Comprehensive Assessment of Reform Efforts: The COMPARE Initiative

Comprehensive Assessment of Reform Efforts:

The COMPARE Initiative

Elizabeth A. McGlynn, Ph.D.Associate Director, RAND Health

November 16, 2009

McGlynn -2- 11/16/09

Outline for Seminar

Background on COMPARE

Review of major bills in Congress

Analysis of HR 3962

Cost containment: the next frontier

McGlynn -3- 11/16/09

Steps Leading to COMPARE We undertook a priority setting process with

RAND Health Board of Advisors Brainstorming session Formal rating of 20 topics Paragraph descriptions written for top 10 Second round of rating 10 topics Subgroup of RHBA & RAND Health staff

assigned to further develop concept

RAND Board of Trustees and RAND Senior management engaged in a similar exercise

Reform of the health care system emerged from both processes as a high priority

McGlynn -4- 11/16/09

The Status Quo

55% 47M

$2T

McGlynn -5- 11/16/09

Uncertainty Surrounds Likely Effects of Proposed Changes

??% ?M

$??TMandates

Subsidies

Tax breaks

Expanded eligibility

Transparency

P4P

HIT

Diseasemanagement

Prevention

Tort reform

Medicalhome

CDHP

Nurse staffingratios

Comparativeeffectiveness

McGlynn -6- 11/16/09

We Considered Two Possible Options

Design a comprehensive plan for health reform

Develop a method for evaluating plans proposed by others

What would you do?

McGlynn -7- 11/16/09

COMPARE Goals

Provide the factual foundation for a national dialogue about health reform options

Facilitate the development of health reform policy options by public and private policy makers

McGlynn -8- 11/16/09

Health Care Proposals May Recommend One or Multiple Policy Changes

Reform medicalmalpractice law

Examples

Proposal ASingle policy

changes • Employer mandate

• Individual mandate

• Medicaid/SCHIP expansion

• Tax credits

Proposal BMultiple changes

But it can be difficult to compare effects of different proposals

McGlynn -9- 11/16/09

COMPARE Utilizes Multiple Methods to Examine Policy Options

We developed a new microsimulation model Estimates effects of policy changes on spending,

coverage, consumer financial risk and health

We conducted systematic reviews of the literature on prior experiences with and/or theory surrounding policy options

We made COMPARE results available online at www.randcompare.org:

Synthesize status quo Summarize state and federal legislation Analyze likely effects of different policy options

http://www.randcompare.org/

McGlynn -10- 11/16/09

The COMPARE Dashboard Evaluates Policies Across Nine Dimensions

McGlynn -11- 11/16/09

What Makes COMPARE Unique?

Modular

Multidimensional

Evidence-based

Transparent

Accessible

Adaptable

McGlynn -12- 11/16/09

Outline for Seminar



Analysis of HR 3962


McGlynn -13- 11/16/09

Overview – Committees and Floor DebateHOUSE SENATE

COMMITTEEPROCEDINGS

FLOORCONSIDERATION

Debate

Full House vote on Bill(simple majority to pass)

Three Bills combined into One

Rules Committee sets terms for debate; confirmed by full House

House-SenateConference Committee

Energy & Commerce

Ways & Means

Education& Labor

Finance HELP

Full Senate vote on Bill(simple majority to pass)

DebateFilibuster

Cloture

Debate

Debate terms negotiated Limited debate; no filibuster

Regular Order Reconciliation

Two Bills combined into One

Hearings

Legislation

Cost estimate

Mark-Up

Hearings

Legislation

Cost estimate

Mark-Up

McGlynn -14- 11/16/09

Overview – ConferenceHouse-Senate

Conference Committee

Conference Report

Debate

Full House vote on Bill(simple majority to pass)

Rules Committee sets terms for debate; confirmed by full House

Full Senate vote on Bill(simple majority to pass)

DebateFilibuster

Cloture

Debate

Debate terms negotiated Limited debate; no filibuster

Regular Order Reconciliation

HOUSE SENATE

President signs or vetoes the bill

McGlynn -15- 11/16/09

Major Options Under Consideration for Expanding Coverage of Uninsured

Expand eligibility for Medicaid (Medi-Cal)

Require employers to offer insurance (employer mandate)

Improve the functioning of health insurance markets

Require individuals to have coverage (individual mandate)

McGlynn -16- 11/16/09

How Many Americans Lack Insurance?

