Value Over Volume 2.0 Practical Tools for Policymakers to Support Health Care Reform

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1 Value Over Volume 2.0 Practical Tools for Policymakers to Support Health Care Reform Council of State Governments/Eastern Regional Conference Health Policy Committee May 2014

2 Value Over Volume 2.0 Practical Tools for Policymakers to Support Health Care Reform Health care costs consume nearly a quarter of state budgets, on average, and that share is growing. While cost increases have moderated recently with the economic downturn, there is some evidence that the growth in costs may be accelerating again, especially for state and local governments. There is a collective understanding that our higher spending is not resulting in better quality care or improved health outcomes. Good evidence shows that the way we pay for health care continues to fuel the problem, by rewarding higher volume and intensity of care at the expense of prevention and maintenance. There is growing recognition that lasting reform will require a shift from a volume- based system to one based on value. While things are slowly changing, most US providers still employ a fee- for- service system, in which they are paid for each individual service they provide. Under this system, one episode of care may include hundreds of services, each with a separate payment. The fee- for- service system rewards volume and intensity of services over efficiency and quality, driving up costs without improving value. Because providers are paid higher rates for more intense interventions, the system discourages more conservative but potentially better options for patients. Fee- for- service also encourages duplication and overuse of services and discourages prevention or investment in quality innovations. Fee- for- service payments generally do not distinguish between high- and low- quality care. There is a collective understanding that higher spending on health care is not resulting in better quality or improved health outcomes. Providers who accept high- risk or noncompliant patients are at a disadvantage in fee- for- service arrangements, as they are paid the same for each service needed, regardless of the difficulty in providing that care Several payment reforms are gaining ground among payers, often with help from states. States are on the leading edge of health care reforms linking payment with quality, serving as incubators for innovation, testing models, and learning lessons, often in partnership with the federal government and other payers. Building on the prevalent fee- for- service model, some payers are recognizing better quality with pay- for- performance rewards on top of fees, some are paying higher fees and steering patients to better performing providers, and many are risk- adjusting fees to ensure that providers caring for higher need patients are compensated fairly. To give providers incentives to control costs, other payers have shifted away from fee- for- service to other payment models that shift some financial risk onto providers. New models include shared savings (providers share in any savings and possibly losses in the total cost of care for their patients), episode- based care (a single payment to cover all the treatments needed for a specific episode of care, i.e. 2 VALUE OVER VOLUME 2.0: PRACTICAL TOOLS FOR POLICYMAKERS TO SUPPORT HEALTH CARE REFORM

3 coronary bypass surgery) and global capitation models (a single payment for all the care needed by a patient over the year). These models include quality benchmarks providers must meet to ensure that patients are not denied needed care. Related innovations are emerging to support payment reform. Accountable Care Organizations (ACOs) are groups of doctors, hospitals and other providers who join forces to improve care quality and share in savings or losses in the total cost of care for their patients. ACOs offer the promise of coordinating care and aligning incentives for both improved quality and lowering costs. Paid largely on a shared savings model, ACOs integrate care across the continuum, reducing fragmentation and duplication of services. ACOs share in any savings they generate, given that they reach certain quality standards. Patient- centered medical homes (PCMHs) hold great potential to both improve health outcomes and control costs. PCMHs work by coordinating care, expanding access, expanding capacity through teams of providers each working at the top of their license and giving patients the tools they need to keep themselves well. In PCMHs, care revolves around the patient who is the final decision- maker and ultimately responsible for outcomes. i Since our first Value Over Volume report four years ago, states have led efforts to reform health care payment systems. As substantial purchasers of health care, state budgets continue under the strain of health care spending. The 2010 federal Patient Protection and Affordable Care Act (ACA) provided states with a great deal of federal resources, assistance and flexibility to undertake reform, and many are implementing changes that reward quality and value. These include Medicaid innovations implemented in Pennsylvania, Illinois and Texas that base payment on specific performance standards, Massachusetts s plan to transition to Alternative Payment Methodologies that include shared savings, episode- based care and global capitation models; Connecticut s decision to implement a care- management- focused Medicaid program; and Oregon s creation of Coordinated Care Organizations that are rewarded for quality improvement. This report builds on the first Value Over Volume report by updating the health care landscape, sharing state success stories, and cataloging policy options and tools states and others have found useful in building a value- based system. Introduction Health care spending consumes 17% of the US economy ii and 24% of state budgets on average. iii In good news, US spending on personal health services grew only 3.7% in 2012 iv, the lowest rate in four years, and Medicare spending last year grew by only 2%, the lowest rate of growth since v However, there is debate about whether that trend will continue as the economy improves. vi Early evidence shows that the rate of total national health care spending growth has begun to climb again. vii State and local government spending on health care accelerated by 8% in 2012, twice the overall national rate of health spending growth. viii VALUE OVER VOLUME 2.0: PRACTICAL TOOLS FOR POLICYMAKERS TO SUPPORT HEALTH CARE REFORM 3

