Should Medicare premium information be shared with PPO providers?
CMS and the Center for Medicare and Medicaid Innovation (CMMI), in an effort to provide a more coordinated and satisfactory patient experience when it comes to the delivery of healthcare services, has placed much focus on improving Medicare program transparency around access to services, provider quality measures, clinical outcomes and fair pricing.
It is fair to ask whether or not providers - who are responsible for the delivery of clinical diagnosis and treatment to Medicare beneficiaries - should have knowledge about the beneficiaries' benefit plan and premium costs, including copayments and coinsurance. There is reasonable argument on both sides of this issue regarding patient privacy, the right to know or not know, as well as the opinion that a provider or supplier does not need to know a beneficiary's premium payments to price the service or item provided.
Those in favor of providing provider and suppliers with premium information might suggest that the information helps the provider find less expensive treatment alternatives when the benefit plan and related financial requirements would otherwise prove problematic. Others would opine that the provider's number one concern should be the patient's needs and hoped-for outcome.
There is, however, another reason that it might make sense to share premium information with providers and suppliers: Providers, like the patient, usually do not appreciate the financial relationship between the monthly dollar amount assigned to each patient for provision of medical care and the actual cost charged for providing that medical care. Knowing that relationship may have the desired effect of providers, suppliers and the patient agreeing on a treatment approach that is more judicious regarding the ordering of procedures, tests and supplies that may not be necessary in every case for the desired treatment outcomes.
At the end of the day there is a limit to the financial resources available for the funding of medical services. If everyone involved in the provison of medical services and supplies understands those limitations, then decisions on how those resources are expended may beome more measured without sacrificing service quality or treatment outcomes.
Pioneers Move Forward, But Medicare May Still Be Left Behind on ACOs
A CMS official announced Tuesday that final regulations for the Medicare Accountable Care Organization (ACO) Shared Savings Program are now expected mid-October. It looks like ACA's requirement that the SSP launch January 1 is now out of reach, and there's scuttlebutt here in DC that the launch date will be pushed to June or July 2012. These regs can't come fast enough -- and must be dramatically redrafted from the disastrous April draft -- or Medicare could be left behind as the ACO revolution surges just about everywhere else.
Sure, the Pioneer ACO Demonstration was some progress, especially on the beneficiary alignment provisions and the apparent willingness of CMS to consider our partial capitation proposals. All 6 of GHG's applicants for Pioneer made it to the finals this week, advancing both partial (Part B only) and global (Parts A and B capitated, excluding transplants and ESRD) capitation models. CMS intends to pick 25-30 Pioneer ACOs to launch on January 1 -- these are the advanced "already ACOs" that are ready to go given their significant integration and deep experience in Medicare Advantage -- and they'll give CMS some early wins to tout to a skeptical Congress. We are thrilled all of our Pioneers are moving forward -- with no arrows in their backs yet.
But it's the Shared Savings Program with its applicability to a much broader swath of providers that's significant here -- and that messy draft reg from last spring was like a cold shower from Medicare for most providers that might consider it. The irony is the draft regs forced many sophisticated provider systems and medical groups to recommit themselves to Medicare Advantage. CMS got over 1,200 comments on the NPRM and we're hopeful next month's final reg gets it right.
The ACO train is leaving the station in both the Medicaid and commercial markets, and Medicare must be on it if there's to be any hope of significant delivery system reform. Take for example the following initiatives being undertaken by the major payers:
- United Health Group has 1 ACO in Tucson and expects to expand to 9-13 this year
- Aetna is in more than 100 conversations about building ACOs and is actively marketing ACO back end operations functions to providers
- Centura is developing a strategy to market ACO development and operations support functions and is pursuing several ACO pilots in the commercial market
- Cigna has ACO experiments in 12 markets expanding to 30 by year end
- Humana is in discussions to develop ACOs in several of its markets, especially FL and AZ
- Wellpoint is partnering with major medical groups to establish ACOs
- Coventry is creating ACO models and may roll them out first in support of its Medicaid diversification strategy
- HealthSpring has committed to a major ACO development initiative with its major provider groups and clinics its acquired in the Bravo transaction
We're crossing our fingers that our friends in the CMS Innovation Center took those 1,200 comments to heart and that we'll see a viable final reg on ACOs next month. Broad participation in Medicare by ACOs would be another tremendous achievement to add to the legacy of Dr. Berwick.
