What Does Alex Azar’s Plan for Value-Based Care Really Mean?

After two months, it's hard to tell.

Alex Azar, US Secretary of Health and Human Services
Alex M. Azar testifies at a US Senate Finance Committee confirmation hearing on January 9, 2018.

It may feel like longer, but only two months have passed since Alex M. Azar was confirmed as secretary of the US Department of Health and Human Services (HHS). Having served as the Department’s first general counsel and deputy secretary during the George W. Bush administration, Azar stepped into the role with more knowledge of it than most other members of the Trump Cabinet. However, his employment in the intervening years as a top executive of the global pharmaceutical giant Eli Lilly and Company drew praise, distrust, and apprehension in equal measure from the lawmakers tasked with his confirmation.

Policymakers and health care stakeholders are still waiting to see how Azar’s approach may differ from that of his embattled predecessor, Tom Price. Upon taking office, Azar identified four top priorities for HHS. Three of these priorities — combating the opioid crisis, bringing down prescription drug prices, and addressing the cost and availability of insurance — echo the agenda of his predecessor and reflect the most pressing issues of the moment. But it is in his growing emphasis on the fourth priority, what he calls “the value-based transformation of our entire health care system,” that Azar appears poised to distinguish himself.

Azar’s Four-Point Plan

In nearly identical speeches that were delivered separately to the Federation of American Hospitals and America’s Health Insurance Plans last month, Azar outlined his vision for a “radical reorientation” of the American health care system. The secretary declared that he is “determined that we look back at the years of this administration as an inflection point in the journey toward value-based care,” and he warned the groups that he will be “unafraid of disrupting existing arrangements simply because they’re backed by powerful special interests.”

Secretary Azar laid out a plan under which HHS will strive to spur value-based transformations of the health care industry in four areas by:

  • Giving consumers greater control over health information through interoperable and accessible health information technology. This will include the government-wide MyHealthEData Initiative and Medicare’s new Blue Button 2.0.
  • Encouraging transparency from providers and payers. Azar stated that there is “no more powerful force than an informed consumer” and called on doctors, hospitals, drug companies, and pharmacies to become more transparent about pricing and about the outcomes of their services and products.
  • Using experimental models in Medicare and Medicaid to drive value and quality “throughout the entire system.” Diverging from his predecessor, Azar said he would not hesitate to use the “tremendous power to experiment with new payment models” developed with the Affordable Care Act’s Center for Medicare & Medicaid Innovation (CMMI) and the 2015 Medicare Access and CHIP Reauthorization Act (MACRA).
  • Removing “any government burdens” that impede this value-based transformation. Azar pointed to “certain Medicare and Medicaid price reporting rules,” current interpretations of various anti-fraud protections, restrictions on the coverage of wraparound services like transportation, and provider reporting requirements as examples of the regulations he plans to address.

Azar declared that the four “shifts” he outlined are “going to happen, one way or another” and warned that the changes will require “some degree of federal intervention — perhaps even to an uncomfortable degree.” He acknowledged that some may be surprised by such a statement from an administration that “deeply believes in the power of markets and competition.” However, he argued that government intervention is necessary to facilitate reform in a system where “the status quo is far from a competitive free market in the economic sense of the term.”

Uncomfortable for Whom?

The secretary has promised a value-based agenda that will be “disruptive to existing actors” in the health care system. But on close examination of his words, it’s not entirely clear what measurable outcomes HHS hopes to achieve. There are few details about the levers it intends to pull or the programs it intends to implement. And there is dissonance in Azar’s simultaneous threat of greater “federal intervention” and his professed goal of a “free market” health system.

This leaves us to ask: Which groups will bear the brunt of this discomfort?

Hospitals and providers? Again, Azar cites his department’s authority over MACRA and CMMI as the primary tool through which it will drive delivery reform in Medicare and Medicaid. His comments would seem to signal a departure from the position of Price, who was sharply critical of the provider burdens imposed by each. However, in a recent hearing on MACRA implementation, the principal deputy administrator of the Centers for Medicare & Medicaid Services (CMS), Demetrios Kouzoukas, touted the deregulatory reforms made by the Trump administration to scale back the law’s Merit-Based Incentive Payment System (MIPS) program. The payment reforms under MACRA were designed to move Medicare toward value by incentivizing providers to furnish high-quality, low-cost care. But rather than a discussing the future of physician-led value, Kouzoukas appeared to celebrate loosening any demands made on doctors.

Drug makers? Azar warns that he’ll be calling on “not just doctors and hospitals, but also drug companies and pharmacies” to become more transparent in their pricing, but he does not specify how. California is currently leading the nation in this respect, with the implementation of a first-of-its-kind transparency law — a measure that has already revealed some controversial price hikes on the horizon. But observers in the state are now asking whether this added transparency will do anything to bring prices down. The administration’s recent white paper on drug pricing solutions fell well short of the bold claims President Donald Trump and his advisers have made regarding their plans to address drug prices.

Azar’s four-point plan for value-based care appears to be torn between radical transformation and a relaxation of demands on providers and other health care stakeholders.

Insurers? Few details were provided on how HHS would compel greater transparency from insurance companies. While Azar encouraged insurers to continue leading value-based policies in Medicare Advantage and Medicaid managed care, he mainly discussed how the administration plans to address burdens placed on insurers, including the “well-meaning but often Byzantine rules and regulations regarding consumer communication.” He has also been at the helm for the release of new proposals that would loosen regulations governing the sale of short-term, limited duration insurance policies and association health plans.

States? Azar said in his speech that the administration wants to look at “bold measures that will fundamentally reorient how Medicare and Medicaid pay for care and create a true competitive playing field where value is rewarded handsomely.” This type of rhetoric may signal a desire to return to last year’s efforts to radically cut and restructure Medicaid, or potentially further privatize Medicare. These proposals have remained a priority for the Republican majority in the House, and Azar signaled his own support for Medicaid block grants at a hearing in January.

Patients? Azar has envisioned a health care system in which patients and consumers are the drivers of value, a situation made possible by greater price transparency across the board. Greater transparency throughout the system is beneficial, but the added information may not drive value in the way he suggests, given that costs are filtered through third-party payers and patients’ choices are often limited. A study published in the Journal of the American Medical Association in 2016 questioned the extent to which patients will avail themselves of price transparency tools even when they are available, and ultimately concluded that the use of such tools was not associated with lower health spending in the study.

Many Forks in the Road

Azar’s four-point plan for value-based care appears to be torn between radical transformation and a relaxation of demands on providers and other health care stakeholders. The entire health policy community, and health care system managers, are closely watching for signs of how he will choose to steer the American health care system — which accounts for one-sixth of the world’s largest economy.

More from the CHCF Blog