4 Per- capita health care spending is high in the Council of State Government s Eastern Region (CSG/ERC), which includes eleven of the nation s highest- spending fourteen states. However, the rate of annual cost increases varies considerably in the region ranging from the second highest to the second lowest annual growth rate in the country. ix CSG/ERC state rankings CT DE ME MD MA NH NJ NY PA RI VT health care spending per person, 2009 annual % increase spending, Source: Rankings among US states, calculated from CMS National Health Accounts The percentage of a state s economy consumed by health care also varies widely in the region, ranging from Delaware which spends 11.9% of GDP on health care, to highest- in- the- nation Maine, with 21.7% of GDP devoted to health care spending. x health care spending as % GDP, CT DE ME MD MA NH NJ NY PA RI VT xi Source: T Saving and J Goodman, Why Do Some States Spend More on Health Care?, Health Affairs Blog, March 25, VALUE OVER VOLUME 2.0: PRACTICAL TOOLS FOR POLICYMAKERS TO SUPPORT HEALTH CARE REFORM

5 There is overwhelming evidence that we are not getting what we are paying for. There is little correlation between prices for health services and quality. xii Many studies have documented wide variation in health care prices for similar services. A systemic review across all peer- reviewed studies published between 1990 and 2012 found little or no correlation between health care quality and cost. xiii A recent study found no association between high and low priced hospitals on a variety of quality measures including 30- day mortality rates among Medicare patients with heart attacks, deaths among surgery patients with serious treatable complications, and collapsed lung due to medical treatment. xiv Evidence shows that high prices are limiting access to care. One in three American adults cannot see a doctor when sick or does not get recommended care because of cost; only 8% of Canadian adults report those same barriers. One in five American adults do not fill prescriptions or skip doses due to costs, compared to 8% of Canadians. America spends three times as much per person on health insurance administration than Canada and our primary care practices report spending over twice as much time getting needed A systemic review across studies found little or no correlation between health care quality and cost. patient care authorized than Canadian providers. xv Despite substantial research and expense, progress in improving the quality of care is slow. xvi Further, it is estimated that one third or more of US health spending is wasted. Waste includes spending on services that lack evidence of effectiveness, failures to coordinate care, overtreatment, administrative complexity, excessive pricing, and fraud and abuse. Waste costs Medicare and Medicaid an estimated $300 billion, and the entire US health system $910 billion annually. xvii The CSG/ERC states are not immune to the disconnect between health care spending and quality. Ninety two percent of hospitals in New Jersey will be fined this year for readmitting too many patients within 30 days of discharge. In 2012, over 11,000 children in New York were admitted to a hospital for asthma, a condition that can usually be managed well with adequate primary care avoiding hospitalization xviii. The quality of care in most CSG/ERC states is rated only average by the US Agency for Health Care Research and Quality. xix VALUE OVER VOLUME 2.0: PRACTICAL TOOLS FOR POLICYMAKERS TO SUPPORT HEALTH CARE REFORM 5

6 State % hospitals penalized for Medicare readmissions, FY 2014 xx Pediatric asthma hospital admissions, per 100,000 population, 2012 xxi Quality rating xxii Connecticut 75% average Delaware 33% NA average Maine 60% 73.9 strong Maryland NA average Massachusetts 85% strong New Hampshire 46% 63.1 strong New Jersey 92% average New York 85% average Pennsylvania 71% average Rhode Island 64% average Vermont 33% 50.0 average/strong Overtreatment Overtreatment alone is estimated to cost the US health system $192 billion annually. xxiii Overtreatment is care provided that adds no health benefit and, in many cases, can cause harm. According to studies, angioplasty is inappropriate in about one in ten patients who receive it and questionable in another one in three, costing about $600 billion annually. Overuse of antibiotics for respiratory infections is estimated to cost $1.1 billion annually and fuels the serious problem of multi- drug resistant bacterial infections. Duplicate CT scans can unnecessarily expose a patient to radiation equivalent to 350 X- rays. xxiv It is estimated that the 70 million CT scans performed in 2007 will cause 29,000 cancers and 14,500 deaths. Some 32% of Americans believe they have received unnecessary medical care. Overall, 42% of primary care physicians believe that their patients receive too much care. xxv Overtreatment is estimated to cost the US health system $192 billion annually. A random study of medical treatments found no evidence of effectiveness for half the care patients receive. Only 35% of treatments were found to be beneficial or likely to be beneficial. xxvi Unfortunately, the use of questionable care is not improving. xxvii For example, between 1999 and 2009, the use of antibiotics for upper respiratory infections rose from 37.8% to 40.2%, imaging for back pain rose from 19.1% to 22.8%, and PSA screening in men over age seventy four rose from 3.5% to 5.7%. xxviii A 2010 study found that back pain patients who had an MRI within the first five months didn t recover any faster than those who didn t have the test, but their medical costs were five times higher. xxix 6 VALUE OVER VOLUME 2.0: PRACTICAL TOOLS FOR POLICYMAKERS TO SUPPORT HEALTH CARE REFORM

