A New Normal in Health Care Quality, Cost and Access

By Andy Slavitt

The following are comments delivered by CMS Acting Administrator Andy Slavitt at the American Academy of Actuaries annual meeting and public policy forum on Thursday, November 3, 2016 in Washington, D.C.

I want to thank this Academy for the objectivity, technical leadership, and the expertise this membership brings to the hard questions of health care reform. It doesn’t matter what happens politically, there will always be ongoing debates about health care policy decisions, and your work and your voice are vital to our ability to get them right.

Any study of the history of American health care reform will reveal a series of fits and starts — a pattern of many years with little to no progress followed by a significant event which catalyzes change for a while and creates a “new normal.” The Affordable Care Act was such an event, as was MACRA. In between these spurts of progress, we adapt and make adjustments as necessary to live in “the normal.”

Normally in my speeches, I like to begin extolling the virtues of what’s been accomplished by the Affordable Care Act. But instead, I’m going to go in a different direction and talk a little bit about what it was like prior to the ACA during the “old normal.” The old normal required us to accept that our health care system was not designed for many of our neighbors, or frankly, for any of us. Remember what the “old normal” was like? It wasn’t that long ago.

Old Normal

Let me start at the beginning of the health-illness cycle:

• Fifteen percent of the country had no preventive care; no reliable to primary care, let alone care management services. And, therefore, they utilized the ER for needed services.
• When they got sick, millions of people could not fill their prescriptions. If they felt pain or needed surgery or other expensive care, they ignored it as long as possible
• The finances were all backwards. People with low income were chased down for billed charges — well in excess of commercial rates.

As a result, health care became the leading cause of personal bankruptcy. And for hospitals and clinics, bad debt became part of the formula. And that meant cost shifting, raising the price for employers and reducing compensation.

Of course, there were other effects. A person with a past illness was prevented the ability to get insurance, which often meant the need to stick with an employer only for health benefits.

Finally, despite arguments from some that market forces served us best, the lack of transparent information, technology, incentives for quality, or incentives for coverage created little inclination to make things better. As a result, you and I would attend meetings like this once a year where people would talk about progress, but no one would ever deliver any.

I can go on, but suffice to say, the “old normal” was bad for patients, bad for our health, bad for hospitals and physicians. But, it was also bad for our economy, bad for medical trend, bad for our country.

One law isn’t going to fix all that in an instant. But today, when we count 20 million Americans in the “new normal” who now have the security of coverage due to the ACA, it represents an opportunity for us to move away from the dysfunction of the past.

So cutting the uninsured rate in half doesn’t just represent a set of numbers, even beyond the impact of people’s lives, it represents our country’s ability to set off on a path for progress, where we finally moved from fits and starts to a place where we can improve … and improve … and improve. But that’s not the work of the law — it’s the work of all of us. So what do we need to do next?

First, the basics — covering more and more people. The most obvious way to do this is to expand Medicaid everywhere. Millions of people, health outcomes, state budgets and health care finances will all instantly improve as they have around the country. We know this. Even rates the exchanges decreased by 7 percent when Medicaid is expanded.

Second — reach the millions of people this open enrollment period who are chronically uninsured, most of whom don’t realize that coverage is affordable thanks to the tax credits available to them. Open enrollment began Tuesday and it’s clear the demand is real with 150,000 people applied for coverage in the first day.

Third, we are going to need to teach people how to adapt to live in this “new normal.” We are beginning the process, in community after community across America, of re-connecting consumers to the health care system. All of us need to adapt to the new normal. For the consumer who’s used to making trips to the ER, it’s learning all the preventive and primary care avenues that are available to them; for the health plan, it’s adapting the past business model designed around underwriting- to one around new care and network management approaches; for the hospital it is learning how to make money when beds are empty, not by filling them. To continue to succeed in the new normal, we can’t take the old rules into the “new world” without making adjustments.

Fourth– find the places where tweaks and adjustments will help the ACA work better. We are in the early stages of a very new set of rules and just now beginning to see data now on care patterns, costs, and opportunities. If Medicare is any guide, a series of policy decisions are typically going to be necessary to improve it. Things like risk adjustment, state-based waivers, the impact of third party provider payments. Put politics aside, there will come a time for adjustments, whether at the state or Federal level and all things should be considered in order to get them right.

Fifth– and most importantly, is addressing the real factors that are driving up the cost of health care. Very few people outside of this room know what actually goes into their premium, what factors cause them to increase, and how rates are set. To the average person, what we call “unit prices”, their hospital stay or a prescription are too high but the relationship to their premium isn’t clear. Transparency into costs is important in a world where more people are paying their own premium. Hospital profits in many cases are double or more what they were before the ACA. Drug costs are growing at record levels. And there are more endemic issues like the costs of untreated chronic diseases like diabetes or the large “tax” the fee-for-service system imposes on us when care isn’t coordinated or when bad quality is delivered. While people may not equate these costs or inefficiencies to the premiums they pay each month, we need to make those connections clear that this is where the real work needs to happen.

Gaining on the Progress

One thing that is clear is that we are either going to move forward and capitalize on the gains that have been made? Or we are going to retreat back to a mode of saying what’s not perfect must be killed, and along with it, the gains we have made for millions of Americans and the health care system?

For the crowd who believes we should go back to the old normal, I bet very few have been in the position where they’ve ever had to declare bankruptcy from cancer. Or had to tell their daughter she couldn’t play on the volleyball team because “mommy doesn’t have health insurance for you.” To the people we interact with every day, who say they can sleep well at night because of the ACA, we need to keep moving forward.

