STATE PURCHASING FOR HEALTH CARE QUALITY
Quality and Accountability Systems in Four States
Purchasing Medicaid Managed Care and Public Employee Coverage in
Massachusetts
Oklahoma
Washington
Wisconsin
by
Kala Ladenheim, National Conference of State Legislatures
Erica Lewis, National Conference of State Legislatures
Christina Smith Ritter, The George Washington University
School of Business and Public Management
October 2000
Contents
PREFACE AND ACKNOWLEDGMENTS
INTRODUCTION
FINDINGS AND OPPORTUNITIES
SECTION 1:
State Purchasing for Health Care Quality
SECTION 2:
Analysis of State Quality Activities
SECTION 3
APPENDICES
- Interview Protocol
- Contacts
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PREFACE AND ACKNOWLEDGMENTS
The case studies are themselves abbreviations of a larger data collection effort. It was difficult to choose what to include, given the complexity of state activities and the willingness of states to share their insights. We salute the efforts and interest of state agencies who are working on the cutting edge of health care quality, and apologize in advance for the inevitable oversimplifications in the following pages. Any omissions and errors are the authors'.
The authors would like to thank NCSL staff Leann Stelzer for her editing assistance. We also would like to thank NCSL staff Dewayne Davis and Anna Weinstein for their research assistance. We are grateful for the time and effort put in by colleagues at NCSL─particularly Daniel Steinberg and Donna Folkemer─to review and comment on the report.
The project could not have been completed without the advice, guidance and assistance of many people, particularly Lee Partridge at the National Association of State Medicaid Directors, Jessica Briefer French at the National Committee for Quality Assurance, and the many people who work directly on these issues in the states who took the time to talk with us about what they had learned and who reviewed drafts of the case studies. Finally, we are grateful for the support and guidance of Dr. Karen Scott Collins at the Commonwealth Fund. This report was produced with the generous support of The Commonwealth Fund.
INTRODUCTION
How can state legislators secure the best quality health care at a given price for all their constituents? Health care quality has long been considered one of a trio of interconnected health care issues, but until recently it received little attention from policymakers. Financing and access (the other issues) are easier to measure, making shortfalls seem more urgent. In the past, quality was seen as the domain of medicine. Governmental quality activities, such as they were, focused on whether care was appropriate, since fee-for-service payment encourages unnecessary care.
The opportunities and risks of managed care have changed expectations about health quality policy. Managed care raises prospects of profits being earned by plans that provide too little, rather than too much, care. In theory, a well-managed health system encourages health by rewarding plans that keep patients well and treat early. In practice, managed care shifts power from health care professionals and patients into the business offices of health plans, raising fears that business concerns might compromise quality. As long as purchasers choose plans primarily on the basis of price, owners and administrators compete by keeping costs down by whatever means necessary. As this dynamic plays out, a backlash against managed care in the form of adverse publicity for plans has created a fertile political atmosphere for regulating managed care.
A national debate continues over whether detailed regulation actually improves quality. Meanwhile, legislators have another way to promote greater quality in health care: through states contracts with managed care organizations. As major purchasers of health care, many states now encourage plans to fulfill the promise of managed care: true quality-based purchasing. By coupling quality-related activities with the expenditure of state revenues to purchase health care (for the low-income, aged, blind, and disabled in Medicaid; and for employees and retirees), states create incentives for plans to improve the quality of care. The improved practices resulting from state initiatives also can affect others served by the same plans.
Efforts to measure and assure health care quality are proliferating. The growth of managed care is one reason for this burst of creativity: managed care organizes providers to treat their customers, creating new opportunities to measure quality by matching care with outcomes for the covered population. New technologies and measurement techniques also contribute to the renewed interest in quality. Plans can capture and analyze data on health care in ways that were unimaginable a generation ago, although competence has not yet caught up with the new vision of what is possible.
Legislatures can make the most of this opportunity to "purchase quality" in several ways:
- They can leverage state purchasing authority to improve quality using legislative language in appropriations and enabling legislation related to state purchasing of care.
- They can become active partners in quality purchasing through quality-oriented oversight and supportive attention to state agencies that are responsible for purchasing care.
- They can act as leaders in their community, coordinating state activities with private-sector quality initiatives.
This Study
This study is designed to introduce legislators and staff to basic principles of quality in health care purchasing policy and present some examples of state activities to improve health plan accountability for quality. The report describes how four states have approached quality in purchasing care, focusing principally on quality purchasing in Medicaid managed care. The report compares this purchasing with state practices in purchasing for a group that resembles a private sector employer plan: the employees and retirees in the state system. By showing how several states have addressed this challenge, these case studies are intended to better inform state legislators about possible state approaches to purchasing quality managed care health insurance. State lawmakers who seek to improve health care quality may find useful models in these four states for decisions they face in their own states.
This report has three sections. Section one introduces the subject of quality in health care and Medicaid managed care, describes the study methodology, and suggests how study results can be applied. Section two presents the findings, including a cross-state analysis of quality activities for both the Medicaid managed care and the state employee and retiree population. The final section of this paper consists of the state case studies. The section details state-specific quality activities, expanding upon the information discussed in section two.
FINDINGS AND OPPORTUNITIES
The importance of state purchasers in promoting health care quality cannot be ignored. State-sponsored quality improvement initiatives potentially can affect all care provided within the state. The activities of state purchasers in improving and promoting quality influence the practices of managed care organizations and health care providers, thereby influencing the quality of care in commercial─as well as in public─populations.
Findings
Definitions of Quality
- Quality is difficult to define.
- Quality definitions differ from state to state and vary depending upon the individual's role.
- Definitions may concentrate on a specific quality aspect or encompass a conglomeration of factors.
- Quality must be viewed as collaborative.
State Purchasers Emphasized Different Activities
- The state Medicaid agencies' performance reporting activities tended to be broader than those of the state employee benefits agencies. Medicaid agencies also engaged in more extensive review and analysis of collected plan performance data, information audit activity.
- Federal requirements motivate stringent and extensive external review activities for state Medicaid agencies.
- Although state Medicaid agencies provide more comprehensive feedback to their managed care contractors, both purchasing agencies were equally active in providing feedback to consumers, external parties and the legislature.
- In all the states studied, extensive collaborative and coordinated quality activities were fundamental to the development of successful statewide, value-based purchasing programs.
Opportunities
- The Institute of Medicine's report about medical errors raised public awareness about quality in health care and provides an opportunity to evoke public support for state health care quality initiatives.
- The Internet provides an excellent forum for both stakeholder interaction on quality activities and dissemination of quality results and also may be used to promote quality activities.
- Other technology such as databases and information systems provide opportunities for greater information sharing and analysis of activities that could result in improved quality across the state.
- As interest in health care quality grows and more private quality organizations arise within the states, opportunities for collaboration and coordination grow and should be exploited.
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National Conference of State Legislatures
William T. Pound, Executive Director
1560 Broadway, Suite 700
Denver, CO 80202
444 North Capitol Street, N.W., Suite 515
Washington, D.C. 20001
October 2000
Support for this report was provided by The Commonwealth Fund as part of
Contract No. 990915,
Working with States on Quality of Care in Medicaid Managed Care.
The National Conference of State Legislatures is the bipartisan organization that serves the legislators and staffs of the states, commonwealths and territories.
NCSL provides research, technical assistance and opportunities for policymakers to exchange ideas on the most pressing state issues and is an effective and respected advocate for the interests of the states in the American federal system.
- To improve the quality and effectiveness of state legislatures.
- To promote policy innovation and communication among state legislatures.
- To ensure state legislatures a strong, cohesive voice in the federal system.
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