7 Payment reform progress Since our first report, many states and other payers have made changes in payment systems intended to reward high quality, appropriate care and reduce incentives for low- quality, unnecessary care. The federal government is encouraging states to implement and test value- based payment reform models with dozens of programs and resources implemented across thousands of facilities in CSG/ERC states. xxx Medicare alone has 23 programs to test payment reform models. The federal Affordable Care Act created a Center for Medicare and Medicaid Innovation with $10 billion in funding over ten years to test encouraging models. xxxi Despite this effort, results of payment reforms are mixed. After five years, Medicare s flagship value- based purchasing program Pioneer Accountable Care Organizations found that all 32 participant organizations significantly improved care quality across fifteen broad measures but only thirteen generated savings. Nine organizations decided to leave the program. xxxii Other studies find that value- based insurance design, which reduces consumer costs for high- value treatments such as preventive medications, selecting higher quality providers, or participation in disease or care management, shows strong signs of progress in improving health and but that evidence of cost control is lacking. xxxiii State roles in reform The text of the Affordable Care Act refers to states over 1,000 times. xxxiv While it includes 906 pages of detail on reform, much of the work of implementing the ACA falls to states. Thankfully a great deal of federal resources, assistance and flexibility were also given to states to undertake reform. State governments are usually the largest payer of health care coverage in their state. Even before passage of the ACA, states have historically had many levers to encourage health reform. State governments are usually the largest payer of health care coverage in their state, through Medicaid and state employee benefit plans. State and local governments spend billions of dollars on uncompensated care for uninsured residents. xxxv Providers and insurers are licensed and regulated by state governments. States and public universities are large producers and consumers of health care quality and financial data, often providing the public with comparative information not available elsewhere. All CSG/ERC states are using their unique role to create All- Payer Claims Databases (APCDs) to help guide reforms, evaluate policies, and maximize scarce resources. xxxvi APCDs are large- scale, generally state- based databases that collect paid claim information across payers from a large variety of provider sources. States are responsible for enforcing new insurance rules and consumer protections in the ACA. States take responsibility for regulating, VALUE OVER VOLUME 2.0: PRACTICAL TOOLS FOR POLICYMAKERS TO SUPPORT HEALTH CARE REFORM 7

8 operating and funding critical public health and consumer education functions. State higher educational institutions have a primary role in educating health care providers, and states regulate continuing education requirements for providers. In their role as conveners, states have a powerful role in encouraging other stakeholders to participate in larger system reform. States have taken a lead role in promoting health system innovation both before and since the ACA testing models that support local values and needs. Medicaid Medicaid consumes a large and growing share of state budgets. Last year, state Medicaid programs covered over 12 million CSG/ERC state residents. xxxvii By 2018 implementation of the ACA is expected to increase Medicaid membership by 13 million nationally. xxxviii As of this writing, nine CSG/ERC states have decided to expand their Medicaid programs under the ACA to new populations, with unique health care needs. xxxix 30 Medicaid % of total popula[on, 2013 % of total population CT DE ME MD MA NH NJ NY PA RI VT Source: calculations from Medicaid Enrollment June 2013 Data Snapshot, Kaiser Family Foundation, January 2014 and US Census 8 VALUE OVER VOLUME 2.0: PRACTICAL TOOLS FOR POLICYMAKERS TO SUPPORT HEALTH CARE REFORM

9 Medicaid in CSG/ERC states Medicaid % of state budget, FY 2012 Medicaid % increase, FY 2012 to 2013 CT DE ME MD MA NH NJ NY PA RI VT Source: State Expenditure Report FY 2011 to 2013, NASBO, November 2013 Medicaid innovations Given the rising share of state budgets dedicated to Medicaid, most states are considering reforms that reward quality and value. States have taken advantage of new opportunities, from the Affordable Care Act and other federal programs, as well as supporting ongoing successful innovations and learning across the market. Several states are using quality measures to drive Medicaid payment decisions. Illinois, Texas and Pennsylvania are paying health plans based, at least in part, on quality performance. Idaho and Maine are paying providers more for higher quality care in their Primary Care Case Management programs. Pennsylvania is using performance on quality measures to enroll members who don t choose a Medicaid health plan for themselves into higher- performing plans, providing consumers with higher- quality care and incentives for plans to improve quality. xl Massachusetts has a long history of value- based health system reform legislation. The latest version, Chapter 224 of the Acts of 2012 but more commonly known as Health Reform 2.0, includes integrating the state s Medicaid program into reforms planned for the entire health system. By July 2015, Massachusetts s Medicaid program expects to move 80% of members from fee- for- service based care to plans with Alternative Payment Methodologies (APMs). APMs include shared savings, episode- based care and global capitation models. The state will encourage uptake of APMs by paying providers who adopt new payment methodologies 2% higher rates for a year and by prioritizing certified ACOs in state Medicaid contracting. xli There is evidence from private plans in Massachusetts that global capitation models are both lowering the growth of health costs and improving the quality of care. xlii VALUE OVER VOLUME 2.0: PRACTICAL TOOLS FOR POLICYMAKERS TO SUPPORT HEALTH CARE REFORM 9

10 Vermont has embarked on an extensive transformation of their entire health system. The multi- payer Blueprint for Health supports creation of Advanced Primary Care Practices (APCPs) that offer medical home services and community health teams. In 2013, costs for Medicaid consumers cared for in an APCP were 11% lower for children and 7% lower for adults. Primary care visit rates were higher and specialty care lower for members of APCPs. xliii Vermont is also implementing bundled payment and ACO programs in their Medicaid program with other payers expected to participate soon. xliv Vermont expects to evolve to a single- payer, integrated health care model by xlv Starting in January 1, 2012, Connecticut has implemented a care management- focused Medicaid program that has reduced per- member costs by 2%. Since the transition from capitated insurers to a quality- based system, the number of participating providers is up 32%, hospital admissions and length of stay are down, inpatient and emergency department costs are down, as are non- urgent visits to emergency departments. The program concentrates on supporting development of patient- centered medical homes that provide team- based care coordination and intensive care management for at- risk members. xlvi Oregon, building on earlier work that prioritized treatments for Medicaid consumers based on effectiveness, has created sixteen Coordinated Care Organizations (CCOs), similar to Accountable Care Organizations. CCOs are local networks of providers that span the continuum of care people need. CCOs are rewarded for quality improvement and paid a set fee per patient. Fees are risk- adjusted to reflect patients needs. xlvii Most recently, Oregon is piloting a reform model with three community health centers that replaces fee- for- service payments with a monthly fee based on the size and composition of their patient population. xlviii Twenty states, including Connecticut, New York and Massachusetts, have been awarded federal grants to design an integrated, value- based care model for residents who are eligible for both Medicare and Medicaid. States are now in the process of implementing novel payment and delivery reforms linking quality and payment for care under that program. xlix State policy options and tools to support payment reform Four years ago our first report, Value Over Volume, described the growing consensus among payers, consumers, providers and policymakers that the way we pay for health care is fueling rising costs but little improvement in the quality of care. Paying providers paid based on the volume and the intensity of services regardless of quality offers little financial incentive to prevent health problems or invest in quality. 1 0 VALUE OVER VOLUME 2.0: PRACTICAL TOOLS FOR POLICYMAKERS TO SUPPORT HEALTH CARE REFORM

