The Agenda

CareMore and Yuval Levin’s Confident Market Solution

 

Tom Main and Adrian Slywotzky have written an article on California’s CareMore system that might be of related interest:

CareMore, through its unique approach to caring for the elderly, is routinely achieving patient outcomes that other providers can only dream about: a hospitalization rate 24 percent below average; hospital stays 38 percent shorter; an amputation rate among diabetics 60 percent lower than average. Perhaps most remarkable of all, these improved outcomes have come without increased total cost. Though they may seem expensive, CareMore’s “upstream” interventions—the wireless scales, the free rides to medical appointments, etc.—save money in the long run by preventing vastly more costly “downstream” outcomes such as hospitalizations and surgeries. As a result, CareMore’s overall member costs are actually 18 percent below the industry average.

In addition to policies designed to extend health-care benefits to more than 30 million previously uninsured Americans, the Affordable Care Act, which President Obama signed into law in 2010, contains a host of provisions aimed at lowering overall health-care costs and improving quality of care at the same time. These provisions include the adoption of electronic medical records, programs to increase at-home care and preventive care, the development of evidence-based protocols to improve quality, disincentives for unnecessary rehospitalizations, and other measures, many of them focused on Medicare, which is a primary driver of increasing costs.

The central idea that quality can be improved while costs are being reduced has been met with varying degrees of hope and skepticism. Yet many of the provisions called for have been standard operating practice at CareMore for years. And the company’s success to date suggests that such efforts to “bend the curve,” achieving better outcomes at a lower cost, may be more plausible than they sound. The implications for the future of Medicare—and the nation’s fiscal health—may be substantial.

The founder of CareMore decided early on to build a medical provider focused on a core competency of providing cost-effective, high-quality care for the elderly:

At first, CareMore accepted patients of all ages, but in 1997 Zinberg and his team restructured the company around his original concept, focusing on the elderly and eventually accepting payment exclusively from the Medicare Advantage program. Rather than paying for services rendered (the traditional fee-for-service model), Medicare Advantage pays CareMore an annual per-patient fee, adjusted according to each client’s risk profile. This system, by replacing the distorted incentives of the fee-for-service economic model, allows CareMore to be rewarded for innovative, results-oriented care. In particular, it enables the company to build specialized programs for its highest-risk patients, who generally suffer more—and run up astronomical costs—under traditional fee-for-service plans.

One of CareMore’s critical insights was the application of an old systems-management principle first developed at Bell Labs in the 1930s and refined by the management guru W. Edwards Deming in the 1950s: you can fix a problem at step one for $1, or fix it at step 10 for $30. The American health-care system is repair-centric, not prevention-centric. We wait for train wrecks and then clean up the damage. What would happen if we prevented the train wrecks in the first place? The doctors at CareMore decided to find out.

And now that CareMore has been acquired by a larger firm, it seems likely that it’s innovative methods will spread. But perhaps the best way of guaranteeing that outcome would be to embrace something like Yuval Levin’s Medicare reform proposal, which he calls the “confident market solution”:

First, Medicare would define the minimum insurance benefit it would seek to provide to all covered seniors​—​presumably at roughly the level of coverage it now provides. Then, in each region of the country (Medicare is already divided into geographic regions), there would be a competitive bidding process each year in which private insurers would offer bids proposing to provide that (or a greater) benefit at the lowest cost they could. The level of the premium-support payment in each region for that year would be set at, for instance, the level of the second-lowest of the bids. Seniors would then be able to apply that amount toward the purchase of any of the plans on offer in their area. Thus, in each region, there would be at least one option that would cost less than the Medicare benefit, and seniors choosing that option would get the difference back as cash in their pockets; there would be at least one plan that cost the same as the benefit, so that seniors could obtain it with only the same out-of-pocket costs they have today; and there would be other plans that cost more (perhaps because they offered more, or because they failed to find ways to drive greater efficiency in their networks of doctors and hospitals) and for which seniors would pay an additional premium if they chose. 

Medical providers will have a strong incentive to beat the benchmark, and to organize the delivery of care in such a way that allows them to do so profitably. Yet because premium support is tied to the value of the minimum insurance benefit, risk isn’t shifted onto Medicare beneficiaries if competition fails to reduce the cost of delivering it. 

Reihan Salam is president of the Manhattan Institute and a contributing editor of National Review.

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