Where are we going? Medical Cost and ACOs with Geisinger Health System, The Heritage Foundation & the Urban Institute

By Barbara Day, M.S., R.D., C.N.

The Health Enterprises Network (HEN) provided a panel discussion on Where are we going? Medical Cost and ACOs. The panelists were from Bruce Hamory, MD, FACP with Geisinger Health System, Ed Haislmaier fromThe Heritage Foundation and John Holahan, PhD with the Urban Institute.  Mark Birdwhistell, former Secretary for the Kentucky Cabinet for Health & Family Services and current Chief External Officer/Chief of Staff at the UK Medical Center.

Dr. Hamory with Geisinger Health System which has 900 physicians at 35 locations throughout rural Pennsylvania said that the US health care system is the most expensive in world and rate 19th in quality care throughout the world. His company uses IT to connect all the locations and physicians which has effectively brought down health care costs and has improved outcomes, according to him. Dr. Hamory said the Accountable Care Organizations (ACO) under Affordable Care is supposed to provide better care with the physician acting as a COACH. He said that this is a complete redesign of Medicare through better coordination of care for better outcomes.

Dr. Hamory said that information technology through the medical home can help improve costs and also improve outcomes. The medical home uses technology as well as nurse case managers as a type of concierge medical care for the elderly. This type of care can improve outcomes and decrease hospital admissions and readmissions. According to Dr. Hamory, these nurse case managers should be taking care of 80 to no more than 125 chronically ill patients for best care practices.

Dr. Holahan said the costs of the really sick are on the rise due to increases in obesity and chronic illnesses. He said that “the CBO did NOT score ACOs as a savings because since they are not proven.”  (NOTE: ACOs are being developed currently all over the country).

Dr. Holahan suggested the Cadillac tax which begins in 2018 will collect “a 40% excise tax on employer’s health insurance plans with premiums over $10,200 for the individual ($4080 tax + $10,800 = $14,280/year with tax) and $27,500 for families ($11,000 + $27,500 = $38,500/yr with tax).”

According to Dr. Holahan, by removing the tax deduction on employer health insurance policies the Federal Government may collect $3.5 trillion “but what affect will that have on health insurance when companies lose that deduction.”  (NOTE: Under Affordable Care, in 2014 businesses over 50 will be required to offer health insurance or pay a mandated penalty of $2000 per employee. Ex. 51 employees X $2000 = $102,000. 51 employees X $9600 ($800/month premium) each employee = $489,600 plus pay a tax of say 5% Fed Gov (estimated tax) $24,480 = $514,080 for health insurance. If the employer puts the employees into the state health insurance exchanges the owner saves $412,000 per year)

Dr. Holahan also suggested that “chronic care management with multiple doctors is responsible for 30% of health care spending.”  He suggested the “state health exchanges would become the rate setter not Medicare. The cost of federal government subsidies is unsustainable.”

Ed Haislmaier said “the cost is what you pay, the benefit is what you get.” He said the question is “what are we getting for our money? We are seeking a better value system. Top down – invent better value.” He suggested “too much public policy is about herding of cows. People do things in self interest and easiest with less effort. Consumers are not all equal. Health insurance agents have to become a buyer’s agent,” to find the best policy for the consumer not the best policy for the health insurance company the agent they are representing. Managed care not a better value [for care] but lower rates.  There should be an incentive for providers and insurers to collaborate.”  Haislmaier said in so many words that there needs to be transparency and the ability to compare all health insurance policies in a logical easy manner.

What will the future bring?

Haislamaier says the shift in health care need to be toward the patient centered model. Dr. Holahan says 5 years out no real changes just more regulations and more options is the health exchanges.

Who will be the holder of the risk? Are we back to CAPITATION?

Providers will be given a specific amount of money from Medicare for a patient under the ACOs which is very similar to CAPITATION under the HMOs. (NOTE: Capitation is a fixed prepayment, per patient covered to a provider to deliver medical services. The payment is the same no matter how many services or what type of services each patient actually gets. Under capitation, the provider is financially is responsible).

Dr. Hamory suggested providers will be at great risk because they must provide quality care while dealing with the bottom line. He said “30% waste in health care system is in the billing department rather than spent in patient care. The system is inefficient.” (Under Affordable Care Act, providers will be given bonuses if they can control costs).

Haislmaier claims “if you don’t care about the administrative costs [like the Centers for Medicare and Medicaid Services] you don’t care about fraud. There is 20% fraud in Medicare. Look at concierge medicine all the administrative costs are eliminated.”

What Next?

As for the ACOs, they are still being developed so the proof will be in the pudding once they officially begin. Questions still not resolved under the Affordable Care Act for Medicare is: Will physicians be paid at the 29.4% reduction rate scheduled for January 1, 2012 which could be a major factor in patient care for seniors?  Or will Congress raise the reimbursements to physicians which will increase the cost of Medicare but also increase access to care? Will ACOs be effective at driving down costs while improving outcomes? Will all providers be connected by information technology which can improve outcomes and also decrease costs? Will information technology drive up the administrative costs or decrease them? Stay tuned!

Barbara Day, M.S., R.D., C.N, is a registered dietitian (www.DayByDayNutrition.com) who has been teaching healthy lifestyles strategies to consumers for over 35+ years. Check out Barbara’s new healthy lifestyles website: www.KentuckianaHEALTHwellness.com.