Retirement Giant Fidelity Now Wants Workers’ Health Insurance

By Zachary Tracer
Bloomberg Business, January 25, 2016

Fidelity Investments is already the U.S.’s No. 2 mutual fund company. Now, it wants to get bigger in the health insurance business.

The financial services firm is introducing a shopping website for health insurance and other employee benefits called Fidelity Health Marketplace. Targeted at businesses with as many as 2,500 workers, the site, known as a private health exchange, complements Fidelity’s existing benefits products such as retirement accounts.

The private exchanges set up by companies like Fidelity are separate from the government-run websites created under the 2010 Patient Protection and Affordable Care Act. But they share some of the same features and goals, such as letting customers shop for the best deal by examining the cost and coverage offered by different health plans. They can also help limit the cost to employers, by giving workers a set amount to spend.

In a private exchange, when a worker enrolls in a more expensive plan, the added expense comes out of their paychecks. If a plan costs less, the employees can use the extra funds to buy life insurance or other benefits on the same platform.

It’s a change that echoes the shift from pensions to employee-funded retirement accounts that happened in the U.S. over the past decades, and helped give rise to investment management giants like Fidelity.

“What they’re trying to do is move to a model where employers are defining a contribution amount for employees to use on their benefits,” according to Mike Trilli, senior health-care analyst at Aite Group, a research and consulting firm.

Fidelity may also be able to use the health offerings to draw customers to its investing products, according to Amy Gurchensky, an analyst at consulting firm NelsonHall. When customers pick a high-deductible health plan — for example, one that pairs a $5,000 deductible with a tax-free savings and investment account — Fidelity will be able to offer its own investing services.

http://www.bloomberg.com/news/articles/2016-01-26/retirement-giant-fidelity-now-wants-workers-health-insurance

***

Comment:

By Don McCanne, M.D.

Although a majority of Americans favor a national health program, many in the policy and political communities express a preference for incrementally building on the existing multi-payer system, as modified by the Affordable Care Act (ACA). Although 64 percent of our heath system is already funded through our taxes, our government gives control of much of our total spending to the private sector, such as the private insurance companies. Thus the private sector is the source of much of the incremental changes that are taking place. Now that Fidelity Investments is entering the scene, what incremental change are they offering that will benefit patients?

*  They are introducing Fidelity Health Marketplace – similar to the government insurance exchanges under ACA except that they are privately owned and operated. Since they are targeted at small businesses, they are an additional intermediary that increases administrative complexity and expenses. That adds to the cost of the insurance, so that does not benefit the patient.

*  The plans will be purchased with a defined contribution from the employer. Because the contribution is fixed, more of the premium costs are shifted to the employee, especially over time. Either the employee must contribute more to the premium, or choose a plan with fewer benefits, which then increases financial exposure in the event of medical need. That does not benefit the patient.

*  Fidelity already offers health savings accounts – savings accounts that are linked with high deductible health plans and can be used to pay the deductibles and other cost sharing. Since high deductible plans have lower premiums which are less likely to exceed the defined contribution, Fidelity will no doubt heavily market the plans which are linked to their own health savings accounts. Since employers would use the Fidelity Marketplace to reduce their own health benefit spending, by offering a defined contribution, it is likely that employees will have difficulties keeping their health savings accounts funded. Higher deductibles linked to an empty savings accounts certainly does not benefit the patient.

*  If an employee or family member has an expensive chronic disorder then a more comprehensive plan should be selected to mitigate the higher costs. But with the smaller defined contribution, the portion of the premium that the employee must pay is significantly greater, and often unaffordable. That does not benefit the patient.

Private sector solutions in health care financing, including insurers and other fiscal intermediaries, are designed primarily to benefit the industry, usually at a cost to the patient, though often opaque and thus deceptive. Public sector solutions, such as Medicare and Medicaid, are designed to benefit the patient. But even there the private sector has moved in with their private Medicare Advantage plans and their private Medicaid managed care programs, to the detriment of patients and taxpayers.

How much more of this private incremental invasion of our already dysfunctional health care financing system can we take? The next time you hear a politician say that we need to build on the system we have through incremental steps, do not remain silent. Say something. Yell, if necessary. Scream, if that’s what it takes. But do not let them con us out of the national health program that a clear majority of us want.

Retirement Giant Fidelity Now Wants Workers’ Health Insurance

By Zachary Tracer
Bloomberg Business, January 25, 2016

Fidelity Investments is already the U.S.’s No. 2 mutual fund company. Now, it wants to get bigger in the health insurance business.

The financial services firm is introducing a shopping website for health insurance and other employee benefits called Fidelity Health Marketplace. Targeted at businesses with as many as 2,500 workers, the site, known as a private health exchange, complements Fidelity’s existing benefits products such as retirement accounts.

