With Roots In California, Managed Competition Still Aims To Reform Health Care.

Managed competition is a concept that was born in California and has achieved a measure of acceptance there. As California and the United States as a whole continue to struggle with the challenge of providing high-quality health care at a manageable cost, it is worth asking whether managed competition-with its tools for harnessing market forces-continues to hold promise as a means of improving value in health care, and whether the standard conceptualization of managed competition should be modified in any way. In this article we reflect on four aspects of California's health care ecosystem that provide insights into these questions: integrated delivery systems, patients' choice of health plans, quality measurement, and new health care marketplace architectures such as Covered California and private insurance exchanges. Overall, while California's experience with managed competition has resulted in some challenges and adaptations, it also gives reason to believe that principles of managed competition continue to have the potential to be a powerful force toward creating a more efficient health care system.

Improving The Affordable Care Act: An Assessment Of Policy Options For Providing Subsidies.

A key challenge of health reform efforts is to make health insurance affordable for individuals and families who lack coverage without harming those with coverage or increasing federal spending. The Affordable Care Act (ACA) addresses this challenge in part by providing tax subsidies to qualified individuals for purchasing individual insurance and retaining tax exemptions for employer and employee contributions to the cost of premiums of employer-sponsored insurance. These tax exemptions cost approximately $250 billion annually in lost tax revenue and have been criticized for favoring higher earners and conferring preferential treatment of employer-sponsored over individual insurance. We analyzed three options for leveling the financial playing field between the two insurance markets by reallocating the value of tax benefits of employer coverage. We found that one option that uses the subsidy formula employed in the insurance Marketplaces under the ACA for both the individual and employer-sponsored insurance markets, and additionally requires the subsidy to be at least $1,250 without an upper income limit on subsidy eligibility imposed, could expand insurance coverage and reduce individual market premiums relative to the ACA with no additional federal spending.

Delivery system reform tracking: a framework for understanding change.

The health care delivery system is changing rapidly, with providers forming patient-centered medical homes and exploring the creation of accountable care organizations. Enactment of the Affordable Care Act will likely accelerate these changes. Significant delivery system reforms will simultaneously affect the structures, capabilities, incentives, and outcomes of the delivery system. With so many changes taking place at once, there is a need for a new tool to track progress at the community level. Many of the necessary data elements for a delivery system reform tracking tool are already being collected in various places and by different stakeholders. The authors propose that all elements be brought together in a unified whole to create a detailed picture of delivery system change. This brief provides a rationale for creating such a tool and presents a framework for doing so.

Reform incentives to create a demand for health system reengineering.

America needs a far more efficient health care financing and delivery system than the one we have. Our present system is a serious threat to public finances and is pricing itself out of reach. At the root of the problem are incentives and organization. The present fragmented fee-for-service small practice model is filled with cost-increasing incentives. There are some relatively efficient organized delivery systems, mostly based on large multi-specialty group practices. Unfortunately, most consumers are not offered the opportunity to save money and get better care by choosing such a system. This situation presents great opportunities for improvement in performance by re-engineering the system. However, for this to happen, incentives must be fundamentally changed so that everyone is cost conscious and care is organized in accountable care systems seeking improvement.

Toward a 21st-century health care system: recommendations for health care reform.

The coverage, cost, and quality problems of the U.S. health care system are evident. Sustainable health care reform must go beyond financing expanded access to care to substantially changing the organization and delivery of care. The FRESH-Thinking Project (www.fresh-thinking.org) held a series of workshops during which physicians, health policy experts, health insurance executives, business leaders, hospital administrators, economists, and others who represent diverse perspectives came together. This group agreed that the following 8 recommendations are fundamental to successful reform: 1. Replace the current fee-for-service payment system with a payment system that encourages and rewards innovation in the efficient delivery of quality care. The new payment system should invest in the development of outcome measures to guide payment. 2. Establish a securely funded, independent agency to sponsor and evaluate research on the comparative effectiveness of drugs, devices, and other medical interventions. 3. Simplify and rationalize federal and state laws and regulations to facilitate organizational innovation, support care coordination, and streamline financial and administrative functions. 4. Develop a health information technology infrastructure with national standards of interoperability to promote data exchange. 5. Create a national health database with the participation of all payers, delivery systems, and others who own health care data. Agree on methods to make de-identified information from this database on clinical interventions, patient outcomes, and costs available to researchers. 6. Identify revenue sources, including a cap on the tax exclusion of employer-based health insurance, to subsidize health care coverage with the goal of insuring all Americans. 7. Create state or regional insurance exchanges to pool risk, so that Americans without access to employer-based or other group insurance could obtain a standard benefits package through these exchanges. Employers should also be allowed to participate in these exchanges for their employees' coverage. 8. Create a health coverage board with broad stakeholder representation to determine and periodically update the affordable standard benefit package available through state or regional insurance exchanges.

