President Obama's hallmark domestic policy initiative has been blunting the worst shortcomings of the US healthcare system. But it is unrealistic to expect the PPACA alone to totally transform the practice and financing of medicine.
"Every revolution evaporates and leaves behind only the slime of a new bureaucracy." – Franz Kafka
After receiving a recent HealthPocket.com study on the Top 10 medical services excluded from health insurance policies on the new public exchanges, my first reaction was "here we go again" – here is yet another black eye for the PPACA rollout.
HealthPocket.com, which is based in Sunnyvale, CA, found that eight of the top 10 medical services excluded from health insurance policies before the PPACA are also excluded from insurance policies on the new public exchanges. "There hasn't been a dramatic change from the pre-exchange market to the post-exchange market," Kev Coleman, HealthPocket.com's head of research and data, told me last week.
But on close examination, Coleman says, it becomes apparent why the pre-exchange and post-exchange Top 10 lists are nearly identical, for a host of financial, historical and moral reasons. "The health system expresses itself in that Top 10 list," he says.
The No. 1 medical service excluded from insurance policies before and after creation of the new exchanges is long-term care, which is associated with burdensome costs. "Long-term care is extremely expensive," Coleman said. "If you're inside any institutional facility, it costs tens of thousands of dollars."
Two of the other classes of medical services that appear on both lists, dental and vision care, have historically tenuous holds in the health insurance marketplace. "Originally, people paid out of pocket for all their healthcare needs," Coleman said. "Things like dental insurance and vision insurance come along much later."
Harald Schmidt, MA, PhD,
And, he says, a strong moral case can be made against health insurance policies covering cosmetic surgery, which holds the No. 2 slot on both Top 10 lists of excluded medical services.
Evidence-based Medicine Raises Questions of Cost
Coleman and a pair of medical ethicists I spoke with Monday said the HealthPocket.com study contains elements of a brewing conflict over evidence-based medicine.
"Health insurance costs reflect costs of care," Coleman said, adding that evidence-based medicine seeks to "bend the cost curve by covering procedures that have the best clinical outcomes. But then you get into a very sensitive area."
Harald Schmidt, MA, PhD, an assistant professor at the University of Pennsylvania's Department of Medical Ethics and Health Policy, told me that doctors will have difficulties following the dictates of evidence-based medicine when treating individual patients. "They are very often at the sharp end of patients asking for something they saw on TV," he said of physicians. "On other things, there may be stronger shades of gray."
The murky areas present quandaries for all healthcare providers, Schmidt said. "Should you pay for useless care? That's the easy case. But what do you do when something works but it is expensive?" he said. "That's the really thorny one… There are always value judgments involved. That's something we're going to be looking at in the future as we define value when we have to figure cost into the equation."
One set of solutions to pay for treatments that are expensive but effective has been the steady increase in copays and other forms of cost sharing, Schmidt said: "Coverage alone isn't the only thing that matters."
Arthur Caplan, PhD, director of the Division of Medical Ethics at NYU Langone Medical Center, emphasizes that knowing the probability of clinical outcomes does not obviate the need to make value judgments about medical services that are marginal, longshots, or offer low benefits at high cost. "If you don't get agreement on the ethics, the evidence isn't enough," he said.
The Limits of Revolution
For those of you who find the HealthPocket.com study yet another discouraging report from the frontlines of the nation's healthcare reform battles, take comfort in humanity's past experience with revolution before you give up on the PPACA's impact in the future.
One of my first political science courses as an undergraduate included theoretical analysis of the French Revolution. I can see the instructor in my mind's eye and recall one of his fondest maxims: Revolution cleanses a society of its worst abuses, but fails to wash away the majority of longstanding institutions and traditions.
The evolution of the PPACA appears to be following this maxim.
President Obama's hallmark domestic policy initiative has been blunting the worst shortcomings of the US healthcare system, for example, by requiring insurance policies to cover pre-existing conditions. But it is unrealistic to expect the PPACA alone to totally transform the practice and financing of medicine.
"[The Obama administration] is finding that there's still a combination of unintended consequences as well as large issues that are not addressed," Coleman said.
The PPACA's focus on access and affordability has left the question of essential benefits in health plans largely off the revolutionary menu. "We never really have had a fight about benefits," he said.
A move by CMS to tweak the public health insurance exchange rules grants a measure of relief to states where individuals have struggled to enroll because of faulty state exchange websites.
They are still looking at the fine print, but state officials are welcoming a decision by the federal government to ease public exchange enrollment for individuals in states with exchange website woes.
On Feb. 27, the U.S. Centers for Medicare & Medicaid Services issued a bulletin announcing the availability of advance payment of the premium tax credit and cost-sharing reductions for individuals who have had trouble enrolling in states with troubled exchange websites.
The bulletin says the enrollment relief measures are being granted in states that "have had difficulty in providing timely eligibility determinations to applicants and enrolling qualified individuals in Qualified Health Plans through the Marketplace during the initial open enrollment period for the 2014 coverage year."
The open enrollment period ends March 31.
In comments to HealthLeaders Media this week, state officials in Massachusetts, Minnesota, and Oregon, which have all experienced significant problems with their exchange websites, praised both the substance and the spirit of the CMS bulletin.
