Federal officials unexpectedly announced a projected 0.4% increase in the 2015 payment rate for Medicare Advantage health plans. A cut had been proposed in February.
The Centers for Medicare & Medicaid Services caught insurers off guard Monday by announcing that the average 2015 Medicare Advantage payment rate for insurers will increase 0.4 percent.
The net positive MA payment rate change from the current year to 2015 is at odds with the 5.9 percent payment rate cut insurers had been anticipating for weeks.
During Monday afternoon's conference call, Jonathan Blum, CMS's principal deputy administrator, defended the agency's accounting of the 2015 MA payment rate. "CMS has a very good track record," he said. "We've been pretty spot-on over the past four years on predicting the markets."
Blum said payment rates for specific MA health plans will vary depending on factors such as geography and bonus payments from the MA star ratings program for quality. He set a confident tone throughout the conference call, saying "we're very confident we will see a very strong program go forward for 2015."
In a statement released Monday night, America's Health Plan of America President and CEO Karen Ignagni said the trade association remained concerned that its members risked MA payment cuts next year.
"The changes CMS included in the final rate notice will help mitigate the impact on seniors, but the Medicare Advantage program is still facing a reduction in payment rates next year on top of the 6 percent cut to payments in 2014. We remain concerned about the impact year-over-year cuts to Medicare Advantage would have on the high-quality, affordable coverage millions of seniors like and rely on today," Ignagni said.
"We are still reviewing the final rate announcement to assess the full impact on payments and we will continue to work with policymakers in both parties to strengthen this critically important part of Medicare," she said.
'Baby Boomer Adjustment Factor'
In February, CMS had predicted an MA payment rate cut of at least 1.9 percent.
On Monday, Blum said CMS had made several statistical and policy changes since February that altered the 2015 MA payment rate equation:
Year-to-year cost reductions in the MA program from 2014 to 2015 have been revised upward, with insurers forecast to experience a 3.9 percent reduction in health plan costs. "That's a good news story for the Medicare program," Blum said.
CMS is adjusting the MA program's risk model to reflect an unexpected positive spike in the health condition of new beneficiaries. With baby boomers entering MA health plans in better health than anticipated, Blum called this positive impact on the payment rate the "baby boomer adjustment factor."
CMS is dropping plans to cut back reimbursement for physicians who visit patients in homes or group home settings.
Blum called the 2015 payment rate impact on MA insurers "significantly better" than the proposal CMS released in February.
'An Interesting Little Number'
Nicole Stone, director of Wolters Kluwer Law and Business' Health Reform Knowledge Center, said a combination of fear and jubilation likely played a role in CMS pegging the final 2015 MA payment rate at a 0.4 percent increase.
Calling the 0.4 percent figure "an interesting little number," Stone said CMS faced a possible backlash from beneficiaries if the agency had announced a payment rate cut to the MA program, which serves more than 15 million seniors. By holding the anticipated MA payment rate increase to below 1 percent, CMS also runs little risk of "breaking its budget."
And announcing a modest increase to the MA payment rate adds to the healthcare reform momentum the Obama administration established last week, she said.
The forecast of a 3.9 percent reduction of MA costs in 2015 coupled with last week's announcement that more than 7 million people had enrolled in health insurance plans through the new individual exchanges are both significant achievements, she said.
"The last week has essentially been a success story for healthcare reform," Stone said. "It's kind of a feel-good moment for the federal government."
The most significant change on tap to the ratings system is expected to be an increase in the star threshold for bonus payments to health plans, based on a wide array of quality standards.
In addition to a widely anticipated cut to the Medicare Advantage payment rate in 2015, the Centers for Medicare & Medicaid Services are expected to announce Monday several changes to the MA five-star ratings program.
The most significant ratings change on tap to the ratings system is expected to be an increase in the star threshold for bonus payments to health plans, based on a wide array of quality standards.
When the star ratings program's three-year demonstration period comes to a close at the end of this year, three-star ratings will no longer make the bonus payment cut; four-star ratings will become the new gold standard.
The bonus payments are a "the big driver" of the MA star ratings program, according to Michael Kavouras, VP of star ratings at the Connecticut-based insurer, Aetna. "There are revenue opportunities for health plans," he said in a phone interview.
The pay-for-performance program can earn insurers a five percent bonus on top of the benchmark payment rate in the particular county or counties where an MA health plan is offered. The benchmarks set the maximum amount Medicare will pay a health plan in an area.
"There's a huge financial and competitive advantage to companies that can sustain four stars," Kavouras said of the anticipated 2015 program, noting Aetna has been investing bonus payment dollars back into its MA health plans to help achieve quality standards and lower costs.
The six percent payment rate cut to MA health plans in 2014 and the anticipated six percent cut in 2015 heightens the importance of the bonus payments for insurers, he says.
"Medicare Advantage payment cuts are hitting a level now where health plans are going to have to make choices," Kavouras says. "Plans will have to make choices if they are not getting those bonus payments."
In the proposed 2015 MA payment rateand rules document released in February, the star ratings program was described by CMS as an essential element to achieving quality. The agency noted that it is striving to optimize the program.
