Posts Tagged ‘Centers for Medicare and Medicaid Services’

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Medicare, Medicaid Costs Rising More Slowly

Tuesday, January 24th, 2012

Healthcare spending nationally grew slowly for the second successive year in 2010, bringing it in line with growth in the U.S. economy as a whole, according to the Department of Health and Human Services (HHS).  Spending rose by 3.9 percent in 2010, to $2.6 trillion, while the GDP rose 4.2 percent, according to HHS, which published its findings in the journal Health Affairs.  In 2009, spending increased nearly the same by 3.8 percent, but in contrast it’s growth rate was twice that by 7.6 percent in 2007.  Spending increases frequently hit double digits in the 1980s and 1990s.  While spending growth in general remained slow, premiums for people in private insurance plans grew faster for the first time in seven years than what was spent on their care, according to the Centers for Medicare and Medicaid Services (CMS).  Premiums in 2010 rose 2.4 percent, slightly less than the 2.6 percent increase in 2009, although private health insurers’ spending on actual benefits rose only 1.6 percent in 2010, down from 3.7 percent in 2009.

Healthcare represents 17.9 percent of the U.S. economy, the same proportion as in 2009, according to a government report. “Persistently high unemployment, continued loss of private health insurance coverage and increased cost sharing led some people to forgo care or seek less costly alternatives than they would have otherwise used,” the report said.

The report showed that the federal government paid 29 percent of the nation’s healthcare bill in 2010, up from 23 percent in 2007. Some of that increase reflects a transitory increase in federal aid to states to enroll more uninsured people in Medicaid. The percentage of spending by private businesses and state and local governments fell.

The recession played a large role in impacting spending, CMS officials said.  Because fewer people were insured, and private insurers generally picked up less of the cost, patients went to the doctor and hospital less frequently.  The answer may go beyond the recession.  “The utilization slowdown is at least in part structural, and not just cyclically driven by the economy, and the adoption of higher cost sharing plan designs will result in some level of permanent slowdown in trend,” said Ana Gupte, a senior analyst at Sanford Bernstein, which conducts research for investors.

“Premiums grew faster than benefits for the first time in seven years, and benefits grew at their slowest rate in the history of the accounts, according to Anne Martin, a CMS economist.  Martin said this was because private health insurance companies lost enrollees as people were laid off, moved to cheaper health insurance plans as a result, cost-sharing increased.

Karen Ignagni, president of America’s Health Insurance Plans, said that the portion of premiums “allocated to health plans administrative costs was among the lowest in recent years, despite the fact that health plans have been in compliance with the healthcare reform law.”

Additionally, spending on prescription drugs declined in 2010.  Not only did individuals buy fewer drugs, but there were also more switches from brand to lower-cost generic medications. According to CMS, fewer new drugs came onto the market.

Paul Ginsburg, president of the Center for Studying Health System Change, a Washington research group, said the report didn’t address the biggest question: “When the economy gets strong again, do we just return to the old business as usual?  Probably,” he said. “But there’s a chance that the experience of people economizing may have longer-lasting effects.”

The Obama administration was pleased with the report and called it good news for the healthcare law, although some researchers found the law had a less than 0.1 percent impact on national health spending in 2010.  “These numbers do not take into account all of the cost-saving provisions in the Affordable Care Act that are still being implemented.  But they do show why the Affordable Care Act is so important,” senior White House adviser Nancy-Ann DeParle said. According to DeParle, the insurance regulations in the law will keep insurance companies “in check.”

The phasing in of the patient Protection and Affordable Care Act (ACT) which will expand insurance coverage to as many as 32 million people, will incur larger cost increases later in this decade. National health spending is expected to increase by 8.3 percent in 2014, when the most ambitious coverage expansions take effect, according to CMS projections.  “The law will control the growth of healthcare spending through fraud prevention, better coordination of care, disease prevention and overhauling insurance markets,” DeParle said.

According to DeParle, “Starting in 2011, insurance companies were required to publicly disclose and justify any premium increases larger than 10 percent. Many states have the authority to reject unreasonable premium increases and the Affordable Care Act gives states $250 million to strengthen their rate review programs. Additionally, insurers are required to spend at least 80 percent of your premium dollars on healthcare expenses instead of overhead and profits.”

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States Rewarded for Adding Kids to Public Insurance Rolls

Monday, January 9th, 2012

Twenty-three states will share $296.5 million in federal funds for encouraging low-income families to enroll children in state-run public healthcare programs.  The bonuses reward states that streamlined eligibility for Medicaid, the federal-state health program and the Children’s Health Insurance Program (CHIP).  The goal is to assure coverage for children younger than 19 from households with annual incomes of less than $45,000 for a family of four, though some states are more generous.  Despite 2011’s shaky economy, the number of uninsured children fell to 5.9 million in 2010 from 6.9 million the previous year, according to a study by the Georgetown University Health Policy Institute.  Children still leave the program rolls because parents neglect to renew eligibility, increasing the likelihood of missed vaccinations and dental checkups, said Tricia Brooks, a senior fellow at the Georgetown institute.

