My Talk at AHIP's Medicare Conference
I had the pleasure of addressing a standing-room-only crowd at the AHIP Medicare conference yesterday, sponsored by our friends at TMG Health, our 4th year together there. That speech always keeps me on my toes, especially this year -- a tough, smart audience that demands a tough, smart message on how to survive in the new Age of American Austerity. Here are the main points of what I said:
- Volatility and Accountability will define the sext several years in Medicare. Volatility: rates, the Medicaid dual eligible explosion, the Congressional "Super-Committee", industry consolidation, and the 2012 elections. Accountability: it's already here. Star Ratings bonuses, minimum MLR regulations, compliance, rate reviews, RADV audits, and Accountable Care Organizations.
- The State of the Union in Medicare Advantage (MA) and Part D is strong. All predictions of the demise of the program following health reform were wildly premature. MA will grow about 7% this year, and over 40% of beneficiaries aging into Medicare have chosen MA in the last two years. Local PPOs with the drug benefit integrated remain the product of the future in MA, as do Special Needs Plans given the tsunami of dual eligibles -- a $300 Billion market alone. We think MA will pass 15 million members by the end of 2015.
- Medicaid managed care is risky (BIG) business. We've already seen major awards this year in TX, LA and KY. CA is prepping the biggest RFP in US history: 150,000 duals in plans by end of 2012; all duals in plans by end of 2015: a $21 Billion opportunity. WA, FL, NH, NE, MI and HI are all preparing to move duals into plans.
- Volatility: many of us thought we "gave at the office" in health reform when the ACA whacked over $120 Billion from MA rates over a 7-year period. There's more austerity to come from the Congressional "Super-Committee" on the debt. Best case scenario? The Super-Committee fails, sequestration occurs, and we get hit with a 2% cut in 2013, 2014 and 2015, compounded. And what about the "doc fix"? If they don't fix the SGR and docs take a 29.5% cut in Medicare reimbursement in 2012, MA gets hit by about 7% in 2013, and the beneficiaries take it in the shorts. Bar the exits! Consolidation is intensifying in both payer-payer transactions, and payer-provider deals like United/Monarch (CA). And then there's the elections. My money as of today is that Obama gets re-elected by the narrowest of margins, Democrats lose the Senate, and we have another 4 years of economic doldrums with the HUGE exception of the ACA's implementation in 2014.
- Accountability: it's already here, a cornerstone of the ACA. It's embodied throughout, in Star Ratings bonuses, Accountable Care Organizations, with growing incentives for chronic care improvement, member satisfaction, and compliance. The cornerstone is transparent data reporting. Berwick's legacy will be his embedding the "Triple Aim" in the DNA of CMS. And CMS says it will terminate MA plans with less than 3 stars for 3 years running. A "good" star rating is not a hedge against the rate cut: it is an existential issue -- and a management revolution.
- What to Do?
- Aggressive revenue management in the near term. Master risk adjustment and audit-proof the function by embedding it where it belongs in Medical Management, move from claims extracts and chart reviews to Prospective in-home Evaluations, and be a Star Czar.
- Care coordination and chronic care management over the mid-term (3 years). It will take years to see results, but this is what it's all about in the mid-to-long-term. High-touch with the frequent flyers.
- Commit to a Culture of Compliance. The regulator is the purchaser, and you keep this account happy by following their rules. To. The. Letter.
- Revisit the service model and move from reactive to proactive. Health care is still a service business and Boomers are tough customers.
- Establish and Invest in Medical Homes, Accountable Care Organizations, and Exclusive Provider Organizations. In the end, it's all about the docs.
Questions? You can always reach our team at ghg@ghgadvisors.com.
PS Join me for another talk September 25-26 in Arlington at the Opal Events MA Strategic Business Symposium. Complimentary passes are still available today.
Medicaid Managed Care = Risky (BIG) Business
The Washington Post printed a recent expose on the coming explosion in Medicaid managed care opportunities, coupled with the tremendous challenges of caring for lower-income, vulnerable beneficiaries, especially dual eligibles.
