The Claws Will Come Out at CMS in 2013
Health plans and other stakeholders in Medicare Advantage and Part D can be assured of one thing by President Obama's reelection: that the claws will come out at the Centers for Medicare and Medicaid Services (CMS) in his second term.
Having worked a number of years at the agency I can tell you there is a natural tendency among career regulators to be emboldened in a President's second term. With legacy in mind they know that a Democratic White House won't push back much on a more aggressive posture with the private sector. And frankly many of those regulators have scores to settle with some of the companies in their portfolio that go back even pre-Obama. Now's their chance.
But CMS on the warpath in the next four years is driven by many more factors this time around, like the fact that the agency would like to be in business with many fewer than the almost 2,000 plan options available in Medicare Advantage. The career staff feels there's an embarrassment of riches in MA/Part D, to the point that it confuses beneficiaries. Therefore, a priority in the second term will be to simplify the program by systematically hunting down and eliminating inferior species.
Second, CMS made it very clear that it would begin targeting Medicare Advantage and Part D plans with lower than 3-Star ratings for three or more years in 2013. Low-Stars plans also get the "Scarlet Letter" of a low-quality indicator on Medicare.gov, and this past AEP marked the first time CMS actually sent letters to enrollees of sub-3 Star plans encouraging them to take a look at higher-ranked plans in their market. If you've been below 3 Stars the last several years you now have a target on your back.
Third, budget pressures and cuts to CMS's administrative funding in the last couple years meant that CMS shifted more of its traditional oversight functions to the plans themselves. This year, through routine site visits and remote data monitoring, CMS will find that many of those functions have been neglected and the agency will make some examples. This is particularly true of the renewed focus by CMS on delegation oversight -- how a plan monitors its vendors like its pharmacy benefit manager and affiliated provider groups. They'll also pay much more attention to "compliance effectiveness" -- whether the plan's internal compliance program is actually a living, breathing function that roots out issues before they become problems for beneficiaries.
Fourth, there were a number of new audit protocols for 2013 announced by CMS in last year's call letter, such as expanded use of private contractors overseeing program integrity in Medicare Advantage and Part D, renewed emphasis on remote monitoring of sales and enrollment "red flags", and intense focus on Complaint Tracking Module cases where beneficiaries are howling about poor performance.
Finally, 2013 will be the year that the long-dreaded Risk Adjustment Data Validation (RADV) audits will begin in earnest. CMS, its program integrity vendors, and the law enforcement branch of HHS, the Office of Inspector General (OIG), will undertake dozens of audits of health plans' diagnostic data submitted for risk adjustment in the coming two years. Yesterday OIG said the $124 billion MA program is the focus of very few investigations from fraud-hunters—a conclusion that comes on the heels of several RADV audits alleging hundreds of millions of dollars of questionable payments in the program. Last year HHS officials published the results of years-long investigations into four MA plans, and concluded that the plans had received nearly $600 million more than they should have in 2007 by inflating diagnostic data. All four companies denied the allegations, but OIG is continuing with probes of several other of the 175 plans participating in MA.
This is also about setting the tone with health plans before the launch of the Affordable Care Act's health insurance exchanges this fall. CMS knows most of the plans that participate in Medicare Advantage and Part D will also jump into the exchange, and bloodying some noses in 2013 lets them all know who's calling the shots as we sail into what promises to be a chaotic launch of health reform. Remember the messy launch of the Medicare drug benefit in 2006? The launch of the exchanges and the complexity of the subsidies will make Part D pale in comparison...and CMS wants its private sector partners to be walking on eggshells.
Smart executive teams will commit themselves to a doctrine of "lean and clean" and a culture of compliance in the President's second term.
Resources:
For more infomration on how Gorman Health Group can help with Part D requirements, visit our website.
For information on how Gorman Health Group can help support your goals with Medicare Advantage, visit our website.
To find out how Gorman Health Group can help you develop a Star Ratings action plan, visit our website.
