Ryan Redux: Another Medicare Cage Match Smackdown is Coming
I think it's a shame that Democrats are already demogoguing the issue -- Ryan/Wyden is a vast improvement over his original plan and worth a thoughtful debate -- but hey, it's an election year, what can you expect? Here's what: alot of incumbent blood on the floor of the House and Senate over the next several months, more "Medi-Scare" tactics by both sides, and likely, no major reforms until a monster deficit reduction package in 2013.
The State of the Union in Medicare Advantage Has Never Been Stronger
At long last the January 1 enrollment numbers are in from CMS and the State of the Union in Medicare Advantage has never been stronger. Our favorite program hit almost 13 million enrollees last month. Premiums are down 7% on average for 2012 and enrollment has grown by about 10% year-over-year from last January. Hate on, haters -- all the predictions of the demise of Medicare Advantage when the ACA passed are proving false and the program is bangin'.
CMS went on to say that:
- On average, there are 26 Medicare Advantage plans to choose from in nearly every county across the country;
- Access to Medicare Advantage remains strong: 99.7 percent of Medicare beneficiaries have access to a Medicare Advantage plan; and
- Since 2010, when the Affordable Care Act was passed, Medicare Advantage premiums have fallen by 16 percent and enrollment has climbed by 17 percent.
"Not only are average premiums lower, but plans are better, with more beneficiaries enrolled in 4 and 5 star plans," said CMS Acting Administrator Marilyn Tavenner. "The Affordable Care Act has strengthened Medicare Advantage by motivating plans to improve the quality of their coverage."
"We're seeing a very competitive landscape," said Jon Blum, CMS's deputy administrator. "The
plans seem to want to compete hard for their beneficiaries." The reason? Health plans have never been more dependent on Medicare, which now represents upward of 30% of earnings on average for publicly-traded companies that dominate the program. Since the passage of the ACA, it's been a "make it work" moment, and the plans are winning for the most part. Digging into the numbers on the market leaders we see the following:
- Humana added 250,000 lives in two months, or growth of 12.9%
- UnitedHealth added 132,000 lives
- Coventry had a very strong AEP with growth of 12.2%
- Health Net looked similarly strong with growth of 10.1% -- after having been sanctioned by CMS last year.
MA Enrollment - Good News
Today Secretary Sebelius announced the results of the annual election period showing that Medicare Advantage (MA) enrollment increased by 10 percent compared to this time last year. She declared that Medicare Advantage is "stronger than ever". This is consistent with my prediction in a December 2, 2011 blog based on reports we were seeing on the ground and hearing from the industry. The best news is that more beneficiaries are enrolling in 4 and 5 star plans, suggesting that the star bonuses and better information to beneficiaries may be influencing the choices. It is interesting that enrollment in stand-alone Prescription Drug Plans increased while enrollment in Medicare Advantage plans with drug coverage (MA-PDs) declined compared to last year. Enrollment in Special Needs Plans also increased about 10 percent. I look forward to seeing research on the effects of the new quality incentives on beneficiary choices and future changes in star ratings and beneficiary satisfaction surveys.
The End of Health Insurance?
Writing in the January 30 New York Times, Zeke Emanuel and Jeffrey Lieberman predict that accountable care organizations will totally replace health insurance within the next eight years.
They credit the health care reform act with establishing this revolutionary new form of care, in which claim processing is unnecessary, and ACOs will perform the risk-pooling function of insurance. This is uninformed twaddle raised to breathtaking heights.
First of all, the affordable care act did not create accountable care organizations. They have been around, under different names such as capitated physician groups and independent practice associations, since the San Joaquin Foundation for Medical Care pioneered the concept in the 1950s. If the notion of capitated groups of physicians hasn't supplanted health insurance over the past sixty years, it's hard to understand how the affordable care act will suddenly cause that effect now.
