U.S. Senate, July 2017

H.R. 1628

AMENDMENT IN THE NATURE OF A SUBSTITUTE

This Act may be cited as the “Better Care Reconciliation Act of 2017.”

SEC. 1903A. PER CAPITA-BASED CAP ON PAYMENTS FOR MEDICAL ASSISTANCE.

(b) ADJUSTED TOTAL MEDICAL ASSISTANCE EXPENDITURES

(6) AUTHORITY TO EXCLUDE STATE EXPENDITURES FROM CAPS DURING PUBLIC HEALTH EMERGENCY.—

(A) IN GENERAL.—During the period that begins on January 1, 2020, and ends on December 31, 2024, the Secretary may exclude, from a State’s medical assistance expenditures for a fiscal year or portion of a fiscal year that occurs during such period, an amount that shall not exceed the amount determined under subparagraph (B) for the State and year or portion of a year if—

(i) a public health emergency declared by the Secretary pursuant to section 319 of the Public Health Service Act existed within the State during such year or portion of a year; and

(ii) the Secretary determines that such an exemption would be appropriate.

(B) MAXIMUM AMOUNT OF ADJUSTMENT.—The amount excluded for a State and fiscal year or portion of a fiscal year under this paragraph shall not exceed the amount by which—

(i) the amount of State expenditures for medical assistance for 1903A enrollees in areas of the State which are subject to a declaration described in subparagraph (A)(i) for the fiscal year or portion of a fiscal year; exceeds

(ii) the amount of such expenditures for such enrollees in such areas during the most recent fiscal year or portion of a fiscal year of equal length to the portion of a fiscal year involved during which no such declaration was in effect.

(C) AGGREGATE LIMITATION ON EXCLUSIONS AND ADDITIONAL BLOCK GRANT PAYMENTS.—The aggregate amount of expenditures excluded under this paragraph and additional payments made under section 1903B(c)(3)(E) for the period described in subparagraph (A) shall not exceed $5,000,000,000.

https://www.budget.senate.gov…

***

Medicaid And The Latest Version Of The BCRA: Massive Federal Funding Losses Remain

By Sara Rosenbaum
Health Affairs Blog, July 14, 2017

Where Medicaid is concerned, the most notable thing about the latest version of the Better Care Reconciliation Act (BCRA) is that despite the drama of the past two weeks—the flood of news coverage regarding the potential impact of the losses; mounting concerns raised by Senators from expansion and non-expansion states alike; and the massive outcry from hospitals, physicians, insurers, and health care organizations—the new iteration leaves untouched the fundamental Medicaid contours of the earlier version.

By 2036, CBO reports, federal Medicaid funding would be about 35 percent below current law, a catastrophe of epic proportions.

The Illusion Of A Public Health Emergency Exemption To The Per Capita Cap

One of Medicaid’s most important dimensions is its irreplaceable role in addressing the immediate and long-term effects of public health crises. Medicaid is by far the nation’s biggest single source of health care financing for dealing with critical public health threats. These threats may begin with an initial, recognized period of a formally declared emergency. They then can morph into events with very long-term effects felt for years or decades after. This was the case with the World Trade Center attacks, which led to an immediate surge in health care spending, followed by years of elevated spending to address the long-term health fallout triggered by the emergency itself. One need think only about Zika or the opioid crisis now gripping the nation to understand the near-term/long-term nature of public health threats.

Medicaid enrollees are disproportionately likely to live in poor communities, and poor communities are disproportionately likely to face public health threats ranging from environmental hazards to infectious disease. These communities also are inherently less likely to have resources to cope with the effects of an emergency. Thus, a program such as Medicaid is crucial in its ability to deploy health care financing resources to the hardest-hit populations. Indeed, two thirds of all Louisiana Medicaid beneficiaries lived in the parishes affected by Hurricane Katrina.

