BY GEORGE HALVORSON

Former Kaiser Permanente CEO George Halvorson has written on THCB on and off over the years, most notably with his proposal for Medicare Advantage for All post-COVID. He wrote a piece in Health Affairs last year arguing with the stance of Medicare Advantage of Don Berwick and Rick Gilfillan (Here’s their piece pt1, pt2). We also published his criticism (Part 1. Part 2. Part 3) of Medpac’s analysis of Medicare Advantage.  Now Medpac is meeting again and George is wondering why they don’t seem to care about diabetic foot amputations. We are publishing part one today with part two coming soon – Matthew Holt

We need to look honestly at some sad and grim realities about American Health Care and about the role that fee for service Medicare plays for too many people in our country today. 

Fee for service Medicare has the highest level of amputations and one of the highest levels of diabetic blindness of any country in the western world because it buys care so badly and so ineptly and then too often underperforms in multiple ways on the delivery of that care. 

Fee for Service Medicare only buys care and pays for care by the piece. It’s caregivers, both as a group and as individuals, actually can often make more money by performing, inadequate, unsuccessful and, far too often, even bad care, because bad care can result in more care being needed, purchased and paid for.

Many of the failures of care for the patients with the medical conditions that cause them to spend far too much time in the hospital, and in various other care settings, should not be happening—and we know that to be true because large numbers of the care failures are not happening to the patients who are enrolled in Medicare Advantage plans.   

Medicare Advantage plans all have basic care plans and approaches  for their patients that are linked to care related care processes of care—and a very high percentage of those processes do not exist for far too many of our fee for service Medicare enrollees  

The sad and unfortunate reality is that fee for service Medicare has no quality standards, no quality expectations, and that it is, in aggregate, a very expensive way to buy care because bad care often costs more money at several levels than appropriate care.  

Those accusations are easy to prove and they are easy to demonstrate.  

We Have The Highest Rate of Amputations in The Western World  

We have the highest rate of amputations of any country in the Western world.  We spend $8 billion dollars a year on amputations, and the average amputation costs over $100,000.  

Because Medicare Advantage caregivers understand the basic functional patterns of care for those patients that lead to and create those amputations, the care teams for plans look at each step in the process that can change that trajectory.  

The care teams for the plans know that roughly twenty percent of diabetic patients will develop ulcers on their legs and feet, and they know that twenty percent of those ulcers currently turn into amputations.  

Because the plans all are capitated and have a strong financial incentive to keep that $100,000 expense from happening for each patient, the care teams for Medicare Advantage plans all have care processes to prevent that expense.  

There are some practical and common sense interventions that work. Medicare Advantage plans start with basic care approaches that intervene with individual patients to keep those ulcers from happening in the first place. They coach patients on foot hygiene and foot status awareness—and they often have success there. Simply getting patients to always wear dry socks can have a 10% to 20% reduction in the number of ulcers.

Early detection is a process and goal. The plans try hard to detect ulcers as soon as they can for each patient. Having caregivers knowing that an ulcer exists gives the Medicare Advantage care team a chance to do early treatment and successful intervention. You can’t cure or heal an ulcer that you don’t know exists.

The current pattern for all Medicare patients is for 20% of those ulcers to require a complete amputation—giving us the highest rate of amputations in the western world—and the current pattern for Medicare Advantage patients is to have under 5% of those ulcers to go down that path.

That success with those patients changes the cost picture for Medicare Advantage significantly. Every $100,000 amputation that does not happen saves very real money for each plan. The capitation paid to the Medicare Advantage plan is based on the average cost of care in each county for Fee For Service Medicare. The average cost in each county is added up every year and Medicare Advantage plans make their capitation bids each year against that average cost number.  So the $100,000 expense from Fee For Service Medicare is included in the bid and the $100,000 expense is subsequently in very few of the expense columns for the plans. That why all of the plans have surpluses relative to the capitation payment. It isn’t upcoding by the plans. It’s bad and expensive care happening in all of the counties that creates higher available costs.

Those expenses should not be happening in America—and they happen continuously in the fee for service Medicare payment system. The sad truth is that payment model can and does reward the caregivers and their business units who under performed and who failed the patients for those procedures.

And—adding serious injury to serious injury– the sad truth is that for more than 40% of amputees, that procedure will repeat itself and the amputation will happen again for all of those patients because the fee for service Medicare package of care is so inadequate for far too many  of those patients.   