"One of CMS's most important strategic goals is to improve quality of care and general health status for Medicare beneficiaries," the document states. "For the 2015 Star Ratings…Our priorities include enhancing the measures and methodology to reflect the true performance of organizations and sponsors, maintaining stability due to the link to payment, and providing advance notice of future changes."
Health Plans Face Termination
In addition to the new four-star threshold for bonus payments, CMS's final 2015 MA rules are expected to reaffirm the agency's determination to oust health plans from the program if they score at the two-star level for three consecutive years.
"From CMS's view, you're talking about low performers," Kavouras says, noting Aetna does not have any MA health plans with less than 3-star ratings. "It should be rare. It's probably the right thing to do… so beneficiaries have high-quality plans."
For 2014, only 1.1 percent of MA health plans posted a two-star or 2.5-star rating, according to a Barclays analysis.
While Aetna does not have any low-performing MA health plans, it does have "some 3.5 star plans" that will pose a risk for the company when the new four-star bonus payment threshold starts in 2015, Kavouras says, noting that market forces are at play in some areas of the country that make it hard for MA insurers to reach the star-star mark.
"We think CMS should look closely at that," he said. "In one market, Aetna is the top performer in the state but only has 3.5 stars."
While acknowledging that setting a star threshold for bonus payments is "a challenge for CMS," Kavouras says the quality measurement difference between an Aetna MA health plan earning a 3.5-star rating versus a four-star rating has been as little as 0.003 of a point. "You're talking about minute differences," he says.
Big Ratings Star Ratings Changes to Come in 2016
In seeking a better way to finesse the "minute differences" in quality assessment grading, CMS is poised to make a controversial change to the MA star ratings program, Kavouras says.
The 2015 rules could include the removal of a suite of set standards used to help determine four-star quality ratings. The current set standards include quality measures such as the percentage of a MA health plan's beneficiaries who get annual breast cancer screening.
"A key concern is the potential for generating Star Ratings that do not reflect a contract's 'true' performance, otherwise referred to as the risk of 'misclassifying' a contract's performance (e.g., scoring a 'true' four-star contract as a three-star contract, or vice versa)," CMS states in the proposed 2015 rules.
"Misclassification," it reads, "occurs in any measurement system because all performance measurement is a mixture of signal (true performance) and noise (random measurement error due to rounding, variation due to who is sampled, and similar factors)."
The proposed 2016 star measurement change is designed to strike a better balance between transparency for consumers and the wealth of data at regulators' disposal to set star ratings, according to the proposed rules:
"Over the years several features have been implemented in the quality rating system to simplify the information for consumers, as well as to make the ratings process and methodology more transparent for organization/sponsors. For example, we group the measure scores into star categories and round the data to make it easier for consumers to understand what a particular score means."
"We have also implemented pre-determined four-star thresholds for some measures since the 2011 Star Ratings to increase transparency for organizations/sponsors and set a priori expectations for high performance. However, all of these features create more 'noise' or measurement error in the system."
Removing the suite of set standards for four-star quality will pose a daunting challenge for MA insurers and their provider networks, Kavouras says, calling the proposed change "switching to grading on a curve… We won't know the rules we're being graded on until after the fact. It really confuses providers about the standards they are being graded on."
Having set standards for some four-star quality measures has allowed insurers and providers to work in tandem to achieve clearly understood and measurable quality goals. "It allowed us to work with our providers," Kavouras says. "Providers need and want to know what the benchmarks are."
In the proposed rules CMS acknowledges insurers' concerns, but contends the star ratings system needs restructuring:
"Whole stars contain less information than the corresponding measure data because there is information loss associated with converting a numeric scale to a 1- to 5-star rating. While we understand sponsors' perceptions that pre-determined four-star thresholds provide stability in setting performance expectations, in reality the use of pre-determined thresholds violates our principle of assigning stars that maximize the difference between star categories."
Healthcare payers and providers are bracing for a payment rate cut to Medicare Advantage health plans next year. The 2015 rate is expected to be announced Monday by CMS.
In February, federal officials received a decidedly cold reaction to a proposed 2015 Medicare Advantage payment rate cut from the health insurance industry. Next week, regulators will likely feel some heat when they announce a final decision on the cut.
On Monday, the federal Centers for Medicare & Medicaid Services is set to release the final 2015 Rate Announcement and Call Letter that will establish payment rates and rule changes for next year. Among the most contentious changes CMS proposed in February is a payment rate cut to MA that insurers have estimated at justunder 6 percent.
America's Health Insurance Plans, the main trade association for healthcare payers, has waged an aggressive lobbying campaign against the anticipated MA cut. The effort has included organizing seniors as well as an avalanche of press releases and op-ed pieces.
In an editorial published Wednesday in USA Today, AHIP President and CEO Karen Ignagni said a 6 percent cut to MA for a second year in a row could result in millions of seniors losing their health insurance policies.