The private exchanges set up by companies like Fidelity are separate from the government-run websites created under the 2010 Patient Protection and Affordable Care Act. But they share some of the same features and goals, such as letting customers shop for the best deal by examining the cost and coverage offered by different health plans. They can also help limit the cost to employers, by giving workers a set amount to spend.

In a private exchange, when a worker enrolls in a more expensive plan, the added expense comes out of their paychecks. If a plan costs less, the employees can use the extra funds to buy life insurance or other benefits on the same platform.

It’s a change that echoes the shift from pensions to employee-funded retirement accounts that happened in the U.S. over the past decades, and helped give rise to investment management giants like Fidelity.

“What they’re trying to do is move to a model where employers are defining a contribution amount for employees to use on their benefits,” according to Mike Trilli, senior health-care analyst at Aite Group, a research and consulting firm.

Fidelity may also be able to use the health offerings to draw customers to its investing products, according to Amy Gurchensky, an analyst at consulting firm NelsonHall. When customers pick a high-deductible health plan — for example, one that pairs a $5,000 deductible with a tax-free savings and investment account — Fidelity will be able to offer its own investing services.

http://www.bloomberg.com/news/articles/2016-01-26/retirement-giant-fidelity-now-wants-workers-health-insurance

Although a majority of Americans favor a national health program, many in the policy and political communities express a preference for incrementally building on the existing multi-payer system, as modified by the Affordable Care Act (ACA). Although 64 percent of our heath system is already funded through our taxes, our government gives control of much of our total spending to the private sector, such as the private insurance companies. Thus the private sector is the source of much of the incremental changes that are taking place. Now that Fidelity Investments is entering the scene, what incremental change are they offering that will benefit patients?

*  They are introducing Fidelity Health Marketplace – similar to the government insurance exchanges under ACA except that they are privately owned and operated. Since they are targeted at small businesses, they are an additional intermediary that increases administrative complexity and expenses. That adds to the cost of the insurance, so that does not benefit the patient.

*  The plans will be purchased with a defined contribution from the employer. Because the contribution is fixed, more of the premium costs are shifted to the employee, especially over time. Either the employee must contribute more to the premium, or choose a plan with fewer benefits, which then increases financial exposure in the event of medical need. That does not benefit the patient.

*  Fidelity already offers health savings accounts – savings accounts that are linked with high deductible health plans and can be used to pay the deductibles and other cost sharing. Since high deductible plans have lower premiums which are less likely to exceed the defined contribution, Fidelity will no doubt heavily market the plans which are linked to their own health savings accounts. Since employers would use the Fidelity Marketplace to reduce their own health benefit spending, by offering a defined contribution, it is likely that employees will have difficulties keeping their health savings accounts funded. Higher deductibles linked to an empty savings accounts certainly does not benefit the patient.

*  If an employee or family member has an expensive chronic disorder then a more comprehensive plan should be selected to mitigate the higher costs. But with the smaller defined contribution, the portion of the premium that the employee must pay is significantly greater, and often unaffordable. That does not benefit the patient.

Private sector solutions in health care financing, including insurers and other fiscal intermediaries, are designed primarily to benefit the industry, usually at a cost to the patient, though often opaque and thus deceptive. Public sector solutions, such as Medicare and Medicaid, are designed to benefit the patient. But even there the private sector has moved in with their private Medicare Advantage plans and their private Medicaid managed care programs, to the detriment of patients and taxpayers.

How much more of this private incremental invasion of our already dysfunctional health care financing system can we take? The next time you hear a politician say that we need to build on the system we have through incremental steps, do not remain silent. Say something. Yell, if necessary. Scream, if that’s what it takes. But do not let them con us out of the national health program that a clear majority of us want.

Fight To Lower Drug Prices Forces Some To Switch Medication

By Alison Kodjak
NPR, January 26, 2016

Steve Miller… The chief medical officer at Express Scripts, the largest pharmacy benefit manager in the U.S., has been essentially auctioning off his 80 million customers to the drug companies that will give him the best deal.

Express Scripts and its rivals including CVS/Caremark and OptumRX manage prescription drug coverage for insurers and employers. They’re trying to spark price wars among drugmakers by refusing to pay for some brand-name medications unless they get a big discount.

The result is that average costs for many drugs are falling. At the same time, consumers are being forced to change medications, sometimes to brands that don’t work as well for them.

This year, more than half of all people with insurance will have some medications excluded from coverage, says Ronny Gal, a drug industry analyst at investment firm Alliance Bernstein in New York.

“Drug companies have been pricing their drugs largely along the lines of, you know, whatever you can get away with and still have the patient get the drug,” he says. “This year exclusion will become a standard feature of the industry, which is actually quite a shocker for a lot of patients.”

Express Scripts pioneered the strategy two years ago, when it announced it would no longer pay for 48 brand-name drugs.