Section 319 of the Public Health Service Act authorizes the HHS Secretary to declare the existence of a public health emergency arising from events such as a “disease or disorder,” “significant outbreaks of infectious diseases or bioterrorist attacks,” or other events identified as public health emergencies by the HHS Secretary. Whether to declare an emergency is entrusted to the Secretary’s judgment, and during the immediate emergency period, the Secretary enjoys expanded powers to deploy resources to designated populations or geographic areas. These special powers end when the declared emergency period ends. In the aftermath, states and local communities effectively are on their own, relying on the resources they have.

In and of itself, a loss of federal health funding as large as that imposed by BCRA elevates the threat risk. This risk grows exponentially when a true crisis hits, if Medicaid is crippled in its ability to provide a large-scale surge in public health care spending both during the emergency and thereafter. To understand how little the revised bill does to mitigate the crippling impact of the initial draft one need only look carefully at what the revisions would do when a true emergency strikes.

The press release accompanying the new draft states that “if a public health emergency is declared, state medical assistance expenditures in a particular part of the state will not be counted toward the per capita caps or block grant allocations for the declared period of the emergency.” But a close read of the actual bill text reveals its fundamental inadequacy.

First, the period of exemption lasts only five years, from January 1, 2020 through December 31, 2024. Emergencies happening after this date won’t qualify for the spending adjustment. Second, the bill provides no additional federal spending during the period of a declared emergency. The draft simply allows states to eventually qualify for additional federal funding in the years following the emergency if they can prove to the Secretary that their spending on the affected population went up compared to prior years and then only for immediate emergency costs. What state will have the money in advance? And what state will be able to take a chance on spending more given the purely speculative nature of whether an emergency will be declared and emergency expenditures recognized?

Third, states would receive no additional funding ever unless the HHS Secretary actually declares an emergency in the affected portion of the state or for the state’s affected populations. Many public health threats may not rise to a level that triggers a formal Secretarial determination, and the Secretary may be inclined not to make such a determination because of other, spillover effects that come with such a determination, such as the elevated demand for other types of resources.

Fourth, the additional amount of federal funding made available would be limited to the difference between what the state spent on the population in connection with the emergency and the state’s previous expenditures for the same population. Expenditures to cope with the emergency aftermath would not count, and of course these expenditures likely would not occur simultaneously with the emergency expenditures. For example, Zika has triggered emergency expenditures aimed at preventing the spread of the virus, but the true costs of Zika will roll out slowly in the form of babies left permanently and severely disabled by the virus.

And here is where the public health implications of BCRA become clear: other than exempting state expenditures on children classified as disabled from the caps, the revised bill, like its predecessor, makes no adjustment for long-term consequences. To be sure, as just mentioned, BCRA does exempt state expenditures on severely disabled children from the federal cap. But because the vast majority of children qualify for Medicaid based on poverty, this type of cramped classification system for measuring exemptions is sure to exclude spending for millions of children in severely compromised health from the exemption process.

Fifth, the bill allows only $5 billion in the aggregate for all additional federal funding over the five-year time period covered by the emergency exemption. In other words, the bill essentially creates a five-year, $5 billion mini-block grant to help all states address Medicaid spending for all emergencies occurring during this time period. The incredibly small size of the block grant alone would be likely to incentivize the HHS Secretary to avoid declaring emergencies out of concern that the money won’t be there to cover them.

In the end, the newest iteration of BCRA does nothing to alleviate the catastrophic effects of its predecessor: the difference in magnitude between what Medicaid can do today and what it will be capable of doing in the future is incalculable.

http://healthaffairs.org…

***

Comment:

By Don McCanne, M.D.

Based on some of the rhetoric being tossed around during the debate on repealing and replacing the Affordable Care Act you might think that the politicians currently in charge of the process do not believe that the government should play much of a role in health care. However, based on today’s excerpt from their “Better Care Reconciliation Act,” it almost seems that they do believe that the government should step up during a public health emergency. Or do they?

There are many government agencies that might play a role during a public health emergency. One of the more important is providing victims with Medicaid funding during these emergencies and for the essential services required in followup. Yet the massive reductions proposed for the Medicaid program by the Republican legislation (close to a trillion dollars over the next decade – “a catastrophe of epic proportions”) would cripple this important resource for emergency coverage.

