It’s tempting to focus on only the health insurance provisions of the Patient Protection and Affordable Care Act (ACA), yet the law is so much more. In fact, there are 10 major sections, many of which were created to improve our nation’s healthcare system, the quality of the care we receive, and the value for our nation’s more than $3 trillion annual investment in healthcare.
Before the ACA
Let’s take a quick look back at the state of our healthcare system before the ACA became law in March 2010:
- Healthcare Costs: Total healthcare costs in 2010 were $2.6 trillion, up from $1.37 trillion in 2000. That means our nation’s per person costs increased from $4,878 in 2000 to $8,402 in 2010, a 72.2 percent increase in just one decade.1
- Health Insurance Premiums: From 1999 – 2004, average health insurance premiums for employer-sponsored family plans increased 72 percent, and from 2004-2009, family premiums increased 34 percent. In other words, family health insurance premiums grew from $5,791 in 1999 to $13,375 in 2009.2
- Uncompensated Care: The cost of uncompensated healthcare was $57.4 billion in 2008, which was financed by all of us:3
State and local
Direct care programs4
Private $6.3 billion 11.0%
- Hospital-Acquired Conditions. In 2010, there were 145 hospital-acquired conditions for every 1,000 hospital discharges.5 That means 14.5 percent of all the people admitted to the hospital got sicker while they were there as the result of acquired conditions like bloodstream and urinary tract infections, pressure ulcers, and adverse drug events.
- Hospital Readmissions: In the years 2007 through 2011, nearly 20 percent of Medicare fee-for-service beneficiaries were readmitted to the hospital within 30 days.6
Just as importantly, the widely-respected Commonwealth Fund had released research in 2004, 2006, 2007 and 2010 showing the United States paid more per capita than any other industrialized nation and ranked last on measures of quality, access, equity, efficiency and healthy lives. Their 2010 report showed the U.S. spent two to three times as much per capita as countries like Australia, New Zealand, Germany and the Netherlands, but was dead last and worsening in terms of quality.
Healthcare Cost & Quality for Industrialized Nations
Source: The Commonwealth Fund, U.S. Ranks Last Among Seven Countries on Health System Performance Based on Measures of Quality, Efficiency, Access, Equity, and Healthy Lives, June 2010.
Volume to Value
Because of the acute state of our healthcare system – escalating and unsustainable costs coupled with decreasing quality - the transition from volume to value had already begun.
In fact, it began in the 1990s with pay-for-performance in quality and cost outcomes. By 2007, the shift to value-based care as heralded by the adoption of patient-centered medical homes and accountable care organizations had really started to take hold. These efforts began as private-public partnerships, led by stakeholders in business, commercial insurers, state agencies, and physician and hospital organizations around the country. The earliest forms were voluntary in nature and were created to address the stark reality of U.S. healthcare costs and quality as compared to other industrialized (OECD) countries.
CMS Embrace of Value-Based Care
In the years after private industry began embracing new models of care and reimbursement, the Centers for Medicare & Medicaid Services (CMS) eventually realized it too needed to align with these initiatives to create significant change. For practice patterns to improve, incentives, measurement and reimbursement needed to change across an entire practice, not solely for the small portion of patients with commercial insurance. CMS’s embrace of value-based care led to its codification in the ACA, thereby accelerating the evolution from fee-for-service to value-based care.
The ACA’s Title III authorized Medicare to join the movement to value-based reimbursement, establishing guidelines for accountable care organizations (ACOs) and creating the Medicare Shared Savings Program and the Center for Medicare and Medicaid Innovation. This part of the law incented hospitals and primary care physicians to transform their practices technologically, financially and clinically to achieve the Triple Aim – improved quality and outcomes, lower cost and higher patient satisfaction.
Fast forward to today and the U.S. healthcare system continues to be challenged by:
- An Aging Population
Each day, 10,000 Americans enroll in Medicare, a trend that will continue for more than a decade. Within the next 20 years, the total number of Medicare beneficiaries is expected to double.
- A Sicker Population
In 2015, 191 million Americans had at least one chronic disease such as asthma, diabetes and heart failure; 75 million had two or more chronic diseases. The number of people with three or more chronic conditions is expected to grow from 30.8 million in 2015 to 83.4 million in 2030.7
- Growing Government Healthcare Expenditures
Medicare spending grew 5.5 percent to $618.7 trillion in 2014. Medicaid spending grew 11 percent to $95.8 billion in 2014.
