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.
Welcome to Another Year of Gridlock in DC
- Obama is narrowly re-elected and Democrats maintain leadership of the Senate: weakened President, weakened Democratic margins (Dems are defending 23 Senate seats this year vs. 10 for the GOP, so they'll certainly lose seats) = more gridlock.
- Obama is narrowly re-elected but Republicans win the Senate: badly weakened President with no control over legislature: worse gridlock. For the record, I 'm thinking this is the most likely outcome this year.
- Obama defeated and Republicans win the Senate: Democrats throw themselves on the partisan hand grenade to prevent GOP from undoing Obama's legacy like health reform -- worse gridlock. I consider this to be the least-likely outcome this year.
All of this argues that no matter what happens in November, the partisan divide in Washington is likely to widen -- and that signals this may be our "Lost Decade" like the Japanese suffered in the 90s, with a political class unwilling and unable to meet their legislative responsibilities as the country goes further into the economic ditch. That means Medicare and Medicaid continue to run amok as uncontrolled entitlements, further depressing US creditworthiness and pouring fuel on the national deficit fire. Not a pretty picture, no matter who's getting inaugurated a year and a week from now.
It seems the only safe bet these days is to count on Congress producing another goose egg in solutions to what ails our nation.
Berwick Redux? Recess Appointments Could Derail Tavenner Nomination at CMS
2012 has a lot in store
2012 will be a busy year for GHG and our clients. The first Legislative agenda item will be the Medicare physician Sustainable Growth Rate (SGR) fix. The 27 percent physician fee schedule cut has only been postponed for the first 2 months in 2012. The big question is how the Congress will choose to pay for the doc fix. Medicare Advantage cuts were on the table briefly as part of the House discussion, but the House ended up cutting Medicare payments to hospitals to cover their one year fix.
The Innovation Center has a lot of activities on the docket for 2012. 32 Accountable Care Organization (ACO) Pioneers are starting this month and organizations that are interested in the ACO Shared Savings model must submit their applications by January 20, 2012 for an April 1, 2012 start date or March 30 for a July 1, 2012 start date. Some of the applicants for the Shared Savings program will also be submitting an application for the Advanced Payment ACO model. Applications for the Health Care Innovation Challenge grants are due January 27 for the first round and if the $1 billion is not fully awarded there will be a second round of applications due in the summer. Due to the large provider response, CMS has extended the deadline until April 30, 2012 for applications for the Bundled Payments for Care Improvement program for models 2 — 4.
CMS will release the Advance Notice of MA and Part D Payment changes and the Call Letter around February 17 with final rates and the final Call Letter issued in April. We would also expect CMS to issue final regulations for MA and Part D Benefit Programs for CY 2013 in the first quarter of 2012.
Applications for new Medicare Advantage plans and service area expansions for CY 2013 are due February 23, 2012 followed by bids on June 4, 2012.
Work will continue on implementing meaningful use and the Medicare Advantage and provider value based purchasing initiatives that reward quality and penalize failure to meet targets.
On the Health Care Reform front the first six months of 2012 will focus on the Supreme Court review of the ACA. Oral arguments will begin March 26 and a decision is expected in late June. States will continue their work on developing the infrastructure for the Exchanges. CMS must certify that sates have made sufficient progress by January 2013. The Exchanges will go live in October 2013 for coverage and subsidies to begin January 1, 2014.
HHS will develop a back up federal Exchange for states that aren't certified. The federal government is also building a data hub to support the Exchanges that will link Social Security, IRS and Medicaid data to facilitate eligibility and subsidies.
CMS will have to issue final regulations and guidance on policies that will govern the Exchanges. While states will have flexibility on the Essential Benefits that plans must offer in the first two years, additional regulatory guidance is expected from HHS.
The presidential election in November will underscore future changes that we can expect, especially in the area of Medicare reform and additional budget cuts. Most observers expect the big cuts to start in 2013. The conventional wisdom is that it won't be the 2 percent sequester for Medicare that was passed in the Budget Control Act of 2011 but substantially higher cuts to both the public and private Medicare plans.