American Taxpayer Relief Act of 2012
The January 1 legislation to fix the fiscal cliff postpones the scheduled 27 percent Medicare physician fee schedule cut under the Sustainable Growth Rate formula for one year. In order to pay for the doc fix, there are a number of payment reductions to Medicare fee for service providers, especially reductions in hospital and ESRD payments, and an extension of the DME competitive bidding program to diabetes test strips purchased at retail pharmacies. The Medicare Advantage (MA) program also takes a hit. The legislation saves $2.5 billion over ten years by adjusting the MA risk adjustment methodology to increase the coding intensity adjustment factor for 2014 from 1.3 percentage points to 1.5 percentage points and to increase the adjustment factor for 2019 and subsequent years from 5.7 percent to 5.9 percent. The coding intensity adjustment is intended to reflect different coding patterns between Medicare Advantage plans and FFS providers.
The legislation postpones the sequester for two months. MA plans are subject to a 2 percent cut beginning in March if the sequester is not repealed or amended.
The legislation extends the special needs program through December 2014 and the Medicare managed care cost program through December 2013.
The legislation extends the authority and funding ($7.5 million in FY 2013) for SHIPs (State Health Insurance Programs) and Area Agencies on Aging to conduct outreach and assistance for low income subsidy programs.
The legislation extends the Qualifying Individual (QI) program and the Transitional Medical Assistance program through December 2013.
The legislation amends two provisions in the ACA. The legislation precludes spending for any new Consumer Operated and Oriented Plans (CO-OPs). The legislation also repeals the CLASS long term care program and establishes a Commission on Long Term Care to make recommendations on long term services and supports.
Resources
For more information on how Gorman Healh Group can help with Medicare Advantage Risk Adjustment visit our website.
View a 90-minute recording on "Risk Adjustment in the Exchanges - Lessons Learned from MA and Part D".
Listen in to what Jean LeMasurier thinks will happen next regarding the outcome of the fiscal cliff.
Health Affairs: Medicare Advantage is Crushing Fee-for-Service
Two new Health Affairs studies this month brought further evidence that Medicare Advantage (MA) is crushing traditional fee-for-service Medicare in quality, and that the world's largest experiment in risk adjustment is working in MA.
The first study suggests that members of Medicare plans "might use fewer services and be experiencing more appropriate use of services than enrollees in traditional Medicare."
The second suggests that the government has succeeded over the past decade in reducing favorable risk selection in MA plans by introducing diagnosis-based risk adjustment, a lock-in period for members, and expanded plan types.
The studies together paint a compelling picture that MA plans are crushing traditional Medicare in cost containment without necessarily serving the healthiest members, and that risk adjustment has the desired effect.
The New Post-Reform Core Capability for Health Plans: Risk Adjustment
Medicare Advantage and Part D have for years been the world's largest experiments in paying insurers more for the care of sick members while paying less for healthier members, or risk adjustment. Some two dozen states now risk-adjust Medicaid payments to health plans, and the hundreds of Accountable Care Organizations (ACOs) launching this year and next are risk-adjusted as well. Now that the election has been decided, we know that health plans operating in the insurance exchanges launching in 2014 will also be risk-adjusted based on a similar methodology to that used in MA and Part D. It's the new core capability for health insurers in the post-reform world, and it's examined closely by my two top experts, Bill MacBain and Dr. Jack McCallum, in this month's Managed Healthcare Executive magazine here.
Election Gives Health Reform the Kiss of Life
It's hard to argue this wasn't a decisive victory for the President and Democrats in the Senate. What remains to be seen is whether intractable Congressional Republicans will come to the table to get stuff done.
While it was a distant #2 issue in exit polls, this election was a de facto referendum on health reform. The ACA will not be repealed and is now assured to be Obama's lasting legacy. The "repeal and replace" campaign -- over three dozen repeal attempts in Obama's first term at taxpayer expense of more than $50 million -- is over. The GOP fought the ACA fiercely but I expect it will be hugely popular by 2016. Our hope is that Congressional Republicans will lay down their arms and help shape the ACA's implementation so they can share the credit when it's as successful as Medicare Part D has been. House Speaker John Boehner made some welcome gestures this week, asserting that "ObamaCare is the law of the land" and that the repeal agenda is over. We'll see.
Here are some thoughts on what happens in government health programs now that the election is over:
Sequestration and Fiscal Cliff: the 2% across-the-board sequester will not happen and the two parties will make a deal on the fiscal cliff that leaves everyone pissed — like compromise is supposed to. The political dynamics strongly favor the President, as his ideal scenario — raising taxes on the wealthy to accompany budget cuts -- occurs without any legislative action, and nothing happening in Congress is always a safe bet these days. Any deal reached will now involve both entitlement cuts and tax increases, we'd guess in the neighborhood of $2T or roughly half that recommended by the Simpson-Bowles Commission, and it will have bipartisan support.
