By Vilsa Curto, Liran Einav, Amy Finkelstein, Jonathan Levin, Jay Bhattacharya
American Economic Association, American Economic Journal: Applied Economics, April 2019

Abstract

We compare health care spending in public and private Medicare using newly available claims data from Medicare Advantage (MA) insurers. MA insurer revenues are 30 percent higher than their health care spending. Adjusting for enrollee mix, health care spending per enrollee in MA is 9 to 30 percent lower than in Traditional Medicare (TM), depending on the way we define “comparable” enrollees. Spending differences primarily reflect differences in health care utilization, with similar reductions for “high-value” and “low-value” care, rather than health care prices. We present evidence consistent with MA plans encouraging substitution to less expensive care and engaging in utilization management.

From the Introduction

While Traditional Medicare (TM) offers publicly administered insurance, a significant fraction of the over-65 Medicare population has opted out of TM in the last decade and enrolled in private insurance plans through Medicare Advantage (MA). In MA, private insurers receive capitated payments from the government for providing Medicare beneficiaries with health insurance that roughly mimics commercial health insurance for the under-65 population.

A simple tabulation of the MA and TM claims points to a large difference in public and private health care spending levels. We calculate that MA spending per enrollee-month in 2010 totaled $642, of which $590 was paid by MA insurers and the rest by enrollees out of pocket. In contrast, average spending per enrollee-month in TM was $911, of which $771 was paid directly by the Medicare program to providers. Capitated payments to the MA plans roughly track the latter amount; the MA plans in the HCCI data received on average $767 per enrollee-month. In other words, the revenue of the MA plans we observe is 30 percent higher than the payments they make for their enrollees’ health care. If this applied to the entire MA population in 2010 (including those outside our sample), it would imply $21 billion in annual (2010) revenue for MA insurers in excess of their spending on health care claims.

Lower health care spending in MA than in TM primarily reflects lower utilization of services rather than lower payments for the same services.

From the Conclusion

We find that MA insurer revenues are 30 percent higher than their health care spending. Health care spending per enrollee-month in MA is 30 percent lower than in TM; holding enrollee county and risk score fixed, this spending difference shrinks to 25 percent, and adjusting for mortality differences further reduces it to 9 percent.

The lower spending by MA enrollees is entirely due to lower health care utilization. Prices appear similar in MA and TM. Where we can most directly measure this—the price of an admission for a given DRG at a given hospital—we estimate that average prices in MA are 1.1 percent higher than in TM. Reductions in utilization appear similar both for types of care where there is concern about “overuse” (e.g., imaging and diagnostic tests) and where there is concern about “underuse” (e.g., preventive care).

We provide suggestive evidence for some of the potential channels by which MA may reduce health care utilization for enrollees. We find that utilization is lower in MA but that, conditional on an encounter, spending per encounter is similar or slightly higher in MA. This suggests that MA plans restrict utilization on the margin to sicker individuals. Relatedly, individuals discharged from the hospital are much more likely to be sent home—and less likely to be sent to a post-acute care facility—if they are enrolled in MA rather than in TM. We also find evidence consistent with substitution to less expensive types of care in MA; for example, differences in specialist visits are much larger than differences in primary care visits.

Finally, in light of the widespread interest in geographic variation in health care spending in TM, and recent work on geographic variation in commercial (under-65) private insurance, we explore similar comparisons in MA. Although geographic variation in spending in TM is often viewed as a reflection of the inefficiencies in a public health insurance system, we find similar—in fact, slightly larger—geographic variation in spending in MA compared to TM. And while recent work has emphasized the much greater geographic pricing variation in private commercial insurance than in TM, we find similar—in fact, slightly smaller—geographic variation in pricing in MA compared to TM.

One natural question these findings raise is their implications for MA insurers and consumers. For insurers, our estimates from MA data indicate that their revenue exceeds their health care expenditures by $177 (about 30 percent) per enrollee-month. Implications for consumers are more elusive, since the elements of their objective function are not as straightforward to define or measure.

https://www.aeaweb.org…

---

Comment:

By Don McCanne, M.D.

Per capita health care spending is much higher in the United States, on average twice that of other wealthy nations. It is now clear that this high level of spending is not due to greater utilization of health care services but rather is due to our high prices. Medicare is an exception. Medicare has been much more effective in controlling high prices than has the private commercial insurance sector.

This study is important because it provides a direct comparison of prices and utilization between the traditional Medicare (TM) program and the private Medicare Advantage (MA) plans offered as an option to Medicare beneficiaries.

Early on it was recognized that the private MA plans were successful in marketing their products to healthier Medicare beneficiaries while being paid at rates reflecting the lower average health of the entire, more expensive, Medicare population. To correct this scheme, risk adjustment was introduced with the intent of adjusting payments based on the health of each Medicare beneficiary. Private insurers, always being advocates of innovation, then began to upcode – adding diagnoses to each patient to make them appear sicker than they actually were. From a business perspective, that worked well since shareholders benefited from greater profits and rising stack evaluation.

So how effective was this? The MA plans have been able to keep payments down at the level of the TM program rather than having to pay higher rates comparable to the commercial plans. Yet by being paid capitation rates more appropriate for patients who were sicker than their healthier insured clients, the MA plans have been paid 30 percent higher than their spending on actual health care – comparable to a medical loss ratio (MLR) of 70 percent (medical loss being an insurance term for what has to be paid out on actual health care). Compare that to the requirement that larger employer-sponsored plans are required to meet an MLR of 85 percent, leaving only 15 percent for their administrative costs and profits. This explains why the larger insurance companies that dominate the MA market have done so well on Wall Street – the MA plans holding back 30 percent rather than the 15 percent or less of the larger commercial plans.

Supporters of the private MA plans contend that this shows that they are more effective in reducing unnecessary utilization of health care – that is, managing care – and thus they are entitled to greater rewards. In fact, this study shows that utilization of specialized services by MA patients is much lower, and there is also much lower utilization of post-acute care facilities. Since physicians are paid about the same in both TM and MA and have no reason to game referrals, this lower utilization strongly suggest that the MA patients are significantly healthier and that the MA plans are guilty of very serious upcoding.