ACO: Change agent or fad?
Aetna recently published results of two studies suggesting that ACOs can indeed cut Medicare enrollee costs. The results came from two medical groups - one in Ohio and one in Florida. The Florida group reduced inpatient hospital days by 37% and hospital readmissions by 27%. The Ohio group reduced inpatient days by 30% and hospital readmissions by 27%. In each case the program started in 2009 - so not bad results for a 2 year program--right?
Recall that the goal of a Medicare ACO is to streamline care, reduce unnecessary care/procedures, focus more on patient health management than catastrophic treatment, thus leading to happier patients, more fulfilled providers and less medical cost per capita. So the concept seems to work and everybody is happy-right?
Well not everybody! The Aetna study shows that ACO success can be defined in terms of less procedures, inpatient days and use of resources for a defined population. And the results point to the intrinsic benefits that accompany better outcomes as well as healthier patients and less patient exposure (sometimes harmful) to unnecessary procedures. But that is just part of the story because the Hospital and the Physician--the ones who are doing less procedures than before and the hospital that is seeing its inpatient volume shrink -, they are dealing with the reality of revenue loss unless it can be replaced through seeing more patients, increasing unit cost, cost-shifting to non ACO managed populations or limiting access to ACO participating patients, etc. -- all those consequences that are an anathema to ACO believers.
Thus individual ACO enterprises may meet all the goals set out by CMS and the private health care sector but medical costs on a consolidated basis will still go up unless.....
Unless we as an industry, choose not to wait for the next health reform shoe to drop. Instead, let us shift our attention away from experimenting on different populations with multiple cost cutting initiatives. Let us focus on health care delivery and pricing solutions that cut across all populations and funding sources with the goal of extracting involuntary practitioner and consumer behavior changes with respect to health care delivery and individual responsibility for lifestyle choices. Said differently: if everyone is riding the same train at full speed it becomes difficult and potentially harmful to jump off.
That brings me back to ACOs, the topic for this blog. I happen to think that ACOs, or rather the philosophical tenets that define an ACO, are here to stay and should and can become the foundation for the wholesale change required to change our approach to accessing and funding health care. More about that later.
It's the Providers' Turn to Make the Transformation
I just read Dr. Don Berwick's speech at the IHI National Forum and I am awed with his insight and inspiration. It reminds me of the speech that I heard Dr. Ken Kaiser give at a Veterans Administration conference that led to the transformation of the VA health system from "worst to first" in the 1990s.
Dr. Berwick discusses how our nation is at a crossroads on health care where "choice is stark — chop or improve." Everyone seems to agree that the political stalemate will continue during 2012 with the election and Supreme Court decision on health care reform. Experts expect paralysis until 2013 when real and substantial budget cuts will be unavoidable. Dr. Berwick is right that in the past the usual solution has been across the board cuts through budget reconciliation. Any cuts need to be thoughtful and support value improvement.
Dr. Berwick is hopeful that sensible solutions can be found by the provider community at the local level. He notes that government, payers and regulators cannot do what must be done. "Only people who give care can improve care." He recommends six areas where providers can cut costs and improve value — overtreatment, failures of coordination, failures of reliability, administrative complexity, pricing failures, fraud and abuse. He estimates that waste in these areas could be $1 trillion a year or one-third of the total cost of production in the health care system.
But is the provider community ready and willing? There is evidence that this is happening. A recent Leavitt report concluded that there were 164 "ACO entities" forming in the country. AHIP reports that there are 30 ACOs and 150 patient centered medical homes. And CMS is developing initiatives in Medicare and Medicaid that will build on these private sector efforts. Other leaders are trying to inspire change that avoids across the board cuts. At the recent Politico Policy conference, Dr. Ken Thorpe reminded us all that the focus needs to be on the patients with chronic illness, which will require moving away from provider silos to provider cooperation. Policy discussions at a recent Alliance for Health Reform focused on the next steps after the failure of the Super Committee. Experts noted the fundamental differences in opinions between the Republicans and Democrats on health care policy. Several experts agreed that many in the provider community understand that business as usual will not be possible and that the "gig is up". These providers are developing ACOs and medical homes and thinking about approaches to bundled payment. However it was noted that any savings from these initiatives will not be scored by CBO and that the timeline to implement these changes is longer than the Congressional budget schedule. One positive recommendation is that the CMS Innovation Center spend more time on the Hill while the providers in the community undertake the necessary transformation of the delivery system.
