Background
The Future of the Medicare Population
The Power of Good Information
Continuous Quality Measurement and Improvement
Technology Assessment Is a Continuous Process
Continuous and Seamless Infrastructure
Aligning Incentives and System Reform
References
I appreciate the special opportunity to comment on the challenges that face Medicare in anticipation of continued changes in the nation's health—especially changes in the health needs of the elderly, changes in the health care system, and changes in the Nation itself. In my new position at the Agency for Health Care Policy and Research, usually when I appear before panels like this or in congressional hearings, I am asked to provide answers to tough questions and solutions to difficult problems.
So it is a particular pleasure to be given the chance to raise the tough questions as well as to share my thoughts on the direction your deliberations might take. But preparing this presentation reminded me that it is often harder to ask the right question, and I admire the Commission for taking on a task that will shape health care for decades.
Your task is as important—and as daunting—as the task that was before the President's Commission on Consumer Protection and Quality in the Health Care Industry. The recommendations released by the Quality Commission last month lay out several avenues that will allow the nation to improve the quality of health care services (Quality First: Better Health Care for All Americans, 1998). The recommendations include:
My perspective on these issues is shaped by my career as a health care researcher and as a general internist, particularly my experiences providing care to Medicare beneficiaries and chairing the large group practice of a university department of medicine. I also spent 10 years studying the Medicare program as a member of the Physician Payment Review Commission (PPRC), and served as chairman of the panel for 2 of those years.
I am proud of what Medicare has accomplished in its first three decades. The program serves 39 million older Americans well. The Health Care Financing Administration (HCFA) has pioneered the use of innovative payment mechanisms, such as diagnosis-related groups (DRGs) and the Resource-Based Relative Value Scale (RBRVS), that are now used by many group practices and managed care organizations for their own payment, while also striving to measure and improve the quality of health care services for beneficiaries.
In a 1994 study commissioned by the Physician Payment Review Commission, Mathematica Policy Research found that almost 40 percent of Medicaid programs and over one-quarter of managed care plans in the survey had adopted Medicare's RVS physician payment system (Gold, 1995).
But I will not comment today on issues of financing Medicare, nor about the financial security of Medicare beneficiaries. Others will have plenty to say about these important issues. Instead, I want to focus on what we do with the funds for which Medicare is responsible, about how Medicare can be a steward of the resources that are available for the care of the elderly, the disabled and those with renal failure.
I believe that there are three ways in which we can improve health through better health care, and I have been fortunate in my career to have had a chance to help improve each. I believe this Commission can contribute to the health of the public not only by ensuring the actuarial and financing solutions to health care for Medicare beneficiaries, but also by ensuring that the new Medicare will contribute in these three fundamental ways.
First, in my years as a teacher, researcher, and doctor (and remember that the word doctor comes from the Latin "doctore"—to teach), I have believed that good health care requires that knowledge be discovered, translated, and used. Good health care is based on good knowledge—about what works clinically and what works in the organization and financing of care.
Second, as a health care researcher and as a former clinical chief at a medical center, I know that knowledge is a necessary but not sufficient condition to improved health care. The structure of the system, and especially its leadership, is also critical.
Both of these—knowledge and the combination of structure and leadership—are important but insufficient unless the third element is in place. The incentives built into payment systems should encourage behavior from all that is consistent with the public's interest and good health for individuals. My own career has been guided by these three principals for improving health through improved health care—information, leadership and management, and appropriate incentives.
Many reforms in Medicare have been designed to level the playing field, so that decisions can be made on the basis of the best evidence rather than because one alternative is more profitable than another. I know that this was the guiding principle of the PPRC—to level the playing field of health care financing so that decisions could be made by clinician and patient, based on information about what would help bring good health. I am very pleased that President Clinton and Secretary Shalala recognize the need for evidence-based research and good information to improve the quality of health care services. The Fiscal Year 1999 budget request they proposed earlier this spring included an investment of new funding for quality-related research.
Research indicates that the Medicare-eligible population in the future will look very different from the past. In this century, the average length of American life has climbed from 46 to 73 years for men and 49 to 79 years for women. Life expectancies for people upon reaching the age of 65 have also increased during the past century, from 11 to 16 years for men and 12 to 19 years for women (Social Security Area Population Projections: 1997). This has led to a demographic bulge—the aging population. As a result, the Office of the Actuary of HCFA estimates that the Medicare rolls will grow from 37 million to approximately 86 million from 1998 to 2069.
