MINNEAPOLIS, March 20, 2008 -There is growing momentum at the Capitol to pass a health care reform package that included a complicated and controversial payment reform proposal that resembles capitation.

The payment reform, known as Level 3, gained steam when it was added to the House health care reform bill this week. Previously, the payment reform measure was only in the Senate’s reform bill. The MMA responded by sending an Action Alert to members Tuesday.

What is Level 3?
The proposal, known as Level 3, would create a centralized data system that would calculate and publish the comparative cost and utilization statistics of doctors and other providers.

Using this data, providers would submit a bid for providing care to a particular population of patients.
Physicians would be required to honor that bid as part of their commitment to manage the costs of care for those patients. 

Initial participation in the payment scheme would be voluntary; but as early as January 2010, it would be required of providers who care for state employees and enrollees of public programs such as Medical Assistance and MinnesotaCare. Private health plans would also start using the payment method at that time.

MMA Concerns
The MMA is concerned that the scheme lacks sufficient clarity and that it resembles capitation.

Proponents of the plan claim that this is different from capitation in that it does not make physicians assume insurance risk. But the MMA is not convinced.
The MMA is also concerned that because it closely resembles past capitated plans, it could affect patient sentiment.. Patients disliked the capitated approach because it made them feel as if their doctors had a financial interest in withholding care.  

The MMA is also concerned that, absent clear agreement on how the system would work,  this financing scheme would lead to unintended consequences such as a consolidation of health care providers. The bidding process appears so complicated that the MMA is concerned that small and rural providers would not be able to compete against large, integrated systems. This could prompt a consolidation of providers similar to the one that occurred in the early 1990s when the Legislature encouraged the formation of integrated service networks.

Finally, the MMA believes that having a centralized organization collect and publish data and manage the bidding process will likely add significant administrative costs.

The MMA is trying to convince lawmakers that instead of passing this complicated, controversial, and poorly defined approach, they should focus on passing reforms that encourage medical homes and care coordination, both of which have been shown to lower costs by supporting patients and physicians in their efforts to optimally manage chronic diseases.

Go to http://capwiz.com/mnmed/home/ to send a message to your lawmakers asking them to oppose Level 3 payment reform.