- Rising Healthcare Spending
According to the National Health Expenditure Data, health spending is projected to grow at an average rate of 5.8 percent per year until 2025, rising from 17.5 percent of gross domestic product in 2014 to 20.1 percent in 2025. These projections reflect ACA provisions to contain costs, and could ultimately be higher.
Despite these dynamics, many industry experts are encouraged by the impact of value-based care.
Health Plans & ACOs
Since the ACA was enacted in 2010, health plans have created many value-based and risk-based contracts with physicians, hospitals and other providers with the shared goals of improving healthcare quality and lowering cost. Estimates suggest there are 838 ACOs serving 28 million Americans, and nearly all health plans have some type of value-based arrangements in place:
- 72 percent of health plans surveyed for the Deloitte 2015 Study of Medicare Advantage Health Plans and Providers have one or more patient-centered medical homes for their commercial population,
- 62 percent have accountable care organizations (ACOs) with shared savings,
- 45 percent have ACOs with shared risk,
- 45 percent use global capitation, and
- 41 percent use bundled payments.
There is increasing evidence ACOs and other risk-based models are working as intended to improve healthcare quality and cost.
The ACO Results
Let’s look more closely at the experience of one of Geneia’s health plan clients. This health plan has embraced the concept of value-based care and currently has 10 accountable care arrangements. Under this model, the health plan partners with primary care physician practices to provide dedicated care management resources and advanced analytics to deliver patient-centered, holistic care.
Data for a recent 12-month period show the health plan’s accountable care partners are outperforming their peers for the following measures:
- Acute inpatient admissions are 4.7 percent lower for employer group customers and 7.2 percent lower for Medicare plan customers.
- Readmissions are 8 percent lower for employer group customers and 14.8 percent lower for Medicare plan customers.
- Emergency department visits are 8.4 percent lower for employer group customers and 8.2 percent lower for Medicare plan customers.
- Medical and pharmacy costs at accountable care partners are growing at a lower rate than the plan’s total book of business.
At the same time utilization and costs have decreased, quality has improved:
- Accountable care partnerships are meeting or exceeding agreed-upon quality goals relating to chronic disease management, helping patients who have chronic conditions such as diabetes, coronary artery disease and heart failure experience improved health.
- The accountable care partnerships are exceeding the regional average for Healthcare Effectiveness Data and Information Set8 (HEDIS® ) measures for some of the leading chronic diseases. For example, several participating providers have demonstrated performance of greater than the 95th percentile for the Comprehensive Diabetes Care measure and greater than the 90th percentile for the Cholesterol Management for Cardiovascular Conditions measure.
The ACA and its embrace of value-based reimbursement helped to propel what is today commonly referred to as population health; that is, improving the health and cost of an entire population or community, often as the direct result of ACOs, risk-based models and other collaborative partnerships.
The years since the ACA was enacted have been marked by a rapid acceleration of efforts to improve the quality and cost of our nation’s healthcare. Despite political sentiments about the insurance mandate and Medicaid expansion, medical societies, hospital associations, health plans and other industry experts consider the evolution to value-based care - which long-preceded but was codified in the ACA - an absolute necessity to transition from a low-value, fee-for-service model of care.
The train on value-based care and population health has long since left the station. Without another creative solution to address our cost and quality conundrum, it will continue down the track.
1Kaiser Family Foundation, Health Care Costs: A Primer, May 1, 2010.
2Kaiser Family Foundation, Premiums and Worker Contributions Among Workers Covered by Employer-Sponsored Coverage, 1999 - 2016
3John Holahan and Bowen Garrett, The Cost of Uncompensated Care with and without Health Reform, March 2010.
4Direct care programs include the share of Veterans Administration, Indian Health Service, community health centers and other program spending that support the uninsured.
5Agency for Healthcare Research and Quality, Saving Lives and Saving Money: Hospital-Acquired Conditions Update, 2014.
6U.S. Department of Health and Human Services. New HHS Data Shows Major Strides in Patient Safety, Leading to Improved Care and Savings, May 7, 2014.
7Partnership to Fight Chronic Disease. Fact Sheet: What is the Impact of Chronic Disease in America.
8HEDIS is a comprehensive tool used by most health plans to measure performance on important aspects of care and service.