Health Affairs recently published a research brief, Value-Based Payment As A Tool To Address Excess US Health Spending. The brief is one in a series that serves to provide snapshots of research performed by the nonpartisan Council on Health Care Spending and Value. The council plans to release recommendations in early 2023 in response to excessive health spending in the United States. The council defines excessive spending as “that which both diverges from a norm and is not commensurate with the health it produces.”
According to Health Affairs, the level and growth of healthcare spending in the United States has diverged from not only domestic norms, but also international norms. From 1970 to 2019, total health spending in the United States grew from 6.9% of GDP to 17.7% of GDP. Then, in 2020, as a result of the pandemic, healthcare spending was 19.7% of GDP, a level not expected until 2028. The Organization for Economic Cooperation and Development estimates that total health spending among member countries was 8.8% of GDP in 2019, compared to 16.8% in the United States.
In its research brief, Health Affairs considers value-based payment models to be any arrangement that is not an open-ended fee-for-service payment or straight pay for volume.
Health Affairs noted that Medicare (and even Medicaid) are well known for the use of advanced alternative payment models/value-based payment models. However, they also note that California’s private sector is another good example. According to the research brief, California has about 200 medical groups that participate in the “delegated model,” under which they are paid a risk-adjusted per member per month capitation from commercial payers, either for professional (physician) spending or for the full continuum of care (including hospital and drug spending). Additionally, while the groups are capitated by health plans, they are still able to pay individual physicians on a fee-for-service basis.
The research brief went on to say that advanced alternative payment models/value-based payment models “remain the nondominant form of payment” in the United States, with the percentage of all payments in category 3 or 4 alternative payment models growing steadily, from 23% in 2015 to roughly 41% in 2020. While the “growth in category 3 and 4 APMs is notable,” Health Affairs notes, “nearly 40 percent of payments in 2020 remained pure fee-for-service” and were not tied to “any type of quality yardstick.” Another 20% of healthcare payments were fee-for-service that were tied to quality or some other measure of value.
Accountable Care Organizations
Health Affairs pointed to Accountable Care Organizations (ACOs) as a potential solution, noting that ACOs are incentivized to lower the costs for a defined population of patients while meeting certain measurable quality improvements. The details of the ACO arrangements vary depending on who leads the model (hospital versus physicians), the basis of the payer, and a variety of other factors. However, it is hard for researchers to truly discern how much an ACO can save, as it is hard to prove what would have happened if the ACO were not in existence.
Citing a 2018 study of ACOs in the Medicare Shared Savings Program, Health Affairs noted that in 2012, 2013, and 2014, the average ACO reduced spending by 3.1%, 1.4%, and 0.4% per beneficiary, respectively, by the end of 2015. Not only did the ACOs result in less spending per beneficiary, but the financial performance of physician-led ACOs was “superior” to those led by hospitals.
Conclusion
For this research brief, Health Affairs concluded that the “relatively modest” results of the value-based payment models for Medicare and Medicaid “may be related more to challenges in design and implementation,” not necessarily the fundamental approach. Additionally, CMMI seems willing to address some of the criticisms identified in the programs, including the voluntary nature of the models, too many models being available at once, and inadequate support for delivery systems to accept downside risk.