Express Scripts isn’t alone. Caremark, Optum and Prime Therapeutics also refuse to pay for some name-brand medications. Dr. David Lassen, the chief medical officer at Prime, which is the pharmacy benefit manager for several Blue Cross and Blue Shield plans, says the company offers an exclusion option to its health plan customers.

http://www.npr.org/sections/health-shots/2016/01/25/463809474/fight-to-lower-drug-prices-forces-some-to-switch-medication

***

Comment:

By Don McCanne, M.D.

Drug prices are a problem, so much so that many people will not fill their prescriptions unless they have a drug plan that will cover most of the costs. The United States relies largely on market solutions through pharmacy benefit managers (PBMs), rather than through government administered pricing. Markets and the government function quite differently.

Drug companies have been pricing their products at the maximum that the market will bear, which results frequently in truly unreasonable prices. As the market intermediaries, PBMs are now boycotting products that they believe are overpriced. The obvious problem is that patients are then denied coverage for some medications that may be much more preferable than other options, including doing without.

In contrast, government programs such as Medicaid and the VA have been able to negotiate even better prices while making the drugs more accessible to patients on those programs.

It is time for us to quit pretending that there is some magic in the market when it is our public programs that function far better. If we had a national single payer program that included a drug benefit, the intrusive obstruction of the pharmacy benefit managers would go away.

Fight To Lower Drug Prices Forces Some To Switch Medication

By Alison Kodjak
NPR, January 26, 2016

Steve Miller… The chief medical officer at Express Scripts, the largest pharmacy benefit manager in the U.S., has been essentially auctioning off his 80 million customers to the drug companies that will give him the best deal.

Express Scripts and its rivals including CVS/Caremark and OptumRX manage prescription drug coverage for insurers and employers. They’re trying to spark price wars among drugmakers by refusing to pay for some brand-name medications unless they get a big discount.

The result is that average costs for many drugs are falling. At the same time, consumers are being forced to change medications, sometimes to brands that don’t work as well for them.

This year, more than half of all people with insurance will have some medications excluded from coverage, says Ronny Gal, a drug industry analyst at investment firm Alliance Bernstein in New York.

“Drug companies have been pricing their drugs largely along the lines of, you know, whatever you can get away with and still have the patient get the drug,” he says. “This year exclusion will become a standard feature of the industry, which is actually quite a shocker for a lot of patients.”

Express Scripts pioneered the strategy two years ago, when it announced it would no longer pay for 48 brand-name drugs.

Express Scripts isn’t alone. Caremark, Optum and Prime Therapeutics also refuse to pay for some name-brand medications. Dr. David Lassen, the chief medical officer at Prime, which is the pharmacy benefit manager for several Blue Cross and Blue Shield plans, says the company offers an exclusion option to its health plan customers.

http://www.npr.org/sections/health-shots/2016/01/25/463809474/fight-to-lower-drug-prices-forces-some-to-switch-medication

Drug prices are a problem, so much so that many people will not fill their prescriptions unless they have a drug plan that will cover most of the costs. The United States relies largely on market solutions through pharmacy benefit managers (PBMs), rather than through government administered pricing. Markets and the government function quite differently.

Drug companies have been pricing their products at the maximum that the market will bear, which results frequently in truly unreasonable prices. As the market intermediaries, PBMs are now boycotting products that they believe are overpriced. The obvious problem is that patients are then denied coverage for some medications that may be much more preferable than other options, including doing without.

In contrast, government programs such as Medicaid and the VA have been able to negotiate even better prices while making the drugs more accessible to patients on those programs.

It is time for us to quit pretending that there is some magic in the market when it is our public programs that function far better. If we had a national single payer program that included a drug benefit, the intrusive obstruction of the pharmacy benefit managers would go away.

New Report: CMS’ Changes to Medicare Advantage Undermine Care for Beneficiaries Managing Chronic Conditions

America’s Health Insurance Plans (AHIP), January 22, 2016

With 17 million seniors and individuals with disabilities depending on the Medicare Advantage program, a report from Avalere Health raises new concerns about CMS’ policies that undermine health plans’ efforts to care for beneficiaries managing multiple chronic conditions. After assessing the accuracy of CMS’ current risk adjustment model and the cost of care for chronic health conditions, the Avalere analysis found that the model under-predicts costs for individuals with multiple chronic conditions by $2.6 billion on an annual basis. These findings come just weeks before CMS releases its annual proposed payment notice and call letter for Medicare Advantage and Part D plans, which may include further changes to the program and seniors’ benefits.

In the spring of 2015, CMS finalized changes to the risk adjustment system, which directly targeted chronic disease prevention programs. This latest Avalere analysis demonstrates that these changes significantly limit health plans’ early intervention efforts and seniors’ benefits.

“Further cuts to Medicare Advantage and seniors’ benefits are fundamentally at odds with the goal of delivering better care and better value for beneficiaries,” AHIP President and CEO Marilyn Tavenner said. “Rather than relying on an antiquated fee-for-service approach as the model for care delivery, CMS should focus on strengthening Medicare Advantage and the innovative programs that improve seniors’ health.”