Berwick, Unshackled, Blasts "Death Panels"
Freed from the shackles of his Washington job, last week former CMS Administrator Don Berwick described for an audience of health policy wonks Washington's cynicism, epitomized by the "hogwash" claim that health reform included "death panels."
"The outrageous rhetoric about death panels — the claim, nonsense, fabricated out of nothing but fear and lies, that some plot is afoot to, literally, kill patients under the guise of end-of-life care. That is hogwash," Berwick said Wednesday to his old think tank, the Institute for Health Improvement's annual conference in Orlando. He went on to say that the death panel rhetoric "is purveyed by cynics; it employs deception; and it destroys hope. It is beyond cruelty to have subjected our elders, especially, to groundless fear in the pure service of political agendas...It is one of the great and needless tragedies of this stormy time in health care that the ‘death panel' rhetoric has denied patients the care that they want, denied caregivers the information they need to give that care, and denied our nation access to a mature, open, informed, and balanced discussion of the challenge of advanced illness and the commitment to individual dignity. It is a travesty."
It was a stunning departure in tone for Berwick, who was unfailingly polite throughout his 16-month tenure at CMS. And I couldn't agree more. End-of-life care is a personal crusade of mine and my mother, Dr. Susan Black, a prominent family physician and palliative care advocate.
You'll recall the ridiculous notion of death panels erupted when former Alaska Governor and GOP vice presidential candidate Sarah Palin said the health care law would mean seniors would have to stand in front of a panel of Federal regulators to find out if they were worthy of health care. It was beyond preposterous, but it stuck -- and arguably set the debate on end-of-life care back a decade. The issue dogged the administration long after the ACA was passed: in January, the administration yanked language on end-of-life planning for seniors from a Medicare regulation on annual physicals.
As I've said here before, since the Terri Schiavo circus we have lived in an age of distortions like "Death Panels," where open dialogue on end of life is politicized and limits on what Medicare will cover are demogogued as rationing. The only way out of Medicare's fiscal mess is a mature discussion about how we're going to address the 1 in 4 dollars Medicare spends today in the last 6 months of life. Let's hope the 2012 elections will bring us a fresh crop of "grownups" to have that dialogue.
Some Daylight in the Medicare Reform Debate
This morning's New York Times featured a terrific editorial that provided some daylight for the left in the ongoing Medicare reform debate. Essentially the Times rejects House Budget Committee Paul Ryan's (R-WI) draconian approach but opens the door to examining "premium support" as thought of by Alice Rivlin, former President Clinton's budget director, which is structured more like Medicare Part D, or even the insurance exchanges envisioned in the ACA.
Members of both parties believe Medicare could offer a fixed amount of money to beneficiaries to buy coverage from competing private plans, whose costs and benefits would be tightly regulated by the government. Rivlin urged the Congressional deficit "Super-Committee" to establish an insurance exchange for Medicare beneficiaries where private plans would compete with traditional Medicare and would have to provide the same benefits. The federal contribution in each region would be based on the cost of the second-cheapest option, whether that was a private plan or traditional Medicare.
Rivlin's approach is more "soft-hearted" than Ryan's and recognizes the fundamental premise behind the success of Part D: yes, the government can create an insurance market from a green field -- but it won't accomplish its goals in savings or quality unless CMS regulates the crap out of it. It's market forces plus the stiff arm of regulation that makes "premium support" work.
The Times editorial follows. Remember this sort of debate was unthinkable just a year ago, and we have President Obama and Speaker Boehner to thank for the daylight to examine this big idea.
