Obama Enjoys Big Edge in Voter Trust on Medicare
Even after that limp first debate performance that wiped out the Democratic convention bounce and tightened the Presidential race across the board, President Obama enjoys a 15-point edge in voter trust on Medicare, clearly a central issue to the campaign and voter turnout on November 6.
This represents a six-point increase for Obama since the last poll, which was conducted in September, and almost certainly reflects VP Joltin' Joe Biden's aggressive debate with Paul Ryan and their heated exchanges on our favorite program (the poll was fielded October 10-13, after the VP debate).
Fact-Checking the Medicare Advantage Clash at Biden/Ryan Debate
Like most, I found the Biden/Ryan debate last week some of the best TV of the election season. Both were well-prepared and spoiling for a fight, and moderator Martha Raddatz did a terrific job. There was one exchange that really got our attention when the topic turned to Medicare Advantage:
Rep. Paul Ryan:"7.4 million seniors are projected to lose their current Medicare Advantage coverage they have. That's a $3,200 benefit cut."
Vice President Biden: "That didn't happen."
Ryan:"What we're saying. . ."
Biden:"More people signed up."
Ryan:"These are from your own actuaries."
Biden:"More people signed up for Medicare Advantage after the change."
WaPo's Fact Checker Glenn Kessler did a nice piece today on the veracity of the claims made:
"Many viewers were probably puzzled by this back-and-forth over Medicare between Vice President Biden and the GOP vice presidential nominee, Rep. Paul Ryan (R-Wis). The strange thing is that both are right — but Ryan has a distinct edge in the argument.
The Facts
Medicare Advantage is the private alternative to the traditional insurance program for seniors, with 13.1 million beneficiaries, or about 27 percent of the Medicare population. We've previously explored some of the debate concerning the $145 billion reduction in projected spending for Medicare Advantage contained in the health-care law, which is intended to reduce costs in a program in which the government pays more per senior than in traditional fee-for-service Medicare.
Ryan is correct that the Medicare actuary, Robert S. Foster, estimated that the projected enrollment in Medicare Advantage would be halved under the law. "We estimate that in 2017, when the MA provisions will be fully phased in, enrollment in MA plans will be lower by about 50 percent (from its projected level of 14.8 million under the prior law to 7.4 million under the new law)," Foster wrote.
Note that this is from a projected level that is currently higher than enrollment today (13.1 million), so the actual projected reduction from today's level is 5.7 million. But Ryan absolutely nailed the number in Foster's estimate, even noting that it is a projected figure. (His claim of a $3,200 benefit cut came from a report by the right-leaning Heritage Foundation.)
What about Biden's response that enrollment has gone up "after the change"? This is technically correct, but misleading. Enrollment in Medicare Advantage plans have gone up from 11.1 million (when the health care law was approved) to 13.1 million today — but most of the reductions in Medicare Advantage have not taken effect yet.
Moreover, in what Republicans believed was a politically motivated move, the administration earlier this year essentially deferred the planned cuts with a $6.7 billion infusion of funds into Medicare Advantage. The cuts were to begin to take effect this year, but the action helped mitigate the impact in this election year.
Still, the Kaiser Family Foundation cautioned in a report that the extra payments could not fully explain why enrollment has continued to climb:
The Medicare Advantage marketplace is robust based on plan participation and enrollment. While new quality based bonus payments may have helped to mitigate the effects of the payment reductions that are now being phased in, the trend towards growing Medicare enrollment has been persistent over time and is unlikely to be fully explained by quality bonus payments alone, but rather a combination of historical trends in payment, new quality bonuses, the continued erosion of retiree benefits, and other factors affecting beneficiary choice.
The Pinocchio Test
Readers should always keep in mind that projections are only estimates, and so claims of potential cuts should be taken with a grain of salt. Still, Ryan was correct that the Medicare actuary estimated that millions of retirees would switch out of Medicare Advantage in response to the reductions contained in the health care law — and Biden was being misleading when he said enrollment has continued to climb "after the change." Those cuts have largely not yet taken place, in part because of some election-year spending by the administration. So Biden gets the (2)Pinocchios in this case."