The Republicans seem to have been caught off guard by the intensity of the reaction to the cruelty inherent in their reform proposals. Taking a second look at what they crafted, it apparently occurred to them that their substitute legislation should be modified to be sure that public health emergencies were covered.

So what did they propose? A mini-block grant capped at a maximum of $5 billion over five years, and, at that, with many restrictions. As Sara Rosenbaum states in her Health Affairs article, “the incredibly small size of the block grant alone would be likely to incentivize the HHS Secretary to avoid declaring emergencies out of concern that the money won’t be there to cover them.” Based on his track record, it would not be difficult to imagine HHS Secretary Tom Price withholding funds for an emergency just because there wouldn’t be any funds left over for inevitable public health emergencies to come, providing him with an excuse for being the heartless skinflint that he is.

Thus, amongst the many other profound deficiencies, the Republicans in their repeal and replace legislation do not make a serious attempt to ensure that the government would have the ability to respond in fulfilling one of the more crucial essential functions of government – providing assistance in a public health emergency. These guys really don’t believe in government.

We need to replace not only the health care financing infrastructure with one that ensures that government will be there for us when we have health care needs, but we also need to replace the stewards of the program with people who understand that we are all in this together and we take care of each other in times of need. We do believe that don’t we?

Stay informed! Visit www.pnhp.org/qotd to sign up for daily email updates.

U.S. Senate, July 2017

H.R. 1628

AMENDMENT IN THE NATURE OF A SUBSTITUTE

This Act may be cited as the “Better Care Reconciliation Act of 2017.”

SEC. 1903A. PER CAPITA-BASED CAP ON PAYMENTS FOR MEDICAL ASSISTANCE.

(b) ADJUSTED TOTAL MEDICAL ASSISTANCE EXPENDITURES

(6) AUTHORITY TO EXCLUDE STATE EXPENDITURES FROM CAPS DURING PUBLIC HEALTH EMERGENCY.—

(A) IN GENERAL.—During the period that begins on January 1, 2020, and ends on December 31, 2024, the Secretary may exclude, from a State’s medical assistance expenditures for a fiscal year or portion of a fiscal year that occurs during such period, an amount that shall not exceed the amount determined under subparagraph (B) for the State and year or portion of a year if—

(i) a public health emergency declared by the Secretary pursuant to section 319 of the Public Health Service Act existed within the State during such year or portion of a year; and

(ii) the Secretary determines that such an exemption would be appropriate.

(B) MAXIMUM AMOUNT OF ADJUSTMENT.—The amount excluded for a State and fiscal year or portion of a fiscal year under this paragraph shall not exceed the amount by which—

(i) the amount of State expenditures for medical assistance for 1903A enrollees in areas of the State which are subject to a declaration described in subparagraph (A)(i) for the fiscal year or portion of a fiscal year; exceeds

(ii) the amount of such expenditures for such enrollees in such areas during the most recent fiscal year or portion of a fiscal year of equal length to the portion of a fiscal year involved during which no such declaration was in effect.

(C) AGGREGATE LIMITATION ON EXCLUSIONS AND ADDITIONAL BLOCK GRANT PAYMENTS.—The aggregate amount of expenditures excluded under this paragraph and additional payments made under section 1903B(c)(3)(E) for the period described in subparagraph (A) shall not exceed $5,000,000,000.

https://www.budget.senate.gov…

***

Medicaid And The Latest Version Of The BCRA: Massive Federal Funding Losses Remain

By Sara Rosenbaum
Health Affairs Blog, July 14, 2017

Where Medicaid is concerned, the most notable thing about the latest version of the Better Care Reconciliation Act (BCRA) is that despite the drama of the past two weeks—the flood of news coverage regarding the potential impact of the losses; mounting concerns raised by Senators from expansion and non-expansion states alike; and the massive outcry from hospitals, physicians, insurers, and health care organizations—the new iteration leaves untouched the fundamental Medicaid contours of the earlier version.

