Clinton resurrects public option

By Dan Diamond
Politico Pulse, February 23, 2016

Hillary Clinton is bringing back the “public option,” a liberal health reform that so far has gotten little attention this campaign cycle as Bernie Sanders has pushed an even more progressive single-payer plan.

The public option — initially conceived as a government-run alternative to private insurance — was backed by Clinton in her 2008 campaign and was the subject of intense debate during the drafting of the Affordable Care Act. However, Democrats abandoned the measure after Senate moderates said they wouldn’t vote for it because it expanded the government’s role in health care too far.

Clinton is again making clear she supports a version of the public option. This time, though, she wants to allow states to opt in, according to a newly updated policy position on her campaign website.

How would it work — and why now?

Clinton appears to be suggesting that states could use the ACA’s 1332 waivers to “empower states to establish a public option choice” in 2017. It’s plausible that liberal governors and legislatures would opt in, while keeping the fight over this progressive idea largely out of Washington.

It’s unclear exactly what Clinton’s thinking is on this, however. The campaign didn’t respond to repeated requests from POLITICO to clarify its new policy language.

Just last month: Clinton said ‘we couldn’t get the votes’ for public option.

While Clinton’s spokesperson told PULSE that she has consistently backed the public option since the 2008 campaign, Clinton pointed out just last month that Congress wasn’t able to get it through during the ACA. “There was an opportunity to vote for what was called the public option,” Clinton said during a debate in South Carolina, after she rebuked Sanders’ plan as impractical. “But even when the Democrats were in charge of Congress, we couldn’t get the votes for that.”

http://www.politico.com/tipsheets/politico-pulse/2016/02/clinton-resurrects-public-option-califf-nomination-moves-forward-how-the-election-could-shape-the-market-212836

***

Hillary for America

Affordable health care is a basic human right.

Hillary has never given up on the fight for universal coverage—and she won’t stop now. Building on the Affordable Care Act to expand coverage for millions of Americans, Hillary will:

*  Continue to support a “public option” — and work to build on the Affordable Care Act to make it possible. As she did in her 2008 campaign health plan, and consistently since then, Hillary supports a “public option” to reduce costs and broaden the choices of insurance coverage for every American. To make immediate progress toward that goal, Hillary will work with interested governors, using current flexibility under the Affordable Care Act, to empower states to establish a public option choice.

https://www.hillaryclinton.com/issues/health-care/

***

Public Plan Option in a Market of Private Plans

By David Himmelstein, M.D. and Steffie Woolhandler, M.D., M.P.H.
Physicians for a National Health Program, May 26, 2009

The “public plan option” won’t work to fix the health care system for two reasons.

1. It forgoes at least 84 percent of the administrative savings available through single payer. The public plan option would do nothing to streamline the administrative tasks (and costs) of hospitals, physicians offices, and nursing homes, which would still contend with multiple payers, and hence still need the complex cost tracking and billing apparatus that drives administrative costs. These unnecessary provider administrative costs account for the vast majority of bureaucratic waste. Hence, even if 95 percent of Americans who are currently privately insured were to join the public plan (and it had overhead costs at current Medicare levels), the savings on insurance overhead would amount to only 16 percent of the roughly $400 billion annually achievable through single payer — not enough to make reform affordable.

2. A quarter century of experience with public/private competition in the Medicare program demonstrates that the private plans will not allow a level playing field. Despite strict regulation, private insurers have successfully cherry picked healthier seniors, and have exploited regional health spending differences to their advantage. They have progressively undermined the public plan — which started as the single payer for seniors and has now become a funding mechanism for HMOs — and a place to dump the unprofitably ill. A public plan option does not lead toward single payer, but toward the segregation of patients, with profitable ones in private plans and unprofitable ones in the public plan.

https://pnhp.org/blog/2009/03/26/himmelstein-and-woolhandler-on-a-public-plan-option/

You remember the public option. During the drafting of the Affordable Care Act (ACA), efforts were made to include a public option – a government-run plan that would compete with the private health plans in the insurance marketplace. If the private plans proved that they could provide greater value, then they would prevail. If the government could do a better job, then the public option could expand by demand and eventually become the single payer for the nation, so supporters believed.

The original concept for the public option was to allow individuals to buy into the Medicare program instead of purchasing private insurance. There were some obvious problems. Medicare lacked some important features required of the private plans such as catastrophic coverage – establishing a maximum out-of-pocket responsibility of paying for health care. Also, the existing Medicare pool was composed of the elderly and those with long term disabilities – expensive groups to insure. The exorbitant premium that would have to be charged could not be competitive with the private plans.

It was then decided to establish a new public insurance program that was designed like the private plans and that would have to follow the same rules. The insurance industry immediately opposed this since it would be “unfair” competition considering the government resources backing up the public plan, and the inherently higher administrative costs that the private insurers face, not to mention the need to profit from their operations – profit not being a feature of a publicly-owned insurer. Several (anti-competitive) features were proposed for the public option which would give the private insurers a “fair” playing field.

The insurers were still concerned that they could not compete against even a restricted government plan, and thus they continued to oppose it. There is a basis for that concern since the private Medicare Advantage plans are able to “compete” with the traditional Medicare program only because of the overpayments that are being made to the private plans. If they were in the same playing field, the private plans would perish. Nevertheless, the issue of the public option became moot when Sen. Joseph Lieberman, with no votes to spare, threatened to kill the entire Affordable Care Act if the public option were included.

We were left with the co-ops as a substitute for the public option. The co-ops are non-profit organizations in which the insured members are the owners. Congress, under the Republicans, has refused to provide promised funds, and half of them have collapsed. They are now being used by opponents of single payer to “prove” that the government would be incapable of running a single payer system – an obvious non sequitur.