But experts also estimate that in the next 80 years, by 2080, life expectancy will increase only 2 or 3 more years—to 76 years of age for men and 81 years for women. Thus, we may not extend life much more, and rather will focus on advancing the quality of life in these years.
The future needs of the very elderly are in chronic illness. Americans already enjoy more years with the vigor of good health. Infirmity now comes much later in life. Eighty percent of years that previously were lost to nontraumatic, premature death have been eliminated (Fries, 1980). An editorial in the New England Journal of Medicine emphasized that "morbidity and disability will be compressed into a relatively short period" between the ages of 75 and 85. "Despite some hesitancy about the quality of life in the 70s, 80s, and 90s," the editorial continued, "almost everyone wants to reach these ages" (Campion, 1998). Savings of money and improvements in health will accrue by reducing the need to spend on illnesses in mid- and late life, by compressing morbidity into a few years before the individual dies.
With this compression of morbidity, more health expenditures will result from chronic diseases afflicting the elderly, expenses that can be avoidable. Recent research shows that persons with less health risk (nonsmokers, lower body mass index, and exercising) have initial disability at an older age, with lower levels of cumulative disability at any given age (Vita et al., 1998). Thus, the typical Medicare beneficiary will be one who increasingly seeks improved quality of life in a longer life, hoping for less illness before the onset of chronic illness late in life.
Medicare is a payment system built on traditional insurance, especially focusing on high cost, acute-care events. When Medicare was established—over three decades ago—these acute events were diagnosed and treated in the hospital. When I was a medical resident (a little over two decades ago) the average person was hospitalized for over 10 days. Length of stay is now less than 4 days in some health plans. When I was a resident, for every thousand Americans there would be a thousand bed days in hospitals per year, an average of one day in the hospital for every person. Now, in some health plans, that ratio is less than 200 days per thousand.
With the emphasis on chronic disease and with the compression of morbidity, the challenge is different than it was in 1966. The elderly need a financing system—and a health care system—that helps them delay disability and deal effectively with their chronic diseases, which are usually multiple chronic conditions in multiple organ systems. In fact, a majority of women on Medicare have more than one chronic condition.
While health financing policymakers have focused principally on the changing age distribution as they ponder the future, there are also significant implications as the complexion of the Nation changes. The changing demographics of race and ethnicity in this country will have a profound impact on Medicare and on the practice of medicine. Nearly one-quarter of the U.S. population today are members of racial or ethnic "minority" groups. By the middle of the next century, this percentage will increase to nearly 47.5 percent.
Clinicians—and policymakers—will need to take into account the epidemiologic and cultural sensitivities involved in treating patients of different ethnic and racial groups. Their patterns of disease may differ, as may their belief systems, and their preferences for types of care. Research has clearly demonstrated differences in the use of medical care services, even when income and insurance status are taken into account.
One study found that older African Americans were less likely to use nursing homes than similar white Americans (Wallace et al., 1998). However, African American men were more likely to have higher use of paid home care services, care by family and friends, or to have no care. These differences may represent different cultural approaches to health care, but may also represent more limited access to care for African Americans. When we learn that white men on Medicare are twice as likely to undergo an invasive diagnostic procedure as African Americans men following a heart attack (Franks et al., 1993), do we conclude that African American prefer fewer services or that African Americans had less access?
When we learn that, following the diagnostic procedure, white men are still 1.8 times more likely than African American men to undergo coronary artery bypass surgery, do we assume that African Americans prefer less medical treatment or that they have less access? We have even less information on the care that is received by other ethnic minorities. Are these differences in the use of medical services to be celebrated as an expression of the nation's diversity or eliminated as an expression of the Nation's inequality?
In this context—remarkable demographic changes and the ever greater dominance of chronic conditions that jeopardize the quality of life—I would like to emphasize four key elements of health care for Medicare beneficiaries that I hope the Commission will keep in mind as it looks at alternatives for financing and organizing Medicare:
Many discussions of the care of the elderly (and of Medicare expenditures) have focused on end-of-life care, and the final year is indeed expensive. But I believe that we also need to focus our efforts on maintaining and improving the quality of care—and the quality of life—in the years prior to the end of life. These are the years that set the stage for the costs of the last year—and may postpone it in exchange for more years of high quality life.