11 In the last four years most states have begun to reform how they pay for health care, removing incentives for volume and rewarding value. State policymakers are searching for tools to support payment reform, looking to other states and other payers for options they can bring to their state. This report collects tools, large and small, from across the CSG/ERC region and beyond, which are successfully supporting payment reform. Many of these tools overlap in implementation, supporting one another. Payment tools Early elective deliveries Almost half of American births are covered by Medicaid between 26% (Maryland) and 63% (Maine) in the CSG/ERC region. l A 2009 study found that approximately one in eight US births were performed early without a medical reason, often for the convenience of providers or mothers. Early elective deliveries can lead to serious health complications for the child and increased costs. Babies born early are twice as likely to be admitted to a newborn special care unit. li Risks to babies born early include immediate medical complications such as respiratory distress and infection, as well as long- term effects on neurologic and cognitive development. Avoiding early elective deliveries also reduces the costs of care between $2,300 and $7,500 per case. lii Through provider education efforts and payment reforms, the rate of early elective deliveries has dropped from 11.2% in 2012 to 4.6% last year, but further savings of $10 to $25 million for New England alone are possible. liii Successful tools include multi- media and educational outreach campaigns, provider quality collaboratives (OH, NC), strengthening regulatory protections, e.g. requiring prior authorization or peer review (NM), payment incentives for reducing elective deliveries and/or disincentives for poor performance (AR, LA, WA, TN), non- payment for early elective deliveries (NY, NC, SC, TX) and clinical hard- stop policies that prohibit all early deliveries without a medical reason (NY, NC, MN, MI). liv Medication management Early elective deliveries can lead to serious health complications for the child and increased costs. It is estimated that four out of five US adults use prescription medicines, over- the- counter drugs, or dietary supplements each week and nearly one- third of adults take five or more different medications. Americans experience preventable adverse drug events, or medication errors, 1.5 million times each year, costing billions of dollars. lv A study found that 38% of patients receiving home health care are taking at least one potentially inappropriate medication; Medicare and Medicaid patients were at even higher risk. lvi Inappropriate use of antibiotics has led to a troubling rise VALUE OVER VOLUME 2.0: PRACTICAL TOOLS FOR POLICYMAKERS TO SUPPORT HEALTH CARE REFORM 1 1

12 in multi- drug resistant bacteria infecting an estimated 2 million Americans each year and killing 23,000. lvii Medication management holds great promise to reduce errors, improve adherence to necessary medications, and lower costs. A Connecticut program that connected pharmacists with Medicaid patients to review their medications identified over ten drug therapy problems per patient on average, and saved $1,123 per patient per year on medications and $472 on medical, hospital and emergency department costs. lviii Studies have found that targeting prescription copay reductions carefully can significantly improve patient adherence to critical medications, achieving savings and improving health status. lix Common drug purchasing across all state and affiliated programs Americans experience preventable medication errors, 1.5 million times each year, costing billions of dollars. Combining prescription purchasing across state programs and across state boundaries has achieved savings for many states. By combining prescription purchasing between Medicaid and the state employee plan, Connecticut is saving $66.5 million annually. lx The National Medicaid Pooling Initiative is saving ten states millions on prescriptions. lxi Negotiate rates with insurers and encourage value across all state and affiliated programs, especially state- based health insurance exchanges The Affordable Care Act established health insurance exchanges - - user- friendly marketplaces for consumers and small businesses to purchase affordable, practical coverage. States have three options available for establishing these marketplaces: they can set up and operate their own exchanges; partner with the federal government; or defer to the federal government to set up and operate an exchange in their state. Eight of the eleven CSG/ERC states have elected to develop their own state- based health insurance exchange or operate one in partnership with the federal government under the ACA. lxii Eventually, insurance exchanges are expected to cover seven million people, or one in nine people in the region. lxiii These exchanges could have a very large influence on the overall insurance market in the region. That influence can be used to ensure the best price and quality of coverage both within the exchange, and as a market leader, to enhance value outside the exchange as well. lxiv Ninety percent of US large employers use competitive bidding to select health plans for their employees. lxv Small businesses, which do not have sufficient market clout to negotiate, pay 18% more than large companies on average. lxvi Through active purchasing, Massachusetts s exchange has kept the rate of premium increase inside 1 2 VALUE OVER VOLUME 2.0: PRACTICAL TOOLS FOR POLICYMAKERS TO SUPPORT HEALTH CARE REFORM