“Families may avoid routine preventive care with the hope they’ll have more money next month or delay seeking care until they know they really have to bring the children in,” Brooks said.  “At that point, the emergency room is a likely choice.”

Besides the 1.2 million newly insured children, three million who previously had private insurance transferred to CHIP or Medicaid during that time frame, said Sherry Glied, assistant secretary for planning and evaluation at the Department of Health and Human Services (HHS).  Because of that, children have been protected from 10 years of erosion of health insurance among Americans that resulted as employers dropped coverage, workers with insurance were laid off because of the recession, and people whose only alternative was to buy insurance on their own could not afford to do so.  Since CHIP was first established in 1997, the share of adults ages 26 to 64 with a health plan dipped from 83 percent to 80 percent. By contrast, in the same period, the share of children with insurance grew from 86 percent to 93 percent.  “It’s very encouraging, because it shows that even in an economic downturn, CHIP really made a difference,” Glied said.

The 23 states that are eligible to receive performance bonuses are: Alabama, Alaska, Colorado, Connecticut, Georgia, Idaho, Illinois, Iowa, Kansas, Louisiana, Maryland, Michigan, Montana, New Jersey, New Mexico, North Carolina, North Dakota, Ohio, Oregon, South Carolina, Virginia, Washington, and Wisconsin.

To earn their bonuses, states used electronic databases rather than paperwork submissions from families to verify incomes or preemptively enrolling kids who appear to be eligible.  Additionally, states may guarantee one year of eligibility rather than requiring periodic renewals.  Georgia and South Carolina use information from their nutrition assistance programs to hasten eligibility determinations, said Marilyn Tavenner, acting administrator of the U.S. Centers for Medicare and Medicaid Services.  In 2010, 15 states claimed bonuses totaling approximately $206 million.  Alabama, which received $55 million after adding 133,000 children to its public insurance programs, led the pack.

In Connecticut, for example, an estimated 49,000 Connecticut children under 18 have no health insurance, said Mary Alice Lee, senior policy fellow with Connecticut Voices for Children.  The state provides affordable insurance for children under the Husky Health program. According to Lee, considering that the state’s economic downturn and the 2010 nine percent unemployment rate, the fact that the percentage of uninsured children held steady means that the Husky program is working.  “The number of uninsured children in Connecticut is really relatively low compared to other states,” Lee said.  On a national basis, 9.8 percent of children under 18 were uninsured in 2010.  “The Husky program is doing exactly what it’s supposed to do, that is, provide affordable coverage for children during times of economic stress.”

No parent in America should have to think twice about taking their child to a doctor’s appointment or filling a prescription for their child because the cost is too high,” Tavenner said. “And no child should have to miss school or activities because they’re not getting the care they need to stay healthy.”  States have wide latitude regarding how they spend the funds, but the intent is that they will be used to help defray the shared Medicaid costs that the states incur by enrolling more children.

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ACA Is Fixing U.S. Healthcare Delivery: Donald Berwick

Wednesday, January 4th, 2012

Dr. Donald Berwick, who oversaw Medicare and Medicaid until recently said the programs are trapped in a health system that promotes wasteful spending and inefficient care. “Healthcare is broken,” Berwick, who headed the Centers for Medicare and Medicaid Services (CMS), said.  “We have set up a delivery system that is fragmented, unsafe, not patient-centered, full of waste and unreliable.  Despite the best efforts of the workforce, we built it wrong. It isn’t built for modern times.”  Berwick said the Patient Protection and Affordable Care Act (ACA) is changing how physicians and hospitals are paid and deliver care through such innovative arrangements as accountable care organizations (ACOs), which improve coordination and lower costs.”

According to Berwick, it is not clear whether these efforts will produce results quickly enough to silence the critics who want to make more radical changes that would shift the majority of the burden onto beneficiaries.  “That is the central question, the nub…whether that will happen fast enough, I just don’t know.”

To read the full transcript of Berwick’s remarks, click this link:

Berwick defended his tenure as CMS administrator. Even though he failed to win Senate confirmation, that did not impact his ability to get things done, though he would have preferred a longer term.  “An agency of this size will do better with longer-term leadership commitment,” he said.  With the knowledge that his tenure was likely to be short, Berwick felt a greater sense of urgency to achieve things.  Berwick’s most challenging decisions involved state requests to cut Medicaid benefits and writing regulations to encourage doctors and hospitals to form ACOs, while not making the requirements overly burdensome.

Berwick took exception to state’s efforts to limit hospital coverage for Medicaid recipients, which is presently under review by federal regulators.  Hawaii has proposed a 10-day limit on some enrollees; Arizona has proposed a 25 day limit.  “It’s a nonsensical idea.  If a patient needs 20 days, the patient should get 20 days,” he said.