What the ACA did do was authorize a variant of ACO as an adjunct to the fee-for-service Medicare program (and set up a largely ignored demonstration program for pediatric ACOs under Medicaid). Unlike the imaginary ACO that Emanuel and Lieberman conjure up, the Affordable Care Act version is based on fee for service payments, not capitation. While the Pioneer demo program will experiment with capitation, the vanilla ACO version authorized under health care reform requires that all healthcare providers continue to submit claims and receive fee payments from Medicare. How does this threaten health insurance? It doesn't touch the non-Medicare world at all, and it consciously avoids changing benefits or payment mechanisms in the nation's largest health insurance scheme, Medicare itself.
Emanuel and Lieberman assume that ACOs will be paid on a per capita basis, and that the capitation will somehow flow from the ACO to individual practitioners. In practice, this process requires the enrollment and claim processing functions of an insurance company. From whom, if not insurance companies, will payment be received? They rightly note that about 60% of people who receive coverage from employers are actually insured by the employer, who contracts with an insurance company to perform the tasks of determining eligibility, paying claims, maintaining networks of health care providers (including ACOs of various descriptions), and providing insurance to protect the employer from unusually large claims. How would a Medicare program designed to reward efficiency have any impact on these employer programs?
They envision ACOs pooling risk for populations of 15,000 or more beneficiaries, as insurance companies do now. Any that do so will come under state insurance statues, and will either have to become insurance companies themselves, or contract with insurance companies as risk-bearing provider organizations. Someone, either the ACO or an upstream carrier, will have to carry the reserves and comply with state mandates.
With the advent of health insurance exchanges, it is probably that local provider organizations will be able to develop and market their own insurance plans in competition with the national giants. The exchanges will create a retail marketplace in which the advantages enjoyed by the large carriers in marketing wholesale to employers will be diluted. But make no mistake, these new entrants will still be insurance companies, and will still need to operate in compliance with both the statutory requirements and economic realities that govern the business of health insurance.
Don't Throw Away Your Insurance Card Just Yet
I just can't resist commenting on the January 30th commentary in The New York Times by Ezekiel Emanuel and Jeffrey Liebman on the demise of the Insurance industry by 2020 at the hands of an explosion of Accountable Care Organizations.
To test that premise, let's go back to the role that insurance companies play in the health care market place. Insurance companies, otherwise known as payers, provide a financial safety net to consumers of health care services by aggregating different types of providers willing to provide health care services to consumers at a predetermined price. The insurance companies in turn contract with employers and individuals to provide that network for a cost to the employers or individuals ( usually the cost is shared). That cost, referred to as a premium, is determined by various factors that speak to how often the covered individual has used healthcare services in the past and based on that history how often the insurance company believes that the patient will access health services in the future, (usually the future is defined in annual increments) and by what the market place has priced the value of that service to be.
Said differently, the insurance company plays the role of a middleman between purchaser and supplier. In that role the insurance company also does something else, namely the aggregation of a lot of information about you and me regarding our utilization of health services and the consequent extrapolated assumptions about our lifestyle. Such data aquisition becomes a valuable commodity not easily or cheaply replicated by other organizations including self insured employers or ACOs.
What about ACOs? The Accountable Care Organization is typically either a provider sponsored or payer sponsored enterprise. In either case the ACO stakeholders include providers, patients or consumers and the payer/insurance company--in the absence of the insurance company the payer is the emloyer, the government, small business group purchasers, or the individual. The purpose of the ACO is to provide a framework for delivering the right service in the right setting, at the right time and for the most reasonable cost. The purpose is not to replace the payer, in fact the payer becomes a necessary strategic partner for ACOs with respect to information sharing, sharing of risk based on aggregation of defined populations via disease stratefication, etc.
The authors reference several benefits of an ACO which they assume will trigger the demise of insurance companies such as payment shifting from FFS to a fixed amount per patient; ACOs making money by keeping patients healthy; ACOs pooling patient acuity and consequent risk by capturing large groups of patients thus pooling risk; ACOs eliminating administrative costs such as those associated with claims billing and processing, and in general by eliminating unnecessary tests and procedures.
