tv Health Care Costs CSPAN October 27, 2017 11:59am-2:17pm EDT
to definitively traced back to problems between politicians and the press, he said he stopped when he got to the first congress. the point is this. crucial.tionship is this relationship will and/or. .he institutions will endure we have a messy system, but this messy system is the best possible system, and this messy system of government completely relies on a free and open press. [applause] our founders understood this and this, too, will endure. it does not work with that what you do. beneath the scar tissue, assumed cynicism, which we had at a high level these days, we do share -- >> this is available online at
www.c-span.org. we will take you live to capitol hill for a discussion on health care and how to decrease costs while improving quality. we will hear from a chairman of the advisory board and executives in arkansas and new york. live coverage is here on c-span. >> they come at these problems from different perspectives, but one unifying scene from all is there concern for what rising health care costs do to americans and dad the need to increase -- and the need to increase health care value in our system. they arell discuss how increasing value in our health care system. this is a nonpartisan organization. we believe why bringing people together with different perspectives, we can improve health care through cooperation. througha wonderful --
collaboration. we have a wonderful audience today. we want to bring you into the conversation. at the end of the program, we have allowed for 30 minutes of q "snl -- 30 minutes of q and a. we will use the cards to ask the panel questions. we added a last-minute change. memberht notice that one is not sitting up your. he got injured playing hockey. you have to love that at his age, so he wasn't able to join us. another member has graciously offered to cover points he was going to make and the implications of these increasing tots and why there is a call action to increase value in our health care system. i will start by introducing each panelist and then go on.
thell start with one of nation's most highly regarded economist and what distinguishes him is not only is he brilliant on the theory and research, but probably more than any economist, he understands how markets work. he leads much of the health care policy coming out of harvard medical school but also sits on harvard's benefits committee, where he learned why markets are not always efficient. is that fair to say? [laughter] , he also serves on cbo's panel of health advisors, members of the massachusetts health connector board of directors and vice chair of met pack. we had the fortune of having mike serve on one of our advisory boards. he is one of the pioneers of
insurance design and go to researcher for evaluating health care in organizations. join me in welcoming mike to the panel. [applause] mike: i am thrilled to be here. nice in herays introductions. tremendous to see all of you here. i am going to talk broadly about payment reform, benefit design because bob was going to talk about the budget, i want to start with comments about the budget. the quiz question is, what do these decades have in common? if the answer is in everyone, spending growth exceeded income growth. 1970's, we were 2% faster. in the 1990's, considered a very
good decade for health-care spending growth, we had it only exceeds income by 1.6%. that is a fundamental challenge is health care is growing much more quickly the national income. we have had -- and one reason it is great to be here today -- an ongoing national discussion about what to do in the health care sector. i will talk about broad ideas but i want to make an important semantic distinction. in many debates when people talk about challenges we face regarding national healthcare spending, they are talking about total spending in the country. other conversations where people discuss the challenges with rising health care spending, what they really mean is the government is spending too much. those are different issues and there are different solutions for how to address the
efficiency of the health care system and health-care spending in america relative to concern about what the government is spending. because i spend time in a number of different settings, i will make a comment about medicaid's challenge. in 2015, roughly speaking, , a littleas 3.5% more, of gdp. care spending growth continued to exceed income growth by two percentage points, roughly the average, by 2035, we would be up to 8% of gdp. if we are really successful and able to reduce health care spending growth to one percentage point, medicare spending would be a little more of gdp.% if we were stunningly
successful, emphasized stunningly successful, and how see medicare would still rise as a share of overall spending because we have more medicare beneficiaries. we had fundamentally two problems. one of them is there has been rising spending per beneficiary historically in the health-care system. the second is in medicare, we are struggling with how to finance a growing portion of our population on medicare. it should not be surprising that if we had more medicare beneficiaries per worker, the workers will typically have to pay more to finance those beneficiaries. that is not rocket science math. the implications of how you deal with a growing population are very different than the implications were dealing with rising spending per capita.
it is not just a medicare problem. i am not from d.c. i think there has been discussion about medicaid. d.c.e state houses and in as medicaid spending grows, a crowds out other things at the state level, so it is a huge challenge, not just on how we finance medicare but medicaid. to give you rough numbers -- basically, there are other parts of the budgets we can think of cutting from. if you tried to fund health care spending growth, no borrowing, just taxes, and you raised everybody's income tax proportionally, and health care spending grew at one percentage , the faster than income historical rate is 2% faster, tax rates by 2060 would have to rise to the neighborhood of 70%. i am waiting for the gasp. hello? tax is are going
to be 70% in 2060 and it is admittedly true the power of compounding can make number seem enormous if you go out far remainsut the factor the fiscal challenges associated with rapid spending growth are real and create tension in the system. mentioned, i have the honor of sharing and may be -- the benefits committee at harvard university on what to do with our benefits package. when we look at the numbers, we can see projections of spending growth that put huge pressure on the wages and salaries of people that work at harvard university. although we talk about the federal and state spending problem, this is also a huge private sector issue on how to control spending growth. what i want to spend the rest of my time on his solutions. word clear, i use it the
you sleep because i will not have a magic bullet at the end. because i do not have a magic bullet at the end. i want to talk about payment reform and consumer strategies or benefit designs, things related to engaging consumers in different ways. it turns out that one strategy might use to payless is to payless -- a less this to pay less. you see that in recent health reform discussions, where the assumed increases in fees to physicians and other health care facilities are lower than the past. -- no one that i know is thrilled about the pay less strategy and there is energy around alternative payment models.
the two big models are episode payments, or bundles, and a population-based payment model in the federal context, largely aco's. to give you some idea, business from brookings. we had a system called sustainable growth rate, which was many things, not sustainable. macra, a rule called which governs the way it positions are paid and in it there is a portion called mips, they pay for value components, and the thing that i think is most important to understand about this system is the scheduled fee increases for physicians are essentially flat in nominal terms for decades to come. the key thing to understand is directly speaking, in 2042, the
base level are scheduled to rise by less than 10%, in nominal terms. shooting for 2% inflation. slowly over time, there would be a reduction in the real-time of fees to physicians and there are similar adjustments called productivity adjustments for payments to facilities, where fees are scheduled to go up less than in put prices. i believe that will be a challenge for the provider system decades to come in the service system. what we have been trying to do is build a somewhat different type of payment model, where physicians in the system more broadly can pull the efficiency out and allow provider systems to share in some savings, they can perform better financially than if they are having their fees eroded by inflation over the next 20 years or 30 years. that is a theory of how the
models should work. i was listening to a very well-known venture capitalist who said these flexible payment models allow innovators to make changes in ways that are not distorted by needing to create revenue by charging more for specific services. there is a lot of economic appeal. i am going to go through what those payment models are. they had three characteristics, errs, they tend to transfer risk to providers -- first, they tend to transfer risk to providers. that can be a good and bad thing. --y included pay for proof for performance components. to i have a learned appreciate the data. a lot of what i think insurers are doing is providing data support to succeed under these new models because it is hard when you change sector business models. models go under
the monitor of value-based payment. you see this all over the place. reconciling, value, the word value is commonly used in all of these. this begs the question of what do we mean by value? my personal view may be a little contrary. this is mary poppins. it is a little bit of the sugar that makes the medicine go down. we are trying to shift some of the responsibility and accountability for providing high-quality care to providers and then hold them accountable for the financial components shifting risk and recall value -- and we called it valuable because it is more appealing. it is not your standard model. it is transferring risk and responsibility down the delivery system. episode-based payments have
gotten a lot of attention. i do not have time to go through an exhaustive literature, although, i would love to do that. in general, the evidence is pretty clear they save money. they are examples where they save large amounts of money. five-ishe, they save percent. there are a lot of examples that you say but there could be an increase of volume in episodes. we have not seen -- we have seen a huge impact -- we have not seen a huge impact in quality. ofre are several concerns episode-based payment. the episode models work well for certain conditions. hips, knees, maybe other things, but a lot of the problems we had
our people deal with chronic conditions that are harder to put in episode models and it is unclear how far you could go in capturing the total spend in the country on an episode-based framework and the second concern was induced. let me jump the population-based models. we used to call it decapitation and i think -- capitation, but the basic idea is that the toivery system gets a fee care for a population of patients over time. aey are all built on fee-for-service, meaning during the year, money is flowing in rate, but thevice organizations that accept its accountability are responsible for the reconciliation at the andwhich ignored is spent the total budgets.