Since the enactment of ACA there have been endless calls to add a public option. Single payer failed to gain traction because of the pervasive meme that single payer was not politically feasible. But if we could just get a public option, that would automatically evolve into a single payer system, they said.

Then along came Bernie Sanders. He carried the message that not only was single payer politically feasible, it was a moral imperative to achieve health care justice for all.

To the surprise of Hillary Clinton and her campaign staff, Bernie Sanders came out of nowhere and gained traction carrying the single payer banner, and, as a result, has become a genuine challenge to her candidacy.

Hillary Clinton has always been an opponent of single payer and instead has supported the private insurance industry. Some have misinterpreted a statement of hers many years ago as supporting the fact that we would have single payer in the United States. But that statement was not in support of single payer but rather was her threat to us that if we did not accept her managed competition model of reform, we would have single payer.

So what was her campaign to do? They decided to bring back the concept of a public option to appease those who were turning to Sanders because of his advocacy of single payer. They are relying on the meme that the public option is our door to single payer (even though it is not true). But look at what her version of the public option is.

She says we should build on ACA. She has proposed no new federal public option legislation but she is merely suggesting that the states look at Sec 1332 of ACA which authorizes waivers for limited innovations on a state level. Imagine the difficulties that states would have, within the confines of Sec 1332, in building their own intra-state public plan. Unless they used private insurance innovations such as high deductibles, narrow provider networks, and tiered services, the premiums would be unaffordable to most. A single payer system would be funded equitably through progressive taxes, but you could not do that with a public option since that is only one plan in a multi-payer system.

In 2009, David Himmelstein and Steffie Woolhandler explained in very brief terms why the public option is a flawed concept (reproduced above). Hillary Clinton is now showing us how it is a diversion from the reform we really need – single payer. It is up to us, the people, to convince our politicians that single payer is what we want. It will not happen without us.

Physicians for a National Health Program (PNHP) is a nonpartisan educational organization. It neither supports nor opposes any candidates for public office.

Pence seeking help from Congress in Medicaid dispute

By Maureen Groppe
Indianapolis Star, February 21, 2016

Gov. Mike Pence wants Congress to get involved in his dispute with the Obama administration over the evaluation of Indiana’s alternative Medicaid program.

Pence has accused the administration of hiring an evaluator that is biased against Indiana’s approach.

Indiana is one of a handful of states that received permission to not follow some federal rules when expanding Medicaid coverage under the Affordable Care Act.

One of the conditions of such waivers is that the demonstration program be evaluated to see whether it’s meeting the expected result. Indiana must submit an interim evaluation of the program by mid-2016.

For example, Indiana is testing whether requiring participants to make monthly contributions to a health account that can be rolled over if not used for health care reduces the use of unnecessary care.

That feature is based on high-deductible insurance plans with health savings accounts that are becoming increasingly common in private insurance coverage.

Pence argues that the Urban Institute, one of the evaluators chosen by the federal government to assess Indiana’s plan, has previously been skeptical of using the health savings account model for Medicaid recipients.

Pence wrote Health and Human Services Secretary Sylvia Burwell in December, asking that the federal review be dropped as the Healthy Indiana Plan has already been evaluated by a state-hired contractor.

In a Feb. 10 response, Burwell said the federal evaluation will not duplicate the state’s analysis, and a rigorous evaluation will help the federal government determine whether other states should be allowed to use Indiana’s model.

Pence said he is “wholly unsatisfied” with that response, and will ask the GOP-controlled Congress to review the agency’s vendor selection process.

While Pence said Burwell always worked in good faith with him while they negotiated the terms of Indiana’s alternative program, there are people “deep in the bureaucracy” who are “very antagonist towards consumer driven health care.”

“The administration wanted Indiana — and still wants every state — to just expand traditional Medicaid,” he said. “We have the most significant Medicaid reform in the 50-year history of the program, and it’s working.”

A coalition of health care and other advocacy groups wrote a letter last month in support of the federal government’s evaluation of HIP 2.0. The coalition — which includes Families USA, the March of Dimes and the American Cancer Society Cancer Action Network — said there can be a conflict of interest with state-contracted evaluations.

“When a state pays an organization to assess the merits of its own program there is the potential that the evaluator’s objectivity will be compromised,” the coalition wrote to the director of the Center for Medicaid and CHIP Services.

The groups said aspects of Indiana’s program are potentially harmful to beneficiaries and need to be evaluated before the federal government decides whether other states can adopt them. Those features include the option of charging monthly payments to recipients below the poverty line, blocking coverage for those above poverty who miss their monthly payments, and the overall complexity of HIP 2.0.

http://www.indystar.com/story/news/2016/02/20/pence-seeking-help-congress-medicaid-dispute/80663058/

The RWJF/Urban Institute report that Pence argues shows a bias against using healthy savings accounts in Medicaid:

http://www.rwjf.org/content/dam/farm/reports/issue_briefs/2015/rwjf420603

***

Comment:

By Don McCanne, M.D.

Gov. Mike Pence of Indiana wants to select his own facts for a report to CMS confirming that their consumer-directed health program for Medicaid, authorized by a Sec. 1115 waiver, is meeting Medicaid requirements for the patients.

They have already independently contracted with the Lewin Group to provide a report to CMS, but numerous organizations have expressed the concern that this report could be biased because of the conflict of interest. CMS has contracted with the Urban Institute, but Gov. Pence objects because Urban has produced a previous report expressing some concerns about the option to charge premiums for individuals living in poverty and about the administrative costs and inefficiencies of health savings accounts that are used in Indiana’s program. Also there is concern about Medicaid patients being locked out of care if they are in arrears with their premium payments.

