Federal Budgetary Effects of the Activities of the Center for Medicare & Medicaid Innovation, U.S. Congressional Budget Office, September 2023

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The Center for Medicare & Medicaid Innovation (CMMI) was created by the Affordable Care Act (ACA) in 2010. It conducts pilot programs, known as models, that test new ways to deliver and pay for health care in Medicare, Medicaid, and the Children’s Health Insurance Program, with the goal of identifying approaches that reduce spending or improve the quality of care.

CBO currently estimates that CMMI’s activities increased direct spending by $5.4 billion … between 2011 and 2020. …

By contrast, in 2010, when the ACA was enacted, CBO projected that CMMI would produce net savings over the 2010–2019 period. …

Looking ahead, CBO currently projects that CMMI’s activities will increase net federal spending by $1.3 billion, or 0.01 percent of net spending on Medicare … from 2021 to 2030.

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The CBO Report That Didn’t Roar, KFF, January 4, 2024, by Drew Altman (KFF CEO & President)

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A Congressional Budget Office (CBO) report in September slipped … largely unnoticed by the larger health community despite its potentially broad implications for efforts to promote value through popular payment changes. …

CBO found that most of post Affordable Care Act (ACA) payment and delivery demonstrations launched by the Centers for Medicare and Medicaid Innovation (CMMI) in CMS between 2011 and 2020 did not save money as intended, and cost the government $5.4 billion more than they saved, including administrative costs associated with them. CBO also projected that CMMI would be a net loser cost-wise for Medicare through 2030.

This matters because the CMMI demonstrations have been widely regarded as the leading edge of a generation of value-based payment initiatives which have become the primary cost strategy in the U.S. over the past decade, displacing what had always been the dominant schools of cost containment, competition (favored by conservatives), and regulation (favored by liberals). …

CMS’s goal remains to see every Medicare beneficiary in some form of accountable care arrangement in seven years. And recently former Health and Human Services Secretary Alex Azar called for an end to demos altogether, feeling value-based payment was the way to go. After all, Medicare spending growth has slowed in recent years. While the full explanation for that is not well understood, it’s possible that the drive towards value-based payment and accountable care has changed provider attitudes and behavior and is part of the explanation, though that is difficult to quantify. Still, Medicare spending is expected to accelerate in the future.

Back to the CBO report. Whatever the results of a particular group of demonstration projects, CMS will always need the authority to experiment with changes in its three big programs: Medicare, Medicaid, and the ACA. In a more perfect world not every demonstration would need to save the federal government money; some good things could actually cost more and might be worth investing in; for example, if they demonstrably improve access or health outcomes.

Having worked in CMS earlier in my career trying to coordinate waivers from the administrator’s office, and once been nominated to run the agency, I know the need to have a division within CMS, like CMMI, to oversee R&D activity. In fact, it would make good sense to better consolidate CMS waiver and demonstration activity across Medicaid, Medicare, and the ACA within the agency, but that’s truly inside baseball and a subject for another day.

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Comment:

By Ana Malinow, M.D. and Jim Kahn, M.D., M.P.H.

The recent post by Drew Altman in “KFF Beyond the Data” spotlighted the overlooked but important Congressional Budget Office (CBO) report published in September on the budgetary effects of the Center for Medicare and Medicaid Innovation (CMMI). The report strikingly found that in its first decade, the CMMI did not reduce Medicare program expenditures, as mandated and promised, but instead cost Medicare $5.4 billion more than it saved, with ongoing losses projected through 2023.

Instead of advocating that CMS / CMMI abandon its model of using value-based care to try to fix fee-for-service, Dr. Altman makes excuses as to why only six of the 49 demonstration models produced modest savings. It goes further, wishing “equity” into existence if CMMI just integrates a “focus on equity on everything [it] does.” The evidence available suggests that VBC fails to control costs [i], improve quality, or increase equity. Defining and measuring value is extremely difficult, and as a result, CMMI pilots have little to do with value and lots more to do with cost (which, again, go up). We never have the data we need — complete, accurate, and timely. Little data, little value.