love to spend in power and talk about the evidence. if you follow twitter, this is half the places i am, arguing this point. i believe evidence is clear that population-based models reduce spending by a small amount. it differs across population. the private sector clearly does better. part of the reason is because there are wide variations of prices in the private sector and in these models, it turns out these organizations that accept this risk can shot better and save money by directing patients to lower-priced settings and providers. it seems clear results improve over time, and also, at least in medicare, that independent physician organizations to somewhat better. that is a generalization because i am an academic and i get paid to generalize.
rule, if you want to save money by keeping out of the hospital, it helps if you are not a hospital. the other thing really important to understand, and i do not know why this is so hard to explain. it seems it does not sink in, in a shared savings model, the savings get shared. [laughter] you understand how that works. if you save $100 in less spending, you will not keep that $100 because you shared it. that is how sharing works. if you look after a year, you will not do as well have you not shared the savings but the incentive to induce the savings. if you did not share, you would not have any savings, so share. i think we have to worry about creating a health care system that is working in 2019. i went the health care system to
work in 2019, but i am more interested in getting on a path where the health care system will work in 2025 and 2030. if we spend all of our time 2019, to get a big win in we risk abandoning a path that might get us some more successful in 2025. so, the reason why i have been supportive of these models is not because the is evidence that suggests you to savings. saves money, if it and improves in quality, in my book, that is a win. it might not be a slamdunk but that is a win. the reason why i think we should keep moving on this path is because if we get all the regulations writes, it enables enables a delivery system to capture some of the efficiencies, which is where i think we want to go. quick caveats, details matter.
we often say aco's succeed, dale, remember, details of the are different. it is important to remember execution matters. it is how it gets implemented. how the organizations doing the work accomplished their path and it ends up being imported. do not underestimate management and execution. my summary of the sorting, we want a mansion. we have a dilapidated house. we know how to build tiny houses. the point remains, it is still a house and hopefully over time, we can put on additions. that is my folksy answer. comparing episode of population-based payments, they may be able to work together. both seem to lower spending. episodes are narrower, so if you save 10% on 5%, you have not save that much on a population basis. the other models are broughter.
the -- broader. the concern is not all areas are ready to support population-based payments. it is also the case that episode models engage specialist better and the other tends to be focused on organization of primary care providers. again, iey continue, believe they should in part because macra is going to be challenging given the fee level projections and it will be hard to put in more money. my general view is when money gets tight, and i hope my beginning slides convinced you money will be tight, the providers are going to want to control the money. behind overarching theme a lot of these new payment models are mechanisms to allow providers to control the money, capture and share some of the
savings they create. i will switch gears to benefit design. understand one thing about insurance is to mitigate risk. it should not be surprising that butpurpose is to insure, sometimes you forget that part, so we're balancing risk spreading and the goal of cost sharing is not just a lower premium. it is easy to have premiums go down if you have the patient pay more at service. that is not a clear win. that is shifting from a premium to the point of service, which adds risk, not diminish it. the other issue about cost-sharing is the goal to not tax the sick. the sick people pay. i will speak for harvard, our goal is not to meet the health care challenges we face by charging employees who have , like or other things
have babies, our goal is not to charge young families to support our health care spending. is because we are trying to improve the incentives into pot ways. one is to reduce excess utilization. you probably know there is a waste in the system and we would like to have less. and we would like to encourage price dropping, particularly in the private sector, where they are huge variations. plans,r high deductible co-pays, coinsurance plans. essentially, models that charge patients more. those tend to be blunt instruments for a variety of reasons. they face no incentives for cost sharing and they don't encourage shopping, although we would love them too. most of the newer, more grants designs try to target a purpose, either price dropping or
encouraging use of high-value services. so reference pricing is the basic idea you pick a price and at an employee goes to a higher price run, they pay the difference out of pocket. that steers them to lower cost providers. shared networks is similar but not for a simple episode like hip or a need but for all emissions -- admissions -- like a hip or knee, but for all admissions. the value-based insurance design concept is the idea of trying to align co-pays with value, so my colleague would be frustrated with me if i did not mention that if you look at the care we get, some is high-value and we want people to consider that care. other care is low value and we would discourage people from using that and there's this idea behind how you-based insurance design to align cautionary to
discourage it low value. the basic results from all of these benefit design studies is it is thankfully to an economist good news that people respond to cautionary. financial incentives matter. financial incentives matter. care,hift the site of tiered network plans move to lower-priced models. not all of them. a small percentage, but there is movement associated with that. to give you an idea, there are but onally large savings a narrow amount of care in a tiered model. on study we did was based population and it is clear high deductible health plans, depending on your study, 5% to 40% savings, and value-based
insurance is more nuanced. it depends on how much emphasis you have put on encouraging high-value and discouraging the value. so how you design it depends and determines the financial implications. concerns. this is the one that is disturbing to an economist. i am a little sheepish. posturing does influence patient behavior because they do not respond the way clinicians might want them to. they reduce their use of high-value and the value care and about the same proportions. if you charge them for preventive services, they reduce high-value pharmaceuticals. there is a number of retreating, diabetes, they charge people more. they are not that good at discriminating. that is one of the patients. you can use cost-sharing -- i do
not want to use manipulate, that makes me sound evil -- but it allows you to set up a benefit of setting a line to what you want patients to do. there is another concern you are transferring risk. the purpose of insurance is to mitigate risk. if you charge people a lot, you are undoing that. we are worried about disparities. if you charge people out of pocket, you have to worried that will impact some populations more than others, so a consumer oriented strategy has to grapple with disparity concerns, particularly given people are not always the best decision-makers in terms of care. a few final thoughts, first, keep it simple. it is really easy to come up complexmatically nuanced solutions, where people have to choose amongst different dividers or the providers will
have complicated regulations on how they will do things. ,he quality measurement system hasi am a big fan of it, become a big, complex entity that creates cost throughout the system. you will see this if you spend time talking to anybody and there is a lot of concern about that. we should do our best to try to keep the system simple to avoid a crushing administrative distraction that we could create if we were not careful. the last point, and may the most important, do not be so impatient. is it came here today and what ever talks you go to next week in the week after, if you are hoping there will be a magic solution, and we get rid of whatever we are doing now and put in a spectacular thing, that is not the way the system will work. by and large, my view is the
road to success is always under construction and we should be happy with small wins and incremental improvements in the direction re-think will promote value using incentives to the delivery system, payment reform, patient design, and hopefully, get to a sustainable place. one way or the other, we will control health-care spending growth. in the end, math will win. we have to figure out how to do that in a way that maintains quality of care as we have a health care system designed to meet health care needs. i think we are on a reasonable path. hopefully, with continued work, we moved in the right direction. thank you very much. [applause] nancy: mike, thank you. really terrific, thereof and clear. -- dollar-euro and clear -- very
clear and lauro. i would like to introduce the president and ceo of blue cross blue shield, a nonprofit mutual insurance company, the largest in the state of arkansas with about 2 million members. curtis is a champion for improving the health of his fellow citizens in arkansas, the most boehner will people there, and under his leadership, the arkansas blue cross blue shield has instituted a number of addiction,der opioid health literacy and food scarcity he is here to talk about -- security. to talk about making health care more affordable and that is movement models inve care collaboration with the state and federal government, and they have had a remarkable amount of
success in arkansas and has served as a model for cms and other states. curtis is pretty passionate about building a better health care system and we are pleased to happen with this today. thank you. [applause] curtis: thank you, nancy. i think it is fitting for me to follow michael in our comments today because he has spent an amount of time in my home state studying the effects and initiatives i will be talking with you about this afternoon. when i joined arkansas blue cross blue shield in 1993, i worked with a primary care network. that was a product we made available to large employers located in rural parts of our state. user communities with populations as small as 3000 two
as large as 20,000. communities that had primary care physician clinics and at least one large employer and they tended to be fortune 500 companies with a planned located in arkansas. these were top models, so the character employees and their family members and were directed to primary care physicians. those positions treated those patients, coordinated their care and referred them for additional services. one of my main jobs was to work together on a regular basis with employer leadership and physician leadership to bring them together, to manage those programs, and we would go through extensive data analysis to do that. 1993, theseine in are amounts of data and reports we would work through. what we were trying to do is look at which primary health
care decisions were performing the best and which specialist they could refer them to. we were aligned together to manage health care costs because we made an interest in keeping those jobs in local communities. we were trying to work towards two objectives. one to establish primary health care as the care core nader and the second was to identify and reward value. whileorward 24 years and we do not continue to have that product in our state, as an industry, we continue to work with those objectives today. it is what consumes us on a day in and day out basis. over the 24 years, we have seen progress. especially in the last five years or six years, and i think a big part of that has been we have had a new partner involved