It's Official: the Supremes Will Decide on the Mandate. Smack in the Middle of the Presidential Election.
On Monday the Department of Justice confirmed that it did not request a review of an appeals court's decision to overturn the ACA's individual mandate. The decision ensures the Supreme Court will rule on the mandate sometime in June of 2012: just months before the Presidential election.
My thinking up until today was that health reform wouldn't play a prominent role in the election; it's all about jobs and the economy. But a decision coming in the heat of the campaign could escalate the issue for voters. The ACA is one of the most contentious and visible ways the President differs from his Republican rivals. A decision by the Supremes either way — that the law is a valid exercise of Congress's power or an unconstitutional overreach — could have political effects neither side can predict.
I remain convinced the Supremes will uphold the mandate -- legal precedent is well-established that the Congress can tax interstate commerce and even "inactivity" like refusing to buy health insurance. And if it's struck down, there are several other mechanisms by which Congressional Democrats can achieve the same effect of getting the maximum number of uninsured Americans into the insurance pool of the exchanges, like "auto-enrollment" with an opt-out and penalties for late enrollment like we have in Medicare Part D.
Either way, the Republican field must be thrilled about the timing, and the President's spin team will use the decision as an opening to tout reform's successes to date -- like 2.3 million twentysomethings already allowed to stay on their parents' insurance until age 26 -- and the promise of coverage for 32 million uninsured in 2014.
The individual mandate doesn't get a lot of love. It polls horribly, is thought by many to be unconstitutional and, from a policy perspective, is tagged as too weak to push Americans into buying coverage. But let's remember that last month there was new evidence that the mandate could work: 76% of the uninsured say they would rather purchase insurance than pay the law's penalty. That would reduce the number of people without insurance to 5% of the population and have 25 million Americans purchasing through the exchanges, just slightly higher than the 24 million that the CBO projected.
This is surprising - and it isn't. On the one hand, health reform's penalty for not purchasing health insurance - which will rise to $695 by 2016 - is a lot less than the cost of buying health insurance coverage. But on the other, Massachusetts - the only state that has implemented an individual mandate - has seen high uptake.
One other interesting finding to point out here: those with the lowest incomes turned out to be the most likely to comply with the mandate. That bodes well for a sop to Obama's base when the Supremes make their call next summer. But again, it's impossible to predict the effect the Supremes will have on the 2012 elections, so hold onto your backside next summer.
Repairing Medicare
Last week the President outlined his proposal for salvaging Medicare. He suggested cutting $248 billion in expenditures over the next ten years. Significantly, that is only 4% of the $6.3 trillion estimated to be spent on the program in that decade. The money is to come from two places: The majority (90%) is from decreased reimbursement to providers and drug companies. The rest ($24 billion) is to come from charging beneficiaries more. What struck me was the deafening silence about spending smarter.
The Kaisers and the Mayo Clinics of this world have repeatedly demonstrated that good care is cheaper than bad care. It is worth thinking for a minute about the economics of good and not so good medicine. The plans are being urged—well, forced—to consider quality, but mostly from the point of view of HEDIS indicators that are heavily weighted toward preventive care and maintenance care in chronic illness. There is no question that those measures can improve quality of life, but the evidence that they will save money in an aging population is less compelling. There is, however, some evidence that good case management can save money, especially measures that decrease repeat and unnecessary hospitalizations and that cut down on complications of medical care.
One area that gets less attention, but one that I think would have the greatest financial impact, is to quit paying for care that has not been shown to be of benefit. Examples include very expensive chemotherapeutic agents that have not been proven to prolong life significantly, stents for completed MI's and strokes, or complex back surgeries for elderly patients with degenerative disease of the spine. The list is much longer than that, but I would venture to guess that just those three would produce more savings than the President's plan.