We all agree that CMS resources should be used efficiently to pay for care for enrollees. And we agree that CMS has not succeeded in that mission.

Where we disagree is what comes next. Dr. Altman supports continued experimentation with VBC. We believe that we now have ample evidence from the US and other countries that the fundamental problem is a health care system with a huge role for for-profit insurers and contracting intermediaries.

Can we (and especially Dr. Altman) say … our system is broken, resistant to real change with weak tools like value-based care, where financial incentives are primary and at odds with good care. CMS and the rest of us should follow the lead of dozens of other wealthy nations with identical comprehensive publicly mandated insurance for everyone, with no role for profit-oriented intermediaries. Time for single payer.

This represents an attack on the current system. Having someone like Dr. Altman, with his policy heft, making the argument would be revolutionary.

Can we move beyond what has failed and focus instead on improving and expanding Medicare?

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[i] As discussed in the article’s comment, an updated analysis shows that MSSP further increases costs to Medicare. We’ll report on this soon.

https://healthjusticemonitor.org…

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Wealth Redistribution to Extend Longevity in the US, JAMA Internal Medicine, January 29, 2024, by Kathryn E. W. Himmelstein, Alexander C. Tsai, Atheendar S. Venkataramani

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Question: What is the association between wealth redistribution and longevity in the US?

Findings: In this cohort study of 35,164 US adults aged 50 years or older, those with low and high wealth experienced marked differences in longevity. Participants in the highest wealth decile had a hazard ratio of 0.59 for death (95% CI, 0.53-0.66) compared with those in the lowest decile, corresponding to a 13.5-year difference in survival. Simulations suggested that more equitable distributions of wealth might be associated with up to 2.2 years of additional population-level longevity, closing the gap with other OECD countries.

Conclusions: The findings of this cohort study suggest that unequal and racialized distribution of wealth in the US is associated with dramatically reduced longevity across the entire population, with particularly harmful consequences for the survival of individuals with low wealth and Black individuals in the US. Redistributive policies could greatly improve health and longevity of US residents without harming the health of individuals in the US who are currently wealthy.

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Comment:

By Don McCanne, M.D.

In the United States, the wealthiest 10% of households hold over 70% of the total wealth, whereas the lower half holds less than 2%. Racial wealth inequalities are even worse. Unfortunately, this plays out in impaired access to medical care and other health risks for poor, Blacks, and Latinos – together substantially lowering life expectancy in these groups.

The good news is that we can fix this. We can redistribute wealth from billionaires and mega-millionaires, using public policies – most of all taxation. We could use much of that revenue to pay for a health care system that takes care of all of us, without the wealthy losing any health care at all. Thus, none of us would have to worry any longer about economic disadvantage reducing our life span.

https://healthjusticemonitor.org…

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Oregon SB 1089 (now enacted law)

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(5) “Single payer health care financing system” means a universal system used by the state for paying the cost of healthcare services or goods in which:

(a) Institutional providers are paid directly for health care services or goods by the state or are paid by an administrator that does not bear risk in its contracts with the state;

(b) Group practices are paid directly for health care services or goods by the state or are paid by an administrator that does not bear risk in its contracts with the state, by the employer of the group practice or by an institutional provider; and

(c) Individual providers are paid directly for health care services or goods by the state, by their employers, by an administrator that does not bear risk in its contracts with the state, by an institutional provider or by a group practice.

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Comment:

By Michael Lighty

The implementation of California’s Unified Healthcare Financing Act (SB 770) begins this year as Oregon ramps up its Universal Health Plan Governance Board (SB 1089) to create a universal healthcare system based on single payer financing.

Call it the West Coast Way.

In California, SB 770 mandates discussions between the State and the federal government to explore and define waivers to permit unified financing / single payer. We discussed this in HJM.

In Oregon, SB 1089 creates the Universal Health Plan Governance Board. The Board will develop an implementation plan, and then administer it. The process will create a detailed, publicly funded, single payer universal health plan. It will do in-depth research and analysis to design program details. The Board will include members with a variety of expertise and backgrounds. It will present the plan to the state legislature, so implementation could start as soon as 2027 (though note need for ballot referenda below).