December 3, 2011
What About Premium Support?
As the election campaign progresses voters can expect to hear a lot of hype — and if we are very lucky some good ideas — about how best to "reform" Medicare. It will take stamina and well-honed skepticism to sort it all out.
Republican politicians are touting the virtues of market competition and calling for a "premium support" plan that would give beneficiaries a set amount of money to shop among private plans for their own insurance. What they do not say is that private plans have long been more costly than traditional Medicare and have shown far less ability to slow spending. Nor do they admit that the most extreme versions of premium support — like the one championed by Representative Paul Ryan — would save the government money mainly by shifting costs to the beneficiaries, who would have to decide whether to forgo treatments or pay more for coverage.
Most Democrats have been fiercely opposed to privatizing Medicare. They believe the traditional system can be reformed to reduce costs without demolishing the whole structure. But with concerns about the rising deficit and the long-term sustainability of Medicare, some centrist Democrats are backing the premium support idea.
As Americans try to figure out who is right or wrong in this debate, here are some matters to consider:
HAS IT BEEN TESTED? The Massachusetts health care reforms already provide premium support to help low- and middle-income people buy private policies on an exchange. Unlike the Ryan plan, the program guarantees everyone a defined, comprehensive set of benefits, and officials bargain aggressively with private plans to keep their premiums down. As a result, annual cost increases have been held well below the premium increases for other private group insurance providing comparable benefits.
The Medicare prescription drug program provides support to help beneficiaries buy coverage from private insurers. The costs have been far less than initially projected, a fact that promoters of premium support trumpet. Market competition has helped, but costs have mainly been held down because many major drugs have gone off patent and have been replaced by cheaper generics.
Perhaps the strongest caution against overselling the benefits of competition is Medicare's own track record. What critics of the current program don't acknowledge is that over the past four decades, Medicare's spending per enrollee has risen much more slowly than private insurance premiums — an average of 8.3 percent a year between 1970 and 2009, compared with 9.3 percent for private premiums. And the private Medicare Advantage plans that cover roughly a quarter of all enrollees cost an average of 10 percent more than what the same coverage would cost in traditional Medicare.
The lesson from all this is that it is far too early to talk about scrapping traditional Medicare. At the same time, serious analysis and testing of premium support are clearly worth pursuing.
A GOOD APPROACH The best proposal for premium support is one that gives beneficiaries choice while protecting them from any added costs if competition does not keep prices down. Enrollees would be given a set amount of money to buy a plan comparable to what Medicare now provides. If they chose a plan that cost less, they could pocket the difference. If they wanted better benefits, they would have to pay the added premium themselves. But if market competition failed to restrain costs, the federal government would increase the support given. So far, this idea has found no support among leading politicians, who apparently have less confidence in market forces than they claim.
SOME BAD APPROACHES Versions of premium support backed by Congressman Ryan and other conservatives have one primary goal: pushing down growth in federal spending on Medicare, even if it means that beneficiaries have to pay far more for coverage. These proposals tie increases in premium support to indexes, like the gross domestic product or the consumer price index, that historically have risen far more slowly than health care costs.
Proponents hope competition will lead private plans to reduce their premiums and that beneficiaries will think seriously about whether they need a costly CT scan. While competition and cost-sharing by beneficiaries could help curb overuse of services, we are skeptical that patients who are chronically ill or nearing the end of life, who account for a huge chunk of Medicare's spending, would second-guess their doctors and choose cheaper care.
The Congressional Budget Office concluded that the Ryan plan would force new enrollees in 2022 to pay thousands of dollars out of pocket for benefits similar to those currently provided by Medicare.
THE NEXT TEST The health care reform law, starting in 2014, will provide premium support subsidies to help people with modest incomes buy private policies on new insurance exchanges. That will be the next big test of whether premium support can work to hold down costs while providing good coverage. With so many uncertainties, it would be rash to weaken or jettison the traditional Medicare program now. The good news is there is some time to get it right.