Indiana’s program is driven by ideology rather than by objective application of health policy principles. Pence touts their success at “applying consumer-health care principles to the Medicaid population.” It is more important for him to require patients to demonstrate individual responsibility through sharing in the costs of care than it is to ensure that they do receive the care that they need. It has been demonstrated that requiring payments creates barriers to care, particularly for low-income individuals.

Imagine instead having one national standard program that automatically includes everyone, gives them free choice of their health care professionals, and removes financial barriers to care. We could have that with a single payer national health program, as long as we keep ideologues like Pence out of the way.

Pence seeking help from Congress in Medicaid dispute

By Maureen Groppe
Indianapolis Star, February 21, 2016

Gov. Mike Pence wants Congress to get involved in his dispute with the Obama administration over the evaluation of Indiana’s alternative Medicaid program.

Pence has accused the administration of hiring an evaluator that is biased against Indiana’s approach.

Indiana is one of a handful of states that received permission to not follow some federal rules when expanding Medicaid coverage under the Affordable Care Act.

One of the conditions of such waivers is that the demonstration program be evaluated to see whether it’s meeting the expected result. Indiana must submit an interim evaluation of the program by mid-2016.

For example, Indiana is testing whether requiring participants to make monthly contributions to a health account that can be rolled over if not used for health care reduces the use of unnecessary care.

That feature is based on high-deductible insurance plans with health savings accounts that are becoming increasingly common in private insurance coverage.

Pence argues that the Urban Institute, one of the evaluators chosen by the federal government to assess Indiana’s plan, has previously been skeptical of using the health savings account model for Medicaid recipients.

Pence wrote Health and Human Services Secretary Sylvia Burwell in December, asking that the federal review be dropped as the Healthy Indiana Plan has already been evaluated by a state-hired contractor.

In a Feb. 10 response, Burwell said the federal evaluation will not duplicate the state’s analysis, and a rigorous evaluation will help the federal government determine whether other states should be allowed to use Indiana’s model.

Pence said he is “wholly unsatisfied” with that response, and will ask the GOP-controlled Congress to review the agency’s vendor selection process.

While Pence said Burwell always worked in good faith with him while they negotiated the terms of Indiana’s alternative program, there are people “deep in the bureaucracy” who are “very antagonist towards consumer driven health care.”

“The administration wanted Indiana — and still wants every state — to just expand traditional Medicaid,” he said. “We have the most significant Medicaid reform in the 50-year history of the program, and it’s working.”

A coalition of health care and other advocacy groups wrote a letter last month in support of the federal government’s evaluation of HIP 2.0. The coalition — which includes Families USA, the March of Dimes and the American Cancer Society Cancer Action Network — said there can be a conflict of interest with state-contracted evaluations.

“When a state pays an organization to assess the merits of its own program there is the potential that the evaluator’s objectivity will be compromised,” the coalition wrote to the director of the Center for Medicaid and CHIP Services.

The groups said aspects of Indiana’s program are potentially harmful to beneficiaries and need to be evaluated before the federal government decides whether other states can adopt them. Those features include the option of charging monthly payments to recipients below the poverty line, blocking coverage for those above poverty who miss their monthly payments, and the overall complexity of HIP 2.0.

http://www.indystar.com/story/news/2016/02/20/pence-seeking-help-congress-medicaid-dispute/80663058/

The RWJF/Urban Institute report that Pence argues shows a bias against using healthy savings accounts in Medicaid:

http://www.rwjf.org/content/dam/farm/reports/issue_briefs/2015/rwjf420603

Gov. Mike Pence of Indiana wants to select his own facts for a report to CMS confirming that their consumer-directed health program for Medicaid, authorized by a Sec. 1115 waiver, is meeting Medicaid requirements for the patients.

They have already independently contracted with the Lewin Group to provide a report to CMS, but numerous organizations have expressed the concern that this report could be biased because of the conflict of interest. CMS has contracted with the Urban Institute, but Gov. Pence objects because Urban has produced a previous report expressing some concerns about the option to charge premiums for individuals living in poverty and about the administrative costs and inefficiencies of health savings accounts that are used in Indiana’s program. Also there is concern about Medicaid patients being locked out of care if they are in arrears with their premium payments.

Indiana’s program is driven by ideology rather than by objective application of health policy principles. Pence touts their success at “applying consumer-health care principles to the Medicaid population.” It is more important for him to require patients to demonstrate individual responsibility through sharing in the costs of care than it is to ensure that they do receive the care that they need. It has been demonstrated that requiring payments creates barriers to care, particularly for low-income individuals.

Imagine instead having one national standard program that automatically includes everyone, gives them free choice of their health care professionals, and removes financial barriers to care. We could have that with a single payer national health program, as long as we keep ideologues like Pence out of the way.

Making Medicare Advantage Payments More Accurate

By Edwin Park
Center on Budget and Policy Priorities, February 16, 2016

Anticipating the Centers for Medicare and Medicaid Services’ (CMS) expected announcement Friday of preliminary payment rates and policies for Medicare Advantage insurers in 2017, insurers have pushed for changes to the “risk adjustment” system — which raises or lowers payments to plans based on their enrollees’ health.  Insurers claim the system undercompensates them for high-cost enrollees with chronic conditions.  We favor making the system as accurate as possible, but that should include reducing overpayments to insurers as well.