"History often repeats itself, and that reality is a daunting one for seniors in Medicare Advantage," Ignagni wrote. "While some have argued that cuts to the popular program would do nothing to jeopardize seniors' health benefits, precedent tells us this isn't true. In 1997, Congress passed substantial cuts to Medicare Advantage, then known as Medicare+Choice. As a result, between 1999 and 2003, nearly 2.4 million seniors lost their health care coverage. That's a dangerous precedent."
Hospitals have also been lobbying against cuts to MA. On March 17, a coalition of hospitals, businesses, and hospital associations began airing a television ad blasting the proposed cuts. In a statement announcing the ad, the Coalition to Protect America's Health Care said it had launched "a major new advertising campaign" that included print ads at two Metro stations in Washington, DC.
There are more than 15 million seniors enrolled in MA health plans. About 40 percent of MA beneficiaries have annual incomes below $20,000 and are cost-sensitive to changes in their healthcare expenditures, according to AHIP.
Soon after the Feb. 21 release of the proposed 2015 Medicare payment rates and rule changes, a CMS spokesman defended the agency's plans for 2015. "Since the Affordable Care Act became law, enrollment in MA 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," he said.
A study AHIP commissioned in late February pegged the likely 2015 payment rate cut for MA at 5.9 percent. The New York-based management consulting firm Oliver Wyman conducted the research.
For beneficiaries, the payment cut would result in reductions of MA benefits or increases in MA out-of-pocket costs from $35 to $75, the study predicts. The dollar impact on beneficiaries from the 6 percent MA payment cut in the current year ranges from $30 to $70, it says.
Other changes CMS is expected to announce Monday include the transition from the demonstration phase of the MA five-star ratings program to a more stringent operational phase. One of the biggest changes slated for the star-based ratings program in 2015 is giving CMS authority to terminate MA health plans that earn less than a four-star rating for three consecutive years.
With half of states embracing federally financed Medicaid expansion and the other half slow to follow suit, hospitals are key players in one of the hottest healthcare policy clashes in the country.
Medicaid expansion appears to be following the same trajectory as the original program that was created in 1966, with about half of the states joining the expansion effort quickly and the rest gripped in a highly politicized struggle.
If history repeats itself, the battle over Medicaid expansion could be grueling campaigns in some states. Arizona resisted joining the Medicaid program until 1982.
But a handful of states, including Arkansas and New Hampshire have apparently found a way to break the political impasse: using federal Medicaid expansion dollars to fund the expansion of Medicaid through the new public health insurance exchange for individuals. And Missouri is fully engaged in an effort to move legislation forward.
"This is definitely the playbook states are using," says Brendan Saloner, PhD, lead author of a perspective piece on Medicaid expansion published in the New England Journal of Medicine on March 27. In a phone interview last week, he said, "there is a certain toxicity to the [Patient Protection and Affordable Care Act] that makes it hard to make progress."
Federally finance Medicaid expansion, which provides a mechanism to offer health coverage to low-income adults under the age of 65, is a crucial component of the PPACA. At the heart of the federal Medicaid expansion push is a guarantee from Washington to pick up the entire tab through 2016. In subsequent years, through 2020, the federal reimbursement rate to the states will be tapered to 90 percent.
About 15 million uninsured and underinsured people will have no affordable option to obtain health coverage if their state governments decide not to expand Medicaid, according to a Commonwealth Fund study released last week.
Republicans in several states including Georgia, Missouri, and Texas have staunchly resisted the federal government's offer to fund 100 percent of a straight expansion of existing Medicaid programs. But Arkansas, New Hampshire and a handful of other states have taken an alternative route to Medicaid expansion that many Republican lawmakers across the country find enticing.
A waiver from the federal Medicaid expansion law "allows states to customize their approach to a model that may be more palatable politically," Saloner said.
In New Hampshire, where the Republican-controlled Senate firmly opposed a straight expansion of Medicaid, turning to the state's new public exchange was a solution GOP lawmakers could swallow.
"A straight expansion product would not have gotten past the Republicans," NH Rep. Tom Sherman, a Democrat, said last week in a phone interview after the House approved the Senate's plan to expand Medicaid through the public exchange.
"In the end, it had to come from the Republican Senate," Sherman said of the Granite State's Medicaid expansion plan. "We couldn't get anything through that they couldn't live with… Nobody got exactly what they wanted out of this."
He says expanding Medicaid in New Hampshire took political will and the realization that expansion of the program was needed to address uncompensated care in the Granite State.
"The real winners are all of the residents of New Hampshire because we are all affected by the people who lack health insurance," said Sherman, a freshman lawmaker and practicing gastroenterologist. "This isn't welfare. This is not a handout. This is financial security for people with health needs."
Resistance Could be Futile
States that are resisting Medicaid expansion are feeling heavy pressure from healthcare providers and business leaders.
"Hospitals that see people who are uninsured are putting lots of pressure on political leaders," Saloner said. "Some hospitals more than others do see people who are uninsured… The money is there to help hospitals finance their care."
Business leaders in states that have not expanded Medicaid fear competitive pressures from neighboring states that have moved forward with expansion, he said. "Your workforce is going to be different," Saloner said of states without Medicaid expansion, citing the negative economic impact of poor access to healthcare on individuals and employers.