I think Kessler is showing the Vice President some tough love here. Technically Joe is also right, and it's not misleading to make the claim he did without the cuts having been implemented yet (they were deferred via CMS's massive $8 billion Star Ratings Demonstration). Medicare Advantage continues to grow at a blistering 10+% pace even after health reform's passage. And that's something both parties can claim credit for.
Medicare Advantage in 2013: Stronger Than Ever
CMS recently released the September 2012 enrollment figures and market data on Medicare Advantage (MA) offerings for 2013, and the numbers show a program that's stronger than ever and defying all predictions. It's proof that this industry is capable of adapting to the new market conditions brought by the Affordable Care Act.
CMS says Medicare Advantage will grow by around 1.24 million members in 2012: individual Medicare enrollment has grown almost 800,000 lives this year, while group employer plan membership is up 200,000 lives. Special needs plan (SNP) enrollment is up nearly 100,000 lives. These are astounding figures for a program most on Capitol Hill thought would be in its death throes by now.
CMS estimates average member premiums will increase by 4.7% while MA enrollment is projected to grow by 11% -- or roughly another 1.5 million -- in 2013. MA plans will offer nearly 43,200 distinct MA product offerings and nearly 11,900 SNP offerings in 2013; the industry clearly remains heavily committed to MA despite a cloudy rate outlook with the ACA's payment cuts beginning to be felt next year. 32% of MA/SNP products are zero-premium in 2013 -- exactly in line with the 2012 ratio.
Humana will again offer the most MA/SNP plans (12,125) for the 2013 MA plan year, again dominating the Medicare market with over 22% of the entire MA/SNP market in 2013. Humana continues its expansion with increased network-based HMO and PPO products by nearly 16%.
Overall HMO/PPO products expanded by 21% for 2013. PPO products will account for 63% of Humana's product portfolio in 2013. United Healthcare expanded its product offerings by nearly 250% to 10,155 distinct products in 2013 from 2,939 in 2012. This growth was largely driven by the acquisition of XL Health and its vast SNP product portfolio earlier this year. Of the other major Medicare players, WellCare and United will offer the highest mix of zero premium non-SNP MA plans at 90% and 86%, respectively.
MA plans are also extraordinarily positioned for the migration of some 9 Million dual eligibles that will begin transitioning to plans in 2013. The number of Special Needs Plans (SNPs) available will increase by 61% in 2013 to 11,881, rapidly outpacing the 21% growth rate in 2012. United's SNP product portfolio is expanding by over 800% due to its acquisition of XL Health, and is now the leading SNP carrier in the market by a wide margin.
CMS expects 11% enrollment growth, so the MA market will continue to grow as a percentage of overall industry revenue in 2013. The average MA member premium rate increase of 4.7% should also provide some offset to weak-to-falling rates from CMS as the ACA cuts take effect. However, overall pricing in MA will remain muted and Medicare cost trends are creeping up slightly -- so MA margins will likely compress in 2013, an indication that plans will trade margin for membership as the ACA cuts become the norm over the next few years.
Anyway you look at it Medicare Advantage is thriving and a resounding success -- and provides the best blueprint going for reform -- both of Medicare itself, and the health system more generally as the ACA is implemented in 2014.
Affordable Care Act and Insurers of Last Resort
From the Detroit News, 9/12/12:
Gov. Rick Snyder says his plan to reform Blue Cross Blue Shield of Michigan would make health care more affordable and improve health, but it was met Tuesday by resistance from other insurers, the state's attorney general and a consumer group.
Snyder's proposal would convert the state's largest health insurer into a mutual insurance company owned by its members, end its special exemption from state taxes and make it comply with state rules that other insurers must meet.
This reminds me of BCBS of NW Ohio, which became Medical Mutual. They gave up not-for-profit status to go mutual, and, unlike Michigan (at least so far), gave up the Blue Brand. Surprisingly, they have remained a mutual company and not gone the rest of the way to stockholder ownership.
If the economy in Michigan turns around, and people start moving to Michigan instead of away, I could see BCBSMI going for-profit. Until then, I would expect their stock would fare worse than Facebook.
