Blue Shield and Aetna to raise healthcare rates over state objections

By Chad Terhune
Los Angeles Times, March 6, 2013
Despite objections from regulators, health insurers Blue Shield of California and Aetna Inc. are proceeding with double-digit rate increases that state officials said were unreasonable.
Officials at the California Department of Managed Health Care said increases that average more than 11% for about 47,000 individual and small-business policyholders of Blue Shield and Aetna were unreasonable. But state officials don’t have the authority to reject changes in premiums, and increasingly health insurers refuse state demands to lower rates.
“I am disappointed that after lengthy negotiations, Blue Shield and Aetna were unwilling to bring their proposed health plan increases down to a reasonable level,” said Brent Barnhart, director of the Department of Managed Health Care.
Last year, Aetna led the way for the industry’s more defiant stance by proceeding with an 8% rate hike on some small-business policyholders despite objections from the state insurance department. In January, California Insurance Commissioner Dave Jones scolded Anthem for proceeding with an 11% premium hike for small businesses that he determined was excessive.
http://www.latimes.com/business/la-fi-health-insure-rates-20130307,0,130…

It is no surprise that in California – a state that can review insurance premium increases but has no power to control them – private insurers are proceeding with premium increases deemed to be unreasonable. The surprise is that our elected representatives continue to keep in charge of our health care spending an industry that uses us as instruments to achieve their own business ends.
Imagine a scenario in which Medicare would demand unreasonable increases in premiums. It would never happen. Medicare is a service model designed to serve us, the people. Private insurers are business models designed to serve their own business interests.
Did anyone ever think that it might be a good idea to dismiss the private insurers and provide Medicare for all of us?

By Steven Brill
Reuters, March 5, 2013

For the past 10 days I’ve been interviewed on various television and radio shows about the article I wrote for the March 4 issue of Time, called “A Bitter Pill.”  It’s all about how exorbitant prices and profits are at the core of the crisis America uniquely faces when it comes to financing healthcare, the cost of which now accounts for roughly a fifth of our gross domestic product.

Invariably a question has come up in these interviews about how I thought of that approach. So, since this is supposed to be a column about good story ideas, I think I’ll use it to explain the genesis of “A Bitter Pill” in more detail than I’ve been able to on the talk show circuit.

During the long debate over President Barack Obama’s health insurance reform proposals, a question kept nagging at me: Everyone on all sides seemed to accept as a given that healthcare was wildly expensive, and the only debate seemed to be over who should pay for it. I wondered: Well, why is it so expensive in the first place?

I had no idea what the answers were. But it seemed obvious that there was only one way to find out: If you want to know why something is so expensive, figure out every element of its costs. In other words, follow the money.

As those who have read the article or heard about it now know, I found that all my initial suspicions were wrong. By following the money, I discovered that our healthcare prices are out of whack for a reason that was hiding in plain sight — a reason that should be obvious to anyone who has ever been a healthcare consumer, which means all of us: There is no such thing as a free market in healthcare, if one defines a free market as a place where there is some balance of power between the buyer and the seller. Instead, healthcare is – except when Medicare is the buyer – a lopsided seller’s market. That became clear at both ends of the money trails I followed – from the patients’ lack of any knowledge of what they were buying or its prices, much less any leverage to bargain over it, to the sellers’ ability and willingness to charge absurdly high prices on everything from gauze pads to ambulance services to cancer wonder drugs.

In other words, everyone along the supply chain – from hospital administrators (who enjoy multimillion-dollar salaries) to the salesmen, executives and shareholders of drug and equipment makers ‑ was reaping a bonanza. The only exceptions, I found, were those actually treating the patients ‑ the nurses and doctors (unless the doctors were gaming the system by reaping consulting fees from drug or device makers or setting up diagnostic clinics in their practices in order to steer patients there for expensive tests).

http://blogs.reuters.com/stories-id-like-to-see/2013/03/05/coming-up-with-a-bitter-pill/

Comment:

By Don McCanne, M.D.

