Older Adults and America’s Healthcare Cost Crisis

WINTER 2019–20 West Health Supplement

Journal of the American Society on Aging

OlderAdults andAmerica’s Healthcare Cost Crisis

A system in crisis: the runaway costs of America’s healthcare

Rx for spiraling drug costs: how philanthropy can help

Can value-based payment transform care for the seriously ill?

Supplement | 1

ASA Executive Committee Chair, Board of Directors Karyne Jones, Washington, DC Chair-Elect Michael Adams, New York, NY Secretary Jean Accius, Washington, DC Treasurer Lisa Gables, Alexandria, VA Member at Large Deborah Royster, Washington, DC ASA Board of Directors Ginna Baik, San Diego, CA Connie Benton-Wolfe, Fort Wayne, IN Richard Browdie, Alexandria, VA Brian M. Duke, Radnor, PA Robert Espinoza, Bronx, NY Maria Henke, Los Angeles, CA Brooke A. Hollister, San Francisco, CA Karen N. Kolb Flude, Chicago, IL Daniel Lai, Hong Kong Rebecca C. Morgan, Gulfport, FL Scott Peifer, San Francisco, CA Kevin Prindiville, Oakland, CA Phil Stafford, Bloomington, IA Joyce Walker, Richmond Heights, OH Interim CEO Cynthia D. Banks, San Francisco, CA Yanira Cruz, Washington, DC Paul Downey, San Diego, CA


Alison Hood Senior Editor Alison Biggar Typography & Production Michael Zipkin | Lucid Design, Berkeley Generations cover and book design by Lisa Rosowsky, Blue Studio.

gary and mary west foundation editors Zia Agha Meagan Alley Amy Herr Sofia Kosmetatos Jon Zifferblatt

Front cover image ©Getty Images/ Fanatic Studio © 2020 American Society on Aging

Union Bug

Supplement | 1

GENERATIONS – Journal of the American Society on Aging

inside generations supplement Older Adults and America’s Healthcare Cost Crisis

a call to action 3 Unaffordable Healthcare Affects All Generations By Robert Blancato 7 America’s Healthcare Cost Crisis By Shelley Lyford and Timothy A. Lash 13 The Employer Role in Reining in Healthcare Prices By Lauren Vela 19 Leveraging Philanthropy for Bolder Action on Costs By Shelley Lyford 24 The Physician Perspective on Reducing Healthcare Costs By Mark Gwynne and Zia Agha 30 A Modest Proposal: Negotiate Medicare Drug Prices By Richard G. Frank and Len M. Nichols 35 Value-Based Payment Reform for Serious Illness By Mark Japinga, Mathew Alexander, and Mark B. McClellan cost containment approaches: a medical perspective

42 Emerging Priorities and Opportunities in Geriatric Emergency Care By Kelly Ko, Ula Hwang, Kevin Biese, and Zia Agha 47 Balancing Act: Models that Support Home- Based Acute Care By Christopher Crowley, Amy Stuck, Jon Zifferblatt, Kevin Biese, and Regina Berman 53 The Independence at Home Demonstration By Gregory J. Norman, Bruce Kinosian, Tyler Kent, and Richard Kronick

advancing solutions: beyond medical care 57 The Three-Strategy Answer to Long-Term Care Cost Growth By Anne Tumlinson

63 Investing in the Social Determinants of Health By Robyn I. Stone

70 Improving Access to Oral Healthcare Among Low-Income Older Adults By Mario Orozco, Karen Becerra, and Victoria Shumulinsky

2 | Winter 2019–20

Older Adults and America’s Healthcare Cost Crisis

Unaffordable Healthcare Affects All Generations By Robert Blancato

It is well past time to move from debate to action on lowering healthcare costs.

I t is my distinct honor to serve as the Guest Edi- tor of this important Supplement to Winter 2019−20 Generations , “Older Adults and America’s Healthcare Cost Crisis,” sponsored by West Health. I commend West Health for its focused commitment to lowering healthcare costs to enable successful aging. As the largest consumer group of healthcare services (Sawyer and Clax- ton, 2019), America’s older adults have a particu- larly high stake in advocacy efforts to reverse the upward cost spiral. The timeliness of this Supplement cannot be overstated. Unaffordable and ever-rising healthcare costs continue to dominate the pol- icy agenda in Washington, D.C., and in state cap- itals across the nation. Today, the United States spends upward of $420 million per hour on healthcare, a number that is increasing by the minute (West Health, 2019). On average, the United States spends two and a half times as much as its peer nations on healthcare, yet U.S. health outcomes lag behind (Organisation for Economic Co-operation and Development, 2019). As the U.S. population ages, it is increasingly vital to support commonsense steps that can

reverse the trend of runaway healthcare costs. Unless we advocates take bold actions now to lower healthcare costs, our nation’s older adults cannot hope to successfully age in place in the communities they cherish. In the search for real-world, actionable solutions to include in this Supplement to Winter Generations , we ‘Unaffordable and ever-rising healthcare costs continue to dominate the policy agenda in Washington, D.C.’ solicited ideas from leading experts and vision- aries in academia, business, and the public and nonprofit sectors. The lead article, co-authored by West Health’s President and Chief Executive Officer Shelley Lyford and Chief Strategy Officer Timothy A. Lash, examines the heavy toll of healthcare costs upon individuals, families, and institutions. They highlight an eye-opening West Health–Gallup Inside the Supplement to Winter 2019−20 Generations

abstract In this Supplement to Winter 2019–20 Generations , sponsored by West Health, the Supplement’s Guest Editor Robert Blancato emphasizes the urgency with which the United States needs to act to reduce healthcare costs, and the importance of this topic to older adults, citing findings from a 2019 West Health–Gallup poll. This introductory article to the Supplement describes the contents of a number of articles in the issue, and acknowledges the Supplement’s timeliness for the 2020 election year. | key words : U.S. healthcare costs, crisis, older adults, costs of care

