Here is what you’ll find in this week’s newsletter!

1. Important links 🔗 - the best articles we found this week about the Medicare Market along with links to Jared’s recent LinkedIn posts.

2. Deep Dive 📚 - This week we look at Value Based Care. What is it? Why is it important?

3. Sponsor Snapshot 🚀- Get access to Telos Actuarial’s Market Opportunity Reports.

4. Data Visual of the week 📊 - Data Visual highlighting healthcare spending in the US compared to other countries.

It’s only a 5 minute read, but it will make you 10x smarter.

Deep Dive 📚

Medicare Value Based Care 101

The United States’ health care system is in peril! 

The cost of care is increasing at unsupportable rates and our annual healthcare expenditures are 2x that of other comparable countries[1]. This level of spending is straining the Medicare system and is expected to deplete the Part A Trust Fund in 2031. 

This high cost of care doesn’t just impact our government and health care payors, it is also impacting patients. A recent study conducted by the Kaiser Family Foundation found that the leading cause of bankruptcy is medical debt.

As lawmakers and healthcare professionals have looked at ways to influence the level of spending, they have determined that improving the long-term health of the population is a key factor in controlling the overall level of healthcare spending. And that solution is known as “Value Based Care”.

What is Value Based Care?

In the United States today, our healthcare system primarily uses a ‘Fee-for-Service’ system where providers are paid according to the specific services that they perform for their patients. This compensation is rarely based on the quality nor outcome of the care. Some people believe that this compensation system is the main driver of the extreme health care costs in the United States.

Value Based Care (“VBC”) is a system where providers are compensated based on the health outcomes of their patients instead of the number of services provided. This is accomplished by focusing on the quality of care and pursuing treatments that are expected to result in the best possible long-term outcome. Essentially, healthcare providers are rewarded for improving the health of their patients.

VBC was created to achieve three primary goals:

1. Improve the Patient Experience

At the heart of a VBC system, there is a strong relationship between the patient and their Primary Care Physician (“PCP”). This relationship will be at the core of the patient’s experience and will be the starting point for obtaining care from other specialists and for being admitted to hospitals or other care facilities. The PCP will have more intimate knowledge of their patients’ health history and their social determinants of health. As they are more aware of the needs of their patients, they will be able to coordinate care across other providers.

2. Increase the General Health of the Population

One of the key benefits of providers having a focus on high quality care and health outcomes, is there will naturally be a greater focus on preventative care. The increase of preventative care is expected to result in better long-term health across all members of the population. Over the long term, providers will have greater incentive to work with their patients in preventing the  development of chronic conditions that can lead to more serious health problems.

3. Decrease the Aggregate Costs of Healthcare

VBC is expected to reduce overall health care expenditures in three key ways:

(1) Providers are no longer incented to recommend unnecessary procedures or tests;

(2) Patients will be guided to receive the correct type of care at the correct site of care. This is expected to reduce unnecessary Emergency Room and Urgent Care visits; and

(3) Coordinating care across all of a patient’s providers will result in more efficient sharing of information and will avoid the duplication of services.

How is Medicare pursuing VBC?

Medicare is currently the home of our nation’s largest VBC system. The Medicare Shared Savings Program (“MSSP”) has been around since 2012 and has saved billions of dollars in healthcare expenditures. In fact, during  2021 the MSSP covered 10.7 million beneficiaries and reported savings of $2.0 billion dollars. Results for the 2022 performance year are expected to be released over the next several weeks.

The MSSP is a voluntary program where providers (physicians or hospitals) can participate through Accountable Care Organizations (“ACOs”). The ACOs have a contract with the Centers for Medicare & Medicaid Services (“CMS”) and the expenses for providing care to its patients are compared to a benchmark amount. If the aggregate costs are less than the benchmark, the ACO is rewarded a portion of those savings.

Since this is a part of the Medicare program, there are multiple flavors of contracts. Contracts can be “One-Sided” (share in savings only) or “Two-Sided” (share in savings and losses), and there are different methods for assigning beneficiaries to the ACO risk pools (“Prospective” or “Retrospective”).

CMS has an explicitly stated goal of: “All Medicare beneficiaries with Parts A and B will be in a care relationship with accountability for quality and total cost of care by 2030.”[2] In 2021, there were roughly 35.9 million Medicare beneficiaries that had coverage through Parts A and B. Comparing that to the 10.7 million ACO covered lives that were reported by MSSP represents about 30% of the goal. 

What are Some Specific Ways that VBC will impact Medicare Beneficiaries?

We expect that there will be a greater focus on preventing the onset of chronic illnesses such as Type 2 diabetes and better management of high blood pressure. Reducing the frequency and severity of these two chronic conditions can curtail the impact of related conditions and co-morbidities. This would be a major step in improving the general health of the population!

Additionally, we expect that there will be a continued push to identify Medicare beneficiaries that do not currently have a PCP and encourage them to establish a regular pattern of wellness visits. A recent study suggested that 35% of Medicare beneficiaries do not meet with a PCP on an annual basis[1]. CMS can help close that gap by making PCPs more accessible in underserved geographies while finding ways to encourage more beneficiaries to establish a relationship with a PCP. This could be done through tele-health services and promoting the use of Medicare’s Annual Wellness Visit.

We are excited about the positive momentum in the VBC market. We think that the MSSP has the potential to bend the curve and correct the trajectory of Medicare expenditures.

What innovative services have you seen that are having a positive impact on the Medicare population?

[1] https://www.healthsystemtracker.org/chart-collection/health-spending-u-s-compare-countries/

[2] https://innovation.cms.gov/strategic-direction-whitepaper

[3] https://www.ncbi.nlm.nih.gov/pmc/articles/PMC8688292/

Data Visual of the Week 📊

This week’s Data Visual shows the US as an outlier in healthcare spending compared to other countries. (US is the green dot)

That’s it for this week. Are there any topics that you would like to see us cover? Feel free to reply to this email with your ideas.