To Gauge ObamaCare Impact, Ignore CBO and Focus on AQC

The big health care story in Washington, D.C., on Wednesday morning comes down to three letters: CBO. The Congressional Budget Office released its latest projections about the Affordable Care Act’s cost and coverage, concluding that the Supreme Court’s changes to the ACA will lead to some states to opt out of its Medicaid reform. As a result, the ACA’s cost would fall by $84 billion over 11 years but lead to about three million fewer people receiving health insurance.

The CBO numbers are incredibly important in one sense: They reframe the debate over the ACA yet again. As “Road to Reform” noted last week, more than two-thirds of states are waffling on whether to participate in the law’s Medicaid expansion, and the new CBO numbers will offer new targets for supporters and opponents of ObamaCare to make their case.

But the CBO score is also more of a political story than policy news. And as both parties continue to haggle over the ACA’s price and impact, keep in mind that the CBO’s projections about health law costs are often wrong.

So rather than focus on estimates of future reforms, “Road to Reform” this week will examine results from a current one: the Alternative Quality Contract. It’s an important payment pilot developed by Blue Cross Blue Shield of Massachusetts — and a key forerunner of the ACA’s accountable care organizations.

AQC Offers Template for ACO

Under the AQC, which Blue Cross launched in January 2009, a hospital or physician group negotiates a budget — or global payment — that covers the cost of care for all patients in their practice. If participating providers stay under budget, they receive bonuses; if they overspend, they pay the difference.

Sound familiar? In one sense, the AQC harkens back to capitated payments, a model that California knows all too well. But it’s also a private-sector effort that mimics the government’s own Medicare Shared Savings Program, which has launched about 150 new ACOs in the past six months.

And as the Washington Post‘s Sarah Kliff noted this month, that’s why the AQC is so important to watch; it’s like “an ACO that is up, running and looks to be delivering the exact results that everyone has hoped for.”

Latest Results Hearten Supporters of Payment Reforms

Eleven organizations — which include 4,800 physicians, caring for more than 420,000 patients — have signed up for the AQC. And there’s new enthusiasm around the model because early reports had suggested that global payments might not effectively slow health cost growth.

Massachusetts Attorney General Martha Coakley (D) last year reported that AQCs did not cost less than the traditional fee-for-service model. One month later, a New England Journal of Medicine study indicated that the program generated only “modest” savings.

But a new Health Affairs study offers the strongest evidence yet that the AQC model can be successful. Harvard Medical School researchers examined the progress of the 11 participating organizations in the first two years of the pilot program. According to the researchers:

  • The average participating organization spent about 2% less than non-participating organizations in the first year and 3.3% less in the second year; one provider achieved nearly 10% in savings in year two.
  • Meanwhile, participating providers improved the quality of chronic care management, pediatric care and preventative care among adults, especially in the second year.

One key takeaway, according to the researchers, is that “organizations need time to implement change,” which is reflected in the second-year surge in savings and improvements. Researchers also spotlighted the organizations’ common money-saving strategies, such as referring patients to lower-cost providers and reducing utilization of extra tests, especially imaging.

Can Model Work, in the Long Run?

There are still many open questions about the AQC’s impact, and even why researchers uncovered certain savings.

For example, study author Michael Chernew says his team could not determine whether providers reduced inappropriate imaging or cut back on procedures that could have improved care. And Chernew adds that the “real question is going to become, as the global budget gets tighter, can the groups continue this level of savings” in the coming years?

Meanwhile, Eric Beyer — the president and CEO of Boston’s Tufts Medical Center, one of the first participants in the AQC — says that despite all the praise for the AQC from policymakers and providers, employers aren’t signing up.

“More of our population is moving toward products that have no requirement for paying providers for quality over quantity,” Beyer wrote in the Boston Globe last week. And while “this migration from performance-driven to preferred provider organizations” often gets missed in news coverage, “it’s an enormous step backward” for an industry desperately trying to tamp down its costs while raising care quality.

Here’s what else is happening around the nation.

Medicaid Expansion

  • Despite the U.S. Supreme Court‘s ruling on the Medicaid expansion, states still must adhere to the Affordable Care Act’s “maintenance of effort” provision requiring them to maintain enrollment levels until 2014, according to a recent Congressional Research Service report. The report, however, did not clarify whether states could opt into the expansion after 2014, or choose to cover some, but not all low-income adults who are eligible for Medicaid coverage under the overhaul (McCarthy, National Journal, 7/18).
  • Nearly 11.5 million uninsured U.S. residents with incomes below the federal poverty line could fall into a new coverage gap if every state decided to opt out of the federal health reform law’s Medicaid expansion. Analysts already are referring to the coverage gap as the new “doughnut hole,” a reference to a coverage gap in the Medicare Part D prescription drug benefit (Alonso-Zaldivar, AP/Sacramento Bee, 7/18).
  • In a letter sent on Monday to HHS Secretary Kathleen Sebelius, Virginia Gov. Bob McDonnell (R) — chair of the Republican Governors Association — expressed frustration with CMS’ response to a recent RGA letter requesting answers to a series of questions about the federal health reform law. McDonnell wrote that acting CMS Administrator Marilyn Tavenner‘s response to the letter “was neither substantive nor serious” and wholly inadequate” (Reichard, CQ HealthBeat, 7/23).

In the States

  • Last week, Republicans in the Kentucky Legislature thwarted Gov. Steve Beshear’s (D) efforts to set up a state-run health insurance exchange by rejecting funding to rent offices for the new exchange employees. The move came shortly after Beshear signed an executive order to create the exchange (Baker, “Healthwatch,” The Hill, 7/17). However, Kentucky Finance Secretary Lori Flanery has the authority to override the Republican effort (Brammer, “Bluegrass Politics,” Lexington Herald-Leader, 7/17).
  • Alaska Gov. Sean Parnell (R) announced last week that the state would not create its own health insurance exchange, leaving the task to the federal government. Parnell said the exchange program is too costly to implement and that the responsibility of creating and running the exchange should fall on the federal government (Rosen, Reuters/Hartford Courant, 7/17).

On the Hill

  • Last week, about half of the House Republican caucus signed a letter to the House GOP leadership urging more votes to block funding for the Affordable Care Act. The letter — by Reps. Michele Bachmann (R-Minn.) and Jim Jordan (R-Ohio) — asked House Speaker John Boehner (R-Ohio) and House Majority Leader Eric Cantor (R-Va.) to continue efforts to halt the law “until we are successful” (Viebeck, “Healthwatch, The Hill, 7/19).

Rolling Out Reform

  • Last week, HHS pledged up to $275 million for a state innovation program that will help states design and test new multi-payer payment and delivery models (Zigmond, Modern Healthcare, 7/19). The Center for Medicare and Medicaid Innovation program — called the State Innovation Models Initiative — was created under the Affordable Care Act and will distribute two types of awards: model design awards and model testing awards (HHS release, 7/19). Applications for the awards are due Sept. 17, 2012, and HHS expects to announce the winners in November (Modern Healthcare, 7/19).

Public Opinion

  • Just over half of likely voters believe Congress should address other issues now that the U.S. Supreme Court has ruled on the Affordable Care Act, according to a recent NPR poll. The poll also found 48% of likely voters disapprove of the overhaul, while about 47% agree with the high court’s decision to uphold the law (Viebeck, “Healthwatch, The Hill, 7/19).

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