In both states, there is a clear requirement for a single source of payment for all healthcare services. This follows the recommendations of the Healthy California for All Commission, and Oregon’s Universal Healthcare Task Force. CA SB 770 (Sec. 1 Part 4 1001 (q)) and OR SB 1089 prohibit risk-bearing contracts and financial incentives to deny care. A key issue for both plans is the role, if any, of integrated delivery systems, benefit funds, and third-party administrators.

The detailed policy development beginning this year by the UHP Governance Board in Oregon and the California Department of Health Services will lead to discussions with the federal government, specifically the Center for Medicare and Medicaid Services, over the terms of federal financial support and approval of the universal healthcare system in each state. This “Waiver” of existing federal rules will then form the basis of final approval by the respective state legislatures likely in 2026. In both states, voters will have the final say on how the programs will be financed, as early as 2028.

These efforts are the most advanced and strategic approaches to determining what it actually takes and implementing a plan to achieve guaranteed healthcare through single-payer financing. Major questions to address include: the role of Medicare in relation to state universal health care programs, how employee benefit funds relate to the new programs, and how the federal ERISA law governing employer provided benefits impacts these state programs. These and other issues must be resolved in order to redirect federal funds currently used to support healthcare in the state into the new universal healthcare programs.

Both states decided to lay out the principles that govern the design of a universal healthcare system, and to finalize the details based upon discussions with the federal government before asking the legislature to approve a full-blown program and financing. That is different from prior efforts to pass the program and then talk to the federal government.

After decades of unsuccessful legislative and ballot initiatives in Oregon and California, advocates are optimistic about this new strategy. Answering political, technical, and legal questions up front can preempt any excuse avowed supporters of universal healthcare may cite to oppose single payer.

Will it succeed? We are some years away from knowing, but the political impact is encouraging. Building a coalition that includes the full range of health reformers from single payer advocates to those working for coverage and access expansion, along with unions and policymakers, has enabled the progress so far. This strategic approach to policy creates a political momentum that could be the missing piece to finally winning guaranteed, efficient, and equitable healthcare. The West Coast can lead the way.

Administration’s Share of Personnel in Veterans Health Administration and Private Sector Care, JAMA Network Open, January 18, 2024, by Steffie Woolhandler, Andrew Toporek, Jian Gao, Eileen Moran, Andrew Wilper, and David U. Himmelstein

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“Nearly 4 million people were employed in health care administration in the private sector (excluding long-term care) in 2019, a number that would have decreased by nearly 900 000 individuals had staffing patterns followed those of the VHA. …

The VHA’s leaner administrative staffing likely reflects the agency’s simpler financing scheme. … [Private sector] health care institutions bill for individual patients and services and interact with insurers that have varying fee schedules, deductibles, prior-approval requirements, formularies, and referral networks. . . . Even capitation payment schemes generally entail risk-adjustment calculations requiring detailed tracking of each patient’s service use, diagnoses, and costs. In this context, investments in administration may make financial sense, for example, increasing revenue by documenting more diagnoses. Financial success is key to private sector institution growth and even survival, and executive compensation is often linked to financial metrics. This could incentivize efforts to improve efficiency but could also encourage revenue-enhancing administrative activities that add little clinical value (eg, marketing and upcoding).

In contrast, VHA hospitals and clinics are funded mostly through lump-sum budgets. The VHA does not bill Medicare or Medicaid and collects only 2.7% of its revenues from private insurers and 0.3% from patients, minimizing the need to attribute costs and charges to individual patients. In the VHA, all facilities are in network, 1 formulary applies to all patients, and few services require prior authorization. While managers must adhere to budgetary constraints and provide a volume of clinical services commensurate with their budgets, incentives based on financial metrics are minimal for hospital leaders and their institutions.