I do expect the exchanges to generate a trend among Blues to try to shed their "insurer of last resort" role. They will compete better outside the exchanges if they can get the exchange plans, including their own, to carry the last resort risk. Sort of like bad banks and good banks dealing with toxic assets. This would be another step in the process of turning the exchanges into high risk pools. Health insurance will continue to be a game of Old Maid until everyone operates by the same set of rules. I'm thinking Medicare for all, with MA at the center, but we'll see.
That would also fix the biggest problem with Ryan/Wyden: the GDP+1 cap on the vouchers to buy Medicare plans will shift more costs into the commercial sector, which has no such cap. If the Medicare and commercial sectors merge, that problem goes away.
Romney-Ryan Plans for Medicare Are Kid Stuff Compared to What They'd Do to Medicaid
GOP nominees Mitt Romney and Paul Ryan have big plans for Medicare reform, as we've written about here often. But health plans and other stakeholders need to start paying attention to their plans for Medicaid, which are game-changing, would affect millions more Americans, and would take effect much sooner: a recent Bloomberg report found that Romney/Ryan's changes to Medicaid would lead to an estimated $1.26 trillion drop in federal funding from 2014 through 2022. Other analyses estimated that 14-27 million Medicaid beneficiaries could lose coverage if the campaign's promise to block-grant the program became reality.
If Romney becomes President in January, the potential consequences for our industry are both massive and uncertain. While he speaks daily to his intention to repeal the 2010 health-care law, he has spent less time talking about what policies he would replace it with. His campaign website, www.mittromney.com, lists 15 health-care proposals — some specific, others vague — which, taken together, would dramatically affect the business landscape, no matter what your politics may be.
Medicaid is the largest source of health coverage in America -- covering 53 million people at a cost of about $457 billion a year, and needless to say covers the most vulnerable patients in the nation. Of those covered, around 24 million are in health plans, a number expected to double this decade. Its addition of as many as 16 million new Americans in the Affordable Care Act and moves by dozens of states to enroll dual eligibles in health plans also present the biggest opportunity for health plans since the launch of the Medicare drug benefit. The duals alone represent a bigger opportunity for health plans than the 16 million uninsured expected to enter health insurance exchanges in 2014. In the wake of the Supreme Court decision we think almost all states will eventually take the ACA's Medicaid expansion money as a deal too good to pass up.
But if Romney and Ryan win, all bets are off. It'd take them years to unwind the ACA, even if the GOP retakes the Senate -- but they could take a meat-axe to Medicaid much easier and quicker. Republicans would need a super-majority in the Senate to repeal the ACA, which they likely won't have, even if they reclaim control of the upper body. But Medicaid can be gutted through budget reconciliation, which only requires simple majorities. And their cuts to the program would take effect almost immediately in 2013, as opposed to Ryan's Medicare plan, which wouldn't be effective for almost a decade.
Medicaid is an easy target for budget hawks. Providers and states alike hate it. While Romney and Ryan would have to face the music with colossus AARP to enact their Medicare vision, there is no National Association for Poor Folks, just a gaggle of underfunded nonprofits fighting for Medicaid, and its beneficiaries often don't vote. But it remains the most important source of health insurance in America, and the biggest opportunity going in health insurance. Remember that while you're "voting your wallet" in November.
Medicare Advantage in the Spotlight
Medicare Advantage (MA) has been in the news quite a lot recently. HHS issued a press release entitled "Medicare Advantage Remains Strong" reporting that since the ACA was passed, MA premiums have fallen by 10 percent and enrollment has risen by 28 percent. Today, 27 percent of Medicare beneficiaries are enrolled in MA plans. HHS projects that enrollment in MA plans will increase another 11 percent in 2013. The number of plan choices will increase by 7 percent in 2013. Surprisingly, discussion at the recent AHIP Medicare conference revealed that even more plans are in the process of submitting new applications for 2014.