These excepts from Steven Brill’s explanation of how he came to write “Bitter Pill,” his TIME special report on exorbitant prices and profits in U.S. health care, reveal that there are two elements that come out untarnished: 1) most of the doctors and nurses actually treating the patients, and 2) Medicare.

The first point is very reassuring, but the second point should be a call to action. As Brill writes, “healthcare is – except when Medicare is the buyer – a lopsided seller’s market.” We really do need to make Medicare, in an improved version, a buyer for all of us.

***

For those who have not yet read the 36 page report, “Bitter Pill,” it can be downloaded at the following link. The point to glean from the article is how well Medicare works, which should lead you to the conclusion that we need an improved Medicare for all of us, as opposed to merely accepting the relatively ineffectual tweaks that he suggests at the end of the article.

http://healthland.time.com/2013/02/20/bitter-pill-why-medical-bills-are-killing-us/

Coming up with “A Bitter Pill”

By Steven Brill
Reuters, March 5, 2013
For the past 10 days I’ve been interviewed on various television and radio shows about the article I wrote for the March 4 issue of Time, called “A Bitter Pill.”  It’s all about how exorbitant prices and profits are at the core of the crisis America uniquely faces when it comes to financing healthcare, the cost of which now accounts for roughly a fifth of our gross domestic product.
Invariably a question has come up in these interviews about how I thought of that approach. So, since this is supposed to be a column about good story ideas, I think I’ll use it to explain the genesis of “A Bitter Pill” in more detail than I’ve been able to on the talk show circuit.
During the long debate over President Barack Obama’s health insurance reform proposals, a question kept nagging at me: Everyone on all sides seemed to accept as a given that healthcare was wildly expensive, and the only debate seemed to be over who should pay for it. I wondered: Well, why is it so expensive in the first place?
I had no idea what the answers were. But it seemed obvious that there was only one way to find out: If you want to know why something is so expensive, figure out every element of its costs. In other words, follow the money.
As those who have read the article or heard about it now know, I found that all my initial suspicions were wrong. By following the money, I discovered that our healthcare prices are out of whack for a reason that was hiding in plain sight — a reason that should be obvious to anyone who has ever been a healthcare consumer, which means all of us: There is no such thing as a free market in healthcare, if one defines a free market as a place where there is some balance of power between the buyer and the seller. Instead, healthcare is – except when Medicare is the buyer – a lopsided seller’s market. That became clear at both ends of the money trails I followed – from the patients’ lack of any knowledge of what they were buying or its prices, much less any leverage to bargain over it, to the sellers’ ability and willingness to charge absurdly high prices on everything from gauze pads to ambulance services to cancer wonder drugs.
In other words, everyone along the supply chain – from hospital administrators (who enjoy multimillion-dollar salaries) to the salesmen, executives and shareholders of drug and equipment makers ‑ was reaping a bonanza. The only exceptions, I found, were those actually treating the patients ‑ the nurses and doctors (unless the doctors were gaming the system by reaping consulting fees from drug or device makers or setting up diagnostic clinics in their practices in order to steer patients there for expensive tests).
http://blogs.reuters.com/stories-id-like-to-see/2013/03/05/coming-up-wit…

These excepts from Steven Brill’s explanation of how he came to write “Bitter Pill,” his TIME special report on exorbitant prices and profits in U.S. health care, reveal that there are two elements that come out untarnished: 1) most of the doctors and nurses actually treating the patients, and 2) Medicare.
The first point is very reassuring, but the second point should be a call to action. As Brill writes, “healthcare is – except when Medicare is the buyer – a lopsided seller’s market.” We really do need to make Medicare, in an improved version, a buyer for all of us.
***
For those who have not yet read the 36 page report, “Bitter Pill,” it can be downloaded at the following link. The point to glean from the article is how well Medicare works, which should lead you to the conclusion that we need an improved Medicare for all of us, as opposed to merely accepting the relatively ineffectual tweaks that he suggests at the end of the article.
http://healthland.time.com/2013/02/20/bitter-pill-why-medical-bills-are-…

Office of Inspector General
Department of Health and Human Services, March 2013

Objectives

1. To assess sponsors’ Pharmacy and Therapeutics (P&T) committees’ conflict-of interest-definitions.
2. To determine whether sponsors’ P&T committees established objective processes to determine and manage committee members’ conflicts of interest.
3. To determine whether the Centers for Medicare & Medicaid Services (CMS) oversee sponsors’ P&T committee compliance with conflict-of-interest requirements.