Texas is moving some 425,000 beneficiaries into health plans this year. California began moving 380,000 older and disabled patients into private plans in June. Louisiana debuted managed-care contracts in July, affecting 875,000 enrollees. In October, New York plans to begin moving about 1.5 million patients into managed care. Florida is negotiating with the federal government to move most of its 3 million Medicaid enrollees into private plans. With the expansion of Medicaid managed care underway in at least 20 states and the surge of enrollment in 2014, thanks to the ACA, insurers expect $60 billion in new annual revenue.
We've long said that by 2015 we expect the entire TANF population (Temporary Assistance to Needy Families -- the "moms and kids") population to be in health plans, with millions of dual eligibles to follow suit. With a new office in the CMS Innovation Center dedicated to Federal/state collaboration on the duals, that segment will transition to managed care quickly as states desperately try to reduce the #1 item in every state budget: long-term care for the elderly and disabled. The "A/B/Ds" (Aged/Blind/Disabled) are the "final frontier" for health plans, and worth upwards of $300B annually -- but not without their perils in this climate of austerity.
11th Circuit Court Strikes Down Mandate
Much of the news related to healthcare last week focused on those headlines. Those who have consistently argued that the Health Care Reform act is bad policy hailed the circuit court's decision as a victory. Those who believe in the mandate that every American have access to and be motivated to buy health insurance, decried the decision as just another example of "kicking the can down the road".
So who is the real winner? The real loser? It depends on who you ask (and whether the respondent already has insurance) and on who is taking care of the uninsureds' health needs. The provider community continues to be stuck with providing care to the uninsured, the cost of which is estimated to exceed 40 billion dollars per year, at last count. The tax payer, you and me, doesn't benefit by this ruling because ultimately that 40 plus billion comes out of our pockets in the form of higher insurance premiums and higher bills from the hospitals and the practitioners (it is called cost shifting).
And, believe it or not, it also impacts the cost of providing care under Medicare, because if I am an uninsured individual who does not seek healthcare unless it is an emergency—by the time I am eligible for Medicare I tend to be sicker than my insured counterpart and consequently my cost to Medicare will be significantly higher. Not a good situation, given that the Medicare ranks will swell by some 76 million people over time. Even if we account for a certain portion of Medicare eligibles dropping from the rolls due to death, without significant changes to how we finance and deliver healthcare, Medicare will become the single most costly program in the history of this country - and most of us will be around to see it and suffer under it.
In my last blog I talked about how a financial approach to solving the healthcare crises in the US is, at best, a short term approach akin to sweeping the problem under the rug (the "kick the can" analogy comes to mind one more time).
As an example, let's focus on the Medicare-eligible individual for the moment, to illustrate why a financial solution is not going to solve the problem. Assume that Medicare funding is cut across the board (that is exactly what is anticipated if the debt ceiling super committee cannot get its act together). The impact of such cuts? Providers are paid less (some suggest that they should be paid significantly less), which could result in primary care physicians and specialists closing patient panels to new Medicare patients; inpatient and other allied healthcare providers raising rates to balance out the cuts; and the individual Medicare-eligible exhausting their savings more quickly due to higher out of pocket costs. That in turn will lead to greater reliance by those individuals on other community services such as food stamps, Medicaid, state funded social and aging services, which will in turn drive up those expenditures and create significant budget issues in those programs.
By now you are probably thinking that this is just rambling with no real end purpose. Not really.
My point is that decisions we make in the healthcare field have far reaching consequences, whether they are made in a physician's office regarding how to treat a particular pathology, or whether they are made at the national policy level. Isolated decisions such as striking down the health insurance mandate set into motion a series of events, the impacts of which may not be felt for years, but can be very damaging once they become apparent.
No one disputes that the current health care reform has significant failings. This writer is amongst those who decried the process as well as the outcome. But irrespective of political leanings or philosophical differences, the Affordable Care Act and its emphasis on tying future provider reimbursement to better conceived approaches to patient communication, treatment and access is much better than the potential for an arbitrary cutting in healthcare financing as part of resolving this nation's debt crises.
