Health Law's Test Kitchen For Payment Reforms Could Offer Tool For GOP Ideas

As they debate and discuss ways to repeal the Affordable Care Act, lawmakers will weigh the value of the Center for Medicare & Medicaid Innovation.

This article first appeared December 1, 2016 on Kaiser Health News.

By Julie Appleby

Joint replacements. Cardiac care. Chemotherapy.

What do those things have to do with the repeal of the Affordable Care Act?

Economists and policymakers think the U.S. may be overpaying for such services, which helps drive up health care expenses for everyone. And the health law has a program that includes testing new ways to pay for care — including in those three areas — that might result in better quality and lower costs.

But with the ACA up for potential repeal, what happens to that testing now? One of the emerging questions is whether Congress will save all or part of that effort, known as the Center for Medicare & Medicaid Innovation.

Republican lawmakers have complained — along with some in the health care industry — that the law under the Obama administration gave too much authority to the head of the Department of Health and Human Services to create and expand projects. Now, however, that very same authority may look appealing as Republicans head the department and may want to use the center to test their own ideas, including those that would revamp Medicare or Medicaid.

"You can dislike that authority, until you have the opportunity to use the authority," said Rodney Whitlock, a vice president at ML Strategies, a government consulting firm in Washington, D.C., and former Republican staff member of the Senate Finance Committee.

As they debate and discuss ways to repeal the Affordable Care Act, lawmakers will weigh the innovation center, funded through the health law with $10 billion for 2011 to 2019, and another $10 billion for each subsequent decade. The Congressional Budget Office estimates the center would increase federal spending initially, but ultimately result in lower costs and save up to $34 billion over the next 10 years.

Congressional Republicans have not yet hinted whether they will keep, modify or kill the program but they generally support the cost-saving goal of the center and many observers think they will want to preserve it.

"If health care providers can do a better job of delivering patient care … at the same or lower costs, that's the kind of flexibility the system needs more of," said Mark McClellan, a professor of health policy at Duke University who headed Medicare for two years under the George W. Bush administration.

One group that generally supports the broad cost-saving goal of the center, nonetheless warned that Congress should place limits on it. Otherwise, "there is nothing preventing [the center] from testing a model … that includes all Medicare and/or Medicaid beneficiaries in the U.S," the Healthcare Leaders for Accountable Innovation in Medicare said in a white paper. "In effect [the center] could test a model that completely restructures the Medicare or Medicaid program."

Billions of dollars have already been spent by the center, testing a variety of ideas, from ways to improve care for at-home dialysis to ways to foster more collaboration between doctors and hospitals to efforts to reduce unnecessary hospital visits by chronically ill Medicare patients. Many of the efforts look at ways to move from Medicare's traditional fee-for-service payment system — that economists and policymakers say drive up costs — and instead set up reimbursement that rewards coordinated care. Few of the projects have been in place long enough for the center to determine if they truly save money and improve care.

Even if the center were eliminated, many experts say these types of payment reforms will continue because of private sector interest.

"Pay-for-value is going to be a guiding principle going forward irrespective of who is in power," said Dan Mendelson, president and CEO of the consulting firm Avalere Health. "It would surprise me to see wholesale U-turn from that policy."

To date, most of the programs funded by the innovation center are voluntary, but controversy has arisen over several recent initiatives that require participation by doctors or hospitals.

What may happen is that there will be fewer of these mandatory efforts. This year, one such project got underway, testing a method of "bundling" payments for joint replacements at 800 hospitals in 67 metro areas. For their Medicare patients, the project requires a single bundled payment to cover the cost of these procedures, including in-patient and post-operative care, instead of separate payments for each doctor, hospital or nursing home visit. A similar mandatory project for certain kinds of cardiac care has also been proposed.

In the end, the center's future will be determined by whether the Republican majority believes it is one of the best ways to slow rising medical costs, said Christopher Condeluci, principal at CC Law & Policy in Washington, D.C., and the former tax and benefits counsel to the Senate Finance Committee.

"If the answer is yes, they will keep it and it might go to new heights," Condeluci said.

But economist Joe Antos, a resident scholar at the American Enterprise Institute, does not think the new administration — or many members of Congress — will push to use the center's authority to create broad, mandatory nationwide experiments with Medicare.

"I can't imagine a Trump administration saying we want the bureaucrats to decide on the health care your grandmother is going to get," said Antos. "Anything that is that much of a marquee issue absolutely has to go through Congress."