"Doc Fix": The Sustainable Growth Rate (SGR) or the "doc cut" will be fixed, but it has to be paid for — and that's the obstacle both parties struggle with. MA rates are profoundly impacted by this issue, and Congress's inclination to deal with it through annual increments rather than the 10-year price tag in CBO estimates means that MA plans must wait until the next year's rates are announced. The discrepancy between how and when MA rates are set vs. FFS means that MA plans are never really made whole. It's a tremendous challenge for our industry — and an enormous windfall for MA in 2014 and beyond if Congress solves the problem.
Exchanges: Many Red State governors held out hope the election would settle whether they must prepare for health reform. The 11th hour means most have been caught flat-footed and the Federal Exchange will operate in over 30 states and will be the defining marketplace for health insurance starting in 2014. Far-right governors in Kansas and Virginia will eat the Federal fallback; Wisconsin Governor Scott Walker is now scrambling to get his own exchange together, and a handful of others may follow. It's one of the supreme ironies of Obama's reelection: the governors who screamed loudest of a "government takeover of health care" are about to get just that for their inaction, when the Federal Exchange comes to town in 2014.
Medicaid: most, if not all, of the 7-8 Red States who opposed expansion following the Supreme Court ruling will fold and take the expansion funds in the next 90 days — it's just too good a deal to pass up. Most of the 16 Million new Medicaid beneficiaries envisioned by the ACA — many childless uninsured adults -- will be assured of coverage in a second Obama term.
Dual Eligibles: The migration of dual eligibles to health plans will now move forward in more than two dozen of states in the next two years. The state fiscal crisis will overwhelm concerns about the speed of the migration, and it will result in over $200 Billion in new annualized premiums for plans in the next 3 years. The duals are now affirmed as the biggest opportunity for health insurers in a generation — bigger than the exchanges. They're also the most vulnerable, complex and expensive patients in the entire US health system and will challenge health plans like never before.
Medicare Advantage and Part D will continue on the course set by the ACA, and we expect the consolidations within the industry to accelerate with the election's uncertainty resolved. Look for a much tougher CMS in a second Obama term, with a continued increase in oversight, bolder regulations raising the bar, and a tougher compliance posture from CMS for Medicare Advantage and Part D plans.
- The Stars program's current trends will continue: Standards will change every year and underperforming plans will be hunted down and eliminated. CMS may get moving on SNP-specific rating standards, as SNP plans will be in trouble soon without them. Plans with 4+ Stars will continue to get bonuses and rebates under the ACA, but 2013 will usher in a new era of sub-3 Star plans being shut down by a much tougher CMS.
- CMS will keep trying to find a better way to risk adjust. We expect an attempt to recalibrate the HCC coefficients based on encounter data, which will change the dynamic: Plans will have to find missing codes to avoid being cut, rather than getting paid more. How CMS adjusts for the FFS error rate will be crucial.
- SNP and 1876 reauthorizations will both get paid for, but we need a vehicle to get the 1876 extension quickly, since it expires the end of December 2012. SNPs expire at the end of 2013, and so have more time for reauthorization.
Medicare: We expect Medicare will serve as a piggy bank for deficit-reduction proposals, given its size and fiscal situation.
- The Ryan/Wyden Medicare reform proposal will be debated as a gesture of "cross the aisle" goodwill from the President, but won't come close to enactment. But "premium support" will go mainstream in the debate and become more palatable over time — it reeks of inevitability and Democrats must come to the table to save the program we all hold so dear. The discussion begun by Ryan and Wyden must have its day.
- We expect the cuts that have been considered in prior budget proposals will be back on the table, including: fraud detection, reforming Medicare cost sharing rules, restricting first dollar coverage in Medigap, extending Medicaid drug rebates to duals and LIS, and more means testing. Provider cuts will also be on the table, especially for hospitals.
- An increase in the eligibility age to 67 is a possibility. But unlike with Social Security, deferring the eligibility age merely cuts off the lowest-cost tail of the distribution. The cost reduction would be disproportionately small compared to the number of people politicians would upset.