To be sure, risk adjustment tends to underpredict health spending for high-cost individuals in poorer health.  The Medicare Payment Advisory Commission (MedPAC) suggests that CMS make several changes to better account for higher spending by people with multiple chronic conditions and low-income beneficiaries eligible for both Medicare and Medicaid.

But Medicare Advantage risk adjustment also overcompensates insurers for healthier, low-cost enrollees.  For example, Avalere Health research, which insurers have cited favorably, shows risk adjustment overpredicting spending among people with no chronic conditions by 26.9 percent and among people with one or two chronic conditions by 5.1 percent.  That’s critical because Medicare Advantage enrollees are healthier than those in traditional Medicare, on average.

CMS could reduce Medicare Advantage overpayments by doing more to address “upcoding,” which the Congressional Budget Office, the Government Accountability Office (GAO), and academic research cite as a long-standing problem.  The risk adjustment system measures enrollees’ health using a “risk score” based on patient diagnoses; upcoding occurs when the risk scores that plans submit for their enrollees rise over time — making enrollees appear increasingly unhealthy — without actual changes in their health.

Risk scores have risen 9 percent faster in Medicare Advantage, on average, than in traditional Medicare for comparable beneficiaries, MedPAC estimates.  This leads to excessive payments to Medicare Advantage plans.

To compensate for upcoding, health reform requires CMS to adjust Medicare Advantage’s risk adjustment system by at least a minimum amount each year.  CMS has only applied the minimum required adjustment in recent years.  A larger adjustment, which MedPAC believes is warranted, would reduce overpayments to Medicare Advantage plans.

CMS could also reduce upcoding by excluding health assessments from risk score calculations unless they’re later confirmed in treatment settings, as MedPAC will likely recommend in its March report to Congress.  Medicare Advantage plans increasingly provide health assessments of their enrollees; for example, a nurse may come to a patient’s home to do a physical exam.  CMS has found that some insurers mainly use these assessments to “collect” diagnoses in order to raise enrollees’ risk scores for purposes of risk adjustment, rather than to improve follow-up care or identify illnesses requiring treatment.  In fact, CMS had proposed excluding these kinds of assessments but dropped this change in the face of industry opposition.

http://www.cbpp.org/blog/making-medicare-advantage-payments-more-accurate

***

2017 Medicare Advantage and Part D Advance Notice and Draft Call Letter

CMS.gov, February 19, 2016

Today, CMS released proposed updates to the Medicare Advantage (MA) and Part D programs through the 2017 Advance Notice and Draft Call Letter. Through these policies, CMS is proposing updates to the program designed to improve the accuracy of payments to plans serving beneficiaries who are dually eligible for Medicare and Medicaid.  

CMS is proposing updates to the Risk Adjustment Model used to calculate payments to Medicare Advantage plans and to the Star Rating system used to evaluate plan performance. In both cases, the updates reflect a public process through which CMS shared research findings and solicited public comment.

Expected Average Change in Revenue:  3.55%

Risk Adjustment Model

CMS is proposing to implement a new Risk Adjustment Model for 2017. The proposed new model has separate coefficients for partial benefit dually eligible beneficiaries, full benefit dually eligible beneficiaries, and non-dually eligible beneficiaries.  These proposed changes will improve the precision of the payments made to plans, including increases in payments for plans serving full benefit dually eligible beneficiaries.

Coding Pattern Adjustment

Each year, as required by law, CMS makes an adjustment to plan payments to reflect differences in diagnosis coding between Medicare Advantage organizations and fee-for-service (FFS) providers. In CY 2017, CMS proposes to make an adjustment reflective of the statutory minimum.

Using Encounter Data

CMS calculates risk scores using diagnoses submitted by FFS providers and by Medicare Advantage organizations. Historically, CMS has used Medicare Advantage diagnoses submitted into CMS’ Risk Adjustment Processing System (RAPS). In recent years, CMS began collecting encounter data from MA organizations to develop more accurate payment models. In 2016, CMS began using diagnoses from encounter data to calculate risk scores, by blending encounter data-based risk scores with RAPS-based risk scores. In 2017, CMS is proposing to continue using a blend, using a higher percentage of encounter data-based risk scores.

Star Ratings – Adjusting for Socioeconomic Status

CMS is proposing to implement a new analytical adjustment for a subset of Star Rating measures that is meant to adjust for plans serving dually eligible enrollees and/or enrollees receiving the low income subsidy, as well as enrollees with disabilities. Through this interim adjustment, CMS seeks to more accurately capture true plan performance, while work continues by the HHS Assistant Secretary for Planning and Evaluation (ASPE) and measure stewards in this important area.

https://www.cms.gov/Newsroom/MediaReleaseDatabase/Fact-sheets/2016-Fact-sheets-items/2016-02-19.html

CMS Advance Notice of Methodological Changes for Calendar Year (CY) 2017 for Medicare Advantage (MA) Capitation Rates, Part C and Part D Payment Policies and 2017 Call Letter (over 220 pages):

https://www.cms.gov/Medicare/Health-Plans/MedicareAdvtgSpecRateStats/Downloads/Advance2017.pdf

***

AHIP, Coalition for Medicare Choices Launch Nationwide Ad and Grassroots Campaign to Protect Medicare Advantage

AHIP, January 28, 2016

As CMS prepares to release proposed Medicare Advantage payment policies, AHIP’s Coalition for Medicare Choices (CMC) is launching a coast-to-coast mobilization of its 2 million Medicare Advantage beneficiaries who are calling on Washington to protect their coverage from further cuts.