Findings

Most sponsors’ P&T committees had limited definitions of conflicts of interest, which could prevent them from identifying conflicts
  * Half of P&T committees’ definitions did not address conflicts prohibited by Federal regulations
  * P&T committees’ definitions did not always address relationships with other entities that could benefit from formulary decisions
  * More than two-thirds of P&T committees’ definitions did not address employment

Many sponsors’ P&T committees allowed members to determine and manage their own conflicts of interest
   * Nearly two-thirds of P&T committees relied on members to determine whether financial interests constituted conflicts
  * More than three-quarters of P&T committees relied on members to recuse themselves from discussions and votes

CMS does not adequately oversee sponsors’ P&T committee compliance with Federal conflict-of-interest requirements
  * CMS does not review P&T committee conflict-of-interest information
  * Data discrepancies would prevent CMS from identifying with certainty the members of each P&T committee

Conclusion and Recommendations

Our findings reveal that both sponsors and CMS conduct limited oversight of P&T committee conflicts of interest, compromising their ability to ensure that financial interests do not influence formulary decisions. Specifically, we found that without direction and oversight from CMS, many sponsors’ P&T committees have limited oversight of members’ conflicts of interest. Additionally, we found that CMS does not adequately oversee compliance with the Federal requirement that at least one physician and at least one pharmacist on each committee be free of conflict.

To address limitations in how P&T committee members’ conflicts are defined, determined, and managed, we recommend that CMS:

* Define PBMs as Entities That Could Benefit From Formulary Decisions

* Establish Minimum Standards Requiring Sponsors To Ensure That Safeguards Are Established To Prevent Improprieties Related to Employment by the Entity That Maintains the P&T Committee

* Establish Minimum Standards Requiring Sponsors To Ensure That an Objective Process Is Used To Determine Whether Disclosed Financial Interests Are Conflicts

* Establish Minimum Standards Requiring Sponsors To Ensure That an Objective Process Is Used To Manage Recusals Because of Conflicts of Interest

* Oversee Compliance With Federal P&T Committee Conflict-of-Interest Requirements and Guidance

Agency Comments and Office of Inspector General Response

CMS did not concur with our first and second recommendations, concurred with part of our third and fourth recommendations, and concurred with our fifth recommendation.

CMS maintained that it is not necessary to conduct additional P&T committee conflict-of-interest oversight because current formulary reviews and P&T committee audits appropriately protect beneficiaries from any adverse effects of potential conflicts of interest.

If conflicts of interest among P&T committee members are not addressed, beneficiaries may receive inferior therapies when safer or more effective therapies are available, limited Medicare dollars may be wasted to pay for inappropriate treatment, and public confidence in the Federal Government may be undermined. In contrast, CMS asserts that conflicts of interest would not disadvantage beneficiaries or the Federal Government because it believes that formulary decisions influenced by conflicts would result in higher premiums and the plan would be priced out of the marketplace.

https://oig.hhs.gov/oei/reports/oei-05-10-00450.pdf

Comment:

By Don McCanne, M.D.

When the conservatives enacted the Part D drug program for Medicare, they designed it as a private sector solution, using private insurer sponsors and private pharmacy benefit managers (PBMs), while specifically prohibiting any competing public drug plan.

An important function of these intermediaries is to select the drugs to be covered through their formularies, balancing the adequacy of drug selection with the opportunity for profit not only for the insurer sponsors and the PBMs, but also for the pharmaceutical firms supplying the drugs. This function is carried out by the sponsors’ own Pharmacy and Therapeutic (P&T) committees, and not by the government.