According to a HCFA study published in the New England Journal of Medicine, 29 percent of Medicare payments for the elderly in 1988 were made for beneficiaries during the last year of life. Although this study is slightly dated, researchers found a flat trend from 1976 to 1988 (Lubitz and Riley, 1993). Analysts often emphasize that 10 percent of the population accounts for 70 percent of expenditures.
One of the most critical elements in improving the quality of life, as well as its duration, is that information be available to all health care decisionmakers at all levels—patients and clinicians, health care system leaders, and policymakers. Information empowers patients to select health plans on the basis of quality in addition to cost. Patients and clinicians use information to weigh their options for diagnosis and treatment. Information enables health plans and policymakers to identify and correct underuse, overuse, and inappropriate use of services. Information allows markets to compete on quality. Those who are reorganizing health care and health care systems need information to guide their choices about which options they will select. Investments in information systems are expected to guide many of these decisions.
But data are not the same as information, and there are few assurances that the information that will be available to decisionmakers will be good information. In his poem "The Rock," T.S. Eliot wrote, "Where is the wisdom we have lost in knowledge? Where is the knowledge we have lost in information?" Medicare discovered through its experience in releasing hospital mortality rates that information is more than data. For information to be used wisely to inform decisionmaking, it must be analyzed carefully, placed in context, translated into knowledge, and used wisely to enhance the health of the public.
Also, simply providing information does not necessarily mean that it will be used for decisionmaking, nor that it has value to the recipients of the information. A 1996 survey cosponsored by AHCPR and the Kaiser Family Foundation indicated that only two out of five Americans had actually seen information on the quality of health care within the previous year. And only one-third of those who had seen the comparisons actually used them to make a decision about health plans, doctors, and hospitals (Kaiser Family Foundation and AHCPR, 1996).
Providing Medicare beneficiaries—and all patients—with information could enable them to participate in their care as informed decisionmakers. Evidence suggests that patient involvement in health care decisionmaking can enhance the outcomes of treatment by improving a patient's sense of coping with illness, lead to more appropriate use of services, and thereby improve health outcomes and satisfaction. For example, patients with early breast cancer who believed that they were more responsible for treatment decisions and who believed that they had more choice of treatment reported higher quality of life than those who perceived themselves to be less in control of the treatment decisions (Street and Voigt, 1997).
Similarly, self-management courses in arthritis teach patients how to cope better with this chronic and often debilitating disease. In a randomized controlled trial, investigators found that a self-management program sent to patients through the mail had a positive effect on outcomes and decreased use of medical resources (Fries et al., 1997).
For it to be effective, information—whether to select health plans or make treatment choices—should be based on science and provided in a useful, understandable format. One of the best examples of this is the Shared Decision Making Program for benign prostate disease. This interactive, videodisc-based patient education program is designed to allow patients to explore and make an informed choice about whether to undergo transurethral resection of the prostate (TURP) or follow a program of "watchful waiting." In a pilot involving a sample of men, the results were promising (Wagner et al., 1995), although a study with a larger sample is needed to gain a clearer picture of the impact of the program. Before viewing the videodisc, two thirds of the men favored an approach of watchful waiting. Afterwards, this percentage increased to 79 percent. Investigators found that 27 percent of the men who initially favored surgery changed their mind while only 1 percent of those initially inclined to wait opted for surgery.
To improve care for Medicare beneficiaries, we must be able to measure quality, identify successes, and target areas where we can do better. We know, for example, through the work of Dr. John Wennberg, about the wide variations that exist in medical practice. Variation provides us an opportunity to study what care is appropriate, how much is enough, and what is fair. In some cases, variation is caused by geographical and epidemiological differences or by the preferences and values of patients. In other cases, variations are opportunities for improvement.
On an individual level, patients and their clinicians must weigh personal preferences when making health care decisions. For example, research has indicated that some patients with laryngeal cancer would rather undergo radiation and risk living fewer years than undergo a procedure that would cause them to lose their voices (McNeil et al., 1981). For them, the issue is not the length of their lives, but the quality of their lives.