Integrated delivery systems: the cure for fragmentation.

Our healthcare system is fragmented, with a misalignment of incentives, or lack of coordination, that spawns inefficient allocation of resources. Fragmentation adversely impacts quality, cost, and outcomes. Eliminating waste from unnecessary, unsafe care is crucial for improving quality and reducing costs--and making the system financially sustainable. Many believe this can be achieved through greater integration of healthcare delivery, more specifically via integrated delivery systems (IDSs). An IDS is an organized, coordinated, and collaborative network that links various healthcare providers to provide a coordinated, vertical continuum of services to a particular patient population or community. It is also accountable, both clinically and fiscally, for the clinical outcomes and health status of the population or community served, and has systems in place to manage and improve them. The marketplace already contains numerous styles and degrees of integration, ranging from Kaiser Permanente-style full integration, to more loosely organized individual practice associations, to public-private partnerships. Evidence suggests that IDSs can improve healthcare quality, improve outcomes, and reduce costs--especially for patients with complex needs--if properly implemented and coordinated. No single approach or public policy will fix the fragmented healthcare system, but IDSs represent an important step in the right direction.

'Redefining health care': medical homes or archipelagos to navigate?

This paper provides an analysis of the structure of the health care delivery system, emphasizing physician group practices. The authors argue for comprehensive integrated delivery systems (IDSs). The jumping-off point for their analysis is the recently published Redefining Health Care: Creating Value-Based Competition on Results, by Michael Porter and Elizabeth Teisberg. The authors focus on the book's core idea that competitors should be freestanding integrated practice units (or "islands in archipelagos") versus IDSs (or "medical homes"). In any case, the authors contend that this issue should be resolved by competition to attract and serve informed, cost-conscious, responsible consumers on a level playing field.

New directions for public health care purchasers? Responses to looming challenges.

State public employee health plans (PEHPs) provide health benefits for millions of state and local workers, retirees, and their dependents nationwide. This paper explores major issues and challenges that PEHP leaders and state policymakers are addressing. These include the perennial challenge of funding benefits for a diverse and aging workforce; new accounting standards affecting public employers; and the changing relationship between states, retired public employees, and the Medicare program. Interviews with PEHP executives explored whether these are incremental challenges to which states can effectively adapt, or whether these challenges will catalyze broader and lasting change in the public employee and retiree health benefits arena.

Employment-based health insurance: past, present, and future.

We review the rise, stabilization, and decline of employment-based insurance; discuss its transformation from quasi-social insurance to a system based on actuarial principles; and suggest that the presence of Medicare and Medicaid has weakened political pressure for universal coverage. We highlight employment-based insurance's flaws: high administrative costs, inequitable sharing of costs, inability to cover large segments of the population, contribution to labor-management strife, and the inability of employers to act collectively to make health care more cost-effective. We conclude with scenarios for possible trajectories: employment-based insurance flourishes, continues to erode, or is replaced by a more comprehensive system.

Connecting consumer choice to the healthcare system.

American healthcare needs to be reformed into competing, efficient, comprehensive care systems. To get there from here, we need a health insurance market in which each person or household has a wide, responsible, informed, individual multiple choice of health care financing and delivery plans. The point of this is competing delivery systems, not just competing carriers. To compete, some carriers will create or contract with selective delivery systems or doctors selected for their quality and cost-effectiveness. Others will already be teamed up with large multispecialty group practices. On the other hand, high deductible plans will not help us get to a reformed delivery system.

Competition in health care: it takes systems to pursue quality and efficiency.

Many stakeholders agree that the current model of U.S. health care competition is not working. Costs continue to rise at double-digit rates, and quality is far from optimal. One proposal for fixing health care markets is to eliminate provider networks and encourage informed, financially responsible consumers to choose the best provider for each condition. We argue that this "solution" will lead our health care markets toward even greater fragmentation and lack of coordination in the delivery system. Instead, we need markets that encourage integrated delivery systems, with incentives for teams of professionals to provide coordinated, efficient, evidence-based care, supported by state-of-the-art information technology.

Stanford University's experience with managed competition.

Stanford University has a "managed competition" model of health insurance. Stanford contributes the cost of the low-cost plan, and employees are responsible for premium differences between this plan and other offerings. Each employee gets what he or she wants and is willing to pay for, and everyone has low-cost access to health insurance. Stanford risk-adjusts the premiums based on age and sex and plans soon to adjust including prescription drug data. In the past five years, premiums have risen rapidly, in line with the rest of the market. For competition to transform the delivery system, most employers in the region must adopt managed competition.

Sustaining a market-based healthcare system.

Purchasers of health care are not holding the healthcare system accountable for quality and cost. Employers need to: Offer their employees a wide range of choices in health coverage. Earmark for employees' purchase a fixed dollar amount for health care set at or below the price of the low-priced plan. Insist that carriers and providers report the quality of care delivered.