ACOs: with the ACA intact, the truly astounding surge in ACOs participating in Medicare, Medicaid and the commercial market will continue. Over 100 ACOs are already operating in Medicare. Over 500 applications were received by CMS for the September filing deadline for the Medicare Shared Savings Program, and over 300 ACOs are active in the commercial market and Medicaid reforms. With the election ACOs are here to stay as the bedrock contracting vehicle for the evolution and enrichment of forward-looking providers.
While it ended up a "status quo election" it gave the Affordable Care Act an indelible kiss of life and ushers in one of the biggest changes in our domestic policy in a generation. Now it's time to get down to the real work of implementing it.
Join us Thursday for First in New Webinar series: Risk adjustment in the exchanges
On Thursday July 26th at 1pm ET we'll kick off our new webinar series, "Lessons from Medicare Advantage and Part D", a monthly webinar series around what we've learned in Medicare that can be applied to the exchanges and other aspects of health reform. We'll begin with a deep dive on risk adjustment in the exchanges.
Risk adjustment is the defining health care finance issue of the decade, and MA and Part D represent the largest experiments in risk adjustment on the planet. MA and Part D's risk adjustment system is the blueprint for ACOs, the exchanges, and a growing number of state Medicaid programs as well. We'll explore the risk adjustment provisions in the ACA and the final regulation, and apply what we've learned in the last 7 years to the future of health plan payment, with our partner Dr. Jack McCallum, CEO of GHG sister firm CenseoHealth. Bring your CFO, Chief Strategy Officer, CMO,Chief Marketing Officer, and your actuaries for a geektastic discussion on how to follow the money post-2013. In the coming months we'll examine other reform topics where the Medicare, Part D and Medicaid Dual Eligible experience shines a light: In early September: Distribution In and Around the Exchanges: Lessons from MA and Part D. We'll explore how individuals with subsidies and small groups will be sold the "metal" plans, especially in the Exchanges through Navigators and other impartial facilitators, to the deployment of brokers and sales management. Our focus will be on the Federally-Facilitated Exchange, which could operate in as many as 40 states, with updates on specific states as applicable. In late September: we'll explore the Nuts and Bolts of the Federal Exchange: Lessons from MA and Part D. We'll focus on how the Federal Exchange will function from a 10,000-foot level perspective, where the plan interfaces are and the broad strokes of anticipated reporting requirements. In late October: Product Strategy in the Exchanges: Lessons from MA and Part D. How subsidies will work based on income determinations; a landscape view of where states are on accepting ACA Medicaid expansion dollars in the wake of the SCOTUS ruling. For Red States: what the new "near-Medicaid coverage gap" means in those states that refuse the ACA funds. We'll examine how to segment the market for Platinum, Gold, Silver, and Bronze plans, and the allowability of supplemental insurance products (like dental) in the exchanges. What existing commercial and government programs provider networks mean to product pricing and strategy. The imperative for a database of local individual claims to wargame product designs on. More to come. The scars on our collective backsides in Medicare the last 16 years provide some great "teachable moments" for the new world post-ACA. We look forward to the discussion.
The Supremes Say the Mandate is Constitutional. But Voters Get the Final Word.
Washington's best-kept secret since JFK and Marilyn Monroe came out today: the Supreme Court upheld the individual mandate in the ACA in a 5-4 decision made by Chief Justice John Roberts. The President ducked a bullet in the ruling and comes out strong heading into the election on this issue; the decision will galvanize the right and embolden the left; and Chief Roberts finessed the issue by calling the mandate a tax, avoiding new precedent and getting the Supremes out of the nastiest domestic squabble since Bush v. Gore. But the Supremes didn't get the last word on the ACA: that rests with the voters in November. Making Obama a one-termer is now the GOP's only hope to stop health reform.
The Supremes' decision means reform moves forward without delay. That means most of the 26 Red States that brought the case to the Court, and a handful of others, are now WAY behind in implementation and will likely have the Federal Exchange jammed down their throats in January 2014 for their intransigence. That's the Supreme irony of the case: for all their bitching about a government takeover, that's exactly what those states will get for having done nothing while the case worked its way through the Courts.
