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Remarks on Value-Based Transformation Accomplishments

Alex M. Azar II
Hubert Humphrey Building
December 9, 2020
Washington, D.C.

For too long, Americans had seen costs mount, without commensurate increases in quality. They’d heard all the promises about consumer empowerment and paying for value—but the pace of change was too slow. That is why this administration acted so boldly, on every front: to deliver true price transparency, to put patients in control of their data, to bring real value-based payments to more areas of care, and to get regulations out of the way.

Thank you, Matt [Eyles], for that introduction, and thank you to AHIP for inviting me to address this meeting today.

The topic of this summit—the consumer experience in digital health—speaks to one of the very top priorities I have had at HHS: putting the person at the center of healthcare and letting consumers drive value.

To promote health through digital innovation, we need the same things that we need to promote health generally.

We have to put the patient and their unique needs at the center, and we have to allow market forces to do what they do in every other sector of the economy, driving costs down and quality up, through competition and innovation.

But for too long, things have been going in the other direction: costs have gone steadily up, and outcomes haven’t kept pace.

When I wonder why that’s the case, I think back to a lesson I received at a well-known bastion of free-market fundamentalism, Yale Law School.

My land-use controls professor, Robert Ellickson, liked to ask us a question: When you take the Metro North from Connecticut into Manhattan and you see land with burnt-out buildings or land that’s not being put to its highest and best use, even if only as a parking lot, ask yourself the following question: How is the government involved here?

That’s always been a guiding principle for me in thinking about economics and regulation. When things don’t work the way they should—when we ask why the rest of our economy is fully digitized when healthcare isn’t, when we wonder why healthcare lacks the dynamism of the rest of the economy, when costs continue to rise without commensurate outcomes— I look for culprits.

So very often, the culprit is government action, sometimes from decades ago. In some cases, that means that government action may be needed to fix what government action broke. Sometimes the necessary government action may be strong medicine, because markets have become so distorted or so diminished. And sometimes our solutions may be subject to the law of the second best, to use law and economics speak.

Always, however, our actions will be aimed at putting the individual back at the center and facilitating market forces to serve the patient.

Of course, when it comes to many public health challenges, there is also a role for aggressive government action, and I’ve been proud to launch a number of efforts to tackle public health challenges that have been neglected for far too long: opioid addiction, youth e-cigarette use, HIV/AIDS, our system of organ donation, and combating infectious threats around the world like Ebola.

But when it comes to lowering costs and improving outcomes for all Americans, there is no substitute for patient-centered markets. So, when I began as HHS Secretary, I focused on what was holding our system back from putting patients at the center and serving them like any other successful market.

There were some obviously needed—and long overdue—steps.

First, you need consumers to be equipped with price and quality information. Competition requires information. In our modern healthcare system, Americans have never had meaningful access to useful pricing information, even as more and more out-of-pocket costs have been shifted onto them.

Second, you need consumers to be in control of their data. That’s essential to letting patients own their healthcare decisions, instead of being captive to any one provider or system.

Third, you need providers in a position where they actually compete to deliver value, by ensuring they’re paid for value, rather than volume.

Fourth, you have to let actors in this market work with each other to deliver better value for customers. You can’t have regulations unnecessarily standing in the way of market actors working together, or, just as bad, actually incentivizing non-economic-driven consolidation.

Those were the four key elements of value-based transformation that I laid out in early 2018, including at an AHIP conference in March 2018.

Three years later, we’ve now delivered bold reforms on each of those areas—and still others besides.

Start with transparency. Almost three years ago when I laid out this four-part vision, I said you ought to have the right to know the price of a healthcare service—and the price it will really cost—before you get that service. At the time, to many, this probably sounded like a fanciful, almost chimerical notion. As they did on drug pricing, people underestimated my doggedness and determination to blow up the status quo.

I told a story about how, a few years ago, when I needed an echocardio stress test, it was an incredible effort just to get the hospital to tell me what it would cost if I paid cash, and what my insurer’s negotiated price would be—which I would owe out-of-pocket because I had a high deductible plan.