According to the Bangor Daily News, Berwick’s departure from CMS is “an unnecessary loss.” Berwick’s parting words should help Americans understand how their health system is in the process of being improved.  The article notes that “Waste is a broad term, including needless medical procedures, failure of adequate preventive measures, duplication and inefficiency, as well as outright fraud.  Hospital-acquired infections have caused the deaths of almost 100,000 Americans each year and the illness of millions more, according to the U.S. Centers for Disease Control and Prevention.  Dr. Berwick has reported that these complications have added as much as $45 billion a year to hospital costs borne by taxpayers, insurers and customers.  He said that some hospitals have virtually eliminated some infections that other hospitals still consider inevitable.  Under the Affordable Care Act, sometimes called Obamacare, financial incentives will go to hospitals that excel in fighting these infections starting in 2015.

Unnecessary hospital readmissions add another $12 billion a year, estimates the Medicare Payment Advisory Commission.  It says half or more of these readmissions could be prevented through better coordination and patient education, permitting them to recover at home rather than re-entering the hospital with complications.  ‘Integrated care’ will also reduce costs, said Dr. Berwick, by protecting patients from having to tell their stories over and over to different providers and letting a doctor know what medication they had already been given.  No figure is available for the savings from automated record keeping, but it is becoming substantial.  Preventive medicine is already reducing waste, for example by detecting diseases at early stages for prompt treatment.  The Affordable Care Act makes preventive benefits like cholesterol tests, mammograms and screening for colon and rectal cancer free for everyone with Medicare.”

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Berwick Laments Washington, D.C., Cynicism About ACA

Tuesday, December 20th, 2011

Dr. Donald Berwick, who recently left his job as administrator of the Centers for Medicare and Medicaid Services (CMS) because the Senate refused to confirm his nomination, struck back at his critics who had accused the pediatrician of advocating healthcare rationing.

“The true rationers are those who impede improvement, who stand in the way of change, and who thereby force choices that we can avoid through better care,” Berwick said.  “It boggles my mind that the same people who cry ‘foul’ about rationing an instant later argue to reduce healthcare benefits for the needy, to defund crucial programs of care and prevention, and to shift thousands of dollars of annual costs to people — elders, the poor, the disabled – who are least able to bear them.”

Although Berwick didn’t specifically accuse Senate Republicans, it was clear that he was referring to proposals to drastically slash the nation’s budget deficit by capping federal funding to states for Medicaid.  That proposal could cut billions of dollars that critics have said would lead to cuts in benefits.

During his 16-month tenure at CMS, Berwick studiously avoided using the term “rationing”.  Now, the gloves have come off.  “When the 17 million American children who live in poverty cannot get the immunizations and blood tests they need, that is rationing.  When disabled Americans lack the help to keep them out of institutions and in their homes and living independently, that is rationing.  When tens of thousands of Medicaid beneficiaries are thrown out of coverage, and when millions of seniors are threatened with the withdrawal of preventive care or cannot afford their medications, and when every single one of us lives under the sword of Damocles that, if we get sick, we lose health insurance, that is rationing.”

Berwick also jabbed at those who inaccurately said the Patient Protection and Affordable Care Act (ACA) included so-called “death panels.”  According to Berwick, “If you really want to talk about ‘death panels,’ let’s think about what happens if we cut back programs of needed, life-saving care for Medicaid beneficiaries and other poor people in America.  Maybe a real death panel is a group of people who tell healthcare insurers that is it OK to take insurance away from people because they are sick or are at risk for becoming sick.”

Going even further, Berwick said that the ACA needs more advocates supporting the law. “The law is just a framework,” Berwick said.  “Healthcare in America can improve and it can become sustainable without a tremendous amount of community involvement.”  President Obama has an important role in this, as do healthcare consumers who must push healthcare leaders to rethink the way they work.  “Increasingly, though, that advocacy role is falling to physicians, nurses, and hospital executives.  We need their voices, because they know the system can’t go on the way it is,” he said.

“I think that a lot of the public concern about that law and a lot of the congressional criticism is ill-founded and based on myths,’’ Berwick said.  “I think any chance to air publicly, with conversation and even debate, matters of such concern is healthy.’’

While contemplating what to do next in his career, Berwick said “I’m excited by how much is in motion in healthcare right now.  It’s an incredibly interesting and promising time with many risks, and I want to stay thoroughly engaged in reshaping American healthcare into the high-performance, sustainable system I know it can be.”

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Study Tracks Development of ACOs

Wednesday, December 14th, 2011

Accountable care organizations (ACOs) are the biggest thing in healthcare today, and a new study by Leavitt Partners quantifies exactly how hot they are.  ACOs, as defined in the Patient Protection and Affordable Care Act (ACA), are a delivery model that offers doctors and hospitals financial incentives to provide quality care to Medicare patients and keep costs affordable.

