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Coordination Of Care

PERSPECTIVE

Public Administration Barriers To Expanding Integrated Models

"How much do you spend each year on the Colorado Medicaid program?" he asked.

"$1.3 billion," I replied.

His response: "We can do it for 1.2."

I laughed, but he was serious.

Experiences such as these, while perhaps amusing, also illustrate why public managers are hesitant to open the doors too widely to innovative models. For every innovator who is community-based and mission-driven, there are a few whose motives, credibility, and capacity are less clear.

Those of us who share Master and Eng’s vision and desire for better systems should welcome their honest discussion of the challenges these models face. They rightly place in the hands of public programs and administrators a share of responsibility for the limited replication of successful integrated care models. It is from my perspective as a former public administrator that I expand upon this topic here.

Flexibility versus program size. First, there is an inherent tension between program flexibility and program size. The archetype of flexibility is a capitated payment. But capitation implies that the plan takes full risk for the uncertain cost of serving its patients. A small plan may be able to purchase insurance to cover this risk, but at a potentially prohibitive cost. If the state retains some or all of the risk, the plan must give up some of the desired flexibility. After all, there must be some boundaries around the services the plan can provide if it expects someone else to pay for them.

True risk adjustment. Second, the way the authors use the term risk adjustment is a bit misleading. True risk adjustment is cost-neutral. It implies transferring funds from those who serve inherently lower-cost populations to those who serve higher-risk groups. There is no doubt that the people served by the programs the authors discuss are high risk, but I am aware of no evidence that we are paying all other service models too much, given who they serve and what they do. Master and Eng are concerned about payment adequacy, which is not the same as risk adjustment.

Quality and choice. Third, assuring quality and choice requires true risk adjustment, which is not yet well developed. For a public administrator, one of the best mechanisms for assuring quality is to provide choice. Yet, given the heterogeneous needs of the population and the highly varied costs of meeting those needs, client choice means opportunities for risk selection. This is particularly the case with a high-need population. With imperfect risk adjustment, the best way for a plan to make money is to provide lousy service to those with the greatest needs, encourage them to go elsewhere, and take the capitation payment to the bank. This fear is not in the public administrator’s imagination—it is grounded in real experience.

Allocating costs. Fourth, battles between Medicaid and Medicare over how to blend capitated payments may be unseemly, but they are only a microcosm of the tension that always arises in allocating costs across different payers, whether public programs, private insurers, or consumers’ paying out of pocket. Negotiating the boundaries of responsibility takes time, energy, and desire.

Expanded benefits. Fifth, permitting some delivery systems to offer a far broader mix of services raises equity issues and places pressure on the entire system. One need only look at the Medicare program for proof that when flexibility (combined, perhaps, with some favorable risk selection) permits some plans to offer Medicare enrollees more benefits, the expanded package becomes viewed as a new entitlement and the expected level of care for all, whether in an efficient system or not. Unleashing this dynamic makes public officials nervous when the cost of serving populations with complex medical needs is already high.

Systems of accountability. It is folly to defend all aspects of the rules-based accountability systems that most public programs rely upon today. Outcomes-based accountability is always conceptually preferable, but it requires agreement about what outcomes are desired and achievable. It requires a different sort of risk adjustment—not the financial kind, but a kind that captures the varying definitions of success and quality for the complex population being served. Leadership in developing new forms of accountability must come from the medical and client communities. For outcomes-based accountability to be effective, it also requires a different and more resource-intensive kind of oversight by the public agency. As with the general movement to Medicaid managed care, agencies need time and help making this change.

Care integration and cost-effectiveness. In the end, I believe that Master and Eng’s essential failing is to rest too much of their case for care integration on the view that these systems are cost-effective. There is no doubt that experiences with individual patients reveal examples where breaking down categorical and programmatic limitations yields financial savings. It is even possible that small-scale experiments, developed and operated by motivated and creative leaders, are cost-effective. But redesigning an entire system to provide a more comprehensive service mix, a more personally tailored plan of care, a community orientation, a variety of quality choices for patients, and appropriate financial and service oversight costs money. Even once the transition is complete, such a system may well cost more than the rules-based system we primarily rely upon today.

Rather than claiming value-neutral "cost-effectiveness," we should claim that such a system is worth it—in terms of honoring human dignity and reflecting the tremendous capacity of the medical and social delivery systems that dedicated people can create and have created. It is the right thing to do, and it is worth new investments and even some financial risk to make it happen. If our society could reach agreement on that, we would clear away a major barrier to expanding effective models.

Editor's Notes

 
Alan Weil is director of the Urban Institute’s Assessing the New Federalism Project. Health Affairs invited his comments on the paper by Robert Master and Catherine Eng, which precedes the Perspective.

The opinions expressed are those of the author and do not represent those of the Urban Institute, its trustees, or its sponsors.

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