Let's Get the Ryan/Wyden Party Started!
This morning I was quoted in conservative standard-bearer Fred Barne's lead opinion piece in the Wall Street Journal on the Ryan/Wyden Medicare reform plan. Fred makes the point that Ryan is beginning to convince Democrats that his approach is reasonable.
I don't know if Ron Wyden, Jim Capretta and I make Ryan's new proposal "bipartisan", but the optimist in me has long hoped we can turn down the volume on the Medicare reform street-fight long enough to have a thoughtful discussion about it.
The pragmatist in me recognizes it's an election year and that nothing meaningful can happen on this issue this year -- but it will certainly be front and center in the big deficit reduction debate coming in 2013.
Memo on CMS Advance Notice and Draft Call Letter for 2013
CMS continues to refine operational policy for Medicare Advantage and Part D plans. View our summary of the 45-Day Advance Notice and Draft Call Letter for 2013 by clicking here. I was disappointed CMS did not finalize their proposed regulations prior to issuing this document. As a result some of the more significant policy changes will be reserved for the final rate announcement and final Call Letter.
I was struck by how complicated the payment formulas have become. While use of more recent data should make the formulas more accurate, there are so many other factors that can affect the bottom line in different directions that may be hard to predict, including the recalibrated MA and Part D risk adjustment processes. The new frailty adjustors for Fully Integrated Dual SNPs should provide an incentive for these plans to grow more rapidly, which is exactly the direction that CMS intends.
The number of quality measures continue to grow, with the most intriguing new measure being the net quality improvement at the Part C and Part D contract level. But I wonder how plans can keep up with all of the new measures and modifications to current measures each year. CMS continues to advance its value based purchasing agenda, including moving down the path of measuring performance of plans with less than 1,000 enrollees. This will pose some methodological challenges but should provide a more level playing field for plan comparisons.
My Crystal Ball
IF the Supreme Court (SCOTUS) find the mandate unconstitutional, THEN the Exchanges begin to unravel.
And IF that happens, THEN the Dems will have an extraordinary issue to run on in 2012, which is as meaningful to Congressional races (remember: Congress holds the money) as it is to the Presidency.
But IF it doesn't, the GOP will have the same. It will look like this: "We're being turned into France! But without the French kissing!"
And IF they successfully take the house and hold the Senate—a scenario in which they likely capture the Big House too—then they can defund the exchanges even if they can't muster 60 votes in the Senate to overturn it.
Should be an interesting year.
More Good News for Medicare Advantage in 2013 Rate Announcement
CMS released the 45-Day Notice of CY 2013 Medicare Advantage (MA) rates after the market close on Friday, and while it's the usual hot mess of green-eyeshade factors that comprise payment, it brought unexpectedly positive news for the industry. If it holds up in the final rate announcement on April 2, it will represent the largest increase in payments to plans in 4 years. Here's a brief rundown of what's hot, what's not, and what to watch in the runup to the final rates.
HOT
- The weighted average rate increase for 2013 is 2.47%, net likely flat. Most Wall Street analysts expected a cut of 2-4% in 2013. Again, this represents the largest increase in payments to MA plans in 4 years.
- CMS maintained the risk adjustment coding intensity adjustment at 3.41%, for the third consecutive year. 2013 will be the last year CMS can offer this concession -- the ACA mandates that coding intensity increase to 4.71% in 2014, and then by at least 25 basis points/year 2015-2018, bringing it to at least 5.7% by 2019. There is no incremental impact on 2013 rates, and plans get an extra year to get their risk adjustment houses in order before the pain starts.
- CMS made no mention of Risk Adjustment Data Validation (RADV) audits, which have been looming large over the plans for the past 3 years and remain a prominent source of revenue recoveries in the President's last two budget proposals.
- The fee-for-service normalization factor, which adjusts for upward trend in risk scores in MA vs. FFS, was a big positive for 2013. It usually rises or falls by 1-2% a year, and in most years it increases. For 2013, CMS is dropping the FFS normalization factor by almost 5 points, boosting 2013 rates by around 150 basis points.
- CMS's general tone toward the industry was decidedly more positive, as it was last year. CMS noted that the proposed annual growth rate "will sustain a strong Medicare Advantage landscape for 2013," and highlighted that enrollment increased roughly 10% in the last year. I guess once you top 25% enrollment in Medicare the agency has to show you some love.
- Star Ratings quality bonuses and rebates remain a key source of revenue boosts for high performing plans, which helps to offset the cuts to MA in health reform. Bonuses will increase in 2014 for plans with ratings of 3.5-4.5 Stars. We estimate that Star bonuses will increase payment by more than 4% in 2012 and around 25 basis points in 2013, as MA plans' overall Star rating increased to 3.56 stars, up 0.11 Stars year-over-year.
- CMS is also rebasing MA county rates for 2013. Historically this is usually a good thing for the plans (though CMS notes it could hurt a little next year). CMS is required to undertake this exercise every 3 years, and the consensus among many Wall Street analysts is that rebasing will add approximately 60 basis points to the 2013 rates.