Even though ACOs are not yet operating, there are already 164 “ACO entities” in the country, according to a report by Leavitt Partners, a consulting firm led by Mike Leavitt, a former governor of Utah and Secretary of Health and Human Services during President George W. Bush’s administration.  In his survey of ACOs, Leavitt examined news releases, media reports, trade groups and conducted interviews and concluded that a health system is an ACO if it either self-identified as one or was “adopting the tenets of accountable care.”  The study included systems that work with private payers rather than Medicare.

Of the 164 “ACO entities” identified, 99 are sponsored by hospital systems, 38 by physician groups and 27 by insurers.  They are in 41 states, although there were vast regional discrepancies.  Poor, rural regions reported minimal ACO growth.

“A quiet scramble is clearly underway,” Andrew Croshaw, managing director at Leavitt Partners and director of the Leavitt Partners Center for ACO Intelligence, said.  “In certain markets, competition to establish leadership is already emerging.”

Due to the rush to complete the study, ACOs may be prolific in certain areas while sparse in some regions of the country.  Even though ACOs are still a new concept, certain states are already home to significant accountable care activity, primarily in Texas, California, and Michigan.  In general, states with larger populations have more ACOs.  “Adoption of this model will vary greatly due to both regional differences as well as variations among the sponsoring entities,” the report states.

Of the 164 ACOs that researchers examined, nearly 60 percent were established by hospitals or health systems, indicating a trend toward hospital systems leading the development of ACOs.  Leavitt Partners examined the trends of “ACO or ACO-like organizations,” meaning the report loosely defined an ACO as an entity that is “financially accountable for the healthcare needs of a population, manages the care of that population and bear that responsibility at an organizational level.”

The success of the various ACOs is still not known. According to the report, although there are different models of providing accountable care, the most successful approaches at achieving an ACO’s goals is still undecided.  “With neither a set definition, nor a national method for identifying ACOs, it is difficult to precisely identify and study such organizations,” according to the report.  “It is possible that some of the organizations, which should be considered ACOs, are missing from our study and some, such as organizations that self-identify as ACOs but will never ultimately adopt any type of care coordination or bear any risk for a population, may not belong.”

The final ACO rule provides more flexibility for eligible providers and increases the amount of possible bonuses.  The Centers for Medicare & Medicaid Services (CMS), which released the rule in October, also decreased the number of quality measures from 65 in five domains to 33 in four domains.  Although the full implications of the rule are not yet known, providers’ responses reflected their desire for long-term care to actively participate.  ”We certainly want to ensure skilled nursing and post-acute facilities are part of the cost-saving model,” according to the American Health Care Association President and CEO Mark Parkinson.

There are some who are not quite so bullish about ACOs. One is J. Thomas Rosch, commissioner of the Federal Trade Commission, who is deeply skeptical about ACOs.  According to Rosch, “even in the most optimistic scenario, the savings to Medicare from the ACO program are no more than a rounding error.”  He also believes that there is a possibility that providers may form ACOs not to collaborate or improve healthcare, but to gain market share.

“Against the very meager prospects for cost savings, there is a very real risk that some ACOs will be formed with an eye toward creating or exercising market power.  The net result of the Shared Savings Program may therefore be higher costs and lower quality healthcare — precisely the opposite of its goal,” Rosch said.

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Can Marilyn Tavenner Save Medicare?

Monday, December 5th, 2011

President Barack Obama’s choice of Marilyn Tavenner as administrator of the Centers for Medicare and Medicaid Services – to replace Dr. Donald Berwick, whose recess appointment was set to expire at the end of the year – is more likely to survive the Senate confirmation process relatively unscathed.

A Harvard-educated pediatrician, Berwick won praise and the backing of major healthcare groups for his academic work, which focused on cutting the cost of care while improving quality and patient experience.  Republicans took exception to his praise of Britain’s National Health Service as an “example” for the United States to emulate.  Others accused him of supporting “rationing” healthcare services, a claim Berwick rejects.  “Every bone in my body, as a physician, even as a person, is to get everything (patients) want and need and to help them at every step,” he said.  “I have gone to the mat to get a last-ditch bone marrow transplant for a child with leukemia…and they are telling me I’m rationing?  They haven’t met me.”

White House officials said, “Before entering government services, Tavenner spent nearly 35 years working with health care providers in significantly increasing levels of responsibility, including almost 20 years in nursing, three years as a hospital CEO, and 10 years in various senior executive-level positions for Hospital Corporation of America.”

According to Ezra Klein, “Tavenner’s healthcare experience lies much more in management than policy.  Former colleagues describe her as a patient-centered manager, a hands-on medical professional equally comfortable in the board room and the emergency room.  And in contrast to Berwick, Tavenner isn’t associated with a grand vision for health reform, or a particular policy agenda for Medicare and Medicaid.  ‘With Marilyn, you present the information, then she makes a decision, and you move on,’ said Patrick Finnerty, who served as Virginia’s Medicaid director under Tavenner.  ‘She doesn’t make promises she can’t keep.  There are differences of opinions, and she would try to work through those.  She’s straight with folks but always respectful.’”