with this as we pursue those objectives and that partner has been the public sector. today is give do you a look at what public and private collaboration has looked like in the state of arkansas. i want to go over initiatives we have pursued, talk about support needed to make it work and and by talking about -- and end talking about how this is influenced our work in driving the health care system toward value going forward. the health care challenges in arkansas are not too different than other rule states, especially southern rural states. it is hard to navigate, it is fragmented, there is little visibility when you think of quality and cost, and health care spending is growing at rates that is severely straining
public and private payers in our states, and the health status of arkansans ranks near or at the bottom in a number of key health measures, whether obesity, type two diabetes, prenatal care, we tend to ring toward the bottom. publicworking together, and private sector's have begun to transform the health care system in arkansas. this is the framework for how we have been going about that work, called the arkansas improvement initiative. there are two main components. the first, the medical home model we have had in place, with their company going back to 2010, and it ties directly into the conference of primary care initiative sponsored by the federal government and episodes of care components, put in place in 2012. all of this work was helped in
2013 when our state received a state innovation model grant from cms. i think it is important to note that arkansas payment improvement initiative is not just a public-private collaboration. it is a multi-payer initiative. as you can see, all the major private payers in our state involved in the program at some level and have been supportive, as well as major employer groups . employers who have a commitment toward value-based care and have been partners in this, as well. i want to talk a little about our medical home approach. that are the objectives well-designed patient medical center home and to achieve these objectives, a practice has to go through significant transformation. for example, they must commit to a team approach care, identify
user top 10% patients, and electronic health records, toange for 24/7 live access care going forward. all of these are important activities that they have to undertake to transform their practices. in return, these practices receive upfront payments, which helped fund transformation activities. stake0, our company put a in the ground, and we said if we are going to have a sustainable health care system going forward, have got to have a strong primary care infrastructure. it turned out to be a two-year public program to see if we could transform primary care physician practices into patient medical homes and these are the goals that we sought to achieve.
in only two years, we saw good results. we saw hospital we admission rates for patients go down. we sought emergency room visits and related costs go down. we saw the appropriate use of the emergency room actually go up, as well as drug prescribing rates. we also came away with significant and valuable lessons learned. goes is ther money need for payer alignment when you pursue these initiatives. even with our market share, and we tend to be the leader in arkansas, we realized quickly wereanyone private payer not represent in the volume to get the practices to make investments that were needed to transform them the way they needed to be practice or occur. we understood that quickly that
without much more volume, this would be a one-off effort and would have a short shelf life. you can also see the had other important lessons learned, as well. 2012, when cms opened up the opportunity for markets to apply for the conference and care program, we took our lessons learned, joined with arkansas and other health care and political leaders in our state, and we made applications and seize that opportunity at the time. to 2016,ee from 2012 we were one of seven markets that were selected, one of four 268 were statewide, and providers selected, and five payers dissipated, including participated,
including arkansas medicaid. we also could offer incentives would be that sufficient in upper primary care practices to make investments in infrastructure and changes in clinical decision-making and processes needed to transform the clinics. the volumes were critical to doing that. over the course of the time we participated in the cpc, you can see that we did participate throughout that time. we saw improvements in patient satisfaction and experience of care during that time. we saw reductions and hospital andssion rates of 15%, reductions in emergency, as well. we saw improvement in quality metrics and information kept
2016 in arkansas, they did have the net savings of results of the program, so we came away feeling it was a success. the experience we had in the cpc classic program led us to want to be part of the cpc plus program, which went into effect january 1 2017. we are a part of that. we are one of 14 regions that have been selected for cpc plus and we have grown our participation across the board. we have 182 practices now a part of that. 689 providers enough to seven payers supporting the initiative. we think this will allow us to have a greater impact going forward. i want to turn my attention and talk about the episodes of care program. we work closely with arkansas
medicaid to develop and implement the episodes of care program. the purpose was to include, improve quality and basically the tophe variation in procedures that were used to treat acute conditions. we felt it was an important movement in the right direction. episodes, thee clinical leaders identified and that individual is identified. there are quality standards established, and they were thresholds also established. and laid out acceptable unacceptable cost levels for each of those episodes. we also provide regular reporting back to the clinical lead, so they can look at the episodes across the spectrum of
care and look at how quality measures performed and utilization and costs associated with different episodes. to date, we had 22 episodes of care, each of the payers is free to decide which of the episodes they want to implement based upon their populations that they serve. for arkansas blue cross, we have implemented 14 episodes of care. how thean example of payment model works for the episodes of care program. you can see at the end of the performance, and average cost per episode is calculated for each of the clinical leads. this is typically at the end of a one year timeframe and there are levels acceptable and unacceptable. those who perform and meet the commendable level qualify for gainsharing. that is shared back with people
with clinical leads, and those who perform above the unacceptable level have to share the cost of the program, so a artion of their payment is result of that. since putting the program in place, we have seen one of the intended effects, which is we have seen variation reduce and quality improve. we feel this has been important in our state. these are high-level results from a couple of the episodes we have had in place. probably the longest for our plan is prenatal. and total knee and hip replacement. these cost reductions are not adjusting for inflation. if you were to do that, assuming year, i grow year over think the cost reductions would have a greater impact.
i did mention this earlier, but arkansas was one of the several states who had been selected for state innovation model grant. our state received a grant of $42 million to help fund the improvement initiative. the activity i have been talking about. and to help develop those episodes, the process, and we think that partnership with cms is certainly indicative of how public and private organizations should work together. you can see we have been having an impact in our state. i do not think i can overemphasize the importance of withand communications supporting these types of programs. when we implemented them, we worked closely with arkansas medicaid, especially on the episodes program, and we held 21
public workgroup meetings around our state and receive feedback from over 500 providers, patients, and other stakeholders who helped shape how these models would look and work. ongoing communication is critical, as well. each of the payers have teams involved in this on a regular basis and we have quarterly meetings. it is not just payers getting together to work on the program. we also include the arkansas hospital association, medical society, and practicing participating practices as well. we are sharing challenges, talking about program changes and best practices. to the also critical success. we decided early on that if we were to try to build a whole new
technology tools from scratch, they would add cost to this, so arkansas blue cross made -- ourle are information information network early in the program, so it was used by 99% of providers in arkansas, we had already had a presence in the offices, so we use that as the way to push information and data to the provider practices, especially authorities. we thought it was critical to keep the the providers from having to log into multiple systems and their and formats and get the more comfortable with the program. we provide a variety of dashboards to our practices as part of the initiative. can seepabilities they exactly how they are performing and where there are areas for improvement. we did earlyings
on is establish a dedicated resource center that providers could contact and there was at reach to them to help them understand the reporting and how to use that information to help drive practice improvement. by really going back to my comments at the outset. i feel like we have made in our state good progress with the objectives i talked about, and that is to prove -- improve care coordination and identify and reward value. we think a lot of that progress is a result of collaboration between the public and private sectors, by working with cms, having arkansas medicaid, we have been able to bring together a bigger impact than before. arkansas blue cross is convinced we need to continue to move this market toward value-based payment. we think that is critical to
having a sustainable health care system going forward. we also believe that all the initiatives that we have worked on, that i spent the last minutes talking about, from working with providers in our state on health initiatives, we feel all those different episodes have helped lay a foundation that we can continue to pursue this going forward, and we are working on those plans today. continue to to collaborate with public programs. i encourage public agencies, whether state or federal levels, to continue to view the private payers as partners in innovation. we think that is critical, as well. finally, to leave you with one of the remark, and that is we have seen firsthand in our state that by working better together, by combining our patient volumes, are different
perspectives, by combining our different areas of expertise, i combining our resources, we can pursue common strategies that commonused to address challenges. we believe that by working better together, we can have a greater impact than any one company or agency can have working alone. thank you. [applause] nancy: see why so much -- thank ,ou for your remarks collaboration and leadership with the public sector. we look forward to getting future updates on how you all are continuing to make progress. now it is my great pleasure to introduce dave anderson, president and ceo of the cross blue shield in western new york and northeastern new york.
