Health care reform isn’t over.  For patients, it has just begun. The health plans are beginning to figure out how they will survive and thrive under the new rules, and the way forward is, according to one managed care exec, to change how providers are paid. This will have consequences.

Jeffrey Kang, MD, chief medical officer for Cigna, has some thoughts on this already:

It’s important to measure and provide incentives for better outcomes… not for improved processes or certifications achieved.  Some examples of outcomes to measure might include smoking cessation, weight loss, lower blood pressure, and lower total cost of care.  Incentives should be around pay-for-performance…not for shared insurance risk.

“We as health plans are better off continuing to hold that insurance risk because we have the actuaries and the capital,” he says. Health plans can then focus on “really trying to create payment methods that give people incentives to improve quality, lower cost or penalties if they miss these targets.”  Cigna has eight pilots offering incentives for quality, outcomes and lower total healthcare costs.

As for wellness and disease management, Kang notes, “From a benefit design perspective, the legislation did get it correct” by focusing on first dollar coverage for prevention and screening.

Cigna should be one of the thought leaders in this aspect of the reform, because they were around 25 years ago when this was tried before under the term “health maintenance organization.” The HMOs (disclaimer: I did the marketing for one of the first) thought that if they could keep people healthy, they could lower the cost of care.

They tried everything. They held classes, they provided patient education films and leaflets,  they put up big posters in doctors’ offices. None of it worked.

Finally, they “capitated” the doctors. A doctor received $X per patient per year, whether he saw that patient once or one thousand times. A patient had to be seen by a PCP (primary care physician) before he could make an appointment with a specialist.

Capitation was supposed to be a way to quell rising costs and encourage doctors to keep their patients healthy. But doctors resented being gatekeepers and fought back by refusing to participate in some HMOs, and the patients responded by rising up in hordes to protest lack of access to care. During this period, if your employer changed plans, you likely had to leave your doctor.

Buoyed by patient support, some doctors began backing out of  capitated HMOs altogether, and employers began to buy a new product: the PPO — a plan where the patient could choose the doctor, and there were fewer gatekeepers. That’s how patient choice got to be such a big issue in the last health reform debates. Patients learned that under an HMO they couldn’t choose which doctor they wanted to see, but had to see a doctor in their plan.

Never mind that most patients couldn’t choose a doctor wisely in their wildest dreams, especially while sick.

This time around, we have marvelous sources like HealthGrades and Yelp, two services that further distort the process of patient choice through advertising or subscriptions.

Cigna took a lot of flak the last time around for being a horrible HMO. So, by the way, did Kaiser. This time, executives of both are emerging as thought leaders in the cost control space.

I hope we don’t go through the same thing we went through in the 80s. It could have been wonderful (yes, I’m biased because Intergroup, the HMO I worked with, started with pure motives) but it ended up dreadful. And we literally can’t afford to have that happen again.

I spent the day at Health 2.0 conference in the Bay Area. This is the third year of the conference, and it has grown from a fringe group of early adopters and application developers to a bona fide e-patient movement, probably spurred by the broken health care system.

Health plans already know that whatever versions of Obama’s reform plan are passed, they will be dealing more with consumers and less with employers in the future. They are are investing in the tools to do a more subtle form of medical management than they did in the ’80s, when the HMO movement became known for the dreaded “gatekeeper” concept of denying care. During the heyday of this concept, health care costs escalated about 25% over a decade.

However, consumers became so angry that in 1999, one of the largest payers, UnitedHealth Group, said it would do no more medical management. All other plans had to follow suit, and with no effective medical management, health plan costs exploded 60% between 2000 and 2007. 20% of all commercial plan enrollees have been priced out of coverage, and now health plans have decided to be proactive again and turn back to management. But this time, they are trying to shift the paradigm and get the patient to be the manager.

Health Innovation’s Jerry Reeves, the medical director for union plans across the country, says hospitalizations are no longer the key drivers of rising costs. Costs are now being driven by ambulatory settings like ERs, outpatient settings, imaging centers, and the outsourcing of diagnostic activities outside the physicians office. A doctor visit would be the low cost solution, but people are not getting access to physicians’ offices, and wind up in the ER, which costs 13x as much to deliver the same services. In addition, Reeves said people are not getting lifesaving treatments and things they really need, because the system is so broken. He is trying to move to value-based health care.

Mohan Nair is a serial entrepreneur now with Regence BCBS, a four-state plan that has been working for last 6 years to help the system change. Regence is trying to invoke a vision of health care as everyone’s community asset: the consumer has to recognize that it’s his money and his future. Although there’s plenty of blame to go around in the health care industry, rather than trying to find someone to blame, Nair says, insurers have to change, and change quickly, altering their centers of gravity to the consumer and helping the consumer make better decisions, balancing medical management with consumer engagement. Of Regence BC/BS’s 3 million members, 30% are already actively engaged in online communities.

Over the past two years, CIgna’s 8.5 million domestic” lives” have already seen a transformation from their old school insurance company to a customer-centric universe Focused on what people actually want from this system, Cigna participates in Facebook, Twitter, Second Life, Eliza, and Intuit (Quicken Health). Cigna patients can download all their claims information in Quicken Health and see what’s been paid, what hasn’t been paid, and what their responsibility is. The application both tells people how much is actually being covered by their insurance, and explains why things are not covered — in plain English. Cigna patients have seen their information made transparent and delivered to them through many interactive channels. However, merely making information available does not necessarily encourage people to change their behavior. You need to have a motivated patient that’s willing to act on the information.

But at least the new system invites the patient in, which the current health system does not do.

Nathan Moracco, St of Mn Management and Budget supports the employer group for the state of Minnesota, and has devised for the state a tiered product with care systems ranked on a cost and quality basis, layered on top of incentives for members to seek the right care at the right time. The state is doing quality management around diabetes and depression care right now, because veryone knows that 5 chronic diseases account for 70% of the health care spend.

Chris Ohman of Kaiser (8.5 million members, ten states,) says they are putting finishing touches on installing their health IT system throughout the enterprise with an emphasis first on clinical care management, and second on the customer experience. Kaiser, too, knowing the numbers, is making big steps forward in chronic disease management, delivering what they feel are better benefits at lower costs.Engagement of consumers is related to this and Kaiser patients are filling prescriptions, making appointments, getting test results on the web, and then engaging with the physician.