Map of life expectancy at birth from Global Education Project.

Thursday, June 28, 2012

Let me elaborate

I made a couple of broad assertions in the previous post, I realize most readers won't know exactly what I was talking about.

In the first place, the law regulates insurance markets so that insurers must offer a basic package of benefits, and cannot engage in medical underwriting -- that is, they must sell a given policy to anyone who wants to buy it, and they have to charge the same price regardless of the person's state of health or health history. There is an exception in that they can adjust prices for age, but obviously that only goes up to age 65 at which point everybody gets Medicare so it's not a horrible problem. They are also required to pay out a minimum percentage of the premium in benefits.

That means the only way for them to maximize their profits is to get more customers, and if they want to compete on price, they have to find ways of delivering those minimum benefits for less money. That means they have to work with providers to find efficiencies, which allies their interests with some lesser-known provisions of the ACA. These create incentives and investment to experiment with new ways of organizing and financing health care delivery. The basic idea is that providers get paid for results, not for doing more stuff.

There are a lot of complexities involved, but the current buzzwords are Accountable Care Organization (ACO) and Patient Centered Medical Home (PCMH). These are somewhat overlapping concepts but the first puts more emphasis on how providers are reimbursed, and the second on how they are organized. An ACO, however organized, gets paid mostly on a capitated basis -- i.e. they are responsible for you as a patient, and they get paid an annual fee to take care of you, no matter what they do. But they are accountable in that they get paid more or less depending on various quality measures. Note that they are only accountable for the services within their organization, in other words if you get hit by a bus your trauma surgery may be paid for separately, if that's not part of the original deal.

A PCMH is probably compensated as an ACO, and an ACO probably tries to be something like a PCMH, but they aren't exactly synonymous. A PCMH means that one organization provides all, or at least most, of the services you are likely to need, i.e. your primary care doc is there and works under the same umbrella with specialists and ancillary services like physical therapy and social workers. They have a lot of extra services such as easy accessibility of a nurse if you need to talk about stuff, health educators, people to come to your home if you have complicated comorbidity or are losing your marbles who will work with you and any significant others to set up a plan for self-management, transportation vouchers if you need them to get to appointments, etc. All of this is paid for, presumably, by the money saved by keeping you out of the hospital or avoiding complications of diabetes or whatever.

Finally, there are research dollars invested through the Patient Centered Outcomes Research Institute (PCORI) to figure out what treatments work best for which patients, what the tradeoffs are of alternatives, and how to explain it to you so you can make informed choices on your own behalf; and the Center for Medicare and Medicaid Innovation which supports experiments in the organization and financing of health care as described above and tries to figure out how to deliver better results for less money.

In order to make all this work we need additional infrastructure such as electronic medical records, and decision support and informational tools for docs and patients. It's in there.

Now, actually getting individual health care providers, and institutions such as group practices, hospitals, and integrated medical systems, to take this stuff up and make it work is a long road to travel. We need to learn more about how to do it and we'll need to write new rules and regulations. Yes, there is an essential role for government in the health care industry to make this work, and it will gore many a fat ox. The political obstacle course will be as challenging as ever. But at least we've stepped onto it and jumped the first hurdle.

I'll try to say more about all this as we go along, and will be happy to answer any questions.


kathy a. said...

so -- an ACO is like a PPO plan, and a PCMH is like a kaiser permanente plan?

i just do not have a lot of understanding of various plans. we loved our doctors under the old PPO plan -- but it was a pain in the ass when we needed services outside their office. i hated moving to kaiser, but it has integrated services, and it is unbelievably easy. plus, i got to choose my PCP, they have my charts, it is easy to communicate, and if i need something extra -- tests, prescriptions, consult with a specialist, whatever -- it can easily be done on site.

Daniel said...

I'm looking forward to learning more about the plans that insurance companies will be required to offer, the options they'll have for competing for more insureds and the implications for improving efficiency in health care delivery.

Cervantes said...

Yes, KP is something like a PCMH and is getting to be more so, I think. They're considered something of a pioneer.

A PPO is a version of managed care. It is not necessarily an ACO -- that would depend on how the finances are structured and the providers compensated. An ACO would have a good array of specialists available outside of your primary care office, but would still restrict your choices to members of their own network, like a PPO.

Cervantes said...

Daniel, as I understand it there is leeway for states to write some of those regulations, so we're waiting to see exactly what they do. Most states with Republican governors have refused to begin. Either they will now do so, or the federal government will do it for them. Get out your popcorn.