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Medical practices wary of insurer efforts on new payment programs

By Victoria Stagg Elliott
American Medical News, December 3, 2012

Medical practices have a low opinion of how insurers are operating emerging payment programs, such as accountable care organizations, patient-centered medical homes, shared savings and payment bundling, according to a survey of 800 practices released Nov. 14 by MGMA-ACMPE.

Researchers asked practices to rate the willingness of seven large payers to engage in innovative models on a scale of one, meaning completely unwilling, to five, which indicates completely willing. Medicare Part B scored the highest at 1.95, and United Healthcare was the highest private payer at 1.82.

When asked to rate the favorability of these payment models to the practice on a scale of one to five, Medicare Part B scored highest at 1.68.

Health industry insiders said the scores on innovative payment models reflect physicians’ frustrations with programs they believe were not designed for their specialty or size, and that insurers were not flexible in negotiating terms.

ACOs serve 25 million to 31 million patients, a “remarkable achievement for a care arrangement that was scarcely on the map at all two years ago,” according to a report released Nov. 26 by management consulting company Oliver Wyman.

Cigna’s collaborative accountable care program includes 42 participating entities, mostly large, with about 10,000 physicians providing care for 400,000 members. A paper in the November Health Affairs found the plan’s ACO program improved quality and lowered costs.

http://www.ama-assn.org/amednews/2012/12/03/bisa1203.htm?utm_source=nwltr&utm_medium=heds-htm&utm_campaign=20121203

And…

Practice Perspectives on Payer Performance, 2012

MGMA-ACMPE

For the fifth year in a row, the Medical Group Management Association (MGMA) has conducted its poll to determine group practice professionals’ attitudes about payer interactions.

Of the payers who are willing to engage in innovative payment models (accountable care, shared savings, medical homes or payment bundling), how favorable or unfavorable do you consider these options to be to your practice?

Rating average / Payer

1.68  Medicare Part B
1.62  United Healthcare
1.62  Aetna
1.58  Cigna
1.57  Anthem
1.55  Humana
1.48  Coventry

(Based upon a 5 point scale where 1 = Completely unfavorable, 2 = Moderately unfavorable, 3 = Neutral, 4 = Moderately favorable, and 5 = Completely favorable.)

http://www.mgma.com/WorkArea/DownloadAsset.aspx?id=1372690

And…

A Collaborative Accountable Care Model In Three Practices Showed Promising Early Results On Costs And Quality Of Care

By Richard B. Salmon, Mark I. Sanderson, Barbara A. Walters, Karen Kennedy, Robert C. Flores and Alan M. Muney
Health Affairs, November 2012

Cigna’s Collaborative Accountable Care initiative provides financial incentives to physician groups and integrated delivery systems to improve the quality and efficiency of care for patients in commercial open-access benefit plans.

Although not statistically significant, these early results revealed favorable trends in total medical costs and quality of care.

http://content.healthaffairs.org/content/31/11/2379.abstract

Comment:

By Don McCanne, MD

These early results should sound the alarms on our current efforts to implement accountable care organizations (ACOs). We’ve barely begun and already about 30 million patients have been assigned to ACOs. Yet look at how that is working.

Health care professionals in group practices were polled on how favorable or unfavorable the insurers’ innovative payment models, primarily ACOs, were to their practices. The average rating for all insurers was in the 1s – “completely unfavorable”!

Further, we are now seeing the same response from the insurers that we did with earlier efforts at managed care. They were telling us then that we were receiving higher quality care at lower cost. As it turned out, costs continued to rise and quality remained mediocre.

Now Cigna is reporting that the recent Health Affairs article that they authored showed that their “ACO program improved quality and lowered costs.” Yet the article actually states that these early results were “not statistically significant.”

This turkey has already taken off, and yet it can’t fly. The health care of 30 million patients is already at stake, and they are being cared for health care professionals who find the arrangement COMPLETELY UNFAVORABLE!

Senior Issues Task Force
National Association of Insurance Commissioners (NAIC), November 30, 2012

Patient Protection and Affordable Care Act
SEC. 3210. DEVELOPMENT OF NEW STANDARDS FOR CERTAIN MEDIGAP PLANS.
(a) ‘(y) ‘(1) IN GENERAL- The Secretary shall request the National Association of Insurance Commissioners to review and revise the standards for benefit packages described in paragraph (2) under subsection (p)(1), to otherwise update standards to include requirements for nominal cost sharing to encourage the use of appropriate physicians’ services under part B. Such revisions shall be based on evidence published in peer-reviewed journals or current examples used by integrated delivery systems…

11-5-12 Draft of proposed letter from NAIC to HHS Secretary Kathleen Sebelius

(Excerpts of draft)

Pursuant to section 3210 of the Patient Protection and Affordable Care Act (ACA) you have requested the National Association of Insurance Commissioners (NAIC) to review and revise the NAIC Medicare Supplement insurance (Medigap) model regulation to include nominal cost sharing in Medigap Plans C and F to encourage the use of appropriate physicians’ services.