“Medicare Advantage is the game-changer. It’s the foundation for innovative, high-quality care delivery that seniors and the country demand,” AHIP President and CEO Marilyn Tavenner said. “CMS should protect millions of beneficiaries who depend on Medicare Advantage and strengthen — not undermine — the program moving forward.”

https://www.ahip.org/News/Press-Room/2016/AHIP,-Coalition-for-Medicare-Choices-Launch-Nationwide-Ad-and-Grassroots-Campaign-to-Protect-Medicare-Advantage.aspx

***

Comment:

By Don McCanne, M.D.

Today CMS released proposed updates for the 2017 Medicare Advantage (MA) plans. It appears that, once again, CMS will be co-conspirators with the insurance industry in increasing net MA payment rates when the Affordable Care Act requires reduction of the MA overpayments.

The Medicare Payment Advisory Commission (MedPAC) has recommended that CMS apply a larger adjustment to the MA risk adjustment system to reduce overpayments to the MA plans. Yet, once again, as with prior years, CMS is making “an adjustment reflective of the statutory minimum.”

Another example is that the MA plans have been using “encounter data” to upcode the diagnoses of the MA patients. Home visits are made, not by the health care providers but by representatives of the MA insurance plans, in order to find other disorders that can be used to pad the diagnostic list, making these patients appear sicker than they really are, thus qualifying the MA plans for higher payments than warranted. MedPAC is expected to recommend excluding encounter data from risk score calculations unless they are later confirmed in treatment settings. Yet, CMS is instead proposing to use a higher percentage of encounter data-based risk scores.

Instead of a reduction in payments, CMS is proposing a 3.55% increase.

CMS invites comments through March 4, 2016 before the final publication on April 4, 2016. During that time, AHIP, the insurance lobby organization, will be negotiating with CMS for further adjustments that will favor the MA plans. Each year that has resulted in additional innovative chicanery that further thwarts the intent of ACA to reduce MA overpayments. Since the new President and CEO of AHIP is Marilyn Tavenner, the former Administrator of CMS, it is anticipated that the negotiations on behalf of the MA plans will be quite successful.

Ensuring success of the MA plans is part of the plot to eventually privatize Medicare – converting it into a premium support system (vouchers) for a market of private plans that will displace the traditional Medicare program. The value of the voucher equivalents will erode with time, shifting ever more of the costs to the Medicare beneficiaries. It will be disastrous.

By this time it was expected that MA plan enrollment would begin to decline since the private insurance industry is incapable of providing comparable benefits at the same or lower costs than traditional Medicare, because their administrative costs are significantly higher than those of the traditional program, plus they need to return a profit to their investors. They have been profitable only because they have continued to be successful in enrolling healthier, less costly patients while at the same time receiving overpayments from the government.

Thus this conspiracy reenacted each year to use innovative payment schemes (chicanery) is vital to this industry. Members of AHIP’s Coalition for Medicare Choices will, once again, pressure members of Congress to cajole CMS into “saving” the Medicare Advantage plans through whatever accounting tools they can find (all with a wink and a nod). What is surprising is that this has not provoked the outrage of taxpayers. But maybe this is not so surprising after all since hardly anyone recognizes the terrible crime that is taking place before our very eyes.

Making Medicare Advantage Payments More Accurate

By Edwin Park
Center on Budget and Policy Priorities, February 16, 2016

Anticipating the Centers for Medicare and Medicaid Services’ (CMS) expected announcement Friday of preliminary payment rates and policies for Medicare Advantage insurers in 2017, insurers have pushed for changes to the “risk adjustment” system — which raises or lowers payments to plans based on their enrollees’ health.  Insurers claim the system undercompensates them for high-cost enrollees with chronic conditions.  We favor making the system as accurate as possible, but that should include reducing overpayments to insurers as well.

To be sure, risk adjustment tends to underpredict health spending for high-cost individuals in poorer health.  The Medicare Payment Advisory Commission (MedPAC) suggests that CMS make several changes to better account for higher spending by people with multiple chronic conditions and low-income beneficiaries eligible for both Medicare and Medicaid.

But Medicare Advantage risk adjustment also overcompensates insurers for healthier, low-cost enrollees.  For example, Avalere Health research, which insurers have cited favorably, shows risk adjustment overpredicting spending among people with no chronic conditions by 26.9 percent and among people with one or two chronic conditions by 5.1 percent.  That’s critical because Medicare Advantage enrollees are healthier than those in traditional Medicare, on average.

CMS could reduce Medicare Advantage overpayments by doing more to address “upcoding,” which the Congressional Budget Office, the Government Accountability Office (GAO), and academic research cite as a long-standing problem.  The risk adjustment system measures enrollees’ health using a “risk score” based on patient diagnoses; upcoding occurs when the risk scores that plans submit for their enrollees rise over time — making enrollees appear increasingly unhealthy — without actual changes in their health.

Risk scores have risen 9 percent faster in Medicare Advantage, on average, than in traditional Medicare for comparable beneficiaries, MedPAC estimates.  This leads to excessive payments to Medicare Advantage plans.

To compensate for upcoding, health reform requires CMS to adjust Medicare Advantage’s risk adjustment system by at least a minimum amount each year.  CMS has only applied the minimum required adjustment in recent years.  A larger adjustment, which MedPAC believes is warranted, would reduce overpayments to Medicare Advantage plans.

