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ABipartisanBlueprintforImprovingOurNation’sHealthSystemPerformanceFebruary 23, 2018 John W. Hickenlooper, Governor, State of Colorado John Kasich, Governor, State of Ohio Bill Walker, Governor, State of Alaska Tom Wolf, Governor, State of Pennsylvania Brian Sandoval, Governor, State of Nevada

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ABipartisanBlueprintforImprovingOurNation’sHealthSystemPerformance1

ABipartisanBlueprintforImprovingOurNation’sHealthSystemPerformance

February23,2018

Governorsacrossthecountryareleadingeffortstotransformtheirhealthcaresystemstoproducebetterhealthoutcomesatalowercosttogovernments,employersandindividuals.Statesplayakeyroleinhealthcaretransformationasmajorpurchasersofhealthcare,aschiefregulatorsandadministrators,andascatalystsforbringingtogetherdiversestakeholdersaroundasharedvisionforimprovingoverallhealthsystemperformance.Governorsunderstandthat,whilesomeissuesmaytemporarilydivideus,onmostissueswecanfindagreementandactforthegoodofourstatesandcountry.Thispaperrepresentsabipartisanapproachforimprovingournation’shealthsystemperformance,includingprinciplesandcorebeliefstoguidereform,aswellasspecificstrategiesthataddressthemosturgentproblemsinthecurrentsysteminwaysthatwebelievewillsustainbroadsupport.

GUIDINGPRINCIPLES• ImproveAffordability:Insurancereformsthatincreaseaccesstoquality,affordablehealthcare

coveragemustbecoupledwithreformsthataddressrisinghealthcarecostsacrossthehealthcaresystem.Insurancereformsshouldbedoneinamannerthatisconsistentwithsoundandsustainablecostcontrolpractices.

• RestoreStabilitytoInsuranceMarkets:Americanswithoutaccesstoemployer-sponsoredcoverageor

governmentplansneedtohaveaccesstoahealthy,stableandcompetitivemarketofinsurersfromwhichtochoose.

• ProvideStateFlexibilityandEncourageInnovation:Statescandevelopinnovativeapproachesthat

havethepotentialtostrengthenhealthinsuranceforallAmericans.Withinstandardsthatprotectthemostvulnerable,statesshouldhaveappropriateflexibilitytoimplementreformsinamannerthatisresponsivetolocalandregionalmarketconditions.

• ImprovetheRegulatoryEnvironment:Astheprincipalregulatorsofinsurance,statesareinthebest

positiontopromotecompetitionwithinstateinsurancemarkets.Federaleffortsshouldprovideappropriatestandardstoprotectconsumerswhilelimitingduplicativeorburdensomeregulationsandprovidingrelieftosmallbusinessownersandindividuals.

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COREBELIEFS• Wecanandmustachievemultiple,complementaryobjectives:protectionforall,accesstohighquality

care,andaffordable,sustainablecostsforconsumersandpayersovertime.Toooften,theseobjectivesareframedasoptionsinoppositiontoeachother:

− WecanensureAmericanshavehighqualityhealthcareorwecanreducecosts.− Wecaneitherbefiscallyresponsibleorbegenerousandhumane.− Wecanfosterindividualaccountabilityorwecansupportpeopleinneed.− Wecanembraceanationalvisionorwecanaddresstheneedsofeachmarket.

Werejectthesefalsechoices.Othersectorsoftheeconomyhavedeliveredgreateroutputatlowercostoverthelast30years.Weshouldexpectthesamehighperformanceandcontinuousimprovementfromourhealthcaresystem.

• Thebeststrategiestoimproveourhealthcaresystemaddressmultipleobjectivessimultaneously,reconcilecompetingpriorities,andholisticallyaddressourpresentandfutureneeds.

