LTC Bullet: Value is in the Eye of the Beholder

Wednesday, January 30, 2019


LTC Comment: Like beauty, health care value is in the eye of the beholder, and it may turn out to be very unattractive indeed. We explain after the ***news.***

*** ILTCI UPDATE: The 19th Annual Intercompany Long-Term Care Insurance Conference convenes at the Sheraton Grande Hotel in Chicago March 23-27, 2019. Details on speakers, sessions, sponsors, scholarships and more are now available here. Download the mobile app here. Attendees will meet and learn from industry thought leaders, get in-depth insights and information at more than 40 breakout sessions, network and have substantive discussions with more than 60 exhibitors and sponsors that specialize in providing products and services to this growing industry. You know the movers and shakers of the LTC insurance profession will be there. But did you know that if this is your first time attending the ILTCI, you may be eligible for an additional $50 scholarship?! Just reply to to receive your discount code, which you can use when registering at Damon and I hope to see you there. ***



LTC Comment: The 1960 Twilight Zone episode “Eye of the Beholder” begins with a young woman lying in a hospital bed. Her head is wrapped in bandages. She awaits the outcome of a surgical procedure performed by the State in a last-ditch attempt to make her look "normal." When finally the bandages are removed, we see her beautiful face but we hear the horrified expressions of others in the room. Then the camera pans to those others. They have dreadfully disfigured faces. In their eyes, our idea of beauty is ugliness itself.

The latest trend in health care financing reminds me of that story.

The government wants to pay for high-quality health care outcomes (value) instead of reimbursing for specific health care services (volume) in the traditional manner. “Value-based” reimbursement for acute and long-term care under both Medicare and Medicaid is all the rage. The idea is to pay for better care instead of more procedures. Policy makers hope that medical outcomes will improve and expenditures will decline under such a system.

But some analysts worry the end result will be a two-tiered system. Poor providers, punished for delivering inferior care, may become even worse and more dependent than ever on low Medicaid reimbursements. Better providers, rewarded for higher quality care, may attract more private payers. That could reduce the subsidy private payers’ higher reimbursement rates deliver now to providers already too dependent on Medicaid. The result may be far different from the expectation, just as so many well-intentioned government interventions have caused unintended and highly disagreeable consequences.

What will we find when the bandages come off and we finally see what value-based health care reimbursement has wrought?

LTC Bullets have followed the value-based revolution in long-term care financing for several years. We first raised the issue in LTC Bullet: A New Revolution in Long-Term Care Financing . . . by Government on November 6, 2015:

Huge changes in how the government pays for post-acute and long-term care are under way, building steam, and about to revolutionize LTC service delivery. “Bundling” and “prospective payment” are on every health care bureaucrat’s lips. The system’s transformation to “managed care,” whereby state Medicaid programs turn over responsibility for providing and paying for LTC to the highest bidders, has long been sweeping the country. … The government’s latest move toward centralized control of the LTC market is even more significant. The Centers for Medicare and Medicaid Services (CMS) is changing the focus of long-term care financing in both of the programs for which it is responsible from paying for services (volume) to paying for value (as measured by new, vague and complicated “quality” metrics). The new system will put care managers and providers at far greater financial risk. Only time will tell if this shake-up improves or damages the care patients actually receive.

The following week, in LTC Bullet: The Future of Long-Term Care Seen Through the Prism of History, November 13, 2015, we answered some key questions bearing on the prospects for value-based financing:

In a nutshell, the Centers for Medicare and Medicaid Services (CMS) seeks to change both programs’ LTC payment systems to reward quality instead of quantity. Sounds good, right? But why does government pay for most LTC in the first place? Why does it have to revolutionize its reimbursement methods to ensure quality? Why can’t people simply choose the LTC services and providers they prefer without the long arm of the law needing to intervene?

We introduced the topic with satire:

If value-based payment is good enough for Medicare, it should be good enough for McDonald’s too.


A monopsonistic [i.e., single buyer], government-based nutrient payer could ensure quality food distribution by paying for value instead of quantity.


We could reimburse prospectively for dietary-related groups of alimentary consumption episodes rewarding lower food poisoning levels with five-star ratings.


“What if I want a Big Mac,” you ask? Tough luck. Too many calories for too little nutrition. The re-hospitalization risk is off the chart.


Why do we have prospective payment systems, bundling, managed care, and value-based payment in health care but not in food distribution?


Why is government micro-management of long-term care service delivery and financing the wave of the future?


Well, it’s been a slippery slope for 50 years. Santayana said: Remember history or you’ll repeat it. We’re not just repeating the mistakes of the past, we’re doubling down.

This Bullet traced the history of long-term care financing, explained how earlier government interventions caused the problems this latest government intervention seeks to resolve, and concluded “The risk is that further interference in an already fragile LTC market will turn everything topsy-turvy just as the age wave begins to crest and the entitlement programs’ unfunded liabilities begin to come due.”

Next, in LTC Bullet: What’s Wrong with Bundled and Value-Based LTC Payments?, January 20, 2017, we expressed concern that the new president replacing Barrack Obama would carry on with the same plans.

Recently, listening to long-term care policy experts speculate about the likely future prospects under the approaching Trump presidency, I heard something both wrong and disturbing. A supposedly “conservative” commenter observed that a major new approach to LTC financing promoted by the Obama Administration—bundled and value-based long-term care payments—should be embraced and carried forward by the new Administration. I could not disagree more. Because such views are being expressed and because so many of the officials of both parties in DC and the states who are implementing the new policies will remain in positions of influence, I want to re-visit our critique of these bad ideas.

The fundamental problem with value-based reimbursement is that central government planners determine who gets what and they alone define what patients are supposed to consider good care. “In a free market,” we explained instead, “consumers rule. They demand quality and volume. If they don’t like what they get, they vote with their pocket books and move on to products and providers they prefer. Competition to provide the best care at the lowest price in the most appropriate settings could and would solve the LTC service delivery and financing problems that have been created by government’s interventions, however well-intentioned those interventions may have been.”

Then, in LTC Bullet: Government LTC Financing “Revolution” Averted, August 25, 2017, we announced with relief: “According to Healthcare Finance: “The Centers for Medicare and Medicaid Services on Tuesday officially announced it is pulling back from mandatory bundled payment models set up under the Obama administration.”

How wrong we were!

It appears now that the Trump Administration’s Center for Medicare and Medicaid Services (CMS) is proceeding full-speed ahead with the value-based approach. Find a summary of several such initiatives here. Impacting long-term care the most and soonest is the Patient-Driven Payment Model (PDPM), whereby “therapy minutes are removed as the basis for payment in favor of resident classifications and anticipated resource needs during the course of a patient's stay,” whatever that means. Only time will tell whether this expansion of centralized control over the health care Americans receive will achieve its objective of better care at less cost or pull us even further away from patient choice at even higher public expenditures. Count me among the dubious.