By 2036, CBO reports, federal Medicaid funding would be about 35 percent below current law, a catastrophe of epic proportions.

The Illusion Of A Public Health Emergency Exemption To The Per Capita Cap

One of Medicaid’s most important dimensions is its irreplaceable role in addressing the immediate and long-term effects of public health crises. Medicaid is by far the nation’s biggest single source of health care financing for dealing with critical public health threats. These threats may begin with an initial, recognized period of a formally declared emergency. They then can morph into events with very long-term effects felt for years or decades after. This was the case with the World Trade Center attacks, which led to an immediate surge in health care spending, followed by years of elevated spending to address the long-term health fallout triggered by the emergency itself. One need think only about Zika or the opioid crisis now gripping the nation to understand the near-term/long-term nature of public health threats.

Medicaid enrollees are disproportionately likely to live in poor communities, and poor communities are disproportionately likely to face public health threats ranging from environmental hazards to infectious disease. These communities also are inherently less likely to have resources to cope with the effects of an emergency. Thus, a program such as Medicaid is crucial in its ability to deploy health care financing resources to the hardest-hit populations. Indeed, two thirds of all Louisiana Medicaid beneficiaries lived in the parishes affected by Hurricane Katrina.

Section 319 of the Public Health Service Act authorizes the HHS Secretary to declare the existence of a public health emergency arising from events such as a “disease or disorder,” “significant outbreaks of infectious diseases or bioterrorist attacks,” or other events identified as public health emergencies by the HHS Secretary. Whether to declare an emergency is entrusted to the Secretary’s judgment, and during the immediate emergency period, the Secretary enjoys expanded powers to deploy resources to designated populations or geographic areas. These special powers end when the declared emergency period ends. In the aftermath, states and local communities effectively are on their own, relying on the resources they have.

In and of itself, a loss of federal health funding as large as that imposed by BCRA elevates the threat risk. This risk grows exponentially when a true crisis hits, if Medicaid is crippled in its ability to provide a large-scale surge in public health care spending both during the emergency and thereafter. To understand how little the revised bill does to mitigate the crippling impact of the initial draft one need only look carefully at what the revisions would do when a true emergency strikes.

The press release accompanying the new draft states that “if a public health emergency is declared, state medical assistance expenditures in a particular part of the state will not be counted toward the per capita caps or block grant allocations for the declared period of the emergency.” But a close read of the actual bill text reveals its fundamental inadequacy.

First, the period of exemption lasts only five years, from January 1, 2020 through December 31, 2024. Emergencies happening after this date won’t qualify for the spending adjustment. Second, the bill provides no additional federal spending during the period of a declared emergency. The draft simply allows states to eventually qualify for additional federal funding in the years following the emergency if they can prove to the Secretary that their spending on the affected population went up compared to prior years and then only for immediate emergency costs. What state will have the money in advance? And what state will be able to take a chance on spending more given the purely speculative nature of whether an emergency will be declared and emergency expenditures recognized?

Third, states would receive no additional funding ever unless the HHS Secretary actually declares an emergency in the affected portion of the state or for the state’s affected populations. Many public health threats may not rise to a level that triggers a formal Secretarial determination, and the Secretary may be inclined not to make such a determination because of other, spillover effects that come with such a determination, such as the elevated demand for other types of resources.

Fourth, the additional amount of federal funding made available would be limited to the difference between what the state spent on the population in connection with the emergency and the state’s previous expenditures for the same population. Expenditures to cope with the emergency aftermath would not count, and of course these expenditures likely would not occur simultaneously with the emergency expenditures. For example, Zika has triggered emergency expenditures aimed at preventing the spread of the virus, but the true costs of Zika will roll out slowly in the form of babies left permanently and severely disabled by the virus.

And here is where the public health implications of BCRA become clear: other than exempting state expenditures on children classified as disabled from the caps, the revised bill, like its predecessor, makes no adjustment for long-term consequences. To be sure, as just mentioned, BCRA does exempt state expenditures on severely disabled children from the federal cap. But because the vast majority of children qualify for Medicaid based on poverty, this type of cramped classification system for measuring exemptions is sure to exclude spending for millions of children in severely compromised health from the exemption process.

