Health Cost Containment and Efficiencies NCSL Briefs for State Legislators
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Health Cost Containment and Efficiencies NCSL Briefs for State Legislators TABLE OF CONTENTS (Each individual brief in the series is numbered, #1-16 and includes page numbers specific to that brief, four to six page each) Cover Table of Contents Introduction Series I: Payment and Purchasing Reforms (Briefs No. 1-10) 1. Administrative Simplification in the Health System 2. Global Payments to Health Providers 3. Episode-of-Care Payments 4. Collecting Health Data: All-Payer Claims Databases 5. Accountable Care Organizations 6. Performance-Based Health Care Provider Payments 7. Equalizing Health Provider Rates: All-Payer Rate Setting 8. Use of Generic Prescription Drugs and Brand-Name Discounts 9. Prescription Drug Agreements and Volume Purchasing 10. Pooling Public Employee Health Care Series II: Delivery System and Health Promotion Reforms (Briefs No. 11-16) 11. Combating Fraud and Abuse 12. Medical Homes 13. Employer-Sponsored Health Promotion Programs 14. Public Health and Cost Savings 15. Health Care Provider Patient Safety 16. Medical Malpractice Health Cost Containment and Efficiencies NCSL Briefs for State Legislators May 2011 A series examining options for containing or reducing health costs and improving efficiency in health – expanded for 2011 he cost of health and health care in the United States 3. Episode-of-Care Payments for years has been a highly visible topic of discussion 4. Collecting Health Data: All-Payer Claims Databases Tfor consumers, employers, state and federal policy- makers, and the media. 5. Accountable Care Organizations 6. Performance-Based Health Care Provider Payments Innovations and Experiments Policymakers, especially at the state level, have spent a 7. Equalizing Health Provider Rates: All-Payer Rate Setting good deal of time and energy considering—and some- 8. Use of Generic Prescription Drugs and Brand-Name Dis- times passing—laws and budgets aimed at controlling or counts even cutting selected health expenditures. In recent years, 9. Prescription Drug Agreements and Volume Purchasing a variety of health policy innovations and experiments have been put into place to improve quality, control cost 10. Pooling Public Employee Health Care and expand coverage. Many new approaches, already es- tablished in parts of the private, commercial market and in state and public sector programs, promise savings or im- The Topics for Series II: Delivery System and proved affordability. Health Promotion Reforms 11. Combating Fraud and Abuse Some health cost controls have medical consequences; 12. Medical Homes some are obvious and some are unintended. During bud- 13. Employer-Sponsored Health Promotion Programs get crises, for example, health programs may reduce cov- erage, shift costs to enrollees or phase out programs for 14. Public Health and Cost Savings special populations. 15. Health Care Provider Patient Safety Successes and Potential 16. Medical Malpractice This series of briefs takes a fresh approach by describing a number of health cost containment and cost efficiency ideas. Emphasis is on documented and fiscally calculated Federal Health Reform results, along with results that affect budgets, coverage, Several cost containment approaches are included in the fed- quality, prevention and wellness. Each brief describes 1) eral Patient Protection and Affordable Care Act, signed into cost containment strategy and logic; 2) the target; 3) rela- law in March 2010. Some federal provisions build upon pro- tion to the federal health reform law; 4) state and non-state grams already used by some states. Other sections of the law examples; 5) evidence of effectiveness; 6) challenges and provide new options, challenges and grant opportunities for complementary approaches and 7) best sources for more states that choose to create a new policy or program in future information. Where the results do not meet the intended years. These examples are described in each brief where ap- goals, these reports present an objective appraisal, say- plicable. ing, for example, “Limited evidence is available ... “ or “It is still too early to determine…” Future Updates and Forthcoming Briefs The latest information and published material for this project The Topics for Series I: Payment is available at www.ncsl.org/?tabid=19200. NCSL will continue and Purchasing Reforms intermittent publications of briefs in this series; new editions 1. Administrative Simplification in the Health System and recent developments will be posted online. 