All of us; providers, payers, healthcare industry professionals and patients, have a vested interest in reengineering our approach to health services delivery and financing through logic and rationality. After all, we will be customers of the system sooner or later. At that point in time, I for one would like a say in what I experience.
Obama and Boehner Have Forever Changed the Medicare Debate
President Obama and House Speaker Boehner may have failed to strike a "grand bargain" on the nation's deficit, but they have accomplished one thing in our world: they have forever changed the terms of the Medicare debate. There is an air of inevitability about some of the proposals they have put forth brewing here in DC.
Obama says he could accept "means testing" the program, which would require affluent seniors to pay more for services. Obama used himself as an example of someone who would pay a higher rate. Obama has also been open to other proposals, including charging co-pays for home health services and for lab work.
Obama also floated on several occasions a provision that would raise Medicare's eligibility age from 65 to 67 -- one that Boehner agrees with him on. In doing so, they gave a controversial idea legitimacy and high political cover. The concept is now likely going to be a fixture in the Medicare debate.
The idea has drawn some support from the GOP in the past. Senators Tom Coburn (R-OK) and Joe Lieberman (I-CT) introduced a bill last month moving the eligibility age up by two years, and Democrats ran from it like scalded dogs. Senate GOP Leader Mitch McConnell didn't endorse the proposal but applauded the effort. Grover Norquist -- the guy behind the GOP's stalwart refusal to move one inch on taxes in this debate -- backed it too.
Under the ACA, in 2014 insurers are banned from turning down any patient — and that could make increasing the eligibility age an easier pill to swallow because 65-66 year-olds would ostensibly have access to coverage in the exchanges. It also means that any increase in eligibility age is unlikely to pass until the exchanges and subsidies are in place in 2014.
The "agreement" between Obama and Boehner -- before talks collapsed last week -- bumped up the eligibility age from 65 to 67 over about two decades. One approach called for increasing the age by one month per year beginning in 2017 until it reached 66 in 2029. In 2030, it would increase two months each year until it hit 67.
The Congressional Budget Office said raising the eligibility age to 67 would save $125 billion over 10 years, adding that the savings would be somewhat reduced by new spending on Medicaid and insurance subsidies to cover the uninsured 65- and 66-year-olds. It's still too big a number to ignore when the bills come due next month.
Expect to see a lot more discussion about these ideas in the coming weeks as we hopefully find our way out of this looming mess. I'm turning 43 next week -- and my retirement plan assumes no Medicare or Social Security for me or my wife by the time we're ready for it. Our generation should be prepared for a very different look to Medicare now that the once unthinkable has become a fixture of the debate.
Exchange Eligibility Regs: Massive and Visionary
Just as we were speculating Friday on timing for the Exchange eligibility and enrollment regs, out it came. The NPRM is a massive and visionary document that starts a discussion about how to revolutionize the way Americans select, enroll and pay for insurance.
States and the Federal government face a daunting task of preparing for a flood of millions of new consumers into Medicaid and subsidy programs in 2014. The ACA mandated a consumer-friendly, one-stop enrollment process with simpler eligibility rules and advanced technologies — referred to by one state official as "radical simplification". Most states couldn't be farther from the ACA's goals, having onerous cultures, manual paper-driven processes, and antiquated and disconnected systems. The Administration has released extensive guidance and unprecedented funding for states to revamp these processes and systems, and the timetable for planning and implementation is brutally tight.
Fact sheets from HHS are here. Tim Jost offered a nice overview at Health Affairs here. The GHG Public Policy team is reviewing the NPRMs and will have more perspectives this week on this page.
Medicaid Came This Close to Deep Cuts in the Debt Battle
Keeping Medicaid from automatic cuts was a priority of the Obama administration in the final, ugly days of the debt ceiling fight. It was the one major concession the President and the Democrats won in the whole nasty sausage-making exercise.
