Seven Solutions to Healthcare Reform (Part 6 of 7)

The sixth blog of our seven-blog series will detail the proposed changes that’s needed to the U.S. Healthcare System as part of Healthcare Reform for the 21st Century.

Based on experience, we believe that each our seven key suggestions are equally weighted in importance therefore, it would be hard for us to decide which one is most important.

Additionally, we still don’t believe that meaningful healthcare reform can be done in one, two, or even four years. The right plan for the population would likely take a decade therefore, it is far too difficult to accomplish with the vagaries of our system of government without true nonpartisan support.

The best example I can cite is America’s plan to “put a man on the moon and bring them back safely,” the famous words that inspired a nation spoken by President John Fitzgerald Kennedy, and that took a decade.

I am certain that all the astronauts found the second part of this statement every bit as important as the first. We should not only commit to developing a nonpartisan healthcare plan that serves the people, put it in legislation, and then allow it to survive changing administrations without partisan meddling.

As President Trump has been quoted saying- “healthcare is complicated.”

I think that reforming health care today is as complicated as putting a man on the moon in the 1960s. First, laws of the universe and nature are fixed. Second, there are so many “decision makers” involved; not only do you have the Executive Branch of government, led by the President and the Secretary of Health and Human Services (HHS), but also you have 535 federal legislators, 50 states with 50 governors and 50 legislatures, and 335 million Americans. We find it sad and at times comical, to watch people talk about how they can reform healthcare, particularly when their only exposure to healthcare is the annual visit to the doctor!

As with the building of a physical structure, you need first to prepare the site, prepare and build a good foundation to support the walls the roof, and then you can build out the inside. You cannot not start from anyplace but the foundation. Healthcare is a live, very dynamic environment, and all components are interconnected.

A change in one part propagates throughout the system, and this creates constantly moving and inter-related parts. This ripple effect, is one of the key reasons making healthcare reform “complicated.” We cannot just throw on some new tires, or change the engine and keep racing – this is a total top to bottom overhaul!

A key, if not mandatory, component of healthcare reform is to have material reform of provider compensation. As we discussed in our last blog, the healthcare industry has the most opaque and obscure, in fact Byzantine, payment and collection model in the world. This model does not benefit anyone. It does not benefit the system, the providers, the payors, nor the patients.

The U.S. Congress with bipartisan support in 2015, started “a” process to transform payments for Medicare with the passage of MACRA.

What is MACRA?

The Medicare Access and CHIP Reauthorization Act (MACRA) of 2015 intended to transform physician Medicare payments by replacing the flawed Sustainable Growth Rate (SGR) physician fee, and update the formula with a new payment system.


The goal is to improve care for Medicare patients by transitioning the payment system from volume to value beginning in 2019.

The plan is to move providers from an “encounter only” compensation model, to an “outcomes based” compensation model. MACRA is the latest attempt to transform compensation for providers. In fact, this has been a series of fifty-year experiments, since Medicare was founded in 1965.

Having just completed my third MACRA briefing, and reading everything that has been available on the subject over the last 12 months, I believe it will be hard to administer and may require too much from small groups of providers. It is heavily reliant on technology, something we advocate strongly; however, the technology needed is not in place and it will take more time that was allocated to fully implement. Therefore, that means providers and, in fact the Center for Medicare and Medicaid, are not even ready to implement MACRA.

MACRA officially started on January 1, 2007, to accumulate data for how much providers will be paid in 2019 the system, and yet systems and process are still not yet ready.

At the same time, we are in the middle of the pilot program of Accountable Care Organizations or ACOs. Under the ACO program, doctors (or groups of providers, sometimes including hospitals) are paid initially on a fee-for-service, and on a look-back basis. Medicare shares in the cost savings (based on historical cost) with the ACOs; however, most ACOs have not been able to share in the savings by the last count. Less than 20% could meet the goals as set by the program, and receive bonus payments.

Now, some of those ACOs, the good ones anyway, are now embarking on a “full risk” model – much is very much like managed-care organizations, or insurance companies. In a full risk model, the ACO will be exposed to downside risk or losses if patient care is not managed appropriately.

The original idea of the ACO was to eventually transition to a new model that straddled the gap between fee-for-service Medicare and Medicare Advantage; the program that only managed-care organizations (MCOs) administer.