he leads the region's largest health insurer, a community-based nonprofit plan, with one million members. dave is a forward thinking entrepreneur and executive. he is leading innovative efforts to improve the health of new yorkers, including a community outreach campaign to address the opioid epidemic and a unique home-based care program at behavioral and social support. as you will hear today, dave is committed to strengthening the primary care to support better population health and the were health costs. he has led the development of a new payment program to empower primary care providers with flexibility and resources to better manage their patient care.join me in welcoming dave to the podium. [applause] dave: good afternoon.
pleasure to be here. i have enjoyed the comments of our prior speakers and i think the sequencing is good. michael is more of a macro level and talking conceptually. i think curtis and his comments were specific arkansas and the segments, so i wanted to spend a little time today talking about a specific market based, value-based initiative we have brought called best practice. it is very regionalized and also focused on the shortage of primary care. i will give you some context around the population i will be talking about and the area. us, headquartered in
western new york. we operate -- our headquarters is in buffalo. western new york had some shrinkage in population over the past decades and its population is aging a little bit. in the effortsrs that we have made to transform the population. .his is where we are located i will talk specifically about western new york, although, we will begin to roll out similar ascesses in other locations, well. this is -- this is an eight county service area, it has static population trends, there are two pot major hospital systems in that area -- there are two major hospital systems in that area, controlling about 80% of inpatient care, and there is one distinct cancer specialty
hospital that is in that area, as well. fairly typical of legacy territories that are hospital-driven, they are dr. centric, not patient centered, and as we have evolved into a ric segment in health care, we have a need to flip that around. we looked at the area and said how can we begin to transform the provider systems in this specific area to make it more patient centered and bring value-based contracting to the region? there was a high degree or concentration of specialist, also not that unusual when you have hospital driven communities, and they were very much a late adopter to any form of reimbursement, other than the first service.
our program -- other than fee for service. our program really have two main objectives, one, to transform into a value base and realign incentives with the provider system as michael and curtis also, we had and pretty critical shortage of primary care physicians in western new york and you can see numbers there showing our deficit. they are shrinking all the time. not unusual in a number of communities around the country because they have not been supported either economically or within their practices in a way that makes primary care the preferred specialty, if you will, in the provider system. had an agingd, we population, and the results of
the model, the fee for service primary care physicians to be reimbursed and income levels to be such that they have a general incentive to move toward specialties. in a volume-based reimbursement model, the only way that primary care physicians can progress is to do more volume. ofch is exactly the opposite the incentives we wanted to provide. relationship is broken, much you know and have heard. the responsibility of our system in a fee for service world falls on the patient. pcp, our primary care physicians and specialists, do not collaborate as well as they should. often, electronic article records and other forms of patient records do not follow as concurrently and accurately as they should. that results in redundant
testing and procedures, and there is also in a fee for service environments, and inability to reward pcp based on performance. essentially, they are reimbursed in the same way. the result that we have today are higher costs, lower patient satisfaction scores, very difficult to measure quality scores in that environment, and so we have moved forward towards best practice. this is primary care as we felt it should be. it is not perfect, and we did not want to go from a to b all in one year. i do not think that would be possible but i think it is a good step in the right direction. first, the pcp coordinates care and would be compensated accordingly. i will get into that in a
second. to have a pcp assignments does not have to be an hmo type plan where it is chosen. we use a tool to attribute all of our members to a certain pcp, such that they have a full panel. health, on the total which i think should become apparent in a minute. i am not just treating illnesses. the source ofs referrals and we provide support. we have changed our provider support model such that the pcp has concrete data to share with specialist. -- conquer and data to share with specialist. is the outcome. we have seen higher patient satisfaction scores, and this program i will display here in the second started january 1,
but we are already beginning to see, primarily because of changes in referral patterns, we are beginning to see cost decline. functionally, and i will apologize for the granularity of some of this, but i think it is important you know functionally what it can mean. it is not the only model but it is a terminology we use a lot but to bring get right down to a relationship between the health plan, the member and provider, i think it important to understand. 1 launched ours on january and this eight county area. we started the april before and began educating the pcps in our region for nine months prior to implementation. we now have 1000 pcps participating and we have about 400,000 of our members attributed to those pcps.
one of the disadvantages, although conceptually aco's and aco-like arrangements, or even patient centered medical home arrangements, one of the downsides is they generally work on smaller populations. they are specifically about a named population. it might be segment based or whatever that particular provider group can provide care for. we wanted a bigger effort than that. to transform the membership in an eight county area across the board. one of the things we have been able to do is we are including arecaid and medicare and we including our employer population, whether it is self-funded bush -- self-funded or fully insured. what we have done is create a combination of the first service,-- fee for
and there are aspects where it works. as well as a monthly payment as well as a monthly payment that we refer to as a care management fee. also because michael indicated that we don't want to use -- we refer to it as a care management fee. but i have put it back into this explanation on purpose because it is not inpoint the way most of us remember it. here is generally how it works. what we did, we took the 400,000 members. , weook back over two years have that claims data. on a per month basis, we created a base rate and said the cost of
that population, historically, under that traditional model, is a certain amount per member per month. that is the base rate. capitation a form of per month which is historically age and gender related. but what we then did is we used the risk scoring tool that looks back at scoring and can actually begin to predict what costs will be based on an individual score. to we apply to those factors everyone of those members. , if a primary physician has 100 of our members. , based onery well
that risk storing -- scoring tool for that. we combine those two, and that is applied towards everyone of those members risk score. , a monthlyreates service fee. it is unique to every one of the patients that is attributed to that acp. as i said, there are a number of in the particularly preventive and wellness areas that we want to have happen and we continue to pay them on fee-for-service.
it creates the reimbursement model for the primary care physician. we believe everybody wins. i won't read everything on the chart. it's certainly available if you'd like to have it. it creates a baseline level of cash flow for primary care physicians to be able to build their practice and know that they have a certain income level that they attribute to their patients that they can count on. and together, that base level of -- itsation every month allows them to manage the patients the way they think is best. theod example is, under traditional model of fee-for-service, in order for them to receive any consultation , they have become into the office. it may not be necessary.
if they want to use telephonic or video conferencing to communicate with their patients around conditions that are not piece of, there is a that service fee that contemplates that. in order to adjust their practice accordingly. there is a cost and quality data that they traditionally will not have. that cost data is important in the referral pattern process. what we found is the primary care physician making a referral to a specialist at one place or another. what the cost,a quality, and even efficiency measures were. progress.work in already seeing it difference in the referral patterns against this
population. health, thoseand attributed to the primary care doctor, they begin to receive more money because of the way the monthly service fee is calculated. rewarded for the health status of that population. he wants his patients to go to the most effective and highest-quality environments they can to receive their care. historically, they did not know where that was. remember, they are dedicated to pcp. we find our members and choice to help them guide them through this system. the care is not limited to a standard office visit, as we mentioned.
it is up to the physician and the patient to determine how that primary care would be administered. , sos better coordinated when they leave their primary care on referral, the record is largely supportive and they are very current. that allows the member to have shared decision-making with the decision-making. our measures.with scoring withr risk risk adjustment revenue as well as the star ratings. there is a greater focus on population. one of the things we have seen and have underestimated a little bit is there is a change in referral patterns to more cost-effective specialty environments. so it is a major step from fee-for-service.
