An Ounce Of Prevention For The ACA’s Second Open Enrollment

By Jon Kingsdale and Julia Lerche
Health Affairs Blog, August 4, 2014

Since recovering from its flawed rollout, the ACA has enjoyed a string of successes. By April, some eight million Americans managed to enroll.

Approximately 87 percent of Marketplace enrollees claimed premium tax credits, of which an estimated 85 percent, or six million, actually paid premiums. Many of the original six million, plus more recent enrollees, will experience their second enrollment between November 15, 2014 and February 15, 2015. They will also file with the IRS for a premium tax credit as early as January 2015.

The two events in combination represent a huge risk.

However, moderate rate actions, and even rate decreases, can translate into huge, net (after-subsidy) rate hikes. This is one of the challenges that Marketplaces and other stakeholders must anticipate and address. The other potential crisis for enrollees, coinciding with the last month of open enrollment, is filing for their 2014 tax refunds; while most high-income filers with complex returns file in March, April or later, many low-to-moderate-income taxpayers who anticipate a refund file by February. But doing so in 2015 may be impossible. If not addressed, rate shock followed by refund delays will deliver a one-two punch.

I. Rate Shock

Premium subsidy calculations are based on household income and the benchmark premium (second-lowest-cost silver plan) available to each household. For the benchmark plan, a subsidy-eligible enrollee’s monthly contribution is based solely on the household’s modified adjusted gross income (“MAGI”); but for any other qualified health plan, the subsidized enrollee’s contribution is based on MAGI plus/minus the difference in premium between that plan and the benchmark.

There is a very high likelihood that the price and identity of the benchmark plan will change from year to year, as issuers adjust premiums, offer new, narrow network plans, enter new Marketplaces, and expand or contract service areas. A recent study of proposed premium changes in the largest city in each of nine states indicated a change in benchmark plans in eight of them. The impact on after-subsidy rates will be very significant.

Because subsidies are tied to a benchmark plan, the only way a subsidy-eligible consumer can ensure relatively stable premiums is to enroll in the benchmark plan each year. Consumers could even move to another state and pay similar after-subsidy rates, if they were committed to enrolling in the benchmark plan. However, consumers may resist changing plans each year, because they like their current plans, they like their current providers, and/or because of simple inertia.

The calculus is even more complicated for enrollees in non-benchmark plans. Since they contribute the rate they would have paid for the benchmark plan, plus or minus the difference in premiums between their plan and the benchmark, their monthly contributions will change if either the benchmark or their current plan’s premium changes. In other words, it is the difference between two moving targets that determines the net contribution for a subsidized household in a non-benchmark plan. This creates counter-intuitive results.

II. Delayed Tax Refunds

Fifteen public Marketplaces, hundreds of issuers, and CMS/IRS have been trading information for months now in a massive effort to reconcile who is enrolled in what coverage for which months, and who owes what to whom. These are the “back-office” processes that are still being worked on, months after most consumer-facing web sites were fixed. This kind of reconciliation among accounting entities can continue for years; indeed, it is generally “tolerated” ad infinitum among insurers, Medicare, Medicaid, and hospitals with respect to claims submitted, approved, and actually paid, not to mention COB and subrogation. The firms estimate year-end liabilities and reserve for them; auditors check their credibility.

The “tolerable” accounting timeframe for taxpayers of modest means is entirely different. They typically file returns soon after receiving their W-2s in January. Why the rush? According to H&R Block, the country’s largest tax preparer, many of their 21 million clients fit the socio-economic profile of subsidy-eligible enrollees, and most of those receive tax refunds. Refunds average $2,500 to $3,000 and often represent the filers’ largest financial transaction of the year; filers may urgently need the refunds to pay rent, utilities, medical and other bills.

The annual cycle for these tax filers begins to build in January, and it crests in mid-February. No doubt, this is why the IRS requires Marketplaces to provide all their enrollees with the information required to claim and reconcile premium tax credits by January 31. However, meeting this deadline in 2015 will be a challenge, to say the least. Anticipating the need for corrections, IRS/CMS will allow Marketplaces to update these notices monthly, until April 15, 2015. They also want Marketplaces to start sending CMS this information (year-to-date) no later than October 15, but the ability of some Marketplaces to comply is in serious doubt. Even for Marketplaces that have been tracking and reconciling these data all along, two other problems will arise.