The MA plans continue to grow in popularity. If patients think they are doing such a great job, then they should grapple with the question as to why there are so few specialty referrals. Could it be that physicians are withholding information about specialty care that they should have in order to increase the profits of the MA plans? Highly unlikely, especially since the physicians would have nothing to gain by doing this. Rather it is much more probable that the patients are healthier and have less need for specialized services. Yes, these patients are happy with their care – care that they don’t need and thus know nothing about. But what would these patients think if they knew that the insurers were being paid 30 percent more than it costs them to provide care? Would they really agree with this egregious waste of our tax dollars?

Since the private MA plans have been cheating us, why would we want to continue to support them with our tax dollars? Since the commercial insurance plans have been complicit in the exorbitantly high health care spending in the U.S., why would we want to leave them in charge of our health care dollars? Haven’t we had enough? Wouldn’t it be much better to improve the benefits of the traditional Medicare program, expand it to cover everyone, and then fund it equitably through progressive taxes that each of us could afford? Single payer, improved Medicare for All is just what we need to correct our health care injustices.

Stay informed! Visit www.pnhp.org/qotd to sign up for daily email updates.

By Hiroshi Gotanda, research scientist, Ashish K Jha, K T Li professor of health policy, Gerald F Kominski, professor of health policy, Yusuke Tsugawa, assistant professor of medicine and health policy
BMJ, February 5, 2020

Abstract

Objective: To examine the association between expansion of the Medicaid program under the Affordable Care Act and changes in healthcare spending among low income adults during the first four years of the policy implementation (2014-17).

Design: Quasi-experimental difference-in-difference analysis to examine out-of-pocket spending and financial burden among low income adults after Medicaid expansions.

Setting: United States.

Participants: A nationally representative sample of individuals aged 19-64 years, with family incomes below 138% of the federal poverty level, from the 2010-17 Medical Expenditure Panel Survey.

Main outcomes and measures: Four annual healthcare spending outcomes: out-of-pocket spending; premium contributions; out-of-pocket plus premium spending; and catastrophic financial burden (defined as out-of-pocket plus premium spending exceeding 40% of post-subsistence income). P values were adjusted for multiple comparisons.

Results: 37 819 adults were included in the study. Healthcare spending did not change in the first two years, but Medicaid expansions were associated with lower out-of-pocket spending (adjusted percentage change −28.0% (95% confidence interval −38.4% to −15.8%); adjusted absolute change −$122 (£93; €110); adjusted P<0.001), lower out-of-pocket plus premium spending (−29.0% (−40.5% to −15.3%); −$442; adjusted P<0.001), and lower probability of experiencing a catastrophic financial burden (adjusted percentage point change −4.7 (−7.9 to −1.4); adjusted P=0.01) in years three to four. No evidence was found to indicate that premium contributions changed after the Medicaid expansions.

Conclusion: Medicaid expansions under the Affordable Care Act were associated with lower out-of-pocket spending and a lower likelihood of catastrophic financial burden for low income adults in the third and fourth years of the act’s implementation. These findings suggest that the act has been successful nationally in improving financial risk protection against medical bills among low income adults.

From the Discussion

Using a nationally representative sample of the low income non-elderly population in the US, we found that the Affordable Care Act Medicaid expansions were associated with lower out-of-pocket spending, lower out-of-pocket plus premium spending, and lower probability of experiencing a catastrophic financial burden at the national level in the third and fourth years of the implementation. We found no significant changes in the first two years of its implementation, and no evidence that premium contributions changed after the implementation of the Affordable Care Act. These findings should be reassuring for policy makers as they suggest that the act successfully achieved one of its primary goals—namely, improving national protection from financial risk against medical bills among low income adults.

Our four years of data indicate that not only were Medicaid expansions associated with a statistically significant improvement in financial risk protection, but also the magnitude of the effect was large and clinically meaningful.

Our estimates indicate that one in seven low income individuals could still have a catastrophic financial burden even in the expansion states after the implementation of Medicaid expansions, and there are several possible reasons for this. First, individuals eligible for Medicaid could have periods without health insurance owing to coverage transitions associated with changes in life circumstances, such as a job and income changes (“churning”). Second, although states generally charge no premiums and nominal cost sharing (eg, $4 per outpatient service) for Medicaid enrollees, the total spending of enrollees could still be financially catastrophic for individuals with very low income. Possibly, also, some states are charging higher premiums and cost sharing from Medicaid beneficiaries through waivers. Finally, those with a high deductible private health insurance plan could still have a catastrophic financial burden even with health insurance coverage when they receive expensive healthcare services.

Conclusion and policy implications

In summary, using a nationally representative sample of the low income, non-elderly population, we found lower out-of-pocket spending, lower out-of-pocket plus premium spending, and a lower likelihood of catastrophic financial burden in the third and fourth years after the implementation of the Affordable Care Act Medicaid expansions. Our findings suggest that the Act is probably achieving a key goal—improved financial risk protection from healthcare spending among low income adults.

Our study has important policy implications. The constitutionality of the Affordable Care Act is once again being challenged in the courts by attorneys from 18 states, and its repeal or substantial modification continues to be discussed by policy makers. Our findings suggest that, if our findings were causal, as many as one million low income individuals could face catastrophic financial burden nationally, if the Medicaid expansions were to be repealed.

Finally, even though our results show significant reductions in out-of-pocket spending and financial risk due to Medicaid expansions, an estimated 9.3 million Americans who were eligible for Medicaid in 2017 were still not enrolled, including an estimated 2.5 million who lived in states that had not expanded their Medicaid programs. These findings suggest that substantial barriers to Medicaid enrolment might persist not only in non-expanded states, but also in expanded states. Understanding and eliminating barriers to enrolment is important for the long term success of the Affordable Care Act.

https://www.bmj.com…

---

Comment:

By Don McCanne, M.D.