Obama Kicks the Hornet's Nest on Medicare
The President laid out his recommendations on Medicare and Medicaid to the Congressional Super-Committee on Tuesday: about $320 Billion's worth, mostly retreads of long-standing recommendations from other budget-cutting panels like Bowles-Simpson. Kaiser Health News has the details in their Wednesday story. The White House fact sheet on the President's proposal can be found here.
Obama really kicked the hornet's nest on this one -- and may have forfeited the political gift of House Budget Committee Chairman Paul Ryan's broadside to Medicare just a few months ago. Obama's taking lumps, as you'd expect, from Congressional Republicans, who in their outright refusal to look at revenue raisers, are setting up for Debt Ceiling Battle Royale Redux. But now AARP, AMA and the hospital lobby, just to name a few, are piling on.
The President gave a long-overdue impassioned plea in the Rose Garden yesterday, with the exclamation point of a veto threat for Republicans if they try to close the budget gap purely with cuts. The problem is, he's giving Democrats very little raw meat to line up for, only pain. Sure, Obama backed off the idea of raising the eligibility age for Medicare to 67, explicitly tied entitlement and tax reform, and didn't cut as much from Medicaid. That may placate his base. But not much.
I suspect he's going to have a hell of a time getting his own caucus to line up for him in the coming weeks. And my money's on an epic fail by the Super-Committee, resulting in sequestration in December -- and that's a more favorable outcome for Medicare Advantage and Part D.
P.S. I'll be talking more about this and other issues on the national stage at the Opal Medicare Advantage Strategic Business Symposium, September 26-27. Click here for more details about that event.
Medicare Advantage Premiums Down, Enrollment Way Up in 2012
We've long said on these pages that all the predictions of the demise of Medicare Advantage following passage of the ACA and its steep cuts to the program were premature. Finally, confirmation from CMS: MA premiums will fall another 4% in 2012, and enrollment will grow by a brisk 10%.
The news was delivered Friday by Jonathan Blum, deputy administrator for the Centers for Medicare and Medicaid Services. Blum said health plans are also lowering co-payments and deductibles. He attributed the premium drop to the agency's strong negotiations with plans as well as the plans' continuing desire to serve the market.
Some color commentary on Blum's announcement:
- Government programs (Medicare and Medicaid in particular) are the only segments of the insured that are growing. MA, for instance, will grow over 7% this year, topping 12.5 million beneficiaries. Part D is approaching 20 million enrollees;
- Publicly-traded companies like MA leaders Humana and United are now dependent on Medicare, deriving twice their earnings from the program than they did a decade ago (average publicly-traded health plan earnings from Medicare in 1999: 13%; today, 26%, with some like HealthSpring and Universal American over 70%. Bottom line: the big boys ain't going anywhere.);
- Over 40% of beneficiaries aging into Medicare have enrolled in MA plans the last two years, indicating the Boomers are a much more plan-friendly population than the World War II generation given managed care trends in the commercial market (HMOs, PPOs and POS plans represent more than 90% of all insured Americans).;
- Market-leading plans are adapting to the challenges of the ACA by offsetting its payment cuts with intense focus on Star Ratings quality bonuses and mastering the new state of the art in risk adjustment: the prospective home advanced evaluation. It's working, enabling plans to hold the line on benefits and premiums, and maintaining the attractiveness of these products vs. Medigap or traditional Medicare.
As long as the Congressional deficit Super-Committee doesn't fire another broadside at MA plan payment rates this fall, 2012 is shaping up to be a VERY good year.
Obama Submits (Medicare) Proposal to Super-Committee Today
The Congressional deficit "Super-Committee" formally began its work last week, and President Obama is expected to release his deficit reduction proposal today at 10am EDT. The President's plan is expected to seek as much as $3 Trillion in savings -- including, most notably, the new "Buffett Rule" establishing a new tax bracket for millionaires. The plan also includes $320 Billion in health savings over the next decade including $248 Billion in Medicare (would add 3 years to the trust fund) and $72 Billion in Medicaid cuts. The plan calls for exempting existing enrollees from some changes.