First, there will be hundreds of thousands of “open” issues in December 2014, which probably cannot be resolved in time for the January notices. If not delayed, these January notices must be subsequently “corrected.” For example, consider the impact of the 90-day grace period for late premium payment: subsidy-eligible enrollees who do not pay their share of October-through-December premiums until late December will have received APTCs for October, but not for November and December. If the late-payment is received within 90 days (December 29), the issuer must post and report it to the Marketplace, and the Marketplace must reconcile this report with prior data, report that to CMS/IRS, and incorporate it into the enrollee’s 1095-A by January 31 — smack in the middle of its busy open enrollment season. On the other hand, if late payment is not received by year-end, and there were other lapses in coverage, the enrollee may be subject to a tax penalty. (A filer may qualify for both premium tax credits and the penalty.)

Second, for tax filers accustomed to handling one or more W-2s and perhaps their bank’s 1099, the new 1095s with over a dozen data fields will be mystifying. Some tax filers will receive multiple 1095s from Marketplaces, employers and insurers. Many subsidized enrollees will probably not recall “receiving” advance tax credits, since the advance credits simply offset QHP premiums. Reconciliation will also require filing a new (8962) tax form; and filers who previously used the short form (1040EZ) must switch to a long form (1040 or 1040A).

And this is the simple scenario. The IRS regulations also describe multiple formulas for allocating premiums and tax credits among (a) members of one tax-filer’s household enrolled in multiple health plans, or (b) members of one subscriber’s family who file taxes separately.

Difficulties in projecting tax credits at the time of enrollment and fear about “claw-back” later on have received much attention. Far more significant may be the dislocation that will occur if millions of low-to-moderate income enrollees cannot file their tax returns in January and February 2015 because they lack accurate 1095s, cannot decipher them, or are stymied by the new tax forms.

Ducking This One-Two Punch

Those closest to these issues, the IRS, CMS, and Marketplaces in particular, may have more practical solutions, but we offer a few suggestions for consideration. First, urge enrollees to compare premiums and shop for the best choice of health plans, rather than auto-renew their current health plan. Exchanges were developed to facilitate comparison shopping and they should continue to engage consumers. Doing so will minimize rate shock in 2015 and can actually reduce monthly contributions for some subscribers. This means overcoming consumers’ natural inertia and the policy arguments in favor of auto reenrollment.

Second, help subsidized enrollees understand the gyrations in their net (after-subsidy) rates and select the best option. This will require decision-support tools which customer service representatives, navigators, brokers, and outreach workers can use to assist shopping and APTC redetermination. “Premium migration tables,” developed at the rating region or county level, by FPL level and household size, plus guidance as to which plans offer enrollees’ current providers, could help with renewals. The premium tables are readily doable, but they require advance notice to develop and disseminate.

Third, consider one-time “fixes” to the premium tax credit reconciliation process for 2014, in order to enable timely filing for refunds. One option might be to cut off reconciliation of premium tax credits for 2014 prior to the end of December, so that carriers and Marketplaces have enough time to issue accurate 1095 forms by January 31, 2015. Another might be for the IRS to apply Marketplace-generated data on premium tax credits, even if tax filers omit the long form and 8962s. This might even mean carrying over some 2014 reconciliations into tax-year 2015.

Fourth, prior to January 2015, mail Marketplace enrollees a partial-year 1095-A, reporting advance tax credits paid through September or October 2014. Doing so would remind enrollees that they are benefiting from these tax credits, and allow them to scrutinize and seek corrections of the calculations.

Fifth, provide clear, detailed training from the enrollees’ perspective to health plans, brokers, navigators, and tax preparers on both premium tax credits and counter-intuitive changes in enrollees’ contributions.