"Here in Massachusetts, we have put in coverage extensions and transitional coverage that help people who may be having trouble accessing the website, and we are working on identifying how that programming crosses over with the CMS guidance," said a spokesman for Massachusetts Health Connector. "That said, throughout our transition to the Affordable Care Act, we have been working very closely with CMS and the federal government to ensure that we are delivering the choice, benefits, and expanded subsidy opportunities to as many people as possible in Massachusetts."
On Monday night, Minnesota Governor Mark Dayton issued a brief but emphatic statement on the CMS bulletin. "I guarantee that my administration will do everything possible to provide Minnesotans with all the federal tax credits for which they are eligible," the first-term Democrat said.
Officials at MNsure, the public exchange in Minnesota, were cautiously optimistic that the CMS bulletin will help residents in the state who have struggled to enroll online. "There are a number of important decisions for MNsure to make in regards to this bulletin," the Minnesota officials said. "There will be opportunities for Minnesotans to secure retroactive coverage when warranted, which is certainly a positive step for consumers who need affordable health insurance. We are still assessing this situation, and we are working very closely with our health insurance company partners to determine how we will proceed."
A spokeswoman for Cover Oregon also said state exchange officials were working in tandem with insurers to make the most of the flexibility offered in the CMS bulletin. "We will work closely with our carriers to get this policy implemented so that Oregonians get the financial help they are eligible for," she said.
Enrollment has been one of the prime areas for cooperation between CMS and insurers in the rollout process for the public exchanges since they were launched in the fall.
In November, CMS announced a pilot program in Ohio, Florida, and Texas to allow individuals a "direct enrollment" option to buy health insurance. "If consumers choose to directly enroll in a Marketplace plan through an insurance company, they still will be able to compare products, and choose the one that offers them the best value for their dollar," Julie Bataille, CMS director of communications said in an agency blog post on Nov. 22. "Consumers will be informed that they can compare and select other plans on HealthCare.gov, and prior to buying a health plan, [a] consumer's application will be securely routed to HealthCare.gov to assess their eligibly for coverage along with potential discounts on premiums and cost sharing."
In her blog post, Bataille said the direct enrollment pilot program was linked to ongoing efforts to improve the rollout of the public exchanges. "Issuers utilizing direct enrollment in these three states will provide detailed feedback on their experiences to feed into our real-time work to make improvements for both consumers and issuers," she said.
CMS has issued a clarification on its rule governing how Medicare classifies and pays for short hospital stays, but healthcare providers are still crying foul over the new standard.
A top policy official at the American Hospital Association says last week's Two Midnight Rule guidance letter from federal officials provides welcomed clarifications but leaves the policy fundamentally flawed.
"This is guidance that hospitals have been waiting for," said Priya Bathija, senior associate director of policy at the AHA. "It's been very hard for hospitals to operationalize Two Midnights without the guidance."
She praised the directive in the Feb. 24 guidance letter calling on Medicare Administrative Contractors to "re-review" all claim denials under the Two Midnight Rule's probe and educate process prior to Jan. 30. The Centers for Medicare & Medicaid Services says the MAC claim denial re-reviews are supposed "to ensure the claim decision and subsequent education is consistent with the most recent clarifications. The MAC may reverse their decision and issue payment outside of the appeals process if the MAC determines that a claim is payable upon re-review."
Last week's guidance letter from CMS is the second is less than a month. On Jan. 30, CMS issued a guidance letter that included an update on physician certification of short-term hospital stays.
"The probe and educate review will be beneficial to find out whether hospitals are complying," Bathija said. "It requires the MACs to be consistent. All of the MACs across the country will use the guidance from Jan. 30 to evaluate claims."
Under the rule, which CMS issued last year on Aug. 2, hospitals that admit patients for less than two nights will receive reimbursement at Medicare B outpatient rates. The rule states that hospital admissions shorter than two midnights in length are "generally inappropriate for payment under Medicare Part A, regardless of the hours the patient came to the hospital or whether the patient used a bed."
CMS made its case for the so-called "Two-Midnight" policy in a prepared statement released with the final rule on Aug. 2. "The rule improves value and quality in hospital care and provides clarification about when a patient should be admitted to the hospital and responds to recent concerns about extended Medicare beneficiary stays in the hospital outpatient department," CMS officials said.
"The rule also moves forward with health care delivery system reforms made possible by the Affordable Care Act. These include a new program aimed at improving safety in hospitals and refining the Hospital Readmissions Reduction program."
CMS's prepared statement includes this comment from Administrator Marilyn Tavenner: "This rule helps improve hospital care and establishes clearer guidance to hospitals for when we will consider inpatient care to be appropriate so the system works better for patients and providers."
Rule Resistance
From the AHA's perspective, "This Two Midnights standard is just arbitrary," Bathija said, adding the policy penalizes hospitals for being efficient in patient care or providing treatments that involve a short-term hospital stay.
Bathija said the AHA is asking CMS to either develop a better payment methodology within the Two Midnight policy or to replace the rule with a better method to pay for short-term hospital stays.
The American Medical Association, which has also been an outspoken critic of the new policy, expressed an even more skeptical view following the release of last week's guidance letter.
"The new policy does not solve the problem of unanticipated financial liabilities for patients, and increases documentation burdens for physicians," AMA President Ardis Dee Hoven, MD, told HealthLeaders on Thursday. "Recent guidance from… CMS on the order and certification requirements for physicians leaves many questions unanswered, and has not alleviated confusion. While we are encouraged by CMS's recent delay in enforcement and the decision to have Medicare Administrative Contractors review their application of the new policy, these issues continue to cause tremendous difficulties for physicians and patients."