2. Global Payments to Health Providers NCSL takes no position for or against any state law or pro- posed legislation. Materials and descriptions included in these briefs do not constitute the opinion of NCSL, its mem- bers or staff. National Conference of State Legislatures Health Cost Containment and Efficiency Strategies Strategy Cost Containment Strategy Target of Cost Containment Evidence of Effect on Costs and Logic 1. Administrative Streamlining administra- • High health care system Studies are limited and indicate Simplification in the tive functions in the current administrative costs. that efforts to reduce administra- Health System health system (e.g., standard- • Administrative inefficien- tive expenses have resulted in ized forms and processes, cies associated with com- some efficiencies. streamlined claims processing, plex, uncoordinated, often reduced and/or coordinated duplicate regulatory and government regulations, etc.). administrative require- ments. 2. Global Payments to A fixed prepayment made to • Lack of financial incentives Research indicates global pay- Health Providers a group of providers or health for providers to hold down ments can result in lower costs care system (as opposed to a total care costs for a popu- without affecting quality or ac- health care plan) for all care for lation of patients. cess where providers are orga- all conditions for a population • Inefficient, uncoordinated nized and have the data and sys- of patients. care. tems to manage such payments. • Not enough attention to management of chronic conditions. • Prevention and early diag- nosis and treatment. 3. Episode-of-Care A single payment for all care to • Lack of financial incentives Research is limited and shows Payments treat a patient with a specific for providers to manage cost savings for some conditions. illness, condition or medial the total cost of care for an Payment mechanism is at an early event, as opposed to fee-for- episode of illness. stage of development. service. • Inefficient, uncoordinated care. 4. Collecting Health A statewide repository of • Inability to identify and It is too early to determine Data: All-Payer Claims health insurance claims infor- reward high-quality/low- whether all-payer claims databas- Databases mation from all health care cost providers. es can help states control costs. payers, including health insur- • Lack of data to enable ers, government programs and consumers to compare self-insured employer plans. provider prices and care quality. 5. Accountable Care A local entity comprised of a • Lack of a locus of account- Because it is a relatively new con- Organizations (ACOs) wide range of collaborating ability for overall health cept that has not been fully test- providers that is accountable care costs and quality for a ed, there is insufficient evidence to health care payers for the population of patients. to assess the effect on costs. Ex- overall cost and quality of care • Fragmented care. isting evidence is mixed. for a defined population. 6. Performance-Based Payments to providers for • Providers not financially Research is limited and indicates Health Care Provider meeting pre-established rewarded for providing ef- some improvements in quality of Payments (P4P) health status, efficiency and/ ficient, effective preventive care but little effect on costs. or quality benchmarks for a and chronic care. group of patients. • Unnecessary care. 2 National Conference of State Legislatures Strategy Cost Containment Strategy Target of Cost Containment Evidence of Effect on Costs and Logic 7. Equalizing Health Payment rates that are the • High health care prices. Evidence is mixed but indicates Provider Rates: All-Payer same for all patients receiving • Lack of price competition. that, properly structured, state Rate Setting the same service or treatment • Significant provider costs all-payer rate setting can slow from the same provider. Rates to negotiate, track and price increases but not necessar- can be set by a state authority process claims under many ily overall cost growth. or by providers themselves. reimbursement schedules. 8. Use of Generic Buying more generic prescrip- • State government-funded Expanded use of generic drugs Prescription Drugs and tion drugs instead of their pharmaceutical purchas- is documented to save states 30 Brand-Name Discounts brand-name equivalents and ing, including Medicaid, percent to 80 percent on certain purchasing brand-name drugs state-only programs and widely used medications, reduc- with discounts can significant- some private-market phar- ing expenditures by millions of ly reduce overall prescription maceutical purchasing. dollars annually. drug expenditures. 9. Prescription Drug States use combinations of ap- • Helps state government State Medicaid programs are us- Agreements and Volume proaches to control the costs public sector programs ing preferred drug lists, supple- Purchasing of prescription drugs includ- operate more efficiently mental rebates and multi-state ing: and cost effectively. purchasing arrangements