Given recent legislation that has substantially cut MA expenditures including cuts in the ACA and the expected two percent cut beginning next year as a result of sequestration, it is amazing that MA plans on average are only increasing premiums by $1.47 next year. At a Ways and Means Subcommittee on Health hearing on September 21, 2012 GAO described how the $8 billion CMS quality bonus demonstration has backfilled 70 percent of the ACA cuts to date. At the AHIP Medicare conference, Bob Berenson seemed to have an explanation for how MA plans are able to maintain their low premiums noting that MA plans do not experience the same level of fraud and abuse as the FFS program, are able to selectively contract and manage utilization, and peg payment rates to Medicare FFS levels. Berenson questioned why MA costs are not lower than FFS given these advantages. CMS indicated that since the ACA was enacted MA costs have declined from 114 percent of FFS to 107 percent of FFS. MA plans note that their expenses are higher since they provide extra benefits, reduced cost sharing and care coordination programs and have higher administrative costs including marketing costs.
At the Ways and Means hearing AHIP's Karen Ignani warned that the impact of MA cuts will not be realized until 2014. She also pointed out that the cuts will be compounded by the introduction of a new premium tax that will result in a net cost of $220 per beneficiary in 2014 and a $9 increase in Part D costs.
More Swing-State Voters Trust Obama on Medicare
We all know seniors vote in huge numbers, and that Medicare has become a centerpiece issue in this Presidential campaign with the selection of Rep. Paul Ryan as the GOP VP candidate. Gallup is out with a new poll showing registered voters in swing states prefer President Obama to Mitt Romney on Medicare.
National polls mean exactly Jack Shitola in our electoral system, and that's why it's worth paying attention to polls of registered voters in swing states, which mean a lot. Fifty percent of registered voters in 12 swing states trust Obama to handle Medicare, compared to 44 percent who trust Romney more.
Another interesting finding: A majority of voters are pessimistic that Medicare will still provide elderly Americans with adequate health care two decades from now, with 53 percent of swing-state voters and 55 percent nationally saying it won't.
Time to Reauthorize Special Needs Plans
Special Needs Plans (SNPs) are a special type of health plan for America's most vulnerable and complex seniors that are set to expire at the end of 2013. Over 500 SNPs serve more than 1.5 million Medicare beneficiaries across the United States. Done well, the SNP significantly improves outcomes and brings down costs thanks to personal care planning, care-transition assistance, disease management, and medication therapy management. Not all SNPs are good at what they're designed to accomplish, but there are many providing patient-centered, coordinated care to vulnerable populations showing signs of success -- the program should be allowed to continue.
There are three types of SNPs since their launch in 2006: Institutional SNPs serve individuals who reside in institutional settings or are eligible for skilled nursing. Chronic SNPs serve individuals living with multiple chronic conditions, such as diabetes, congestive heart failure, and end-stage renal disease. Dual-eligible SNPs serve those eligible for both Medicare and Medicaid (MediCal in California).
An April 2012 study found that SCAN Health Plan's dual-eligible members had a hospital readmission rate that was 25%lower than dual eligibles with identical risk profiles in Medicare fee-for-service. The study also found that SCAN performed 14% better than fee-for-service on keeping people out of the hospital for preventable conditions and episodes of care.
A five-year extension for SNPs would stabilize specialty care for the 1.5 million beneficiaries in SNPs while continuing the progress they are making in reducing emergency department visits, hospitalizations, re-hospitalizations and nursing home stays. An extension would also allow states, if they choose, to construct their duals and long-term care demonstrations on a SNP framework, and allow time to evaluate findings from SNPs so that CMS can work with Congress to enact a permanent program going forward.
We Love Us Some Kitzhaber...Medicaid Reform Genius
It's happy days for us when Sarah Kliff at WaPo, one of our favorite bloggers, posts a great "get" with Oregon Governor John Kitzhaber, MD -- one of our favorite Medicaid reformers. It was such a terrific interview I wanted to reprint it here, with thanks to both for an illuminating discussion of the way forward on reforming entitlements:
Interview: Gov. John Kitzhaber on Oregon's $1.9 billion Medicaid experiment
"Oregon is in the middle of a multibillion-dollar Medicaid experiment. It has promised the Obama administration it can slow the program's growth to a rate comparable to the rest of the economy over the next two years. That means reducing Medicaid cost growth, on a per capita basis, by 2 percent.
If Oregon can't pull it off, the state stands to lose $1.9 billion in federal funds meant to jump start that process. As Oregon Gov. John Kitzhaber (D) put it, his state has "to change how you do business in order to survive."