Hoven said CMS needs to cut its losses and move in another direction. "We will continue to work with stakeholders to rescind the Two Midnight policy and pursue alternative workable solutions," she said.
On Feb. 20, the AMA and seven other medical societies filed an amicus brief in a case before the Second Circuit of the US Court of Appeals pitting a half dozen Medicare beneficiaries against HHS Secretary Kathleen Sebelius.
In the filing, the medical societies assert that they are "concerned that those patients covered under the Medicare Program should receive the benefits to which they are legally entitled and that those patients do not suffer financial hardship on account of arbitrary administrative decisions."
The legal brief claims that the Two-Midnight Rule imposes an unfair burden on Medicare beneficiaries. "The refusal by HHS to afford the plaintiffs the benefits that come with inpatient status led many of them to substantial medical and financial hardships," the medical societies state. "The financial losses for each of the [Medicare beneficiaries] ranged from $4,000 to $30,000."
'Ill-conceived and Poorly Drafted' Mark Bogen, senior vice president and CFO at South Nassau Communities Hospital in Oceanside, NY, offered a scathing assessment of the Two Midnight Rule via email Thursday:
"The Two-Midnight Rule came out as a way by CMS to deal with the RAC process that they created, which resulted in a huge backlog of unadjudicated appeals and the mounting threat of lawsuits from the AHA and other interested parties on behalf of the hospital industry. It was ill-conceived and poorly drafted and it is why the 'enforcement' has been delayed until October 1, 2014, for now…
"I believe that instead of measuring/defining inpatient status based on the 'clock' they would have been better served to create a system, which they ultimately did do for the Transfer Issue back in 2002, whereby these short stays would be paid using the [diagnosis-related group] methodology but would be reduced for the fact that the stay was short.
The ability to have to monitor this at the Hospital level has added untold burden and cost and does not lead at all to the triple aim (Patient Satisfaction, Quality Outcomes and Lower Cost) as well as it in fact shifts the financing cost between Part A (Medicare tax component of FICA) and Part B (basically a premium-based financing) and shifts cost to the Medicare Beneficiary…
Bogen, echoing the AMA and AHA, said "the Two-Midnight rule needs to be repealed and a more thoughtful process needs to be contemplated."
A study commissioned by America's Health Insurance Plans is predicting a second consecutive year of deep payment cuts for Medicare Advantage programs which "could result in a high degree of disruption in the MA market."
America's Health Insurance Plans is projecting a 5.9 percent cut to Medicare Advantage payments in 2015 and the group issued a stern warning Thursday that the reduction in funding would have dire consequences for the popular program.
After taking a 6 percent hit in the current year, an MA payment cut of similar size in 2015 "puts at risk the coverage of millions of seniors," AHIP President and CEO Karen Ignagni said during a conference call announcing a study, which was conducted for AHIP by New York-based management consulting firm Oliver Wyman. "You add something of this magnitude… that is a material impact."
Ignagni said the industry association had commissioned the study to help clear up confusion linked to last Friday's notice letter from the Centers for Medicare & Medicaid Services. "One thing we know is there is a lot of confusion and uncertainty about the impact [of the proposed cut]," she said. "There's no one number in the Friday notice, which is what makes this study so important."
Glenn Giese, principal at Oliver Wyman and one of the authors of the commissioned report, said MA would take a "5.9 percent cut if this payment notice holds up." For beneficiaries, he said the payment cut would result in reductions of MA benefits or increases in MA out-of-pocket costs from $35 to $75. The dollar impact on beneficiaries from the 6 percent MA payment cut in the current year ranges from $30 to $70, according the study.
5-Star MA Plans Bonuses Would be Trimmed
The study includes a detailed accounting of the factors contributing to the projected 5.9 percent cut, with the prime factors as follows:
PPACA quartile impact: -2.4 percent
Reduction of bonuses in 5-star rating system: -1.9 percent
Ratebook change: -1.9 percent
Projected insurer fee: -0.8 percent
Risk score normalization factor: +3.2
Elimination of home assessment diagnoses: -2.0
Projected Effects on the Market
The study's authors conclude that the proposed payment cut poses a threat to the MA program, including a reversal of enrollment growth that has pushed the number of seniors in the program above 15 million.
"We find that the payment policies proposed in the 2015 Advance Notice in combination with the continued phase-in of the ACA cuts and other legislative and regulatory cuts… could result in a high degree of disruption in the MA market," the report states. "This includes the potential for plan exits, reductions in service areas, reduced benefits, provider network changes, and MA plan disenrollment due to declines in plan value from 2014 to 2015."
Ignagni said MA insurers are particularly worried about the 41 percent of MA beneficiaries who have annual incomes below $20,000. "They are on very low incomes and they are very cost-sensitive," the AHIP president and CEO said.
CMS is slated to reach a final decision on the 2015 payment level for Medicare Advantage on April 7.
New Political Battle Line
With the Patient Protection and Affordable Care Act a focal point of this fall's mid-term elections in Congress, the proposed payment cut for Medicare Advantage has sparked a political firestorm in Washington.
On Tuesday, six Republican Senators sent a letter to HHS Secretary Kathleen Sebelius, blasting the proposed payment cut. In addition to Senate Minority Leader Mitch McConnell (R-KY) and Minority Whip John Cornyn (R-TX), the letter was signed by Sens. John Barrasso (R-WY), Roy Blunt (R-MO), Jerry Moran (R-KS) and John Thune (R-SD).