MCOs are paid a flat sum by Medicare based on several factors. The most important factors are age, sex, location and the major health issues of the beneficiary. Based on that very complex formula, MCOs received a flat sum for each member or beneficiary. This was to the extent that a patient is proactively engaged, and taken care of by the MCO, it will likely be profitable. However, it’s not, it is exposed to material losses. In this model, the MCO is at total risk for the difference between Medicare payments and the patient healthcare cost; something a large group of patients would consume quickly in healthcare costs and services if not properly “managed.”

Contrary to most public perceptions, MCOs, in fact, are incentivized to provide the fastest, most efficient “outcome-based” medical treatment, and to not restrict access or reduce care.

This is not a theory to us; this is practical experience helping MCOs manage tens of thousands of lives over the past two decades. In fact, when my own parents qualified for Medicare, I advised them to join the Medicare Advantage program. In South Florida, that was Humana, Inc.

To make it better for consumers to improve the quality of care, HHS is sadly making it all more complicated for providers or care. We believe that both the MCOs and the new at risk ACOs, must report “a large number” of what are called HEDIS measurements.

What is HEDIS?

The Healthcare Effectiveness Data and Information Set (HEDIS) is one of the most widely used sets of health care performance measure in the United States. The term “HEDIS” originated in the late 1980s as the product of a group of forward-thinking employers and quality experts in the early 1990s. Using HEDIS, Medicare scores the HMOs with stars, up to five stars to be exact; ideally the consumer has a baseline to compare benefits and quality.

Medicare Advantage (MA) growth has effectively stalled at approximately 31% of those eligible for Medicare, and has primarily been growing in the Sunbelt regions, and in big cities. In some MCOs, providers and organizations may be paid one of several ways including a fee-for-service, capitated payments and/or sharing in cost savings. With capitated payments, providers receive a flat sum, a per member per month fee (PMPM) for the primary care needs of the patients, and in many cases specialists also receive a capitation based on the number of patients, and specialty of their care. It essentially fixes the payments that Medicare makes to the MCO.

To Medicare, the more ACOs and MCOs that are at full-risk, the easier it will be able to control cost and ideally better care for its beneficiaries. This is because the recipient of the Medicare payment has an incentive keep the patient healthy, and particularly out of an acute environment.

It also materially fixes the problems of unnecessary care, duplication of care, as well as potential fraud and abuse paid by Medicare providers. The MCO is effectively in the middle of the delivery system between Medicare and its beneficiaries, and the medical providers.

The future of a new payment model is guaranteed to have more MACRA, more at risk ACOs, and we think more MCOs.

For the most part, we believe fee-for-service Medicare will be extinct before 2030. Additionally, we are confident what is missing is a way to incentivize the patient to both safeguard fraud and abuse, and encourage their own compliance. Furthermore, we believe the patient or beneficiaries should be incentivized to maintain or adopt a healthy lifestyle. Therefore, we have previously proposed that Medicare use a “wellness index,” and offer beneficiaries cash, credit or refunds to Medicare Part B premiums, for improving their own health care condition.

For the last 15 years, too many providers have seen a net reduction in reimbursement when adjusted for inflation even as total healthcare costs have nearly doubled. That model cannot continue as we will continue to lose providers at exactly the wrong time – 77 million baby boomers have begun to retire, increase consumption of health care services, and overwhelm the healthcare delivery system in the U.S.

No healthcare reform can be done without addressing how the government programs pay for care, and reducing reimbursement alone is not the answer. Neither is more reporting without reform.

We advocate a more humane and dynamic model, where the episodic nature of healthcare payment is replaced with “total care “or “wellness” focus. This dynamic includes empowering the patient to become an active participant, as well as stakeholder in the financial benefits of this new payment model. That requires giving patients full access to their electronic health (wellness) record.

As someone who has been involved in managed care for nearly my entire 25 years in healthcare, operating medical centers, designing and invested materially in health information technologies, new innovations and intellectual property to track quality of care, I can tell you with total confidence that technology can provide a pivotal role in payment reform.

Proper payment reform, and the use of better and more technology, can place the center of the healthcare industry around the patient; this is fundamental and must be included in the “foundation” of healthcare reform. The best way to do that is by putting everyone on the same path and with the same objectives. As we noted earlier, we believe this path will take a long time, at least a decade, so we better start now.

– Noel J. Guillama, President