Well, starting January 1, 2021, no American hospital will get to leave any patient—health secretary or not—in the dark like that. Hospitals will have to make easily accessible their standard charges for at least 300 common shoppable services, as well as their negotiated rates with insurers for those services.

For all procedures, this information will have to be posted online in a machine-readable format, so that it can be incorporated into third-party tools such as smartphone apps.

Then, starting in 2022, patients will have access to negotiated costs from their insurer as well, and then their cost-sharing information for the most common services in 2023, and for all services in 2024.

The gradual pace of this effort recognizes that it is not the simplest task to provide patients with easy and useful access to this information—helping them use it to lower their own costs, and therefore yours. But it is fundamental to a patient-centered, competitive market.

We want to work with you to use this transparency to lower overall costs, which is why we’re making it possible for you to pass savings along to patients when they choose lower cost providers, without it counting against your medical loss ratios.

We want to make sure that patients can know what they’ll owe for a service, and whether there are cheaper alternatives. We’ve taken steps toward that goal in drug pricing, too, by banning gag clauses that prevented pharmacists from informing patients about lower cost options, and requiring real-time pharmacy-benefit tools that can tell you and your healthcare provider what a potential drug option will cost, before you’ve been prescribed it.

In drug pricing, we had to go further than transparency. We had a fundamentally broken system where rebates negotiated by middlemen were not just hidden from patients, but also weren’t reducing their often-shocking out-of-pocket costs at the pharmacy counter.

That’s why we finalized a rule this fall to end this broken system of kickbacks, and replace it with a simple, transparent system where these discounts are applied at the pharmacy counter.

This move will not only mean lower out-of-pocket costs for the patients with the most costly drugs—putting the individual patient and their needs at the center—but will help drive more competition, by removing obstacles to lower-cost generic and biosimilar options that are sidelined by the broken rebate system.

Now, empowering patients with transparency only gets you so far if there are still major practical barriers to shopping around. That’s where our second bold step came in: ensuring patients control their own health data.

As I think many of you know, plenty of healthcare services are in fact shoppable. Services like MRIs and blood tests are scheduled in advance and have virtually no variation in quality, and yet prices can vary wildly. The highest negotiated prices for MRIs here in D.C. can be almost twice the price of the lowest cost option. More complex procedures, like joint replacements, are considered shoppable in similar ways.

But knowing where you can get a good deal doesn’t help if there are other barriers to shopping around—like the fact that one provider’s health IT system won’t talk to another’s.

When we began looking at the need for interoperability in health IT, we kept the goal simple: Patients ought to have control of their records in a useful format, period. When they arrive at a new provider, they should have a way of bringing their records, period. That’s interoperability—the what, not the how.

We believe that our interoperability rule will deliver that. We aren’t dictating exactly how EHR companies and providers get there—we’re just saying they have to get there.

Through what are known as application programming interfaces, or APIs, patients will be able to use a smartphone app to have all their health records and claims data at hand, for use by them and their doctors.

And that’s just the beginning. We hope to see a whole ecosystem of condition- or disease-specific apps to help patients monitor and improve their health in real time, in part by using data made available via API.

We have apps and sensors today that can help patients monitor one particular data point, like glucose levels, but they can’t easily help the patient understand their whole health picture—and that’s what’s essential to putting the patient truly in control.

In addition, requiring that EHRs use a standardized bulk-data FHIR API means that payers will also be able to readily analyze population-level EHR data on provider performance across an entire delivery system.

This creates a new way for you to analyze outcomes and inform your negotiations with providers, and it should provide a much more informative picture than the narrow and often-gamed quality measures today.

As part of our commitment to innovation, we’ve also unleashed claims and encounter data like never before. We believe this can be of huge value to researchers and to payers who want to explore innovative new arrangements or better understand healthcare markets and patient behavior.