"During the debate on Obamacare, many of us warned about the impact on America's seniors of raiding Medicare to finance a new entitlement program," the senators wrote. "At the time, we cautioned that the steep cuts to Medicare Advantage required by Obamacare would cause seniors to lose access to many of the health plans and benefits that they had liked, contrary to the President's promises."
On Wednesday, the proposed MA payment cut was the inspiration for political theater, as senators from both sides of the isle participated in a C-SPAN spectacle.
Republicans including Cornyn suggested the proposed payment cut would cannibalize Medicare Advantage to prop up the PPACA. "The truth is, these cuts in Medicare Advantage will force many seniors to pay higher premiums and further undermine their existing healthcare arrangements," the Texas senator said.
Senate Democrats fired back, highlighting the most popular PPACA reforms such as providing health insurance regardless of pre-existing conditions. Standing next to a poster listing several early accomplishments of President Obama's hallmark domestic policy initiative, Sen. Chris Murphy (D-CT) defended the proposed MA payment cut. "We were paying private insurance companies 13 percent more than it cost the federal government to run Medicare," Murphy said. "It just didn't make sense."
As health systems across the country look for ways to adapt to a changing marketplace and a wave of federally driven reform efforts, Sanford Health is enjoying the benefits of a strategic leap it took nearly two decades ago.
The evolution of provider-payer relationships is one of the great mysteries of healthcare reform efforts in the United States. Built on mutual need, these two parties have evolved from politely tolerating each other to something that lately has more closely resembled a Punch and Judy show.
But these relationships continue to evolve. What was once unthinkable is now trending upward. Some health systems arelaunching their own health plans while others are considering partnering with payers to offer in-house health plans.
Ruth Krystopolski knows what they are facing. And the South Dakota-based health plan executive knows what they stand to gain. "The health plan became a central depository," Krystopolski, president of Sanford Health Plan in Sioux Falls, told me last week. "It collected [valuable] information from a variety of sources."
Sanford Health began offering insurance through its partner health plan in 1998, starting in the health system's established market in Iowa, South Dakota and Minnesota, says Krystopolski, who helped craft the plan.
In addition to acting on the realization that it would be "good to have the information others had on us," she said Sanford Health determined that there was an unmet need in the marketplace—many workers throughout the region had limited options for health insurance.
"We wanted to understand what the employees in our market wanted," Krystopolski said of the research her team conducted before launching the plan. "It was really to respond to the needs of the market and get the information."
The result has been the creation of a partnership between Sanford Health and Sanford Health Plan that aligns with the needs of patients. "We are able to co-manage," the health plan president said. "We have a shared responsibility for a patient… We know they belong to us from the day they enroll and we reach out to them."
Together They're Stronger The coupling of a health system and a health plan can help providers be more responsive to patients. "Learning what [patients'] needs are has made us more thoughtful," Krystopolski told me.
And having an in-house health plan has helped Sanford Health achieve several healthcare reform goals in recent years, in part because it brings flexibility to help adapt to change, Krystopolski said. "Because we are the payer and the provider, the lines… allow you more room to be creative," she said, citing the health plan's ability to work closely with Sanford physicians if there are complications billing an office visit.
The health plan helped Sanford Health stay ahead of the healthcare reform curve on quality reporting, continuous improvement projects, and comparisons of provider performance. "We had insight into some of the transparency reforms because we had been doing it for a while," she said.
And having the health plan has helped Sanford Health extend access to healthcare services in its market, she said, noting that the petroleum industry boom in the Dakotas has led to a transient segment of the population with few health insurance policy options. "It helps us understand where we might have access challenges," Krystopolski said. "We typically hear of it first at the health plan."
Sanford Health Plan has grown with its partner health system, to about $500 million in 2013 claims since its inception 17 years ago. Krystopolski says selecting good partners has been a key factor in the health plan's success.
State Regulators as Collaborators While the health plan has an actuary on staff, Sanford Plan works with the Seattle-based consulting firm Milliman to conduct audits and help develop rates through modeling services. Sanford Health Plan has also had a partnership with Epic to develop an electronic medical records system that connects the health system and the health plan. "The technology is so much better than it was," Krystopolski said, recalling the early days of the health plan when patients would file paper claims. "But I believe we are only at the beginning."
Sanford Health had at least one advantage over current health systems considering the formation of a health plan: a supportive and relatively simple regulatory environment. Krystopolski says state insurance regulators have played a key role in the growth of Sanford Health Plan, contrasting state rules with often burdensome new federal regulations. "They have helped guide us and helped us do the things we had to do to establish regulatory compliance," she said of state officials. "They've been a key collaborator and partner."
As health system executives look for business models that will strengthen their capacity to face industry changes yet to be seen, in-house health plans appear to be a fine companion.
Join our webcast featuring Alan J. Murray, President & CEO, North Shore-LIJ CareConnect as hospital leaders outline the strategic transition from provider to payer, and new opportunities for controlling costs, managing risk, and maximizing reimbursements. March 28, 2014, 1:00–2:30 p.m. ET. Register today.
With weeks to go before federal regulators set the final figure for a payment rate cut to the Medicare Advantage program, insurers and financial analysts are predicting the blow will be twice as hard as what CMS proposed last week.