western new york was very traditional. i arrived there for .5 years ago. there was essentially no value-based contract in the market at all. territory that would have lagged a little bit. pcp mentioned, 90% of the and all of the attributed on the basis of that contract. we spent nine months educating in advance. i heard curtis say the same thing. it is essential in the environments that you change the support model. they need data in a different way and different timing in order to make the right decisions over what they have had in the past. we have added about 25 provider service representatives that do nothing but administer these
contracts with those pcps. outcome, as mentioned, 90% are working with us now. directly is told that we were awarded cpc plus contract is one of the pilots of 2017 specifically because the best practice program. runway,i had a little but the largest competitor has copied us already. that is the way we feel we made some of the right decisions. we're not quite done with the area. what do we expect to see? we have a higher degree of cost transparency and that is hoping the make appropriate referrals.
the value-based literacy among pcp's that they did not know two to three years ago. improvement greater than traditional performance in risk which helped us adjustment processes as well as the star rating. we are pretty aspirational and we think are an overall basis, around 2%. yet.n't know that it looks like that's about what we are tracking. i agree with the comment michael made. it may not seem like a lot. it seems like a lot of work.
system was 2%. but this was a multitier arrangement. arrangement.r the 2% savings resets. forward, thatat 2% becomes very significant overtime when the baseline is continuously reset. we will hopefully have a chance to come back and report towards the beginning of next year when we have a full year in. it was opal to give some granularity about how these concepts are applied at a market level. thanks for having me. i appreciate it. [applause] >> dave, thank you so much for that granular look at how these
contracts really work. impressive you already have 90% of your primary care physicians under contract. -- thewe will hear cofounder and president of the foundation for research on equal opportunity. the nonpartisan nonprofit think tank that conducts additional research on americans with incomes or wealth below the u.s. median. it is a very topical issue that you are addressing in your new foundation. you will know him. he's the leading conservative change agent. influences and informs the policy debate as well as and opinions editor at forbes. he has experience in medicine and financeinfluences. himre also honored to have
as a member of the advisory board and the senior advisor to the bipartisan policy center. he is a fierce advocate for the free market and a very effective advocate for the free market in patient centered reforms to lower the cost of health services and prescription drugs. we're just delighted to have him here today. [applause] >> the presentations from some very impressive people. as nancy mentioned, the new think tank focused on trying to find ways to achieve the goals and the principles of both progressives and conservatives. it's find solutions, let's find reform ideas that can move the needle for the people and that have the least economic
opportunities and in america today. all of you understand the prescription drug crisis is an isa where affordability particularly impactful for low income communities. alone in being a place where health care is expensive as we have heard today but an area where in particular, patients are exposed to those calls. may, thehed, in competition prescription. the point of the paper was to trythe point of the paper was to try to break through the logjam we had a prescription drug pricing. the dynamic we've had, there has been a lot of concern about high prescription drug prices. advocacy of price controls to try to regulate the problem. and on the conservative side, the views are that we don't like are that we don't like
price controls. forave such high prices fiction drugs. they have allowed prices or incentivized prices to go up the way they have. competition, we have had so youes and failures all know this story. pay act that americans lot more for prescription drugs than everybody else. it is basically doubled the rest of the wealthy countries at
$1327 in 2014 is where this data comes from. thatyou might not know is , wehe context of the value are actually the best country in on world at putting people cheap, low cost, unbranded generic drugs. it costs less than a bottle of water. about the high prices in america, but those high prices by theven in particular fraction that is not the 82%. it is the 18%. ,he 18% that are branded drugs particularly the subset of those that are likely a patented brand of drugs is where the high prices are. the vast majority of prescriptions are cheap unbranded and they are doing very well.
which did a lot to stimulate the growth in prescribing the generic drugs. compared to the european meeting of 21%, we are four times better in terms of making sure that where there is a cheap alternative available, people have access and they are using it in the clinical effectiveness , as good as the old competitors. job,e doing a great actually, at engineering and encouraging competition when a lot of drugs go off patent. the problem is that, for the brand of drugs, the prices going up. pharmaceutical spending is growing by x percent. what you don't see in those charts, slides, or tables is that if you just look at branded drugs, the inflation is even higher.
in 2012, we were spending $228 million on branded drugs and in 2016, spending was up 50%. drugs, and generic this is nominal data, not inflation data. spending $52 were billion. in 2016, $50 billion. there was actually a real decline, a nominal decline in the dollar value of spending on generic drugs even though prescription share generic drugs were going up. it's where each generic drug is available, cost are declining. but for the branded patented drugs, costs are skyrocketing. to hear the pharmaceutical industry point out, you can't just go by the price you see in the newspaper. the list price.
they are not actually what we receive in revenue. you have to account for all the discounts that come out of that list price before it actually gets to the consumer. and they do have a point. thenet price of pharmaceutical industry report is actually the true price by consumer. walking through it here, there is the list price. that is the price almost nobody pays. it is the sticker price. there are wholesalers and distributors. they actually by these drugs from the pharmaceutical manufacturer and sell them to pharmacies. so they take a discount for buying in bulk. is about, on average, 16%. sticker price was
about 16% and what imf called the invoice price. and then to get the net price, you subtract out a few other things. what investment managers do, they get rebates from the pharmaceutical industry to get more favorable position on certain drugs over other drugs. some are generic and some are branded. rebates which are contracted with insurers to a sickly incentivize them to stimulate more utilization of those branded drugs when the generic drugs will take over. coming out of the pharmaceutical industry to get drugs to consumers. it is a mixed bag in terms of what is happening. in some case they are using a costlier drug which drives up health insurance rates. the cost to the consumer goes up.
another is the co-pay system. they say we know the drug cross -- cost several hundred thousand dollars but for the low income patients that can't afford that, we will pay their co-pay and deductibles of a don't have any out-of-pocket costs. that they arey being very charitable to low income populations in big get a lot more utilization of their drug. a higher utilization means what? spending goes up and premiums go up? the end result is not the net price. the price for the consumer is actually higher than that price that they are paying for the higher premiums as a result of the expensive drugs. to try to illustrate that in the next chart, the other wealthy countries in the blue there. ok, what is it in the united states and what are the
different components? $899 is the net price. the $1600 is the sticker price. the real impact is this piece. it's about 1150. we should factor in the price that consumers pay is lower than the sticker price and that should be part of your thinking. even if you take that into account, we are talking about prices that are more than double throughout the wealthy economies in the world. it is a huge policy problem. why are we in this situation? the free market has allowed these high prices to emerge and if we just had more price control, we wouldn't have high prices. i'm not dismissing the fact that if you regulated prices, you could, in fear he, have lower prices and we have.
that's true. but it's also true we don't have a free market for drugs, let alone anything else and health care. whyhe primary driver of drug prices are so high in the united states. we focus on many of the ways in congressionalugh policy and aid policy have made it easier for drug companies to charge higher prices. that notimportant is only doing not pay for drugs weectly, for the most part, have a third-party payment of drugs. we have the third-party payment for insurance. there is a ninth party payment for drugs. no wonder the patients are divorced from the clinical value in the cost they are using.
they don't always have a real sense of how much the drug costs because they are indirectly exposed to those prices. there is also the fact that there are constitutionally sanctioned monopolies. that patent lasts for 20 years and on average, 10 of those active whenstill be the drug gets to the fda approval process. and we don't want to get rid of that. we want the reward innovation and we want people active to dep innovation drugs and capture some. the monopoly is not exactly a market. also the fact that federal health care programs like obamacare, medicaid, the v.a. -- they basically mandate drugs be covered. basically every drug approved by the fda has to be covered by medicare. that gives companies incentives regardlessigh prices
of what the price actually is. this is a problem in oncology. it's mostly old people that get cancer. medicare is health insurance for old people. in those areas that primarily , the pre-elderly individuals, there's a lot more notrage and they will reimburse for this or pitch to a generic drug or what have you. is where the leverage has been the lowest because of the situation where medicare is effectively required to pay for it. and obamacare, this is more of a cms regulation. administration, forion every therapeutic class, it had to be one branded drug. what does that mean?