Last year, more than 340 members of Congress, lead by Sen. Chuck Schumer (D-NY), Sen. Mike Crapo (R-ID), Rep. Patrick Murphy (FL-18), and Rep. Brett Guthrie (KY-02), urged CMS to protect seniors’ coverage and provide stability to the program. Ahead of the upcoming February rate notice, more than 2 million seniors from AHIP’s Coalition for Medicare Choices have mobilized, urging Washington to defend the Medicare Advantage program from further payment cuts.

https://www.ahip.org/News/Press-Room/2016/New-Report–CMS–Changes-to-Medicare-Advantage-Undermine-Care-for-Beneficiaries-Managing-Chronic-Conditions.aspx

***

Analysis of the Accuracy of the CMS-Hierarchical Condition Category Model

Avalere Health, January 2016

From the Executive Summary

Since 2000, the Centers for Medicare & Medicaid Services (CMS) has adjusted Medicare Advantage (MA) capitated payments for demographic characteristics and health status (also known as “risk adjustment”). In 2004 CMS adopted the Hierarchical Condition Category (HCC) risk adjustment model, which includes a series of patient diagnoses that impact healthcare spending. In 2014, CMS introduced a new version of the model that removed certain conditions, added others, and made additional modifications (hereafter referred to as the “2014 model”).

In this project, Avalere assessed the accuracy of the 2014 model for beneficiaries in the traditional Medicare program with certain common chronic conditions by using Medicare fee-for-service (FFS) claims data to compare predicted healthcare costs with actual healthcare costs.

In summary, we estimate that the 2014 model under-predicts costs for individuals with multiple chronic conditions by $2.6 billion on an annual basis (see Table 1). As a result, because the model is “zero sum”—that is, the values for each condition are relative to the average cost across all individuals—under-prediction for individuals with multiple chronic conditions is balanced by over-prediction of costs for individuals with no chronic conditions.

On October 28, 2015, CMS announced proposed changes to the MA risk adjustment model that the agency believes will improve its predictive power for low-income beneficiaries. Specifically, CMS intends to further refine the model by accounting for both dual eligible/low-income subsidy (LIS) eligible and disabled status.

(W)e intentionally used a different disease classification system from the HCC model groupings in order to independently assess how well the model predicts costs for specific chronic diseases.

Table 1. Predictive Accuracy for Beneficiaries with Multiple Chronic Conditions

  Total Estimated MA Over/Under- Prediction of Expenditures ($ millions)

    Multiple Chronic Conditions (All)  $ (2,613.7)
   
    Multiple Chronic Conditions (Dual/LIS-eligibles)  $ (401.8)

The purpose of risk adjustment is to anticipate systematic differences in costs for groups of individuals so that plans are reasonably compensated for the financial risks they bear. If plans are not accurately compensated for taking on the risk associated with a particular group, it creates a misalignment between payments and costs for higher cost beneficiaries, and under-compensates plans that enroll many chronically ill members. For any particular individual, the model may over- or under-predict actual costs, in some cases by a wide margin; every dollar of under-predicted cost is balanced by a dollar of over-predicted cost.

From the Detailed Findings

Analysis for Multiple Chronic Conditions

We reviewed how well the model predicts expenditures for individuals with multiple chronic conditions in order to determine how well payments to MA plans would be risk adjusted for the clinical severity of their patient populations under the 2014 model. As shown in Table 3, we find that the model under-predicts costs by approximately $2.6 billion for individuals with three or more chronic conditions. We also find that the model over-predicts disease burden for individuals without chronic conditions.

Table 3. Predictive Accuracy for Members with Chronic Conditions; All Members and Dual/LIS-Eligibles

  Total Estimated MA Over/Under- Predictions ($ millions)

    All Members

      Multiple (3+) Chronic Conditions  $ (2,613.7)

      Few (1-2) Chronic Conditions  $ 936.2

      No Chronic Conditions  $ 1,677.50

    Dual/LIS-Eligibles

      Multiple (3+) Chronic Conditions  $ (401.8)

      Few (1-2) Chronic Conditions  $ 599.8

      No Chronic Conditions  $ 582.9

From the Conclusion

We reviewed the accuracy of the new CMS-HCC model at predicting costs for individuals with multiple chronic conditions, and paid particular attention to how well the model predicts costs for high cost individuals. We find that the CMS-HCC model substantially under-predicts costs for individuals with multiple chronic conditions, under-predicts costs for several specific chronic conditions, and does not accurately predict costs for high cost individuals within each chronic condition.

These findings suggest the model may need improvements and modifications in order to appropriately pay for high cost members and individuals with multiple and certain single chronic conditions. In other words, the model may not be adequately compensating health plans for treating these individuals.

http://go.avalere.com/acton/attachment/12909/f-028f/1/-/-/-/-/012016_Avalere_HCC_WhitePaper_LP_Final.pdf

***

Comment:

By Don McCanne, M.D.

