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National Commission Looks to States to Contain Healthcare Costs

NJ's Robert Wood Johnson Foundation one of chief funders of new commission.

Raymond C. Scheppach will serve as the executive director of the State Health Care Cost Containment Commission.
Raymond C. Scheppach will serve as the executive director of the State Health Care Cost Containment Commission.

A new national commission is looking for ways to contain the rising cost of healthcare at what may the only place where political action is possible -- the state level.

The State Health Care Cost Containment Commission is tasked with producing a range of policy options that can be tailored to meet the needs and cultures of different states.

The Plainsboro-based Robert Wood Johnson Foundation, as well as Kaiser Permanente, a California-based nonprofit managed care consortium, are funding the commission. It was announced on January 4 and will be based at the University of Virginia’s Miller Center. It comes at a time when the partisan divide in Washington makes further changes to national health policy more difficult.

Foundation senior program officer Andrew Hyman said rising costs have become a major barrier for improving Americans’ health. The foundation is supporting the commission and other initiatives as a way of exploring different approaches to holding down healthcare costs.

“We don’t know enough at this point about what is the most important lever” for containing costs, Hyman said, adding that issues worth investigating include how healthcare is delivered, whether it is over-utilized, and whether prices are appropriate. “We have to figure this out. It is through a variety of initiatives that we are trying to learn what are the chief drivers of costs.”

Cochairmen former Utah Gov. Mike Leavitt, a Republican who also served as U.S. Secretary for Health and Human Services, and former Colorado Gov. Bill Ritter, a Democrat, will lead the commission. It will also include representatives of doctors, hospitals, consumers, insurers, employers, and state and federal healthcare officials.

“We believe that everyone has a stake in addressing this problem and everyone has a role,” Hyman said. He noted that rising costs have helped increase the number of Americans without insurance.

Leavitt said in a conference call announcing the commission that health costs are also contributing to fiscal challenges in many state budgets.

“Both the federal government and states will have to continue to reduce investments in education and infrastructure to fund healthcare, which will in turn reduce our long-term economic growth and reduce our standard of living,” Leavitt said. He added that the 2010 Affordable Care Act only partially addressed this challenge.

“While there are provisions of the ACA that will encourage integration and will help reduce costs, it seems that states have a clear advantage in providing leadership in this area. Most public policy transformations in the United States, such as clean air and welfare reform and even healthcare for the uninsured, started in the states,” Leavitt said. “States clearly continue to be the laboratories for public policy change.”

Kaiser Permanente chairman and CEO George Halvorson, a commission member, laid out the variety of issues the commission will examine. One of these will be expanding integrated healthcare delivery systems, such as accountable care organizations and patient-centered medical homes. Another will be payment reforms, such as global capitation for hospitals and in-network providers, in which payments are based on the number of patients rather than services. The commission also plans to investigate bundled payments for clinical procedures, such as making one payment to a surgical team rather than separate payments for each provider in a team.

Encouraging Value-Based Decisions

Other issues will include whether providers should be paid for how well they perform and encouraging consumers to make “value-based” purchasing decisions, in which they hold providers accountable for both quality and cost of services. Also on the agenda: reducing waste and inefficiencies, such as readmissions, deaths from sepsis, pressure ulcers, unnecessary emergency-room visits, as well as more efficient use of both hospice and palliative care. Helping states share medical knowledge and best practices with providers also is likely to be considered, as are reducing restrictive scope of practice laws, medical malpractice, whether the length of time in medical school is appropriate, the health consequences of inactivity and obesity, and the management of chronic conditions.

“We as a commission are going to look comprehensively for practical cost control strategies that states could actually utilize,” Halvorson said. “It’s going to be important to have a continuum of options that will have appeal across the political spectrum.”

Andrew Dreyfus, president of Blue Cross Blue Shield of Massachusetts, said his state’s experience with establishing near-universal healthcare has shown the importance of having stakeholders buy into the process. “Our experience has shown us how critical it is to address the cost of healthcare” to sustain high coverage levels, Dreyfus said.

New Jersey state Sen. Joseph Vitale (D-Middlesex) said he is eager to see the commission’s recommendations, which are scheduled to be released in November.

“The resources they’re going to provide and employ are going to be much more thorough and the data that they’re going to produce will be well thought out,” Vitale said, adding that there are opportunities for further state-level reforms.

"We have done some good things," he added, "but there’s still a lot we can do that is more targeted.”

Vitale is particularly interested in the commission’s work on prevention, education, and reducing the “overall abuse of the system, whether it's fraud or inappropriate care -- particularly in the wrong setting. We still have to tackle the issue of out-of-network abuse and fraud with respect to overbilling. Those fraud issues continue to exist in New Jersey. There are still some gaping issues that have to be closed.”

Vitale also said it’s important that cost-containment efforts also maintain quality of care. He pointed to the work of Dr. Jeffrey Brenner’s Camden Coalition of Healthcare Providers as an example of both cost containment and care improvement.

State Department of Health spokesman Dawn Thomas also said state officials are interested in learning more about the commission.

Raymond C. Scheppach, who will serve as the commission’s executive director, said changing how healthcare is paid for would provide the greatest opportunities for cost containment. “There are things you can do in New Jersey you can’t do in Mississippi” due to the differing state political climates, he said.

Scheppach, the former executive director of the National Governors Association, said the partisan divide in Washington would prevent appropriate adjustments to the ACA.

“There’s a lot of tinkering that needs to be done but no one can bring it up because they’re so scared of losing control,” Scheppach said, noting the ongoing budget dispute. “It’s going to hard for them to act on the one hand, but on the other hand I think it’s up to states to act. Governors are going to be very accountable.”

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