In the Show Me State, the Missouri Hospital Association has joined forces with the Missouri Chamber of Commerce and Industry to break the political gridlock over Medicaid expansion.
"What's certain is that Missouri will need a state-specific solution," David Dillon, vice president of media relations at the MHA, said in an email last week. "We have at least two 'Medicaid reform and transformation' bills in the legislature that could provide a path forward. The question is whether lawmakers will keep the bills moving and provide an appropriation for the program if common ground can be found."
Alex Feldvebel, NH deputy insurance commissioner, says there are compelling reasons for other states to follow the Granite State's lead. "We can't speak for other states, but we know that in New Hampshire, Medicaid expansion will address the coverage chasm for those people below 133 percent of the federal poverty level."
He cites "many benefits" to Medicaid expansion:
It promotes efficient use of a state's health care resources. Giving more people secure coverage can lower overall costs by moving patients to more cost-effective care settings such as primary care offices rather than emergency rooms.
It may improve the average health status in the commercial insurance risk pool.
Many hospitals write off any payment liabilities from patients earning less than 200 percent of the federal poverty level. A Medicaid expansion would decrease the number of self-pay patients and reduce collection efforts.
Looking to the future
Dillon, Saloner, and officials at the Arkansas Hospital Association say the odds are good for Medicaid expansion to take hold nationwide.
"Missouri will eventually move forward," Dillon says. "We hope it will be this year. Other states have provided a laboratory for state-specific reform efforts. … We believe that the momentum is gathering."
In an email last week, Arkansas Hospital Association officials said they are bullish on the prospects of nationwide Medicaid expansion because the federal agency in charge of the effort has shown a willingness to finesse the issue. "[The Centers for Medicare & Medicaid Services] has shown it is open to ideas that allow coverage of those eligible, and states are now exploring those alternatives. This will lead to more states expanding their coverage over time."
After states have expanded their Medicaid programs to serve adults under the age of 65, it will be hard to turn back the clock, Saloner said.
"Once a program is in a state, it's really hard to unravel," he said. "Once benefits are expanded, it's difficult to go back to a place where you don't have that level of coverage and level of federal financing."
In a flurry of activity in Washington, DC and New Hampshire, two sets of lawmakers addressed a broken physician pay system and poor adults without health insurance. Guess which group got gridlocked and which one rendered a public service that will actually help people.
"It has been said that democracy is the worst form of government except all the others that have been tried."– Winston Churchill
For me, the past week has been a tale of two cities.
In Washington, DC, the potential for political gridlock to derail even bipartisan healthcare reform efforts was on full display. It took about a year for Democrats and Republicans in both houses of Congress to craft a "Doc Fix" for Medicare's broken physician payment system.
After two months of squabbling over the new value-based payment system's $180 billion tab, Congress punted, voting to patch Medicare's much-maligned Sustainable Growth Rate formula rather than to replace it.
The American Medical Association released an exasperated statement soon after the Senate endorsed the House version of the "Doc Fix" patch Monday night: "The American Medical Association is deeply disappointed by the Senate's decision to enact a 17th patch to fix the flawed Sustainable Growth Rate (SGR) formula. Congress has spent more taxpayer money on temporary patches than it would cost to solve the problem for good."
In an alternate reality last week at the Statehouse in Concord, NH, the potential for politicians to work together to enact healthcare reforms in the interest of the general citizenry soared like the frosty peaks of the White Mountains.
NH Senator Nancy Stiles, (R)
NH lawmakers and Gov. Maggie Hassan, (D-Exeter), capped a year-long effort to expand Medicaid to more adults under the age of 65. The Granite State's Medicaid expansion law, which was formed in the Republican-controlled Senate with Democrats at the table, will use federal Medicaid dollars to help income-eligible adults buy private health insurance policies on the state's new public exchange.
I live in New Hampshire and was filled with pride last week after speaking with two of the architects of the state's Medicaid expansion compromise: Sen. Nancy Stiles, (R-Hampton), and Rep. Tom Sherman, a Rye Democrat and practicing gastroenterologist. Stiles and Sherman get it. They understand that when it comes to essential elements of American society – such as our healthcare delivery system – the greater good has to trump narrow political interests.
"Healthcare is going to be expensive," Stiles told me in phone conversation while House lawmakers debated the Senate's Medicaid expansion bill last Wednesday. "This was not only bipartisan. The House was involved, too."
After last week's House vote, Sherman told me he had decided more than a year ago that federally financed Medicaid expansion was an offer states would be foolish to refuse. "States are leaving a lot of people uninsured," the freshman lawmaker said of the two dozen states that are either resisting Medicaid expansion or struggling to find ways to make expansion work. "But they're also leaving a lot of money on the table."
NH Rep. Thomas Sherman, MD (D)
Sherman was ecstatic over last week's accomplishment, which will provide access to healthcare to as many as 50,000 previously uninsured NH residents. "It never would have crossed my mind that I would be able to help the health of 50,000 people," he said. "To have an opportunity to make a difference on this scale is mind-boggling."
But Sherman also displayed a level of politically healthy humility that is all too often lacking in Washington.
