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Trump admin backs off Obama-era cost-cutting program

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The Trump administration is rolling back a controversial Obama-era program aimed at cutting health spending.

The program changed the way doctors would get paid for a handful of common procedures including hip replacements, heart attacks, and cardiac rehabilitation. The Obama administration had planned for many of these changes to start in 2018.

But Medicare has largely halted the program, suggesting a slightly different approach to containing the country's sky-high health care costs.

"This is taking the foot off the gas a bit on the movement toward alternative payment models," says Josh Seidman, senior vice president at the health research firm Avalere.

The Obama administration was notably aggressive in terms of moving the health care system from one that pays for volume (a set fee for each scan and service) to one that pays for value (payments for when there is actually value in each scan and service). The idea is to reward doctors and hospitals for making patients healthier, not just providing massive amounts of health care.

The Affordable Care Act contained dozens of experiments and pilot projects meant to hasten this type of change. And many of those continue to move full steam ahead under President Trump. One good example of this is the Accountable Care Organization (ACO) program, which allows doctors, hospitals, and pharmacies to band together to accept a flat fee for all care related to a particular patient or condition.

The ACO program has quickly expanded across the country. The consulting firm Leavitt Partners identified 838 ACOs as of this past spring.

Health Affairs

There is no evidence at this point of the Trump administration backing off from this ACO program, which has taken hold in the American health care system over the past few years.

But the Trump administration is not going to continue all the experiments that the Obama administration set up. We see this most clearly with the programs that were canceled or significantly scaled back this week.

For example: Medicare will significantly scale back a bundled payment for joint replacements, which the Obama administration began to pilot last year. Originally, Medicare planned to make this lump sum payment for things like hip replacements mandatory in 67 geographic areas by January 1.

The Trump administration will pare that number back to just 34. It plans to emphasize "voluntary" cost-cutting experiments rather than mandatory ones.

“Changing the scope of these models allows CMS to test and evaluate improvements in care processes that will improve quality, reduce costs, and ease burdens on hospitals,” Medicare administrator Seema Verma said in a statement.

Medicare will cancel three other bundled payment programs — ones that dealt with heart attacks, cardiac rehabilitation, and hip fractures — entirely. The changes seem to, in part, respond to complaints from doctors that these changes were too sudden and didn't give enough time to prepare.

"One of the things we heard a lot from orthopedic providers was that this is sudden, this is complex, we're not sure we're ready to do it," says Chas Roades, chief research officer at the Advisory Board Company, which consults with hospitals. "There was a lot of pushback around the speed and complexity of it, and in general, this is an administration looking to reduce regulatory complexity."

To that point, some hospital systems celebrated the announcement. This includes America's Essential Hospitals, a trade group that includes many safety net providers that serve low-income populations.

"We are pleased CMS recognizes the burden of mandatory participation and proposes to reduce the overall number of hospitals required to participate in the CJR model," the group's chief executive, Bruce Siegel, said in a statement.

Experts say that the Trump administration is not backing off from value-based payments entirely; that train has, in some ways, already left the station. The ACO program, for example, continues to grow. A bipartisan Medicare reform law passed in 2015 called MACRA (Medicare Access and CHIP Reauthorization Act) built on these programs.

"MACRA is rocket fuel for this transition, and we're seeing more adoption of ACOs," says Roades. "We're still seeing big interest from providers."

In other words: The Trump administration is not turning the ship around on changing the way Medicare pays for health care. But the ship is moving a little bit slower now, and depending more on doctors volunteering to make these changes themselves — rather than the government requiring it.

Chart of the Day

Birth control mandate lowered out-of-pocket spending

Health Affairs

As we wait for the Trump administration's new rule on Obamacare's birth control mandate — which is expected to widely expand exemptions — it's worth revisiting this 2015 Health Affairs study on how that health law requirement significantly lowered out-of-pocket spending for multiple types of contraceptives. Economists Nora Becker and Daniel Polsky estimate that IUD users saved, on average, $248 for the intrauterine device and Pill users saved $255. Read the study here.

Kliff’s Notes

With research help from Caitlin Davis

Today's top news

  • “White House: Gov’t to make health law payments this month”: “The government will make this month’s payments to insurers under the Obama-era health care law that President Donald Trump still wants to repeal and replace, a White House official said Wednesday.” —Ricardo Alonso-Zaldivar, Associated Press
  • “Trump Set to Roll Back Obama-Era Contraception Rule”: “The Trump administration is poised to issue a rule unwinding an Obama -era requirement that employee health benefits include contraception, which will spark a fresh round of litigation over an issue that has been before courts for six years.” —Michelle Hackman and Louise Radnofsky, Wall Street Journal
  • “Obamacare Startup Oscar Posts $57.6 Million First-Half Loss”: “Oscar Insurance Corp., the health-insurance startup focused on selling Obamacare plans, posted a smaller first-half loss than a year earlier, according to state regulatory filings. Oscar, whose co-founders include Joshua Kushner and Mario Schlosser, lost $57.6 million in the first half of the year in Texas, New York and California.” —Zachary Tracer, Bloomberg

Analysis and longer reads

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