The good news is that Medicaid expansions under the Affordable Care Act have been “successful nationally in improving financial risk protection against medical bills among low income adults.” The bad news is that “one in seven low income individuals could still have a catastrophic financial burden even in the expansion states after the implementation of Medicaid expansions.”

From a policy perspective, it is clear that merely adding a Medicare for All public option does nothing to correct these deficiencies in the Medicaid program, not to mention correcting the problems with inadequate subsidies for the ACA exchange plans, plus excessive deductibles and other cost sharing with employer-sponsored plans, and the instability of coverage for the 67 million people who left their jobs last year.

What this nation needs is the good news of making health care affordable and accessible for everyone without the perpetual appendages of bad policies that create financial hardship, physical suffering, and even death. Merely introducing a Medicare public option will not amputate these appendages, and the options discussed under repeal and replace would only makes things much worse.

We could have affordable health care for everyone by nationalizing our entire health care delivery system – creating a government owned and operated national health service – socialized medicine. But that would be too disruptive for prevailing American tastes.

We really can’t get around it. What we need is the single payer model of an improved Medicare for All. That would remove financial barriers to health care for everyone, forevermore.

The political debate today is between single payer Medicare for All, which would work well, and adding a Medicare public option to our highly dysfunctional system, which would leave tens of millions exposed to financial hardship and leave many of them without the care they need. The debate should not be between single payer and a public option, since only one of those would work. Instead, the debate should be between single payer Medicare for All and a national health service model of socialized medicine, either of which really would work. We should bring pressure on the pollsters and the media to present and discuss those two options.

Stay informed! Visit www.pnhp.org/qotd to sign up for daily email updates.

By John Geyman, M.D.
Copernicus Healthcare

Preface

Providing personal and compassionate long-term care for aging seniors and people with disabilities has been a challenge over the last 100 years in this country. It has become much more of a challenge in recent years for a number of reasons, including its unaffordability even for well-off families, the lack of insurance to cover its costs, the aging of our population with increasing prevalence of dementia, mobility within families, the large number of people with disabilities, and the critical shortage of caregivers.

The markers of a growing crisis in long-term care are stark – by 2035, U.S. seniors over age 65 will outnumber, for the first time in our nation’s history, the number of children under age 18; the odds of developing dementia by age 85 are approaching 40 percent; more than one-half of U.S. seniors are expected to need long-term care (LTC) help with activities of daily living in their later years; and one in four Americans has some type of disability, most commonly with mobility, cognition, and/or being able to live independently.

Despite this looming crisis in long-term care, we still have no national plan to make it accessible and affordable. Long-term care insurance has become a relic of the past, Medicare provides little coverage, and Medicaid only covers some costs after the patient has spent down to a poverty level.

What to do about the U.S. health care system was a big issue in the 2016 election cycle, and promises to be even more so as the 2020 election campaigns battle it out over future health care. It is an open question whether or not most of us will be able to afford long-term care when we need it, whether for our parents, our children, or ourselves. Will there be a safety net for us when we get there?

This book examines, in three parts, the big, largely unaddressed challenge of long-term care: Part I: What are the problems?; Part II: How did we get here?; and Part III: What can be done?

The U.S. remains an outlier among almost all advanced countries without a system of universal coverage of health care. It is my hope that this book will help voters and legislators to better understand policy alternatives , and to support what will best meet the needs of all of us for the care that we will all need, sooner or later.

Barnes & Noble:
https://www.barnesandnoble.com…

Amazon:
https://www.amazon.com…

---

Comment:

By Don McCanne, M.D.

The growing crisis in long-term care, as John Geyman describes, seems almost insurmountable, but, as he explains, it doesn’t have to be so. Although it will test our nation’s dedication to solidarity, we can ensure that we each have the best quality of life attainable under the given circumstances in our infirm years in spite of the trying circumstances that many of us will face. In “Long-Term Care in America,” John Geyman tells us what can be done to help ease the tasks and tribulations for us and our caregivers.

Stay informed! Visit www.pnhp.org/qotd to sign up for daily email updates.

Children’s Defense Fund, February 3, 2010

Introduction

For years our country has fallen short of its promise to its children, and as we enter a new decade, the situation for many children is only growing more dire.

One in six children in America lives in poverty, with income inequality having grown to the widest gap our nation has seen in 50 years. Millions of children are homeless and millions more are just one missed paycheck away from losing their homes. Far too many children lack access to quality early childhood care during the most critical years of brain development. For the first time in a decade, the number of children without health coverage is on the rise. And across the country, from urban centers to rural towns, our nation’s gun violence epidemic is killing more children, more often.

Even more damning is that as we reach a critical turning point in 2020, when children of color will become the majority of children in America, we are failing these children worst of all.

Of the nearly 12 million children living in poverty, 73 percent are children of color. One in six children in America lives with food insecurity, with Black and Hispanic children twice as likely to not have enough nutritious food to eat. Our schools have slipped backwards into deep and damaging patterns of racial and socioeconomic segregation, perpetuating achievement gaps. Children of color are targeted by a discriminatory school discipline and youth justice system that fuels a cradle-to-prison pipeline. At our borders and around the country, we tear immigrant and refugee children from their parents and put them in cages.

This is why 2020 is such a crucial year for this country and our children. We have an opportunity to decide who we are. Are we a nation that delivers on its promises to its children? Are we a country that abandons and neglects our most innocent and vulnerable citizens? Are we a society that not only condones but promotes a cycle of poverty that prevents millions of children from ever having the chance to live up to their potential?

We know that to succeed, children need stable homes, quality health care, ample nutritious food, good schools, safe neighborhoods, and access to resources and opportunities that enable them to reach their potential. This report makes it clear that for too many of our children, especially children of color, these basic building blocks are out of reach.

And yet, in the wealthiest nation on Earth, the proportion of federal dollars invested in children has fallen to its lowest level in a decade. The shameful state of our children is not an inevitability—it is a choice. We don’t lack the resources to make sure every child has a chance to succeed. We just choose to invest them elsewhere.