Insurance status in United States (2007)

Uninsured

45.3million

Insured252 million

McGlynn -17- 11/16/09

What Are the Major Sources of Insurance Coverage?

0 50 100 150 200

Employer-sponsored

Employers are the largest source of insurance

28

38

40

Medicaid/SCHIP

Medicare

Non-group

186

People in millions

McGlynn -18- 11/16/09

Who Are the Uninsured?

19%

30%

29%10%

12%

A significant portion are low-income

<100% FPL

100-200% FPL

200-300%FPL

300-400% FPL

Over 400% FPL

McGlynn -19- 11/16/09


Nearly two-thirds are employed or their dependents

Employedand their

dependents62%

McGlynn -20- 11/16/09


More than one in four has access to employer insurance

Has access toemployerinsurance

28%

McGlynn -21- 11/16/09


A similar proportion is eligible for Medicaid or SCHIP

Eligible for

Medicaid/SCHIP28%

Comparison of Major BillsProvision HR 3962 Senate

FinanceSenate HELP

Medicaid expansion

Eligibility to 150% FPL

Eligibility to 133% FPL

No jurisdiction

Employer mandate

Payroll > $500K

Premium share: 72.5% single, 60% family

Penalty for noncompliance: 8% of payroll

No “mandate”

Tax on employers > 100 FTE that do not offer: $400/ employee

Firms > 25

Premium share: 65%

Penalty for noncompli-ance: $400/ employee

Comparison of Major Bills (cont.)Provision HR 3962 Senate

FinanceSenate HELP

Insurance market reforms

Guaranteed issue; 2:1 rate banding*; risk equalization

Guaranteed issue;

4:1 rate banding**; risk equal.

Guaranteed issue; rate banding;

Individual mandate

Yes. Penalty is 2.5% AGI

Subsidies for 150-400% FPL

Yes. Penalty $200/yr to $750 btwn 2013-2016


Yes. Penalty is $750/yr


*age, family size, geography**age, family size, geography, tobacco use

McGlynn -24- 11/16/09

Medicaid Eligibility

200%185%

41%

0%

68%74%

Children PregnantWomen

Elderly andIndividuals

withDisabilities

WorkingParents

Non-WorkingParents

ChildlessAdults

Federal Poverty Line (For a family of four is

$21,200 per year in 2008)

Eligibility for Medicaid Varies by Category of Eligibility

Note: Medicaid income eligibility for most elderly and individuals with disabilities is based on the income threshold of Supplemental Security Income (SSI).SOURCE: Based on a national survey conducted by the Center on Budget and Policy Priorities for KCMU, 2009.

Medicaid Eligibility for Working Parents Varies by State

AZAR

MS

LA

WA

MN

ND

WY

ID

UTCO

OR

NV

CA

MT

IA

WIMI

NE

SD

ME

MOKS

OHIN

NY

IL

KY

TNNC

NH

MA

VT

PA

VAWV

CTNJ

DE

MD

RI

HI

DC

AK

SCNM

OK

GA

TX

IL

FL

AL

50- 99% FPL (20 states)

20-49% FPL (14 states)

> 100% FPL (17 states including DC)US Median Eligibility = 68% FPL: $11,968 per year

*The Federal Poverty Line (FPL) for a family of three in 2008 is $17,600 per year.SOURCE: Kaiser Commission on Medicaid and the Uninsured, Where are States Today: Medicaid and State-Funded Coverage Eligibility Levels for Low-Income Adults. October 2009.