Sometimes, clinicians must turn to family or friends to ask about patients' treatment preferences. However, the Hospitalized Elderly Longitudinal Project (HELP) indicates that surrogate decisionmakers often underestimate how much patients seek to live longer and overestimate how much time they would sacrifice to have better quality of life (Tsevat et al., 1998). Therefore, we need to assess and understand patients' preferences for care not only at the end of life, but as an integral part of their medical and health history.
On the health system level, we need measures to gauge the quality of health care and develop innovative and effective strategies for improving the quality of care. This must be a continuous, dynamic process.
Researchers have shown that differences in denial rates for services screened for medical necessity result from lack of knowledge regarding the efficacy and effectiveness of various medical technologies. For example, a study examining the high variability in the use of electroconvulsive therapy found that a primary cause was the lack of knowledge regarding the effectiveness of the procedure.
For many reasons—first among them their professional responsibility and ethos—clinicians want to do well in helping their patients stay well or get well. When there are gaps between what clinicians can do—or what scientific advances allow them do—and what they actually do in practice, they will want to improve. When there is evidence that others are doing better, clinicians will want to achieve the standards of those best practices. Cynics might argue that this is because they want to compete for patients, or avoid malpractice suits, or compete like they have since pre-med days. These factors certainly play some role in clinicians' and hospitals' desire to succeed in translating science into improved health, but I believe the dominant reason is the underlying professionalism of clinicians, the sense of mission that led to hospitals being founded, and the spirit of healing that motivates both.
For both purposes of quality measurement— for choice and for improvement—it is important to adjust for the severity of illness of the population being measured. The absence of such an adjustment can result in serious unintended consequences. High-quality health plans might attract the sickest patients and incur greater costs without recouping greater reimbursement. Thus, payment adjusted for risk is a high priority for reform of health care financing. Equally important, but less often recognized, is the need to adjust quality and outcome measures for severity and complexity of disease. Otherwise, poorer outcomes that are caused by a clinician's or a hospital's willingness to accept sicker patients could be misinterpreted as poorer quality care. Researchers are just beginning to discover ways of adjusting both costs and outcomes for severity, and recognizing that different factors may affect these two aspects of care.
Similarly, to understand the impact of Medicare and the care that it finances, continued development of outcomes are needed to reflect not just traditional clinical measures, but also to measure results that people care about. The usual measures—like millimeters of blood pressure reduction—can be projected by epidemiologists into averted cardiovascular events. But patients want to know more than these physiologic measures; they want to know how well they will feel, and they want to judge their health care by how healthy they consider themselves to be.
One of the first such measures to be developed was the quality-adjusted life-year (QALY). QALYs seek to capture both quantity and quality of life in a single metric. Used in economic analyses, QALYs allow the comparison of medical interventions along the measure, "cost per quality-adjusted life-year." The World Bank is now considering the use of a related measure, "disability-adjusted life-years" (DALYs), as it evaluates the use of scarce resources to provide health care in developing nations. The use of new measures of outcomes such as QALYs and DALYs assumes that quality of life can be accurately measured, and that community preferences can represent individual preference. They also present challenges in evaluating care of the elderly, who have fewer years of life to save (LaPuma and Lawlor, 1990). They do, however, emphasize the importance of measuring not only traditional outcomes of care, like lives saved, but also the quality of the life that patients gain.
The health care market today is characterized by intense price competition, with purchasers demanding greater accountability and value. These pressures are leading health plans and facilities to give increasing scrutiny to capital investments and decisions to cover new medical procedures or services. Unfortunately, policymakers often lack unbiased, scientific evidence on effectiveness that would help them judge the relative value of alternative health technologies. In addition, technology assessment does not always keep pace with research and development, nor with the changing needs of health care practice.
In some cases, old technologies linger, even when they have been surpassed by better ones. In 1989, I conducted a study that examined old and new technologies in hospitals and found that new technologies did not replace older technologies, but were simply added to the hospital regimen (Eisenberg et al., 1989). We found that a decrease occurred in only one of five older technologies that we studied, a small reduction in oral cholecystograms when it should have been replaced by gallbladder ultrasound.