Within this report you will find stories of real children and families, as well as statistics, data and trends that show in the clearest terms how we are failing our children. We have provided the latest available information on the state of America’s children across a range of issues that impact their lives, from poverty, housing and hunger to health and welfare to gun violence. Because immigrant and refugee children have faced particularly cruel attacks that impact them in a variety of ways, we have included spotlight features throughout each chapter of this report to demonstrate how our current policies are harming these children.

While there are promising proposals and signs of meaningful progress in many areas, our steps forward are too small and too slow compared with the obstacles and barriers our children face because of our collective inaction. As a result of our continued failings, the state of our children is unjust, unacceptable and short-sighted. We neglect our children at our own peril.

We urge advocates, policymakers, parents and families, community and faith leaders, educators and all those who stand up for our children to use the information in this report to push for America to make a different choice. Let us choose, finally, to recognize that every single child is precious and full of potential. Let 2020 be the year we give every single child the chance to succeed.

Alarming Coverage Declines After Decades of Progress

After decades of hard-fought progress to expand access to comprehensive, affordable health coverage for children through expansions of Medicaid, the Children’s Health Insurance Program (CHIP) and the Affordable Care Act (ACA), our nation had brought the rate of uninsured children to a record low. But children’s health coverage is sliding perilously backwards: 2017 and 2018 marked the first increases in the number of uninsured children in the U.S. in a decade.

• In 2018, 1 in 18 children under age 19 were uninsured—nearly 4.3 million. School-aged children (ages 6-17) represented more than 3 million of the nearly 4.3 million uninsured children in 2018.
• The number of uninsured children in the United States increased by 425,000 between 2017 and 2018.
• Children’s coverage losses were widespread, with 15 states showing statistically significant increases in the number and/or rate of uninsured children—Alabama, Arizona, Florida, Georgia, Idaho, Illinois, Indiana, Missouri, Montana, North Carolina, Ohio, Tennessee, Texas, Utah and West Virginia. Only one state—North Dakota—made positive progress.
• Following steady increases in child enrollment in Medicaid and CHIP since 2007, 2017 was the first year to not see an increase despite a strong economy. Child enrollment in Medicaid and CHIP decreased by over 828,000 between 2017 and 2018, a 2.2 percent decline in only one year.
• These programs provide lifelong benefits that far outweigh the short-term costs. The National Bureau of Economic Research compared children eligible for Medicaid during childhood with those not eligible and found Medicaid-eligible children were more likely to attend college and make greater contributions as adult taxpayers.
• States that have not expanded Medicaid to parents and other adults under the Affordable Care Act have seen increases in their rate of uninsured children three times as large as states that have.

The increase in uninsured children and decrease in Medicaid and CHIP enrollment has been attributed to a number of factors, including unnecessary paperwork and bureaucratic red tape that make it harder for families to enroll or renew their eligible children in Medicaid or CHIP. But these factors also include attempts to repeal the ACA and deeply cut Medicaid, such as cutting outreach and enrollment funds, eliminating the ACA’s individual mandate penalty and creating a pervasive climate of fear and confusion for immigrant families. The latter has left many of these families reluctant to enroll their citizen children in public coverage for fear of having it held against them or seeing their families ripped apart.

https://www.childrensdefense.org…

---

Comment:

By Don McCanne, M.D.

How can President Trump boast about the state of the union when he neglects the state of our children? The future of the nation is dependent on our children. The current status cries out for public policies, yet the president is moving the process backwards, particularly evident in the decline in health care coverage for children.

It is rumored that he is going to boast about his health care proposals while condemning socialism in health care – specifically condemning Medicare for All. It is reported that his speech writing team is supervised by Stephen Miller. We should listen carefully to his rhetoric that is devoted to the children, and then see whether or not he follows through on it. What future will our children have under this president?

Stay informed! Visit www.pnhp.org/qotd to sign up for daily email updates.

By Elizabeth Woodcock, MBA, FACMPE, CPC
Medscape, January 29, 2020

If you’ve knocked yourself out to earn a Merit-based Incentive Payment System (MIPS) bonus payment, it’s pretty safe to say that getting a 1.68% payment boost probably didn’t feel like a “win” that was worth the effort.

And although it saved you from having a negative 5% payment adjustment, many physicians don’t feel that it was worth the effort.

Based on 2018 participation, the bonus for those who scored a perfect 100 is only a 1.68% boost in Medicare reimbursement, slightly lower than last year’s 1.88%.

Overall, more than 97% of participants avoided having a negative 5% payment adjustment.

Indeed, these bonus monies are based on a short-term appropriation of extra funds from Congress. After these temporary funds are no longer available, there will be little, if any, monies to distribute as the program is based on a “losers-feed-the-winners” construct.

It may be very tempting for many physicians to decide to ignore MIPS, with the rationale that 1.68% is not worth the effort. But don’t let your foot off the gas pedal yet, since the penalty for not participating in 2020 is a substantial 9% (in perpetuity). Physicians should make sure that they, at minimum, achieve the 45 points necessary to avoid that pitfall this reporting year.

Physicians are spending a significant amount of money to comply with the program requirements. This includes substantial payments to registries—typically $200 to >$1000 per year—to report the quality measures for the program; electronic health record (EHR) systems, many of which require additional funding for the “upgrade” to a MIPS-compatible system, are also a sizable investment.

These hard costs pale in comparison with the time spent on understanding the ever-changing requirements of the program and the process by which your practice will implement them.

(Electronic Referral Loops) is only one of more than a dozen required elements: six quality measures, two (to four) improvement activities, and four promoting interoperability requirements. Each one of these elements has a host of requirements, all listed on multipage specification sheets.

In 2020, the threshold to avoid the penalty is 45 points. In order to get the 45 points, practices must participate in two improvement activities, which is not difficult as there are 118 options. That will garner 15 points. Then there are 45 points available from the quality category; you need at least 30 to reach the 45-point threshold for penalty avoidance.

