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Reforming Health Care’s Payment and Delivery Systems

Each year, billions of dollars are needlessly spent in California’s health care system. In fact, as much as 30 percent of treatment may be unnecessary. At all levels in the system, we see excessive administrative costs, overpriced services, and duplicative or even harmful care. Our private and public reimbursement systems are inefficient and poorly targeted.

Starting January 1, 2014, more than 2 million will be newly eligible for Medi-Cal and more than 3.2 million Californians will be eligible for premium subsidies in the Health Benefits Exchange. The ACA begins to tackle some of these problems and prepare for this new world, emphasizing wellness, prevention, primary care, improved outcomes for chronic conditions, and slowing the rise in spending. Health reform attempts to control costs and improve value in the short- and long-term, and the law includes pilot/demonstration programs to better direct payments that incentivize proper, efficient, and effective care delivery.

However, we in California will need to do more. We must begin preparing now for what we know is on the horizon. We need to be sure that both the currently- and the newly-insured have timely access to primary and specialty care regardless of age, income, or location. We should explore new reimbursement structures that contain the right incentives for payers and providers. We need to better deploy managed care in Medi-Cal, Medicare, Healthy Families, and other public programs.

ITUP’s Delivery System Reform Workgroup has been tackling these questions, and we have just released this White Paper with recommendations for delivery system reform.

Among others, the paper recommends that we (the state and pertinent stakeholders and decision-makers):

  • Apply for one of the five Medi-Cal Global Payment System Demonstration Project under section 2705 of the ACA to adjust payments made to their safety net hospital system/network from FFS to a global capitated payment model;
  • Experiment with condition-adjusted capitation under the Global Payment System Demonstration Project or with the Medi-Medi population through the §1115 Medicaid waiver;
  • Test bundled payment approaches as a recipient of either the National Pilot on Payment Bundling under section 3023 of the ACA or the Medicare Hospice Concurrent Care Demonstration Program under section 3140;
  • Whether in Medi-Cal, Medicare, or the Exchange, begin exploring and encouraging the use of VBID payment models and reference pricing to choose services with higher values and use cheaper products/medications;
  • Investigate PROMETHEUS payment options where payment is given for an entire care episode, but is adjusted for the severity/complexity of an individual’s condition and provides only a portion of payment for potentially avoidable complications;
  • Begin enrolling Medi-Cal beneficiaries with chronic conditions into a “health home” as authorized under section 2730 of the ACA;
  • Participate in the Medicare Shared Savings Program and the five-year Medicaid pediatric ACO demonstration project under section 2706;
  • Encourage ACO-like partnerships between community clinics, other smaller providers and local hospitals, otherwise too small to bear risk;
  • Expand and promote the use of tele-medicine in order to provide more efficient and appropriate care in rural counties;
  • Ensure that our state’s providers and plans are utilizing modern enrollment, delivery, information storage, and information systems;
  • Increase, and at the very least avoid cuts to, Medi-Cal provider rates, especially for primary care;
  • Increase the scope of practice of nurse practitioners (NP), physician assistants, or physician expanders (PE), thus increasing the importance of working in multi-disciplinary teams, especially in chronic care management;
  • Eliminate or loosen the requirement that ties NPs to physician supervisors and allow NPs to practice more independently; and
  • Change medical school curricula and provider rates to promote careers in primary care.

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