Fifth, the bill allows only $5 billion in the aggregate for all additional federal funding over the five-year time period covered by the emergency exemption. In other words, the bill essentially creates a five-year, $5 billion mini-block grant to help all states address Medicaid spending for all emergencies occurring during this time period. The incredibly small size of the block grant alone would be likely to incentivize the HHS Secretary to avoid declaring emergencies out of concern that the money won’t be there to cover them.

In the end, the newest iteration of BCRA does nothing to alleviate the catastrophic effects of its predecessor: the difference in magnitude between what Medicaid can do today and what it will be capable of doing in the future is incalculable.

http://healthaffairs.org…

***

Comment:

By Don McCanne, M.D.

Based on some of the rhetoric being tossed around during the debate on repealing and replacing the Affordable Care Act you might think that the politicians currently in charge of the process do not believe that the government should play much of a role in health care. However, based on today’s excerpt from their “Better Care Reconciliation Act,” it almost seems that they do believe that the government should step up during a public health emergency. Or do they?

There are many government agencies that might play a role during a public health emergency. One of the more important is providing victims with Medicaid funding during these emergencies and for the essential services required in followup. Yet the massive reductions proposed for the Medicaid program by the Republican legislation (close to a trillion dollars over the next decade – “a catastrophe of epic proportions”) would cripple this important resource for emergency coverage.

The Republicans seem to have been caught off guard by the intensity of the reaction to the cruelty inherent in their reform proposals. Taking a second look at what they crafted, it apparently occurred to them that their substitute legislation should be modified to be sure that public health emergencies were covered.

So what did they propose? A mini-block grant capped at a maximum of $5 billion over five years, and, at that, with many restrictions. As Sara Rosenbaum states in her Health Affairs article, “the incredibly small size of the block grant alone would be likely to incentivize the HHS Secretary to avoid declaring emergencies out of concern that the money won’t be there to cover them.” Based on his track record, it would not be difficult to imagine HHS Secretary Tom Price withholding funds for an emergency just because there wouldn’t be any funds left over for inevitable public health emergencies to come, providing him with an excuse for being the heartless skinflint that he is.

Thus, amongst the many other profound deficiencies, the Republicans in their repeal and replace legislation do not make a serious attempt to ensure that the government would have the ability to respond in fulfilling one of the more crucial essential functions of government – providing assistance in a public health emergency. These guys really don’t believe in government.

We need to replace not only the health care financing infrastructure with one that ensures that government will be there for us when we have health care needs, but we also need to replace the stewards of the program with people who understand that we are all in this together and we take care of each other in times of need. We do believe that don’t we?

Stay informed! Visit www.pnhp.org/qotd to sign up for daily email updates.

From Last to First — Could the U.S. Health Care System Become the Best in the World?

By Eric C. Schneider, M.D., and David Squires, M.A.
The New England Journal of Medicine, July 14, 2017

Many Americans believe that the United States has the best health care system in the world, but surprisingly little evidence supports that belief. On the contrary, since 2004, reports from the Commonwealth Fund have consistently rated the performance of the U.S. health care system last among high-income countries, despite the fact that we spend far more on health care than these other countries.

Timely access for people at risk for poor health may be impeded by three features of health care systems: the cost of care and its affordability for individuals, the administrative burden (or hassle) that people confront as they obtain and receive care, and disparities or inequities in the delivery of care based on income, educational attainment, race or ethnic background, or other nonclinical personal characteristics.

The first challenge the U.S. health care system must confront is lack of access to health care. The high-income countries that are top-ranked according to the most recent Fund report (the United Kingdom, Australia, and the Netherlands) offer universal insurance coverage with minimal out-of-pocket costs for preventive and primary care. Affordable and comprehensive insurance coverage is fundamental. If people are uninsured, some delay seeking care, some of those end up with serious health problems, and some of them die.