CMS could also reduce upcoding by excluding health assessments from risk score calculations unless they’re later confirmed in treatment settings, as MedPAC will likely recommend in its March report to Congress.  Medicare Advantage plans increasingly provide health assessments of their enrollees; for example, a nurse may come to a patient’s home to do a physical exam.  CMS has found that some insurers mainly use these assessments to “collect” diagnoses in order to raise enrollees’ risk scores for purposes of risk adjustment, rather than to improve follow-up care or identify illnesses requiring treatment.  In fact, CMS had proposed excluding these kinds of assessments but dropped this change in the face of industry opposition.

http://www.cbpp.org/blog/making-medicare-advantage-payments-more-accurate

***

2017 Medicare Advantage and Part D Advance Notice and Draft Call Letter

CMS.gov, February 19, 2016

Today, CMS released proposed updates to the Medicare Advantage (MA) and Part D programs through the 2017 Advance Notice and Draft Call Letter. Through these policies, CMS is proposing updates to the program designed to improve the accuracy of payments to plans serving beneficiaries who are dually eligible for Medicare and Medicaid.

CMS is proposing updates to the Risk Adjustment Model used to calculate payments to Medicare Advantage plans and to the Star Rating system used to evaluate plan performance. In both cases, the updates reflect a public process through which CMS shared research findings and solicited public comment.

Expected Average Change in Revenue:  3.55%

Risk Adjustment Model

CMS is proposing to implement a new Risk Adjustment Model for 2017. The proposed new model has separate coefficients for partial benefit dually eligible beneficiaries, full benefit dually eligible beneficiaries, and non-dually eligible beneficiaries.  These proposed changes will improve the precision of the payments made to plans, including increases in payments for plans serving full benefit dually eligible beneficiaries.

Coding Pattern Adjustment

Each year, as required by law, CMS makes an adjustment to plan payments to reflect differences in diagnosis coding between Medicare Advantage organizations and fee-for-service (FFS) providers. In CY 2017, CMS proposes to make an adjustment reflective of the statutory minimum.

Using Encounter Data

CMS calculates risk scores using diagnoses submitted by FFS providers and by Medicare Advantage organizations. Historically, CMS has used Medicare Advantage diagnoses submitted into CMS’ Risk Adjustment Processing System (RAPS). In recent years, CMS began collecting encounter data from MA organizations to develop more accurate payment models. In 2016, CMS began using diagnoses from encounter data to calculate risk scores, by blending encounter data-based risk scores with RAPS-based risk scores. In 2017, CMS is proposing to continue using a blend, using a higher percentage of encounter data-based risk scores.

Star Ratings – Adjusting for Socioeconomic Status

CMS is proposing to implement a new analytical adjustment for a subset of Star Rating measures that is meant to adjust for plans serving dually eligible enrollees and/or enrollees receiving the low income subsidy, as well as enrollees with disabilities. Through this interim adjustment, CMS seeks to more accurately capture true plan performance, while work continues by the HHS Assistant Secretary for Planning and Evaluation (ASPE) and measure stewards in this important area.

https://www.cms.gov/Newsroom/MediaReleaseDatabase/Fact-sheets/2016-Fact-sheets-items/2016-02-19.html

CMS Advance Notice of Methodological Changes for Calendar Year (CY) 2017 for Medicare Advantage (MA) Capitation Rates, Part C and Part D Payment Policies and 2017 Call Letter (over 220 pages):

https://www.cms.gov/Medicare/Health-Plans/MedicareAdvtgSpecRateStats/Downloads/Advance2017.pdf

***

AHIP, Coalition for Medicare Choices Launch Nationwide Ad and Grassroots Campaign to Protect Medicare Advantage

AHIP, January 28, 2016

As CMS prepares to release proposed Medicare Advantage payment policies, AHIP’s Coalition for Medicare Choices (CMC) is launching a coast-to-coast mobilization of its 2 million Medicare Advantage beneficiaries who are calling on Washington to protect their coverage from further cuts.

“Medicare Advantage is the game-changer. It’s the foundation for innovative, high-quality care delivery that seniors and the country demand,” AHIP President and CEO Marilyn Tavenner said. “CMS should protect millions of beneficiaries who depend on Medicare Advantage and strengthen — not undermine — the program moving forward.”

https://www.ahip.org/News/Press-Room/2016/AHIP,-Coalition-for-Medicare-Choices-Launch-Nationwide-Ad-and-Grassroots-Campaign-to-Protect-Medicare-Advantage.aspx

Today CMS released proposed updates for the 2017 Medicare Advantage (MA) plans. It appears that, once again, CMS will be co-conspirators with the insurance industry in increasing net MA payment rates when the Affordable Care Act requires reduction of the MA overpayments.

The Medicare Payment Advisory Commission (MedPAC) has recommended that CMS apply a larger adjustment to the MA risk adjustment system to reduce overpayments to the MA plans. Yet, once again, as with prior years, CMS is making “an adjustment reflective of the statutory minimum.”

Another example is that the MA plans have been using “encounter data” to upcode the diagnoses of the MA patients. Home visits are made, not by the health care providers but by representatives of the MA insurance plans, in order to find other disorders that can be used to pad the diagnostic list, making these patients appear sicker than they really are, thus qualifying the MA plans for higher payments than warranted. MedPAC is expected to recommend excluding encounter data from risk score calculations unless they are later confirmed in treatment settings. Yet, CMS is instead proposing to use a higher percentage of encounter data-based risk scores.

Instead of a reduction in payments, CMS is proposing a 3.55% increase.

CMS invites comments through March 4, 2016 before the final publication on April 4, 2016. During that time, AHIP, the insurance lobby organization, will be negotiating with CMS for further adjustments that will favor the MA plans. Each year that has resulted in additional innovative chicanery that further thwarts the intent of ACA to reduce MA overpayments. Since the new President and CEO of AHIP is Marilyn Tavenner, the former Administrator of CMS, it is anticipated that the negotiations on behalf of the MA plans will be quite successful.