- The "Doc Fix": In the past, CMS has insisted on basing its trends on the law in force at the time they made the projection. The doc fix on the books for 2/17/2012, the date of this advance notice, only extends through 2/29. The new doc fix, through 12/31, hasn't been signed into law yet. So our guess is that the advance notice doesn't include a catch up correction for a doc fix for the remainder of 2012. The fact that CMS didn't hold a conference call makes us think they didn't want to discuss the matter until the bill is signed. If we're right, we'll see a higher trend and higher rates in the final notice on April 2, when an additional 10 months of higher doctors' fees is factored in.
- Sequestration: the 2% cut to Medicare from the failure of the not-so-Super-Committee is the law of the land as of today, so CMS should have included that in their trending -- and we still came out ahead.
NOT
- CMS is updating and recalibrating the HCC (risk adjustmetnt) system for Medicare Advantage for the first time since 2009. The current HCC model for Medicare Advantage has 70 HCCs, a decrease of 7 from 2011. Our best guess of the impact of the HCC changes will cut 2013 rates by 125 basis points on average. Some
diseases will pay better and some will pay worse after recalibration, which could have a significant impact on some plans. CMS is looking for a better way to calculate the coefficients, one that is not so sensitive to
plans' activities to improve coding accuracy and completeness. One thing they are looking at is the impact when plans target a specific subset of members for prospective evaluations.
WHAT TO WATCH
- Repeal of sequestration before April would, presumably, result in a higher 2013 trend -- but that ain't gonna happen in an election year. Wait for something in the lame duck session after the election, when Congress has to deal with sequestration, the expiration of the Bush tax cuts, the expiration of the payroll tax holiday and the 2012 doc fix. Should look like a cross between cage fighting and smash-mouth hockey. If sequestration is repealed, it will show up as a correction to the 2014 rates.
All in all, a very positive development for our favorite program, considering the Age of Austerity we live in.
At Supremes' Mid-Session Recess, Hints on the Individual Mandate
I've long thought this November's Presidential and Congressional elections are far more relevant to the future of the Accountable Care Act than the US Supreme Court's consideration of the Constitutionality of the individual mandate. On that point, this morning's WaPo had a new poll showing President Obama with his first clear lead in a hypothetical matchup against Mitt Romney.
The Supremes started their mid-session recess this week and are on track to hear more than 5 hours of oral arguments on the ACA's individual mandate in March, with a ruling expected at the end of the Court's session in late June -- right smack in the middle of the election season. Court watchers have given some interesting perspectives in the last couple weeks that indicate the ruling is likely to go Obama's way -- and not necessarily by a 5-4 margin.
In the first half of this term, the Court has shown several nuanced positions on thorny partisan issues -- a real rarity in Washington in these days of polarization. Court experts say this suggests conservatives -- including Chief Justice John Roberts -- may bridge the divide between the five Republicans and four Democrats on the mandate. Roberts, in particular, "is very cautious of the institutional credibility of the Court," said Barry Friedman, a New York University law professor. By achieving unanimity in several major cases thus far, the Roberts Court showed an ability to reach narrow agreement on topics with clear ideological lines. The decisions show that Roberts "is working very hard, as apparently are some of the justices, to ensure that the Court doesn't draw negative attention to itself" on partisan issues, Friedman said.
In the Citizens United campaign finance decision, Roberts wrote separately to reiterate his commitment to "the important principles of judicial restraint and stare decisis" -- or respect for precedent. And there's plenty of precedent that would support the Congress' powers to regulate interstate commerce and taxation of economic activity as the mandate does. Adherence to stare decisis is among the "certain decision-making rules that guide [justices'] actions and sometimes prohibit them from acting consistent with their ideological preferences," said Forrest Maltzman, a professor of political science at George Washington University.
Professor Michael Bailey of Georgetown University said last week, "I just have the sense that Roberts will go in to find a way to uphold the law, but in a way that narrows," without overturning the key 1942 decision that established Congress' broad powers to regulate interstate commerce.
In a January interview Professor John Yoo of Berkeley Law, a prominent conservative and former Bush Administration legal adviser, predicted Justice Anthony Kennedy, the Court's moderate vote, and Roberts would likely to join the four liberals to uphold the Affordable Care Act's individual mandate. "Roberts cares about the institutional permanence of the Court and protecting it from politics," Yoo said. "I could see Roberts going with the majority" to exercise his prerogative as chief justice "to control who got to write the opinion to keep it as narrow as possible."
According to a Kaiser Family Foundation poll released last week, this kind of decision wouldalso be responsive to public opinion. While 67 percent of those polled don't believe health care reform's individual mandate is constitutional, half want the the law kept as it is or expanded. Narrowing Congress' commerce powers without striking down the health care mandate, then, would address the public's constitutional concerns without changing a law that promotes a policy that most people like.
And as I've always said: markets are a better predictor of events than anything. This morning the futures trading site InTrade.com had only a 39.8% chance of the Court ruling against the mandate later this year. My money's on the Court upholding the mandate, by a 6-3 margin.
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.
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.
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.