13 their exchange to half the rate in the outside market, saving consumers between $16 and $20 million in FY 2010 alone. lxvii State exchanges can also enhance value by rewarding quality improvement, encouraging delivery reform, monitoring to ensure that prices for care reflect value, and developing web- based decision tools to help consumers make value- based choices between plans and treatments. lxviii These value- based purchasing initiatives can be translated beyond insurance exchanges to all state health care purchasing including state employee plans and Medicaid programs. Accountable Care Organization certification Several states are creating certification and assistance programs for the formation of ACOs. ACOs offer the promise of coordinating care and aligning incentives for both improved quality and lowering costs. Medicare has certified 366 ACOs across all fifty states, the District of Columbia, and Puerto Rico as of December 2013, lxix but several states are certifying ACOs to operate in their state serving other populations. It is estimated that 6% of Americans are now served by an ACO. lxx Twenty three states have considered legislation and at least 10 have passed laws to design, promote or create a demonstration project for ACOs. lxxi State certification helps reduce conflicting financial incentives between payers and lowers administrative burdens by streamlining certification for organizations. lxxii States can use outside accreditation bodies for certification, such as the National Council for Quality Assurance, which many states use for other certifications such as patient- centered medical homes. lxxiii Incorporate Comparative Effective Research findings into state health purchasing and benefit design According to the Congressional Budget Office, the largest driver of rising health costs is new treatments, drugs, and devices. lxxiv Many of these new treatments have not been shown to be any more effective than the less costly treatments they are replacing. The average annual cost of treatment for a new cancer drug is over $100,000, with little evidence that new treatments improve survival. lxxv Comparative Effectiveness Research (CER) is a broad effort to understand which treatments are worth the price. lxxvi Massachusetts s exchange has kept premium increases inside their exchange to half the rate in the outside market. The average cost for a new cancer drug is over $100,000, with little evidence that new treatments improve survival. As the body of CER work grows, states can incorporate those findings into benefit design for state programs and encourage other payers as well. lxxvii New York has incorporated CER into Medicaid policymaking. lxxviii Twice a year CEPAC, a New England collaborative of clinicians, researchers, payers including Medicaid plans and patient advocates, undertakes a VALUE OVER VOLUME 2.0: PRACTICAL TOOLS FOR POLICYMAKERS TO SUPPORT HEALTH CARE REFORM 1 3

14 deep analysis of CER evidence regarding new treatments for costly conditions and votes on whether to recommend adoption. Past subjects for CEPAC review include treatments for drug- resistant depression, supplemental cancer screening for women with dense breast tissue, and treatments for sleep apnea. CEPAC s sponsoring organization, the independent Institute for Clinical and Economic Review, regularly publishes action guides for policymakers, in addition to consumers and providers, on how best to act on the research. lxxix State employee plans could save significant amounts and improve health outcomes by aligning state employee benefits with evolving CER. Support effective wellness programs About 25% of employers medical costs are caused by eleven alterable risk factors: lack of exercise, alcohol use, overweight, current or former tobacco use, depression, stress, blood pressure, cholesterol, Every dollar and blood glucose. lxxx Well- designed employer wellness invested in programs can reduce sick- leave absenteeism by 28%, lower wellness programs health care costs by 26%, and increase overall employee returns $3.27 in satisfaction. lxxxi On average, every dollar invested in wellness lower medical costs programs returns $3.27 in lower medical costs and $2.73 in lower absenteeism. lxxxii and $2.73 in lower The ACA includes incentives for wellness programs for employers and payers. lxxxiii absenteeism. Connecticut has created a Health Enhancement Program for state employees with early evidence of reduced inappropriate emergency department use, improved medication compliance, reductions in specialty care and expanded access to primary care. lxxxiv As part of their cost- control law passed in 2012, Massachusetts instituted a wellness tax credit up to $10,000 per employer, directed creation of a model guide for business wellness programs, and included stipends to businesses to create wellness programs. Massachusetts also requires insurers to reduce premiums for small businesses that provide wellness programs. lxxxv Workforce tools Train and certify Community Health Workers Community Health Workers (CHWs) are frontline public health workers who are trusted members of their community. Because of their trusted relationship, CHWs serve as a link between health services and underserved communities to facilitate access to care, improve the quality and cultural competence of service delivery. CHWs may be known by different titles and work in a variety of settings. A few states are moving to certify CHWs and pay them through health programs rather than through public health grants. A comparative effectiveness analysis recently found that CHWs hold promise in reducing long- term health costs for people with several chronic conditions including diabetes, hypertension, and low birth weight. 1 4 VALUE OVER VOLUME 2.0: PRACTICAL TOOLS FOR POLICYMAKERS TO SUPPORT HEALTH CARE REFORM