"No one person should take credit. I think it's a collaborative move," Sherman said of New Hampshire's Medicaid expansion law. "That whole process, which has been a yearlong process, is clearly the best solution for the whole state… People put aside everything except what was the best thing for the citizens of New Hampshire. This was a unique and time-limited opportunity to lift a significant portion of our citizens out of financial and healthcare uncertainty."
It has been 75 years since the first screenings of "Mr. Smith Goes to Washington" starring James Stewart. Hollywood producers should cast Dr. Sherman in a remake. And voters should send more lawmakers like him and Nancy Stiles to Congress.
The clock is ticking and insurers operating on the new public health insurance exchanges have just two months to gather data on 2014 enrollees to help guide decisions on business plans for 2015.
With Monday's grinding close of the 2014 open enrollment period, insurers offering individual health insurance policies on the exchanges are pivoting their attention to setting rates and benefit products for 2015.
The final day of enrollment was frustrating for consumers and payers alike as the Healthcare.gov website was offline for several hours because of an apparent software problem and high volumes of users.
But now that all applications have at least been started in the system, payers' attention turns to the next phase. In the Final 2015 Letter released by CMS on March 14, the qualified health plan application submission window is set between May 27 and June 27. Between now and the end of June, insurers will be pouring over enrollment and claims data, as well as assessing market factors present in exchanges state-by-state, to craft their insurance policy offerings for 2015.
"Insurers are already moving to learn as much about their new customers as possible," Ceci Connolly, managing director of Pricewaterhouse Coopers' Health Research Institute, said Friday. "They want to know about any existing health issues, but also try to determine what problems might be looming on the horizon. In this particular demographic, multiple chronic conditions are possible and the major challenge will be managing those efficiently."
Factors Already in Play
While it likely will take weeks for federal and state officials to release key beneficiary data from the exchanges such as age distributions, actuaries and others crunching the health insurance policy numbers for 2015 have already identified several factors they will have to take into account.
As Connolly noted, there is a widespread assumption that the 2014 beneficiary pool on the new exchanges will have a disproportionately high number of unhealthy people compared to subsequent enrollment years. This assumption is based on the reasonable expectation that pent up demand for medical services among the previously uninsured will prompt those individuals to be among the first to sign up for individual coverage on the exchanges.
"I would bet that many of the first million people who enrolled were people with pre-existing conditions who couldn't get coverage before," said Tammy Tomczyk, senior principal and consulting actuary at Oliver Wyman Consulting Actuaries inMilwaukee.
As insurers look toward setting premium rates and benefit packages for 2015 and beyond, the percentage of enrollees with pre-existing conditions is expected to decline, she said. "As we add [more beneficiaries to the exchanges], we're not going to be adding more of those people because they'll already be in," Tomczyk said.
A 'Bifurcated Market'
Another major factor already in play for 2015 rates and benefit packages is the Obama administration's decision to allow states to let individuals keep their health insurance policies outside of the exchanges as long as the end of 2016. Most states took the feds up on the offer, while more than a dozen, including Colorado, will be requiring individuals to purchase health insurance on the exchanges in 2015.
The states that have allowed individuals to keep health insurance policies off the exchanges through 2016 are running the risk of creating a "bifurcated market," Tomczyk said, noting young policy holders have little incentive to give up existing coverage that often has premium discounts based on age.
If insurers had known federal officials were going to allow "transitional policies" to stay in place through 2016, carriers would have set their 2014 premium rates higher, Tomczyk said. "The rates would have been higher than we saw," she said. "And we wouldn't have seen the likely jump in 2015 that we are going to see."
In Colorado, state exchange officials are predicting a major impact from the requirement for individuals to purchase health insurance through Connect for Health Colorado next year. The year "2015 will be a whole different world," exchange CFO Cammie Blais said last week.
Consumers Key Players
Fostering consumer education is seen as essential to establishing efficiency, stability and predictability on the exchanges.
"During the last few weeks, more people have been contacting Humana with questions about their coverage options under the Affordable Care Act. We've also seen an increase in traffic at our ACA educational events," said Alex Kepnes, director of corporate communications at Humana.
"Humana's approach throughout ACA enrollment has been to provide clear, basic education so people can make well-informed decisions about their health care coverage options. The more informed people are, the more empowered they are to make the right choices about their health needs."
For years, hospitals have complained about low Medicaid payment rates. Now hospital associations are leading the fight to expand Medicaid to millions of low-income adults in two dozen states that have yet to embrace expansion.
Steve Ahnen
President of the New Hampshire Hospital Association
Medicaid is no longer a dirty word in hospital boardrooms.
"Right now, someone is sitting in an emergency room because they didn't have coverage," said Steve Ahnen, president of the New Hampshire Hospital Association, last week after NH lawmakers cleared the path to Medicaid expansion in the Granite State by approving a Senate bill that resolved a yearlong political struggle over Medicaid expansion. "The ability to resolve that is to get people covered."
Ahnen says NH hospitals have been feeling the pinch from uncompensated care that totaled $425 million in 2013. "We believe [Medicaid expansion] will have a significant impact on relieving that burden," he said.