The second challenge is the relative underinvestment in primary care in the United States as compared with other countries. Other countries make primary care widely, and more uniformly, available. In contrast to the United States, a higher percentage of these countries’ professional workforce is dedicated to primary care than to specialty care, and they enable delivery of a wider range of services at first contact, even at night and on weekends.

The third challenge is the administrative inefficiency of the U.S. health care system. Both patients and professionals in the United States are baffled by the complexity of obtaining care and paying for it. Clinicians and their staff spend countless hours completing documentation to prove that insurance coverage is active, that benefits and services are covered, that services were delivered, and that payment or reimbursement occurred. Coping with the byzantine layers of administration results in high levels of burnout for doctors and other professionals, which can reduce the quality of care. The complexity also affects patients, who receive confusing benefit descriptions, limited information about doctors and hospitals, unintelligible and often unexpected (or “surprise”) bills for services, and unpredictable copayments at labs and pharmacies. It is possible to reduce these barriers to adherence and follow-up by reducing complexity for patients and clinicians: if we changed our reimbursement systems to use global payments, fee schedules, formularies, and defined benefits, it would make benefits and costs more predictable for patients and revenue more predictable for clinicians.

The fourth challenge is the pervasiveness in the United States of disparities in the delivery of care. People with low incomes, low educational attainment, and other social and economic challenges face greater health risks and worse health in all countries, but especially in the United States, which has a less robust social safety net than other high-income countries. Other countries achieve better population health by spending relatively more on social services than on medical care. Along with making insurance coverage available to the poor and ensuring that primary care has a strong presence, dedicating resources through social spending to stable housing, educational opportunities, nutrition, and transportation may reduce the demand for emergency, hospital, and long-term care services.

The United States could achieve the best-performing health care system in the world by undertaking coordinated efforts that address each of these challenges. Ensuring universal and adequate health insurance coverage, strengthening primary care, reducing administrative burden, and reducing income-related disparities by strengthening behavioral health and social service supports could go a long way toward improving the health of the U.S. population.

http://www.nejm.org…

***

Mirror, Mirror 2017: International Comparison Reflects Flaws and Opportunities for Better U.S. Health Care

By Eric C. Schneider, Dana O. Sarnak, David Squires, Arnav Shah, and Michelle M. Doty
The Commonwealth Fund, July 2017

The United States ranks last in health care system performance among the 11 countries included in this study. The U.S. ranks last in Access, Equity, and Health Care Outcomes, and next to last in Administrative Efficiency, as reported by patients and providers. Only in Care Process does the U.S. perform better, ranking fifth among the 11 countries.

http://www.commonwealthfund.org…

***

Comment:

By Don McCanne, M.D.

This NEJM Perspective article is based on the 2017 update of The Commonwealth Fund’s ranking of health care systems in eleven wealthy nations. Once again, the United states ranks last in overall performance, ranking at or near the bottom on access, administrative efficiency, equity, and health care outcomes.

Note particularly the four challenges described in the NEJM commentary: 1) Impaired access, 2) Underinvestment in primary care, 3) Pervasive administrative inefficiency, and 4) Disparities in the delivery of care. These are challenges for which a well designed single payer system would be ideally suited to address, but it must be part of a comprehensive public program addressing other factors contributing to our poor performance, especially in the need for social services.

Canada has a single payer system yet they rank ninth of the eleven systems. This is not a criticism of single payer financing itself, but rather it is a call to be certain that we elect public stewards who design and administer the single payer system with continuing oversight and appropriate intervention in not just the financing of the health care system but also in ensuring appropriate, comprehensive social services.

The authors of “Mirror, Mirror 2017” say that high performance can be achieved with any of three systems: national health service (United Kingdom), single payer (Australia, which requires supplemental insurance), and competing private insurers (Netherlands).

Well, the Netherlands, with its competing private insurers, ranks low in administrative efficiency. Australia requires a combination of public and private insurance and ranks low in equity, wherein varying ability to afford the private plans likely contributes to the inequity. The United Kingdom ranks first overall, but it is unlikely that Americans would support the transfer of our private health care delivery system to the government anytime soon.