Confusion continues to swirl around Friday's release of the 2015 federal notice for Medicare payment rates that calls for a cut of at least 1.9 percent. But insurers and financial analysts believe the final payment cut figure that will be set on April 7 will be at least twice as deep.
In an email released on Monday, America's Health Insurance Plans predicted the payment cut to Medicare Advantage in the federal fiscal year beginning in October would be at least 4 percent. The Medicare Advantage payment rate was cut more than 6 percent for the current fiscal year.
"While we continue to evaluate the proposed rate notice and its impact on overall Medicare Advantage payments, estimates released over the past few days from a broad array of analysts help highlight the magnitude of the proposed cut facing seniors in Medicare Advantage next year," AHIP said in prepared statement that included quotations from industry analysts predicting MA payment rate cuts as deep as 9.3 percent.
"Reports from leading industry analysts show broad consensus that the CMS proposal, if finalized, would result in Medicare Advantage payment cuts of at least 4 percent in 2015 and likely much higher once other changes are factored in. This means that total cuts to Medicare Advantage would exceed 10 percent in just a two-year period, causing further disruption for the more than 15 million seniors who get their Medicare coverage through Medicare Advantage."
A federal Centers for Medicaid & Medicare Services spokesperson reached Tuesday said the agency could not "speculate" about any add-ons that could increase the size of the financial hit to Medicare Advantage insurers. The official also defended the 1.9 percent cut announced Friday.
"The proposed changes for 2015 for Medicare Advantage are smaller than those implemented in 2014," the spokesperson said. "As we've seen over the past few years, efforts to reduce overpayments for medical services have corresponded with falling premiums for consumers."
"Since the Affordable Care Act became law, enrollment in Medicare Advantage has increased nearly 33 percent while premiums have fallen by 10, and premiums for Part B have remained flat. We believe that beneficiaries will have a wide array of high quality, low cost options in 2015 while we make certain that plans are providing value to Medicare and taxpayers."
While the financial markets abhor uncertainty, Wall Street reacted positively to a security exchange filing Monday by Humana that predicted the company would experience a weaker-than expected 2015 Medicare funding decline. Humana reported the financial hit could be harder depending on the impact of proposed changes to enrollee risk assessments.
Humana stock ended trading Monday up 10 percent.
In a research note released Tuesday, Wells Fargo sounded a cautiously bullish tone for investors in Medicare Advantage insurers such as Humana.
"We now expect the overall headwinds to [Medicare Advantage] health plans for 2015 to be 3.79 percent (better than our previous estimate of 5.67 percent), with some variation by plan and county," Wells Fargo reported.
"This is consistent with an 8-K released by Humana on February 24, in which the company updates its anticipated funding decline in MA in 2015 to 3.5-4.0 percent (from 6.0-7.0 percent). We expect significant pressure from the industry for further improvements in the final rate notice expected on April 7, but believe further help is less likely."
Humana holds the second-largest Medicare Advantage market share, with nearly 2.8 million members as of Jan. 10, according to a report Monday from Moody's Investors Services. UnitedHealth Group leads in market share at about 3.2 million members, and Aetna is third at 1.1 million members.
"Overall growth was good for most companies," Moody's concluded on data collected from September 2013 to January 2014, "with variations in the growth rates among companies reflecting local strategies, acquisitions or the competitive environment."
On the political front, Republicans are seizing the opportunity to assail the Obama administration over the proposed Medicare spending cuts. Florida Gov. Rick Scott, a Republican, blasted the cuts after meeting with the President Monday.
"If the President cares about our seniors, he needs to fix Obamacare immediately," Scott said in a prepared statement on his website. "We learned last week that Medicare is being raided to pay for Obamacare which is hurting our seniors who could lose access to the doctors they liked and were told they could keep. We need to give our seniors a voice and ask the President directly to not pay for Obamacare by raiding Medicare."
The proposed 2015 payment rate cut to Medicare Advantage health plans is less than expected and less than the reduction this year, but insurers and their allies in Congress are expressing displeasure with the prospect of a second consecutive haircut.
The Centers for Medicare & Medicaid Services is proposing a Medicare Advantage pay cut of at least 1.9 percent despite urging from lawmakers and insurers to maintain current payment rates in 2015.
"Preliminary estimate of the combined effect of the Medicare Advantage growth percentage and the fee-for-service growth percentage is estimated to be -1.9 percent," CMS said Friday. The agency released a 148-page document detailing proposed MA payment and other changes in the fiscal year starting in October. "This historically low growth in Medicare per-capita spending is tied, in part, to successful initiatives undertaken to promote value over volume and help curb fraud, waste, and abuse in the Medicare fee-for-service program in recent years."
Supporters of the MA program, including some of the country's leading insurers, say a second straight year of cuts would impede progress toward a value-based healthcare system and would lead to higher out-of-pocket expenses for seniors.
"The proposed funding cuts threaten the stability of the Medicare Advantage program, which has proven to provide high levels of satisfaction and quality of care for millions of beneficiaries," Aetna officials said in a statement provided to HealthLeaders Media Thursday. "Research shows that these plans outperform Medicare fee-for-service in 9 out of 11 clinical quality measures and have high levels of member satisfaction."
After MA payments took a 6 percent hit in 2014, insurers nationwide and lawmakers in Washington began pressing CMS to maintain the current payment rate level next year. The opposition effort includes a Feb. 14 letter to CMS signed by a bipartisan group of 40 US senators. And at the grassroots, America's Health Insurance Plans has launched a campaign urging seniors to contact their representatives in DC called Seniors are Watching.