Supplement | 3

GENERATIONS – Journal of the American Society on Aging

poll that captures how healthcare costs endan- ger older adults’ fiscal and medical stability— findings I referenced in my testimony delivered to the U. S. House of Representatives House Ways and Means Committee in November 2019 (Blancato, 2019). One particularly shocking finding from the poll is that in the past year, America’s older adults have withdrawn an estimated $22 bil- lion from long-term savings to pay for healthcare (Gallup, 2019). The poll also reveals that an esti- mated 7.5 million older adults are unable to pay for a medicine prescribed by their doctors. Con- sidering these statistics, West Health advances three strategies to lower costs: reducing exces- sive prescription drug prices, accelerating the adoption of value-based healthcare, and enabling transparency to improve the value of care. In “The Employer Role in Reining in Health- care Prices,” Lauren Vela of the Pacific Business Group on Health explains how employers can apply purchasing power to reduce healthcare costs and boost quality care. Vela reports that exorbitant healthcare costs pose a threat to American business, as employers account for half of our nation’s healthcare spending; she proposes ideas to address this concern, in- cluding leveraging the purchasing power of employer-sponsored insurance to promote solu- tions such as advanced primary care models, wherein providers serve at the top of their license, and Centers of Excellence, which de- liver high-quality and high-value care. Another article by UNC Health Alliance President Mark Gwynne and West Health Chief Medical Officer Zia Agha examines the need for physicians to be more aware of and respon- sive to the impact of out-of-pocket costs for their patients, especially those who must man- age high-cost chronic conditions. One proposed ‘Exorbitant healthcare costs pose a threat to American business.’

solution involves greater pricing transparency, which could reduce spending by an estimated $27 billion over ten years (White et al., 2014). The authors also propose raising awareness of the burden of healthcare costs via use of mea- sures like the Affordability Index, which gauges what percentage of a family’s income is spent on health insurance (Emanuel et al., 2017). Returning to the “bold action” focus of this Supplement, an article by Harvard Medical School Health Economics Professor Richard G. Frank and George Mason University Health Pol- icy Professor Len M. Nichols strongly endorses the idea of Medicare negotiating prescription drug prices under Part D, a topic garnering more attention than ever in Washington, D.C., and on the campaign trail. Frank and Nichols make the case that Medicare’s leverage has successfully lowered healthcare prices in other sectors, and that it could leverage lower drug pricing as well. In “Balancing Act: Models that Support Home-Based Acute Care,” Gary and Mary West Health Institute ProgramManager Christopher Crowley and colleagues address the concept of remodeling acute care for older adults through the expansion of home-based geriatric-focused acute care, which has great potential to improve quality of life and lower costs. The remaining feature articles each address important facets of the challenges of lowering healthcare costs, increasing cost accountability, and improving patients’ quality of life. For exam- ple, what role could philanthropy play in low- ering the cost of care? And, how should we be investing more resources in areas where we cur- rently under-spend? Several “Program Spot” (shorter) articles highlight promising opportunities to drive value in the care of America’s older adults. One piece focuses on long-term services and supports and the rebalancing of Medicaid dollars away from institutional care, an action that could reduce nursing home use by more than 1 million people. Another article explores lessons learned from a shared-savings model, the Independence at

4 | Winter 2019–20

Older Adults and America’s Healthcare Cost Crisis

Home Demonstration. Addressing another spe- cial focus of West Health’s work, a third Program Spot discusses new priorities and approaches in emergency medicine and how adapting emer- gency care to serve older adults can improve outcomes and reduce costs. And a fourth short article explores areas within the healthcare sys- tem that need more investment. For example, although oral health is tightly linked to overall health, far too few elders have access to timely, quality dental care. The content in this special Supplement to Gener- ations should leave no doubt that all generations, young and old, are imperiled by unaffordable healthcare. It is a common misperception that because older adults are enrolled in Medicare, they are shielded from the impact of rising healthcare costs. In fact, healthcare spending of all kinds doubles between ages 70 and 90 (De Nardi et al., 2016). For elders on Social Secu- rity, out-of-pocket healthcare costs equal 41 percent of per capita Social Security income in 2013 (Cubanski et al., 2018). Finally, bankruptcy filings among people older than age 65 increased by 204 percent from 1991 to 2016, with out-of- pocket healthcare costs being a driving factor (Thorne et al., 2018). One trend is clear: older Americans are in­ creasingly concerned about how rising health- care costs are imperiling their economic security and quality of life. One respondent to a West Health–Gallup poll succinctly expresses this an­ xiety: “I’m a 61-year-old male, married 40 years, The Perils of Unaffordable Care, the Power of Older Voters

The Medicare benefit does not shield older adults from the impact of rising healthcare costs. I believe a mobilized coalition of older adults, their caregivers, and their advocates is crucial to move our nation from debate to action on solving the healthcare cost crisis. I hope this Supplement not only sheds light on the many dimensions of this crisis, but also lays the groundwork for bold steps we can take, right now, to reverse the frightening upward trajectory of the cost of care. Because one fact is beyond dispute: the authors and articles in this Supplement provide compel- ling evidence that now is the time to act. Robert Blancato, M.P.A., is president of Matz, Blancato & Associates, Inc., in Washington, D.C., the Immediate Past Board Chair of the American Society on Aging, and a member of the National Board of AARP. no children. Both my wife and I are heavily con- sidering our retirement and one of the biggest hurdles is our healthcare. We are hoping some- thing positive will happen in our healthcare sys- tem so we can enjoy our retirement.” According to West Health–Gallup poll- ing (West Health–Gallup, 2019), a vast major- ity of older adults say the government is not doing enough to make healthcare and prescrip- tion drugs more affordable. Because older adults turn out to vote in higher numbers than any other age group, they have the power to acceler- ate and drive political action to reduce health- care costs.

