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Texas Native McClellan Working to Make Medicare Savings a Reality
By Jim Landers, Dallas News
March 22, 2009
Traveling by taxi between the White House and Congress, think-tank honcho Mark McClellan answers questions over his cellphone about fixing health care. "It's a lot harder to come up with ways to implement reforms than it is to come up with ideas for reform," he said.
McClellan, 45, is an Austin native from a strongly political family. Brother Scott was President George W. Bush's press secretary. Their mother, former Texas Comptroller Carole Keeton Strayhorn, ran for governor in 2006.
Mark McClellan was a major policy figure in health care during the Bush administration. While most of his former colleagues are now in the political wilderness, McClellan is using his post at Washington's Brookings Institution to keep moving in the circle of implementers who want to "bend the curve" of rising health care costs.
Along with several other health care experts, McClellan is trying to persuade President Barack Obama's reform team and Congress to pay hospitals and doctors more if they can show they're improving treatment for Medicare patients while lowering costs.
McClellan argues that sharing savings could keep Medicare viable without bankrupting the federal government.
"Right now, we are getting what we pay for – high-volume, high-intensity health care," he said. "Often, there's no support for preventive care."
White House Budget Director Peter Orszag says McClellan's approach is "spiritually aligned" with the Obama administration's views on the need to change payment incentives.
"We have the same basic philosophy," Orszag said. "There are huge variations in health care costs across different regions of the country that can't be explained other than because of the intensity of care. ... We need to change the incentives so we get better care, not more care."
Medicare, the federal program for seniors that accounts for 20 percent of health care spending, pays providers on a fee-for-service model. Each visit, each test, each procedure a doctor performs pays a certain amount. The system creates an incentive to see lots of patients, lots of times.
For many years, reformers have argued in favor of payment systems based on performance rather than volume. Pay-for-performance advocates argue their approach gets patients the most effective type of care rather than an uncoordinated cascade of diagnostic tests, prescriptions and treatments.
Cost disparities
Dr. Elliott Fisher of Dartmouth's Institute for Health Policy and Clinical Practice developed a pay-for-performance approach called Accountable Care Organizations that McClellan is now backing in Washington.
Fisher came to his model after sifting data that shows Medicare pays twice or even three times as much per patient in different parts of the country. The average enrollee in Medicare in Dallas, for example, consumes $10,103 a year in medical treatments, while Medicare enrollees in Salem, Ore., get by on half as much.
The Dartmouth researchers found that Medicare spending in Dallas was growing at an average of 5.25 percent a year. The national average was 3.5 percent, while spending in Salem was going up just 2.31 percent a year. If the rate of increase could be dropped from 3.5 percent to 2.4 percent ("bending the curve"), the Dartmouth research showed, Medicare spending could be lowered $1.4 trillion by 2023.
Fisher argues the regional cost disparities can be bent toward lower costs if physicians group together around hospital networks where each Medicare patient's care is coordinated and each treatment is evaluated for quality and effectiveness.
If the network can demonstrate its care regimen reduces average spending by 2 percent or more a year, the doctors and hospital would get bonuses amounting to 80 percent of the savings. If the network fails to meet either its quality or savings targets, its compensation would be penalized.
Fisher and McClellan believe a minimum of 5,000 Medicare patients would need to be covered by an Accountable Care Organization to provide good benchmarks. (Orszag said the White House favors linking the care-giving organization to physicians rather than hospitals but otherwise takes the same approach.)
"We need some big changes to address quality and regional disparities," McClellan said.
Pay-for-performance is not a new idea. Several experiments – some successful, some not – are under way across the country to coordinate care and tie physician and hospital fees to outcomes. Medicare is funding several accountable-care pilot programs, though none in the Dallas area.
The Park Nicollet Health Services system in suburban Minneapolis is an example of how the current compensation system creates incentives for higher spending. Park Nicollet has a 426-bed Methodist Hospital and several specialist clinics.
A few years ago, Park Nicollet started a new outreach treatment program for Medicare patients with congestive heart disease. Health workers call patients once a day and ask five questions. Depending on the answers, patients are asked to come in for a physician visit, alter their daily routine or keep on as they are.
David Wessner, Park Nicollet's president and CEO, said at a recent Brookings Institution workshop that the program has reduced cardiac patient hospital admissions by 80 beds – good news for patients, but not for the hospital, which is losing money.
"Delivering quality health care is a money-losing proposition under these payment rules," Wessner said.
Economic urgency
Len Nichols, a health care economist who worked on the Clinton administration's failed reform effort, said the reform emphasis now was less about ideas like pay-for-performance than ways to implement them.
"None of these are new ideas," he said. "What we have is a sense of economic urgency driven both by the fiscal realities of our Medicare program and, obviously, the economic situation we're in right now.
"We really shouldn't dither any longer about doing serious reconstructive surgery on our health system...We should start this afternoon. The longer we wait, the greater the costs."
This need to implement change is where Nichols and others see McClellan playing a role in the current debate.
John Goodman, president of the Dallas-based, conservative National Center for Policy Analysis, said McClellan is "the single-most respected person in health care policy."
"He's both a medical doctor [Harvard Medical School] and a Ph.D. in economics [Massachusetts Institute of Technology]," Goodman said. "Most people in this debate are neither."
Goodman has been pitching his market-oriented ideas to sympathetic Republicans such as Oklahoma Sen. Tom Coburn. McClellan has been working with Democrats and Republicans
"I'd like to think this is a bipartisan set of ideas," McClellan said. "And in terms of emphasis, it's not just big ideas but important technical and practical details about how do you do this so it doesn't disrupt care and so on. It's paying attention to the details needed for legislation."
The health care debate is just getting started, and how much success McClellan will have is uncertain. For now, though, he's a busy man, shuttling between the White House, Congress and federal health care agencies. His phone directory includes the heads of major health centers across the nation, including Parkland and Baylor.
"We're gathering momentum," McClellan said. "I'm optimistic."
ACCOUNTABLE CARE ORGANIZATIONS
Goal: Give doctors incentives to improve the quality while curbing the quantity – and cost – of medical help for Medicare patients.
Approach: Care for a minimum of 5,000 Medicare patients is coordinated through a hospital, which has an overall annual spending goal.
Patients and physicians are invited to participate in an effort to improve quality and reduce cost.
Treatment results and costs (though not patient names) are transparent and evaluated.
If annual spending is below the goal, most of the savings are shared among participating physicians.
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