COVID-19 May Move the Needle on Value-Based Payment

Over the past decade there has been increasing pressure and attention on addressing high and rising healthcare spending while also expanding coverage to the uninsured, said USC Schaeffer Associate Director Erin Trish at a recent Schaeffer Center webinar.

Trish was joined by Elizabeth Fowler, Executive Vice President for Programs at The Commonwealth Fund, and Paul Ginsburg, Director of the USC-Brookings Schaeffer Initiative for Health Policy, for the event which was viewed by 550 people and focused on the future of value-based payment models.

The Origins of the Modern Era of Value-Based Payment

The Affordable Care Act (ACA) played a significant role in ushering in the modern discussion of value-based payment.

Elizabeth Fowler was on the frontlines of drafting the ACA, and in her role witnessed a bipartisan push for making changes to move towards value-based payment. Congressional members on both sides of the aisle recognized the potential and positives in paying for value rather than volume of care delivered. In addition, she said, there were many members of Congress worried about growing healthcare spending who wanted to make sure the ACA was about controlling costs and not solely expanding coverage.

In the decade since then, the evidence is mixed. For example, CMS announced the results from their newly revised Accountable Care Organization (ACO) program, highlighting it generated about $1.2 billion in savings.  “But to put that in context, we spend about $400 billion annually on fee-for-service in the Medicare Program,” said Trish, who is also an assistant professor at the USC School of Pharmacy. “Are we actually moving the needle?”

“The evidence is really mixed,” said Fowler. “It is really hard to say definitely that any of the strategies worked very well.”

Part of the reason for that is a lot of programs aimed at rewarding value were voluntary. “When a program is voluntary it is much more difficult to have confidence in evaluations because a lot of it depends on who selects into the program,” explained Ginsburg. He said that moving some programs to mandatory, such as bundled payments for joint replacement, might be the next step.

The Role of COVID-19

COVID-19 has had a profound impact on the healthcare system. Ginsburg described the short- and long-term impact he foresees from the pandemic. In the short term, since many healthcare providers are now stressed financially, they are unwilling to take on more risk.  “In the long-term, the experience of COVID-19 has shown more clearly some of the potential to do things in a different and more effective way, from both a quality and cost perspective,” said Ginsburg.

The “COVID story is still being written,” added Fowler. There is still a lot of uncertainty. But she noted that providers are now realizing that “relying on volume as a main source of revenue” has a lot of risks, especially when that volume drastically declines in a short period. In contrast, providers that invested in alternative payment models may have done better financially under COVID, she said.

Policy and Politics

Ultimately when we are talking about a federal program, there are a lot of interested stakeholders and parties, said Trish. The success and potential of value-based purchasing goes beyond policy and into politics. “It’s hard to take politics out of it,” said Fowler. Especially since the current payment systems were designed based on tradeoffs between politicians and stakeholders.

Looking ahead, Ginsburg said the federal deficit will be one area in which politics will play a role. “Policymakers will have to deal with Medicare’s long-term financial problems. And the countries,” said Ginsburg.

The Schaeffer Center’s webinar series is a collaboration between the USC School of Pharmacy and the Price School of Public Policy. See the complete line-up of webinars here.