References Blancato, R. 2019. “Caring for Aging Americans.” Testimony delivered to the United States House of Rep- resentatives Ways and Means Com- mittee Hearing, November 14, 2019. tinyurl.com/w9tlo9q. Retrieved December 10, 2019.

De Nardi, M., et al. 2016. “Medical Spending of the U.S. Elderly.” Fis- cal Studies: The Journal of Applied Public Economics 37(3–4): 717–747.

Cubanski, J., et al. 2018. “Medi- care Beneficiaries’ Out-of-pocket Health Care Spending as a Share of Income Now and Projections for the Future.” tinyurl.com/yal8c3gh. Retrieved December 9, 2019.

Supplement | 5

GENERATIONS – Journal of the American Society on Aging

Emanuel, E. J., et al. 2017. “Mea- suring the Burden of Health Care Costs on U.S. Families.” JAMA 318(19): 1863–4. Organisation for Economic Co- operation and Development (OECD). 2019. “Health at a Glance 2019: OECD Indicators” (Figure 7.1). tinyurl.com/vg8nbl8. Retrieved December 9, 2019.

Sawyer, B., and Claxton, G. 2019. “How Do Health Expenditures Vary Across the Population?” tinyurl.com/rblhdvu. Retrieved December 9, 2019. Thorne, D., et al. 2018. “Graying of U.S. Bankruptcy: Fallout from Life in a Risk Society” (Indiana Legal Studies Research Paper No. 406). tinyurl.com/r9777dg. Retrieved December 9, 2019. West Health. 2019. “The Health- care Crisis: An American Epi- demic.” tinyurl.com/ro9v3ow. Retrieved November 5, 2019.

West Health–Gallup. 2019. “The U.S. Healthcare Cost Crisis.” tinyurl.com/y44eb4gs. Retrieved November 5, 2019. White, C., et al. 2014. Health- care Price Transparency: Policy Approaches and Estimated Impacts on Spending . West Health Pol- icy Center . tinyurl.com/y6bz3b22. Retrieved September 9, 2019.

6 | Winter 2019–20

Older Adults and America’s Healthcare Cost Crisis

America’s Healthcare Cost Crisis By Shelley Lyford and Timothy A. Lash

As the costs of U.S. healthcare continue to escalate, three commonsense reforms could reverse this unsustainable trend.

T he unsustainably high cost of healthcare is levying a heavy toll on America’s popula- tion and institutions. Almost daily, the media chronicles heart-rending stories of patients going without needed but unaffordable medications, of middle-class families being driven into “medi- cal bankruptcy,” and large and small businesses buckling beneath the load of health insurance premiums that average more than $20,000 a year per employee family (Kaiser Family Foundation [KFF], 2019a). The inexorable rise in healthcare costs also has increased anxiety among Americans in every strata of society, inducing fears that a single hos- pitalization or illness could wipe out a lifetime of savings and saddle them with decades of debt. As the price of care spirals upward, millions are borrowing money, skipping treatments, and cut- ting back on household expenses in order to access needed healthcare. Older adults especially are feeling the squeeze. According to a 2019West Health–Gallup Survey, 7.5 million older adults report being unable to pay for a medication prescribed by their doctors, and

90 percent of them think healthcare costs will not improve or will get worse (West Health, 2019a). In 2016, Medicare beneficiaries had a median income of only $26,200 (KFF, 2019b), yet their out-of-pocket average healthcare costs were $5,806 (KFF, 2019b). (Costs are expenses for beneficiaries in traditional Medicare who are enrolled in Part A and Part B, including all pre- miums for Medicare and private supplemental insurance, as well as expenses for medical and long-term care services.) Simply put, Americans are burdened with the world’s costliest healthcare: in 2017, the United States spent $10,739 per person on care (Centers for Medicare &Medicaid Services [CMS], 2019a), more than any other country by far. At that cost, people in our nation should have the longest and healthiest lives. Yet the United States consistently ranks near the bottom of major health indices among developed nations, including life expec- tancy and infant mortality (Organisation for Eco- nomic Co-Operation and Development, 2019). At this pivotal moment in America’s history, a confluence of economic, demographic, polit-

abstract The decades-long upward trajectory of U.S. healthcare costs has made healthcare unafford- able for families in America, and puts an economic strain on government and businesses. Leaders of West Health assess the financial and social toll of this public health crisis, and argue that it requires immediate action across the spectrum of public and private institutions. Three strategies for lowering costs are advanced: addressing excessive prescription drug prices, accelerating the adoption of value-based healthcare, and enabling transparency to assess the value of care. | key words : healthcare cost crisis, reform, pricing transparency, Medicare prescription drug negotiation, value-based care, medical bankruptcy