For the past four years, the private insurance industry, led by their lobby organization – AHIP, has been successful in offsetting the reductions in overpayments that have been made to the private Medicare Advantage plans – reductions that are required by the Affordable Care Act. AHIP has now commissioned Avalere to produce a study that purportedly shows that they will need higher capitation payments than the CMS’s risk adjustment program would allow. The release of this study is the first step in their campaign to, once again, offset the decreases required by ACA.

A program to authorize private Medicare Advantage plans (originally Medicare + Choice plans) was authorized by Congress as a move to eventually completely privatize Medicare once the private plans were able to show that they could deliver higher quality at lower costs. Early on the concept was proven a fraud when the plans successfully marketed their plans selectively to healthy Medicare beneficiaries, while being compensated at levels equivalent to the costs of those in the traditional fee-for-service (FFS) Medicare program who had greater health problems.

In response, CMS developed a risk adjustment program that would pay more when the Medicare Advantage plans enrolled beneficiaries with greater health care needs, based on their diagnoses. The private plans then responded by upcoding the diagnoses of their enrollees, making them appear much sicker than they were. They even went to the point of sending out teams to make detective house calls so that they could add more diagnoses that were not being itemized by the providers.

In 2004, CMS adopted the Hierarchical Condition Category (CMS-HCC) risk adjustment model, which does adjust payments upward for those with greater needs, but it still fails to prevent about four-fifths of the excessive payments.

With pressure from AHIP, and with the support of Congress, CMS used various innovative methods to boost the payment rates for these private plans. This year, they seem to be headed towards a claim that they are being paid much less for high cost patients than the actual costs entailed.

Look at Table 1 in the Executive Summary (the only part that legislators read). Based on current CMS risk adjustment methods, they predict that the calculated costs for beneficiaries with multiple chronic conditions will fall short of actual costs by $2,614 million. They are now campaigning to have those costs added to their reimbursement rates for 2017.

But look at Table 3 which is found in “Detailed Findings” (which most will not read). It is the same as Table 1, but expanded to include the predicted calculations for those who have few or no chronic conditions. It shows that the CMS calculations predict $2,614 million in excess estimates of costs.

For the dual eligible/low-income subsidy group (Dual/LIS), Table 1 shows that the costs for those with multiple chronic conditions would be underestimated by $402 million. But for the Dual/LIS with few or no conditions, Table 3 shows that the predicted costs would be calculated to be $1,183 million over the actual costs. The report indicates that Dual/LIS patients have greater costs, so they plead to be compensated for this $402 million underestimate. They remain silent on the $1,183 overestimate for the healthier sector.

Also the estimates are based on patients in the traditional FFS Medicare program, a less healthy population than those in the Medicare Advantage plans. Since the Medicare Advantage plans continue to be successful in recruiting healthier patients, the overestimates by which they would be reimbursed would be even greater.

The politics are ugly. Marilyn Tavenner, as head of CMS, participated in the conspiracy to use devious innovations to overpay the Medicare Advantage plans. She is now president and CEO of AHIP and will use her cozy relationship with members of Congress to be sure that they put more pressure on CMS to once again jack up the rates for Medicare Advantage plans, in conflict with the intent of the ACA legislation.

This is a nefarious effort that is part of the conspiracy to completely privatize Medicare. As Marilyn Tavenner said in the AHIP news release, “Rather than relying on an antiquated fee-for-service approach as the model for care delivery, CMS should focus on strengthening Medicare Advantage and the innovative programs that improve seniors’ health.” This statement is not ambiguous. It is a blatant call for total privatization of Medicare.

The last thing we want is a privatized Medicare Advantage for all who can afford it.

New Report: CMS’ Changes to Medicare Advantage Undermine Care for Beneficiaries Managing Chronic Conditions

America’s Health Insurance Plans (AHIP), January 22, 2016

With 17 million seniors and individuals with disabilities depending on the Medicare Advantage program, a report from Avalere Health raises new concerns about CMS’ policies that undermine health plans’ efforts to care for beneficiaries managing multiple chronic conditions. After assessing the accuracy of CMS’ current risk adjustment model and the cost of care for chronic health conditions, the Avalere analysis found that the model under-predicts costs for individuals with multiple chronic conditions by $2.6 billion on an annual basis. These findings come just weeks before CMS releases its annual proposed payment notice and call letter for Medicare Advantage and Part D plans, which may include further changes to the program and seniors’ benefits.

In the spring of 2015, CMS finalized changes to the risk adjustment system, which directly targeted chronic disease prevention programs. This latest Avalere analysis demonstrates that these changes significantly limit health plans’ early intervention efforts and seniors’ benefits.