• Material,lastingimprovementtoourhealthcaresystemrequiresharnessingprivatesectorinnovationandcompetitiontothebenefitofall.Wheningenuityandcapitalarefocusedonwhatwemostvalue,weseeincredibleinnovationandproductivitygains.Enablingcompetitionrequiresalignmentoftheincentivesofallstakeholderswithwhatwevalue,sufficienttransparency,andappropriateregulation.Inourcurrenthealthcaresystem,providerscompetetoprovidemorecare,notnecessarilybettercare.Thismisalignmentofincentives,whichrewardsvolumeinsteadofvalue,isthemostsignificantroot-causechallengeinoursystemandaddressingitshouldbeourgreatestpriority.

• Targetedgovernmentactionisjustifiedandrequiredwhenmarketforces,alone,willnotachieveourobjectives,suchasprotectingvulnerableindividualswithouttheresourcestoindependentlysecurehealthcare.

• Reformmustaddresstheunderlyingdriversofcostsandcostincreases,includingthecurrentlackofvalue-basedcompetitioninourhealthcaredeliverysystem(e.g.,hospitals,medicalserviceproviders,andpharmaceuticals)andlifestyle-induceddisease.

• Ourexpectationsforourhealthcaresystemshouldbeconsistentnationally.Everycitizenineverypartofthecountrydeservesahighperformingsystem.Weneedasingle,holistic,integratedframeworktoimproveoursystemovertime.

Butwithinanationalframeworkonesizewillnotfitall.Manyaspectsofhealthcare,suchaspopulationcharacteristics,marketstructure,andvarianceinlocalgovernance(e.g.,tribalauthorities),differsignificantlyacrossmarkets.Theexecutionofanationalstrategywillnecessarilyvarybystateandregion.

• Itismorepracticalandlessriskytobuildfromtheelementsofoursystemthatarestable.Forexample,ourprimarycoverageandfinancingmechanisms–employersponsoredinsurance,Medicare,andMedicaid–areimperfectandwouldbenefitfromreform,buttheyarealsowellunderstoodandmuchmorestablethanisoftenbelieved.Thesemechanismsshouldbethefoundationofeffortstoexpandaffordablehealthcarecoverage.

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• Howwedeliverreformisfundamentaltoitspotentialsuccess.Lasting,highimpactreformmustbebipartisan,driventhroughaninclusive,transparentprocess,andnecessarilyinvolvecompromise.Tosustainreform,bothnationalpartiesmustfeelownershipforreformsandtheirsuccess–orfailure–overtime.

STRATEGIESFORIMPROVINGHEALTHSYSTEMPERFORMANCEPayers,providers,andconsumersknowthatwemustreorientourhealthcaresystemonvalue.Toachievethisgoal,wemustalignconsumerandproviderincentives,encouragemorecompetitionandinnovation,reforminsurancemarkets,expandprovenstateMedicaidinnovations,andmodernizethestateandfederalrelationship.

ReorientthesystemonvalueCoverageisimportant,andcoveragereformscanhelpcontaincosts,butournationneedstoconfronttheunderlyingmarketdynamicsthataredrivingunsustainableincreasesinthecostofcare.Withthesupportofthefederalgovernment,statesareresettingthebasicrulesofhealthcarecompetitiontopayprovidersbasedonthequality,notthequantityofcaretheygivepatients.Thisistrueinourstates,whereweareincreasingaccesstocomprehensiveprimarycareandreducingtheincentivesformedicalproviderstooverusemarginalorunnecessaryserviceswithinhighcostepisodesofcare.Reorientingthesystemonvalueneedstobeourgreatestpriority.CongressandtheAdministrationshouldworkwithstatesandmakeaclearcommitmenttovalue-basedhealthcarepurchasing.Keycomponents:• Measurethevaluedeliveredbyallhealthcareprovidersandpayersinawaythatisfair,technically

credible,andrelevanttopatientsandpurchasers;andmakethisinformationbroadlytransparenttoallpolicymakers,consumers,andstakeholders.