Supplement | 7

GENERATIONS – Journal of the American Society on Aging

ical, and social forces are compelling change. Runaway healthcare costs are undermining our country’s health and prosperity, fomenting a public health and financial crisis that is push- ing federal, state, municipal, and household bud- gets toward the breaking point. Meanwhile, containing healthcare costs is an urgent demo- graphic imperative for the nation’s rapidly grow- ing population of older adults, who require more intensive and frequent care and who have less discretionary income to cover growing out-of- pocket expenses. Now that a groundswell of voter demand is motivating Congress to act, the question remains: What direct and immediate steps can we take to attenuate the decades-long rise in costs and ensure that all Americans, including vulnerable older adults, can afford care? An abundance of data confirms the severity of the U.S. healthcare cost crisis and the urgency of immediately implementing reforms: According to a study by Gallup and West Health (Witters, 2019), more than 13 percent of American adults report knowing of at least one friend or family member who died in the past five years after not receiving needed medical treatment because they were unable to pay for it. That same poll, conducted in September 2019, revealed a rising percentage of adults reporting not having had enough money in the past twelve months to “pay for needed medicine or drugs that a doctor prescribed” to them. This percentage has increased significantly, from 18.9 percent in January 2019 to 22.9 percent in September 2019. The 22.9 percent represents about 58 million adults who experienced “medication insecurity,” defined as the inability to pay for prescribed med- ication at least once in the past twelve months. And though few Americans have to pay the full costs of hospitalization out of pocket, the nation’s population shares in the aggre- gate expense of dramatically inflated hospital The High Costs—and Impacts— of American Healthcare

costs. To illustrate, the average cost of a hospital stay has grown by 600 percent since 1990—five times faster than the average price of a new car. Granted, the complexity of a hospitalization has increased over time, but this extremely high rate of cost increase clearly is unsustainable. With healthcare spending per person grow- ing at twice the rate of household income, it is not surprising that one in four adults risks their health, and sometimes their life, by foregoing needed medical care due to costs. Another West Health–Gallup survey conducted in January 2019 found that 57 million Americans have cut back household spending to pay for healthcare or medicine, and 45 percent of adults fear that a major health event in their household could lead to bankruptcy (West Health–Gallup, 2019). Beyond the impacts on families and house- holds, rising costs are threatening the health of the American economy. The United States spends upward of $3.6 trillion per year on healthcare—or 18 percent of U.S. GDP (CMS, 2019a). If we don’t intervene now to reverse cur- rent trends, the nation’s total annual healthcare spending is on track to triple to $12 trillion by 2040 (West Health, 2019b). America’s workers shoulder a large share of this burden. As healthcare costs have risen dramatically in the past two decades, work- ers’ wages have stagnated (KFF, 2019c). In the same time period, the average premium for family health insurance increased by 54 per- cent and workers’ contributions increased by 71 percent; in contrast, average annual wages increased only 26 percent. Even with employer health coverage, a household earning $45,000 a year must try to budget at least 20 percent of its income for health expenses in order to cover the employee share of insurance premiums, deductibles, and other out-of-pocket costs for healthcare, according to a West Health analysis (West Health, 2019b). The healthcare cost crisis also hurts busi- ness investment and competitiveness. Employer spending on healthcare increased from $313 bil-

8 | Winter 2019–20

Older Adults and America’s Healthcare Cost Crisis

lion in 2000 to more than $800 billion in 2019 and is on track to reach $2 trillion by 2040 (West Health, 2019b). And when healthcare costs rise, and businesses and consumers suffer financially, state and federal budgets also take a hit. Given that forty-four states are spending more on Med- icaid than on K–12 education, compared to a decade ago when twenty-one states were in that situation (West Health, 2019b), it is clear that the healthcare cost crisis is crowding out other We all share in the aggregate expense of dramatically inflated hospital costs. national spending priorities. No wonder Warren Buffet has characterized healthcare spending as “the tapeworm of the American economy” (La Roche, 2017). Looming in the background of our worsen- ing healthcare cost crisis is a demographic shift unlike any in our country’s history. Every day, 10,000 baby boomers turn age 65, triggering an historically unprecedented population shift from private to public healthcare coverage and placing dramatically increased demand upon the Medi- care system. Aging advocacy groups are mobi- lizing to ensure the future of Medicare and to bridge coverage gaps, but older adults continue to be imperiled by the rising cost of care, as this cohort is more likely to suffer serious chronic conditions and must depend more upon medi- cal and social supports—resources that become scarcer when other healthcare costs are draining state and municipal budgets. And older adults living on limited and fixed incomes cannot afford to pay out-of-pocket for services not covered by Medicare or Medicaid. Cost Containment: A Possible Path Forward Political debates over the excessive growth of healthcare costs stretch back to 1969, when the Nixon Administration first took steps to con- tain Medicare spending. Half a century later,

runaway costs are damaging our lives, our busi- nesses, and our social fabric. For far too long, too many sectors of the healthcare industry—includ- ing hospitals, pharmaceutical manufacturers, other providers, and insurers—have been putting profits before the well-being of patients. During recent election seasons, voters have registered their alarm over the unsustainable cost crisis, with mounting vehemence. Fixing healthcare and its spiraling costs consistently ranks near the top of voter priorities (Kirz- inger et al., 2019). Our elected representatives have finally heard the call, and we can draw some encouragement from legislative initiatives recently introduced in Congress, such as mea- sures that would lower drug prices and reduce consumer vulnerability to the ruinous cost of “surprise” medical bills. But with every sector of the healthcare industry flooding Capitol Hill and state capitals with lobbying dollars (e.g., $560 million in 2018 to federal officials alone, an amount that includes lobbying funding to Congress and federal agen- cies across four industry categories: Pharma- ceutical/Health Products, Hospitals/Nursing Homes, Health Professionals, and Health Ser- vices/HMOs) (Center for Responsive Politics, 2019), it would be naïve to rely solely upon politi- cians to solve the crisis. As we search for ways to forge a more sus- tainable cost structure for healthcare, we can look to Medicare for guidance—the health- care system upon which 61 million Americans rely, with 80 million expected enrollees by 2030 (CMS, 2019b). Medicare’s strengths and weak- nesses can offer valuable guidance in the path toward containing healthcare costs. Medicare programs that successfully contain costs should be emulated by the private sector. Meanwhile, for the sake of America’s fast-growing older adult population that relies on Medicare, we must take immediate steps to encourage Medi- care’s adoption of more efficient payment mod- els that are grounded in quality and outcomes, rather than quantity.