Now, having access to all this information is incredibly useful for the patient—but empowering the patient is just part of what we need to deliver a real market.

We also need to ensure that providers are actually being paid in ways that drive competition and value—and that is so heavily influenced by what’s done by the federal government, as by far the largest healthcare payer.

So, we’ve followed through on using bold new payment models to drive value throughout the system. The idea is to align the provider’s financial incentives with the patient’s: toward better health outcomes at lower cost. The goal is for the patient to feel cared for and walked through the complex healthcare system, not left to his or her own devices as an atomized individual.

One key step was going straight to where many patient interact most with the healthcare system: primary care.

We’ve set up three potential paths for Medicare to pay primary care providers in a value-based way, with increasing levels of ambition.

First, we set up one path to allow smaller primary care practices to be paid a simple, flat rate for each patient. When a patient stays healthy and out of the hospital, these practices will get paid a bonus. But if the patient ends up sicker than expected, these practices will bear responsibility for the extra spending, up to a certain share of their practices’ revenue.

Then we have a second path, Direct Contracting, that is more ambitious and aimed at larger practices. Just like Primary Care First, when patients have a better experience and stay healthier, these practices will make more money. But if patients end up sicker, Direct Contracting practices will bear the total cost of care risk for the extra health spending, not just at their own practice but throughout the system.

Finally, last week, we announced a new third option, called Direct Contracting Geographic. This model aims to move entire regions of the country into value-based payment arrangements that offer care coordination to all Medicare fee-for-service beneficiaries in that region. This will provide an unprecedented ability for healthcare entities to compete on price and deliver lower costs and improved benefits to Medicare beneficiaries. It will be the most competition-driven, value-based approach to Medicare since Medicare was born in 1965.

We’ve also brought value-based care to one of the most costly areas of American healthcare, kidney health.

We launched a voluntary value-based model to give providers real incentives to prevent kidney disease and the onset of kidney failure. We also launched a mandatory model, enrolling about one-third of Medicare beneficiaries with ESRD and paying their providers in ways that will encourage home dialysis and transplants.

These interventions can be life-transforming and life-saving for kidney patients, as I know from the experience of my late father—and yet broken government payment models have disincentivized them for too long.

We’ve expanded the ability of Medicare Advantage plans, which many of you run, to deliver better value in creative ways. We updated the highly successful Value-Based Insurance Design model for MA, which is now projected to enroll 1.6 million seniors in 2021.

We expanded the ability of MA plans to provide more supplemental benefits such as home-delivered meals, transportation, and home modifications, which can help address social determinants of health.

We’ve also tackled an artificial bias in our payments toward certain sites of care. Seniors saved an estimated $380 million in out-of-pocket costs in 2019 because we started paying the same for certain clinic visits regardless of where they’re provided—meaning lower costs and potentially more convenient options for patients.

I was astonished to learn of—and am now in the process of entirely eliminating—the “inpatient only” list, where Medicare will only pay for certain procedures in a typically more costly hospital inpatient setting.

This site-neutral philosophy also underlies our mandatory radiation-oncology model that’s scheduled to launch this coming year, which aims to provide higher quality, lower-cost care for patients across 16 different types of cancer.

All of these incentives will help drive value in a competitive marketplace—but they can’t fully succeed if we have regulations standing in the way of providers working with patients, and providers working with providers, to drive value.

Too often, our regulations have been exactly that kind of barrier. The regulations under the Stark Law and the Anti-Kickback Statute had not seen a major update to account for the rise of value-based care since, well, before value-based care existed.

If providers did want to band together to incentivize outcomes, the easiest answer, too often, was common ownership. In other words, our own regulations, rather than market forces, were driving consolidation and stifling competition.

We’ve changed that with the regulatory reforms we finalized this fall. So many of the changes are simply commonsense—and yet so many Americans probably never knew government was standing in the way of the kind of care we all want.