Those benefits can and should be realized by an ACO if everything goes according to plan. Those same benefits can also be realized by other types of health care redesign initiatives such as medical homes, or by payer sponsored networks of excellence or by Integrated delivery system service line initiatives or by any number of different approaches to providing improved coordinated care.
The bottom line is that ACOs will play a significant role in the movement to redefine how healthcare services are delivered, priced and paid for. They are a tool in the arsenal of healthcare reform. They also differ in character, scope and focus from enterprise to enterprise. Do they represent the successor to insurance companies as we know them today? I think not.
WSJ asks, "Can ACOs Improve Health Care While reducing Costs?"
Specifically the question that the WSJ posed in its article on January 23 to three health industry experts, (Don Berwick, former CMS Administrator, Jeff Goldsmith, President of Health Futures and Tom Scully, CMS Administrator from 2001-2004) was whether ACOs are the answer to what ails the health care system. As expected, the response from each of the three respondents differed in outlook, driven by their political, professional and personal perspective.
Don Berwick as the "architect" of a series of innovate healthcare delivery demonstration programs, including Medicare ACO's, obviously is pro ACO - citing the goals inherent in ACO formation as improved quality of services, access and consumer choice, provided at a reasonable cost and accomplished by changing the relationship between provider, consumer and payer.
Mr Goldsmith questions the value of ACO's, citing that ACO's are self serving, not provider friendly, expensive to implement, (an ACO implemented in a midsized market will cost about 30 million) and most importantly don't save patients any money while dictating to the patient the timing, type and quality of treatment available.
Mr. Scully takes a more middle of the road approach, indicating that he likes what Mr Berwick is trying to do but argues that programs like ACO are not significant change agents with respect to timing and incentives. In his opinion ACO are just one minor part of a much larger solution, as yet undefined, that must be achieved to effect significant change in how the US provides healthcare. He does go on to offer a number of recommendations as to how to pay providers, believing as so many do that financial incentives are a more effective tool for changing provider and consumer behavior than any other.
My response is that their opinions about what is good and not so good about ACO's and what is needed to get us out of the healthcare mess we are in is reflective of the debate as a whole. Namely that there is no one size fits all solution to what ails healthcare as it is provided and priced.
ACO's are not a panacea solution for what ails health care. It is not a model that can be replicated in all parts of the US via a rubber stamp process. The financial drivers underpinning the ACO enterprise is not a win/win proposition for everyone that makes a living from the healthcare industry.
Accountable Care Organizations are one tool out of an as yet ill defined tool box designed to help "fix" a healthcare system that is crashing around our ears. ACO's offer a pathway for better coordination of services, better communication between provider and patients, a hopefully more realistic approach to patient diagnosis and treatment planning and ultimately a framework within which patients are more engaged in deciding what is best for them when it comes to healthcare,.
Oh and about that 30 million dollar pricetag for implementing an ACO. Think about what an ACO is to do, i.e. organize care, offfer access to that care and provide better patient" thru put" in the inpatient and outpatient setting. Does that really cost 30 million to accomplish per enterprise?
We spend a lot of time, energy and resources talking about and reacting to the shortcomings of our approach to health services provision and pricing. Those critical of initiatives like the ACO enterprise argue that it is not new, hasn't worked , is doomed to fail, etc.. What strikes me is that we spend a lot of time looking backwards to chart the future. Doing so makes it difficult to see what might be ahead when focused on what was and is.
I believe that every problem has a solution and sometimes those solutions are not grounded in the past but are new, innovative and to coin a phrase, (just kidding) must reflect out of the box thinking. Anyone up to the challenge?