Supplement | 9

GENERATIONS – Journal of the American Society on Aging

there is no rationale for Americans to pay many times more for prescription drugs than people do in any other developed country. It is time to demand bipartisan action on smart policies that can lower drug costs. Mea- sures under consideration by federal legislators are a welcome start, and we must urge action to benefit all Americans. Second, we must accelerate the adoption of value-based healthcare. The United States remains stuck in a predominantly fee-for- service system that includes perverse incentives for more (rather than better) services, treat- ments, and tests. To tackle rising healthcare costs and improve the quality of healthcare, we must fundamentally reshape the way payment for health services is approached and acceler- ate the shift from unfettered fee-for-service to value-based payment models. Value-based care models redirect finan- cial incentives toward reduced costs, greater efficiencies, better health outcomes, and more person-centered care. These models reward proactive, positive steps—such as targeted pre- ventive care and improved management of diseases and conditions with fewer complica- tions—and discourage low-value, unnecessary, and potentially harmful care. The Centers for Medicare & Medicaid Services (CMS) is taking steps in this direction, and this work needs to be accelerated. Two value-based payment models—bundled payment models and Accountable Care Organi- zations (ACO)—show signs of promise in lower- ing costs for Medicare. Bundled payment models encourage better coordination across acute and post-acute care settings because they combine financial accountability across the entire episode of care. Early evaluations of bundled payment models for certain common procedures, such as hip or knee replacements, report overall savings to Medicare. ACOs, for which financial accountability extends to all services the organization provides in a year, have shown significant improvements

West Health’s Three Solutions for Reform Nonprofits, foundations, and service providers are allies of America’s older adults: these organi- zations can and must play a central role in defin- ing the path forward toward cost containment. West Health is a nonpartisan, nonprofit suite of organizations committed to lowering health- care costs to enable successful aging. For the past ‘Political debates over the excessive growth of healthcare costs stretch back to 1969.’ decade, the West Foundation, West Health Insti- tute (an applied medical research organization), and West Health Policy Center have been work- ing closely with leaders in the aging, advocacy, healthcare, academic, government, and business communities to identify practical, high-impact solutions to the cost crisis. We convene a wide array of thought leaders and stakeholders at our Healthcare Costs Innovation summits to put forth new ideas and to forge consensus solutions. West Health has distilled its policy platform and its applied medical research efforts into three evidence-based, commonsense reforms we believe can begin to reverse the trend of rising costs. First, West Health believes that addressing the excessive prices of prescription drugs pro- vides the most immediate opportunity to lower healthcare costs. Prescription drugs have been priced too high, for too long. We need to rebal- ance incentives to increase price competition and prioritize patient access and affordability. West Health has long supported measures to empower Medicare to directly negotiate drug pricing, which is currently prohibited. Allowing Medicare to exert its buying power to negoti- ate drug prices would be a game-changing lever that could force prescription drug manufac- turers to bring down prices and lower costs for older Americans. There is no defensible reason why Medicare should not be able to do this. And

10 | Winter 2019–20

Older Adults and America’s Healthcare Cost Crisis

Addressing excessive prices of presciption drugs is the most immediate opportunity to lower healthcare costs. Greater transparency is essential to basing care decisions on value. Consumers need reli- able, timely data on the cost and quality of care in order to make healthcare decisions that work best for them—and for their families. Employers purchasing coverage on behalf of their work- ers must have price and quality information to improve their ability to negotiate reasonable prices and to assist their workers in choosing providers based on value. The U.S. healthcare system remains opaque about the true costs to patients of a given medi- cation, test, or treatment. In some cases, out-of- pocket costs may make treatment appear to be reasonably priced, even though another entity (such as a patient’s employer or the government) may pay an astronomical price for that treatment. Additionally, the lack of transparency in the U.S. healthcare system perpetuates delivery of unnecessary services. The delivery of unneces- sary or low-value care costs the healthcare sys- tem anywhere from $78 billion to $101 billion every year (Shrank et al., 2019). Even physicians estimate that nearly a fifth of all medical care is unnecessary, partly fueled by patient requests in quality and patient experience (Bleser et al., 2018a), along with small but significant savings (McWilliams et al., 2018). Some subgroups of ACOs—those led by physician groups and those that have taken on significant “downside risk”— could achieve larger savings (Bleser et al., 2018b). Third, we need to enable transparency. Trans­ parency is not sufficient to lower costs on its own, but it is a necessary condition for assessing the value of care and successfully reforming howwe pay for care and drugs.

(Lyu et al., 2017), but research indicates that increased transparency—in this case through shared decision-making—can result in more con- servative care (Behneke et al., 2013). Cost Containment Is Achievable Taking prompt, collective action to adopt and disseminateWest Health’s cost-cutting strate- gies can usher in a new era of high-quality, cost- effective healthcare. We cannot afford to delay or defer taking action to lower costs—not when the health of millions hangs in the balance, and when tangible real-world solutions are within our grasp. Only a meaningful overhaul of how and which healthcare we pay for can reverse the tra- jectory of rising costs. Reforms that nibble at the edges of the problem, like many of the incremen- tal steps being promoted by healthcare lobbyists, will not make for noticeable change. We have an historic opportunity to imple- ment lasting, impactful change to lower health- care costs in America. Let’s seize it. Access to care translates directly into improved quality of life for our families, our communities, and our fellow Americans. Tak- ing bold action—now—to secure that goal is an urgent directive that transcends politics and economics. It is also a moral imperative for each of us who believes that all Americans, whether rich or poor, young or old, deserve the healthcare they need, at a price they can afford. Why should we settle for anything less? Shelley Lyford, M.A., is president and chief executive officer of the San Diego-based Gary and Mary West Foundation and West Health, a nonprofit, nonpartisan family of organizations dedicated to lowering health­ care costs to enable successful aging for our nation’s older adults. Timothy A. Lash, M.B.A., is chief strategy officer and executive vice president of West Health, and president of the West Health Policy Center in Washington, D.C., and the Gary and Mary West PACE in San Marcos, California.