So a well designed single payer system seems most appropriate for the United States, and the four challenges described make it clear that the need is urgent.

***

Speaking of a well designed single payer system, nobody has contributed more to our understanding of single payer and its role in achieving health care justice for all than have the co-founders of Physicians for a National Health Program – Steffie Woolhandler and David Himmelstein. Thus it is with great pride that we present the following announcement from Hunter College:

“Hunter College is proud to announce that David Himmelstein and Stephanie Woolhandler – esteemed teachers, brilliant scholars and front-line leaders in the field of public health – have been named Distinguished Professors by The City University of New York.

“’Nationally and around the world, Professors Himmelstein and Woolhandler are known and admired not only for their knowledge, research and expertise, but also for their forceful activism for quality health care,’ said Hunter President Jennifer J. Raab. ‘No one is more deserving of the designation ‘distinguished professor’ than these longtime collaborators.’”

http://www.hunter.cuny.edu…

Stay informed! Visit www.pnhp.org/qotd to sign up for daily email updates.

AJPH Study: Organizations contracting to care for millions of Medicare enrollees won’t disclose whether they penalize doctors for ordering tests, referrals or other expensive care

Public Citizen/PNHP, July 12, 2017

Ninety-one percent of the accountable care organizations (ACOs) that provide care to 9 million Medicare enrollees refuse to disclose their physician payment incentives, according to new research published today in the American Journal of Public Health. ACOs, similar to the HMOs of the 1990s, receive capitation-like payments and keep a portion of savings if they reduce patients’ use of care. Critics worry that ACOs, like HMOs, might pressure their doctors to deny needed care.

The research team from Montefiore Medical Center in New York, City University of New York at Hunter College and the national consumer group Public Citizen surveyed all 426 ACOs participating in Medicare in 2015. The survey asked how each ACO paid its primary care (PCP) and specialist physicians, and whether doctors were financially penalized for ordering tests or making referrals. Despite repeated email and mail surveys directed to the ACO’s designated public contact person, only 39 ACOs (9.2 percent of all those surveyed) provided any information on their physician payment policies.

Among the few ACOs that responded, 85 percent indicated that they tied PCPs’ compensation to quality metrics. Almost half said they offered doctors incentives to reduce care, via bonuses or financial penalties depending on how much care individual doctors ordered for their patients; other times, physician reimbursement was tied to the bonuses or penalties that ACOs received from Medicare.

The researchers noted that in the 1990s there was widespread concern that HMOs were denying patients needed care. This concern led the Centers for Medicare and Medicaid Services (CMS) to survey HMOs in the 1990s regarding their financial incentives and to require that Medicare HMOs publicly disclose those incentives. However, CMS has inexcusably waived the disclosure requirement for ACOs, which started contracting with Medicare in 2011 and, like HMOs, may gain financially by denying care.

“The lack of ACO transparency means that millions of Medicare patients can’t know how their doctors are being paid. Despite this, ACOs have garnered support from policymakers,” said study author Dr. Mayce Mansour, a primary care physician at Mount Sinai who was a lead author of the study and a resident at Montefiore when the study was initiated. “Since polls have shown that patients are wary of incentives for under-care, we wanted to learn more about compensation incentives that may drive physician behavior and could pose a conflict of interest.”

“Millions of Medicare patients now getting their care through ACOs would be anxious to know if their doctors have incentives to skimp on their care in order to do better financially,” said Dr. Sidney Wolfe, founder of and senior adviser to Public Citizen’s Health Research Group. “Most patients can’t currently find out about these incentives, and CMS’ failure to mandate their disclosure is unacceptable.”

“In 1995, I was fired by U.S. Healthcare — now called Aetna — for violating a ‘gag clause’ in my contract, and revealing that the HMO offered doctors big bonuses for denying care to our patients,” reported Dr. David Himmelstein, a distinguished professor at the City University of New York at Hunter College and lecturer in medicine at Harvard who was the study’s senior author. “In response to the ensuing public outcry, Medicare banned gag clauses and required HMOs to disclose how they pay physicians. The same rules should apply to ACOs, which are essentially the modern version of HMOs.”

