Value Based Payment

Governors Push Value-Based Pay Shift to Control Costs

February 26, 2018 1:57 pm

The governors also backed a series of short-term steps that could help states stabilize their ACA marketplaces and Medicaid programs.

Feb. 22—A bipartisan group of governors urged a range of steps by federal, state, and private payers to spur the shift to value-based payment and help control spiraling healthcare costs.

Five governors—two Republicans, two Democrats, and an independent—issued this week a “blueprint” of policies and initiatives that they said could reduce the share of the economy consumed by health care. Among the data they cited as warning signs was a projection that U.S. national health expenditures will exceed $4 trillion by 2020, according to the latest report by the Office of the Actuary for the Centers for Medicare & Medicaid Services (CMS).

“If we don’t stop paying for quantity and start paying for quality at lower prices, I’ll tell you what we end up with,” said Ohio Gov. John Kasich, a Republican. “You’re either going to have a single-payer system, which will strip out all of the innovation we need in health care because single-payer systems don’t innovate … or the second thing is where we are starting to see many Americans in a two-tier healthcare system.”

Underscoring Kasich’s warning was the introduction last week of a plan by the Center for American Progress, a leading liberal-leaning think tank, to move to single-payer insurance.

Instead, Kasich urged market-based incentives to move away from fee-for-service medicine to a system that pays for quality.

The scale of the challenge was clear in the experience of Ohio, where Kasich has been pushing to shift state health care toward value-based payments for four years—and “it’s like spitting in the ocean,” Kasich said. That’s because employer-sponsored health insurance is the key to controlling healthcare costs.

“Big businesses have got to start saying to insurance companies and they have to start saying to their providers, ‘Either you give me a good price based on lower quality that makes our people happy, or we’re going to find somebody else to do it,’” Kasich said at a Washington, D.C., press conference.

According to the governors, a broader shift to value-based care requires several steps, including:

  • Measuring the value of all healthcare providers and payers and providing public transparency
  • Using information and incentives to drive an evolution of primary care to team-based care with accountability for the health and cost of populations
  • Holding providers accountable for the end-to-end costs and outcomes for episodes of care
  • Using Medicaid and state employee benefits to generate critical mass that can reorient the system toward value
  • Aligning priorities for value-based purchasing across all federal agencies

No Cost Estimates

The governors’ blueprint intentionally omitted estimates of the cost of implementing their initiatives, although Kasich estimated that implementation would save $1 trillion.

“The point with all of these recommendations is they are directions that we can agree to in a bipartisan way that allows us to at least contemplate getting our arms around the runaway inflation that we’ve had for 30 to 40 years,” said Colorado Gov. John Hickenlooper, a Democrat. “This country cannot afford sucking money away from higher education, transportation, from almost every other function of government.”

The governors sought to pressure providers to change how they deliver care.

“Move the entire system towards using incentives in every way that we can to motivate doctors, hospitals, and pharmaceuticals companies to do more with less,” Hickenlooper said.

The latest blueprint followed a Kasich-Hickenlooper proposal, issued in 2017, that laid out specific steps to bolster the ACA marketplaces but gained little national traction.

Short-Term Steps

Beyond the blueprint, the governors urged a series of short-term steps that they described as limited but needed to bolster various parts of the healthcare system.

For instance, they urged passage of the Alexander-Murray legislation, which would provide funding for cost-sharing reduction (CSR) payments. CSRs cover out-of-pocket costs for enrollees with incomes of up to 250 percent of the federal poverty level who buy plans sold on the Affordable Care Act (ACA) marketplaces. The Trump administration ended such payments about a year after a federal court ruled they required a congressional appropriation.

“They have to get this market stabilized,” Kasich said.

The bill also would allow states to set coverage requirements (known as essential benefits) for individual-insurance policies beyond the tight limits established by the ACA. Similar flexibility under federal rules also was sought for state Medicaid programs.

“Let me design a Medicaid program I want,” Kasich said. “Let’s change the Obamacare essential benefit package to what I want.”

Potentially undermining the governors’ calls for greater Medicaid flexibility was a study by the Government Accountability Office that was released Feb. 22 and found some states don’t complete evaluation reports for up to seven years after the start of Medicaid payment pilots and often fail to answer key questions about their effectiveness.

The governors highlighted the need for reinsurance programs for many ACA marketplaces. Alaska is one of three states where the Trump administration has approved a waiver to establish a reinsurance programs to bolster the ACA marketplace, and Gov. Bill Walker, an independent, credited the program with cutting premiums from the state’s sole ACA-marketplace insurer by more than 20 percent. Hickenlooper said his state plans to follow Alaska in seeking a reinsurance waiver.

The Trump administration’s urging of Medicaid work requirements also drew bipartisan support from the governors. At least 10 states have sought to add work requirements. Hickenlooper said he supports such requirements as long they exempt those who are too unhealthy to work.

“There are a lot of people very frustrated when they think [some recipients] are freeloading off the system,” Hickenlooper said.

Rich Daly is a senior writer/editor in HFMA’s Washington, D.C., office. Follow Rich on Twitter: @rdalyhealthcare


googletag.cmd.push( function () { googletag.display( 'hfma-gpt-text1' ); } );
googletag.cmd.push( function () { googletag.display( 'hfma-gpt-text2' ); } );
googletag.cmd.push( function () { googletag.display( 'hfma-gpt-text3' ); } );
googletag.cmd.push( function () { googletag.display( 'hfma-gpt-text4' ); } );
googletag.cmd.push( function () { googletag.display( 'hfma-gpt-text5' ); } );
googletag.cmd.push( function () { googletag.display( 'hfma-gpt-text6' ); } );
googletag.cmd.push( function () { googletag.display( 'hfma-gpt-text7' ); } );
googletag.cmd.push( function () { googletag.display( 'hfma-gpt-leaderboard' ); } );