Tea Party Losing Stranglehold on GOP is Good News for Medicare
As Washington, DC's sports team suck so badly, this time of year politics is our smashmouth football, and I am loving this GOP primary season! It's had everything so far: a thorough vetting of the candidates (hasta la vista, Govs. Perry, Huntsman and Pawlenty), high drama (Palin and Christie indecision; the Iowa caucuses squeaker), sex (awesome Cain and Gingrich salaciousness), some crazies (Ron Paul, Bachmann -- especially her husband), and even Medicare fraud (see the Gingrich Super PAC slam piece on Romney, "Blood Money")! And now: after a stunner in the SC primary, Newt Gingrich's fast fade in Florida is the latest indication that the Tea Party is losing its grip on the GOP. And that's good news for Medicare, with a monster deficit reduction package looming in 2013.
Endorsements this weekend from Tea Party darlings Cain and Palin and the support of the Tea Party Express have not lifted Gingrich back over Mitt Romney in the Florida polls, where as of a day before the primary Gingrich trails by 5-20 points. If Romney wins Florida and goes on to clinch the nomination in the coming weeks, it will serve as further proof of the declining fortunes of the far-right wing of the party: many of the Tea Party freshmen House members are struggling to make their fundraising goals, and several are behind in their own reelections. They'll always be noisy, irrational, anti-establishment problem children for the GOP, and now it looks as if there will be many fewer of them next year. House Speaker John Boehner, in a private moment, must be weeping Merlot-induced tears of joy for a change -- he can start looking forward to a more governable caucus next year.
The implications for Medicare of a declining Tea Party faction in the House are clear. Medicare is the single-largest contributor to the national deficit, and if there's a cohesive cause among Tea Party members it must be deficit reduction. Less influence for the Tea Party means less pressure for draconian cuts and systemic reforms to Medicare.
Maybe we can have a sane debate on the merits of the Ryan or Wyden proposals next year -- and a permanent fix to Medicare physician reimbursement, instead of a replay of the fiscal kamikaze mission the Tea Party forced the GOP into during last summer's debt ceiling debate. That episode not only drove the US to the edge of default and cost the nation its triple-A credit rating, but crushed American confidence like few recent events and nearly tipped the economy back into recession.
There's no chance we'll see a substantive deficit reduction package in an election year, which means the voters will decide national budget priorities at the ballot box this November. That means a monster deficit bill in 2013, where we hope cooler heads will prevail with fewer tri-corner hats on the House floor.
Health Care Innovation Challenge
Today applications for the Center for Medicare and Medicaid Innovation (CMMI) Health Care Innovation Challenge grants are due. There is a lot of money on the table --- $1 billion. And many health care organizations are in the final stages of writing detailed proposals that describe innovative programs that will add new jobs and improve the quality of Medicare and Medicaid services at a lower cost. It is huge job to prepare these applications and applicants are not paid. The proposals must provide a blueprint of how a fragmented and inefficient health care system can be transformed. And right in the middle of the grant writing process the Congressional Budget Office released an issue brief describing how difficult it is to change the health care system. The CBO report concluded that most of the past Medicare demonstrations on Disease Management, Care Coordination and Value-Based Payment have failed.
It takes leaders with vision and optimism to undertake the huge task of trying to turn the Titanic of Medicare spending around. There is definitely an opportunity to achieve success since we know that there are huge inefficiencies that result in unnecessary spending, possibly up to 30 percent of costs. We also know that quality can be improved. The CBO report found some programs succeeded in reducing costs, for example through reduced hospital admissions and bundled payments. The Innovation Challenge grants are designed to be rapidly deployed and begin improvements within six months. Hopefully this challenge will be more successful.
The Cost of Care: "How high can premiums go?"
One of the less publicized requirements of the Accountable Care Act is the requirement of health plans to spend at least 80-85% of the premium dollar on medical services. Aside from the expected discussion of what qualifies as a medical expense, under the previously mentioned medical expense target, health plans that submit "excessive" rate increases will be required to justify any premium increases that are viewed excessive in light of the 80-85 percent MLR target, and will run the risk of State or federal government regulating or rolling back the premium increases.