“Further cuts to Medicare Advantage and seniors’ benefits are fundamentally at odds with the goal of delivering better care and better value for beneficiaries,” AHIP President and CEO Marilyn Tavenner said. “Rather than relying on an antiquated fee-for-service approach as the model for care delivery, CMS should focus on strengthening Medicare Advantage and the innovative programs that improve seniors’ health.”

Last year, more than 340 members of Congress, lead by Sen. Chuck Schumer (D-NY), Sen. Mike Crapo (R-ID), Rep. Patrick Murphy (FL-18), and Rep. Brett Guthrie (KY-02), urged CMS to protect seniors’ coverage and provide stability to the program. Ahead of the upcoming February rate notice, more than 2 million seniors from AHIP’s Coalition for Medicare Choices have mobilized, urging Washington to defend the Medicare Advantage program from further payment cuts.

https://www.ahip.org/News/Press-Room/2016/New-Report–CMS–Changes-to-Medicare-Advantage-Undermine-Care-for-Beneficiaries-Managing-Chronic-Conditions.aspx

***

Analysis of the Accuracy of the CMS-Hierarchical Condition Category Model

Avalere Health, January 2016

From the Executive Summary

Since 2000, the Centers for Medicare & Medicaid Services (CMS) has adjusted Medicare Advantage (MA) capitated payments for demographic characteristics and health status (also known as “risk adjustment”). In 2004 CMS adopted the Hierarchical Condition Category (HCC) risk adjustment model, which includes a series of patient diagnoses that impact healthcare spending. In 2014, CMS introduced a new version of the model that removed certain conditions, added others, and made additional modifications (hereafter referred to as the “2014 model”).

In this project, Avalere assessed the accuracy of the 2014 model for beneficiaries in the traditional Medicare program with certain common chronic conditions by using Medicare fee-for-service (FFS) claims data to compare predicted healthcare costs with actual healthcare costs.

In summary, we estimate that the 2014 model under-predicts costs for individuals with multiple chronic conditions by $2.6 billion on an annual basis (see Table 1). As a result, because the model is “zero sum”—that is, the values for each condition are relative to the average cost across all individuals—under-prediction for individuals with multiple chronic conditions is balanced by over-prediction of costs for individuals with no chronic conditions.

On October 28, 2015, CMS announced proposed changes to the MA risk adjustment model that the agency believes will improve its predictive power for low-income beneficiaries. Specifically, CMS intends to further refine the model by accounting for both dual eligible/low-income subsidy (LIS) eligible and disabled status.

(W)e intentionally used a different disease classification system from the HCC model groupings in order to independently assess how well the model predicts costs for specific chronic diseases.

Table 1. Predictive Accuracy for Beneficiaries with Multiple Chronic Conditions

Total Estimated MA Over/Under- Prediction of Expenditures ($ millions)

Multiple Chronic Conditions (All)  $ (2,613.7)

Multiple Chronic Conditions (Dual/LIS-eligibles)  $ (401.8)

The purpose of risk adjustment is to anticipate systematic differences in costs for groups of individuals so that plans are reasonably compensated for the financial risks they bear. If plans are not accurately compensated for taking on the risk associated with a particular group, it creates a misalignment between payments and costs for higher cost beneficiaries, and under-compensates plans that enroll many chronically ill members. For any particular individual, the model may over- or under-predict actual costs, in some cases by a wide margin; every dollar of under-predicted cost is balanced by a dollar of over-predicted cost.

From the Detailed Findings

Analysis for Multiple Chronic Conditions

We reviewed how well the model predicts expenditures for individuals with multiple chronic conditions in order to determine how well payments to MA plans would be risk adjusted for the clinical severity of their patient populations under the 2014 model. As shown in Table 3, we find that the model under-predicts costs by approximately $2.6 billion for individuals with three or more chronic conditions. We also find that the model over-predicts disease burden for individuals without chronic conditions.

Table 3. Predictive Accuracy for Members with Chronic Conditions; All Members and Dual/LIS-Eligibles

Total Estimated MA Over/Under- Predictions ($ millions)

All Members

Multiple (3+) Chronic Conditions  $ (2,613.7)

Few (1-2) Chronic Conditions  $ 936.2

No Chronic Conditions  $ 1,677.50

Dual/LIS-Eligibles

Multiple (3+) Chronic Conditions  $ (401.8)

Few (1-2) Chronic Conditions  $ 599.8

No Chronic Conditions  $ 582.9

From the Conclusion

We reviewed the accuracy of the new CMS-HCC model at predicting costs for individuals with multiple chronic conditions, and paid particular attention to how well the model predicts costs for high cost individuals. We find that the CMS-HCC model substantially under-predicts costs for individuals with multiple chronic conditions, under-predicts costs for several specific chronic conditions, and does not accurately predict costs for high cost individuals within each chronic condition.