it means those companies have leverage to charge higher prices. for most situations where the drug company has a monopoly but insurers are competing with one another. there is monopoly on the other side and the end result is that the drug company has more leverage to say hey, you are the bad guy. you're the one not paying for this life saving drug because they are insulated from these price signals. there is also the fact that the cost of r&d has gone up considerably over the past several decades. that, of course, means that venture, pharma companies, they try to recoup their costs through higher prices. well, we have to charge
high prices because of the cost of innovation. there is basically no correlation and the paper the study is based on. there is almost no correlation between the cost of developing a thatfic drug and the price the manufacturer actually charges. a monopoly situation where you know insurance is going to pay for the drug, you will charge a high price. you don't have a lot of leverage and you might have to charge a lower price. prices.iving a lot of another example is the ultra-rare disease area. maybe it only affects 4000 people in the u.s. and charging $300,000 or $500,000 per patient per year. drugost of developing that is quite low because r&d is basically directly correlated to the size of the clinical trial you have to do. , 40 patient clinical trial your costs of r&d are low.
if you have to do a trial on 20,000 patients because it's a diabetes drug, the costs are going to be in the billions of dollars. but diabetes drugs can't charge high prices because there are other diabetes drugs out there. say somebody say, we have to charge a high price for the charge of -- for the cost of innovation, roll your eyes. fda has actually, in certain ways, created artificial monopolies. the same example like the martin shkreli drug that was in the news was actually a really old drug that had been off patent for a while. but because of an artificial monopoly, that drug was no longer a monopoly and rally -- martin shkreli could raise the price. inferior theory, there should be more competition.
basically, as many of you know, but maybe not everyone, there is a difference in fda regulation between small molecules that are basically pills you can synthesize in a high school chemistry lab. aspirin, lipitor. antibodies and other big proteins which come out of the dna revolution of the last several decades. those larger proteins have to be manufactured much more carefully and in much more specialized ways. they are not so easy to replicate. the fda has been much tougher at creating higher regulatory barriers for generic competition for those biologic drugs. the original innovative drugs longer runways in terms of having their monopolies than they would have had otherwise. there is also the kind of intellectual and cultural vibes. we have to have innovative
drugs. that is not true. in the clinical profile, guess what that means? if you have two or three or four drugs competing, prices go down. intellectually, we say it is not as innovative. it is important to encourage development of me, to drugs. it means lower prices for every american. let's focus on these areas in particular. this is an example of where congress has created an artificial monopoly. basically, in order to stimulate less thanseases with
200,000 patients in the united states. the idea being that because those markets are relatively they have an incentive to develop drugs in that area. even the molecule your testing has no patent ability. if you develop it for a disease that is relatively rare, we will give you seven years of monopoly exclusivity as if you had a patent. effectivelyd because of that law which has a lot of good intent and positive result behind it is congress really overshot. the end result is what companies fordo now to develop a drug those that have a particular mutation for lug cancer. .- for lung cancer then we can study a different mutation and get another seven years of exclusivity. for a drug that has no patent
because it has been around for several decades. manufactures have taken advantage of that completely legal opportunity to have long monopolies for drugs. it has gotten to the point where orphan drugs are taking over. diseases are rare a quarter of all pharmaceutical spending. be one third.ll drugs that try to treat very rare diseases and i'm not saying those aren't important. but diseases like diabetes and high blood pressure matter, too.
basically, you have created an incentive for companies to move away from studying those populations because there is so much more of an economic incentive to study rare disease. basically, youso again, let's fs where public policy has created artificial monopolies and what we can do to change it. we have talked about monopolies for orphan drugs. and there is something the sec started called the unimproved drugs initiative. they were on the market before the fda existed. they have been on the market legally for many years. the fda said, we don't like that. we're going to try to get those unapproved drugs off the market. manufacturersage to do clinical trials of the drugs. we will give them time.
they jack up the price by 60,000%. the fda had certain good intentions. we want to make sure these drugs that have been around for hundreds of years have a certain kind of regulatory safety that we can certify. but they didn't think ahead and say we are creatingbut they di'd say we are creating this incentive for exploitation of pricing. -- exploitative pricing. another thing that fda commissioner scott gottlieb has , it's the issue of generic drugs when there is a delivery. a specialized delivery technology associated with it. epinephrine, the drug in epipen has been around for 100 years. but the injector thatepinephrins to administer epinephrine has a patent around it.
what stymied competition in this area is that if you want to be a generic manufacturer of another the fdahave to prove to that the exact physical kinetics of the way your epinephrine enters the body are the same as can't do that without running into mylan's intellectual property around their proprietary injector. toolboxhas not had the to say, it doesn't matter if it's exactly the same as epipen, we just have to make sure we have the same clinical effect. that it patient who needs that can get treated. there are things the fda can do to try to express that. but commissioner gottlieb has long argued that congress helped create an amendment to the food, drug, and cosmetic act, a new pathway for those kinds of medicines so that if there was delivery technology around it,
the fda could show that they were clinically equivalent to injectors, even if they weren't physically equivalent. the famous example, it was one of the reasons why the fda was created in the first place. 50's for leprosy, it was causing birth defects. we have to have an agency that keeping an eye on this. the drug has been around for a very long time. a company based in jersey discovered that, actually, there was a lot of utility in a very serious disease. so they did clinical trials to get it approved for that. a company based in jersey and they had a little bit of
exquisite but he because they did those trials. -- a little bit of exclusivity because of those trials. we have to have the risk management strategy to make sure we have to have the risk management strategy to make sure this drug doesn't get to pregnant women. so they developed the evaluation mitigation strategy. it is actually creating more and more of these protocols that people could patent. standardizea way to protocol so that they don't have intellectual property around them which would allow more generic competition. bio similars to have accelerated in the marketplace as a result of a kind of a provision within
the aca called the biologics competition innovation act of 2009. b pcpci. they try to get it to market in a more standardized pathway but the problem is that it is not exactly the same. have aow here, if you like an aspirin, you can get five years of like an aspirin, you can get five years of exclusivity. and then there is generic competition. for reasons that have nothing to do with economics or policy, and have everything to do with politics or lobbying, there is no reason it should be 12 years for biologic and five years for a small molecule. it should be the same. it should be the opportunity to develop competitive drugs in that area. have that legal constitutional monopoly for innovative medication. there should be harmonization. have that legal constitutional monopoly forone of the reasons t chart i showed at the beginning about the 82% uptake of generic
drugs is because at the pharmacy -- if aalgreens or cbs doctor prescribes lipitor, it is off patent. a pharmacist can substitute a generic without asking your permission or the doctor's permission. it is one of the key elements that has led to higher up tech -- uptick. bpci is not a strong at bpci it point. there are various rehab to ask permission or go through a bunch of other hoops before you can get that bio similar prescription. in that way, competition has been inhibited at the state and local level. we have alluded to the number of ideas where we can increase competition in prescription drugs.
the thing that i would encourage you to think about, we have this me,s towards me, to drugs -- too, drugs. if you have a drug for a need that is truly innovative, the fda will give you more accelerated review times and sort of an easier process to get through the fda. we could easily have something similar where there is enough competition. we could have a fast track for an area that is a monopoly. we really need more because of the public health problem that comes from monopolies and lack of affordability. thing we can think about is to emulate the success of medicare part d, to medicare part a and part b. there is a part that pays for prescription drugs.
and the retail pharmacy drugs, we can do a lot of different things to integrate medicare coverage of prescription drugs. the cost savings we have seen to be leveraged throughout those medicare sections or medicare parts. another area we should think about is creating safe harbor for insurers to jointly negotiate for the prices of that prescription drug. the set of having a playing field where the drug company has the monopoly and insurers are fragmented, macon -- maybe they can join and not fear that if one doesn't cover it, they might have a stronger ability to negotiate and get those prices down. it is a big problem that we have been dealing with the last few years.
