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David J. Brailer, MD: CMS Is Set Up to Fail

MANAGED CARE August 2014. © MediMedia USA
The Contrarians

David J. Brailer, MD: CMS Is Set Up to Fail

The accountable care organization hung like an ornament on a Christmas tree, helping to ensure passage of Obamacare, says David J. Brailer, MD. Four years later, however, the money needed to make ACOs work is not there.

Here’s a frightening contrarian view: The Centers for Medicare & Medicaid Services is poised to fail. That’s the opinion of David J. Brailer, MD, the founder and CEO of Health Evolution Partners, a private equity firm.

Perhaps best known as the first national coordinator for health information technology at the U.S. Department of Health and Human Services, Brailer also founded CareScience, a company that specializes in delivering data on quality of care to hospitals. Premier Inc. acquired CareScience in 2007.

His background demonstrates that he has a deep understanding of the U.S. health care system. That’s why he says the world’s largest insurance company, CMS, has an inherent conflict of interest.

“In the long run, CMS is set up to fail because it has two conflicting authorities,” he says. “Not only does it run Medicare, the biggest insurance company in the world, but also it’s a regulatory authority for the health care industry.

“Imagine if the Federal Communications Commission, which regulates cellular bandwidth and the media, also operated the nation’s largest cell phone company. It would have a similar conflict of interest because the commission would want to drive prices down to serve consumers but keep rates high because high rates are good for business. Or you might enforce the rules more stringently against your competitors while not following those rules yourself.”

The mammoth agency is both payer and regulator, and has conflicting missions. It may extricate itself by gradually abandoning its payer role to Medicare Advantage.

As the national coordinator for HIT, Brailer saw the inner workings of CMS and HHS. Ever since then, he’s been wondering why an insurer would also have a competing function as a regulator.

“What is their chief purpose? It’s tremendously conflicted. By doing both, you just create tension, ambiguity and distress among the staff, and I can say from experience that the staff are skilled professionals who do great work.”

Congress should recognize this conflict of interest and separate CMS into two entities, Brailer suggests. One entity would continue to function as an insurer for Americans aged 65 and older. The other entity would be a regulatory authority for health care policy and would report to Congress.

“It will take some time to separate the historical set of conflicts that are currently built in, but it’s necessary to unwind the two parts. If you don’t separate the two parts, CMS has a difficult time making progress on policy issues,” he says. “As it is, they may see their first job as serving as regulators. But then as regulators, do they see themselves as having to protect insurance companies? Obviously, that can’t work.

“This conflict is at the root of why we have seen such a systematic failing of health care policy over many years.”

One way the conflict is expressed is in how CMS manages accountable care organizations (ACOs), Brailer says. ACOs were added to the Affordable Care Act to make the concept of improved care delivery attractive to health insurers, hospitals, and physicians. In fact, Brailer believes the ACA is like a Christmas tree, adorned with ornaments to attract the attention and support of various constituencies. Ornaments on Christmas trees draw our attention just as different parts of the ACA made the law attractive to different segments of the health care system.

Without the support of many segments of the industry, health reform proponents feared the ACA would suffer a fate similar to that which befell the health reform that President Bill Clinton proposed in the 1990s.

When various segments of the industry became attracted to various parts of the ACA, they tended to support its passage in 2010, Brailer says. One reason providers supported the ACA was that ACOs were among the shiniest ornaments.

“The different constituencies, such as members of Congress and those in the health insurance industry, saw what was in the bill, such as those elements designed to advance care delivery reform, and were supportive. And ACOs were probably the most visible part of the care delivery reform parts of the bill,” he says.

But now, four years after the law was passed, it’s important to follow the money. “Look at how much funding goes to ACOs versus how much goes to other forms of care delivery,” he says. “There’s only a few billion dollars going toward ACOs, against almost $3 trillion going to fee for service. So while I respect the ACO experiment and the important lessons that may come from it, when you see the funding differential, you realize that the ACA was never about ACOs. It was never about care delivery reform. Instead, it was about insurance reform. We need to view ACOs as a learning episode.”

Little interest in discussion

Now that hundreds of ACOs are in place, CMS needs to find a way to support them in helping to reform the way care is delivered. There is likely little interest among politicians to start any discussion about reforming care delivery, and CMS is hamstrung in any efforts it might attempt because of its built in conflicts of interest, he says.

Congress cannot take on the job either, because the rollout of the ACA has been so contentious. Democrats generally support it and want the law to succeed. Republicans want to repeal it.

“How will Congress ever take on a major health care policy issue now?” he asks. “Politicians will remember how partisan insurance reform has become. So the question now is: How do we reform the delivery of care when it’s impossible to get from here to there?”

Moving toward risk

The nation needs a fundamental change in how Medicare pays for care by moving away from fee for service and toward risk contracts. And such a change needs to go beyond the trivial share of payments now going into risk contracts. For such a change to work, the nation’s largest insurer should have a leading role.

“We need to move away from fee for service but CMS can’t do it. Instead, developing more risk contracts will require congressional action. It will be years — if ever — before Congress does that.”

Instead of congressional action, the number of senior citizens enrolled in Medicare Advantage will continue to rise, Brailer predicts.

In other words, change will not come from the top. But rather, CMS will allow the shift to occur organically by allowing commercial insurers to enroll more Americans into Medicare Advantage plans.

“We’ve already seen huge growth in Medicare Advantage and now we’re likely to see even more growth because health plans want to get more seniors into Medicare Advantage plans,” he says. “That means that, some day, we will get to the tipping point where Medicare Advantage will become the predominant insurance form for seniors.”

At that point, Congress will quietly change the rules for Medicare Advantage to achieve delivery reform, he adds. That way, members of Congress never need to do anything with fee for service,” he predicts.

“We can get there but it’s not going to be the top-down approach that everyone wants Congress to do. Delivery reform is too difficult to do in any political environment. That’s why it will happen more bottom-up.”

David J. Brailer, MD, the health IT “czar” under President George W. Bush, is an internet pioneer. Back in 1992, he founded CareScience, a company designed to bring Internet-based tools to health care.

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