According to the senators' letter to CMS, MA health plans are in line with crucial health care reform goals and are performing well. "Studies show that enrollees in the MA program enjoy better health outcomes and receive higher quality care than their counterparts in the Medicare fee-for-service program," the lawmakers' letter states.
After the CMS proposal was announced, Senator Orrin Hatch (R-UT), said in a statement, "These Medicare Advantage cuts are misguided, threaten a successful program for seniors, and must be overturned. Medicare Advantage is extremely popular for a reason. Run through the private market, seniors gain access to high-quality and coordinated care with additional benefits that they otherwise wouldn't get."
Two consecutive years of deep cuts could have dire consequences for insurers. "If rate reductions are imposed, health plans will have to make difficult choices that could create disruption and confusion among beneficiaries," Aetna said. "Reducing benefits and plan options, charging higher premiums and copays, offering products with limited provider networks, and, in some cases, leaving the market, are all possible consequences of a second round of cuts to the program."
According to a recent Oliver Wyman report commissioned by AHIP, seniors and people with disabilities enrolled in Medicare Advantage plans would face premium increases and benefit losses of $35 to $75 per month, or $420 to $900 annually, if MA payments were to be reduced by 6 percent next year.
After MA payments were cut 6 percent for 2014, beneficiaries experienced monthly cost increases and benefit cuts from $30 to $70, the Oliver Wyman report found.
Citing the likelihood of "significant upheaval in the MA market," the Oliver Wyman report warns of the "potential for plan exits, reductions in service areas, reduced benefits, provider network changes, and reduced MA enrollment."
In a prepared statement released Friday night, AHIP President and CEO Karen Ignagni cautioned against any further cuts to MA payments.
"The new proposed Medicare Advantage cuts would cause seniors in the program to lose benefits and choices on which they depend," she said. "Last year’s six percent cut to Medicare Advantage rates resulted in higher premiums, reduced benefits, fewer coverage options, and loss of provider choices for seniors. Another round of payment cuts would be devastating to the more than 15 million seniors and people with disabilities that have chosen to enroll in Medicare Advantage for the better benefits and higher quality coverage these plans provide."
In AHIP's view, the MA payment cut could be much higher than 1.9 percent. "There are a number of factors that impact total Medicare Advantage payment rates. The growth rate percentage included in the rate notice is only one factor and does not represent what the total cut will be when other factors are included. In fact, there is no single number in the rate notice that represents the cumulative impact on rates," AHIP said.
Aetna officials encouraged CMS to avoid casting too great a burden on Medicare Advantage as federal healthcare reform initiatives move forward.
"The healthcare reform law includes more than $200 billion in payment cuts, most of these have not yet gone into effect. It also imposes a new health insurance tax that begins this year," they said. "These funding reductions plus other changes to the program resulted in payment cuts of 6.5 percent in 2014… CMS should keep current payment levels and protect MA beneficiaries from any additional cuts, other than those that are already part of the health care reform law."
CMS expects to set the final Medicare Advantage payment rate for 2015 in early April.
Building electronic health record systems that comply with the federal Meaningful Use program is a daunting task for providers large and small. But basic "regulatory compliance is a far larger day-to-day challenge" than fighting fraud, says one health system CIO.
When it comes to meeting Meaningful Userequirements, picking the right partner and setting the right policies are the best ways to avoid running afoul of the law or federal regulators, according to a pair of healthcare chief information officers.
"You're making a multimillion dollar investment," said Brian Sandager, CIO at Circle Health, the corporate parent of Lowell General Hospital in Massachusetts. "You want to select a partner who's going to be with you for a very long time."
Finding an EHR partner with longevity potential is particularly important because Meaningful Use is a three-stage process, the Circle Health CIO said. "I can't imagine health systems that are dealing with vendors that are consolidating. To be forced into change has to be an awful feeling as a CIO," he said. "Healthcare is complex enough."
While criminal fraud such as an alleged attestation scam in Texas should always be guarded against in Meaningful Use projects, Sandager said regulatory compliance is a far larger day-to-day challenge. "We're more concerned about the technicalities of the law," he said. "A lot of the rules and laws are really complex. … You have to have an open dialogue with CMS."
Vendor Selection
Circle Health contracted with one of the biggest players in the EHR market, Cerner, to help orchestrate the health system's Meaningful Use program. In addition to the stability that comes with an established partner, Cerner also has "their own people in DC," Sandager said.
John Halamka, CIO at Beth Israel Deaconess Medical Center in Boston, said it is important to consider track record when selecting Meaningful Use equipment and an EHR vendor. "Buy only MU Stage 2-certified technology," he said. "KLAS ratings are also helpful. Vendors such as Epic, Athena, eClinicalWorks, and Greenway are low risk."
Based in Orem, UT, KLAS Enterprises LLC provides performance data on a range of healthcare industry vendors.
On the HealthIT.gov website, CMS offers guidance to providers on selecting a Meaningful Use partner. CMS says "most practices" use the following process: developing an initial plan that identifies key electronic health record goals, conducting a vendor assessment to pick an EHR system that supports the provider's goals, and finalizing the EHR plan after a vendor has been chosen.
Once a Meaningful Use program has been launched, setting effective policies and working with physicians are the crucial ingredients to meeting system design deadlines and avoiding compliance problems, Halamka and Sandager both emphasized.
