care, particularly to certain vulnerable people, such as: those with multiple chronic conditions, the frail elderly, people who are dually eligible for Medicare and Medicaid, and members of a racial or ethnic minority. These populations tend to see more physicians, have more office visits and take more medications. Too often, there is no one to coordinate this care. This failure to coordinate leads to poor care, such as: †¢ Duplicative tests or procedures †¢ Medication errors †¢ Avoidable hospital admissions †¢ Preventable hospital readmissions †¢ Unnecessary nursing home placements This fragmentation comes at a cost. Overall, health care costs represent 16 percent of our Gross Domestic Product. In 2009, we spent $2.9 trillion on health care. The cost of health care services provided to vulnerable populations is disproportionate to their numbers. For instance, 96 percent of Medicare dollars and 80 percent of Medicaid dollars are spent on patients with multiple chronic conditions. And, Medicaid and Medicare spend four times as much for the nearly nine million dually eligible beneficiaries than for non-duals. This disproportionate spending is in part because these populations have more complex health care needs. But preventable hospitalizations, complications and unnecessary nursing home admissions contribute significantly to these high costs. Improving the health delivery system for these vulnerable people will improve the quality of their lives, while also saving money. Page 2 National Health Reform and Delivery System Change, June 2010 Community Catalyst is a national non-profit advocacy organization building consumer and community leadership to transform the American health care system. www.communitycatalyst.org 2 New opportunities emerging from national health care reform Noted Harvard surgeon and author Atul Gawande said it best in his December 2009 New Yorker article â€Å"Testing, Testing,† where he responded to claims that there was no master plan for improving quality and reducing costs in the then-pending national reform bills. Drawing from what’s worked in agriculture, he said that â€Å"[t]o figure out how to transform medical communities, with all their diversity and complexity, is going to involve trial and error. And this will require pilot programs – a lot of them.† Indeed, the PPACA is filled with just these types of reforms aimed at testing what works. By its very nature, it acknowledges the differences among health delivery systems. While there are too many reforms to cover, this brief aims to discuss some those that hold the most promising for states to improve the health of vulnerable populations. In exchange, designated providers receiving payment for these services must provide regular reports to the state on a set of applicable quality measures. The New Jersey Legislature is currently considering a bill that would create a primary care medical home demonstration project. Should that bill pass, New Jersey could explore taking this state option, and advocates could weigh in on the development of quality measures that are most relevant to vulnerable populations. Accountable care organizations (ACOs) The new law creates a general ACO pilot program in Medicare4 and a pediatric ACO demonstration project in Medicaid,5 in which groups of providers who work together to improve the quality of care they deliver to beneficiaries will be permitted to keep half the savings they achieve over a three-year period. Participating ACOs must promote evidence-based medicine and patient engagement, report on quality and cost measures and coordinate care. They must also demonstrate that they meet patient-centeredness criteria, such as the use of patient and caregiver assessments or the use of individualized health plans. The criteria by which a group of providers will be judged in order to qualify as an ACO will be determined by regulation issued by the Department of Health and Human Services, which will also determine the measures to be used to assess the quality of care provided by the ACO. There is already interest in New Jersey in creating an ACO demonstration project to serve urban, underserved communities. Creating a state project may position New Jersey to take advantage of the federal pilot funding. Home and community-based services (HCBS) The new law offers incentives to states that provide HCBS to individuals instead of placing them in nursing homes.6 Specifically, the law increases Federal Medical Assistance Percentage (FMAP) payments to States that decrease the percentage of spending while increasing spending on HCBS.