When a Law Loses Its Teeth, Can the Reform Still Bite?

When a Law Loses Its Teeth, Can the Reform Still Bite?

After months of industry criticism, CMS' accountable care organizations are winning plaudits after the agency made the program less intimidating for participants. Some suggest that will make ACOs less effective tools of reform, too.

Economist Austin Frakt calls it the catch-22 of health reform: To change provider behavior, the change can’t threaten providers’ behavior.

At least, not at first.

CMS’ Medicare Shared Savings Program is shaping up as a textbook example of this staggered approach.

The program is designed to transform health care provider payments — eventually — by creating accountable care organizations, voluntary structures intended to spur health care provider cooperation.

But when CMS first proposed the so-called ACO rule in April, providers found the program too prescriptive. Even “poster boy” organizations like Mayo Clinic and the Cleveland Clinic announced that they would sit out ACOs, which were modeled after their own systems, Jenny Gold noted in Kaiser Health News.

But in a striking reversal, heath providers and industry associations are applauding the newly finalized MSSP. After six months of criticism, CMS crafted an ACO rule that’s much more palatable for potential participants: The agency reduced the risk of penalties, sliced the number of required quality measures and made it significantly easier for provider organizations to team up without the threat of investigation by the Federal Trade Commission.

Yet making the law more attractive also may have dimmed its initial effectiveness. The Leapfrog Group, which is focused on improving patient safety, knocked the final rule for not having enough transparency on provider performance. The American Benefits Council, which represents employers, said the program’s new changes to federal antitrust provisions may boost provider market power and lead to unnecessary price hikes.

Luring in Participants

Of course, some health reforms that were seen as too industry-friendly — and not sufficiently transformative — ultimately won over opponents.

When Republicans crafted the Medicare Part D program in 2003, many Democrats and some policy analysts said the new drug benefit would be overly generous to the health industry; its harshest critics charged that the law was a GOP sop to pharmaceutical donors, which favored the Republicans by nearly 3-to-1 in their 2002 contributions.

Yet the program is beloved by beneficiaries today, with millions of patients benefiting from prescription drug discounts each year. Many of the Democrats who voted against the law have since become staunch champions.

Still, some say that the law’s original sin — its failure to let Medicare use its massive purchasing power to negotiate discounts with the pharma industry — leads to billions of dollars in unnecessary annual spending and helps drive the federal deficit.

How DRGs Dulled the Edge

Another apt comparison may be Medicare’s last major effort to overhaul how it pays providers: the 1982-1983 fight over prospective payment.

At the time, federal lawmakers feared that paying hospitals in full for their costs was rapidly exhausting the Medicare trust fund. The plan to adopt diagnosis-related codes, or DRGs, was hatched as a way to standardize payment and slow the cost curve.

Yet providers warned that the reimbursement scheme was too rigid and would leave them shouldering new risk to deliver high-quality, low-cost care. Advocates’ criticism — that the law might benefit hospitals at the expense of patients — wouldn’t be out of place today.

Lawmakers relented by delaying the national adoption of DRGs and phasing in the program by adopting nine regional payments. Eventually, the prospective payment system would spread beyond the hospital Medicare program; meanwhile, federal spending did slow down. When DRGs were first introduced, Medicare spending was growing at about 15% per year; the annual growth rate today is about half of that.

Listening to Providers Over Patients

But eking out savings from DRGs began a cycle of rewarding provider concerns at the expense of patients, some advocates suggest.

Writing in Health Affairs, René Cabral-Daniels of the National Patient Advocate Foundation charged that the 1983 DRG reforms were “myopic in their approach to restrain costs without considering patient consequences.” She cites a 1990 study in the Journal of the American Medical Association that found DRGs led to patients being discharged “quicker and sicker” — receiving less hospital care and heading home in less-stable conditions.

That earlier debate also marked another shift in the provider-lawmaker relationship: the start of a new era of targeted lobbying.

Adopting prospective payment meant CMS began issuing annual updates to reimbursement rates; the agency often uses these rules to introduce limited reforms, too. Yet this process also gave providers a regular opportunity to lobby against a proposed version and be rewarded with a less-severe final rule.

For example, the 2010 inpatient prospective payment system rule was originally intended to slow Medicare spending as hospitals shifted to a new, more specific DRG system; after provider outcry, CMS elected to delay the cuts for another year.

Still, the ACO program may represent a promising start to slowly winning providers over to yet another payment model. Frakt concludes that “you have to start with sensible structures that have no teeth.” “Then you have to add small teeth … [then] maybe some canines,” he adds. “By the time we see the fangs, we’re ready for them. The transition is gradual. Everybody is on board.”

Here’s what else is happening around the nation.

Administration Actions

Challenges to Reform

In the States

On the Campaign Trail

On the Hill

Rolling Out Reform

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