The NAIC has performed its requested review of the standards for Plans C and F under Section 3210 of the ACA.  We were unable to find evidence in peer-reviewed studies or managed care practices that would be the basis of nominal cost sharing designed to encourage the use of appropriate physicians’ services. Therefore, our recommendation is that no nominal cost sharing be introduced to Plans C and F. We hope that you will agree with this determination.
 
Medigap is a product that has served our country’s Medicare eligible consumers well for many years, offering them security and financial predictability with regard to their Medicare costs. Medigap’s protections are now inappropriately being held responsible for encouraging the overuse of covered services and increasing costs in the Medicare program.

The statute requires the NAIC to base nominal cost sharing revisions on “peer-reviewed journals or current examples of integrated delivery systems”. However, the Subgroup discovered that there is a limited amount of relevant peer-reviewed material on this topic. None of the studies provided a basis for the design of nominal cost sharing that would encourage the use of appropriate physicians’ services. Many of the studies caution that added cost sharing would result in delayed treatments that could increase Medicare program costs later (e.g., increased expenditures for emergency room visits and hospitalizations) and result in adverse health outcomes for vulnerable populations (i.e., elderly, chronically ill and low-income).

The Subgroup also gathered information from integrated delivery systems (Medicare Advantage plans) but concluded that, because these managed care plans make medical necessity determinations for Medicare, that any such practices were not directly relevant for Medigap.

In summary, based on our thorough review and deliberation on this topic, we believe, and hope that you will agree, that no changes should be made to Plans C and F to add beneficiary cost sharing at this time.

Respectfully submitted,

http://www.naic.org/documents/committees_b_senior_issues_2012_fall_nm_materials.pdf?1

Comment:

By Don McCanne, MD

From a health policy perspective, this is a big deal. A very big deal! The National Association of Insurance Commissioners (NAIC) is perhaps the most credible and authoritative organization involved with private health insurance. Although this decision by their Senior Issues Task Force is limited to Medigap coverage of Medicare cost sharing, the principles involved challenge the wisdom of trying to control health spending by creating consumer sensitivity to health care prices through deductibles, coinsurance and other forms of cost sharing.

One very fundamental issue with cost sharing is that now we have enough studies to show that there is absolutely no doubt that exposing patients to up-front costs causes many of them to avoid obtaining health care services or products that are beneficial. Cost sharing should be rejected on this basis alone, as the highly flawed policy that it is.

Another crucial point is that the policy community tremendously overestimates the savings that could be achieved by expanding cost sharing. They base their estimates primarily on the findings of the RAND Health Insurance Experiment (RAND HIE). This was a large study of a healthy workforce and their young, healthy families, during a few healthy years of their lives. When they were faced with significant cost sharing they did modestly reduce their use of health care. Obviously that was selective since they would not be parsimonious when it came to disease or injury that threatened life or limb (where most health care spending is).

Since the subjects in the RAND HIE were fundamentally healthy, most of them used little health care during the year and so care forgone because of the cost sharing proved to be a significant percentage of the total spending on their health care. As an example, if $1000 of care were recommended for a person who decided to forgo $300 worth of it but accepted the other $700 worth, then the policy people conclude that cost sharing reduces spending by 30%. They then apply this to total health spending and conclude that we can save 30% of health care costs by requiring deductibles, copayments, and coinsurance.

The defect with this reasoning is that these healthy people consume only a minute fraction of our total health care. The 20% of people with more serious problems consume about 80% of all health care. Because of their serious problems, these people quickly use up their deductibles, and then cost sharing plays only a very minor role. As a percentage of their care received, forgone care rapidly approaches 0%. Thus the percentage savings to the system for this high cost sector is almost negligible.

So the alleged 30% savings applies only to a very small portion of our total health expenditures. Even there, the NAIC conclusion is that forgone care can “result in delayed treatments that could increase Medicare program costs later and result in adverse health outcomes for vulnerable populations.” The NAIC is right to reject this flawed cost sharing policy that saves little and can have serious adverse outcomes. After all, it is the patient that really counts.

Now, as far as the Medigap plans are concerned, they are outrageously overpriced, largely because of their profoundly wasteful administrative excesses. It would be much less expensive to roll the benefits over into the traditional Medicare program. There would be zero extra administrative costs, and even a net reduction since processing the cost sharing has its own administrative costs.