Medicaid Expansion, Payer Oversight Seen as Vital to Healthcare Reform
New Hampshire joins several states including Arkansas and Iowa that have chosen to expand Medicaid to income-eligible adults under the age of 65 through the new health insurance exchanges. As opposed to a straightforward expansion of a state's existing Medicaid program, the "premium-based model" allows states to use federal Medicaid expansion dollars to help low-income individuals fund the purchase of health insurance policies on the exchanges.
"We tried to find a way to provide access… and not continue to impose the cost on ratepayers for the uncompensated care," said NH state Sen. Nancy Stiles, (R-Hampton). She says one of the prime benefits to hospitals is that they will receive a higher rate of reimbursement from health policies on the exchange than they would have received through expansion of the state's existing Medicaid program.
Two dozen states have yet to expand Medicaid to income-eligible adults, and hospitals are feeling the pinch, according to Brendan Saloner, PhD, lead author of a perspective piece on Medicaid expansion published in the New England Journal of Medicine on March 27. He says one way the federal government is paying for healthcare reform efforts under the Patient Protection and Affordable Care Act is through cuts to the program Washington had previously used to help hospitals pay for uncompensated care, the Disproportionate Share Hospital reimbursement program.
Cuts to DSH "went into effect under the assumption the states would expand Medicaid," Saloner wrote, adding that hospitals serving low-income populations in states without Medicaid expansion are taking a heavy blow. "That causes a lot of financial strain."
In Missouri, which is politically gridlocked over Medicaid expansion, the state hospital association is leading the charge to expand the program.
"The question is not really whether Medicaid will put hospital revenue in the black, it is more a question of how deep in the red hospitals can go," said David Dillon, VP of media relations at the Missouri Hospital Association. "Without new Medicaid coverage and revenue… hospitals will not only experience the federal cuts but continue to shoulder high uncompensated care costs. In 2012, the most recent year of full data, Missouri's hospitals provided $1.17 billion in uncompensated care."
At the heart of the federal Medicaid expansion push is a guarantee from Washington to pick up the entire tab through 2016. In subsequent years through 2020, the federal reimbursement rate to the states will be tapered to 90 percent.
Pre-expansion Medicaid programs have federal reimbursement rates ranging from 50 percent to 74 percent.
The MHA has established a coalition with business leaders to help break Missouri's Medicaid expansion logjam. "The ACA is the law of the land. In Missouri, the hospital community has teamed up with the Missouri Chamber of Commerce and Industry to move the discussion forward," Dillon said.
"Businesses understand that without a Medicaid reform and expansion law, they will be exposed to significant cost shifting to support uncompensated care. For Missouri's business community, this has been a kitchen table issue, not a foray into the culture wars."
"Our analysis indicates that with more efficient management of enrollees in the current Medicaid program, the state could actually benefit financially from Medicaid reform," said Dillon. "And, this isn't just in the 100-percent years, but enough through the end of the decade that with proper stewardship Missouri could have nearly $700 million in trust for future state health spending requirements."
NH Deputy Insurance Commissioner Alex Feldvebel says Medicaid expansion should bring relief to hospitals in his state that have felt financial pressure from uncompensated care. "This newly eligible population, because of its low income, will consist primarily of uninsured persons. Providers will be better off when a low income patient has coverage rather than no coverage," he said.
But Robert "Bo" Ryall, president and CEO of the Arkansas Hospital Association, says Medicaid expansion is not a panacea for hospitals struggling to adjust to the pace of healthcare reform efforts and the associated financial changes. "Overall, hospital reimbursement has been severely impacted because of Medicare reductions in the Affordable Care Act and sequestration," he said last week. "Medicaid expansion does help hospitals, but in no way comes close to making up for the Medicare reductions."
After the enrollment deadline passes, private insurance carriers operating on the public exchanges must move quickly; they have only two months to file proposed premium rates and product designs for 2015.
Final 2014 enrollment numbers are about to start pouring out of the state and federally administered exchanges across the country like the roaring rivers washing away this harsh winter's heavy snowfall.
At insurance companies and exchange headquarters, officials will be sifting through the data looking for key factors that will help characterize the 6 million individuals who have reportedly enrolled in private insurance plans through the exchanges since October.
The stakes are high for payers, as they assess the cost of doing business with their new customers and try to glean insights from their 2014 beneficiaries that will help them set exchange premiums and product designs for 2015.
"The devil is in the details," Tammy Tomczyk, senior principal and consulting actuary at Oliver Wyman Consulting Actuaries inMilwaukee, said Friday. "Six million signed up, but how many of them paid? Or do they keep their coverage? Are we going to have four million, five million, or six million? I don't know where we're going to end up."
If enrollment on the exchanges is set at about six million beneficiaries, which is the enrollment figure predicted by the Congressional Budget Office in February, Tomczyk said the prospects for stability in the new exchanges could be good. "The bigger the pool, the higher the probability that you will have younger and healthier people coming in," she said, adding data from the exchanges over the next few weeks will make the picture clearer. "The big question, if it really is six million, is what do they really look like? How old are they, for example?"