The next customer experience with new enrollments, renewals, and tax filings is the next big opportunity to reset public perception of the ACA. At a minimum, those who will be holding enrollees’ hands next winter, must understand these challenges and be given the tools and training to help their clients cope.

http://healthaffairs.org/blog/2014/08/04/an-ounce-of-prevention-for-the-acas-second-open-enrollment/

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Comment:

By Don McCanne, MD

Easy. Set up marketplaces (ACA insurance exchanges), let each shop for his or her own preferences, then apply premium subsidies based on income. Then next year let the plan automatically renew. Then why does it require so many words for Jon Kingsdale and Julia Lerche to describe this simple process?

Clearly, when you read this article, you see that the process is not simple, and, at that, only some of the complexities are discussed here. These complexities are directly due to the highly flawed model of reform selected by President Obama and the Democratic members of Congress.

The authors suggest five possibilities for getting around the two problems they discuss – rate shock and delayed tax refunds. But when you read their proposals for negotiating your way around these complications, you see that they are not so simple either. You almost need an accountant, though that is not affordable for most people who are eligible for premium subsidies because of their lower incomes.

According to the authors, “The next customer experience with new enrollments, renewals, and tax filings is the next big opportunity to reset public perception of the ACA.” And where will that reset of public perception land? In a sea of ACA complexities.

How would renewal under a single payer system compare to renewal in the ACA marketplaces? Renewal wouldn’t exist. Your initial enrollment is for life, not to mention that it is an exceedingly simple process – a matter of simply identifying who you are for purposes of enrollment.

Fewer Uninsured Face Fines as Health Law’s Exemptions Swell

By Stephanie Armour
The Wall Street Journal, August 6, 2014

Almost 90% of the nation’s 30 million uninsured won’t pay a penalty under the Affordable Care Act in 2016 because of a growing batch of exemptions to the health-coverage requirement.

The architects of the health law wanted most Americans to carry insurance or pay a penalty. But an analysis by the Congressional Budget Office and the Joint Committee on Taxation said most of the uninsured will qualify for one or more exemptions.

The Obama administration has provided 14 ways people can avoid the fine based on hardships, including suffering domestic violence, experiencing substantial property damage from a fire or flood, and having a canceled insurance plan. Those come on top of exemptions carved out under the 2010 law for groups including illegal immigrants, members of Native American tribes and certain religious sects.

Factoring in the new exemptions, the congressional report in June lowered the number of people it expects to pay the fine in 2016 to four million, from its previous projection of six million.

http://online.wsj.com/articles/fewer-uninsured-face-fines-as-health-laws-exemptions-swell-1407378602

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Payments of Penalties for Being Uninsured Under the Affordable Care Act: 2014 Update

Congressional Budget Office, June 5, 2014

Under the Affordable Care Act, most legal residents of the United States are required to obtain health insurance or pay a penalty.

CBO and JCT have estimated that about 30 million nonelderly residents will be uninsured in 2016 but that the majority of them will be exempt from the penalty. Those who are exempt include:

• Unauthorized immigrants, who are prohibited from receiving almost all Medicaid benefits and all subsidies through the insurance exchanges;
• People with income low enough that they are not required to file an income tax return;
• People who have income below 138 percent of the federal poverty guidelines (commonly referred to as the federal poverty level) and are ineligible for Medicaid because the state in which they reside has not expanded eligibility by 2016 under the option provided in the ACA;
• People whose premium exceeds a specified share of their income (8 percent in 2014 and indexed over time); and
• People who are incarcerated or are members of Indian tribes.

CBO and JCT estimate that 23 million uninsured people in 2016 will qualify for one or more of those exemptions. Of the remaining 7 million uninsured people, CBO and JCT estimate that some will be granted exemptions from the penalty because of hardship or for other reasons.

All told, CBO and JCT estimate that about 4 million people will pay a penalty because they are uninsured in 2016 (a figure that includes uninsured dependents who have the penalty paid on their behalf).

http://www.cbo.gov/publication/45397

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Comment:

By Don McCanne, MD

The Affordable Care Act was designed with incentives for almost everyone to obtain insurance. A financial penalty was to be assessed against any individual who remained uninsured, but now almost 90 percent of the uninsured will be exempt from the penalty. Larger employers were to be penalized if their employees remained uninsured, but now there is bipartisan support to eliminate the employer mandate. The expansion of Medicaid was to occur in all states but it has now been declined by about half of the states. Even with legislative patches, this fragmented system can never ensure that everyone has adequate health care coverage.