Ensuring success of the MA plans is part of the plot to eventually privatize Medicare – converting it into a premium support system (vouchers) for a market of private plans that will displace the traditional Medicare program. The value of the voucher equivalents will erode with time, shifting ever more of the costs to the Medicare beneficiaries. It will be disastrous.

By this time it was expected that MA plan enrollment would begin to decline since the private insurance industry is incapable of providing comparable benefits at the same or lower costs than traditional Medicare, because their administrative costs are significantly higher than those of the traditional program, plus they need to return a profit to their investors. They have been profitable only because they have continued to be successful in enrolling healthier, less costly patients while at the same time receiving overpayments from the government.

Thus this conspiracy reenacted each year to use innovative payment schemes (chicanery) is vital to this industry. Members of AHIP’s Coalition for Medicare Choices will, once again, pressure members of Congress to cajole CMS into “saving” the Medicare Advantage plans through whatever accounting tools they can find (all with a wink and a nod). What is surprising is that this has not provoked the outrage of taxpayers. But maybe this is not so surprising after all since hardly anyone recognizes the terrible crime that is taking place before our very eyes.

Asymmetric Thinking about Return on Investment

By David A. Asch, M.D., Mark V. Pauly, Ph.D., and Ralph W. Muller, M.A.
The New England Journal of Medicine, February 18, 2016

Lately, we’ve attended many conferences about providing health care to patients with high medical and social needs — people with chronic illnesses who are frequently readmitted to the hospital. It seems as if every presentation refers to “return on investment” (ROI), which is invariably presented as a constraint — as in “Our program kept people out of the hospital, but we just couldn’t get the ROI to work.” Heads nod understandingly, and then participants move on to other topics.

At conferences about providing care for patients with cancer or other acute illnesses, by contrast, we almost never hear the term ROI. Instead, people talk about clinical gains, using understandable and patient-centered terms like “survival.” Though high drug prices are sometimes mentioned, no one ever says the ROI is prohibitive. No one mentions ROI at all.

There is no obvious reason why ROI is more relevant to some clinical situations than to others. So why do we focus so heavily on ROI when the topic is chronic illness but rarely mention it when the topic is cancer? A huge amount of the cancer care we deliver provides such small personal and social gains that, were those gains monetized, the endeavor’s ROI would be deeply negative. And yet we ask, “What’s the ROI of that program that keeps chronically ill patients out of the hospital?” but not “What’s the ROI of treating advanced lung cancer?”

Providing cancer care and averting hospitalizations are financed differently. It’s hard to create a favorable ROI for reducing volume in a system dominated by fee-for-service payments for delivering care. Sometimes a favorable ROI is achieved passively when, for example, avoiding care frees up capacity for patients whose care is more profitable. More actively, the avoidance of care can be financed by establishing punishments for delivering avoidable care (penalties for readmissions, for example) or by shifting its cost to the providers themselves (e.g., through capitated or bundled payments).

It might seem that we could make the ROI for appropriate care more favorable if we imposed higher penalties on inappropriate care, just as we could make the ROI for treating cancer less favorable by paying less for cancer treatments. Despite that apparent symmetry, the choice of financing mechanisms — payments versus penalties — determines how much a health care goal will be advanced. If the ROI didn’t work for some form of cancer care — because the payment received was lower than the cost incurred — doctors and hospitals would almost certainly argue for higher payments. But when the ROI doesn’t work for keeping challenging patients with chronic disease out of the hospital, it’s implausible that doctors or hospitals will plead for increased readmission penalties. There isn’t any mathematical reason to prefer payment in the form of rewards over payment in the form of avoided penalties, but you can typically generate more advocates for your cause by paying people to follow you than by penalizing them for going the other way.

So when advocates and organizations devoted to keeping people out of the hospital lament their inability to make the ROI work, they should know that the game is rigged against them. In the highly regulated context of health care, the amount and structure of financing are chosen rather than preordained. The ROI is favorable or unfavorable not because of the workings of some invisible hand, but because of choices someone — usually a private or public insurer — has made regarding what amounts will be paid for various types of care and what form payments will take.

What if the financing of cancer care and of efforts to achieve population health goals traded places? Suppose doctors and hospitals were paid for cancer care by capitation or bundles or through penalties for undesired outcomes and were paid directly and adequately to keep people out of the hospital. Oncologists might begin lamenting that although new approaches to cancer care helped patients, they just couldn’t get the ROI to work. And the outlook for population health might become less financially gloomy.

Rewards and penalties have the same ultimate effect on investment income, but they influence thinking in different ways. We might encourage greater effort and innovation in keeping people out of the hospital and coordinating care if we reframed its financing as positive payments for noble work rather than punitive revenue reductions. As U.S. health care financing begins again to shift risks to hospitals and physicians through bundled payments or readmission penalties, the financing of the care for our most challenging patients might be better shifted in the other direction.

http://www.nejm.org/doi/full/10.1056/NEJMp1512297

***

Comment:

By Don McCanne, M.D.

The concept of return on investment (ROI) in health care may represent what is wrong with our system that causes it to be so expensive yet often mediocre by international standards.

Most health care professionals and institutions are largely fixated on their efforts to provide the best patient care they can with the given resources. But much of the medical-industrial complex is fixated on ROI, as is obvious by the examples of the private, for-profit insurers and the pharmaceutical firms with their egregiously high profits.

The authors of this article discuss trying to take care of cancer patients in which ROI standards are not considered since “monetized” gains for cancer patients would be “deeply negative.” They contrast that with readmissions of patients with chronic illnesses in which the ROI is important based on the penalties assessed for failing to prevent the readmissions.