Now, for instance, if you’re leaving the hospital after surgery, the hospital can provide a care coordinator to work with the doctor you’ll see afterward to help you navigate your care. Further, the hospital can create financial incentives for the doctors who will care for you to keep you healthy and out of the hospital.

If you need a lot of services from your primary care provider—and especially if they have taken responsibility for your total cost of care—now your doctor can provide you with a smart tablet to facilitate telehealth and any in-home services you need.

We’ve also gone beyond the four areas I just outlined, sweeping away other artificial government barriers and perverse incentives.

We’ve brought competition to how the U.S. pays for some of the most expensive prescription drugs, by requiring that America’s seniors get the benefit of sweetheart deals that pharmaceutical companies give to other wealthy countries. No longer will America’s seniors be forced to subsidize the socialized systems of Europe. 

We’ve also unleashed an explosion in telehealth as a way for patients to receive care conveniently—in a way that makes sense for their own situation. We began expanding access to virtual check-ins through Medicare and MA over the past several years, but it only truly took off during the pandemic.

Because of unprecedented emergency flexibilities, we went from about 15,000 virtual visits in Medicare fee-for-service each week before the pandemic, to nearly 1.7 million visits a week at the peak.

We’ve now finalized changes to make more than 60 new services available to Medicare beneficiaries via telehealth after the public health emergency ends.

We believe this will be a lasting revolution in how Americans expect their care to be delivered. We all know that telehealth can’t always replace in-person care. But we’ve learned that telehealth does substitute for, rather than being additive to, in-person interactions, dispelling a fear that has long prevented its expansion. We believe giving patients and providers the flexibility to decide on the right mix of the two will come to represent the new gold standard for care.

We also want to give patients flexibility in how they finance their care. In addition to our successful work to stabilize the Affordable Care Act exchanges for the first time, we made a historic reform to Health Reimbursement Arrangements that allows employers to give their employees tax-preferred dollars to shop for their own insurance.

This change is estimated to give more than 10 million Americans new options over the next 10 years—and we think it could drive more fundamental shifts than that.

It was only because of a completely artificial government barrier that, before our rule, your employer could choose a health plan from one insurance marketplace and pay for it with tax-advantaged dollars, but they couldn’t provide you with those same tax-advantaged dollars to buy a plan of your choice on the individual market.

When the employee is able to buy a plan on the individual marketplace, that’s a plan that the employee owns and can keep when they leave their job.

Much of what I’ve talked about today is patient-centered, market-driven ways to pay for and deliver care; the HRA rule points toward a more patient-centered, market-driven way for Americans to finance their care too.

Mark my words: People will recognize the significance of the HRA rule in the years to come, in the same way that it took time to see the real impact of the high deductible/health savings account reforms we put in place with my help in the Bush Administration.

When I spoke to AHIP almost three years ago, I said that this was no time to be timid in healthcare.

I’m sure everyone in this audience agreed heartily with some of the initiatives I’ve led, and I’m sure many of you would disagree strongly with others.

But I assume we can all agree this was not a timid three years for HHS. 

When I took office, the New York Times called me the Happy Regulator.

Personally, I’d prefer the term Happy Deregulator. Bold, market-oriented action is what American healthcare needed.

For too long, Americans had seen costs mount, without commensurate increases in quality. They’d heard all the promises about consumer empowerment and paying for value—but the pace of change was too slow.

That is why this administration acted so boldly, on every front: to deliver true price transparency, to put patients in control of their data, to bring real value-based payments to more areas of care, and to get regulations out of the way.

The culmination of all of these actions is nothing less than the first meaningful move back toward patient-driven markets in healthcare since 1965.

That is why I believe we will look back on the last three years as a hockey-stick moment for the transformation of healthcare—not only into a system that pays for value, but into a real marketplace that places the patient at the center.

That is what we set out to do, and that is what we delivered.

Thank you for what you’ll do to take advantage of these changes in the years to come, and thank you for the opportunity to address all of you today.

Content created by Speechwriting and Editorial Division 
Content last reviewed on December 9, 2020