Compare this to a single payer system in which absolutely everyone would have been automatically enrolled in a better plan than any of those currently available, including Medicare. Why is there no clamoring for change?

How Medicare Advantage plans code for cash

By Fred Schulte
The Center for Public Integrity, August 7, 2014

A new federal study shows that many Medicare Advantage health plans routinely overbill the government for treating elderly patients — and have gotten away with doing it for years.

Analyzing government data never before made public, Department of Health and Human Services researchers found that many plans exaggerate how sick their patients are and how much they cost to treat. Medicare expects to pay the privately run plans — an alternative to traditional Medicare — some $160 billion this year.

The HHS study does not directly accuse any insurers of wrongdoing or name specific plans that were scrutinized. But the researchers offer the most comprehensive evidence to date that suspect billing practices have been common across much of the Medicare Advantage industry and are likely to get worse unless officials crack down.

Medicare pays the Advantage health plans higher rates for sicker patients and less for healthy people using a complex formula called a “risk score.” But the HHS study spells out several ways health plans have inflated those scores, from reporting implausibly high levels of medical conditions such as alcohol or drug dependence to billing for an inordinately high number of patients with complications of diabetes.

Despite its broad implications for Medicare spending, the study by HHS researchers Richard Kronick and W. Pete Welch has attracted scant notice in Washington. It was quietly posted late last month on an online research site run by the Centers for Medicare and Medicaid Services, part of HHS.

Kronick directs the HHS Agency for Healthcare Research and Quality, whose mission is to improve health care delivery. Welch works for the HHS Office of the Assistant Secretary for Planning and Evaluation.

http://www.publicintegrity.org/2014/08/07/15216/how-medicare-advantage-plans-code-cash

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Measuring Coding Intensity in the Medicare Advantage Program

By Richard Kronick and W. Pete Welch
Medicare and Medicaid Research Review (MMRR), A publication of the Centers for Medicare & Medicaid Services, 2014: Volume 4, Number 2

In 2004, Medicare implemented a system of paying Medicare Advantage (MA) plans that gave them greater incentive than fee-for-service (FFS) providers to report diagnoses.

The increase in relative MA scores appears to largely reflect changes in diagnostic coding, not real increases in the morbidity of MA enrollees.

Concerns about overpayment as a result of favorable risk selection have confronted the Medicare program throughout the history of Medicare contracting with health maintenance organizations and other private plans. In the late 1980s, Medicare paid health plans using a system that adjusted for demographic factors such as age and gender, but plan enrollees were healthier than fee-for-service beneficiaries with the same demographic characteristics, and, as a result, health plans were estimated to be overpaid by approximately 11%.

In order to reward health plans for attracting sicker-than-average enrollees, and to discourage plans from constructing business models designed to avoid risk, Medicare and other payers have increasingly turned to diagnosis-based risk- adjusted payment systems in which health plans are paid more for enrollees expected to need more care. While mitigating the incentive to enroll only healthy people, diagnosis-based risk adjustment creates another set of incentives: to find and report as many diagnoses as possible.

The MA payment system uses diagnostic information to assign a risk score to each beneficiary.

This payment system creates incentives for MA plans to find and report as many diagnoses as can be supported by the medical record.

In addition to the incentives to report more completely, the method of collecting diagnostic information also provides MA plans additional opportunities to increase risk scores. FFS diagnoses are drawn only from health care claims submitted for payment. MA plans may also review medical records and can report all diagnoses that are supported in the record, including those that were not reported by physicians on any health care claim or encounter record. MA plans can also employ nurses to visit enrollees in their homes to conduct health assessments and report diagnoses that are found.

From the Discussion

It appears that most of the reason that MA risk scores increased more quickly than FFS scores is due to increases in relative coding intensity—measured as increases in risk scores for stayers—with little of it accounted for by changes in enrollment mix. There is little sign of coding intensity slowing; in fact, Exhibit 2 shows that it may be increasing.