The potential for conflict of interest within these P&T committees is enormous. This is why this report from the Office of the Inspector General (OIG) is so important. The committee members are in a position to advocate for the interests of the insurer sponsors, or the PBMs, or the pharmaceutical firms. Decisions which benefit any or all of these would likely be detrimental to the patients who pay premiums and a portion of the Part D drug costs, and to the taxpayers who help fund the Part D program of Medicare.

But don’t worry. This program was set up to allow the free market to work its magic. Apparently this is not only the agenda of the conservatives who established this program, this laissez-faire approach is also being followed by the current “liberal” administration.

In her letter in response to the OIG report, acting CMS administrator Marilyn Tavenner wrote, “… if a P&T committee were to create a formulary while operating under a potential conflict of interest, because a discriminatory formulary would not be approved, the only potential impact would be that the bid could be more expensive and, therefore, less competitive. Beneficiaries could easily evaluate these higher premiums in the marketplace and choose a more efficient plan to meet their needs. As a result, we could expect that any authentic conflicts of interest, given our level of formulary review, would disadvantage the sponsor and not the beneficiary or Medicare program.” Note that this is the exact opposite of what is stated above.

Have you tried to shop for Part D plans? Though the premium might be the first feature you see, the complexity of the various benefits, and especially the differences in the formularies are very difficult to make sense of. How can you look up medications that may be prescribed for you next year when you don’t even know what those medications are? And are you really going to carry a formulary with you each time you see the doctor?

How nonsensical this dependency on the power of the market is can be understood by comparing the prices we get through the privatized version of the government Medicare Part D program, with the prices we get through the government purchases of drugs for the VA system. The VA pays about 40 percent less for drugs than paid under Medicare Part D (Austin Frakt). It seems that the only magic in the marketplace is the increased revenues that these intermediaries can glom off of us pathetic saps.

With HHS Secretary Kathleen Sebelius pushing private Medicare Advantage plans (yesterday’s message), and soon-to-be-confirmed CMS Administrator Marilyn Tavenner pushing private Medicare Part D drug benefits, we have
the private sector pretty well covered. One more step to the defined contribution premium support proposal and the private sector will have it locked up.

Our love of the marketplace brings to mind Puck’s comment to Oberon, “Lord, what fools these mortals be!”

Gaps in Oversight of Conflicts of Interest in Medicare Prescription Drug Decisions

Office of Inspector General
Department of Health and Human Services, March 2013
Objectives
1. To assess sponsors’ Pharmacy and Therapeutics (P&T) committees’ conflict-of interest-definitions.
2. To determine whether sponsors’ P&T committees established objective processes to determine and manage committee members’ conflicts of interest.
3. To determine whether the Centers for Medicare & Medicaid Services (CMS) oversee sponsors’ P&T committee compliance with conflict-of-interest requirements.
Findings
Most sponsors’ P&T committees had limited definitions of conflicts of interest, which could prevent them from identifying conflicts
* Half of P&T committees’ definitions did not address conflicts prohibited by Federal regulations
* P&T committees’ definitions did not always address relationships with other entities that could benefit from formulary decisions
* More than two-thirds of P&T committees’ definitions did not address employment
Many sponsors’ P&T committees allowed members to determine and manage their own conflicts of interest
* Nearly two-thirds of P&T committees relied on members to determine whether financial interests constituted conflicts
* More than three-quarters of P&T committees relied on members to recuse themselves from discussions and votes
CMS does not adequately oversee sponsors’ P&T committee compliance with Federal conflict-of-interest requirements
* CMS does not review P&T committee conflict-of-interest information
* Data discrepancies would prevent CMS from identifying with certainty the members of each P&T committee
Conclusion and Recommendations
Our findings reveal that both sponsors and CMS conduct limited oversight of P&T committee conflicts of interest, compromising their ability to ensure that financial interests do not influence formulary decisions. Specifically, we found that without direction and oversight from CMS, many sponsors’ P&T committees have limited oversight of members’ conflicts of interest. Additionally, we found that CMS does not adequately oversee compliance with the Federal requirement that at least one physician and at least one pharmacist on each committee be free of conflict.
To address limitations in how P&T committee members’ conflicts are defined, determined, and managed, we recommend that CMS:
* Define PBMs as Entities That Could Benefit From Formulary Decisions
* Establish Minimum Standards Requiring Sponsors To Ensure That Safeguards Are Established To Prevent Improprieties Related to Employment by the Entity That Maintains the P&T Committee
* Establish Minimum Standards Requiring Sponsors To Ensure That an Objective Process Is Used To Determine Whether Disclosed Financial Interests Are Conflicts
* Establish Minimum Standards Requiring Sponsors To Ensure That an Objective Process Is Used To Manage Recusals Because of Conflicts of Interest
* Oversee Compliance With Federal P&T Committee Conflict-of-Interest Requirements and Guidance
Agency Comments and Office of Inspector General Response
CMS did not concur with our first and second recommendations, concurred with part of our third and fourth recommendations, and concurred with our fifth recommendation.
CMS maintained that it is not necessary to conduct additional P&T committee conflict-of-interest oversight because current formulary reviews and P&T committee audits appropriately protect beneficiaries from any adverse effects of potential conflicts of interest.
If conflicts of interest among P&T committee members are not addressed, beneficiaries may receive inferior therapies when safer or more effective therapies are available, limited Medicare dollars may be wasted to pay for inappropriate treatment, and public confidence in the Federal Government may be undermined. In contrast, CMS asserts that conflicts of interest would not disadvantage beneficiaries or the Federal Government because it believes that formulary decisions influenced by conflicts would result in higher premiums and the plan would be priced out of the marketplace.
https://oig.hhs.gov/oei/reports/oei-05-10-00450.pdf