That $8 billion dollars is one of the reasons that the total health care spending in our country just exceeded four trillion dollars. We have just set a new record for health care sending as a country—and we have done it by buying and paying for almost every piece of care by the piece. We have almost nothing built into the payment that is intended to make that care less costly or to create better care.

Medicare Advantage is the exception to that payment pattern. Medicare Advantage buys care by the month for each patient and we prove every day that this is a far better way to pay for care. 

The better payment model is to buy care by the patient—not by the piece—and then to have care teams use the capitation they are paid for each patient to provide the full set of care needed by each patient in flexible ways to improve quality and to reduce the costs in the process.

The Capitation Cash Can Be Used To Engineer Better Care

Medicare Advantage plans actually basically engineer care processes for their entire range of patients and that process works very well. The plans can use common sense and current medical science, good judgment and continuously improving technology to figure out the most efficient and effective ways of providing care—and the financial model rewards plans for making care better. Medicare Advantage plans can make a profit when they manage to reduce the cost burden of care on their members by providing them with better care and that is far better than making a profit and creating cash flow by creating bad care.

The best plans continuously re engineer their processes to create better outcomes, just like computer companies and manufacturing companies in other industries have continuous improvement as a goal, a skill set, a commitment and an on-going achievement 

 There is a tremendous amount of waste, failure, and inappropriate care in the current Medicare non-system, and the plans work with that reality and opportunity. The plans look at the processes of care for all of their patients and they figure out how they can save money by improving care to the point that many of the most expensive aspects of failed care are not needed by the patients and therefore those expenses do not happen for the plans.

That is entirely different from the cash flow and the reward system for fee for service Medicare.  Some people think the current purchasing model we use for care is a bit like having a car purchasing system where we pay twice as much for a automobile if it crashes and then we pay triple to the car manufacturer if someone dies in the crash.

The hundred thousand dollar amputations at least resemble paying triple for a crash.

Medicare Advantage Plans Are Not Paid Triple for Crashes

Medicare Advantage caregivers and care teams all know that there is a huge difference between those two financial reward systems and that difference creates a huge opportunity  for the plans to improve care. Because the plans only receive a flat monthly fee for each patient, the plans look at each medical condition for each patient and they functionally re engineer many processes of care for many conditions to eliminate many of those very unnecessary costs. 

That is not rocket science or even basic actuarial science. It’s very basic economic common sense coupled with basic process engineering at the most practical  and fundamental level. 

Most of the critics for Medicare Advantage are completely ignorant of what the plans do to succeed financially and to create basic profits as an organization.

There are many very good doctors who take care of Medicare patients who do look at those basic opportunities to serve their patients and some of those doctors do take steps that proactively work to  prevent amputations. That statement about bad care isn’t a blanket condemnation of doctors. Many doctors do deliver the right care to those patients and, particularly for the higher income patients, we can get good care from Fee For Service Medicare doctors . 

But we need to be brutally honest with ourselves as a nation about the total impact of that care because we know that we have an epidemic of amputations.

Medicare Advantage Care Teams Keep Those Bad Outcomes From Happening

The Medicare Advantage approach to thinking about those basic processes for the entire continuum of care is completely different than fee for service Medicare. The patterns of care that happen from that process-related thinking are clearly different for the patients enrolled in Medicare Advantage plans and it is very clear that Medicare Advantage patients benefit from those differences.. 

The plans are all paid a monthly capitation and not fees, so they won’t get any more money for anything they do for the patient. But they can often save the entire amputation expense and the plans can even have that unspent amputation money go to their profits by doing what they need to do to not put the patient into the hospital needing to lose a limb. 

So the plans  tend to focus on patients and to change and modify those basic underlying process numbers  and processes for that basic direct care aspect of their care.  Every Medicare Advantage plan always has every diabetic diagnosed, detected and registered with a caregiver team. The plans have structured responses—and that includes having the plans coach their patients on not getting an ulcer. So the care sites for Medicare Advantage plans have fewer ulcers and they also have far fewer of the ulcers that do happen to patients result in amputations. The plans drop the amputation numbers significantly by doing targeted care for each diabetic in their system. 

All of those processes are known to modern medical science. They are in every text book and they work extremely well in every setting, so we should be ashamed of ourselves for having more amputations than any other country and for not doing anything to keep that much better outcome from happening.