at the end of the day, the best solution for making sure we have a more competitive system of drug is to make sure that every american or as many americans as possible are choosing t the heah insurance plan that covers them. people that are choosing their own insurance, that will do the most to stimulate and incentivize lower-cost prescription drugs in the utilization of the low-cost options we have available today. you have a copy of this paper in the folders. watching us online or on c-span, you can download the paper from our website. i look forward to your questions. thank you for your time. [applause] >> that was terrific. you covered a lot of ground there. a lot of us learned some new things. at this time, i would like to open up the floor to questions.
if you have a question, please complete your card and nicotine will be -- and the team will be going around gathering them. players onre major , withate exchanges to ask open enrollment coming up next week, we are wondering what you and what you are expecting for 2018. there has been a tremendous amount of uncertainty. wondering, curtis, would you like to go first and share your thoughts on what you are expecting? >> this has been an issue that we are watching very closely for quite some time. as we stay close to the market and we do that with feedback we
get through the call center. we interact with those on a regular basis. and with our agents that are very critical to working with these individuals, we have been working with them to try to get an idea of what we might see period. open enrollment all of the things that have occurred over the last several weeks, we are expecting a slight decline as we move toward that. it should not be a surprise to anyone as we move in that direction. the one thing we have seen that might've surprised us a little bit is all of this confusion has bled over into some of our other customer segments. it has principally been our senior market. , arews reports come out they not going to be funded, the
senior population will be going to their own enrollment as well. we are spending a lot of time in our company and the resources not only for the individual market but those that go through to annual enrollment period communicate exactly what this means to them. >> we have a state-based exchange which was developed. >> wefor many of the members inw york, it has grown on a fairly stable basis. i would act of a comment about the instability that has occurred. alreadyvity is substantial. andle calling and going asking what's going on. there isn't a clear delineation of what the reductions apply to
and what the average consumer doesn't understand is that the level of funding in those programs -- they feel their own coverage is in jeopardy. they are concerned not only about losing their coverage, but the members feel like they've done their part and they've come out of the uninsured. they made the effort to enroll .n health insurance coverage and now they don't know what the status is. they don't know what going to coverage.that if they will lose it, if it will be changed. to cause a number of members to drop back out of it. nancy: it is very interesting and we will get back on point with the value-based payments.
i will start with a question from u.s. news and world report that was committed ahead of time. what does the future hold for value-based payment that the affordable care act is repealed or overhauled in the future? is their agreement that the shift in value-based payment is needed for cost control? panelists? mike, do you want to start? mike: i think the challenge is much bigger than what is going on in the affordable care act. the discussions haven't really centered on this aspect of the affordable care act. that there would be some payment moving forward. it is challenging for people in a variety of ways.
many of the models that are going on or not directly related to the affordable care act. , you see thestuff private sector continue to lead in developing models. the ones you may not have realized listening to curtis and dave talk, i think that level of flexibility, it is such that they will be a demand. >> the reason we have a , car, andd iphone everything else, is the consumers directly benefit if companies and manufacturers deliver higher value,
lower-cost, more reliable products. patients should be the ones, not experts, to determine what is valuable. >> the alternative payment models, the value specifics, i think it is here to say. we hear from our customers and the expectation is we would continue to move down that path. to provide affordable coverage
for health care services. and we think moving toward a more value-based system. >> one of the challenges going forward with the model, even though -- i would not say they are relatively new, but in a lot of markets like ours, they are relatively new. it's that the definition of to the health care consumer is changing. to the health care consumer is changing. and we would be challenged to make sure the model changes with that. >> here is a question from cms. getting away with pants laws that allow for ever greening seem to be low hanging fruit to help drug prices. >> i am a skeptic on the pay for delay initiatives.
theave a branded drug where patent is about to expire. nobody knows exactly when the drug will go off half because there are three or four patents. they try to validate some of those patents, and because things are going through the courts, will the patent expiry? will the drug go off patent in 2022 or 2027? we don't know until the judge decides. the branded innovator, the lead generic competitor, they settle. what, in exchange for us to be able to go first and have a certain amount of exclusivity, they let us launch in 2022 or 2025. criticized thee pay for delay.
brandedhappening are companies are gaming the system to extend the life of their patent longer than they should be. accurate. that's i think what is happening is both sides are basically shedding risk, kind of averaging out. it will effectively start having competition in 2025. 2022, it is ating settlement. the reason why these happen is it will win in court. it will be in the market 2022, go to hell, pfizer. that is why these settlements happen. i don't think it's a gaming of the system and the ftc tried to litigate. .hey did not get anywhere
there are a lot of things we can do to encourage competition. i think that one is more of a red herring. nancy: here is a question. oftentimes, clinical quality measures change because of the science underlying them change. affect thehanges quality of care, we use the metrics for pay-for-performance. there are talking about the underlying measures of quality and how when the science gets better. >> two answers. the first one, the process answer is that there is a system that works for companies. measures get vetted through to measureike nqf what processes they want and how they want to work. they see in norma's numbers of cms and others to try to figure out how those measures will be incorporated into a range of contracts.
i mentioned earlier that i was about the administrative costs of all of this. my general sense is that we have ideal and,hat is not in many ways, administratively burdensome. it is important we maintain some version of that process. we are never going to be in a situation where the quality metrics after all dimensions of quality and are updated as timely as you would like. the data becomes overwhelming and we need to begin to think through how do we take the basic framework we have and simplify it to a meaningful and administratively framework we hd ,implify efficient
other things that we will go to. but i would discourage you from trying to say that we would come up with the exact best scientific evidence and get that in front of our contracts as soon as we absolutely possibly can. there are so many ways we can complain about the quality measurement system now. i think it might be updating all the measures, lower on the list of things, too. have so many questions unless somebody wanted to jump in. david: i wanted to emphasize the mission quality. there has been a debate on how quality should be measured and is. it for 30 years or 40 years. is. what you need to do in order to take positive steps forward, you have to determine your methodology and definition of quality.
it is probably not going to be identical to the next person. i agree with michael. that's ok. it needs to be directional. .aiting for it to be perfect that is why it hasn't gotten done any quicker than it has. at the same time, it has to have science behind it. and of course, you will want to wait for some uniform definition and process to determine quality it is going to be applied in every circumstance. nancy: how are the employers engaging in this discussion?
curtis: i talk a little bitterly or about the payment improvement initiative. the strong support from our employer. especially the large customers. that has not happened by accident. we spent a lot of time talking about the individual market. it is very important as we move in this direction. we take them into account as we do that. of carethe episode program, we made it central to the network strategy and became part of the network reimbursement. we created opportunities to visit with all of our large employers. we went out and explained these programs to them. how they work and how it benefits them. we got the feedback on the front and so we could build that into the very beginning. issue isy, the whole
the payment that comes up in those conversations. it is an opportunity for them to share with me as well. we will continue down that issu. we will continue to seek the input of our group customers. will speak briefly from the perspective of harvard and what i know broadly. there is a relatively small subset of leading large employers. curtis probably spent a lot of time with walmart, boeing, caterpillar. they're really doing a range of innovative things sometimes in the space of payment reform. her most employers, it is very hard for you to engage directly with the delivery system because your carrier, insurer, is between you and your delivery system. most of the employers are focusing on aspects of benefit design. that is a much easier lever. and the transformation alliance
where large employers are trying to come together, ways that push the system forward. difficult fore employers to engage in payment reform movement than it is to adopt novel benefits. nancy: did you want to weigh in? am often asked to buy large employers, we are the ones that have the most to gain from lower health-care costs, so why don't experts talk to us and learn from what we do to try to lower costs? i often respond to them when asked, you guys have been the biggest drivers of health care insulation for the last 70 years. it's because, again -- it's coverage that makes workers insensitive to the price and coverage they are consuming that has led to the health care inflation.