McGlynn -27- 11/16/09

The Effect of Medicaid and SCHIP Expansions on Coverage Depends on Eligibility

4.1

9.4

13.9

17.2

6.1

20

35.2

49.5

0 10 20 30 40 50 60

100% FPL

200% FPL

300% FPL

400% FPL

Elig

ible

if In

com

e B

elo

w:

Number Newly Insured, in Millions

Eligibility Based on Income Relative to the Federal Poverty Level (FPL)

McGlynn -28- 11/16/09

VA

Impact on States Will Depend on Portion of Costs for Newly Eligible Borne by Feds

AZAR

MS

LA

WA

MN

ND

WY

ID

UTCO

OR

NV

CA

MT

IA

WIMI

NE

SD

ME

MOKS

OHIN

NY

IL

KY

TNNC

NH

MA

VT

PA

WV

CTNJ

DE

MD

RI

HI

DC

AK

SCNM

OK

GA

SOURCE: Federal Register, November 28, 2007 (Vol. 72, No. 228), pp 67305-67306, at http://edocket.access.gpo.gov/2007/pdf/07-5847.pdf and correction for North Carolina at Federal Register, Friday, December 7, 2007 (Vol. 72, No. 235), p. 69285, at http://edocket.access.gpo.gov/2007/pdf/C7-5847.pdf.

TX

IL

FL

AL

71+ percent (6 states)

50 percent (14 states)

62 to <71 percent (19 states including DC)

51 to <61 percent (12 states)

VA

http://edocket.access.gpo.gov/2007/pdf/07-5847.pdf

http://edocket.access.gpo.gov/2007/pdf/C7-5847.pdf

McGlynn -29- 11/16/09

Employer Participation

McGlynn -30- 11/16/09

On Average, Employers Contribute 83% of Premium Costs for Individuals

779

540

741

806

817

4045

3446

4093

4116

4061

$0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000

ALL

HDHP/SO

POS

PPO

HMO

Employee Employer

Source: Kaiser/HRET Survey, 2009

McGlynn -31- 11/16/09

Most Employees Work for Large Firms that Already Offer Coverage

0% 20% 40% 60% 80% 100%

<25

25-49

50-99

100+

All Firms

<500,000 500-750 >750

McGlynn -32- 11/16/09

Outline for Seminar



Analysis of HR 3962


McGlynn -33- 11/16/09

What Is Our Contribution?

Transparency around the numbers Assumptions Design choices Analytic methods

Objective source

Insights about unintended consequences

Broader perspective on policy effects

McGlynn -34- 11/16/09

Key Features of HR 3962

New insurance “Exchange” created National (Health Choices Administration) States may create separate exchanges (or multi-

state exchanges) Private companies and public plan offer policies

meeting minimum benefit standards

Exchange eligibility limited to those without employer offers or Medicaid eligibility

Exchange-eligible individuals with incomes up to 400% Federal Poverty Level can receive subsidies for premiums and out-of-pocket expenses

McGlynn -35- 11/16/09

Key Features of HR 3962 (cont.)

Medicaid eligibility expanded to all persons with incomes < 150% FPL

States with more generous eligibility must maintain prior levels

Employers required to offer insurance coverage and subsidize premiums

72.5% for individuals, 65% for family

Automatic enrollment of eligible individuals

Exempts firms with payroll < $500K

Penalty for failure to comply: 8% of payroll for firms with payroll > $750K

McGlynn -36- 11/16/09

Key Features of HR 3962 (cont.)

Require everyone to have insurance (individual mandate)

Options include: employer, Medicaid, Medicare, other government, individual

Penalty for failure to comply: 2.5% of adjusted gross income

McGlynn -37- 11/16/09

We’ve Analyzed the Likely Effects of This Legislation on Three Dimensions

Coverage

Spending

Consumer financial risk

McGlynn -38- 11/16/09

Effect of Different Subsidy and Penalty Levels on Reducing Uninsured

05

10152025303540

No penalty 30% 50% 80%

% of Exchange Premium

Mill

ion

s o

f u

nin

sure

d

No subsidy Low subsidyModerate subsidy High subsidy

McGlynn -39- 11/16/09

Newly Insured Obtain Coverage Through Employers, Medicaid, Exchange

0 50 100 150 200

ESI

Medicaid

Non-group

Other

Uninsured

Number of persons (millions)