• Useinformationandincentivestodriveanevolutionofprimarycare,frombeingreactive,focusedonindividualencounters,andfragmented,toholisticcaredeliveredbycoordinatedteamsofcliniciansempoweredandaccountableforthehealthandcostofpopulationsovertime.

• Useinformationandincentivestoempowerandholdprovidersaccountablefortheend-to-endcostsandoutcomesforepisodesofcare.

• States“leadbyexample”usingMedicaidandstateemployeebenefits(andtoalesserextent,individualandsmallgroupmarkets)asacatalystforchange,toovercomeinertia,andachievecriticalmasstoreorientthesystemonvalueacrosspublicandprivatesectors.

• Federalgovernmentchampionsvalue-basedcareinfederalprograms(e.g.,Medicare,MACRAQualityPaymentProgram,FederalEmployeeBenefits)andthosejointly-administeredwiththestates,alignsprioritiesforvalue-basedpurchasingacrossallfederalagencies,andusesitsregulatorycapacitytosupportorpartnerwithstatesandtheprivatesector.

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AlignconsumerincentivesConsumersplayacriticalroleinthemedicaldecision-makingprocessandmakemultipledecisionsinthepathofcarethatultimatelyimpactthevalueofcaredelivered.Thefederalgovernmentandstatescanworktoalignconsumer-focusedincentivesandencouragethedevelopmentoftoolsthatprovideconsumerswiththeinformationtheyneedtocreatevalueinourhealthcaresystem.Keycomponents:• EnsurethatallAmericanshaveaccesstoappropriate,affordable,highqualitycoverageindependentof

theirhealth,age,gender,employmentstatus,orfinancialsituation.

• Builduponexistingfinancialincentivestoencourageconsumerstosecurecoverageandprepareforpotentialout-of-pocketexpenditures.

• EnsurethateachAmericanfinanciallycontributestotheirhealthcareconsistentwiththeirfinancialcapacity

• Encourageresponsiblechoicesbyempoweringconsumerswithusefulinformationandincentinghealthylifestylesandvalue-consciouscaredeliverydecisions.

• Encouragethecreationofnewtechnologiesandtoolsthatwillallowconsumerstocreatevalue-basedhealthcaredecisions.

EncouragemorecompetitionandinnovationOverthepasttwodecades,therehasbeentremendousconsolidationamonghealthcareproviders.Consolidatedprovidersystemscanresistthekindofcompetitionandinnovationthathascreatedefficienciesandbenefitedconsumersinothersectors.TheFederalandStategovernmentsmustensurethatmarketcompetitionisfocusedondrivingbetterpatientoutcomes,increasingefficiency,anddecreasingcosts.Keycomponents:• Encourageinnovation(includingcost-reducinginnovation)inbusiness,technology,andworkforce

models.

• Directlycombatanti-competitivebehavior,particularlyamonglocalhospitalsystems,pharmacybenefitsmanagers,andpharmaceuticalcompanies.

• Requiregreatersharingofhealthcaredataofalltypesacrossentities.

• Systematicallyreviewandrationalizefederalandstateregulationthatmayinhibitinnovationandcompetition(e.g.,credentialing,clinicaltrials,andprescriptiondrugimportregulations).

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ReforminsurancemarketsMostAmericanscurrentlyhaveaccesstoastablesourceofhealthinsurancecoveragethroughtheiremployer,orfrompublicprograms,likeMedicareandMedicaid.Risingcostsareaconcernthroughoutthesystem,butthevolatilityoftheindividualmarketmoreimmediatelythreatenscoveragefor22millionAmericans.Werecommendbuildingonthestrengthsofthecurrentsystem,andtakingimmediateactiontostabilizetheindividualmarket.Keycomponents:• Encouragemoreconsumerstoparticipateinplansthatareavailabletothemeitherthoughtheir

employerorothermarkets(e.g.,ERISAplansatlargeemployers,smallgroupplans,MedicareAdvantage,individualmarket).