At this point, what determines the success of health reform isn’t the big ideas, but the actual implementation. How we execute, measure, learn, and adjust. Our job, as I see it, and where we need you, is to use data and science to expand what works, look at what needs to improve and provide options, steer us to the best answers, analyze results, review and improve.

In the spirit of continuing to move forward, there are a number of areas we can address to make real progress. I will give three critical examples.

1. Moving from Treating Sickness to a Model of Prevention.

Let me start with the devastating impact of chronic disease, diabetes. One in 4 people 65 years or older, more than 11 million people, have diabetes. But diabetes-related care costs the Medicare program $42 billion annually, much of that money is spent on prescription drugs, insulin and other costs, let alone complications from heart disease, blindness and other illnesses.

And when someone develops diabetes, they cost taxpayers 86 percent more to take care of every year. So what if we could prevent illness rather than just treat it? Yesterday we made an exciting announcement — the expansion of a test to offer diabetes prevention services to Medicare beneficiaries. A prevention-based system is something that couldn’t have been conceived of in a system that was developed around treating illness.

So, how do you get there? The ACA created the ability through the CMS Innovation Center to observe what people tell us works, conduct small tests and if they work, expand that test further. For a model to expand, the CMS actuary needs to certify that a model not only improves care, but saves money and can do so at scale. With diabetes prevention, we began testing a model where participants identified at high risk for developing diabetes were provided strategies to increase their physical activity, control their weight, and decrease their risk of type 2 diabetes.

The results of this model were consistent with other studies. Participation led to an approximately 5 percent reduction in weight and saved Medicare an estimated $2,650 for each person enrolled in the program over a 15-month period, more than enough to cover the cost of the program. For us to manage the costs of the Medicare program, prevention has to be part of the new normal. And other models are around the corner, including testing the preventing of stroke and heart disease.

One lesson you learn often in healthcare, and that you probably all understand very well, is that one person’s expense is another’s revenue. I have been reminded of this recently, as when we announced that we wanted to expand the program, and continue to focus on prevention efforts, we got opposition from the drug manufactures. They have publicly criticized our efforts. With that said, it is clear to me that we are going to need to focus on the common good to be successful.

2. Expanding Value and Payment by Engaging Physicians in Better Models of Care

Second in the “new normal” is going interacting with the clinical community in a new way to be engaged and aligned in delivering high-quality patient-centered care. That means paying more for what works and creating an array of accountability models that fit the practice of medicine. And it means reducing burden so physicians can get back to practicing medicine, not filling out paperwork or typing on a keyboard.

And we must pay physicians to listen and talk to patients, not just cut, test, or prescribe.

Yesterday, we announced significant steps to improve payment for primary care, care coordination, and behavioral health.

These changes move Medicare further from an illness system toward a health care system that encourages teams of clinicians to work together and collaborate in order to provide more personalized care for their patients. Geriatricians, internists, and family physicians over time could see increases for coordinated care over 30 percent

And our medical home and episode based payment models under MACRA will allow physicians to receive PMPM payments and quality bonuses for being accountable, as part of a team, for delivering better care. And to engage physicians, the new Quality Payment Program we’ve introduced isn’t about more and more measurement, but more flexibility and a reduction in regulation and paperwork. Commercial health plans must also realize that reengaging physicians and other clinicians in care delivery is vital in this new normal.

3. Finally recognizing the role of the patient.

Finally, if we are going to make progress, the individual and their family will need to be placed in the center of their care. And this is what drives CMS — the care and well-being of 140 million Americans in the Medicare, Medicaid, Children’s Health Insurance and Marketplace programs and the millions more who will need these programs someday. Most are on fixed or modest incomes, who are more diverse, more mobile and more disconnected from our fragmented system. They are also more sensitive to the cost of care than ever before:

• They are Medicare patients leaving the hospital with five prescriptions to fill but unsure how to pay for them. We know keeping them at home will depend on the quality of the transition they make to their own doctor and with their medication;
• They are daughters and sons who have to make the difficult decisions on how to care for their parents who are losing their independence and need more and more assistance. They want to understand their options for both home and institutional care and how quality, staffing, cultural commitment and budgets will keep their parents healthy and independent for as long as possible;
• They are parents with children with disabilities that require 24 hour care, who spend their lives watching every dollar and interviewing every home care worker.
• And, they are Marketplace customers who have coverage for the first time and are finally able to address symptoms they have long ignored. These families have become our weathervane for costs as they feel — in the monthly premiums they pay each month — everything in the system that unnecessarily increases the cost to care.

There are, of course, millions of us in a wide diversity of health circumstances, but each of us are actually looking for a common set of things from the health care system: to intersect with people who understand us and provide reliable, quality care; to understand what comes next in the care process so we can get home and have as productive and as healthy life as possible; and increasingly, we worry about having have access to care we can afford.

So what becomes clear from understanding consumers better is that for the millions of us who work in health care, affordable and coordinated care is now part of everyone’s job.

In closing, and as I think about my next 78 days, we have enormous opportunities for gains in our health care system, but only if we work for them. We can’t expect to do things the same way and make progress. And we have to take the opportunities we have for progress. Unlike many periods over the last 20 years, our opportunity for progress is richer than ever. I want to thank you for the role you have played in the progress we have achieved as a nation and we are excited about the progress we can continue to make together.

Andy Slavitt is the Acting Administrator at the Center for Medicare and Medicaid Services (CMS). These remarks originally appeared on the CMS Blog.