Supplement | 11

GENERATIONS – Journal of the American Society on Aging

References Behneke, L., et al. 2013. “A Tar- geted Approach to Reducing Over- utilization: Use of Percutaneous Coronary Intervention in Stable Coronary Artery Disease.” Popula- tion Health Management . tinyurl. com/udxktfb. Retrieved Novem- ber 11, 2019. Bleser, W., et al. 2018a. “ACO Qual- ity Over Time: The MSSP Expe- rience and Opportunities for Sys- tem-wide Improvement.” tinyurl. com/r4gx3v5. Retrieved Novem- ber 5, 2019. Bleser, W., et al. 2018b. “Half a Decade In, Medicare Accountable Care Organizations Are Generat- ing Net Savings: Part 2.” tinyurl. com/u3ugnwg. Retrieved Novem- ber 5, 2019. Center for Responsive Politics. 2019. “Health Summary.” tinyurl. com/y3gs4suk. Retrieved Decem- ber 5, 2019. Centers for Medicare & Medi­ caid Services (CMS). 2019a. “NHE Fact Sheet.” tinyurl.com/yx3t7d2v. Retrieved December 6, 2019. CMS. 2019b. 2019 Annual Report of the Boards of Trustees of the Fed- eral Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds . tinyurl.com/y5llkja9. Retrieved November 5, 2019.

Kaiser Family Foundation (KFF). 2019a. 2019 Employer Health Bene- fits Survey . tinyurl.com/y5gqmfhx. Retrieved November 5, 2019. KFF. 2019b. “An Overview of Medicare.” tinyurl.com/yc98k8ll. Retrieved November 5, 2019. KFF. 2019c. “Benchmark Employer Survey Finds Average Family Pre- miums Now Top $20,000.” tinyurl. com/y5qxkoj7. Retrieved Novem- ber 5, 2019. Kirzinger, A., et al. 2019. “KFF Health Tracking Poll—September 2019: Health Care Policy in Con- gress and on the Campaign Trail.” San Francisco: KFF. tinyurl.com/ s7nabv8. Retrieved November 11, 2019. La Roche, J. 2017. “Buffett: ‘Med- ical Costs Are the Tapeworm of American Economic Competi- tiveness.’ ” Yahoo Finance . tinyurl. com/um3afgm. Retrieved Novem- ber 5, 2019. Lyu, H. et al. 2017. “Overtreatment in the United States.” PLOS ONE . tinyurl.com/ug6s34v. Retrieved December 9, 2019. McWilliams, J., et al. 2018. “Medi- care Spending After 3 Years of the Medicare Shared Savings Program.” The New England Journal of Medi- cine 379: 1139–49.

Organisation for Economic Co- Operation and Development (OECD). 2019. OECD.Stat . tinyurl. com/wxorqkl. Retrieved Novem- ber 5, 2019. Shrank, W., et al. 2019. “Waste in the U.S. Health Care System: Esti- mated Costs and Potential for Sav- ings.” JAMA 322(15): 1501–9. West Health. 2019a. “The Health- care Crisis: An American Epi- demic.” tinyurl.com/ro9v3ow. Retrieved November 5, 2019. West Health. 2019b. “U.S. Spend- ing More Than $420 Million per Hour on Healthcare, on Track to Spend in Excess of $12 Tril- lion by 2040.” tinyurl.com/tjjxpfb. Retrieved November 5, 2019. West Health–Gallup. 2019. “The U.S. Healthcare Cost Crisis.” tinyurl.com/y44eb4gs. Retrieved November 5, 2019. Witters, D. 2019. “Millions in U.S. Lost Someone Who Couldn’t Afford Treatment.” tinyurl.com/ urynh9b. Retrieved December 4, 2019.

12 | Winter 2019–20

Older Adults and America’s Healthcare Cost Crisis

The Employer Role in Reining in Healthcare Prices By Lauren Vela

How employers can apply purchasing power to reduce healthcare costs—and boost quality care.

C ompared to healthcare spending in other industrialized countries, the United States’ spending on healthcare is an outlier, and its nega- tive effects are great, impacting global competi- tiveness, investment in domestic social services, and resources for beefing up infrastructure. Even worse, U.S. health outcomes are not commensu- rate with that spending. Healthcare purchasers, including the Centers for Medicare & Medicaid Services (CMS), the state market exchanges that formed in response to the Affordable Care Act, and employers offering insurance as a work bene- fit, need to adopt better approaches to promote higher quality care, at a lower cost. Employers, which account for 50 percent of healthcare spending, are positioned to play a larger role in reining in unsustainable costs. This opportunity is magnified because indus- try stakeholders such as doctors, hospitals, and health plans earn more profit from commercially insured patients than they do from government insurance programs. Therefore, the purchasing

power of employer-sponsored insurance plans can be leveraged to influence overall healthcare practices and to potentially lower costs. Companies offering employer-sponsored insurance (historically a substantial contributor to retiree supplemental coverage) struggle to jus- tify ever-growing cost trends. By adopting strat- egies also underway with CMS’s implementation of value-based care, employers could reinforce similar models as they seek savings during a time of hospital consolidation and ill-structured fee- for-service payment methodologies that thwart cost-savings. The need to leverage a Medicare partnership is now greater than ever. CMS’s work through the Center for Medicare &Medicaid Innovation is progressively and proactively considering solu- tions for savings and care improvement, including risk-sharing arrangements with Accountable Care Organizations (ACO). Employers’ adoption of such delivery system approaches through health plans and through direct contracts with provider