To obtain the additional 30 points, turn your attention to the quality category. There are 268 quality measures; choose at least six to measure. If you report directly from your EHR system, you’ll get a bonus point for each reported measure, plus one just for trying.

The quality category has a total of 100 points available, which are converted to 45 toward your composite score. Since you need 30 to reach that magical 45 (if 15 were attained from improvement activities), that means you must come up with 75 points in the quality category.

There are two other categories in the program: promoting interoperability (PI) and cost. The PI category mirrors the old “meaningful use” program; however, it has become increasingly difficult over the years. If you think that you can meet the required elements, you can pick up 25 more points toward your composite score.

Cost is a bit of an unknown, as the scoring is based on a retrospective review of your claims. You’ll likely pick up a few more points on this 15-point category, but there’s no method to determine performance until after the reporting period. Therefore, be cautious about relying on this category.

MIPS is not going anywhere; the program is written into the law.

But that doesn’t mean that CMS can’t make tweaks and updates. Hopefully, the revisions won’t create even more administrative burden as the program is quickly turning into a big stick with only a small carrot at the end.

https://www.medscape.com…

---

Explaining MIPS

Comment by Don McCanne, M.D.
Quote of the Day, March 2015

On reading the summary of the “SGR Repeal and Medicare Provider Payment Modernization Act,” you will see that MIPS places a tremendous administrative burden on health care professionals in a health care system that is already overwhelmingly overburdened with administrative excesses. The only way to escape this additional burden is to participate in Alternative Payment Models (APMs) which, in themselves, create further significant administrative burdens (ACOs, PCMHs, etc.). MIPS is an administrative nightmare.

Under the MIPS payment system, eligible professionals with higher scores will receive positive payment adjustments (and may be eligible for an additional incentive payment). We have observed repeatedly how such systems are gamed in order to receive these extra payments. The problem is that those who do not game the system, and especially those with practice situations and patient populations that make it very difficult to score higher points, will almost automatically receive performance scores below the threshold since their performances will be compared with the gamers. This will result in negative payment adjustments – reducing payments by up to nine percent.

This is serious. And it is being steamrolled through Congress right now! Those who care about the future of Medicare and who do have organizational skills must immediately inform themselves on what is happening here. Then act. You cannot wait to watch the Congressional vote tally on C-Span, perhaps as early as this week (2015). By then it will be a done deal.

https://pnhp.org…

---

Comment:

By Don McCanne, M.D.

There was a great celebration when Congress agreed to repeal the flawed SGR formula for adjusting Medicare payment rates. Unfortunately, the voices of those of us who were very concerned about its replacement – MIPS – fell on deaf ears. We are now living with the MIPS mess.

To avoid a nine percent penalty in Medicare payments physicians must comply with the administrative hassle described briefly above. Nobody benefits from this; it has not even improved quality – its avowed intent. Those who attempt to qualify for bonus payments are disappointed since the bonuses are funded by the penalties, and most avoid the penalties by accepting the administrative burden since a nine percent penalty is excessively punitive.

The net result is that we have added a greater administrative burden to a system already overwhelmed with very expensive administrative excesses with the reward being merely avoidance of a monetary penalty, without extra funds being appropriated for potential of paltry rewards.

CMS continues to push this program, presumably based on the fiction that it improves value. If they really wanted greater value in health care, they should look at the $600 billion in recoverable administrative waste that we could free up by enacting and implementing a well designed, single payer, improved Medicare for All. Enough with the MIPS mess.

Stay informed! Visit www.pnhp.org/qotd to sign up for daily email updates.

By Richard Kronick
Health Affairs Blog, January 29, 2020

In the Deficit Reduction Act of 2005, Congress gave the Centers for Medicare and Medicaid Services (CMS) the statutory authority and obligation to implement a “coding intensity adjustment” for Medicare Advantage (MA) plans, to adjust for differences in patterns of diagnosis coding between MA and traditional Medicare.

Under both the Obama and Trump administrations, the coding intensity adjustment implemented by CMS has consistently been substantially smaller than justified by the data. The fiscal problem created by inadequate adjustment for coding intensity is large. Under reasonable assumptions about the rate of growth of MA coding, CMS will overpay MA plans by $200 billion over the next decade if the coding intensity adjustment remains at 5.91 percent, its current level.

Why does this overpayment persist? The annual decision about the size of the coding intensity adjustment is made by political appointees at CMS, the Department of Health and Human Services, and the White House, and the political benefits from implementing a smaller than empirically justified coding intensity adjustment far outweigh the potential political gains from protecting the taxpayers and creating a stable and level playing field between MA and traditional Medicare.

The Problem

CMS pays MA plans based on the health status of the beneficiaries who enroll, paying more for older and sicker enrollees and less for younger and healthier enrollees. This “risk adjusted” payment mechanism is intended to encourage MA plans to develop systems of care that are attractive to beneficiaries most in need and to prevent MA plans from profiting by attracting only good risks.

The health status of MA enrollees is measured using diagnostic information submitted by the MA plans themselves. As a result, MA plans have strong incentives to identify and report as many diagnoses as can be supported by the medical record, incentives that are not present in traditional Medicare. Although some MA plans may have used fraudulent strategies to inflate enrollee risk scores, many legitimate strategies are available to MA to increase risk scores.

Discretion For CMS

Recognizing the likelihood that MA plans will report diagnostic information differently than is reported in traditional Medicare, in the Deficit Reduction Act of 2005, Congress gave CMS the authority to implement a “coding intensity adjustment” to adjust for differences in coding patterns between MA and traditional Medicare. In 2010, CMS implemented a 3.41 percent coding intensity adjustment, reducing MA risk scores by that amount. The Affordable Care Act, and subsequently the American Taxpayers Relief Act of 2012, created a schedule of minimum adjustments, starting at 4.71 percent in 2014, increasing to 5.91 percent in 2018.