Tavenner started her career as a nurse at Virginia hospitals owned by the Hospital Corporation of America (HCA).  Tavenner met with success, rising from chief nursing officer to CEO.  In 2004, she was again promoted to HCA’s president of outpatient services, her first national position with the firm.  She resigned two years later, when then-Virginia Governor Tim Kaine tapped her to head the state’s Health and Human Resources department.

Tavenner has already won the American Medical Association’s (AMA) backing. “We have worked extensively with her in her role as deputy administrator, and she has been fair, knowledgeable and open to dialogue,” AMA President Peter Carmel said.  “With all the changes and challenges facing the Medicare and Medicaid programs, CMS needs stable leadership, and Marilyn Tavenner has the skills and experience to provide it.”

Senator Orrin Hatch (R-UT), the ranking Republican on the Senate Finance Committee, said that the panel would thoroughly scrutinize Tavenner, but did not say he opposes her nomination.  Despite Hatch’s mild comment, Tavenner is expected to face some difficult questioning because Senate Republicans have not overtly endorsed her.  According to a Republican healthcare lobbyist, “I can’t imagine a lot of support for her,” noting that the high-profile CMS role “always gets sucked into the controversy of the day.”  Ultimately, Tavenner is likely to be confirmed for the CMS post.

Tavenner is widely seen as a pragmatic administrator who will not rock the CMS boat. “The only way to stabilize costs without cutting benefits or provider fees is to improve care to those with the highest health care costs,” she said.  Tavenner also said she opposed Republican efforts to turn Medicaid into a block grant that would limit the amount of federal funding states can receive for the program.  “That approach would simply dump the problem on states and force them to dump patients, benefits or make provider cuts or all the above,” she said.  Tavenner “brings continuity in terms of implementing the mission,” said Len Nichols, director of George Mason University’s Center for Health Policy Research and Ethics.

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Medicare Part B Premiums To Rise Slightly in 2012

Monday, November 7th, 2011

Despite rumors to the contrary, the basic monthly premium for Medicare will be less than anticipated in 2012.  The new Part B premium, which covers outpatient care, will be $99.90 a month for 2012, approximately $7 less than projected as recently as May.  In other words, the majority of senior citizens will pay $3.50 more a month next year, instead of $10.20, as forecast earlier.  Some younger retirees who enrolled recently will actually see their rates go down.  They have been paying as much as $115.40 a month.  Instead, they’ll also pay $99.90 next year.  The primary reason for the lower-than-expected premiums is a result of the interaction between Social Security cost-of-living adjustments (COLA) and Medicare.

“Thanks to the Affordable Care Act (ACA), Medicare is providing better benefits at lower cost,” said Health and Human Services Secretary Kathleen Sebelius.  She reassured seniors that they have nothing to fear from the healthcare law, and described keeping premiums in check as “pretty remarkable.”

Some Republicans do not see the connection between Medicare premiums and the ACA.  “Lower Medicare premiums are being driven by lower-than-average Medicare spending due to the slow economy” – not the healthcare law, said Antonia Ferrier, spokeswoman Senator Orrin Hatch (R-UT), the ranking Republican on the panel that oversees Medicare.

Part B premiums have been frozen at the 2008 level of $96.40 a month for about 75 percent of Medicare beneficiaries because of a lack of a Social Security COLA during the recession.  Social Security recently announced a raise of an average of $39 a month for 2012.  The Part B premium is of great interest to the 48 million people covered by Medicare.  Average premiums for prescription coverage and for popular Medicare Advantage plans will stay flat or dip slightly for 2012, but fewer beneficiaries opt for those benefits.  In May, government experts forecast that Medicare premiums would rise to $106.60 for 2012.  At that time, they were also estimated a Social Security COLA of just 0.7 percent – but it turned out to be a larger 3.6 percent increase.  As a result, rising Medicare costs could be spread among many more people, resulting in smaller individual increases.

“Thanks in part to the Affordable Care Act, people with Medicare are going to have more money in their pockets next year,” added Donald Berwick, MD, administrator of the Centers for Medicare & Medicaid Services (CMS).  “With new tools provided by the Affordable Care Act, we are improving how we pay providers, helping patients get the care they need and spending our healthcare dollars more wisely.”

Advocates for senior citizens also were pleased with the smaller rise in Medicare Part B premiums.  “The payment reforms enacted over the past few years, including those in the Affordable Care Act, in addition to crackdowns on fraud, waste and abuse, are partially responsible for the increased optimism about Medicare’s financial health, the lower-than-predicted Part B premium and an almost unheard-of drop in the Part B deductible,” said Joe Baker, president of New York-based Center for Medicare Rights.  “These developments help show the promise of the ACA’s delivery system reforms, and why we must let them do their job in the coming years.”