Status quo HR 3962

McGlynn -40- 11/16/09

Uninsured in 2019 Are Younger Than Status Quo Projections Without Reform

0% 10% 20% 30% 40%

0-1

2-17

18-34

35-49

50-64

Age(years)

Proportion of uninsured population

Status quo HR 3962

McGlynn -41- 11/16/09

Uninsured in 2019 Are Relatively Healthier than Status Quo Projections

0% 10% 20% 30% 40% 50% 60% 70% 80%

Excellent orvery good

Good

Fair or poor


Status quo HR 3962

Sel

f-re

po

rted

hea

lth

sta

tus

Sel

f-re

po

rted

hea

lth

sta

tus

McGlynn -42- 11/16/09

Uninsured in 2019 Are “Wealthier” than Status Quo Projections

0% 10% 20% 30% 40% 50%

<150% FPL

150-300% FPL

>300% FPL


Status quo HR 3962

McGlynn -43- 11/16/09


Coverage

Spending


McGlynn -44- 11/16/09

House Bill Increases National (Personal) Health Spending by 3.6%

$0

$500

$1,000

$1,500

$2,000

$2,500

$3,000

$3,500

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Nationalhealth

spending($B)

Status quo COMPARE

McGlynn -45- 11/16/09

House Bill Would Increase Cumulative Medicaid Spending by 11.2%

$0$50

$100$150$200$250$300$350$400$450

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

Calendar year

Medicaidspending

($B)

COMPARE CBO

McGlynn -46- 11/16/09

Individual Penalty Payments Would Total $42.7B From 2010-2019

$0$50

$100$150$200$250$300$350$400$450

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

Calendar year

Penaltypayments

($B)

COMPARE CBO

McGlynn -47- 11/16/09

Employer Penalty Payments Would Total $103B From 2010-2019

$0$1

$2$3

$4$5

$6$7

$8$9

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Calendar year

Penalty payments

($B)

COMPARE CBO

McGlynn -48- 11/16/09


Coverage

Spending


McGlynn -49- 11/16/09

Outline for Seminar



Analysis of HR 3962


McGlynn -50- 11/16/09

U.S. Health Spending Increasing Rapidly

2008

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

4,500,000

5,000,000

1965 1975 1985 1995 2005 2015

Spending($ millions)

Total Expenditures

Total Private

Total Public

Federal

State & Local

Source: Centers for Medicaid Services, Health and Human Services, “National Health Expenditures Accounts, 1965–2017.

Compound Annual Growth in Total Health Spending per Capita in OECD Countries, 1990-2007

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

Kore

a

Ireland

Poland

Portu

gal

Greec

e

Unite

d Ki

ngdo

m

Czec

h Re

publ

ic

Spain

Aust

ralia

Belg

ium

New Z

ealand

Hunga

ry

Norway

Mex

ico

Unite

d St

ates

Nethe

rland

s

Iceland

Aust

ria

Japa

n

Fran

ce

Denm

ark

Cana

da

Swed

en

Finland

Switz

erland

Germ

any

Italy

CA

GR

, To

tal H

ealt

h S

pen

din

g in

Natl

Cu

rren

cy U

nit

s,

2000 G

DP

Pri

ces

U.S. Rate of Growth in Health Spending Is Neither Highest Nor Lowest

McGlynn -52- 11/16/09

Health Care Spending Is Increasing Faster than GDP Growth

12

1990

9

6

3

0

–31995 2000 2005 2010 2015

Percentchange

Sources: Centers for Medicare and Medicaid Services, Office of the Actuary, National Health Statistics Group; U.S. Department of Commerce, Bureau of Economic Analysis; and National Bureau of Economic Research.

Growth in national health spending

Growth in GDP

McGlynn -53- 11/16/09

Health Care Spending As A Proportion of GDP Projected to be 20% by 2018

0

5

10

15

20

25

1960 1993 2006 2007 2008 2009 2013 2018

% o

f G

DP

Health Spending

McGlynn -54- 11/16/09

Why Does This Matter?

