Medicare Plan Will Pay Docs Based On Keeping Patients Healthy. Will It Work?

The idea that insurers can keep costs down by encouraging the kind of care that keeps people from needing costlier procedures down the road isn't new, and Medicare has tried a mix of incentives and financial punishments over the last decade.

Most haven't generated significant savings or shown they improve patients' health, and the American health care system still primarily relies on billing for individual services.

Part of the reason that efforts to pay for quality haven't achieved much is that Medicare, Medicaid and private insurers are each going their own way, with separate measures of care quality and different ways of paying, said Karen Joynt Maddox, co-director of the Center for Health Economics and Policy at Washington University.

That means there's not enough momentum in any one direction to change how health care facilities do business at this point, she said.

"It's just a mess right now," she said. "It's moving, but it's moving in a slow, piecemeal fashion."

Colorado health officials think their partnership with the federal Centers for Medicare and Medicaid Services could help change that. It's early in the process, but the plan is that over the next few years, Colorado Medicaid — now called Health First Colorado — and Medicare will pick specific areas where they want to see improvement and decide how to pay in a way that encourages providers to focus on those priorities.

If it works, Medicare could decide to take some or all of the Colorado model nationwide. It's going to try out different ideas to improve care quality in Arkansas, California and North Carolina.

Mark McClellan, one of the co-chairs of the Centers for Medicare and Medicaid Services' Health Care Payment Learning and Action Network, said they chose to work with Colorado and the other three states because they've already taken steps to pay for quality.

"We look forward to the efforts in these states serving as models that will help other states succeed in their efforts to pay for better health and to increase quality and lower costs in health care," he said in a statement.

Kim Bimestefer, executive director of the Colorado Department of Health Care Policy and Financing, said the partnership is just one way Colorado is moving away from paying for each medical service provided and toward a system that rewards better outcomes for patients. She said she thinks Colorado can build something more effective by looking at where other efforts fell short.

"You get what you pay for, and people focus on what you measure," she said.

Monthly rates meant to allow flexible care

Stephanie Gold, president-elect of the Colorado Academy of Family Physicians, said the state started the second phase of its alternative payments plan in January. In the first phase, the state paid extra if practices hit certain goals, like screening a high percentage of eligible patients for cancers that can be successfully treated when diagnosed early, she said.

In the second phase, practices that decide to participate can choose to get a set monthly sum for anywhere from 10% to 100% of their Medicaid patients, with the amount adjusted based on how complex the patients' conditions are, Gold said. They'd still get paid per service for the other patients, as before.

Assuming phase two goes well, phase three will likely significantly expand the per-month payment model, she said.

The monthly rate gives practices more flexibility to put money toward services they normally couldn't bill for, like answering patients' emails or having a navigator work with those who need help getting healthy food or arranging transportation. It also provides some stability, in case demand for services ever drops again like it did at the start of the pandemic, Gold said.

Over the summer, the state rolled out a drug comparison tool, allowing prescribers to see which drugs are preferred because of their outcomes and costs, Bimstefer said. If a doctor enters an expensive drug, the system suggests two lower-cost options, if they exist. Nothing requires the prescriber to choose the lower-cost options if they think that one drug is the best, she said. The state is still working on incentives to get providers to use it.

"If you pay for everything, no matter what the outcome is, you know what you're going to get? More of the same," she said in a department oversight hearing with lawmakers on Jan. 27.

Hard to change "the devil you know"

Medicare and other payers have tried a few different methods to encourage quality and keep costs down, Joynt Maddox said.

One model is to reward or penalize hospitals based on how patients do after being admitted — whether they get a secondary infection or return within a few weeks because of complications, for example. Those plans have produced "minimal" cost savings, and while they may have encouraged hospital leadership to focus on preventing harm, they haven't changed the odds patients will die after care, she said.

"They don't fundamentally disrupt how care is delivered or how it's paid for," she said.

The other main thing Medicare and other insurers have tried is attempting to limit the cost of patients' care over the course of a year, Joynt Maddox said. That can either involve paying the medical practice in charge of people's care a monthly rate (so they get to keep any savings if they keep care expenses down) or setting a goal for spending and rewarding providers if they hit it.

Plans that pay a monthly rate, often called accountable care organizations, have been "somewhat successful" in producing small gains in quality and reductions in cost, Joynt Maddox said. But they haven't necessarily resulted in patients getting what they need, which could be as simple as having a designated staff member check in regularly, she said.

"It's all reactive medicine," she said.

It's difficult for practices to please everyone, since Medicaid, Medicare, state-regulated commercial insurance plans and federally regulated large employer plans all can have different priorities for improving quality, or different ways of measuring essentially the same priority, Gold said.

Providers are understandably concerned about plans where they could lose money, and there's no agreed-upon method for determining how complex a patient's needs are, and therefore how much more their primary care doctor should get paid to serve them, she said.

"I think there's widespread understanding that fee-for-service is a flawed payment system," she said. "I think there's a bit of 'the devil you know.'"

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