CMS and the Congress have responded to the increase in risk scores over time in several ways. First, starting in 2010, CMS lowered payment by 3.41% by applying an across-the-board coding adjustment. The coding intensity adjustment will increase to 4.91% in 2014 and to at least 5.91% in 2018. Second, starting in 2013, CMS set the four most severe diabetes HCCs (Hierarchical Condition Category) to have the same payment coefficient (Department of Health and Human Services, 2012). As a result, recording diagnoses that move enrollees from HCC18 (diabetes with ophthalmologic or unspecified manifestation) into HCC15 (diabetes with renal or peripheral circulatory manifestation) will no longer increase revenue for MA plans. Third, CMS made further changes to the model in 2014, removing some of the HCCs that were the subject of MA efforts at increasing coding intensity.

Relative MA risk scores have been increasing at least 1% per year and are likely to continue to do so, even though MCBS-based risk scores have been roughly constant.8

Footnote 8:  Some would expect that MA plans will react to the 2013 and 2014 model changes by finding other HCCs on which to focus their efforts, and the success of coding intensity efforts may well increase in the future.

http://www.cms.gov/mmrr/Downloads/MMRR2014_004_02_a06.pdf

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Comment:

By Don McCanne, MD

We have discussed before the ways in which the private Medicare Advantage (MA) plans have been cheating the taxpayers, including cheating the beneficiaries in the traditional Medicare program who are paying higher premiums to support these private MA plans. Today’s message is especially significant since it cites a detailed 19 page report from the director of AHRQ and his colleague – a report which further confirms the private insurers’ distortion of Hierarchical Condition Categories (HCC) to receive extra risk adjustment payments based on upcoding that reports their patients as being more ill than they actually are (i.e., they pad the diagnoses).

The history of Medicare Advantage is that of a steady string of abuses. The program began with overpayments of about 14 percent over the cost of caring for Medicare patients in the traditional program. That overpayment was a deliberate ploy of Congress to give the private plans a competitive market advantage in an effort to privatize Medicare. The plans then selectively enrolled healthier, less expensive patients through deceptive marketing practices. When an effort to correct this favorable selection was made through risk adjustment using Hierarchical Condition Categories, the insurers then padded the diagnoses, as mentioned above. Further, since the Affordable Care Act included adjustments to correct the overpayments, the insurance industry heavily lobbied Congress and the Obama Administration to use three years of accounting gimmicks to reduce the impact of these adjustments. Cheat, cheat, cheat.

What can we expect now? Richard Kronick and W. Pete Welch are reserved in their language when they state, in a footnote, “Some would expect that MA plans will react to the 2013 and 2014 model changes by finding other HCCs on which to focus their efforts, and the success of coding intensity efforts may well increase in the future.”

I’ll be more frank. These crooks will continue to cheat the American taxpayers. They will surely use other HCCs to upcode their patients, until that door is finally slammed shut. What then? The private insurers continually tout to their shareholders the importance of “innovation” in health care coverage. They will always be able to find new and more effective ways to cheat us.

One of the more important improvements in an Improved Medicare for All would be to get rid of these crooks once and for all. The sooner the better.

You Qualify for Medicaid: Don’t Sign Up

By Christopher Flavelle
Bloomberg View, August 4, 2014

The debate over Obamacare’s Medicaid expansion divides states into two broad categories — those that expand their program and those that don’t. New research suggests we should talk more about a third group: States that agree to expand Medicaid, then impose premiums whose only purpose seems to be keeping people out of the program.

A paper released today in the journal Health Affairs, written by researchers from the federal government’s Agency for Healthcare Research and Quality, seeks to quantify the effect of premium increases on children’s enrollment in Medicaid or its sister plan, the Children’s Health Insurance Program. They found that even small premiums lead to big drops in sign-ups.

Using data from 1999-2010, the researchers — Salam Abdus, Julie Hudson, Steven C. Hill and Thomas M. Selden — found that for children in families making from 101 percent to 150 percent of the federal poverty line, a $10 increase in monthly premiums was associated with a 6.7 percent reduction in enrollment. For the subset of families not eligible for health coverage through their jobs, that grew to 7.3 percent.