Money spent on health care can’t be spent on other things

Spending on health care may overtake most other discretionary government spending

But, we’ve been concerned about these increases for a long time without taking any serious action

McGlynn -55- 11/16/09

Increased Prices Primary Drive of Rising Health Care Spending

PricesVolume/mixPopulation GrowthAging

Source: California HealthCare Foundation. Snapshot, Health Care Costs 101, 2008.

McGlynn -56- 11/16/09

Massachusetts Asked RAND to Evaluate the Effect of Various Cost Containment Options

Project involved several steps

Selected policy options to consider for analysis

Reviewed what was known from prior experience about effects of selected options on reductionsin spending

Modeled the impact of options that showed promise and that had a sufficient evidence base

McGlynn -57- 11/16/09

Options Were Selected for Study in Collaboration with the Client

We interviewed experts and stakeholders in Massachusetts to collect ideas about how to make care less expensive

We identified 75 options based on these sessions, and grouped into five categories

Reform payment systems Redesign health care delivery system Reduce waste Encourage healthy behavior Reform medical malpractice law

With the client, we selected 21 options for analysis, designed to represent each of the five categories

McGlynn -58- 11/16/09

12 Options in 4 Categories Met Criteria for Modeling (1)

(1) Reform payment systems to better align financial incentives with health goals

Implement bundled payment

Institute reference pricing for academic medical centers (AMCs)

Pay AMCs at a community rate

Institute hospital all-payer rate setting

McGlynn -59- 11/16/09


(2) Redesign health care delivery to improve efficiency and quality

Encourage greater use of medical homes

Increase use of retail clinics

Encourage greater use of nurse practitioners and physician assistants

Encourage greater use of disease management

McGlynn -60- 11/16/09


(3) Reduce waste in the health care system

Eliminate payment for preventable events (e.g., cost of treating hospital acquired infections)

Encourage less intensive use of resources at the end of life

Accelerate adoption of health information technology (HIT)

(4) Encourage consumers to maintain health

Encourage value-based insurance design

McGlynn -61- 11/16/09

Modeling Methodology We developed baseline health care spending

projections in Massachusetts from 2010 to 2020

Adjusted for population change

Allowed for health care cost inflation

Projected $670 billion in cumulative spending

Models estimate a range (upper and lower bound) of potential effects

Vary design and/or impact assumptions

McGlynn -62- 11/16/09

Example: How Bundled Payment Works Fee-for-service payment reimburses providers

separately for each unit of service, which encourages overuse of care

Under bundled payment, the total cost of needed services for a condition is calculated

Bundled payment amount is generally a percentage reduction from average current payment to discourage overuse, encourage coordination

Applies across multiple providers and care settings

Evidence suggests that bundled payment cansave money

McGlynn -63- 11/16/09

What Bundles Did We Include?

Chronic conditions

Diabetes

High blood pressure

Congestive heart failure

Heart disease

Chronic lung disease

Asthma

Procedures or admissions

Heart attack

Bariatric surgery

Hip replacement

Knee replacement

McGlynn -64- 11/16/09

An Example of the Prometheus Bundled Payment Methodology for Diabetes Care

0

1000

2000

3000

4000

5000

6000

7000

Average current payment

$6,076

Typical annual payment for diabetes, current payment system

McGlynn -65- 11/16/09

A Large Share of Health SpendingMay Be Avoidable or Unnecessary

0

1000

2000

3000

4000

5000

6000

7000

Average current payment

$2,357

$3,719

Typical annual payment for diabetes, current payment system

Necessary spending Potentially avoidable spending

61 percent of spending may be avoidable

39 percent of spending for needed care

$6,076

McGlynn -66- 11/16/09

Caps Would Reduce Spending by Limiting Payment for Potentially Avoidable Utilization

0

1000

2000

3000

4000

5000

6000

7000

Average current payment Bundled payment, upper bound

$4,217

$2,357

$1,86050%reduction

Alternative payment rates for diabetes, based on Prometheus

Necessary spending Potentially avoidable spending

$2,357

$3,719

$6,076

McGlynn -67- 11/16/09

Promising, but Many Details Would Need to be Addressed

Evidence is from hospital-based conditions Lower bound includes only hospital conditions But chronic illness is the biggest potential saver

Bundled payment may only work in organized delivery systems Who “holds” the bundle and allocates payments?