Proposed changes to Medicare are not expected to take place until 2017, and would only kick in if Republicans agree on certain revenue raisers. The President's proposal is no longer expected to include an increase in the eligibility age. Medicare cuts would mainly come from providers (reduce bad debt and graduate medical education payments, align rural providers payments with the cost of care, encourage efficient post-acute care) and by increasing Part B and D payments for higher-income beneficiaries, and discouraging certain Medigap plans. Details to come following the announcement.
We remain convinced that the best-case scenario for Medicare Advantage and Part D plans is that the Super-Committee fails to vote out a proposal (7/12 margin required), or that Congress fails to pass the plan by at least a majority vote. This would trigger sequestration, an across-the-board 2% cut to Medicare payments to providers and plans. Those cuts would hit 2013-2017, and are likely less severe than any proposal voted out of the Super-Committee.
And what about the "doc fix" -- reform of the Sustainable Growth Rate? It remains the biggest indirect threat to MA rates. Docs are facing a 29.5% cut in their fee-for-service Medicare payments starting January 1 unless Congress intervenes. Failure to address it could mean MA rates take a 7-8% hit beginning in 2013. The Medicare Payment Advisory Commission (MedPAC) plans to make recommendations for payment cuts to the health care sector that would help offset the cost of a long-term Medicare physician payment reform plan. At its meeting in Washington last week MedPAC outlined the plan, which included a freeze in reimbursements for primary care physicians and reimbursement reductions for specialists.
Stay tuned and watch this closely as the Super-Committee reconvenes on September 22nd. While MA plans "gave at the office" in health reform with around $130 Billion in cuts, we're not out of the woods yet for a second round of payment reductions.
My Talk at AHIP's Medicare Conference
I had the pleasure of addressing a standing-room-only crowd at the AHIP Medicare conference yesterday, sponsored by our friends at TMG Health, our 4th year together there. That speech always keeps me on my toes, especially this year -- a tough, smart audience that demands a tough, smart message on how to survive in the new Age of American Austerity. Here are the main points of what I said:
- Volatility and Accountability will define the sext several years in Medicare. Volatility: rates, the Medicaid dual eligible explosion, the Congressional "Super-Committee", industry consolidation, and the 2012 elections. Accountability: it's already here. Star Ratings bonuses, minimum MLR regulations, compliance, rate reviews, RADV audits, and Accountable Care Organizations.
- The State of the Union in Medicare Advantage (MA) and Part D is strong. All predictions of the demise of the program following health reform were wildly premature. MA will grow about 7% this year, and over 40% of beneficiaries aging into Medicare have chosen MA in the last two years. Local PPOs with the drug benefit integrated remain the product of the future in MA, as do Special Needs Plans given the tsunami of dual eligibles -- a $300 Billion market alone. We think MA will pass 15 million members by the end of 2015.
- Medicaid managed care is risky (BIG) business. We've already seen major awards this year in TX, LA and KY. CA is prepping the biggest RFP in US history: 150,000 duals in plans by end of 2012; all duals in plans by end of 2015: a $21 Billion opportunity. WA, FL, NH, NE, MI and HI are all preparing to move duals into plans.
- Volatility: many of us thought we "gave at the office" in health reform when the ACA whacked over $120 Billion from MA rates over a 7-year period. There's more austerity to come from the Congressional "Super-Committee" on the debt. Best case scenario? The Super-Committee fails, sequestration occurs, and we get hit with a 2% cut in 2013, 2014 and 2015, compounded. And what about the "doc fix"? If they don't fix the SGR and docs take a 29.5% cut in Medicare reimbursement in 2012, MA gets hit by about 7% in 2013, and the beneficiaries take it in the shorts. Bar the exits! Consolidation is intensifying in both payer-payer transactions, and payer-provider deals like United/Monarch (CA). And then there's the elections. My money as of today is that Obama gets re-elected by the narrowest of margins, Democrats lose the Senate, and we have another 4 years of economic doldrums with the HUGE exception of the ACA's implementation in 2014.
- Accountability: it's already here, a cornerstone of the ACA. It's embodied throughout, in Star Ratings bonuses, Accountable Care Organizations, with growing incentives for chronic care improvement, member satisfaction, and compliance. The cornerstone is transparent data reporting. Berwick's legacy will be his embedding the "Triple Aim" in the DNA of CMS. And CMS says it will terminate MA plans with less than 3 stars for 3 years running. A "good" star rating is not a hedge against the rate cut: it is an existential issue -- and a management revolution.