When the conservatives enacted the Part D drug program for Medicare, they designed it as a private sector solution, using private insurer sponsors and private pharmacy benefit managers (PBMs), while specifically prohibiting any competing public drug plan.
An important function of these intermediaries is to select the drugs to be covered through their formularies, balancing the adequacy of drug selection with the opportunity for profit not only for the insurer sponsors and the PBMs, but also for the pharmaceutical firms supplying the drugs. This function is carried out by the sponsors’ own Pharmacy and Therapeutic (P&T) committees, and not by the government.
The potential for conflict of interest within these P&T committees is enormous. This is why this report from the Office of the Inspector General (OIG) is so important. The committee members are in a position to advocate for the interests of the insurer sponsors, or the PBMs, or the pharmaceutical firms. Decisions which benefit any or all of these would likely be detrimental to the patients who pay premiums and a portion of the Part D drug costs, and to the taxpayers who help fund the Part D program of Medicare.
But don’t worry. This program was set up to allow the free market to work its magic. Apparently this is not only the agenda of the conservatives who established this program, this laissez-faire approach is also being followed by the current “liberal” administration.
In her letter in response to the OIG report, acting CMS administrator Marilyn Tavenner wrote, “… if a P&T committee were to create a formulary while operating under a potential conflict of interest, because a discriminatory formulary would not be approved, the only potential impact would be that the bid could be more expensive and, therefore, less competitive. Beneficiaries could easily evaluate these higher premiums in the marketplace and choose a more efficient plan to meet their needs. As a result, we could expect that any authentic conflicts of interest, given our level of formulary review, would disadvantage the sponsor and not the beneficiary or Medicare program.” Note that this is the exact opposite of what is stated above.
Have you tried to shop for Part D plans? Though the premium might be the first feature you see, the complexity of the various benefits, and especially the differences in the formularies are very difficult to make sense of. How can you look up medications that may be prescribed for you next year when you don’t even know what those medications are? And are you really going to carry a formulary with you each time you see the doctor?
How nonsensical this dependency on the power of the market is can be understood by comparing the prices we get through the privatized version of the government Medicare Part D program, with the prices we get through the government purchases of drugs for the VA system. The VA pays about 40 percent less for drugs than paid under Medicare Part D (Austin Frakt). It seems that the only magic in the marketplace is the increased revenues that these intermediaries can glom off of us pathetic saps.
With HHS Secretary Kathleen Sebelius pushing private Medicare Advantage plans (yesterday’s message), and soon-to-be-confirmed CMS Administrator Marilyn Tavenner pushing private Medicare Part D drug benefits, we have the private sector pretty well covered. One more step to the defined contribution premium support proposal and the private sector will have it locked up.
Our love of the marketplace brings to mind Puck’s comment to Oberon, “Lord, what fools these mortals be!”