The decision also means there is no impact whatsoever to Medicare. The cuts to Medicare Advantage (MA) remain and will continue to be phased in. The Star Ratings bonuses and rebates remain untouched. The new Part D coverage expansions -- the "jelly" in the donut hole -- are as sweet as ever. Accountable Care Organizations (ACOs) move forward. Minimum medical loss ratios (MLRs) take effect in Medicare Advantage in 2014. The coding intensity adjustment in MA remains. The Retiree Drug Subsidy (RDS) continues to phase down by 2016, compelling more employers to push their retirees into MA and Prescription Drug-only Plans. Insurer and provider taxes stay put. And 9 Million Dual Eligibles continue their march into health plans. It's as if the case never happened. And that means, as we've said many times here, it's still all about Star Ratings, Risk Adjustment, and chronic care management as keys to survival in Medicare this decade.
Now the only thing standing in the way of ACA implementation in January 2014 is if Obama is deposed in November and the GOP can get enough votes for "repeal and replace". Republican nominee Mitt Romney -- the original baby-daddy of the individual mandate in Massachusetts -- said he raised over $1M in campaign contributions in the first two hours after the decision came down. Obama will use the decision to try to reboot his health reform message. And the election becomes a referendum on the ACA.
Strap on your crash helmet and hold onto your butt -- the next 4 months will be the nastiest campaign cycle this country has ever seen. But for now, the ACA lives. And if you're in health care, you should be turning cartwheels today.
Times Are A-Changin'...Get Your Team to the GHG Forum June 12-13
In response to client requests, GHG is holding its first-ever Client Forum June 12-13 in Washington. With so much change in the air in government programs, the Forum is the perfect opportunity to get your team focused on the road ahead.
This isn't a disjointed lineup of vendors selling from the podium like at your usual industry conference: the presenters are all GHG's elite subject-matter experts, and the agenda is designed to be a silo-busting deep dive for government programs executive teams, with downtime built-in to allow you and your team to process and plan ahead. If you want answers, this is your gathering.
Change is a constant in the government programs world, and most of the folks who call us for help are those who are too busy these days to do anything but react. We have a motto at GHG: you can't react your way to excellence. Take two days to join us, bring your team leaders, and learn about how to get ahead of what's coming.
Don't waste your travel budget
We're less than three months from the GHG Forum. This is NOT your usual conference. We've developed a unique educational retreat for management teams working in government programs. I'm thrilled at the presentations our faculty are preparing: we're putting our senior consultants on the stage to deliver case studies, war stories and tales of best practices. But just as importantly, we're building in time for you to react to these sessions with your team--- to develop questions for your track faculty, compare notes, discuss implementing the best practices you've learned about.
We know it's a new concept in an industry that's become accustomed to sales people masquerading as subject matter experts. But we think that's it's badly needed. Many management teams we work with bemoan the lack of time and space to learn, collaborate and plan for success. In this environment, it's easy to simply react. But no one has ever reacted their way to excellence.
No doubt, if you send one to two people they will benefit individually. But isn't the isolation of our departments from each other central to our basic challenge of reforming our plans? We invite you to join other plans (some are sending as many as a dozen attendees) in making the GHG Forum your travel investment for the year. Send a team. We'll show you around.
Solving your claims-based HCC conundrum
Everybody knows that 37% of claims-based HCCs fail in a RADV audit, but no one ever talks about how to fix the problem.
How to fix the high failure rate of claims based HCCs?
1. Filter your claims and tier into confidence levels (high, moderate and low). (We call our filtration, tiering, and resolution tracking solution CareCurrent.) We recommend you filter on frequency, site of service, provider of service, clinical significance, plus CMS compliance and clinical condition alignment.
2. Audit your medical groups with both the highest member density plus your providers consistently in your low confidence coding tier.
3. Note the diagnoses or most common conditions inaccurately recorded.
4. Meet with physicians and staff to create an evaluation to billing process improvement workflow for your top three most common inaccurate codes. Repeat this education and communication with other medical groups.
5. Re-stratify your claims and note improvements using CareCurrent if you have no internal system.
6. Audit the new dates of service stratified and glean if the education and new workflow aided in more specificity or accuracy in coding.
7. Create clinical and coding initiatives as appropriate to compliment your coding areas of improvement.
If you note that previous codes were inaccurately billed in claims and submitted to CMS, delete the codes prior to final sweeps to ensure appropriate payment and audit success.