Federal officials have identified the cut-and-paste feature in many EHR systems as a compliance risk, fearing the ability to duplicate elements of patient records could lead to fraud.
"Cut-and-paste is a matter of policy, not technology," Halamka said. "Use templates for notes and EHR tools that enable medication lists, lab values, and vitals to be incorporated into documentation."
Workflow Issues
Sandager said the cut-and-paste EHR issue is more of a cultural phenomenon in the medical field than a matter of criminal intent. "There's a general fear in the provider base," he said of many healthcare providers who he said have been conditioned to commit overkill on documentation. "The tendency is to just dump it all in."
Circle Health has been working with physicians to make sure the healthcare system's EHR program has the best possible workflow, which has done more than trim a few minutes off each doctor's daily administrative tasks, Sandager said. "The bottom line is we get a better record out of it," he said.
There is also a measure of patience involved in ensuring Meaningful Use compliance in any large healthcare organization, the Circle Health CIO said. "With hundreds of providers, one or two are going to need help," he said.
Many providers are set to launch Stage 3 of Meaningful Use, which is designed to help push the US healthcare system to a value-based model. Sandager said Circle Health is actively planning for Stage 3 and offered one last bit of advice: "Make sure you and your EMR partner are looking ahead."
The deadline to buy insurance for 2014 on the public health insurance exchanges is March 31. Reaching out to the uninsured and convincing them to enroll is a make-or-break effort for the hallmark federal healthcare reform program.
With the troubled rollout of the healthcare.gov website and a range of other post-launch challenges, educating potential public exchange enrollees has become a focal point for federal officials and insurers.
Last week during a conference call featuring the January enrollment numbers for the public exchanges nationwide, HHS spokesperson Julie Bataille said federal officials have been organizing outreach activities across the country for months. The effort has resulted in about 2,000 public education events since October.
Outreach work has been intense in states where there is a high percentage of previously uninsured residents, Bataille said. "There's a lot of work we are doing to raise awareness in Texas in particular," she said. "We are very [committed] that the people of Texas are aware of the options that are available."
During the conference call, HHS Secretary Kathleen Sebelius announced 3.1 million people had enrolled for health insurance in the public exchanges through the end of January. Last June, Sebelius said enrolling seven million people through the public exchanges was a "realistic target."
The deadline to enroll for 2014 health insurance in the public exchanges is March 31, so reaching Sebelius' target is probably unrealistic at this point.
Humana Finds Local Outreach Partners
Roy Beveridge, MD, Humana's chief medical officer, told me last week that the company is engaged in a nationwide educational effort to boost enrollment in its exchange-based insurance policies. "Humana has committed to providing health reform education for Humana members and non-members alike through the development of strategic partnerships that work to eliminate confusion and provide people with the information they need to make informed, individualized decisions," Beveridge wrote in an email. "Our goal is to make health care easy, so we're going out to communities and giving people the tools and education they need to understand their healthcare options."
Humana's educational partners include CVS Caremark and the YMCA.
"The opportunity is to provide coverage to people who didn't have it before," John Montgomery, MD, Humana's chief medical officer in Florida, told me recently. "A lot of people don't know: don't know what to do; don't know what benefits are available."
Montgomery says CVS Caremark and the YMCA are natural outreach partners for Humana in Florida. "Where the YMCA sites are mirrors our market," he said. "Those partnerships give us opportunities to educate people about health insurance."
In Mississippi, Humana is orchestrating a 36-county push to educate residents about the new public exchange, according to Stacey Carter, who is leading the company's Mississippi Education Initiative. "A lot of people feel the ACA is for the less fortunate," Carter told me last week. "We are trying to get people the numbers for who can benefit from the ACA, and there are a lot of people who can benefit."
Carter said the outreach effort is essential because many Mississippi residents have never had health insurance before. "A lot of these people have never used the system before," she said.
One of Humana's buses
In Mississippi, Buses Campaign for Enrollment A unique element of Humana's Mississippi Education Initiative is a pair of Internet-equipped buses that have logged more than 10,000 miles since October crisscrossing the state. The buses have visited rural areas and they have set up at a variety of locations, from churches and libraries to Walmart stores. "These vehicles are being used to reach people in their community," Carter told me. "It's helped with Humana's brand awareness as well. People are getting to know Humana."
Carter said outreach techniques such as the buses are effective because they create an opportunity to have the kind of one-on-one contact that is needed for many residents to navigate the options available to them through the new public exchanges. "You really need to sit down and have a personal conversation with people," she said. "Even though the enrollment deadline is March 31, we're still going out to educate people this summer."
With millions of Americans eligible for affordable healthcare for the first time in their lives, there are millions of reasons for public exchange outreach efforts to continue aggressively.
Assigning responsibility for the costs linked to maintaining adequate supplies of medications is at the heart of the medication shortage issue, says one pharmaceutical economist.
New rules and greater cooperation between major players appear to be leveling off a spike in medication shortages that began nearly a decade ago. But with at least 38 new drug shortfalls last year, providers are continuing to scramble to make sure the best treatments are available to their patients.
"We, on a routine basis, have to deal with shortages of medication that require mitigation," said Dan Johnson, director of pharmacy services at St. Anthony's Medical Center in St. Louis. When shortages occur, the hospital's pharmacists coordinate with the medical staff, wholesalers, and manufacturers to find alternate therapies or new sources for scarce medications.