United States Government Accountability Office (GAO)
Report to Congressional Requesters, January 31, 2013

What GAO Found

GAO found that the cumulative impact of coding differences on risk scores increased from 2010 through 2012 and was greater than the Centers for Medicare & Medicaid Services’ (CMS) risk score adjustment of 3.4 percent for each of the 3 years. In updating the analysis from its January 2012 report, GAO estimated that cumulative Medicare Advantage (MA) risk scores in 2010 were 4.2 percent higher than they likely would have been if the same beneficiaries had been enrolled continuously in Medicare fee-for-service (FFS). For 2011, GAO estimated that differences in diagnostic coding resulted in risk scores that were 4.6 to 5.3 percent higher than they likely would have been if the same beneficiaries had been continuously enrolled in FFS. This upward trend continued for 2012, with estimated risk scores 4.9 to 6.4 percent higher.

CMS’s adjustment to risk scores for 2010 through 2012 to account for diagnostic coding differences was too low, resulting in estimated excess payments to MA plans of at least $3.2 billion. CMS’s annual 3.4 percent reduction in risk scores is equivalent to $2.8 billion in 2010, $3.0 billion in 2011 and $3.2 billion in 2012. According to GAO’s estimates, the amount of the excess payments to MA plans after accounting for CMS’s adjustments was $0.6 billion in 2010, between $1.1 billion and $1.6 billion in 2011, and between $1.5 billion and $2.9 billion in 2012. Cumulatively across the 3 years, this equals excess payments of between $3.2 billion and $5.1 billion.

For 2013, CMS continues to use the risk score adjustment of 3.4 percent it used in 2010, 2011, and 2012. To conduct its data-based analysis, CMS officials reported that they used the same methodology used in 2010, but they incorporated more recent data.

CMS officials stated that they believed there was policy discretion with respect to the most appropriate adjustment factor but did not identify the specific source of their authority to consider factors other than the required data analysis when determining the adjustment amount. While CMS did not change its risk score adjustment methodology for 2013, agency officials said they may revisit their methodology for future years.

Concluding Observations

Risk adjustment is important to ensure that payments to MA plans adequately account for differences in beneficiaries’ health status and to maintain plans’ financial incentive to enroll and care for beneficiaries regardless of their health status. Our work confirms that differences in diagnostic coding caused risk scores for MA beneficiaries to be higher than those for comparable beneficiaries in Medicare FFS in 2010, 2011, and 2012. CMS’s decision to use a 3.4 percent adjustment to risk scores for 2010 through 2012 instead of the higher adjustments called for by our analysis resulted in excess payments to MA plans. The existence of such excess payments indicates that CMS’s adjustment does not accurately account for differences in treatment and diagnostic coding between MA plans and Medicare FFS—the stated goal of the statute that required CMS to develop a diagnostic coding adjustment. In our January 2012 report, we recommended that CMS take steps to improve the accuracy of the adjustment to account for excess payments due to differences in diagnostic coding. We noted that CMS could, for example, account for additional beneficiary characteristics, include the most recent data available, identify and account for all the years of coding differences that could affect the payment year for which an adjustment is made, and incorporate the trend of the impact of coding differences on risk scores. CMS’s adjustment for 2013 is the same as it used in 2010, 2011, and 2012. However, given our finding that this adjustment was too low and resulted in estimated excess payments to MA plans of at least $3.2 billion, we continue to believe that it is important for CMS to implement our recommendation that it update its methodology to more accurately account for differences in diagnostic coding.

http://www.gao.gov/assets/660/651712.pdf

And…

Medicare Advantage remains strong

U. S. Department of Health & Human Services (HHS), September 19, 2012

“Thanks to the Affordable Care Act, the Medicare Advantage and Prescription Drug programs have been strengthened and continue to improve for beneficiaries,” said (HHS Secretary Kathleen) Sebelius.