- What to Do?
- Aggressive revenue management in the near term. Master risk adjustment and audit-proof the function by embedding it where it belongs in Medical Management, move from claims extracts and chart reviews to Prospective in-home Evaluations, and be a Star Czar.
- Care coordination and chronic care management over the mid-term (3 years). It will take years to see results, but this is what it's all about in the mid-to-long-term. High-touch with the frequent flyers.
- Commit to a Culture of Compliance. The regulator is the purchaser, and you keep this account happy by following their rules. To. The. Letter.
- Revisit the service model and move from reactive to proactive. Health care is still a service business and Boomers are tough customers.
- Establish and Invest in Medical Homes, Accountable Care Organizations, and Exclusive Provider Organizations. In the end, it's all about the docs.
Questions? You can always reach our team at ghg@ghgadvisors.com.
PS Join me for another talk September 25-26 in Arlington at the Opal Events MA Strategic Business Symposium. Complimentary passes are still available today.
Do Stars Matter?
I have occasionally made the point that MA can have a positive impact on members' lives in a way that fee for service Medicare can never replicate. Over the weekend, I was catching up on old journals and ran across a nice case in point. If you are like me, you have wondered from time to time whether there was a real point in some of the Stars and HEDIS data you collect (particularly some of the survey questions) or whether it was just filler to make a bureaucrat feel more useful. Well, here is a reassuring answer to that question:
You are probably aware that one of the HEDIS/HOS indicators is "the percent of sampled Medicare enrollees 65 years of age or older who had a doctor's visit in the past 12 months and who received advice to start, increase, or maintain their level of exercise or physical activity." (It takes at least a 60% positive from the sample to get a plan to four stars.) Another requirement (HEDIS) is that you measure BMI at least yearly in members less than 74 years old. Does all that really matter?
It will probably come as no surprise to you that 20% of adults over 65 are obese (BMI>30) and that the number is rising every year. What you may not have thought about is that obesity is now one of the major causes of frailty in the elderly. The archetypal "little old lady" slowly maneuvering across the room with her cane has been replaced by the very big old lady (or old man) maneuvering through a grocery store on a scooter.
A group led by the geriatricians at Washington University in Saint Louis looked at the problem: they did a one year controlled study of the effects of diet and exercise in the obese elderly.[1] One study group did what they had always done (or not done), a second group dieted, a third group exercised, and a fourth group dieted and exercised. Each group that did something did better than the group that did nothing but the fourth group did best of all. Their strength went up 35%; their gait speed increased 23%; the rate at which they lost bone decreased; their peak oxygen consumption (a reflection of the ability to be active) increased; their balance improved and their risk of falling decreased.
We are accustomed to thinking about weight loss and exercise programs in younger adults as ways to prevent hypertension, diabetes, and other chronic illnesses. It is a different matter in the elderly. For them it is a way to directly and significantly improve the quality of life.
So should MA plans take pride in the fact that they are collecting data about exercise and weight loss and that the good ones are finding better ways to use that data to help their members get thinner and more active? You bet they should.
[1] Villareal, Dennis et al, "Weight Loss, Exercise, or Both and Physical Function in Obese Older Adults" NEJM:364, 1218-1229, March 31, 2011
Alternatives to the Individual Mandate
Kaiser Health News is doing some tremendous reporting these days. Today they offered some perspectives from a number of experts on alternatives to the individual mandate, recognizing the unlikely chance the US Supreme Court will strike it down when it considers the issue next year. We think the mandate will be upheld given other precedents that allow the Congress to regulate interstate commerce and tax economic inactivity like refusing to buy health insurance.
Granted, if the Supremes kill the individual mandate, legislative prospects for these alternatives may be slim. Democrats are in peril of losing both the White House and the US Senate in 2012 (see the current futures markets outlook on these outcomes at InTrade.com here). Still it's encouraging to see so many potential options, and even the perspectives that ACA implementation could proceed without it.