Going Below The Surface E-newsletter: October 2019
October 22, 2019
Trick or treat! In anticipation of Halloween, we’ve chosen to treat you to a special version of the Going Below The Surface email, featuring a more in-depth look at health spending choices related to value and transparency (and not the ghostly kind).
Policymakers have put substantial resources behind proposals that seek to decrease costs via value-based payments and transparency, but the evidence shows these approaches may not actually be effective. In this month’s Digging Deeper, we discuss a recent article by economist Austin Frakt on value-based payment. We also take an expansive look at how policies aimed at transparency are not having the desired effect on prices.
Last month there was a nationwide debate about whether red meat is “bad” or “not bad,” based on a journal article that came down on the side of “not bad.” That spawned innumerable hot takes on beef, bias and nutritional epidemiology. The ultimate conclusion: the question is complex, the question is important and the answer is that more data is required.
That’s the framework needed to understand an article in The Incidental Economist and the New York Times from health economist Austin Frakt regarding whether value-based payments are useful or not. His conclusion: programs that tout value, including those in the Affordable Care Act and Medicare, have had minimal impact on spending.
Frakt cited the Medicare Hospital Readmissions Reduction Program, which penalizes hospitals that have high rates of readmissions. Initial studies of the program suggest it was responsible for reduced hospital spending, but more recent analyses came to different conclusions.
But as in the red meat brouhaha, it’s shortsighted to assume that we can make a black-and-white judgment about value-based payments. While some evidence suggests a modest-at-best impact, the savings achieved by value-based programs depends on a host of complex and interlocking factors, not the least of which are the size of the incentives and the definition of value. As Sherry Glied, dean and professor at the Wagner School of Public Service at New York University, told Frakt, “We don’t even know what we mean by value. How do you pay for something when you don’t know what it is?”
Why It Matters: Definitions of “value” are so flexible that the term risks being cheapened: only 3% of payments around Medicare Hospital Readmissions Reduction Program are at risk, yet the program can claim that all payments are value-based. That limited risk could explain why the program has had modest success, at best, in controlling costs. This isn’t to say that value doesn’t work: we need to keep experimenting and carefully assess the evidence, paying especially close attention to how risk is allocated and what incentives may accelerate – or dampen – savings.
Transparency is being pushed as a policy cure-all that leads to lower prices and better quality, while enabling patient choice, making it a focus of many Trump administration efforts to help control costs. However, several recently published studies looked below the surface and found that, for transparency to be useful to consumers, it needs to be far more nuanced than a number posted on a website. Otherwise, we risk creating a situation where patients – or policymakers – may not understand how to interpret or use the information.
Here are a few health spending tidbits you can discuss with your colleagues over the baskets of unloved and leftover Halloween treats in the break room:
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