CMS retained the authority and obligation to implement adjustments larger than the statutory minimum if the data indicated that a larger adjustment was needed. However, it has not yet done so, despite strong evidence that a larger adjustment is needed to compensate for differences between MA and traditional Medicare in coding patterns. The measured risk of MA enrollees relative to traditional Medicare increased from 95.0 percent in 2007 to 106.2 percent in 2015.

MA enrollment grew substantially from 2007 to 2015, and it is theoretically possible that the increase in relative risk reflects real changes in the relative health of MA enrollees. However, analyses of other data sources—including mortality rates, survey data from the Medicare Current Beneficiary Survey, data on switchers from traditional Medicare to MA, and prescription drug use data—show conclusively that there was little, if any, change in real relative risk over this time period. The 11-percentage-point increase in measured relative risk from 2007 to 2015 appears largely to be the result of differences in coding patterns between MA and traditional Medicare.

Perverse Political Incentives

The main reason that CMS has not implemented a larger coding intensity adjustment is that there is little political gain from doing so, and the decision about the coding intensity adjustment is, ultimately, made by political appointees. If CMS were to implement an adjustment that is larger than the statutory minimum, MA plans would make their displeasure known to members of Congress. Furthermore, an adjustment larger than the statutory minimum might result in higher MA premiums or fewer extra benefits for enrollees, raising the likelihood of constituent dissatisfaction.

In even numbered years, information on MA premiums and benefits is made public soon before the November elections. Members of Congress (and, every four years, the president) are concerned that voters, likely encouraged by information fed to them by MA plans, may blame incumbents for increased premiums or reduced benefits. This is not a merely theoretical argument: Federal legislators have repeatedly exerted strong bipartisan pressure on CMS in response to industry and constituent concerns about MA payment policy.

The political cost of more aggressive action by CMS on coding intensity is clear. The political benefits are much less clear: The deficit would be slightly smaller but not enough to change interest rates or anything else that voters would notice. Given this imbalance between political costs and benefits, it is not surprising that CMS has stuck with the statutory minimum, despite strong evidence that larger adjustments are warranted.

A Better, More Practical Approach

An alternative, and, in my view, preferable approach would be to require CMS to calculate the coding intensity adjustment using a method that CMS floated as a trial balloon in the Advance Notice for 2016 MA rates.

(For details, use the link below.)

Summing Up

Under reasonably conservative assumptions about the rate of growth of coding intensity, using the budget neutrality method to calculate coding intensity would likely result in approximately $200 billion in savings to Medicare over the next decade compared to current policy in which the coding intensity adjustment remains at 5.91 percent. Just as CMS is reluctant to anger the MA industry and its enrollees, members of Congress will be reluctant as well. However, unlike CMS, which does not get to spend any of the savings generated by more appropriate actions on coding intensity, Congress can choose to use the $200 billion in savings for additional spending or tax cuts, providing reason to hope that legislators will, at some point, do the right thing.

https://www.healthaffairs.org…

---

Comment:

By Don McCanne, M.D.

Why was Medicare enacted? Wasn’t the private insurance industry fulfilling the role of financing health care? Well, not for seniors. With their higher health care needs and limited income from social security or modest pensions, the market of seniors who could afford private health insurance was too small. Thus, as governments should do, they filled the void with publicly-funded Medicare.

Since Medicare was functioning quite well, why did we need to add the option of private Medicare plans? It was not to benefit Medicare beneficiaries, but rather it was to give private health plans access to the government funds in order to expand their business model of health care financing.

The insurance industry convinced Congress that they could provide higher quality care at a lower cost and thus the Medicare + Choice program was established. It turned out they couldn’t and enrollment began declining. But the insurance industry wouldn’t give up, and they convinced Congress that the rules needed to be changed, and thus Medicare Advantage was enacted to replace Medicare + Choice. Profits were still the motivating factor.

The industry devised devious methods of selectively marketing their products to the healthy while being reimbursed at rates more appropriate for the less healthy individuals who remained in the traditional fee-for-service sector. It did not take long to recognize this scheme and thus a system of risk adjustment was established such that payments for those at higher risk were greater than payments for those at average risk. The industry then responded in several ways to game the system for higher payments, but the most important was to add diagnoses (upcode) to make their comparatively healthy patients appear sicker than they were, for instance making house calls to snoop around to see if other diagnoses could be added such as recording a diagnosis that would explain a grab bar in the bathroom, or recording a single high blood pressure in a patient offended by this intrusion. You should read the full article by Richard Kronick (link above) to understand how the legislators and bureaucrats responded to make this work for the insurers.

And it is still working to bolster their profits. Their enrollment continues to increase (their beneficiaries seem to be oblivious to their shenanigans, and in this age of tolerance of ethical compromise, they probably wouldn’t care anyway). Further, their performance in the stock market has pleased their shareholders, and between profits and stock appreciation, the political pressure they place on legislators of both major parties is actually welcome since it is accompanied by… (see OpenSecrets.org).

In the full article, Professor Kronick suggests an approach that would recover about $200 billion in overpayments over a decade. As a beneficial tweak, it should be enacted. However, it does not correct many of the other inherent flaws of including private health plans in a fragmented, dysfunctional system of financing health care. The private plans were devised for the purpose of diverting our health care dollars to a business entity – the insurance industry – an industry that doesn’t even provide health care services to patients (though that is changing as they move sectors of the health care delivery system into their enterprises – converting a service industry into an entrepreneurial business model).

No, we need to change the financing infrastructure into one that is designed exclusively to provide essential health care services for everyone while dumping the rent seekers that are screwing up our health care for their own personal gain. The obvious: We need to enact and implement a well designed single payer model of an improved Medicare for All.

Stay informed! Visit www.pnhp.org/qotd to sign up for daily email updates.

CMS.gov, January 30, 2020

The Centers for Medicare & Medicaid Services (CMS) is announcing a new opportunity to support states with greater flexibility to improve the health of their Medicaid populations. The Healthy Adult Opportunity (HAO) emphasizes the concept of value-based care while granting states with extensive flexibility to administer and design their programs within a defined budget.