Politico did a great job telling how the deal was done, and the tense moment when Obama staffers threw down the gauntlet:
[T]he atmosphere was tense as the hours slipped toward the deadline. By Saturday night, discussions over the trigger had bogged down, and a call between [Senate Minority Leader Mitch] McConnell's staff and senior White House aides turned heated when GOP negotiators demanded that Medicaid be added to the mix of programs that could face cuts.
Gene Sperling, chairman of Obama's National Economic Council, was in mid-sentence, trying to calmly explain why the White House wouldn't allow that, when Office of Management and Budget Director Jack Lew interrupted.
"No!" the typically mild-mannered Lew yelled. "The answer is simply no! No, no!"
In earlier plans passed by House Republicans, Medicaid had been subject to automatic cuts. At least the Dems won one for the little guy.
Debt "Deal": Not As Bad for Medicare as Expected, Medicaid Spared
So we have a deal on the debt ceiling. The President is now authorized to raise the debt ceiling by at least $2.1 Trillion. The roughly $2.5 Trillion in cuts over 10 years represents 5% of expected Federal spending over that time period. $917 Billion in cuts are made up-front. A joint bipartisan committee will then decide on an additional $1.5 Trillion in cuts by November 2011 for a December vote.
If the evenly divided committee failed to agree to the required amount of cuts, Congress would either have to approve a balanced budget amendment to the Constitution (which doesn't stand a chance of being ratified), or accept an across-the-board cut in spending, with 50% coming from defense programs beginning in 2013 (military pay and veterans' benefits are exempt). Medicare would also sustain cuts, but only up to a point. Medicaid and Social Security were exempted.
Putting "sacred cows" on the chopping block, like national security for Republicans and Medicare for Democrats, was to provide a strong incentive for the joint committee to avoid gridlock and deliver a plan that could pass Congress. I could see these "incentives" working on Democrats, who just folded AGAIN to the demands of the far-right House GOP. The Tea Partiers just showed they're willing to flirt with global economic ruin -- what's a few billion to the Pentagon or the Department of Homeland Security to them? Expect another budgetary "High Noon" right around the holidays.
Physicians and other providers could see an additional 2 percent pay cut on top of double-digit Medicare reductions already slated for 2012 under the "deal". The now-29% pay cut for physicians is scheduled to go into effect this year unless there's a fix to Medicare's Sustainable Growth Rate formula, as well as an 11 percent regulatory hit to home health agencies.
The White House said last night the Medicare cuts would hit providers but would not directly affect beneficiaries, but of course they do -- mainly in providers' willingness to continue to accept Medicare patients. There wasn't specific mention of Medicare Advantage or Part D plans -- but if the "doc fix" doesn't happen, that 29% cut in traditional Medicare could translate into a 7% hit to Medicare Advantage rates in 2013.
What to expect in the coming months? Two of the proposals in the Bowles-Simpson bipartisan deficit reduction committee's December 2010 report will get more attention: increasing the Medicare eligibility age from 65 to 67, and moving dually-eligible beneficiaries into health plans, which would curry huge state support. As a general proposition, the Administration will likely bend over backwards to provide states with greater flexibility in how Medicaid dollars are spent through the state waiver process.
It's hard to call this anything but a political rout for Obama and the Democrats. A few weeks ago they had the Republicans over a barrel on the Ryan Medicare reform plan. Now they've handed the Tea Party several opportunities where they can create a global financial crisis unless the President caves, and he's now shown for a third time that he will.
My favorite wonk, WaPo's Ezra Klein, called this a "terrible, horrible, no good, very bad deal" and I couldn't agree more. He went on to say that "Today, the markets are breathing a sigh of relief because Washington managed to agree before it sparked an unnecessary financial crisis. But we could be celebrating an agreement that actually did what was necessary to speed the recovery now and reduce the deficits that matter. Congress may be patting itself on the back because it didn't needlessly wreck the global financial system, but that's not evidence of success. It's evidence of how terribly they have failed us. And the fact that so many are celebrating this deal only goes to show how used to their failures we have become."