On the one hand, the professionals and institutions are simply paid for providing appropriate care. On the other, attempting to provide appropriate care is complicated by a necessity to consider the potential of a negative ROI because of financial considerations – penalties – which have nothing to do with the actual medical care being provided.

Instead of ROI driving motivation, the authors suggest that we reframe health care financing as “positive payments for noble work rather than punitive revenue reductions.”

They conclude, “As U.S. health care financing begins again to shift risks to hospitals and physicians through bundled payments or readmission penalties, the financing of the care for our most challenging patients might be better shifted in the other direction.”

Noble provision of health care services – a prime goal of a single payer national health program.

Asymmetric Thinking about Return on Investment

By David A. Asch, M.D., Mark V. Pauly, Ph.D., and Ralph W. Muller, M.A.
The New England Journal of Medicine, February 18, 2016

Lately, we’ve attended many conferences about providing health care to patients with high medical and social needs — people with chronic illnesses who are frequently readmitted to the hospital. It seems as if every presentation refers to “return on investment” (ROI), which is invariably presented as a constraint — as in “Our program kept people out of the hospital, but we just couldn’t get the ROI to work.” Heads nod understandingly, and then participants move on to other topics.

At conferences about providing care for patients with cancer or other acute illnesses, by contrast, we almost never hear the term ROI. Instead, people talk about clinical gains, using understandable and patient-centered terms like “survival.” Though high drug prices are sometimes mentioned, no one ever says the ROI is prohibitive. No one mentions ROI at all.

There is no obvious reason why ROI is more relevant to some clinical situations than to others. So why do we focus so heavily on ROI when the topic is chronic illness but rarely mention it when the topic is cancer? A huge amount of the cancer care we deliver provides such small personal and social gains that, were those gains monetized, the endeavor’s ROI would be deeply negative. And yet we ask, “What’s the ROI of that program that keeps chronically ill patients out of the hospital?” but not “What’s the ROI of treating advanced lung cancer?”

Providing cancer care and averting hospitalizations are financed differently. It’s hard to create a favorable ROI for reducing volume in a system dominated by fee-for-service payments for delivering care. Sometimes a favorable ROI is achieved passively when, for example, avoiding care frees up capacity for patients whose care is more profitable. More actively, the avoidance of care can be financed by establishing punishments for delivering avoidable care (penalties for readmissions, for example) or by shifting its cost to the providers themselves (e.g., through capitated or bundled payments).

It might seem that we could make the ROI for appropriate care more favorable if we imposed higher penalties on inappropriate care, just as we could make the ROI for treating cancer less favorable by paying less for cancer treatments. Despite that apparent symmetry, the choice of financing mechanisms — payments versus penalties — determines how much a health care goal will be advanced. If the ROI didn’t work for some form of cancer care — because the payment received was lower than the cost incurred — doctors and hospitals would almost certainly argue for higher payments. But when the ROI doesn’t work for keeping challenging patients with chronic disease out of the hospital, it’s implausible that doctors or hospitals will plead for increased readmission penalties. There isn’t any mathematical reason to prefer payment in the form of rewards over payment in the form of avoided penalties, but you can typically generate more advocates for your cause by paying people to follow you than by penalizing them for going the other way.

So when advocates and organizations devoted to keeping people out of the hospital lament their inability to make the ROI work, they should know that the game is rigged against them. In the highly regulated context of health care, the amount and structure of financing are chosen rather than preordained. The ROI is favorable or unfavorable not because of the workings of some invisible hand, but because of choices someone — usually a private or public insurer — has made regarding what amounts will be paid for various types of care and what form payments will take.

What if the financing of cancer care and of efforts to achieve population health goals traded places? Suppose doctors and hospitals were paid for cancer care by capitation or bundles or through penalties for undesired outcomes and were paid directly and adequately to keep people out of the hospital. Oncologists might begin lamenting that although new approaches to cancer care helped patients, they just couldn’t get the ROI to work. And the outlook for population health might become less financially gloomy.

Rewards and penalties have the same ultimate effect on investment income, but they influence thinking in different ways. We might encourage greater effort and innovation in keeping people out of the hospital and coordinating care if we reframed its financing as positive payments for noble work rather than punitive revenue reductions. As U.S. health care financing begins again to shift risks to hospitals and physicians through bundled payments or readmission penalties, the financing of the care for our most challenging patients might be better shifted in the other direction.

http://www.nejm.org/doi/full/10.1056/NEJMp1512297

The concept of return on investment (ROI) in health care may represent what is wrong with our system that causes it to be so expensive yet often mediocre by international standards.

Most health care professionals and institutions are largely fixated on their efforts to provide the best patient care they can with the given resources. But much of the medical-industrial complex is fixated on ROI, as is obvious by the examples of the private, for-profit insurers and the pharmaceutical firms with their egregiously high profits.

The authors of this article discuss trying to take care of cancer patients in which ROI standards are not considered since “monetized” gains for cancer patients would be “deeply negative.” They contrast that with readmissions of patients with chronic illnesses in which the ROI is important based on the penalties assessed for failing to prevent the readmissions.

On the one hand, the professionals and institutions are simply paid for providing appropriate care. On the other, attempting to provide appropriate care is complicated by a necessity to consider the potential of a negative ROI because of financial considerations – penalties – which have nothing to do with the actual medical care being provided.

Instead of ROI driving motivation, the authors suggest that we reframe health care financing as “positive payments for noble work rather than punitive revenue reductions.”

They conclude, “As U.S. health care financing begins again to shift risks to hospitals and physicians through bundled payments or readmission penalties, the financing of the care for our most challenging patients might be better shifted in the other direction.”

Noble provision of health care services – a prime goal of a single payer national health program.