Financing and Program Integrity

States participating in HAO demonstrations will need to agree to operate their program within a defined budget target, set on either a total expenses or per-enrollee basis, in a manner similar to that used in other section 1115 demonstrations. Total expenditures for covered populations in excess of the annual budget will not be eligible for Federal Financial Participation. The targets will be negotiated based on the state’s own historic costs and other factors like national and regional trends. The financial parameters will be tied to inflation and adjustments may be made for extraordinary events. CMS will closely work with states to set a realistic baseline.

Under the total expenses model, CMS will calculate a base year amount using prior year expenditures based on the populations and benefits included in the state’s demonstration. CMS will trend this amount forward to each demonstration year without regard to changes in Medicaid enrollment. While available funding will be capped in the aggregate, states will not have the ability to cap enrollment and still receive the enhanced federal match rate available to the expansion population. States agreeing to the total expense model will be required to maintain spending on health services at a level at least 80% of the target amount. To the extent they achieve savings and demonstrate no declines in access or quality, CMS will share back a portion of the federal savings for reinvestment into Medicaid. The amount of shared savings available for reinvestment would increase based on commensurate improvements in quality and access measures.

Under the per enrollee model, CMS will determine a per enrollee base amount for each eligibility group included in the demonstration using prior year expenditures. If prior year expenditures for the covered population are unavailable, the base year amount will be determined initially considering national/regional expenditures and other relevant information, and will be subject to rebasing to ensure accuracy. CMS will trend each group’s base amount forward to the demonstration year and then multiply the trended base amount by the number of enrollees for that year. The amount for each group will be added together to create an overall per capita cap. Therefore, the per-enrollee budget amount will fluctuate based on enrollment, while the aggregate cap budget amount will not.

Under both models, states will be required to participate in program integrity and financial oversight activities to ensure they continue to make accurate eligibility determinations and receive appropriate federal funds for covered populations. While total federal funding will be capped, the HAO does not change the need for states to submit claims reflecting actual expenditures to obtain federal matching funds for the Medicaid program. States will also be required to provide quarterly and annual expenditure reports to demonstrate their financial performance relative to their budget agreement.

Flexibilities Available Under the Healthy Adult Opportunity

The HAO will involve the use of section 1115(a)(2) authority to provide coverage to adults not eligible for benefits under the state’s Medicaid state plan, while affording states significant flexibility in the administration of benefits for such individuals. For the first time, CMS is offering flexibilities currently available to states in a comprehensive suite of pre-packaged waiver authorities. This will give states, if they choose it, the opportunity to propose commonly requested authority for participating populations, including the ability to:

• Adjust cost-sharing requirements to incentivize high value care,
• Align benefits more closely to what is available through a commercial insurance benefit package,
• Improve negotiating power to lower drug costs by adopting a closed formulary similar to those provided in the commercial market (see section below for more detail),
• Make timely programmatic adjustments without additional federal approval,
• Apply additional conditions of eligibility which support the objectives of the program,
• Deliver care through innovative delivery systems, and
• Waiving retroactive coverage and hospital presumptive eligibility requirements.

Managed Care and Delivery Systems

CMS encourages states applying for this demonstration to implement evidence-based payment and delivery system reforms in order to achieve compliance with the quality and cost goals. In general, states will be able to use any combination of fee-for-service and managed care delivery systems and will have flexibility to alter these arrangements over the course of the demonstration, as long as certain guidelines are met.

https://www.cms.gov…

CMS Press Release:
https://www.cms.gov…

CMS letter to State Medicaid Directors (56 pages):
https://www.medicaid.gov…

---

Comment:

By Don McCanne, M.D.

Conservatives for decades have been trying to change Medicaid funding to block grants – a scheme to progressively reduce federal contributions to the state Medicaid programs. Opponents to block grants have pointed out that the program is already critically underfunded, and further reductions will likely cause states to further reduce coverage for those with the least means to pay for their own care.

Today CMS is introducing the Healthy Adult Opportunity program – a program for adults in poverty who are not otherwise eligible for the state Medicaid programs. CMS has bypassed both Congress and the courts in order to to establish this block grant program, though they do not use that label. But, as the fact sheet explains, “funding will be capped in the aggregate” – a nice way of saying “block grant.”

Since the poor have a very weak political voice, programs for them do tend to be underfunded. By establishing a separate health care program for the poor – Medicaid – chronic underfunding is expected. But that affects not only the poor themselves by impairing access, but it also underfunds those in the health care delivery system who are trying to meet the health care needs of these less fortunate individuals. However, separate funding for health care for the poor is unnecessary. Other nations with universal systems based on social solidarity have no difficulty with the concept of providing equitable care to everyone, regardless of income or wealth.

Rather than having a two-tiered or multi-tiered system, we can ensure that everyone receives optimal care by enacting and implementing a single payer model of an improved Medicare for All. The sooner, the better. In fact, maybe the conservatives could accept the concept of block grants in the form of single payer global budgets, as long as everyone is adequately covered.

Stay informed! Visit www.pnhp.org/qotd to sign up for daily email updates.

The UK has one of the most equitable health care systems in the world. Here’s how.

By Ezra Klein
Vox, January 28, 2020

The UK spends barely half what we do, covers everyone, rarely lets cost prove a barrier for people seeking care, and boasts health outcomes better than ours.

Which raises the question: How does the UK do it?

“Britain spends a lot less than we do, yet in terms of broad culture, they have a similar value system to our own,” says Hank Aaron, a Brookings Institution health economist and co-author of two books about the British health care system. “Where do they economize? What do they do? How do they ration?”

Decisions of this sort can be made more or less bureaucratically, more or less transparently, and more or less equitably. But the American health care system is uniquely fractured, opaque, and cruel in its approach to saying no. It says no through prices — but not, as in most other countries, by limiting the prices pharmaceutical companies and hospitals can charge for treatments. Rather, it says no by letting them charge whatever prices they want and denying care to those who can’t afford the cost.