Folding Medigap benefits into Medicare should be a no brainer, especially since it is one of the steps that we want to take in order to improve Medicare as we convert it into a single payer national health program covering all of us – an improved Medicare for all.

By Robert Kuttner
New America Foundation, Demos, November 2012

Today’s prolonged economic slump is fundamentally different from an ordinary recession. In the aftermath of a severe financial collapse, an economy is at risk of succumbing to a prolonged deflationary undertow. With asset prices reduced, the financial system damaged, unemployment high, consumer demand depressed, and businesses reluctant to invest, the economy gets stuck well below its full employment potential.

What’s needed is aggressive fiscal policy – and not the kind of fiscal policy promoted by the austerity lobby to “restore confidence” and allay supposed fears of inflation. The problem isn’t low confidence in deficit-reduction. Banks are now sitting on about $1.8 trillion in cash or government securities – because they can’t imagine where to profitably invest it. Businesses are delaying investment in expansion not because they are fretting about deficit projections for 2023. They are waiting to see customers with money to spend, and general austerity will only reduce that spending power. 
 
But where should this fiscal policy be directed? One, obviously, is investment in a green economy and modern public infrastructure. The other – too little appreciated – is increased outlay in human services, of the sort that can create good, non-exportable jobs and improve the life prospects of the next generation, as well as provide stable, counter-cyclical sources of employment and demand. Government also has the power to structure other service-sector work as decent jobs.

Public investment, including public investment in the service sector, can help the economy climb out of the current deflationary trap – and establish a foundation for a stronger middle class in the future.

The Case for Investing in People
 
The economic collapse triggered by the financial crisis that exploded in September 2008 represented the collision of three trends. One was the license given to speculative finance resulting from increasingly reckless deregulation.

The second trend was the worsening income distribution.

Third, since the early 1980s, the economy has been losing good, middle class jobs, especially in manufacturing.

So where will the sources of increased demand and good, middle class jobs come from? One obvious candidate is the creation of good, professional service jobs improving the quality of education and care for the young, the old, and the sick.

We are shifting irrevocably to a service economy. But there are political choices to be made (or evaded). One path leads to an economy of minimum-wage fast food workers and security guards, many of them with temporary or part time jobs, on one extreme – and billionaire hedge fund managers and takeover artists, on the other. The other leads to a commercial sector of decent wages and terms of work and a human service sector of middle class professionals that serve social needs – which in turn make for a more productive economy and decent society.

Good Human Services as Social Investment and Economic Stimulus

Millions of jobs serving the very young, the very old and the very sick are low-wage jobs. This is a social decision, not the product of private supply and demand, because the qualifications and earnings for these occupations are set socially. A person caring for three-year-olds, for instance, can be a glorified baby sitter with minimum certification as a day care worker – or a well trained professional in child development. The job can pay minimum wage, or it can be a middle-class occupation and career. This social choice governs not just the quality of the job, but the quality of the early education given – especially to young children who begin life with fewer inherited advantages than the children of the professional class and the business elite.

A nursing home worker, likewise, can be a nurse-aide making $8 an hour, or a licensed practical nurse or trained recreation aide earning almost twice that, closer to $30,000 a year. Well-qualified and trained nursing home personnel produce not just better career opportunities and economic stimulus, but better quality of life for the elderly. Having competent staff is more efficient in the long run because there is less turnover, less need for outlays on recruitment, better morale, and fewer incidents of neglect that require far more expensive medical treatment.
 
I’ve done a rough, order-of-magnitude calculation and found that for an annual expenditure of about $100-$150 billion (or under one percent of GDP), we could set a national policy goal of guaranteeing that all human service jobs are professional jobs that pay at least $25,000 a year (which is itself a lower minimum bar than others have suggested). This requires professionalizing some occupations, as well as universalizing the availability of some categories of woefully underfunded services such as early education. As long as the current deflationary economy persists, this funding could come from additional government borrowing. As the economy recovers thanks to the additional stimulus, the normal increase in revenues could pay for part of the cost, supplemented by increased progressive taxation.

One of the great problems of the manufacturing economy, and of some services such as software engineering, accounting, call center work, and repair of jet engines, is that globalization allows these jobs to be done offshore by lower-paid workers. Human service jobs, by contrast, must be performed at home. If we have a national policy of guaranteeing that they are good jobs, there is no risk that they move overseas. We get the quadruple benefit of macro-economic stimulus, better jobs, better quality services, and (in the case of the young) improved lifetime opportunity and productivity.