These findings suggest the model may need improvements and modifications in order to appropriately pay for high cost members and individuals with multiple and certain single chronic conditions. In other words, the model may not be adequately compensating health plans for treating these individuals.

http://go.avalere.com/acton/attachment/12909/f-028f/1/-/-/-/-/012016_Avalere_HCC_WhitePaper_LP_Final.pdf

For the past four years, the private insurance industry, led by their lobby organization – AHIP, has been successful in offsetting the reductions in overpayments that have been made to the private Medicare Advantage plans – reductions that are required by the Affordable Care Act. AHIP has now commissioned Avalere to produce a study that purportedly shows that they will need higher capitation payments than the CMS’s risk adjustment program would allow. The release of this study is the first step in their campaign to, once again, offset the decreases required by ACA.

A program to authorize private Medicare Advantage plans (originally Medicare + Choice plans) was authorized by Congress as a move to eventually completely privatize Medicare once the private plans were able to show that they could deliver higher quality at lower costs. Early on the concept was proven a fraud when the plans successfully marketed their plans selectively to healthy Medicare beneficiaries, while being compensated at levels equivalent to the costs of those in the traditional fee-for-service (FFS) Medicare program who had greater health problems.

In response, CMS developed a risk adjustment program that would pay more when the Medicare Advantage plans enrolled beneficiaries with greater health care needs, based on their diagnoses. The private plans then responded by upcoding the diagnoses of their enrollees, making them appear much sicker than they were. They even went to the point of sending out teams to make detective house calls so that they could add more diagnoses that were not being itemized by the providers.

In 2004, CMS adopted the Hierarchical Condition Category (CMS-HCC) risk adjustment model, which does adjust payments upward for those with greater needs, but it still fails to prevent about four-fifths of the excessive payments.

With pressure from AHIP, and with the support of Congress, CMS used various innovative methods to boost the payment rates for these private plans. This year, they seem to be headed towards a claim that they are being paid much less for high cost patients than the actual costs entailed.

Look at Table 1 in the Executive Summary (the only part that legislators read). Based on current CMS risk adjustment methods, they predict that the calculated costs for beneficiaries with multiple chronic conditions will fall short of actual costs by $2,614 million. They are now campaigning to have those costs added to their reimbursement rates for 2017.

But look at Table 3 which is found in “Detailed Findings” (which most will not read). It is the same as Table 1, but expanded to include the predicted calculations for those who have few or no chronic conditions. It shows that the CMS calculations predict $2,614 million in excess estimates of costs.

For the dual eligible/low-income subsidy group (Dual/LIS), Table 1 shows that the costs for those with multiple chronic conditions would be underestimated by $402 million. But for the Dual/LIS with few or no conditions, Table 3 shows that the predicted costs would be calculated to be $1,183 million over the actual costs. The report indicates that Dual/LIS patients have greater costs, so they plead to be compensated for this $402 million underestimate. They remain silent on the $1,183 overestimate for the healthier sector.

Also the estimates are based on patients in the traditional FFS Medicare program, a less healthy population than those in the Medicare Advantage plans. Since the Medicare Advantage plans continue to be successful in recruiting healthier patients, the overestimates by which they would be reimbursed would be even greater.

The politics are ugly. Marilyn Tavenner, as head of CMS, participated in the conspiracy to use devious innovations to overpay the Medicare Advantage plans. She is now president and CEO of AHIP and will use her cozy relationship with members of Congress to be sure that they put more pressure on CMS to once again jack up the rates for Medicare Advantage plans, in conflict with the intent of the ACA legislation.

This is a nefarious effort that is part of the conspiracy to completely privatize Medicare. As Marilyn Tavenner said in the AHIP news release, “Rather than relying on an antiquated fee-for-service approach as the model for care delivery, CMS should focus on strengthening Medicare Advantage and the innovative programs that improve seniors’ health.” This statement is not ambiguous. It is a blatant call for total privatization of Medicare.

The last thing we want is a privatized Medicare Advantage for all who can afford it.

Doctors group welcomes national debate on ‘Medicare for All’

Nonpartisan physicians group calls single-payer reform ‘the only effective remedy’ for nation’s continuing health care woes and urges focus on facts, not rhetoric

Physicians for a National Health Program, a nonprofit, nonpartisan organization of 20,000 doctors who support single-payer national health insurance, released the following statement today by its president, Dr. Robert Zarr, a Washington, D.C., pediatrician.

The national debate on single-payer health reform, or “Medicare for All,” that has emerged in the course of the presidential primaries is a welcome development. But unfortunately a number of misrepresentations about single-payer national health insurance – and the prospects for its attainment – have crept into the dialogue and are potentially misleading the public.

Most of these misrepresentations, or myths, have been decisively refuted by peer-reviewed research. They include the following:

Myth: A single-payer system would impose an unacceptable financial burden on U.S. households. Reality: Single payer is the only health reform that pays for itself. By replacing hundreds of insurers and thousands of different private health plans, each with their own marketing, enrollment, billing, utilization review, actuary and other departments, with a single, streamlined, tax-financed nonprofit program, more than $400 billion in health spending would be freed up to guarantee coverage to all of the 30 million people who are currently uninsured and to upgrade the coverage of everyone else, including the tens of millions who are underinsured. Co-pays and deductibles, which have been rapidly rising under the Affordable Care Act, would be eliminated. Further, the single-payer system’s bargaining clout would rein in rising costs for drugs and medical supplies. Lump-sum budgets for hospitals and capital planning would control costs even more.