Bundles may be difficult to develop and price Prometheus: ten bundles in three years Balance assumptions about relative overuse and

underuse in current use patterns

Unknown effects on quality of care Prometheus & others recommend quality monitoring

McGlynn -68- 11/16/09

Results: Predicted Change in Spending, 2010-2020

-10 -8 -6 -4 -2 0 2Percentage change in spending

Bundled payment -5.7% -0.1%

-7.7%

McGlynn -69- 11/16/09

Payment Reform Options Among the Most Promising


Bundled payment

Hospital rate regulation

Pay AMCs at community rate

Eliminate payment for preventable events

-5.7%

-4.0% 0.0%

-2.7% -0.2%

-1.8% -1.1%

-7.7%

-0.1%

McGlynn -70- 11/16/09

Predicted Changes in Health Spending: 2010-2020


Bundled payment




Increase adoption of HIT

Encourage use of NPs/PAs

Promote growth of retail clinics

-5.7%

-4.0% 0.0%

-2.7% -0.2%

-1.8% -1.1%

-1.8% 0.6%

-1.3% -0.6%

-0.9% 0.0%

-7.7%

-0.1%

McGlynn -71- 11/16/09

Results: Predicted Change in Spending, 2010-2020


Bundled payment




Increase adoption of HIT

Encourage use of NPs/PAs

Promote growth of retail clinics

Create medical homes

Use value-based insurance design

Encourage disease management

-5.7%

-4.0% 0.0%

-2.7% -0.2%

-1.8% -1.1%

-1.8% 0.6%

-1.3% -0.6%

-0.9% 0.0%

-0.9% 0.4%

0.2%-0.2%

-0.1% 1.0%

-7.7%

-0.1%

McGlynn -72- 11/16/09

We Recently Estimated Effect of Selected Options on U.S. Spending Current legislation in Congress does not include

significant cost containment options

Among options modeled for Massachusetts, selected those that were:

Promising Relevant to the national dialogue

Projected spending on personal health services in the absence of policy change

Estimated likely percentage savings compared to trend from individual options

McGlynn -73- 11/16/09

Cumulative Reduction of 6.2% Needed to Hold Spending to GDP Growth

SQ ProjectionSQ Projection

Hold to growth Hold to growth in GDPin GDP

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019Year

$ Trillions

McGlynn -74- 11/16/09

What Options Did We Model?

Changes in payment Bundled payment Hospital rate

regulation

Delivery system changes

Disease management

Retail clinics

Benefit design (“value-based purchasing”)

Infrastructure investments

Health information technology

Primary care capacity Medical homes Scope of practice

Nurse practitioners

Physician assistants

McGlynn -75- 11/16/09

Payment Reform Tops the List ofPromising Alternatives

Bundled PaymentBundled Payment

Hospital Rate RegulationHospital Rate Regulation

Health ITHealth IT

Disease ManagementDisease Management

Medical HomesMedical Homes

Retail ClinicsRetail Clinics

NP/PA Scope of PracticeNP/PA Scope of Practice

Benefit DesignBenefit Design

6.06.0

5.4%5.4%

4.04.0 3.03.0 2.02.0 1.01.0 00 6.06.0

Percentage change in national health spendingPercentage change in national health spending

5.05.0

0.1%0.1%

2.0%2.0% 0.0%0.0%

1.5%1.5% 0.8%0.8%

1.3%1.3% 1.0%1.0%

1.2%1.2% 0.4%0.4%

0.6%0.6% 0.0%0.0%

0.5%0.5% 0.3%0.3%

0.3%0.3% 0.2%0.2%

Hussey et al NEJM 2009

Comprehensive Assessment of Reform Efforts: The COMPARE Initiative

Documents

policy optionswe

health reformdevelop

compare initiativeelizabeth

compare goalsprovide

compare dashboard

private policy makersmcglynn

health care system

health care proposals