AARP echoes that sentiment.  “Millions of America’s seniors are struggling with higher expenses – particularly higher healthcare costs, lower incomes, depleted savings and reduced home equity or homes lost to foreclosure, and this small increase is welcome news,” noted David Certner, AARP’s legislative policy director.

Writing in Family Practice News, Alicia Ault takes issue with the way HHS is tying the low increase to healthcare reform.  According to Ault, “Part B premiums are calculated to cover one-fourth the cost of physician services, plus a contingency margin that is essentially equivalent to an insurer’s reserve.  This has nothing to do with health reform; it’s been a statutory requirement since, well, for a long time. And the contingency margin is always dependent on what happens with the Sustainable Growth Rate (SGR) formula.  CMS assumes every year that the SGR will be overturned, so that calculation also has nothing to do with health reform.  For an administration that prides itself on transparency, it seems to have done little today to pull back the curtain on Medicare spending — even as Dr. Berwick said that transparency itself had led to lower costs.”

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ACO Rules Revised to Attract Providers

Thursday, October 27th, 2011

The Obama administration has issued revised regulations to encourage doctors, clinics and hospitals to take greater responsibility for improving patients’ care.  The rules will reward healthcare providers who enter into partnerships to cut the cost of caring for Americans while also boosting quality — two goals of the Patient Protection and Affordable Care Act (ACA).  Known as Accountable Care Organizations, or ACOs, these partnerships have been promoted by many experts as the most promising remedy for the high costs that typify the American healthcare system.

Supporters believe that ACOs could save taxpayers billions of dollars by better coordinating patient care and replacing the current fragmented system in which patients bounce between doctors and hospitals with minimal communication between providers.  “ACOs can represent a very big step forward in helping to transform Medicare, Medicaid and the Children’s Health Insurance Programs so they can help assure high quality, seamless and less costly healthcare,” said Dr. Donald Berwick, who runs the Medicare and Medicaid programs and helped to write the new rules.

“We have made changes in response to what we heard,” Berwick said. “I think they make the program more attractive.”  During the early days, between 50 and 270 ACOs may enroll in the program and save the Medicare program as much as $950 million over four years, according to independent estimates.

Among the changes are increased flexibility in eligibility to participate in the Shared Savings Program; a choice of start dates in 2012; a longer agreement period for those starting in 2012; more flexibility in the governance and legal structure; more streamlined quality performance standards; changes to the financial model to enhance financial incentives to participate; increased sharing caps; no downside risk and first-dollar sharing in Track 1; removal of the 25 percent withholding of shared savings; increased flexibility in timing for the evaluation of sharing savings (claims run-out reduced to three months); more flexibility in antitrust review; enhanced flexibility in timing for repayment of losses; and more options for participation of Federally Qualified Health Centers and Rural Health Clinics.

ACOs are a key provision in the ACA to decelerate rising health costs while delivering high-quality care to Medicare patients.  They are designed to change the incentives that influence how doctors and hospitals operate.  Today, most hospitals and doctors get paid more by delivering more, not necessarily better, care.  ACOs will reward healthcare providers for keeping costs down and meeting certain quality measures, including cutting hospital readmissions or emergency room visits.  ACO’s goal is to replicate the highly respected models of care at the Mayo Clinic in Rochester, MN, and the Geisinger Health System in Pennsylvania where hospitals and doctors coordinate their efforts within the same organization.

George Roman, senior director of health policy at the American Medical Group Association, which represents approximately 400 large provider organizations, described the changes as “music to my ears.  We asked for almost all of these things.”

“We are very pleased at the number of significant changes in rules.  They have made the program look more attractive,” said Linda Fishman, senior vice president of the American Hospital Association.  “But it remains to be seen how many hospitals will find these changes to be motivation enough to enter the program.”

The 696-page document includes more generous shared savings incentives, leaves out 32 of the 65 original quality measures, and gives potential ACO participants extra time to formulate their plans.  One vital change is that the rule no longer mandates that 50 percent of participating physicians be approved under meaningful use requirements for electronic health record use. The revisions provide more opportunities for new ACOs to participate without absorbing risk in the earlier years, as well as major changes in at least 10 other critical areas.  Thanks to the revisions, many in the healthcare industry think more providers will be encouraged to sign up.

Writing in the Washington Post, Sarah Kliff notes that “It’s a big moment in health policy wonk land right now: the Obama administration has just published the final Accountable Care Organization rule.  Sound dull?  Let’s rephrase: The Obama administration has just released a regulation that could decide whether the American healthcare system moves past the broken, expensive fee-for-service model.  The idea is to encourage groups of providers to band together into ‘accountable care organizations’ and accept a flat fee for all care related to a particular patient or condition.  If they could deliver high-quality care in a cost-effective way, they could keep the money they saved.  The hope is to do nothing less than change the basic business model of American medicine from making money by getting patients to spend more money to making money by saving patients money.  There.  That’s better.  This is not the administration’s first crack at encouraging ACOs.  A proposed rule in April, which detailed the requirements to become an ACO, was greeted with howls of protest by the provider community.  In hundreds of comment letters, hospital and doctor groups blasted the program as unattractive, with too much risk and not enough reward.  The American Medical Group Association warned CMS that virtually none of its members would participate.  The group called the rule ‘overly prescriptive, operationally burdensome, and the incentives are too difficult to achieve to make this voluntary program attractive.’