For the third year in a row, the Centers for Medicare & Medicaid Services (CMS) used authority provided by the Affordable Care Act to protect beneficiaries from significant increases in costs or cuts in benefits.

http://www.hhs.gov/news/press/2012pres/09/20120919a.html

Comment:

By Don McCanne, M.D.

The private Medicare Advantage plans, offered as an option to traditional Medicare, have been cheating taxpayers by selectively enrolling healthier, lower-cost patients, though being paid at full rates, and more recently by coding patients as having more complicated conditions in order to qualify for higher, risk-adjusted payments. The GAO now provides us with further evidence that Secretary Sebelius and HHS/CMS have been complicit in this fraud.

The Affordable Care Act included provisions to reduce the overpayments to the private Medicare Advantage plans. This GAO report shows that HHS/CMS ignored GAO’s recommendations to improve their risk adjustment methodology, recommendations that should have reduced overpayments due to the embellished diagnostic codes being submitted by the Medicare Advantage plans. HHS/CMS refused to improve the accuracy of their adjustments, which has already resulted in overpayments to these private plans of between $3.2 billion and $5.1 billion.

Why would they do this? Secretary Sebelius has repeatedly touted the Medicare Advantage plans, and has made efforts to expand enrollment in them, even though they cost the taxpayers more money. Overpaying them allows the plans to offer greater benefits in order to entice individuals to enroll. This is leading to further privatization of Medicare, opening up opportunities for Paul Ryan and other members of Congress to push future Medicare beneficiaries into his “premium support” proposal – a voucher plan to privatize Medicare.

Although the Medicare Advantage programs are more expensive, the intent is to expand enrollment and then make a simple change – convert the financing to a defined contribution (premium support), shifting more of the costs to Medicare beneficiaries through higher premiums and then through greater cost sharing (higher deductibles, etc.) to keep the premiums from skyrocketing beyond the means of most seniors.

President Obama has said that he is quite willing to put Medicare on the table as part of the austerity program being advanced by the budget hawks. Secretary Sebelius is advising him on “strengthening” Medicare. Be afraid. Be very afraid.

Medicare Advantage: Substantial Excess Payments Underscore Need for CMS to Improve Accuracy of Risk Score Adjustments

United States Government Accountability Office (GAO)
Report to Congressional Requesters, January 31, 2013
What GAO Found
GAO found that the cumulative impact of coding differences on risk scores increased from 2010 through 2012 and was greater than the Centers for Medicare & Medicaid Services’ (CMS) risk score adjustment of 3.4 percent for each of the 3 years. In updating the analysis from its January 2012 report, GAO estimated that cumulative Medicare Advantage (MA) risk scores in 2010 were 4.2 percent higher than they likely would have been if the same beneficiaries had been enrolled continuously in Medicare fee-for-service (FFS). For 2011, GAO estimated that differences in diagnostic coding resulted in risk scores that were 4.6 to 5.3 percent higher than they likely would have been if the same beneficiaries had been continuously enrolled in FFS. This upward trend continued for 2012, with estimated risk scores 4.9 to 6.4 percent higher.
CMS’s adjustment to risk scores for 2010 through 2012 to account for diagnostic coding differences was too low, resulting in estimated excess payments to MA plans of at least $3.2 billion. CMS’s annual 3.4 percent reduction in risk scores is equivalent to $2.8 billion in 2010, $3.0 billion in 2011 and $3.2 billion in 2012. According to GAO’s estimates, the amount of the excess payments to MA plans after accounting for CMS’s adjustments was $0.6 billion in 2010, between $1.1 billion and $1.6 billion in 2011, and between $1.5 billion and $2.9 billion in 2012. Cumulatively across the 3 years, this equals excess payments of between $3.2 billion and $5.1 billion.
For 2013, CMS continues to use the risk score adjustment of 3.4 percent it used in 2010, 2011, and 2012. To conduct its data-based analysis, CMS officials reported that they used the same methodology used in 2010, but they incorporated more recent data.
CMS officials stated that they believed there was policy discretion with respect to the most appropriate adjustment factor but did not identify the specific source of their authority to consider factors other than the required data analysis when determining the adjustment amount. While CMS did not change its risk score adjustment methodology for 2013, agency officials said they may revisit their methodology for future years.
Concluding Observations
Risk adjustment is important to ensure that payments to MA plans adequately account for differences in beneficiaries’ health status and to maintain plans’ financial incentive to enroll and care for beneficiaries regardless of their health status. Our work confirms that differences in diagnostic coding caused risk scores for MA beneficiaries to be higher than those for comparable beneficiaries in Medicare FFS in 2010, 2011, and 2012. CMS’s decision to use a 3.4 percent adjustment to risk scores for 2010 through 2012 instead of the higher adjustments called for by our analysis resulted in excess payments to MA plans. The existence of such excess payments indicates that CMS’s adjustment does not accurately account for differences in treatment and diagnostic coding between MA plans and Medicare FFS—the stated goal of the statute that required CMS to develop a diagnostic coding adjustment. In our January 2012 report, we recommended that CMS take steps to improve the accuracy of the adjustment to account for excess payments due to differences in diagnostic coding. We noted that CMS could, for example, account for additional beneficiary characteristics, include the most recent data available, identify and account for all the years of coding differences that could affect the payment year for which an adjustment is made, and incorporate the trend of the impact of coding differences on risk scores. CMS’s adjustment for 2013 is the same as it used in 2010, 2011, and 2012. However, given our finding that this adjustment was too low and resulted in estimated excess payments to MA plans of at least $3.2 billion, we continue to believe that it is important for CMS to implement our recommendation that it update its methodology to more accurately account for differences in diagnostic coding.
http://www.gao.gov/assets/660/651712.pdf
And…