A recent study shows 95 percent of U.S. households would come out financially ahead under an improved version of Medicare for all. The graduated, progressively structured tax burden would be based on ability to pay, and the heavy cost to average U.S. households of private insurance premiums, co-pays, deductibles, and many currently uncovered services would be eliminated. Patients could go to the doctor or hospital of their choice, and would no longer be restricted to proprietary networks. Multiple studies over a period of several decades, including by the General Accountability Office and the Congressional Budget Office, show that a single-payer system would provide universal coverage at a much lower cost, per capita, than we are spending now. International experience confirms it. Even our traditional Medicare program, which falls short of a true single-payer system, has much lower overhead than private insurance, and shows that publicly financed programs can deliver affordable, reliable care.

A single-payer system would also greatly diminish the administrative burden on our nation’s physicians and hospitals, freeing up physicians, in particular, to concentrate on doing what they know best: caring for patients.

Covering everyone for all medically necessary care is affordable; keeping the current private-insurance-based system intact is not.

Myth: The U.S. has a privately financed health care system. Reality: About 64 percent of U.S. health spending is currently financed by taxpayers. (Estimates that are lower than this exclude two large sources of taxpayer-funded care: health insurance for government employees and tax subsidies to employers and individuals for purchasing private health plans.) On a per capita basis, the amount of government-funded health care in the U.S. exceeds the health spending of nations with universal health systems, e.g. Canada. We are paying for a national health program, but not getting it.

Myth: A single-payer system would overturn the gains won under the Affordable Care Act and provide inferior coverage to what people have today. Reality: A single-payer system would go far beyond the modest improvements that the ACA made around the edges of our current private-insurance-based system and ensure truly universal care, affordability and health security. For example, H.R. 676, the Expanded and Improved Medicare for All Act, would guarantee coverage for all necessary medical care, including prescription drugs, hospital, surgical, outpatient services, primary and preventive care, emergency services, dental, mental health, home health, physical therapy, rehabilitation (including for substance abuse), vision care and correction, hearing services including hearing aids, chiropractic, durable medical equipment, palliative care, podiatric care, and long-term care. It would eliminate financial barriers to care like co-pays and deductibles and eliminate restrictive networks. It would end the steady erosion of job-based coverage under our current arrangements and disconnect insurance coverage from employment. H.R. 676 currently has 61 sponsors.

Myth: The American people don’t support single payer. Reality: Surveys have repeatedly shown that an improved Medicare for All is the remedy preferred by about two-thirds of the population. A recent Kaiser Family Foundation survey yielded similar results, showing 58 percent of Americans support Medicare for All. A solid majority of the medical profession favors such an approach, as well, as do more than 600 labor organizations, and many civic and faith-based groups.

Myth: The goal of establishing a single-payer system in the U.S. is unrealistic, or “politically infeasible.” Reality: It’s true that single-payer health reform faces formidable opposition, especially from the private insurance industry, Big Pharma, and other for-profit interests in health care, along with their allies in government. This prompts some people to conclude that single payer is out of reach and therefore not worth fighting for. While such moneyed opposition should not be underestimated, there is no reason why a well-informed and organized public, including the medical profession, cannot prevail over these vested interests. We should not sell the American people short. At earlier points in U.S. history, the abolition of slavery and the attainment of women’s suffrage were considered unrealistic, and yet the movements to achieve these goals were ultimately victorious and we now wonder how those injustices were allowed to stand for so long.

What is truly “unrealistic” is believing that we can provide universal and affordable health care, and control costs, in a system dominated by private insurers and Big Pharma.

We call upon our nation’s lawmakers and the political leaders of all political parties to heed public opinion and to do the right thing by acting swiftly to bring about the only equitable, financially responsible and humane cure for our health care ills: single-payer national health insurance, an expanded and improved Medicare for all.

Physicians for a National Health Program (www.pnhp.org) has been advocating for single-payer national health insurance for three decades. It neither supports nor opposes any candidates for public office.

https://www.pnhp.org/news/2016/january/doctors-group-welcomes-national-debate-on-‘medicare-for-all’

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Comment:

By Don McCanne, M.D.

The concept of a single payer national health program – Medicare for all – has become part of the political debate leading up to the presidential primaries. To no surprise, the rhetoric has been driven by politics which characteristically reduces important concepts to sometimes meaningless or deceptive sound bites. The media, including liberal pundits who should know better, have made the debate a battle of words rather than ideas. We at PNHP believe that facts should guide the national debate, and thus this release.