I urge the Commission to factor into its deliberations the need for innovation in technology assessment. Technology assessment should not be a one-time exercise, but an ongoing, continuous process. Technology assessment should not be a hit and run exercise—evaluate, approve, and then forget about it. Instead, we need a more flexible and continuous process of evaluating technology. As a clinician and health services researcher, I recognize that technology evaluation for coverage, for approval, for practice recommendations and for decision making about individual patients may require different types or levels of evidence. When I worked with my PPRC colleagues in 1994 to advise Congress on technology assessment policy, we suggested that new approaches be considered, such as coverage conditional on providers collecting data for an ongoing evaluation, or coverage for patients enrolled in a clinical trial, or coverage for qualified centers or networks of excellence (PPRC Report, 1994).
The technology assessment for lung volume reduction surgery (LVRS) suggests a promising direction to take. LVRS is an investigational procedure that removes damaged, nonfunctional lung tissue from patients in the last stages of emphysema. After discovering that some providers were billing Medicare for LVRS using codes that were assigned to other lung procedures, HCFA asked AHCPR to conduct a full technology assessment of LVRS. AHCPR's assessment found that there was insufficient evidence on which to make a scientific judgment regarding the effectiveness of LVRS, but recommended that coverage be granted within the scope of a clinical trial. That trial is now underway with funding from the National Institutes of Health (NIH), the clinical care being funded by HCFA, and the cost effectiveness analysis supported by AHCPR.
When medical technology is used appropriately, it can improve health, and in some instances, reduce costs. For example, patients who undergo laparoscopic cholecystectomies (a less invasive form of gallbladder removal) had hospital stays that were one-third less than those who underwent the standard surgical procedure. For all these reasons, evidence-based, timely technology assessment as a decision tool for policymakers is key.
When Medicare was passed, so the story goes, it adopted the health care financing modus operandi of the day, and therefore emphasized coverage of acute illnesses, with the payment of hospitals and doctors being considered two separate and distinct costs. Today, health care is different, and we have the opportunity to seek new ways of assuring that Medicare promotes health care that is continuous. Usually, when we primary care physicians emphasize continuous care, we emphasize the value of a personal physician who knows the patient well and is his or her guide and advocate for years. There is good evidence that continuity makes a difference, including a recent study showing that having a primary care clinician predicts better outcomes. Although managed care has helped assure that patients are assigned a primary care clinician, the frequent changes in plans by employers who offer only one or two plans has disrupted some of those relationships.
The value of continuity is also important across space as well as time; that is to say, care should be integrated across different components of the health care system. Research has documented the importance of continuity of information from one health care provider to another as patients are transferred, for example, from nursing homes to hospitals. In one study, researchers found that patients' advance directives remained in the nursing home chart and never made it into the hospital record (Danis et al., 1991). In one out of four cases, the health care team treated the patients either more aggressively or less aggressively than had been requested in the advance directives.
Information technology can help bridge different settings. But information technology requires a substantial investment, and there are few incentives in current payment systems to make this investment. In addition, much remains to be done before information systems can be used effectively to bridge the care of patients across clinicians, across institutions, and across time. National standards for the coding of health information, appropriate safeguards for the confidentiality of individually identifiable health care information, but also appropriate availability of information to care for patients (as well as to assure and improve quality and to facilitate research), and the training of health care professionals in the use of information systems will also help improve the transfer of information and would help improve patient confidence in its use. Of course, investment in information systems must be coupled with evaluation to determine its impact on the cost and quality of care.
Better information systems and improved access to primary care are two important solutions to the need for a seamless and continuous health care system, but more can be done. Innovative and alternative schemes for organizing care may be able to bring together different elements of the health care system. One innovative approach is the social health maintenance organization (HMO) (or S/HMO), which is designed to integrate acute and long-term care under a single capitation payment and management.
According to HCFA's evaluation of the phase I social HMO demonstration project, the S/HMO projects had lower levels of disenrollment, but not rates of hospitalizations or corresponding lengths of stay, than Medicare's risk-contract HMOs. Healthy S/HMO enrollees also expressed overall satisfaction with their participation in the program. Frail S/HMO enrollees were more satisfied than their fee-for-service counterparts in costs and benefits of care. Building upon the experiences of this first phase, a second generation of S/HMO demonstrations may deliver even more information about ways to integrate care effectively (Kane et al., 1997).