etiquette was built on that system as well. and yes, employers do have an incentive to keep health care costs down. but they also have an incentive not to make their workers mad by tweaking too much. michael dealt with this at harvard, where they try to tweak benefits to make them more cost-effective, and the faculty went nuts -- the complaint. it is not the typical company, but a lot of -- a lot of these large employers are afraid to do what a lot of us would say are appropriate ways to refine health insurance coverage. one thing i'm excited about were intrigued about in the last couple of weeks is president trump's executive order -- the subject of noise and commentary -- there is a piece about extending the flexibility of employers to use health reimbursement accounts, which are kind of like hsa's -- not exactly the same -- but i think
that could be interesting tool for putting patients more in charge of the health care dollars and behalf. we could see, depending on what statutory authority they find they have, a lot of innovation that comes out of those moves. >> i want to point out one thing that does relate to health care. i'm a relatively free-market economists, relatively pro-competition in the grand scheme of things, but health care is not asparagus. one of the key challenges we face is this pooling component of health care that does not occur for many of the other consumer products that we talk about. we are pooling sick of people with healthy people, older people with younger people, and part of that involves managing
people and different risk profiles, and part of it is systematic pooling of people that do not necessarily want to be pooled with each other. one of the important roles of the employer-based system provides is a way of pooling is not inherently risk based. challenging, is so because if left fully on their own where consumers have total economy to prove what is best for them, they would do that, so, chalk one up for economists. on the other hand, that might lead people in the situation where they might not have the same options they had in the past. i don't have any great answers to deal with that amount of pooling or whether the aca did too much or too little. i do think when you do an analysis of what is going on and think about these types of things in health care, i do not think you can get close to the right answer unless you are really cognizant with how the
pool is held together or allowed to separate. >> great. we have a question from the american medical association. one way to bend the cost curve is to shift from treatment to prevention -- can a significant impact on preventative medicine be achieved through a free-market solution? what is the best approach? avik: with all due respect to the ama, prevention is important, but we all have to die of something. if we do not die of cancer, we will die of alzheimer's. we are always going to die, i think. if we are always going to die, there is always going to be some expensive care at the end of our lives. while it is important for public health, and if you diet, exercise, and don't eat a lot of
barbecue like i do in austin, you will probably live longer and not have complications, and those are things we should try to achieve from a public health standpoint, that we should not be convinced that would reduce cost. a lot of times prevention could increase cost. if every woman in america got a mammogram, the mammogram would cost more money. we would have some agreement to benefit in terms of really detection of breast cancer -- early detection of breast cancer, but the reason why many say it is only women of a certain age or risk profile that should have mammograms, is because we want to make sure the right people are getting them so we are not massively inflating the cost of running all of those tests. prevention is good. has an economic risk we have to take into account. >> michael also. michael: i watch i agree again with avik.
i have two fitness trackers. i may pay -- fan of wellness and prevention. if you could snap your finger and make everyone healthy until they were 105 and then they guide by walk -- falling down the stairs -- died by the time ,- by falling down the stairs and that would be a better world than we live in now. cost-effective is not the same as cost savings. oddly enough, when we promote prevention, we are often promoting primary prevention, which is giving healthy people things, and the most important things would be secondary prevention, where we are trying to find people that have chronic disease -- conditions, diabetes, and prevent things from happening. where there is a prevention exemption for hsa's that is only on the primary. the will to be a better place if we expand the definition to allow secondary prevention to be treated for prevention for the
purposes of hsa's and other types of things like that. >> dave, this is a question from for you from todd at one of the federal agencies. please address challenges to convince pcp's who are caring for patient's multiple payers to transport to your model. how do you coordinate, get the practice,o your best when while you are a large portion of their business, you are not the only payer they are dealing with. david: we initially thought we would force this issue on our pcp's because we did not know if they would adopt on their own. as you saw from the report that i gave, we were well over 90%, so we never had to get to that point. they are willingly adopting, and they are doing so for a variety of reasons, but one, there can
better data, which allows them to be more accurate and efficient at the point of service that they have historically been frustrated with. also, if they show improvement in the quality scores and health scores of the patients that are treated to them, they have the opportunity to make more money. they are actually paid -- i don't think i mentioned it, but for those performing at the top end of those quality scores, reimbursements can go up by 10% in 2017, and we will go to 20% next year. it is a significant difference. so, there is -- for those that have looked at evaluating the pro -- and evaluated the program, they have been very enthusiastic about adopting it. as i said, one of our primary competitors is a very close follower. i think it is going to become
the standard for reimbursement in the region where it operates. nancy: curtis, do you want to weigh in? you say some of the same challenges in arkansas, the one of the ways you dealt with it was combining with medicaid. curtis: we did. that was 2010, as i talked about earlier, when we started our pilot. the results we express world of different then that what dave has expense today. had we done this in the same timeframe of what dave and his plan had done, we might have seen something different. we think local markets -- local care and the dynamics -- all of those things are important. you have to be open-minded as a plan. you know to solve problems, offer of the best solutions, you have to really adapt to your particular market. that is what really drove us to the approach that we found. commond there was
perspectives, common viewpoints that we had and we shared with other leaders in our state in health care delivery, and also in the government programs as well. so, we thought there was a great opportunity to collaborate in order to drive what we felt like was an opportunity for greater change. there are a couple questions here. orbe they are soon to be can't comment on it. can you i dress it as a former vice chair? ac now,: i am not on medp so i cannot speak for them, and in all honesty, one -- when i was on medpac, i cannot speak for them. very broadly, i'm sure they will look closely at a whole range of things and how it is working. they have been critical at aspects of a program for a bunch of reasons, and we will see what they come up with in terms of recommendations, but that you thing i would say is not all the
physicians are going to be above average. i say that with some confidence. so, the create some penalty said, and a political dynamic that i think is going to be hard to really move forward over a long time with that type model. . think they will look at it i encourage you to read through the materials carefully. they are an unbiased great source of analysis. nancy: right. interesting question. it relates to a conversation we had at dinner from somebody at a national organization. -- two-partport question. what are your thoughts on amazon and turning the farm of business, and you expect more i.e. cvsas a result, buying etna?
avik, do you want to start, and if others want to comment? avik: disenrolling about amazon's strength, keep up best based on what we know about amazon strength --mason what we ,now about amazon's strength evidence is there will be expertise on the distribution said. disruptlook for them to them first. maybe they can drive the 60% discount further down through -- downiscount further through the advantages they have. they bought whole foods. they had these brick-and-mortar facilities they can use to build their own network of pharmacies. we know they are a big retail organization. pharmacies are effectively retail organizations. that is another area where their strengths are. i think they are more likely to attack it from the pharmacy said
rather than thepbm m site specifically at first, not to dismiss they will go there eventually. -etnank the cbs--- cvs situation is more about what is going on in the pbm markets in terms of united having optimum. that is more about that internal market. that is my sense. others might have a different view. nancy: anyone else want to comment? david: the cvs--.net situation -etna situation has not been around that long.
you bring them in-house and operate as an integrated system, etna is essentially coming to the same spot from a different direction. m believe controlling your pb services through at-risk populations and stability to the and that isace, what they are looking for. as far as amazon arriving, i thinkagree with avik, i they start of the distribution side, the realistically amazon -- but realistically, amazon has completely trained the consumer model in every business is completely transformed the consumer model in every business that they have touched, -- completely transformed the consumer model in every business that they have touched.
they are very aware the consumer model in health care has not been very good. there has been a lot of dissatisfaction with the actual ,sers of healthcare services and i think, you know, it is my estimate they have an intention to change that model. nancy: great. well, with that, i think we should record up, and first of all -- wrap it up, and first of all, thank you all so much for joining us today for this great discussion. i would like to think senator ron wyden for sponsoring our event, and also my terrific team, catherine, carolyn, kate alice, kirsten -- you guessed it a great job in helping out on this event. let's give a final round of applause for our great analysts. -- panelists. [applause] their slides are on our website already, and in about a week there will be a video on our website.
>> after wrapping up their week, the u.s. house is back for legislative work next week. live coverage here on c-span. yesterday the house approves the 20 18th republican budget resolution, which calls for congressional committees to work on overhauling the u.s. tax code. chairman of the house ways in means committee, kevin brady says the gop tax bill will be theoduced next week, and committee will mark the legislation on monday, november 6. andcan read the outline watch debate on the bill on c-span.org. in a couple of minutes, today's white house briefing with press secretary sarah huckabee sanders pit we expect questions about the gop tax plan and other topics. that is scheduled for 2:30 p.m. eastern