abstract High healthcare costs affect elders’ ability to enjoy a secure, healthy retirement, and impact our country’s chance to compete globally and spend on social services and infrastructure. Employers pay 50 percent of healthcare bills and a bigger proportion of the system’s profits. They can use this purchasing power to demand price accountability. When employers and CMS adopt value- based models, providers and industry stakeholders will accommodate newly aligned incentives. Employ- ers and employees play a role in the successful transition of employer-sponsored insurance to higher value, more affordable healthcare with better outcomes. | key words : employer-sponsored insurance, healthcare costs, healthcare innovations, value-based healthcare

Supplement | 13

GENERATIONS – Journal of the American Society on Aging

systems can complement CMS’s endorsement of ACOs and Medicare Advantage plans. Health systems are complex organizations that understandably struggle to make real change when payment models contradict one another. For instance, addressing over-utilization of ser- vices and lowering medical device and prescrip- tion costs are rewarded in a value-based model, but are costly for the proportion of a population in traditional fee-for-service structures. More suc- cessful efforts have large proportions of patient populations—or entire patient populations—par- ticipating in value-based arrangements. The Stark Reality for Employers— and Employees The reality is that employers must balance human capital challenges that accompany near full employment with the frustration and finan- cial distress caused by high healthcare costs. At Pacific Business Group on Health (PBGH), we hear frequently about this balancing act from our member organizations—large self-insured employers including Boeing, Intel, and Walmart. In order to meet workforce demands for more plan and provider choice with less oversight, employers allow broader networks, thereby lim- iting negotiation opportunities. High healthcare costs directly impact employers’ profitability and compromise their global competitiveness. These high costs also limit employers’ contri- butions to pensions, 401k investments, and other benefit programs that could otherwise support older adults (e.g., caregiver programs, student loan pay-off, employee volunteer days, etc.). More- over, overpriced, low-value healthcare can have a trickle-down effect on employees, evidenced by lackluster raises and skimpy bonuses. Because of unsustainable costs, employers have capped leg- acy retiree health contributions, and most do not offer retiree health benefits for new hires. At the same time, employees are delaying retirement due to the high cost of pre-age-65 medical coverage. Misaligned incentives, health plan and pro- vider consolidations, pharmacy benefit man-

agers and fragmented data and measurement systems exacerbate wasteful spending on low- value healthcare. Each factor contributes to poor patient experience and impacts employers’ bot- tom lines. No CEO would tolerate their organi- zation’s selling of goods and services that yield the mediocre and disjointed consumer experi- ences of most patients. At PBGH, we are seeing forward-thinking C-suite executives begin to closely examine practices that inhibit their orga- nizations’ contributions to a higher functioning healthcare ecosystem that would protect Ameri- ca’s economy and secure a future for its retirees. The roadmap to a better healthcare system requires changes in how healthcare is delivered, purchased and paid for, and how policies are advanced that can support a functional health- care marketplace. Although not a quick or easy fix, a move to value-based healthcare and away from fee-for-service healthcare is well underway and innovation is percolating in the employer- sponsored insurance space. Discussed below are some areas PBGH believes hold promise, for its members and for the U.S. health system at large. Employers can play a larger role in reining in unsustainable healthcare costs. Thoughtful and proactive advanced primary care can be a cornerstone for better health outcomes. Examples demonstrate that when primary care doctors take time with their patients, particularly their older and sicker patients, this results in bet- ter health outcomes. Primary care physicians, bolstered by an appropriate care team, can effi- ciently address patients’ mental health and social determinants of health. When these doctors are supported with comprehensive cost and quality information, along with the analytics and author- ity to use them, they will produce improved out­ Advanced Primary Care Can Bring System Change

14 | Winter 2019–20

Older Adults and America’s Healthcare Cost Crisis

comes. Patients will have a better experience. Healthcare costs will be contained. This is not a pipe dream. This is the story behind successful ventures such as the Boe- ing Intensive Outpatient Care Program and Iora Health. In these “advanced primary care” models, care team participants work at the top of their license to provide comprehensive and evidence-based clinical care. These alterna- tive payment models, versus traditional fee- for-service, allow clinicians and coordinators to spend more time gathering a holistic picture of a patient’s condition. Integration with com- munity resources means healthcare dollars can be more efficiently used for clinical care, while other challenges to patient well-being also are examined, such as housing, access to food, nutri- tion, transportation, etc. Advanced primary care models are implemented as an integral part of an ACO (Jabbarpour et al., 2018), or as stand alone but integrated components of the larger health- care ecosystem (Proactive MD, 2018). CMS supports innovation in primary care with its Comprehensive Primary Care Plus ini- tiative (CMS, 2019), which can best be expanded via partnerships with commercial payers. Advanced primary care applied to only a pro- portion of a practice’s population is destined for failure. Advanced primary care, like other initiatives, will be propelled by private−public partnerships and be stalled without it. Medi- care Advantage paves the way for comprehen- sive patient care. New initiatives to holistically address patient well-being, not just medical needs, presage new treatment models that can lead to an improved experience for chronically ill and older populations. Collaboration Is Crucial to Purchasing Healthcare Value With employer-sponsored insurance paying for 50 percent of U.S. healthcare spending, and contributing to a larger portion of its profits, employers must collaborate to shift the market toward rational payment reform, care redesign,