15 The report emphasized the need for setting standards for CHWs based on evidence for training, supervision, certification in core competencies, and connection to clinicians. lxxxvi Expand capacity of mid- level providers, examine scope of practice laws Several states have expanded the health care workforce in response to growing unmet needs. There is concern that state legislation and regulation may, in some cases, limit effective and efficient use of the health care workforce. It is critical that state policies match professional competencies with scope of practice laws. lxxxvii In 2010, to expand access to primary care and control costs, the Institute of Medicine recommended removing scope- of- practice barriers for nurse practitioners (APRNs). lxxxviii A recent study by the Federal Trade Commission finds that APRNs deliver safe, effective care and describes the increase in competition leading to lower costs of care in states with fewer barriers to practice for APRNs. lxxxix Recently, Minnesota became the first state to license dental therapists, allowing dental hygienists with enhanced training to provide more procedures, expanding access to oral health care, especially in underserved populations and regions. xc Continuing education, licensure, and provider education requirements to support value States have responsibility for licensing and renewing health care providers licenses. Continuing medical education (CME) requirements are usually set in state statute and/or state regulation. States require between 12 and 50 hours per year of CME for physicians, often requiring training in specific areas such as HIV/AIDS, health information technology, infection control, patient safety or child abuse. xci States could modify CME requirements to include training that supports value- based care such as reducing overtreatment, medication management, team- based care/patient- centered care, comparative effectiveness research, and care management skills. Care coordination tools Encourage Patient- Centered Medical Homes Patient- centered medical homes (PCMHs) hold great potential to both improve health outcomes and control costs. A recent review of published and private insurer evaluations found that PCMHs, reduce the total cost of care, reduce the use of unnecessary and avoidable services, improve population health metrics, increase the use of preventive services, improve access to care and enjoy higher provider and patient satisfaction. The longer a practice has had PCMH status, the greater the cost savings and the better the improvements in The longer a practice has had PCMH status, the greater the cost savings and improvements in quality and outcomes. VALUE OVER VOLUME 2.0: PRACTICAL TOOLS FOR POLICYMAKERS TO SUPPORT HEALTH CARE REFORM 1 5

16 care quality and outcomes. xcii Connecticut s Medicaid program has found that quality of care across numerous measures is better in PCMHs than in non- PCMH practices. xciii The number of PCMHs in both in the CSG/ERC region and across the US is growing rapidly. PCMH primary care practices are certified by several national accrediting bodies. The process of becoming certified can be challenging and expensive, particularly for most small practices that are facing financial strains. At least 43 states have created support systems to promote and support PCMHs. Support can include paying for non- traditional services such as care management, learning collaboratives for PCMH staff, community referral resources, multi- payer alignment of standards and payment policies. xciv States can expand supports and payment to encourage PCMH growth. Comprehensive community health teams Vermont s Blueprint for Health is an exceptional example of enhanced community health innovation. The Blueprint is a statewide initiative that created community health teams to assist primary care practices assess patient needs, coordinate with community services, and provide multi- disciplinary care. The project is financed with both public and private funds. The program has reduced hospital admissions, emergency room visits, and related costs, has improved clinical quality of care and health outcomes, and enjoys high patient and provider satisfaction levels. xcv Technical assistance tools Learning collaboratives Beyond care coordination, state- supported learning collaboratives can assist providers in gaining necessary skills to improve the value of care and develop peer networks to share best practices. Areas for collaboratives include data analytics, quality improvement, patient safety, comparative effectiveness research, public health, integrating behavioral health with primary care, and navigating new payment models. xcvi Encourage health information technology adoption In an environment of scarce resources, emerging technologies hold great promise to improve the quality and efficiency of care. Timely exchange of patient records between providers can improve patient safety, help coordinate care, and reduce costly duplication of services. Telemedicine and telehealth tools enhance access to high- quality care for under- served populations and regions. Consumers can use technology tools to engage State Medicaid programs have delivered $7.6 billion in information technology subsidies to 149,160 providers and 7,294 hospitals. 1 6 VALUE OVER VOLUME 2.0: PRACTICAL TOOLS FOR POLICYMAKERS TO SUPPORT HEALTH CARE REFORM

17 productively in their own care. xcvii States have important roles in encouraging and subsidizing adoption of innovative technologies. States can include health information technology metrics in performance incentive measures and licensure requirements. As of February 28, 2014 over 90% of hospitals and 84% of professionals eligible for Medicare or Medicaid electronic medical record system purchase had received subsidies; state Medicaid programs were responsible for delivering $7.6 billion in subsidies to 149,160 providers and 7,294 hospitals. xcviii Program evaluation Too many health programs are implemented with the best intentions, but without effective evaluation they can miss reaching their full potential. Robust, constructive evaluations are critical to ensuring that reforms work to improve care, lower costs and guard against unintended consequences. Evaluations should be included early in the design of any reform initiative and given sufficient resources to ensure they are effective. Overtreatment tools Choosing Wisely Started in 2009, Choosing Wisely is a growing campaign to address inappropriate overtreatment. The campaign now includes over fifty medical specialty societies. Each society has developed a list of at least five low- value treatments, Things Physicians and Patients Should Question. The growing list of services that should be rarely or never performed now includes 264 questionable treatments. xcix It has been estimated that savings from adoption of the Choosing Wisely list could exceed $5 billion. c While there is some controversy about the value of some treatments, the list enjoys nearly universal support among the providers who must be engaged to reduce use of low- value care. ci State policymakers can support this value- based purchasing initiative by including incentives to avoid the services on the Choosing Wisely list in all state health care purchasing and benefit design. Public education campaigns Consumers Union and 17 other consumer groups have partnered with Choosing Wisely to produce materials to support consumers questioning unnecessary and potentially harmful medical care. The campaign has developed videos and consumer- friendly flyers, available online, to help people suffering from dozens of conditions Savings from adoption of the Choosing Wisely list could exceed $5 billion. navigate their care. cii Studies find that when given understandable, balanced information on health care quality and costs, consumers choose high- value options for their care. ciii State policymakers, elected officials and executive branch agencies VALUE OVER VOLUME 2.0: PRACTICAL TOOLS FOR POLICYMAKERS TO SUPPORT HEALTH CARE REFORM 1 7