• Ensurelowerincomeconsumershaveaccesstoqualitycoveragebymaximizingallavailableoptions(e.g.,financialassistance,expandingMedicaid),whileavoidingperverseincentives.

• BuildontheAugust30,2017,bipartisangovernor’srecommendationstostrengthenournation’sindividualhealthinsurancemarkets:

− ReinstituteCostSharingReductionPayments,− Maximizecarrierparticipation(e.g.,byexemptingcarrierswhoofferplansinunderservedareas

fromthefederalhealthinsurancetaxinthoseareas),− Maximizeconsumerparticipation(e.g.,byincreasingoutreachtohealthierindividuals,andfixing

thefamilyglitch),− Promoteappropriateenrollment(e.g.,byverifyingspecialenrollmentperiodqualifications).− Stabilizeriskpools(e.g.,viariskadjustments,reinsurance,andrisksharing),and− Reducecostthroughcoverageredesignandpaymentinnovation(e.g.,bygrantingstatesmore

flexibilityinchoosingreferenceplansforessentialhealthbenefits).

ExpandprovenstateMedicaidinnovationsStateshavetakentheleadinpromotingvalueintheirMedicaidsystems.Manystatesareworkingtomoveawayfromvolume-driven,fee-for-servicetovalue-basedpaymentsandcarecoordination.FederalandstategovernmentsshouldrecognizeandreplicatethesuccessfultrackrecordofselectstatestoincreasequalityandlowercostsinstateMedicaidprograms.Keycomponents:

• Defineandscalevalue-basedcareandpaymentmodels(e.g.,integrationofphysicalandbehavioralhealth,comprehensiveprimarycare,episodesofcare).

• Investinstate-basedtransitionstonewvalue-basedmodelsofcarethathavethepotentialtoreducepercapitaMedicaidspendingovertime.

• IncorporatesocialdeterminantsofhealthintoMedicaid.

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• Measureandincenthealthandcriticalsocialoutcomes(e.g.,reducingpoverty,increasingemployment,reducingcriminalrecidivism).

• ManageMedicaidrisk-adjustedcostperperson,overtime,belownationalmedicalinflation.

• Usebestpracticevendormanagementtoextractmeaningfulvaluefromthirdparties(e.g.,managedcarecompanies,ITvendors).

• ProvideasmoothtransitionfromMedicaidtotheindividualmarket(backandforth)whilereducingchurnbetweenthetwo.

ModernizethestateandfederalrelationshipStatescanpursuemanyhealthcarereformswithoutfederalassistance.However,insomecasesstatesareconstrainedbyfederallawandregulationfrombeingtrulyinnovative.WeurgeCongressandfederalagenciestoworkwithstatestoovercometheseconstraints.Keycomponents:• Inpartnershipwithstates,theFederalgovernmentshouldfocusondefiningandprotectingareal

"minimum"standard,or"floor,”forhealthcaresystemsineverystatethatmaintainscoverage,increasesvalue,andprotectsconsumers,whileaffordingstatesbroadindependenceabovethatfloor.

• Federalgovernmenttoprovideleadershipwhereanationalapproachismostefficient(e.g.,regulationofpharmaceuticals,airambulances).

• Fullyaligngovernanceandincentivesinprogramssharedamongstatesandfederalgovernment(e.g.,dual-eligiblemembers).

• Explicitlyrecognizesuccessfulstateinnovationsinvalue-basedcare(e.g.,viatheStateInnovationModelprogram)andsupportotherstatesinreplicatingthosesuccesses(e.g.,resources,expeditedwaivers)whilealigningMedicareasmuchaspossible.

• Streamlineadministrativeprocesses(e.g.,waiverrequests)tobeeasier,faster,moreconsistent,andmorepredictable.

JohnW.Hickenlooper,GovernorStateofColorado

JohnKasich,GovernorStateofOhio

BillWalker,GovernorStateofAlaska

TomWolf,GovernorStateofPennsylvania

BrianSandoval,GovernorStateofNevada