Debt Negotiations Collapse. What Does it Mean for Medicare?
Another week, another impasse in debt ceiling negotiations with 9 days to go before default. My favorite wonk, WaPo's Ezra Klein, does a CSI-style autopsy of how we got here and a primer on the issue. We just proved to the world that Washington has become California: ungovernable. Credit agencies aren't grading our ability to raise the debt ceiling, they're grading our ability -- or as now demonstrated, our utter inability -- to deal with our deficit and pressing economic matters in a functional manner.
It's clear that markets are going to have to force the House GOP to swallow a compromise that will satisfy Wall Street. We'll get the first test of that tonight when Asian markets open. And then Monday morning we can pray that Wall Street flirts with mobile network meltdown as GOP donors warn their beneficiaries on the Hill of unmitigated disaster before Standard & Poors and Moody's drop the bomb.
Let's say it takes a few weeks for the credit agencies to weigh in and US bondholders show some admirable restraint. In August the real pain starts as the government literally runs out of money and the President has to start making decisions about which bills to pay. This has never been done before in US history. The Bipartisan Policy Center produced a terrifying report on how it might actually work. Treasury will only be able to pay 55-60% of the federal government's bills in August. So where does Medicare fit in?
It's certainly possible that FFS provider payments or the next month's Medicare Advantage or Part D capitation payments could get held up in one or more months to come. The President may have to decide in the fall that "this month I'm paying interest on the debt, Social Security, military personnel pay, unemployment insurance and Medicaid payments -- those Medicare HMOs and PBMs and all those doctors and hospitals -- not to mention all those Federal employees, the Centers for Disease Control, and air traffic controllers -- will have to wait."
According to the BPC, the federal government needs to roll over $500 billion of debt in August. If we default, no one will want to buy that debt unless we're paying a lot more for it. BPC points out a 10 percent premium would cost us $50 billion.That's only the direct cost -- the indirect costs are far worse. Because most debt instruments are pegged to the Treasury rate, you'll see interest rates spike across the system. Every type of borrowing -- from mortgages and college tuition plans to corporate lines of credit and acquisition financing -- all of it will be hit. It won't just be the federal government that pays. It'll be the economy -- and that goes way beyond Medicare missing a couple months' of accounts payable and then catching up.
If it isn't yet clear: this is really, really bad news.
The Plot Thickens on Florida Medicaid Reform
Government health programs geeks like me are closely watching developments in Florida as Governor Rick Scott attempts a drastic overhaul of his state's Medicaid program. The state intends to seek a broad waiver of Medicaid requirements from CMS on August 1 to force almost all beneficiaries in the state into health plans, including the Aged, Blind and Disabled.
The "ABDs" are considered by industry watchers to be the "Final Frontier" for health plans in the program, with most of the TANF population (moms & kids) already enrolled in HMOs. These are, of course, the most vulnerable patients in the health system, so how initiatives like Florida's go is a harbinger of what's to come in other states as more are forced to confront harsh budget realities.
As Florida's submission to CMS nears, advocacy groups are sounding the alarm. Florida's record on management of ABDs under the state's Section 1115 and 1915(c) waivers hasn't gone well and there is reason for concern about a rush into health plans for these beneficiaries.
But we've seen time and again how these vulnerable populations can be well-served by health plans when they are aggressively regulated and monitored by Federal and state officials: Minnesota's Senior Health Options (MSHO) or Medicare Part D for dual eligibles, to name a few.
The problem is Gov. Scott, the former CEO of HCA during its massive Medicare fraud case, is not a fan of government regulation or monitoring. If CMS makes too many demands, the Governor has threatened to eliminate Medicaid in his state altogether -- turning his back on over $14 Billion in annual Federal matching funds. You can imagine the politics around this filing. If he wins this game of chicken you can expect other states in similarly dire financial straits like Texas to follow suit.
CMS's handling of Florida's application this fall should be a clear indication of how much maneuvering room the Obama Administration will give to fiscally-challenged states -- and that's a long list. Stay tuned.