Medicare Advantage remains strong

U. S. Department of Health & Human Services (HHS), September 19, 2012
“Thanks to the Affordable Care Act, the Medicare Advantage and Prescription Drug programs have been strengthened and continue to improve for beneficiaries,” said (HHS Secretary Kathleen) Sebelius.
For the third year in a row, the Centers for Medicare & Medicaid Services (CMS) used authority provided by the Affordable Care Act to protect beneficiaries from significant increases in costs or cuts in benefits.
http://www.hhs.gov/news/press/2012pres/09/20120919a.html

The private Medicare Advantage plans, offered as an option to traditional Medicare, have been cheating taxpayers by selectively enrolling healthier, lower-cost patients, though being paid at full rates, and more recently by coding patients as having more complicated conditions in order to qualify for higher, risk-adjusted payments. The GAO now provides us with further evidence that Secretary Sebelius and HHS/CMS have been complicit in this fraud.
The Affordable Care Act included provisions to reduce the overpayments to the private Medicare Advantage plans. This GAO report shows that HHS/CMS ignored GAO’s recommendations to improve their risk adjustment methodology, recommendations that should have reduced overpayments due to the embellished diagnostic codes being submitted by the Medicare Advantage plans. HHS/CMS refused to improve the accuracy of their adjustments, which has already resulted in overpayments to these private plans of between $3.2 billion and $5.1 billion.
Why would they do this? Secretary Sebelius has repeatedly touted the Medicare Advantage plans, and has made efforts to expand enrollment in them, even though they cost the taxpayers more money. Overpaying them allows the plans to offer greater benefits in order to entice individuals to enroll. This is leading to further privatization of Medicare, opening up opportunities for Paul Ryan and other members of Congress to push future Medicare beneficiaries into his “premium support” proposal – a voucher plan to privatize Medicare.
Although the Medicare Advantage programs are more expensive, the intent is to expand enrollment and then make a simple change – convert the financing to a defined contribution (premium support), shifting more of the costs to Medicare beneficiaries through higher premiums and then through greater cost sharing (higher deductibles, etc.) to keep the premiums from skyrocketing beyond the means of most seniors.
President Obama has said that he is quite willing to put Medicare on the table as part of the austerity program being advanced by the budget hawks. Secretary Sebelius is advising him on “strengthening” Medicare. Be afraid. Be very afraid.