18 could use their multiple opportunities to communicate with the public to share these materials and raise awareness about the dangers and costs of overtreatment. Shared decision- making and consumer decision aids For many conditions there is more than one appropriate treatment alternative. When consumers are adequately informed about the relative merits and risks of each option and appropriately supported, they can actively participate in decisions about their care. Shared decision- making, a collaboration between patients and providers, often ends with a treatment plan that is less intensive than providers alone would have recommended, but more aligned with patient values. civ Consumer decision aids are important tools to support shared decision- making. The aids can be videos, brochures, websites or other communications, but must be based on high- quality, up- to- date information on the specific health condition and risks and benefits of alternative treatments. They must be clear about the status of research on the condition, help patients define their values and preferences, and support consumers in voicing their concerns. Studies find that for conditions that involve discretionary surgery, such as the choice between lumpectomy and mastectomy for early- stage breast cancer or the choice between surgery and conservative management for back pain, patients who received effective decision aids were better informed and chose less invasive treatments compared to a control group of patients. cv Shared decision making is a difficult skill for both consumers and for providers, and it is rarely taught. cvi State policymakers can encourage shared decision making by including the skill in initial provider training, licensure and continuing medical education. States can also provide consumer decision aids to medical practices and community social service organizations for distribution and use. Prior authorization Prior authorization is an older, very effective method of controlling costs that works and could be expanded, especially for services that are often inappropriately overused. A study of claims from 223,232 patients found that the level of overuse of imaging tests were far higher in benefit plans that did not require prior authorization compared to those that did (23% vs. 1 to 11%). Requiring prior authorization for these services lowered overuse up to thirty- threefold. Potential savings per employee per year ranged from $3.47 to $ cvii Prior authorization requirements have been very effective at lowering the incidence of inappropriate early- elective deliveries (see above). State policymakers can review state health purchasing benefit packages for potential prior authorization for services that could be overused. Prior authorization for imaging services resulted $3.47 to $30.41in savings per employee per year. 1 8 VALUE OVER VOLUME 2.0: PRACTICAL TOOLS FOR POLICYMAKERS TO SUPPORT HEALTH CARE REFORM

19 Reduce prescription drug costs with a provider education/counter detailing campaign A state- sponsored provider education campaign on the relative costs and effectiveness of medications, cviii limiting gifts to providers from drug companies, requiring disclosure of financial ties between providers and suppliers, and prohibiting direct industry funding of provider CME training could help reduce prescription drug spending while improving the quality of care. All these measures have been adopted by Massachusetts in their health care cost- containment reforms. cix Much can be done to encourage generic drug use and mail order delivery savings in Medicaid. Research and data tools APCDs and analytic capacity All- payer claims databases (APCDs) are large- scale generally state- based databases that collect paid claim information across payers from a wide variety of provider sources. Five CSG/ERC states have APCDs and three more are in APCD implementation. cx States are continually finding new uses for APCDs to improve value and innovation including identifying overuse, evaluating programs and policy options, investigating health disparities, identifying hot spots of over or underuse, tracking spending between programs, assessing Medicaid underpayments, and making the database available to researchers to find innovative uses. New Hampshire s APCD is a leader among states including a public health care cost lookup allowing market competition to work on lowering health costs. cxi Public reporting States and other payers have successfully used the power of public transparency to drive improvements in health care systems. The federal government is using comparative quality reporting by provider to drive improvement through HealthCare.gov. Consumers can now compare local hospitals, physicians, home health agencies, nursing homes and dialysis facilities across dozens of quality measures. cxii Providing this kind of information to consumers, when they need it and in a usable format, has been associated with reductions in utilization. cxiii Monitor health care markets, maximize state regulatory authority to improve value States have a critical role in monitoring health markets to ensure fairness and to preserve competition. cxiv State anti- trust approval is needed for mergers and conversions of providers that consolidate the market, reduce competition and potentially increase prices. cxv The Massachusetts Attorney General s office released two reports documenting wide hospital price variation that is not linked to quality of care, complexity of patients, Medicaid or Medicare payments or teaching responsibilities. The reports found that price variation, not utilization, was the VALUE OVER VOLUME 2.0: PRACTICAL TOOLS FOR POLICYMAKERS TO SUPPORT HEALTH CARE REFORM 1 9