Public Citizen
https://www.citizen.org…

PNHP
https://www.pnhp.org…

***

Accountable Care Organizations’ Payments to Physicians: Patients Should Have the Right to Know

By Mayce Mansou rMD, Nathan Favini MD, MS, Michael A. Carome MD, Sidney Wolfe MD, Steffie Woolhandler MD, MPH, and David U. Himmelstein MD
American Journal of Public Health (AJPH), August 2017 (online July 12, 2017)

http://ajph.aphapublications.org… (behind paywall)

***

Comment:

By Don McCanne, M.D.

As long as we leave our health care system under the control of the medical/industrial complex, things will never change. Apparently we didn’t learn much from the perversions of HMOs and the managed care revolution since we are granting similar rights to accountable care organizations (ACOs) that allow them to abuse the system and its patients.

Stay informed! Visit www.pnhp.org/qotd to sign up for daily email updates.

The Private Equity Firm That Quietly Profits on Top-Selling Drugs

By Randall Smith
The New York Times, July 8, 2017

Cashing in on rising drug prices often unleashes an outcry from consumers and politicians.

But a little-known private equity investor, Royalty Pharma, has built an unusual investment portfolio valued at $15 billion — it buys up the rights to royalties on future drug sales — while largely avoiding public controversy. By its own count, Royalty Pharma owns partial rights to seven of the 30 top-selling drugs in the United States, including giants like Humira, the arthritis treatment that is the single biggest-selling medication in America. And its deals have been getting larger.

While Royalty Pharma has benefited by riding the rising tide of drug prices, the drug companies play the largest role in setting prices. George Lloyd, Royalty Pharma’s executive vice president and general counsel, said: “Royalty Pharma has no influence over how drugs in which it invests are priced. These prices are set by the marketer of the product, and we play no role in that process.”

To make big money on promising drugs, investors like venture capital firms and biotechnology funds typically place long-shot bets on drugs that are still in the development stage. Royalty Pharma, based in New York, steps in later in the game: It generally buys rights to the royalties on drugs that have already been approved for sale by regulators. It buys them from patent holders, often hospitals or universities, that want to convert their future royalties into cash right now.

Royalty Pharma has successfully created “a new segment of the investment management industry,” which has helped offset a decline in other types of funds for drug investments, said Andrew Lo, a finance professor at the Massachusetts Institute of Technology’s Sloan School of Management, in a 2014 study written with Sourya Naraharisetti of M.I.T. and Duke University.

Royalty Pharma’s revenues have risen an average of 30 percent annually, from $161 million in 2005 to $2.47 billion in 2016, according to company material.

https://www.nytimes.com…

***

Comment:

By Don McCanne, M.D.

As we look at some of the innovative approaches in health care financial management, we should always ask ourselves, how does this benefit the patient?

Here we have a financial intermediary placing bets that the pharmaceutical industry will continue to gouge its ultimate customers – the patients – using outrageous pricing practices for its pharmaceutical products. This intermediary provides us with a prime example of rent seeking – scooping up large amounts of funds without providing any tangible product.

And the benefit to the patient? None, but worse than that – the patient is harmed by having to pay higher prices, either directly or indirectly, when the entities pricing drugs include in their prices the funds drawn off by these superfluous intermediaries. Of course, there are many other useless intermediaries, not only in pharmaceuticals, but in the rest of the medical-industrial complex as well.

Isn’t it about time that we tailor our health care financing system to serve patients rather than rent seekers and others who drain our resources while shorting patients on essential health care services?

We desperately need to replace our dysfunctional health care financing system with a well designed single payer system. Instead of standing by and watching the politicians struggle with forcing upon us highly flawed health financing policies that cater especially to stakeholders, we should mobilize our forces of citizen action – now – because, if we don’t, they’re going to do it to us again.

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