Other promising approaches warrant investigation. Though functional status remained unchanged, group visits for chronically ill, older adults who were members of a group-model HMO led to fewer emergency room visits, subspecialty visits, and repeat hospital admissions, lower costs, higher rates of pneumococcal and influenza vaccination, and greater patient satisfaction (Beck et al., 1997). In another study, researchers provided preventive occupational therapy in a community-based setting, subsidized housing for seniors. Across various health, functional and quality-of-life domains, the treated group did better than controls (Clark et al., 1997) The famous On Lok program in San Francisco's Chinatown has successfully cared for the frail elderly in a capitated delivery system that integrates primary, acute, and long-term care services with an interdisciplinary team, using case management, staff physicians, an adult health center and home care, and a medical provider network.
To encourage a seamless and integrated health care infrastructure, payers will need to align incentives—financial and otherwise—to encourage flexibility and continuous improvement of care. Today, we tend to compare managed care and fee for service health care, even though many managed care organizations still pay their providers fee for service, even though others pass on risk and responsibility for utilization and quality to providers, and even though some fee-for-service providers have developed innovative integrated systems of care. The lines between managed care and fee for service have blurred, and we must look deeper at the organizational structures and the incentives they create to understand their impact on a seamless system that can deliver continuous care of high quality.
Medicare can lead the market by becoming a value-based purchaser, aligning payment with appropriate incentives for performance. But let me close on the same note that I started. It is appropriate and necessary that this Commission focus on the solvency of Medicare and on the financial security of Medicare beneficiaries. I urge you to add to those considerations the impact that payment systems have on the behavior of those who are paid, and those on whose behalf the payment is made. As a physician, I also want to emphasize that the response of physicians to economic incentives is complex.
Several years ago, with my economist colleague Mark Pauly and others at the University of Pennsylvania, I worked on a chapter for a book we were writing to explain the models that have been advanced to explain physician behavior in the marketplace. They are the profit maximization model, the sophisticated target-income model, and the patient agency model (Pauly, Eisenberg, Radany et al., 1992).
Through the lens of the profit maximization model, physicians are just like other small business owners: they try to maximize profits, constrained by their willingness to work more hours. The simple version of the target-income model suggests that there is some fixed number of dollars, given time and effort, to which a doctor aspires. The more sophisticated version adds that there is a kind of "cost of conscience" in creating demand. This cost of conscience is a psychic cost that limits the physician's willingness to provide services that might not be necessary, or to withhold services, just to increase income. The patient agency model, on the other hand, suggests that physicians seek primarily to serve as their patients' agents.
The point is that physician behavior cannot be explained by a single simple economic model. The right answer will differ among physicians and is probably some amalgam of the three theories. Surely, physicians respond to financial incentives to some extent. As the old joke goes, chlorophyll is not the only green catalyst. But physicians are professionals, and I believe that they will be true to their responsibility to do what is best for their patients. They are influenced by a variety of factors, including information on outcomes, their peers, and their leaders, as well as their incentives (Greco and Eisenberg, 1993).
The observation that there is more variation in medical practice for those services for which there is more uncertainty suggests to me that, if we physicians knew more about the effectiveness of the services we provide, we would provide them differently. I believe that if we were judged on the basis of the quality we and our colleagues provide, we would applaud the effort to reward us for being true to our professional ethos. If we were offered a flexible way, not only to introduce new technology, but also to participate in its evaluation, many of us would do so enthusiastically. If we were to practice in a system that provided assurances of continuity across space and time, and a seamless and integrated system of care, we would welcome the opportunity to collaborate with fellow professionals.
As we consider the Medicare program, we have an opportunity to respond to these challenges—to recognize the power of good information, to assure continuous quality measurement and improvement, to make technology assessment a continuous and creative process, and to build a health care infrastructure that is continuous and seamless. We can align incentives and system reform to respond to the needs of older Americans, of whom there are more and who are living longer, to compress their morbidity further and give them as many years of high quality as we can.
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Current as of April 20, 1998
Internet Citation:
Testimony on the Future of Medicare. John Eisenberg, MD, Administrator, AHCPR, before the Bipartisan Commission on the Future of Medicare, U.S. Congress, April 20, 1998. Agency for Health Care Policy and Research, Rockville, MD. http://www.ahrq.gov/news/test0420.htm
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