The new business plan, he says, is to pay doctors for the quality of health care they provide, rather than the quantity. The idea is to eliminate expensive care that doesn't improve health care — a readmission, for example, for an issue that should have been solved on a first hospital visit. The structure is similar to the Accountable Care Organizations that the Affordable Care Act created in Medicare.
Oregon's revamped Medicaid program launched at the start of this month. We spoke at length about the risks involved in the new project, how it's going and whether it can be expected to improve the health of Oregon's Medicaid recipients. What follows is a transcript, lightly edited for grammar and content.
Sarah Kliff: What's changing on the ground right now in Oregon about how Medicaid patients receive their care?
Gov. John Kitzhaber: The Coordinated Care Organizations have only been up since Sept. 1, but essentially the model is a patient-centered medical home. Each person will have a single point of contact with the delivery system, some sort of a care manager. We'll increase our use of home health workers to essentially try to manage chronic conditions at home. Then there will be financial incentives. If hospitals can, for example, reduce admission rates by five per thousand, those cost savings get shared within the system. They don't go off to a third party.
SK: The Obama administration has given you an additional $1.9 billion to put toward improving your system for this project. How is that money being spent?
JK: We had a big hole in our budget. Providers did take an 11 percent cut, notwithstanding this money. This basically prevents any further cuts to the system. It gives us five years to get the delivery model up and running and realize the savings. It's like changing a car tire while you're driving down the road. You have to maintain the current delivery system while changing it. It gives us the resources to do that.
SK: What's at stake for Oregon here? If you don't hit the cost metrics that you've promised, what happens?
JK: The $1.9 billion is contingent on this gradually ramping down of costs. Chunks of those resources go away if we don't achieve those cost metrics. There will be resources pulled out of the system which will make it more difficult. The real incentive is if we don't transform the system, we go back to the 40 percent cut. There's no more money. This is one where you really have to change how you do business in order to survive. I think the system appreciates that. The grand bargain was they give us the flexibility, they give us $1.9 billion, we reduce the Medicaid cost trend by 2 percent points per member by the end of the second year and improve health outcomes. That's the grand bargain.
SK: How will the administration measure what counts as higher quality care? How do you safeguard against providers skimping on care?
JK: There are metrics we're developing with [the Center for Medicare Services] about patient outcomes and population health metrics. So this is clearly unlike an old HMO, which could save costs by skimping on care.
There will be some things we won't do, but they will be things that don't have an impact on health outcomes. If you can manage someone with congestive heart failure in their home, which is not that hard to do, you save $50,000 every time you avoid them going into the hospital.
There will be clear, specific outcome measures and they're around access, they're around relationship to outcomes. Right now, payment is all about quantity. The more you do, the more you get paid. We're shifting to outcomes-based and performance based-funding.
SK: You're looking at a two-year timeline that you'll be measured on both spending reductions and quality improvements. What kind of health care outcomes can you change in that relatively short time span?
JK: I think what you're going to see is some significant improvements in access. You may see some reductions in low-birth weight infants. If you provide good prenatal care, you can actually see that return pretty quick. Hopefully we'll see an increase in the number of kids who are immunized.
The real big cost savings we're probably not going to see until the end of the second year. Those will be the results of reducing hospitalizations and better managing chronic conditions at home. One of the metrics might be how many times someone with a chronic condition has come had to go to the hospital.
SK: I want to talk a bit about how your proposal compares to the idea of a block grant that some of your Republican counterparts have proposed. Both essentially make a trade off, saying the state could spend less if it's given more flexibility. What do you see as the key differences?
JK: Let's say you have 100 people and a block grant that allows you to spend $100 per person. Let's say the auto industry goes belly-up and now instead of 100 people, you've got 200 people. Now you're only spending $50 per person.
There's no relationship between the block grant and the cost of the care you're trying to provide. It's a meat ax approach that just saves money. It's not designed to improve health outcomes.
What we're doing is we're establishing a per person, per year amount that will grow at a fixed rate. If you add 10 people, they still get that amount. The cost savings are in the rate of inflation. The only way you can achieve that is change your delivery model.