and informed policy change. Senior health sys- tem leadership must invest in and equip human resources professionals to better manage and fulfill vendor oversight responsibilities. PBGHmembers report that intermediaries such as health plans and pharmacy benefit man- agers are not meeting the needs of an evolving healthcare ecosystem. Ancillary vendors hop on the opportunity caused by that gap in the system, resulting in a barrage of vendors hawking trans- parency, navigation, digital apps, and telehealth ‘Providers are the best-positioned stakeholders to control for costs, outcomes, and value.’ services, which further confound already con- fused and sick patients, and unintentionally cause even greater fragmentation in healthcare delivery. PGBH often hears that employers are fed up with intermediaries they perceive as too small to handle large populations, too big to change course, or too misaligned to consider their em­ ployees’ best interests. Consider, for instance, the recent uproar over the business model sup- porting a consolidated pharmacy benefit man- agement industry that leads to higher drug costs (Commonwealth Fund, 2019). Disney, Intel, and other corporate giants hold contracts with ACOs responsible for population health and total cost of care. Other employers are identifying and encouraging patients to use high-quality, high-value providers such as those the Walmart and Lowes’ Employers Centers of Excellence Network recently showcased in the Harvard Business Review (Woods, Slotkin, and Coleman, 2019). Medicare’s engagement with proven cen- ters of excellence would bring the same type of high-caliber clinical care and superior patient experience to older adults desperate for help in navigating a complicated system with wide qual- ity variation. These referenced strategies have one overriding commonality—more account-

Supplement | 15

GENERATIONS – Journal of the American Society on Aging

ability for provider systems. Armed with com- prehensive data and incentives provided by purchasers to act upon it, providers are the best- positioned stakeholders to control for costs, out- comes, and value. Employers and Employees—Reality Redux Having shifted as much (or more) costs to employees as they can comfortably justify, employers among PBGH members are consider- ing opportunities to personalize a benefit design, allowing enrollees to pay less for high-value care and forcing them to pay more for choices that underachieve (e.g., paying a higher cost share for out-of-network services or higher premiums for less efficient health plan options). This “smarter” consumerism lever holds the most promise. Consumerism of years past was generally unsuccessful in shifting the value proposition of healthcare, but was extremely successful in enraging the American public challenged with unsustainable healthcare costs. Now, with drug adherence often being a matter of choosing be­ tween making rent payments or paying for medi- cations, Americans are rebelling. Short-term Band-Aids such as prescription copay coupons and postponed preventive care are not the answer. Amotivated population, accurately informed, can move mountains of healthcare fragmentation, waste, abuse, and misaligned incentives. Activated older adults should insist upon better information, fairer drug pricing, curated networks, and more holistic primary care. Employers’ work and responsibility to man- age healthcare costs would be better served by more informed workers. Open-choice networks are not a privilege for workers; they are a dan- ger to their financial and physical well-being. Employers can access data that identify highest quality and highest value providers and hospi- tals. If that information is not used out of con- cern for “member disruption,” then members are being cared for by substandard systems. Like- wise, data suggest that clinical guidelines are not always followed (Barth et al., 2016), and up to

one-third of procedures are duplicative, unnec- essary, and-or dangerous (Lyu et al., 2017). Allowing coverage for all services by turn- ing off pre-authorization protocol might sound like it improves the experience of insured partic- ipants in a given plan, but it can have bad effects, such as higher costs and exposure to poten- tially harmful care. Employees must demand that their companies use available information to curate care on their behalf. Likewise, CMS should play an important role in curating quality and value for older adults. Pure market forces cannot be relied upon to counter market failures. Appropriate regula- tory intervention can pave the way to the goal of achieving a better functioning market. The White House Executive Order on Improving Price and Quality Transparency (2019) presents a major opportunity toward that goal. Further- more, future policy should find ways to curb the trending consolidation-monopolistic behaviors of hospital systems, manipulations that push prices to be higher than those in any other devel- oped country. Studies comparing the United States to other countries found that higher U.S. utilization did not explain high U.S. costs—prices did (Anderson et al., 2013; Pauley, 1993; Fuchs and Hahn, 1990). Also, sound and thoughtful adjustments to privacy regulations could support appropriate sharing of information for clinical and research excellence, while also assuring protection of all sensitive personal health information (Chen, 2019). Participation in an all-payer claims data- base (APCD) exemplifies one opportunity to col- laborate in secure data-sharing, which could contribute to meaningful data insights, clin- ical improvements, and greater operational efficiency. In Virginia, an APCD is behind a promising initiative to eliminate wasteful order- ing and prescribing by doctors (Virginia Cen- ter for Health Innovation, 2019). Mechanisms Strategic Plotting for More Functional Markets

16 | Winter 2019–20

Page 1 Page 2 Page 3 Page 4 Page 5 Page 6 Page 7 Page 8 Page 9 Page 10 Page 11 Page 12 Page 13 Page 14 Page 15 Page 16 Page 17 Page 18 Page 19 Page 20 Page 21 Page 22 Page 23 Page 24 Page 25 Page 26 Page 27 Page 28 Page 29 Page 30 Page 31 Page 32 Page 33 Page 34 Page 35 Page 36 Page 37 Page 38 Page 39 Page 40 Page 41 Page 42 Page 43 Page 44 Page 45 Page 46 Page 47 Page 48 Page 49 Page 50 Page 51 Page 52 Page 53 Page 54 Page 55 Page 56 Page 57 Page 58 Page 59 Page 60 Page 61 Page 62 Page 63 Page 64 Page 65 Page 66 Page 67 Page 68 Page 69 Page 70 Page 71 Page 72 Page 73 Page 74 Page 75 Page 76 Page 77 Page 78


Made with FlippingBook Learn more on our blog