In some cases, Johnson says the only option is to "restrict the drug to the patients who really need it."
Erin Fox, director of the Drug Information Service at the University of Utah in Salt Lake City, says a recent shortage of oncology drugs demonstrates the potentially severe consequences for patients.
"When you have a limited supply, you have to decide which patients will get a medication and which might not," Fox said, noting "there is no other effective alternative" for several cancer medication regimens.
"That's a really hard position for providers to be in," she said.
FDA Drug Shortage Report
In July 2012, the Food and Drug Administration Safety and Innovation Act became law. In addition to requiring drug manufacturers to provide timely notice of impending or unexpected medication shortages, FDASIA required the FDA to issue annual reports on pharmaceutical shortfalls.
The federal agency released its first "Annual Report on Drug Shortages" this month, with the research focusing on the first three months of 2013. The report notes a slowing in the rate of new medication shortages.
"While the number of new shortages… quadrupled from approximately 61 shortages in 2005 to more than 250 in 2011, after actions by the FDA working with stakeholders, that number significantly decreased in 2012 to 117 shortages. However, shortages continue to pose a real challenge to public health," the report states.
The FDA report indicates reforms in recent years such as FDASIA are having an impact.
"As a result of recent actions by the President, Congress, and FDA, manufacturers are notifying FDA about potential shortages earlier than in the past. Early notification of potential shortages gives FDA additional time to work with sponsors and other groups to identify ways to maintain treatment options and prevent a shortage," the report states.
"Using a range of available tools, including regulatory flexibility when appropriate, FDA's Center for Drug Evaluation and Research (CDER) worked with manufacturers to successfully prevent 140 shortages from January 1 to September 30, 2013. In addition, the number of new shortages tracked by CDER for this same time period is 38, compared to the 117 new shortages during calendar year 2012."
The federal agency can choose from a suite of responses when a drug shortage is reported, including:
Determining whether other manufacturers are willing and able to increase production.
Expediting FDA inspections of manufacturers attempting to restore production.
Working with affected manufacturers to investigate the root cause of a shortage.
Bearing the Cost
"It's a very complex problem. If we could fix it tomorrow, it would be great, but that's unlikely," said Cynthia Reilly, director of the medication safety and quality division at the American Society of Health-System Pharmacists.
"We really can't hold one party responsible for drug supply," she said. "Realistically, part of the reason we have great drugs to treat patients is we have a free market."
Enrique Seoane-Vazquez, PhD, an associate professor at the Massachusetts College of Pharmacy and Health Sciences University in Boston, said assigning responsibility for the costs linked to maintaining adequate supplies of medications is at the heart of the drug shortage issue.
"If a hospital doesn't have a medication, nobody is responsible even if you die," said Seoane-Vazquez, who serves as director of MCPHSU's International Center for Pharmaceutical Economics. "This is the main problem… the lack of responsibility."
He said the players at the opposite extremes of the supply chain—manufacturers and healthcare providers—would face significant costs if they were compelled to bear the burden of avoiding drug shortages alone.
"They don't produce an extra amount in case there is a shortage," Seoane-Vazquez said of pharmaceutical companies. "They produce enough to satisfy the needs of their clients."
For hospitals, stockpiling supplies of medications presents a financial drain, he said. "Hospitals could be required to have the medications to meet the needs of their patients, but it will cost you more," Seoane-Vazquez said.
Transparency Needed
In addition to sorting out the economic imperatives of operating a robust medication supply chain, Fox said boosting transparency in the pharmaceutical industry is needed to ensure a steady supply of quality medications. The University of Utah College of Pharmacy faculty member said the common practice of drug companies contracting out medication lines is problematic.
"Just like our food, we need to know where our drugs are coming from," Fox said. "Some companies are forthcoming with that information and some companies are not… I want to know: is that product quality, or is it going to be recalled? I want to know those medicines are safe."
Fox said the shortage of medications is particularly acute for injectable drugs, noting there are fewer than 10 manufacturers worldwide.
In a prepared statement earlier this month, Ralph Neas, president and CEO of the Generic Pharmaceutical Association, said his group's members are playing a key role in providing a supply of affordable medications to patients around the world.
"Generic pharmaceuticals play a critical role in any strategy to hold down health costs," Neas said. "We will continue to work with policymakers to ensure any proposed laws and regulations do not undo the framework responsible for decades of more affordable generics and trillions of dollars in savings."
Neas describes 2013 as "a year of milestone achievements" for the generic drugs industry. "Generic utilization hit an all-time high as 84 percent of prescriptions dispensed are now generic," he said.
"Congress passed the Drug Quality and Security Act to establish a nationwide, reliable system for tracking prescription medicine that further safeguards our nation's prescription drug supply and protects patients. The law also enhances the ability of regulators to limit risks posed by counterfeit or adulterated products and reassures patients that the generic medicines they receive are secure from the manufacturer all the way to the pharmacy."
Embracing Shared Responsibility
St. Anthony's pharmacy director says the best way to achieve a permanent solution to the nation's drug shortage problem is through teamwork among the players in the supply chain. "We're all part of the problem," Johnson said. "We all need to work together."
The new FDA shortage reporting rules are seen as a significant step toward greater cooperation. "That gives us a chance to allocate drugs before we run out," he said.
"It really is a situation that we are all in it together," Johnson said. "If we don't work together… sometimes we make these situations worse."
