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Quality Measurement More Advanced Than Payment Reform, CMS Official Says

Wednesday, May 21, 2014

By Sara Hansard  

More progress has been made on making health-care quality measurements more uniform than has been made in aligning payment incentives to get better value, the federal government's Medicare director said May 9.

Speaking to a U.S. Chamber of Commerce conference titled Realizing Greater Value: Building on Private Sector Successes, Sean Cavanaugh, director of the Center for Medicare at the Centers for Medicare & Medicaid Services, said that “relative to payment, I think much more progress has been made on aligning quality.”

The development of quality measures in recent years has been “fairly rapid,” Cavanaugh said. “There's a science to it, where payment is less of a science, so you can get clinicians to coalesce around quality.”

Cavanaugh said, although some of the lower Medicare cost growth in the past four to five years likely was due to the recession, some of it was due to public policy changing the delivery of health-care services. A lot of the cost savings were in Part A services for hospitalization and skilled nursing facilities, which aren't discretionary services, he said.

The Affordable Care Act includes incentives to change the delivery of health care to raise value, such as creating accountable care organizations to better coordinate care. Hospital readmissions and hospital-acquired infections have been reduced significantly since the law was enacted in 2010, he said.

Medicare Advantage Cost Growth Down

“There's a dramatic story on the cost and quality side in Medicare Advantage,” Cavanaugh said. A third of Medicare patients are in private MA plans, he said. The ACA changed the payment structure for MA plans, which used to be paid “well above the equivalent fee-for-service costs. They're now gravitating down to about what fee-for-service would pay,” he said. At the same time, the quality of MA plans has improved, with the share of enrollees in top-rated four- and five-star plans rising from about 16 percent in 2009 to 55 percent this year, he said.

Further, enrollment in MA plans has risen in the past couple years, Cavanaugh said. “We are looking very closely at what's driving the popularity of Medicare Advantage,” he said. “Is it financially driven? Are they doing it for the additional benefits and the lower copays, which is a widespread belief?”

Although Medicare cost growth has subsided in recent years, Medicare actuaries are forecasting increased costs due to demographics, as well as per-capita costs, Cavanaugh said. He also said the cost of expensive new hepatitis C drugs “is going to be big.” Gilead Sciences Inc.'s drug Sovaldi has been receiving publicity since it was approved by the Food and Drug Administration in December 2013. With the cost of Sovaldi (sofosbuvir) set at $1,000 per pill, a 12-week regimen of the drug costs about $84,000.

“The drugs are a significant improvement over what went before,” but they are a “significant expense over what went before,” Cavanaugh said. There is a “fairly large” Medicare population that has been diagnosed with hepatitis C, and “there's a belief that there's a significant additional population that has it and is in Medicare but hasn't been diagnosed yet,” he said. Further, “the prevalence might be even greater” in the Medicaid program, and there may be challenges for commercial insurers as well, he said.

Narrow Networks Reducing Premiums

In a separate panel, David Nuzum, a principal in the Washington office of McKinsey & Co., said narrow provider networks offered by many plans in the ACA health insurance marketplaces “have the potential to contribute double-digit reductions in the cost of premiums.”

In December 2013, McKinsey published a study of provider networks in 20 urban markets, finding that about 70 percent of the networks were narrow or “ultra narrow”. In the next several weeks, the consulting company will publish a broad study of provider networks across all ACA health insurance marketplaces, Nuzum said.

McKinsey researchers have found that many consumers would rather have narrower networks for premiums that are as little as 10 percent less, Nuzum said. That holds true especially for lower-income consumers, he said.

McKinsey has found that in the lowest-priced “silver” tier ACA marketplace plans that cover an average of 70 percent of medical claims, 84 percent have narrow networks, Nuzum said. Silver plans with broader networks were priced about 26 percent higher than plans offered by the same insurer with narrow networks, he said.

“We believe that on balance this greater diversity of network configuration is actually a positive step in affording greater choice to consumers,” Nuzum said. Employers that in the past offered all health-care providers in their areas “are now thinking of choice as offering multiple network configurations to their employees” so employees will have the choice of lower-premium plans, he said.

To contact the reporter on this story: Sara Hansard in Washington at shansard@bna.com

To contact the editor responsible for this story: Janey Cohen at jcohen@bna.com

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