“There are two things that really irked healthcare systems here. First, if an ACO ended up spending more money than the target set by Center for Medicare and Medicaid Services (CMS), it would have to pay back some funds. Second, any ACO would have to show savings above two percent before they could reap any of the financial rewards.  The rule eliminates both of those barriers to entry.  It creates an ACO track with no ‘downside risk.’  The two percent gap gets cut, too: under the final rule, ACOs share in any savings from the very first penny.  CMS made a lot of other adjustments too that make the program easier to participate in, like lowering the quality reporting requirements and eliminating requirements that ACOs show significant use of electronic medical records.  As one CMS official put it this morning, the agency wanted to ‘smooth the on-ramp’ into the program.”

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Medicare Advantage Premiums to Fall Four Percent in 2012

Tuesday, October 4th, 2011

The Obama administration’s announcement that Medicare Advantage insurance plans premiums will decline in 2012, at a time when enrollment is expected to rise, is good news for the leading health insurers in that segment.  Wall Street analyst Ana Gupte said that the announcement suggests strengthening support in the administration for the privately-run versions of the government’s Medicare program, which covers the elderly and disabled.  Medicare Advantage plans offer basic Medicare coverage with extras like vision or dental coverage oratremiums lower than standard Medicare rates.  Health and Human Services Secretary Kathleen Sebelius said that Medicare Advantage premiums will average four percent less in 2012, and insurers running the plans believe that enrollment will rise by 10 percent.  “Overall, we were very encouraged by the announcement and see this as reinforcing our bullish thesis on the Medicare Advantage and (prescription drug coverage) segments,” according to Gupte.

It’s highly unusual to see healthcare insurance premiums falling. Reduced premiums and growing enrollment are the opposite of what insurers and Republicans predicted would happen to Medicare Advantage after the passage of the Patient Protection and Affordable Care Act (ACA).  The ACA cut payments to fee-for-service Medicare Advantage plans by about $136 billion over the next 10 tears.  Right before the law passed, American’s Health Insurance Plans predicted that “millions of seniors in Medicare Advantage will lose their coverage, and millions more will face higher premiums and reduced benefits.”  So what accounts for the drop?  The decrease in premiums doesn’t have a lot to do with policy decisions made in the ACA.  It’s three outside factors that are putting downward pressure on Medicare.  One is that Medicare costs are growing more slowly.  Both in Medicare and in private insurance, the recession has seen patients using fewer medical services.  This looks to be especially true in Medicare, where seniors might have more limited resources because they tend to live on a fixed income.  The latest S&P Healthcare Economic Indices data indicates that Medicare spending appears to be rising at a slower rate than just a few years ago.

Jonathan Blum, director of the Centers for Medicare and Medicaid Services (CMS) Center for Medicare, said the more affordable costs and growth forecasts demonstrate that companies are still interested in offering such plans despite new consumer protections under the healthcare law and payment caps to insurers.  According to Blum, “We can say with complete accuracy that despite projections in 2010 that the program will decline, the program has grown and will continue to grow.  The plans have made a very strong statement that they intend to commit to the program.  Plans that do a better job serving the needs of their Medicare members should be rewarded and all plans should be encouraged to improve their performance.” 

Healthcare insurers warned that seniors can expect more costs and receive fewer benefits from their Medicare Advantage plans after payment cuts take effect.  They point to projections from the Congressional Budget Office, which predicted Medicare Advantage enrollment would fall to just 7.8 million participants in 2019.  “Medicare Advantage plans remain committed to the program and are doing everything they can to preserve benefits and keep coverage as affordable and possible for beneficiaries,” said Robert Zirkelbach of America’s Health Insurance Plans (AHIP).  “However, as these cuts take effect in the coming years, Medicare Advantage beneficiaries will face higher out-of-pocket costs, reduced benefits, and fewer health care choices.”  The group and its insurer members, who opposed many of the healthcare reforms before they passed, are now committed to implementing the law.

“Many people raised fears that under the Affordable Care Act, beneficiaries would see their Medicare Advantage options shrink and their premiums rise,” Sebelius said.  “Instead, we have seen just the opposite.”