One of the conversations we had at the White House, was they said, ‘let's say we give Oregon this $1.9 billion and increased flexibility. What's to keep us from giving this to other states?' I said, "well, if another state came to you — lets say New Jersey."
Let's say Gov. [Chris] Christie came you and said, "We will promise you that if you give us X amount of money, we will reduce our medicaid inflation rate to 3.5 percent. We'll increase access, we'll improve outcomes." I'd say, give them the money because if every state did what Oregon is doing, the total saving is $1.5 trillion over five years.
SK: Have you heard from other states who want to try the approach you're taking?
JK: Right after we got the money, we had about 10 states call us up and say how'd you get that money. We haven't had anyone else follow up and say, we want to do it too. I think part of it is due to the election cycle. After the election, when states are faced again with dealing with stuff, I think a lot of states will look at what we're doing. It's actually up now.
Part of this is just good communication. This is hard. It's a big paradigm shift. You need to sit down together so you don't feel like you're all by yourself. You need to figure out what's working and what isn't. What can the state do to facilitate this.
SK: What are the biggest obstacles to making this work?
The biggest challenge is the old business model. People are used to having this unfettered flow of cash that increases every year coming into the health care
What we've signed up for is basically a cap on spending. Even if you figure out a way to raise more money, you can't spend it in the Medicaid program. We're getting there slowly with that. The other big piece is making sure that the private sector knows its in their interest to align their purchasing power with the 900,000 people we have or else some of this is going to be a cost-shift onto them.
SK: How did you get hospitals on board with this? Why should they get behind the idea of essentially capping the amount they can earn from Medicaid?
JK: At the end of the day, they know this isn't working…The lack of resources is what's really driving and motivating people to change. They know the alternative is worse than this.
The interesting thing is, I have to remind them of this all the time, and say let's not do this, then what's your world like? It doesn't look good at all. You have to continually remind them that the alternative is just a whole lot worse for them.
With Presidential Election Static, Senate Slips from GOP's Grip
The most frequent question I get is "what will the elections mean to Medicare and Medicaid?" We've said here the Republicans' only hope of repealing the Affordable Care Act and enacting entitlement reform comes from making President Obama a one-termer, maintaining their majority in the House, and retaking the Senate. At the moment the Presidential race remains largely unchanged, with Mitt Romney getting a disappointing bounce from the GOP convention; Republicans will likely hold the House, but their grip on retaking the US Senate is slipping -- and with it, any chance of ObamaCare repeal or major changes to Medicare and Medicaid.
Earlier this year it seemed a foregone conclusion that Democrats would lose the Senate, defending 23 of 33 seats up this year. But now it's anything but sure, with some wild developments in races thought over and in the books -- just look at Todd Akin's epic "legitimate rape" fail in Missouri, emperiling his shot to knock off Claire McCaskill, and in doing so, possibly control of the Senate.
BusinessWeek got the scoop when GOP master strategist Karl Rove gave a briefing at the Republican convention that gave the best picture yet on the Senate math. Republicans need four seats to retake the Senate, and Rove said he's hopeful the party can pick up three from Nebraska, North Dakota, Wisconsin and Virginia. Between New Mexico, Hawaii and Connecticut, he added, "we've got a shot to take at least one." That's political shorthand for "too close to call."
But Rove also painted a picture where the GOP remains the Senate minority party: if they lose in Maine (Charlie Summers is getting crushed by Independent Angus King) and Massachusetts (Senator Scott Brown is in a dogfight with liberal crusader Elizabeth Warren), where the Republican candidates face headwinds. "But we're gonna lose, either [Summers] or Scott Brown—we can't afford to lose both," Rove said ominously. "If we win both, we're in great shape. If we lose one, it starts to get a little bit edgy. If we lose two, we're in real difficulty."
While the Presidential race remains stuck, it's these "down-ticket" races that really matter in terms of the post-election outlook for Medicare and Medicaid. It doesn't appear Romney gave his GOP colleagues any help down-ticket with Paul Ryan's selection. So unless Akin and Brown manage to pull ahead -- and there's still two months left, folks -- it looks like the Dems may hold the Senate. In doing so, they may assure ObamaCare stays as the law of the land, and major reforms to Medicare and Medicaid unlikely.