At the Centers for Medicare & Medicaid Services, the federal agency working to launch and stabilize the exchanges, officials reacted gleefully Friday to government data showing individual enrollment in the exchanges had crossed the 6 million mark. "The Affordable Care Act is working," a CMS spokeswoman said. "More than six million Americans have signed up for private insurance through the Marketplace, and we're continuing to see a nationwide consumer surge in demand for Marketplace coverage. We only expect this demand to increase in the coming years."
Key Beneficiary Pool Factors
While noting there will be important circumstantial factors to consider from state to state, Tomczyk said "you can count on one hand" the factors that will determine 80 percent of the risks insurers face in the 2014 pool of exchange beneficiaries:
Age
The well-established correlation between higher age and higher healthcare costs means that in states where the exchange beneficiary population is skewed to older individuals, insurers will face higher risk of costly claims.
Metal Mix
There is a presumption that older individuals and people with chronic diseases will pick the most comprehensive Platinum plans to avoid annual out-of-pocket expenses of more than $4,000 in many bronze plans. "For a person in poor health, they're better off buying the Platinum," Tomczyk said. "In general, the people who enroll in Bronze will be healthier."
Medicaid Expansion
About half of the states have expanded Medicaid to income-eligible adults under the age of 65. Presuming low-income individuals are at higher risk of chronic disease and other costly conditions, providing medical coverage through existing state Medicaid programs will divert some of the least healthy individuals entering the health insurance market away from the exchanges. A twist will come in 2015 and beyond, when several states are set to expand Medicaid through the exchanges rather than through existing state Medicaid programs.
Pent Up Demand
In the first year of enrollment in the exchanges, there is an expectation that individuals with pre-existing conditions who could not get insurance before federally driven healthcare reform will be among the first to enroll. While nailing down the numbers will be difficult, Tomczyk said the previously uninsured will fall into two categories: those who were young, healthy and saw buying insurance as an opportunity; and those with costly pre-existing conditions. "This is the data, [that] as it starts emerging, becomes very helpful," she said.
Claims Experience
"With only three months of claims, you can get a pretty good idea of people's risk score for the year," Tomczyk said. "We're going to start looking at our clients' data."
On Friday, CMS said it finds the early data from the exchanges encouraging. The exchanges, a spokesperson said, are proving to be sustainable and appear to be paralleling the experience in Massachusetts, which established a balanced exchange risk pool after then-Gov. Mitt Romney launched a comprehensive healthcare reform effort in 2006.
Exchange Operator's View
From the vantage point of officials operating the exchanges, the 2014 enrollment data will reveal potential unbalances that could be destabilizing factors in the new markets.
"One of the key pieces of this is to have balance," Cammie Blais, CFO of Connect for Health Colorado, said Thursday. "We've been happy with the mix that has come in. But it's going to be critical to use that information to calibrate our next steps and determine how we continue to partner with stakeholders."
Getting a detailed profile of the 2014 Colorado exchange beneficiaries will "become a leading indicator of what we need to be focusing on next," Blais said. The steps Connect for Health Colorado officials need to consider include policy holder retention, policy renewals, and changing marketing campaigns to recruit enrollees from groups that have historically faced barriers to accessing healthcare, she added.
Operators of exchanges across the country are "getting a longer-term view" as the focus on launching the exchanges turns to stabilizing them. "There's going to be early adopters and those who hold out and wait to see if it's going to work… The people who are enrolling now either have a need or see it as an opportunity. … It's a longer vision that we need to have. Our reality will continue to change."
After decades of business interactions that have ranged from politely cooperative to openly hostile, healthcare payers and providers appear destined for peaceful coexistence.
Lynda Mischel
CEO of Noble Health Alliance
US healthcare reform efforts are fueling a drive to establish closer relationships between payers and providers, with a wide range of experimentation under way nationwide.
"I don't think it's going to be an easy change, but it's going to happen," Lynda Mischel, CEO of the newly formed Noble Health Alliance in suburban Philadelphia, told me recently. "Across the country, there are all kinds of examples of providers and payers offering joint products or providers opening health plans of their own."
Noble Health Alliance was established late last year when four health systems based in the Philadelphia area signed a cooperative agreement. Noble is researching potential payer partners to see whether the new cooperative organization can offer a "risk-bearing product" to provide insurance coverage to patients.
Finding a good payer partner is expected to be a key element in Noble's mission to offer a seamless continuum of care to patients throughout the new health system's provider network, says Mischel, who has a professional background in health insurance including managed care operations and employee assistance programs. "A payer/provider partnership is required to change the delivery of care," she said.
Mischel told me Noble has identified several qualities it desires in a payer partner, including technical capabilities and willingness to share data. "Our [existing] payer partners are looking at this as well," she said.
Data sharing is one of the prime benefits of closer payer/provider relationships, and several other healthcare industry executives who have broached the topic over the past two months.
"Our world has become so complex, we need to come together to look at data to make sure patients are getting the best care," Mischel explained, noting electronic medical records have shown great promise in reducing physician errors. "In the 21st century, data is going to drive our ability to provide quality care."