The shift to upgrading work in the service sector, especially work in the human services, can be part of a deficit-financed macro-economic recovery strategy to address the nation’s current unemployment crisis and slow recovery. But this is not enough. It should also be part of a long-term effort to upgrade both the quality of work and of social services. The mistaken slogan of the February 2009 Recovery Act was “timely, targeted, and temporary.” That precluded any medium or long term planning. To adapt to the needs of an economy of the future, efforts to improve service sector employment need to be planned, pro-active, and permanent.

http://www.demos.org/system/assets/drupal/publications/Kuttner_Robert_Service_Sector_Recovery_November_2012.pdf

Comment:

By Don McCanne, MD

Framing is important. Right now our nation’s fiscal problems are being framed as a budget deficit requiring austerity measures such as a decrease in spending on Medicare and Medicaid. Instead, we should be framing the problem as a need to improve our economy by establishing policies that promote and expand our service economy, especially in education and health care.

What does this have to do with single payer? Simply that an expanded and improved Medicare program covering everyone would provide an excellent avenue to expand and improve the type of health care service jobs that are discussed in this paper.

Robert Kuttner’s 11 page paper on economic recovery and social investment should be downloaded, read in its entirety, and shared with others – especially members of Congress who can’t seem to get the framing right.

By Elise Viebeck
The Hill, November 25, 2012

The Obama administration faces major logistical and financial challenges in creating health insurance exchanges for states that have declined to set up their own systems.

Since different states have different insurance markets and different eligibility requirements for Medicaid, Obama’s Health and Human Services Department can’t simply take a system off the shelf as a one-size-fits-all fail-safe.

“You can’t simply deploy one federal exchange across the board,” said Jennifer Tolbert, director of state health reform at the Kaiser Family Foundation.

“Each state is different — their eligibility systems are different, their insurance markets are different. [HHS is] going to have to build these exchanges to fit into the context of each state.”

Experts have predicted that the department will soon have to tap budgets from its other programs to cover exchange costs. Other have said it might charge fees on the insurance purchased in its exchanges once they are launched.

The idea behind the exchanges is to match the uninsured with plans that meet their needs and reflect their eligibility (or lack thereof) for government help.

In practice, the process will require websites that can process massive amounts of personal information from users and yield search results for everyone.

Each portal will require a front end — the interface consumers will use to submit their information and shop for plans — and a specialized back end that is customized based on the state.

HHS will also construct a range of other systems: a federal data hub for verifying user identity; programs for user assistance; a way to certify that health plans meet federal standards; a way to navigate the exchanges via phone or apply for coverage by mail; and so on.

Experts expressed one main concern across the board — that people eligible for Medicaid but not for the exchanges might fall through the cracks in federally run systems, since enrollment in the program is run by states.

http://thehill.com/blogs/healthwatch/health-reform-implementation/269137-obama-faces-huge-challenge-in-setting-up-health-exchanges

Comment:

By Don McCanne, MD

One unique feature of health care financing in the United States is our shameful administrative excesses. The new state insurance exchanges required by the Affordable Care Act (ACA) add to that waste, whether run by the states or by the federal government by default.

To begin with, since the plans offered by the exchanges will be in the individual and small group markets, under ACA they will be allowed to keep 20 percent of the insurance premiums for their own administration and profits.

Next, the exchanges will be much more complex than a mere website from which to compare and choose plans. These portals (exchanges) will require a complex front end to determine eligibility or lack thereof for Medicaid or for the premium subsidies which vary based on the actuarial values of the plans and the incomes of the applicants. Also the managers of the exchanges will have considerable work on the back end in establishing plan eligibility to participate in the exchanges, evaluating the essential health benefits of each plan, confirming that each metal level (bronze, silver, gold, platinum) meets actuarial standards, meeting regulatory requirements that vary from state to state, and providing a mechanism for the purchaser to intelligently navigate the maze established by the exchanges.

Obviously there will be considerable administrative costs associated with these exchanges – costs that are beyond the 20 percent retained by the insurers. ACA requires that the exchanges be self-sustaining, meaning that these administrative costs must be paid by the insurers (beyond the 20 percent) or by the purchases of the plans. Either way, those enrolling in plans through the exchanges will ultimately bear the costs of these administrative excesses.

Finally, physicians, hospitals and other providers of care will continue to bear the costs of the excessive administrative burden placed on them by this fragmented, complex financing system. Instead of providing administrative relief, the exchanges further increase the administrative burden and excess costs of allocating our health care dollars.

Readers already know how over 99 percent of this portion of our administrative waste could be eliminated. Enroll each individual once, at birth, in a single national health program – an improved Medicare that includes everyone. So why aren’t we doing it?