Some in the industry are looking at other ways to bring Medicare costs down.  According to the Fierce Pharma website, “Healthcare industry leaders are poised to make their own deficit-reduction suggestions — including some that might not win them points in a popularity contest.  Uncertain what budget cuts the deficit-reduction committee might propose, the Healthcare Leadership Council has come up with its own proposal that would ask Medicare beneficiaries to endure more belt-tightening themselves.  The group is aiming to put forward an alternative more palatable than across-the-board Medicare cuts mandated by the deficit-reduction bill if the “supercommittee” doesn’t agree on its own plan.  And it’s betting that its proposal will be easier to bear than budget-cutting ideas floated in the past, such as drug re-importation.  The council, which includes Big Pharma executives, hospital companies and insurers, crafted a plan that would raise the Medicare-eligibility age little by little to 67 from 65, beginning in 2014. It would hike co-pays and deductibles.  It would require well-off seniors to pay higher premiums.  And it would add private-sector competition to traditional Medicare coverage, pitting government-subsidized private insurance plans against regular Medicare.  Requiring seniors to pay more might be considered a non-starter; after all, consumer groups, particularly AARP, have vociferously fought against such moves in the past.  But the council figures that provider-based Medicare cuts will end up costing beneficiaries when all is said and done.  ‘This thinking that we’re protecting beneficiaries because we’re only cutting providers — that’s mythical,’ said Mary Grealy, the council’s president.”

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Medicare Bundling Payments to Save Money

Wednesday, September 21st, 2011

The Centers for Medicare and Medicaid Services (CMS) has a new program that would bundle insurance payments for multiple procedures with the goal of improving patient care while saving money.  CMS invited providers to help develop four models to bundle payments.  The program encourages hospitals, doctors and other specialists to coordinate in treating a patient’s specific condition during a single hospital stay and recovery.  “Today Medicare pays for care in the wrong way,” Health and Human Services Secretary Kathleen Sebelius said.  “Payments are based on the quantity of care, and not on the quality of that care.  There is little financial incentive for the kind of care coordination that can help patients from returning to the hospital.” 

The models give providers flexibility regarding how they get paid and for which services, and provides financial incentives to avoid needless or duplicate procedures.  “Hospitals and other providers recognize that they have to accommodate the current (fiscal) environment,” said Nancy Foster, vice president for quality at the American Hospital Association. 

“From a patient perspective…you want your doctors to collaborate more closely with your physical therapist, your pharmacist and your family caregivers,” CMS Administrator Donald Berwick said.  “But that sort of common sense practice is hard to achieve without a payment system that supports coordination over fragmentation.  We’re taking steps that will save Medicare, seniors and taxpayers $28 billion over 10 years. Medicare is paying much more than the private sector for equipment like wheelchairs and walkers.  By expanding our successful competitive bidding program, we can ensure that Medicare pays a fair rate for these goods.”

According to CMS, the initial round of competitive bidding has added up to savings of 35 percent compared to the fee schedule.  Questions in the 1st quarter of 2011 totaled less than 0.9 percent of calls to Medicare’s call center; Medicare received just 45 complaints during that time.  CMS will conduct the second phase of the program for a similar set of products in 91 major cities.  Competition begins this fall; the new prices go into effect on July 1, 2013.  “The success we’ve had in the first phase tells us that we can achieve these savings with no disruption for patients’ access and no negative effect on patients’ health,” said Jonathan Blum, deputy CMS administrator and director of the Center for Medicare. “We remain confident in our bidding methodologies that will produce tangible savings while ensuring adequate choice of qualified suppliers.”

The CMS Innovation Center, created under President Barack Obama’s Patient Protection and Affordable Care Act (ACA), has been investigating bundling payments as part of a larger effort to both improve patient care and reduce costs.

There is some disagreement over whether the CMS bidding program is successful.  Economists, consumer groups and some in Congress are on record opposing the program.  They cite reduced access to care, flaws in the program design and impact on local jobs.  “There’s a reason why more than 30 patient advocacy groups, 244 economists and auction experts and 145 members of Congress oppose this program: it undermines quality of care and it increases costs,” said Tyler J. Wilson, president of the American Association for Homecare.  “Because of this bidding program, beneficiaries will spend more time in expensive institutions, rather than in the far more cost-effective setting for care – their own homes.” 

Tim Size, executive director of the Rural Wisconsin Health Cooperative, is concerned about the impact on rural hospitals.  “Washington has created a new ‘super committee’ to find more cuts.  Some call it a super Congress to remind us this is a small group given powers usually kept by Congress.  Most economists say Washington needs a coherent policy for both additional cuts and additional revenue.  But politics seems to have taken new revenue off the table.  Most people believe the super committee will deadlock.  If Congress fails to act, cuts will be implemented across the board.  Most federal programs will be cut.  Across-the-board cuts harm efficient programs along with the inefficient.  Across-the-board cuts harm necessary along with the less necessary. The country deserves better than bulldozers driven by blindfolded drivers.  Most rural hospitals are financially just holding their heads above water.  Under-payment by government programs has left them vulnerable.  A sluggish economy and an increasingly competitive healthcare marketplace are taking their toll.  Medicare and Medicaid are rural hospitals’ largest payers. Additional cuts are likely to tip many rural hospitals into the red and eventual closure.”

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