New Path to Medicare Cost Control

Move over accountable care. A new contender for controlling Medicare costs has entered the arena. 

The Better Care, Lower Cost Act of 2014, introduced this month by Democratic and Republican sponsors in the House and Senate, offers an innovative path for the future of Medicare.

Under the bill, Medicare would cap payments for the sickest beneficiaries who enter the program, but set the cap high enough to fund teams that can focus on strategies that reduce hospital admissions and keep overall costs under the cap. It is, in essence, a shared-savings program—even though that term does not appear in the bill.

The proposal also offers a radically different approach to how government initiates changes in Medicare. It's not only a bipartisan bill, but its drafters relied on feedback from the people and institutions that actually provide healthcare services to seniors.

Only one Medicare issue has brought both sides of the aisle together in recent years—the annual “doc-fix” required to forestall sharp physician pay cuts mandated by the sustainable growth-rate formula. Conventional wisdom suggests Medicare changes such as Better Care, Lower Cost have no chance in an environment where an SGR-fix or even repeal effort will consume Congress' collective attention span.

The new “X-factor” in the equation, however, is the political capital that Sen. Ron Wyden (D-Ore.) brings to the table and the possibility that the new program might provide money to help fund the doc-fix. Wyden—slated to replace current Senate Finance Committee Chair Max Baucus (D-Mont.), who has been nominated by President Barack Obama to be the next U.S. ambassador to China—introduced the bill with geographically well-distributed co-sponsors: Sen. Johnny Isakson, (R-Ga.); Rep. Erik Paulsen (R-Minn.); and Rep. Peter Welch (D-Vt.).

“The four of us have been working on this bill for a long, long time,” Wyden said during a news conference. “This is arguably the premiere domestic issue of our time, and those big issues require a bipartisan approach.” Echoed Isakson: “The coincidence of Max Baucus becoming the ambassador to China and Ron Wyden ascending to the chairmanship of the committee is irrelevant compared to what we've done with this bill.”

The coalition rejects the “false choice” between either cutting service to beneficiaries or slashing payments to providers—a theme they hear repeatedly from major providers in their regions. Paulsen, for instance, said he received input from Minnesota's Mayo Clinic. The Republican representative said the approach offers a chance to bend the cost curve with its flexibility, alignment of incentives and focus on chronic-care management.

The model follows the strategies deployed by the healthcare delivery systems that registered the most success in Medicare's Pioneer ACO program. They say legislators incorporated their ideas into the bill. “I think what you're looking at today is what responsive government looks like,” said Dr. Andrew Racine, senior vice president and chief medical officer at Montefiore Medical Center in New York.

The Pioneer ACOs that made money, such as Montefiore and Phoenix's Banner Health, did so by focusing on the small percentage of the sickest patients who accounted for the biggest portion of Medicare spending. The strategy was driven by Medicare's decision to simply assign patients to the ACOs.

The proposed Better Care program builds on the lessons learned from the ACO experience. Supporters note that the BCP concept, which would require beneficiaries to receive an individually tailored care plan, also borrows ideas fromMedicare Advantage and the Patient-Centered Medical Home practice model.

“If you keep people out of the hospital, as Willie Sutton said, that's where the money is,” Racine said. Montefiore's Pioneer ACO saved Medicare $23 million in 2012 by reducing admissions by 10% and all-cause 30-day readmissions by 35%.