Panel, Conference Presentation
2015 CA Summit - Fostering Innovation to Improve Health Care
- The Milken Institute's "Faster Cures" unit aims to accelerate the transition from bench research to clinical application by removing barriers for patient advocates, researchers, investors, and policymakers.
- California is positioned as a historical and modern leader in health care innovation, having pioneered the Health Maintenance Organization (HMO) model and continuing to lead in coverage expansions.
- The Medicare and CHIP Reauthorization Act (MACRA) of 2015 is identified as a watershed law that supersedes the Affordable Care Act's impact on payment models by repealing the "doc fix" and introducing Alternative Payment Models (APMs) and the Merit-Based Incentive Payment System (MIPS).
- MACRA creates a bifurcated path for physicians to choose between APMs or MIPS, both of which steer the industry toward value-based payment models similar to California's capitation systems.
- The Heritage Health Prize, a $3 million incentivized competition, attracted 39,000 entries from 41 countries, resulting in top-tier models from data scientists being six times more accurate than health plans in predicting hospitalization.
- The Heritage Health Prize was motivated by the disparity between $3 trillion spent on health care and only $30 billion on NIH research, aiming to reallocate funds from misaligned spending toward curative research.
- Consolidation in the health care sector is accelerating due to the Affordable Care Act, with health plans entering Medi-Cal markets and provider groups forming coalitions; however, excessive consolidation in Northern California risks creating monopolies that drive up costs.
- Covered California has enrolled 1.4 million Californians and collected $6.4 billion in premiums, yet demographics show a disparity: 37.6% of enrollees are white, compared to 26% Latino, 22% Asian-American, and 2.4% African-American.
- 53.5% of Covered California enrollees are aged 45–64, representing a population that previously lacked access to affordable insurance due to chronic conditions.
- By 2016, 90% of California hospitals are projected to operate under a single health plan or system, increasing the need for coordinated care and outreach to underserved communities.
- Reducing health care cost growth requires shifting patient behavior from Emergency Room (ER) utilization to primary care, particularly for managing undiagnosed chronic conditions like diabetes.
- California's Medi-Cal reimbursement rates sit at approximately 60% of Medicare rates, creating a significant barrier to provider participation and geographic distribution in rural and underserved areas.
- The aging population poses a massive future cost driver, with the U.S. population over 65 projected to rise from 50 million to 84 million between 2010 and 2050; dementia is identified as the single highest cost component of the health care system.
- High-cost treatments present a tension between innovation and accessibility, exemplified by Hepatitis C drugs costing $80,000–$150,000 per patient, potentially exceeding Medicaid expenditures in all 50 states if administered universally.
- Blue Shield of California and Anthem Blue Cross, fierce competitors, formed a joint venture called Calindex to create a statewide health information exchange, signaling a shift toward sharing data across siloed organizations.
- Blue Shield of California has implemented 26 accountable care organization (ACO) models since 2010, delivering approximately $325 million in savings to customers over five years, though costs continue to rise at 5% annually.
- The Medicare fee schedule pays specialists 300% of what primary care physicians earn, a structural imbalance originating in the 1940s that discourages entry into primary care despite the field's necessity for managing chronic disease.
- Legislative efforts in California aim to raise the tobacco tax by $2 per pack to generate $1.2 billion in revenue, while simultaneously considering raising the smoking age to 21 to reduce long-term addiction and complication costs.
- Rising end-of-life costs, particularly in the last six months of life, highlight the need for expanded palliative care; ICU utilization in the final 30 days of life varies drastically by region, ranging from 21 days in Florida to 3 days in Minnesota.
- Pharmaceutical pricing faces criticism regarding social responsibility, with one example noting a $24–$25 billion profit in the first year for a Hepatitis C drug purchased by a company for $14 billion.
- The regulatory process for drug and stem cell approval is identified as a major cost driver, with advocates calling for accelerated frameworks similar to those adopted in Japan or cooperative international agreements.
- There is a critical shortage of clinical trial managers and bilingual personnel, necessitating new certification programs at institutions like UC Santa Cruz and San Jose State to accelerate research pathways.
- Primary care and nursing shortages are projected to be the most significant occupational gaps, driven by low reimbursement rates, a medical culture favoring specialization, and shrinking Medicare funding for residency programs.
- Blue Shield of California plans to introduce Accountable Care Organization (ACO) models on the Covered California exchange by 2017, moving beyond its initial PPO-focused approach.
- The panelists emphasize a dual imperative: shifting payment models from volume to value and fostering personal responsibility regarding diet and exercise to manage the "tsunami" of demand from an aging population.
- If market consolidation leads to unchecked price increases, the panel predicts government intervention will return in the form of rate regulation to protect consumers.