Cost and Quality Relationship Memo

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Many of the reforms contained within the Patient Protection and Affordable Care Act (PPACA) are aimed at reducing health care costs and improving quality without rationing care, cutting benefits or reducing eligibility. Starting with the populations that suffer from the most difficult health conditions and have the most medical expenses makes sense. If designed and implemented properly, these reforms hold the potential to transform not only their lives, but also to serve as models for other populations. However, this promise cannot be realized without the informed and meaningful participation of patients, families and their advocates.

The problem: our fragmented system
There is widespread acknowledgement that our current health care system is fragmented, failing to consistently deliver high quality care, particularly to certain vulnerable people, such as: those with multiple chronic conditions, the frail elderly, people who are dually eligible for Medicare and Medicaid, and members of a racial or ethnic minority. These populations tend to see more physicians, have more office visits and take more medications. Too often, there is no one to coordinate this care. This failure to coordinate leads to poor care, such as:

• Duplicative tests or procedures
• Medication errors
• Avoidable hospital admissions
• Preventable hospital readmissions
• Unnecessary nursing home placements
This fragmentation comes at a cost. Overall, health care costs represent 16 percent of our Gross Domestic Product. In 2009, we spent $2.9 trillion on health care. The cost of health care services provided to vulnerable populations is disproportionate to their numbers. For instance, 96 percent of Medicare dollars and 80 percent of Medicaid dollars are spent on patients with multiple chronic conditions. And, Medicaid and Medicare spend four times as much for the nearly nine million dually eligible beneficiaries than for non-duals. This disproportionate spending is in part because these populations have more complex health care needs. But preventable hospitalizations, complications and unnecessary nursing home admissions contribute significantly to these high costs. Improving the health delivery system for these vulnerable people will improve the quality of their lives, while also saving money.

Page 2 National Health Reform and Delivery System Change, June 2010 Community Catalyst is a national non-profit advocacy organization building consumer and community leadership to transform the American health care system. www.communitycatalyst.org

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New opportunities emerging from national health care reform
Noted Harvard surgeon and author Atul Gawande said it best in his December 2009 New Yorker article “Testing, Testing,” where he responded to claims that there was no master plan for improving quality and reducing costs in the then-pending national reform bills. Drawing from what’s worked in agriculture, he said that “[t]o figure out how to transform medical communities, with all their diversity and complexity, is going to involve trial and error. And this will require pilot programs – a lot of them.” Indeed, the PPACA is filled with just these types of reforms aimed at testing what works. By its very nature, it acknowledges the differences among health delivery systems. While there are too many reforms to cover, this brief aims to discuss some those that hold the most promising for states to improve the health of vulnerable populations. Center for Medicare and Medicaid Innovation1

The PPACA creates this new center within the Centers for Medicare & Medicaid Services (CMS) and charges it with testing innovative ways of delivering and paying for health care provided to Medicare

and Medicaid beneficiaries. The goal of these new models is
to reduce program costs while preserving or enhancing the
quality of care. While the Center has discretion to choose
the models it will test, Congress requires it to give
preference to those models that also improve...
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