The authors of the Health Affairs study don’t examine the effect of premium increases on adults. But Laura Dague, a professor at Texas A&M University, has. In an article published in the Journal of Health Economics in May, Dague looked at three years of data from the Wisconsin BadgerCare Plus program, which offers subsidized health coverage to families with low incomes. She found that moving from $0 to $10 a month reduced enrollment among children and adults by 12 percent to 15 percent.

What struck Dague about those results was that it’s not just the magnitude of the premium that matters, but the existence of a premium.

“The biggest effects in my data were at the margin where folks start having to pay premiums at all,” she told me by phone last week. She wasn’t sure why that was — perhaps the difficulty of paying another monthly bill or the psychology of having to pay in the first place.

What makes these papers relevant is that at least four states — Indiana, Iowa, Michigan and Pennsylvania — have expanded or are trying to expand Medicaid access in a way that imposes premiums on those making from 101 percent to 138 percent of poverty. Those premiums aren’t high: $25 a month in Indiana, $10 in Iowa, $25 in Pennsylvania ($35 for a household) and 2 percent of income in Michigan. But these new studies show that even those small amounts can significantly reduce the number of people who sign up.

That seems to be the point. After all, Medicaid spending per beneficiary will reach almost $6,400 in 2014, against which $120 in premiums each year generates additional revenue that’s barely significant. And as Dague notes, imposing a premium at all means spending money to obtain and process those payments.

“If the administrative costs of collecting premiums are high relative to revenue collected,” she wrote, “small premiums seem difficult to justify as anything other than a measure to discourage enrollment.”

If the states that have already imposed premiums were the outliers, then this would be a frustrating story but a limited one. However, 24 states still refuse to expand their Medicaid programs, and there’s a strong chance that some of those will change their minds on the condition that they can impose premiums, too. There’s an equally good chance that the Centers for Medicare and Medicaid Services, which faces pressure to bring those states into the fold, will go along with it.

Unquestionably, access to Medicaid for a small premium is better than no access at all. But this new research says we shouldn’t mince words about the point of those premiums. They’re designed to get fewer people to sign up.

http://www.bloombergview.com/articles/2014-08-04/you-qualify-for-medicaid-don-t-sign-up

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Children’s Health Insurance Program Premiums Adversely Affect Enrollment, Especially Among Lower-Income Children

By Salam Abdus, Julie Hudson, Steven C. Hill and Thomas M. Seedless
Health Affairs, August 2014

In this article we have examined the effects of public premiums on insurance coverage of children who were eligible for Medicaid or CHIP and whose family incomes were above 100 percent of the federal poverty level in 1999–2010. Higher public premiums are associated with lower public coverage and with increases in private coverage and uninsurance. The magnitudes of these premium effects vary considerably by poverty level and by parental coverage offers.

Among lower-income children, premium increases are associated with larger reductions in enrollment in public coverage, and a larger share of the decline in enrollment takes the form of increased uninsurance. The association between premiums and uninsurance is particularly strong among lower-income children who lack access to employer-sponsored insurance through parental offers.

http://content.healthaffairs.org/content/33/8/1353.abstract

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The effect of Medicaid premiums on enrollment: A regression discontinuity approach

By Laura Dague
Journal of Health Economics, September 2014

This paper estimates the effect that premiums in Medicaid have on the length of enrollment of program beneficiaries. Whether and how low income-families will participate in the exchanges and in states’ Medicaid programs depends crucially on the structure and amounts of the premiums they will face.

http://www.sciencedirect.com/science/article/pii/S0167629614000642

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Comment:

By Don McCanne, MD

The obsession of the policy and political communities with requiring even low income families to experience consumer sensitivity to costs has crossed the bounds into blatant psychopathology, as these studies confirm.

The Medicaid and CHIP programs were specifically designed to provide health care coverage for low income families – a goal with which most caring individuals agree. The very modest Medicaid and CHIP premiums extracted from these families are so small that they have no impact on the overall financing of the programs. Yet they are enough that these families with no discretionary income find these programs to be unaffordable, and so they remain uninsured.