So why am I blogging about this? What does this have to do with ACOs or redefining how health care is priced and delivered? Well, think about it. If as a health plan I am now required to spend 80 or 85 cents out of every dollar collected on "medical expenses", then I have 20 to 15 cents to pay for everything else. Depending on my profit margins set by my board or others I have to:
a) operate very efficiently;
b) have a very cooperative relationship, (clinically and financially) with my providers;
c) have the tools necessary to properly risk profile my members, to ensure that the member receives the right services from the right practitioner without excessive cost, and
d) create a customer service environment which not only attracts new members to my plan, but retains those members year after year once I have them in the plan.
Getting all that accomplished requires decision support tools (such as a the risk assessment tool), closely alligned provider relationships, clinical and financial integration and appropriate broker, consumer and provider education.
Meanwhile the provider community is faced with increasing consumer and payer demand for efficiency, accountability for quality, and timely and convenient access to services at a reasonable price. All necessary - but difficult to achieve objectives - given the prevailing practice patterns. Programs like ACO development, innovative payment approaches like bundled payment, and "cross over" provider payer initiatives like the Consumer Operated and Oriented Program and the CMS Health Initiatives program, are some of the tools available to Providers by which to achieve healthcare delivery redesign.
Come and talk to us about how we can help you strategize, identify tools and create strategic partnership with providers, vendors and other health industry stakeholders to meet your financial and medical service provision goals and to apply for and implement the programs mentioned above. We always have opinions and suggestions, and more importantly considerable expertise in the areas discussed based on successful client interactions that have spanned all aspects of the healthcare industry.
Our approach to providing the healthcare industry with business and strategic solutions is guided by a belief that there is a solution for every problem encountered --some might even be out of the box and unconventional ... but that's the idea. Think about it.
Election vs. Supreme Court on Health Reform
In my travels many I've spoken with about health reform's future seem to have the impression that the Supreme Court's consideration of the individual mandate is where the law will live or die. Think again -- the American electorate will have far more sway over the future of the ACA than the 9 Supremes ever will.
Think of it this way: the Justices are only considering the constitutionality of the mandate; voters are considering the whole shebang, and every GOP candidate has sworn to scrap the entire law. In many ways, November 2 is a referendum on whether to implement the ACA, even though it's barely registering as a campaign issue. As a general proposition, if Obama gets re-elected, the ACA moves forward in 2014; if he loses, it's dead.
Front-runner Mitt Romney has pledged to repeal the law, and his advisors are figuring out just how much dismantling could be done through the White House and HHS, without congressional action. A new president and HHS secretary would have enormous power to slow-walk the law during their first year in office. That's when HHS will have to finalize all the regulatory details for the state or federal health insurance exchanges where many consumers will buy coverage after 2014.
It's unknown whether the Senate or House will be controlled by Democrats, who could hinder legislative efforts to repeal or defund the law. Even if they lose control of the Senate, Democrats may still have enough votes to be able to slow down or block efforts to repeal ACA.
If Democrats retain the White House and control both chambers of Congress, implementation could move forward, and they could even pass a law amending the health care reform legislation to make the mandate a tax, which would largely clear it of its constitutional hurdles.
It appears that even if the Supreme Court ruled against the individual mandate in June, the damage probably would be limited. The 26 states are asking the court to strike the entire law, but most legal experts think that's unlikely. Most analysts say that if the court strikes down anything, it would either get rid of the mandate alone or, at most, the mandate with some of the insurance industry reforms and regulations.
The court's ruling could have an impact on state implementation, however: states have to prove to HHS by early 2013 that they have the basics in place if they want to run their own health exchanges; otherwise the federal government would do it. Some states have said they won't do anything on an exchange until they know whether the law is constitutional. "If it is upheld, the states that have been reluctant may look at this and say, ‘You know the odds of the Republicans winning the presidency as well as [both chambers of Congress] is not so high that we should stop all implementation efforts,'" said Tevi Troy, an adviser to the Romney campaign and a former deputy HHS secretary who opposes the law. If a state were to get started after a ruling in June, it might have time to meet the deadline. But the states can't wait until November to decide.
So the Court's upcoming ruling certainly matters to the future of health reform -- it's just that the election matters a lot more. Stay tuned.