20 prime driver of rising health costs in the state. The reports made recommendations to ensure competitive markets and control health costs. cxvi States can also work to minimize regulatory barriers to market entry for new entities, promoting competition and consumer choice. Conclusion States are leading other payers in shifting our health care system from rewarding service volume to paying for quality. Serving as incubators of innovation, states are using multiple levers and resources not available to private payers to develop effective policy tools. By testing models and sharing successes states are uniquely positioned to continue leading health care reform. i G Jackson et. al., The Patient- Centered Medical Home: A Systematic Review, Annals of Internal Medicine 158: , February 5, 2013 ii A Martin et. al., Expenditure Accounts Team National Health Spending In 2012: Rate Of Health Spending Growth Remained Low For The Fourth Consecutive Year, Health Affairs 33:67-77, January 2014 iii State Expenditure Report FY 2011 to 2013, NASBO, November 2013 iv A Martin (2014) v The Budget and Economic Outlook 2014 to 2024, Congressional Budget Office, April 14, 2014 vi G Cickler et. al., National Health Expenditure Projections : Slow Growth Until Coverage Expands and Economy Improves, Health Affairs 32: , October 2013; Trends in Health Care Cost Growth and the Role of the Affordable Care Act, Executive Office of the President of the United States, November 2013; D Cutler and N Sahni, If Slow Rate of Health Care Spending Growth Persists, Projections May Be Off By $770 Million, Health Affairs 32: , May 2013; D Blumenthal et. al., Health Care Sleeping A Giant Slain or Sleeping?, New England J Medicine 369: , December 26, 2013 vii Health Sector Economic Indicators: Insights from National Health Expenditure Estimates through February 2014, Altarum Institute, April 8, 2014 viii State, Local Government Spending on Health Care Grew Faster than National Rate in 2012, Pew Charitable Trusts, State and Consumer Initiatives, January 28, 2104 ix CMS National Health Accounts, Personal health care spending per enrollee by state of residence, FY 2009 x T Saving and J Goodman (2013) xi T Saving and J Goodman, Why Do Some States Spend More on Health Care?, Health Affairs Blog, March 25, 2013 xii C White et. al., Understanding Differences Between High and Low Priced Hospitals: Implications for Efforts to Rein in Costs, Health Affairs 33: , January 2014; Supply- Sensitive Care, Dartmouth Institute for Health Policy & Clinical Practice, Jan. 15, 2007 xiii P Hussey, et. al., The Association Between Health Care Quality and Cost: A Systemic Review, Annals of Internal Medicine 158:27-34, 2013 xiv C White et. al., (2014) xv C Schoen, et. al., Access, Affordability, and Insurance Complexity are Often Worse in the United States Compared to Ten Other Countries, Health Affairs 32: , December VALUE OVER VOLUME 2.0: PRACTICAL TOOLS FOR POLICYMAKERS TO SUPPORT HEALTH CARE REFORM

21 xvi M Chassin, Improving the Quality of Health Care: What s Taking So Long?, Health Affairs 32: , October 2013 xvii Reducing Waste in Health Care, Health Policy Brief, Health Affairs, December 13, 2012 xviii Calculation from 2012 National Health Care Quality Report, AHRQ and US Census data xix State Snapshots on Health Care, AHRQ, accessed 4/7/2014 xx Readmission Penalty Data: State Averages, FY 2014, Kaiser Health News analysis of CMS data; Note; in FY 2014 penalties do not apply to MD hospitals due to a unique Medicare reimbursement arrangement xxi 2012 National Healthcare Quality Report, AHRQ xxii State Snapshots on health care, AHRQ, accessed 4/7/2014 xxiii ibid xxiv M Burns, et. al., Reducing Overuse and Misuse: State Strategies to Improve Quality and Cost of Health Care, Robert Wood Johnson Foundation, January 2014 xxv R Gibson, How the Overuse of Medical Care is Wrecking Your Health and Your State s Budget, CSG/ERC Annual Meeting presentation, July 22, 2012 xxvi Clinical Evidence, British Medical Journal, January 2013 xxvii M Kale et. al., Trends in the Overuse of Ambulatory Health Care Services in the US, JAMA Internal Medicine 173: , 2013 xxviii A Gawande et. al., Avoiding Low Value Care, Perspective, New England J Med, April 3, xxix When Costlier Medical Care Isn t Better, Consumer Reports, October 2012 xxx Where Innovation is Happening, CMS Innovation Center, accessed April 15, 2014 xxxi Senate Finance Committee Holds Hearings on CMMI Progress, American Association of Medical Colleges, March 22, 2013 xxxii Pioneer Accountable Care Organizations Succeed in Improving Care, Lowering Costs, CMS media release, July 16, 2013 xxxiii J Lee, et. al., Value- Based Insurance Design: Quality Improvement But No Cost Savings, Health Affairs 32: , July 2013 xxxiv Patient Protection and Affordable Care Act, PL , March 23, 2010 xxxv The Economic Case for Health Care Reform: Update, Executive Office of the President, Council of Economic Advisers, Dec. 14, 2009 xxxvi APCD Council map, accessed April 18, 2014 xxxvii Medicaid Enrollment June 2013 Data Snapshot, Kaiser Family Foundation, January 2014 xxxviii Updated Estimates of the Effects of the Insurance Coverage Provisions of the Affordable Care Act, April 2014, Congressional Budget Office xxxix Kaiser State Health Facts Online, accessed April 18, 2014 xl K Gifford, et. al., A Profile of Medicaid Managed Care Programs in 2010: Findings From a 50- State Survey, Kaiser Family Foundation, September 2011 xli Payment Reform: A Medicaid Overview, Health Watch, Society of Actuaries, May 2013; State Medicaid Directors Driving Innovation: Payment Reform, National Association of Medicaid Directors, December 2013 xlii Z Song et. al., The Alternative Quality Contract, Based on a Global Budget, Lowered Medical Spending and Improved Quality, Health Affairs 31: , August 2012 xliii Vermont Blueprint for Health 2013 Annual Report, February 2014 xliv S Silow- Carroll, et. al., How Colorado, Minnesota and Vermont are Reforming Care Delivery and Payment to Improve Health and Lower Costs, Commonwealth Fund, March 2013 xlv The State of Vermont: Working Towards a Universal and Unified Health System, Vermont s Health Care Reform, Agency of Administration, accessed April 15, 2014; S Silow- Carroll, VALUE OVER VOLUME 2.0: PRACTICAL TOOLS FOR POLICYMAKERS TO SUPPORT HEALTH CARE REFORM 2 1

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