The screwball idea that these premiums somehow make these low income families better consumers is totally void of reason. These premiums merely defeat the purpose of the programs – getting these people the coverage that they need. The psychopathology rests with those who insist that cash payments, no matter how small, are absolutely essential for these families to appreciate the benefits of actively participating in markets rather than passively accepting a government handout. This is ideology gone mad!

Under a well designed single payer system, premiums and cost sharing are eliminated. People simply get the heath care they need when they need it. Paying for the system is totally removed from the delivery of care since it is financed through progressive taxes that everyone can afford.

For-Profit Medicare Home Health Agencies’ Costs Appear Higher And Quality Appears Lower Compared To Nonprofit Agencies

By William Cabin, David U. Himmelstein, Michael L. Siman and Steffie Woolhandler
Health Affairs, August 2014

Abstract

For-profit, or proprietary, home health agencies were banned from Medicare until 1980 but now account for a majority of the agencies that provide such services. Medicare home health costs have grown rapidly since the implementation of a risk-based prospective payment system in 2000. We analyzed recent national cost and case-mix-adjusted quality outcomes to assess the performance of for-profit and nonprofit home health agencies. For-profit agencies scored slightly but significantly worse on overall quality indicators compared to nonprofits (77.18 percent and 78.71 percent, respectively). Notably, for-profit agencies scored lower than nonprofits on the clinically important outcome “avoidance of hospitalization” (71.64 percent versus 73.53 percent). Scores on quality measures were lowest in the South, where for-profits predominate. Compared to nonprofits, proprietary agencies also had higher costs per patient ($4,827 versus $4,075), were more profitable, and had higher administrative costs. Our findings raise concerns about whether for-profit agencies should continue to be eligible for Medicare payments and about the efficiency of Medicare’s market-oriented, risk-based home care payment system.

Conclusion

Medicare’s home health payment system aims to harness market-oriented incentives for efficiency. CMS seeks to upgrade care through a quality monitoring program that imposes substantial documentation burdens on clinicians. Our findings suggest that this program may not fully insulate patients from profit-incentivized quality compromises.

Meanwhile, the payment incentives have nourished the growth of proprietary agencies whose costs (and profits) are far higher than those of their nonprofit counterparts. Overall, it appears that proprietary home care agencies deliver slightly lower-quality care at a substantially higher cost, belying claims that for-profit incentives increase efficiency.

Further analysis of the impact of proprietary ownership (and other factors associated with poor home health agency performance) is sorely needed. If our findings are confirmed, Medicare should consider returning to the pre-1980 prohibition on investor ownership of home health agencies and simplifying the current complex payment system, which has neither contained costs nor maximized quality.

http://content.healthaffairs.org/content/33/8/1460.abstract

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H.R. 676, Expanded & Improved Medicare For All Act

Sponsored by Rep. John Conyers, Jr and 60 cosponsors

Sec. 103.

(a) Requirement To Be Public or Non-Profit.–

1. In general.–No institution may be a participating provider unless it is a public or not-for-profit institution. Private physicians, private clinics, and private health care providers shall continue to operate as private entities, but are prohibited from being investor owned.
2. Conversion of investor-owned providers.–For-profit providers of care opting to participate shall be required to convert to not-for-profit status.

https://beta.congress.gov/bill/113th-congress/house-bill/676

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Comment:

By Don McCanne, MD

Markets, competition, investor ownership, and profits are touted incessantly as being key to higher quality and lower costs in health care, even though Noble laureate Kenneth Arrow showed us decades ago why markets do not work in health care. Previously studies of hospitals, HMOs, nursing homes, hospices, and dialysis centers have show us that investor ownership is associated with lower quality and higher costs. We can now add Medicare home health agencies to that list wherein proprietary, for-profit investor ownership is detrimental.

H.R. 676, the Expanded & Improved Medicare For All Act, sponsored by Rep. John Conyers, Jr, is a single payer bill that includes provisions that would eliminate investor-owned, for-profit providers. Today’s article adds to the evidence as to why the leadership of Physicians for a National Health Program supports the elimination of passive investors and profit diversion from our health care system. Health systems must be designed to benefit patients, not market exploiters that sacrifice quality while draining resources from health care. The primary missions are different. One is to take care of patients and the other is to make money.