The paradox of the American health system, then, is that it poses as a system with no limits — there is no centralized authority rationing care or negotiating treatments — even as it turns tens of millions of people away from services they need. But the system works quite well for those who profit from it, or can afford all that it has to offer, and they can be mobilized powerfully to resist change. When reformers threaten the status quo, the health industry blankets airwaves with ads warning that under the new system, there will be someone who says no to you: the government.

The UK is the opposite of the US in how it says no. It has embraced the idea we fear most: rationing. There is, in the UK, a government agency that decides which treatments are worth covering, and for whom. It is an agency that has even decided, from the government’s perspective, how much a life is worth in hard currency. It has made the UK system uniquely centralized, transparent, and equitable. But it is built on a faith in government, and a political and social solidarity, that is hard to imagine in the US.

A NICE health care system

At the center of the UK system sits the National Health Service. Founded in 1948, the NHS goes beyond single-payer health care into truly socialized medicine: The government doesn’t just pay for services, it also runs hospitals and employs doctors. The system is financed through taxes, everyone is covered, and supplemental private insurance is rare.

In 1999, the British government set up the National Institute for Care Excellence, or NICE, to assess the cost-effectiveness of medications, procedures, and other treatments, and make recommendations to the National Health Service about what to cover and how. NICE has forced the NHS to become the anti-US: Rather than obscuring its judgments and saying no through countless individual acts of price discrimination, NICE makes the system’s values visible, and it says no, or yes, all at once, in full view of the public.

The political economy of rationing

A public health system is only as good as the government that creates, runs, and protects it. Saying no to treatments that people want to get, and that powerful corporations want to release into the market, will generate furious backlash. If the government isn’t trusted enough to win those fights, or if the politicians turn on the civil servants when they pick those fights, the structure collapses.

The late Uwe Reinhardt, the famed health economist who helped set up Taiwan’s single-payer system, once told me that he feared American politics was too captured to properly construct a single-payer system.

“I have not advocated the single-payer model here,” he said, “because our government is too corrupt. Medicare is a large insurance company whose board of directors — Ways and Means and Senate Finance — accept payments from vendors to the company. In the private market, that would get you into trouble.

“When you go to Taiwan or Canada,” he continued, “the kind of lobbying we have [in America] is illegal there. You can’t pay money to influence the party the same way. Therefore, the bureaucrats who run these systems are pretty much insulated from these pressures.”

Health systems need to be built first on a firm political foundation. It would be challenging, to say the least, for an NHS-like system to be designed in the face of the constant legal challenges, repeal efforts, and attempts at political sabotage that have pockmarked the Affordable Care Act.

Aaron, the Brookings economist, argues that the politics of the NHS is rooted in part in Britain’s post-World War II ethic of shared sacrifice. America, particularly at this moment in its political history, lacks such solidarity to fall back on. That, more than anything else, may be the central challenge that any effort to create a national health system in America must face.

It’s not that the political trade-offs of rationing are easy. It’s that, once well-implemented, they come to seem far better, and fairer, than the alternative. “The NHS is seen as a national treasure,” says Carol Propper, a health policy expert at the Imperial College of London. “Elections are fought and won on the basis of NHS funding.”

The most recent UK election is a case in point. One of the keys to Boris Johnson’s huge electoral win was his promise to increase funding for the NHS, which deprived Jeremy Corbyn’s Labour Party of a central issue. Johnson has even said that the NHS, not Brexit, will lead his agenda.

“I frankly urge everyone on either side of what was, after three and a half years, after all an increasingly arid argument, to find closure and to let the healing begin,” Johnson said in his post-election message. “Because I believe — in fact, I know, because I have heard it loud and clear from every corner of the country — that the overwhelming priority of the British people now is that we should focus above all on the NHS.”

This is the irony of comparing health politics in the UK and the US. In part because of the public and fair ways the UK says no, its health system has generated a form of social solidarity that cuts across political lines, that transcends party divisions. In the US, because of the opaque and unfair ways in which the system says no, health care deepens our political divisions, as the system’s current winners fear that reform could make them tomorrow’s losers.

https://www.vox.com…

---

Comment:

By Don McCanne, M.D.

Although actual health care delivery is similar in the UK and the US, the financing is starkly different. The UK covers everyone, has better outcomes, and does it at half the cost. The people of the UK rightfully take great pride in their NHS. The way the nations contain costs certainly contributes to these differences.

The US rations through price discrimination in a fragmented financing system that is heavily market-based even if largely publicly funded. It simply makes health care unaffordable for tens of millions of individuals. The UK publicly funds health care and uses the National Institute for Care Excellence (NICE) to set fair prices or to deny coverage for care that does not provide adequate value (see the full article at the link for a discussion of QALY, etc.).

The UK system is thought to be underfunded which results in capacity constraints and thus excessive queues for non-urgent services. Boris Johnson, the head of the newly elected conservative government, acknowledges that “the overwhelming priority of the British people now is that we should focus above all on the NHS.” Because of greater social solidarity in the UK, a conservative is promising that the government will address the problem of queues.

In the US, political polarization, especially over the role of private markets versus the government, has prevented us from using our great financial resources to provide comprehensive health care services to everyone. We are turning our health care dollars over to private payers, especially the private insurance companies, which then use price discrimination to control spending by erecting unnecessary financial barriers to care (premiums, deductibles and other cost sharing). This is particularly ironic when 60 percent of health care dollars pass through our tax system.

Imagine if we had the egalitarianism and social solidarity of the UK. The people there are demanding that attention be paid to their NHS, and the conservative government says that it will do so. Here in the US, the media keep telling us that we are too politically polarized to ever have agreement on the most effective approach to ensuring high quality health care for everyone. But that’s not true. The majority of Americans do support Medicare for All. So why do so many of the conservative and neoliberal politicians continue to oppose it? Are they not listening to the people? And shouldn’t the people respond by demanding that their politicians support an improved Medicare for All?

If conservative Boris Johnson follows through and truly supports the NHS, can’t we move politics in the same direction here?

Stay informed! Visit www.pnhp.org/qotd to sign up for daily email updates.