MedPac should have the clear amputation horrors and failures at the top of their immediate priority and easy lifting list for changing peoples’ lives. MedPac should be advising us all on how to make that situation hugely better because even very simple notification to patients can direct them down paths where we know for a fact that they will lose fewer limbs. MedPac has extensive leverage and has potential high impact  as a credible source for getting that kind of information to everyone in the Medicare world.  

Instead, MedPac is not doing anything to advise people on getting better care or explaining where the capitation numbers that they complain about for the plans actually originate.

Capitation Numbers In the Counties Result From Bad Fee For Service Medicare Care 

Medicare Advantage plans capitation levels are actually based on the average actual costs of fee for service Medicare in every county.  The goal and strategy of calculating that average cost of fee or service Medicare for each  county is to have the plans paid less in every county than the average cost of fee for service care in that county. 

That is an extremely good and valid goal and it can give us a cost trajectory for Medicare that could save the Medicare trust fund if we manage it well. One important goal should be to bring down the cost of Medicare by having Medicare Advantage plans bid capitation levels that are lower than the fee for service costs in each county. The bids are measured against the actual cost of the plans for providing care in every county, and the current bids tend to be significantly below those average county costs.  

The capitation for a plan can never go up and create additional pressure on the Trust Fund once it is set for the year—and when there is a surplus from the capitation for the plans, then the surplus is used to increase the benefits for the members in each plans and reduce the costs of Medicare in every setting.  

The surpluses for the plans always exist because the average fee for service cost in each county includes those hundred thousand dollar amputations—and no plans in any county deliver care that is so bad to have those volumes and those numbers of amputations happen in a Medicare Advantage plan setting.  The surpluses that exist for the plans are all based on having a lower bid than the average cost of fee for service Medicare in every county and then beating that cost by having both better benefits and lower expenses everywhere.  

That win win outcome is good for Medicare and is good for the members. But it confuses some people because they think incorrectly that that the plan surpluses that are earned in the counties are new money from the Medicare Trust Fund. They are actually less cost whenever they exist and they are a much better use of the old Medicare money. That better use of old money confuses some people who don’t realize that the basic business model of the plans is to reengineer care in multiple and clearly visible ways and to make a profit doing it.

Congestive Heart Failure In Fee For Service Medicare Is Usually Bad Care 

Congestive heart failure is a high visibility example of that approach. Plans extensively reengineer care compared to fee for service Medicare for those patients.

The plans all do the right sets of things in multiple areas to make care better and less costly for all of their heart failure patients. Congestive heart failure is a painful, frightening, and sometimes deadly disease. Every Medicare Advantage plan knows how to diagnosis the patients with that condition and then to provide patient directed care to keep those painful and expensive crisis from happening for their patients.

Those congestive heart failure crisis range from $20,000 to $40,000 for each patient and when the plans assign a nurse or a care team to each patient to look for the early signs of a crisis, the average plan can reduce the crisis levels for their patients by 40% or more. Very basic and practical process engineering approaches work for those patients as well. The plans often put accurate and easy to use and see weight scales in the patient’s homes to look for sudden weight gain. Some of those scales have telephone connections to give very quick warning to the care team to intervene when that weight gain happens..

Fee for service Medicare does not provide that resource or even allow those nurses to bill Medicare for that care if someone puts them in the patient’s homes. it can actually be fraud to bill Medicare for a nurse detecting that weight gain. Traditional Medicare does not want the future expense risk of having any additional nurses going into homes for any purposes and so that life changing care does not happen for a congestive health failure patient–unless you are in a Medicare Advantage plan. 

That is another huge and measurable failure of fee for service Medicare because that damage occurs without that support for all those patients.  Having 40% more admissions for congestive heart failure in every country does happens—and that difference in care also gets labelled as “upcoding” by some Medicare Advantage critics.

Medicare Advantage plans tend to end up with about 35% percent lower uses of emergency room visits. That is also a huge success for the primary care linkages and teams that plans set up with their members as soon as they are enrolled in plans, because the emergency room is a very expensive site of care.

Plans do the right thing to keep people from needing emergency room care, and they do it very consistently by providing better direct care.  

(Part 2 coming soon) George Halvorson is Chair of the Institute for InterGroup Understanding and was CEO of Kaiser Permanente from 2002-14