Mark Caron, senior VP and CIO at Pennsylvania-based Capital BlueCross, told me last week that providers are eager to gain access to claims information that provides the "whole picture" of a patient's medical history. "They're drowning in information, but they don't have that longitudinal record," he said of health systems, hospitals, and physicians.
Caron says data sharing between payers and providers has the potential to help educate patients about their health risks and to boost transparency in the healthcare delivery system. "The more we create an informed consumer, we'll all win as a society," he said. "Consumers have done a really good job in other industries to help them be the best they could be."
Mischel and Caron both told me there is no single dominant model that is likely to emerge from the ongoing evolution of the payer/provider relationship. "It will look different from market to market," the Noble CEO said. "We're really at the beginning of what the payer/provider relationship may look like."
Caron says there is intense interest across the country in finding new ways for payers and providers to work together in a manner that fits their unique market circumstances.
"Both sides are coming together to leverage the other's competency," he said. "There's an openness to pilot and work together to try new things… It's not going to be a cookie-cutter approach."
Barbara Ladon, managing director at Denver-based Newpoint Healthcare Advisors, told me last week that size is an important consideration for providers seeking closer relationships with payers. Large health systems have more options because their larger scale allows them to take on increased risk and play a health plan role. "The smaller hospitals—150 to 200 beds—are looking for collaborative relationships," she told me.
Drawing payers and providers closer together should help to create a value-based healthcare delivery system. "It's all based on improving the health of the population," Ladon said. "Providers are incented to take on the responsibility for managing the care of the population."
In terms of increasing value, there also is a powerful logical reason to pursue closer payer/provider relationships: partners work together better than adversaries.
After stumbling at the starting line, federal officials are pushing for a strong finish in the inaugural open enrollment period for the new public health insurance exchanges. And they're offering some individuals a deadline extension.
In contrast to the fall's nearly disastrous rollout of the federal government's public exchange website, HealthCare.gov, a hopeful spring appears to be dawning.
As Monday's open enrollment deadline to obtain individual policies on the exchanges approaches, the Obama administration has reported a signup surge.
With about 800,000 people enrolling in the first two weeks of March, more than 5 million individuals have obtained health insurance policies through the exchanges, federal officials say.
On Tuesday night, federal officials confirmed that consumers who have started but not completed the enrollment process by the March 31 deadline will have the option of requesting an extension. As recently as March 12, in testimony before the House Ways and Means Committee, Secretary of Health and Human Services Kathleen Sebelius rejected the prospect of a deadline delay.
Unless there is an enrollment flood in the final two weeks of this month, the exchanges will fall well short of the 7 million enrollee goal set by Sebelius last July. But officials at the federal agency administering the exchanges are sounding a confident note about the sustainability of the new markets.
"As this historic open enrollment period for the Health Insurance Marketplace enters its final days, we've seen the momentum gathering across the country," a spokeswoman at the federal Centers for Medicare and Medicaid Services told HealthLeaders on Monday. "Since October 1, more than 5 million people have signed up for coverage through the Health Insurance Marketplace, and we're continuing to work hard to ensure that every American who wants to enroll in affordable coverage by the March 31 deadline is able to do so."
And CMS officials are expressing confidence in the new exchanges as they look to the future. On March 14, CMS released its Final 2015 Letter for the public exchanges, which set several rule changes for the exchanges next year. Also on March 14, CMS released a 278-page document which proposes more rules changes for 2015 such as protecting exchange navigators from state interference.
"Based on the experience of this open enrollment period, we are also already looking ahead to 2015 and have taken steps to provide early guidance and certainty stakeholders need to provide affordable health coverage next year and beyond," the CMS spokeswoman said.
After reviewing the lengthy document detailing proposed rules changes, a legal analyst at Wolters and Kluwer's Health Reform KnowlEDGE Center in Illinois said its title, Patient Protection and Affordable Care Act; Exchange and Insurance Market Standards for 2015 and Beyond, uses language "not typical of HHS," noting the similarity to the Buzz Lightyear catchphrase, "To infinity … and beyond!"
"If there is a message, it is 'we're here to stay,'" said analyst Michelle Oxman.
Executives at ikaSystems, a Massachusetts-based company that has been helping insurers operate on the public exchanges, say policy carriers are banking on the exchanges to become a permanent fixture of the broader health insurance market.
"We aren't betting against the likelihood that CMS and the administration are able make the exchanges 'sticky,' and, perhaps more importantly, our health plan customers believe that the move to individual markets and exchanges is here to stay," Brian Kim, senior VP for account management at ikaSystems, said Monday.
He said there is little doubt that the exchanges have taken hold, but uncertainty lingers about how the exchanges will evolve over time. "The question is really about what form they will take based on the forces that support, contest and seek to shape the exchanges."
"On that note, we necessarily take a pragmatic view, individual adoption could be modest or massive, small businesses could flock to them or move into private exchanges, the regulatory and administrative requirement changes could be minor or major. All we can do," said Kim, "is help our customers manage the ambiguity by fostering nimbleness and flexibility through solution design and modularity."