The difference in administration’s share of personnel in the VHA vs the US private sector that we found (6.8 percentage points) appears smaller than administrative cost differences between the US and single-payer nations; for example, there was a 13.2 percentage point disparity in hospital administrative costs and a 17.4 percentage point difference in system-wide administrative costs between the US and Canada. Several factors may account for the VHA’s less streamlined administration; unlike in Canada, where all residents are automatically and equally eligible for care, the VHA must determine eligibility based on veteran disability level, veteran income, and other factors. Additionally, the VHA serves as an insurer for some non-VHA care, spending approximately 20% of its budget purchasing private sector care.”

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Comment:

By David Himmelstein, M.D. and Steffie Woolhandler, M.D., M.P.H.

In this study we and our colleagues analyzed data on employment and occupation from a Census Bureau survey of 3.2 million Americans, including 122,315 who worked in private sector and VA hospitals, clinics and medical offices. We grouped all health care occupations into 18 categories, three of them administrative, and applied the same classification criteria to VA and private sector health care workers. We gleaned additional data on health insurance employees from the Bureau of Labor Statistics, and data on employees in the VA Central Office from VA employment records.

Doctors and hospitals waste hundreds of billions each year on useless paperwork. Most of that is inflicted by profit-seeking insurers, who try to avoid paying for care by imposing complex coverage rules and documentation requirements. And our profit-oriented system also rewards providers for devoting more resources to gaming the payment system.

Some VA colleagues complain that the system has rigid rules and too much bureaucracy. But its simplified payment scheme saves so much time and effort that it’s still far more efficient than private sector care. Comparisons with other nations indicate that even greater efficiency is possible under a universal, single payer system.

Previous studies have shown that VA care is as good or better than care in the private sector. We now know that the VA is also more administratively efficient, because patient care – not money – is at the center of its mission.

https://healthjusticemonitor.org…

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Employer-Sponsored Health Insurance Premium Cost Growth and Its Association with Earnings Inequality Among US Families, JAMA Network Open, January 16, 2024, by Kurt Hager, Ezekiel Emanuel, and Dariush Mozaffarian

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Question: What is the association of increasing health care premium costs with earnings inequality and wage stagnation among US families with employer-sponsored health insurance?

Findings: In this economic evaluation of US families receiving employer-sponsored health insurance, the mean cumulative lost earnings from 1988 to 2019 associated with growth in health insurance premiums was $125,340 per family (in 2019 dollars) or nearly 5% of total earnings over the 32-year period. In all 32 years of the study, health care premiums as a percentage of compensation were significantly higher for non-Hispanic Black and Hispanic families than for non-Hispanic White families.

Meaning: This study suggests that increasing health insurance premium costs are likely associated with decreased earnings and increased income inequality, including by race and ethnicity, among US families receiving employer-sponsored health insurance and are meaningfully associated with wage stagnation.

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Comment:

By Don McCanne, M.D.

This study is quite disconcerting because it shows that one of the most important categories of health insurance – employer-sponsored health plans – has some very serious deficiencies that might cause individuals to question whether we should be favoring it over other better methods of financing health care.

Perhaps the most shocking finding in this study is that employers are not footing the premium bill for these policies. Employees explicitly pay a portion of premiums. And the nominally employer component is invisibly paid by employees without their knowledge via forgone wage increases. Lest anyone think this is insignificant, the authors have calculated that it amounts to about $125,000 per worker over the 32-year period studied. Imagine the good that would do if it were an additional contribution to retirement plans, especially for low-income employees.

Another deficiency of employer-sponsored plans is that, since the same premium is usually contributed to each employee’s plan, the contributions are regressive. Low-income employees are paying a much higher percentage of their incomes than are high-income employees. Yet another serious deficiency is that this perpetuates the repulsive social inequities in which Black and Hispanic employees pay a larger percentage of their incomes for health insurance by virtue of the fact that their incomes are lower and yet the same premiums are passively omitted from their incomes. It should embarrass us all that we tolerate a health care financing system that perpetuates such racial inequities.

So not only is private insurance a defective method of financing health care when we purchase it, because of its regressive nature of funding health care (the poor paying as much into the insurance pool as the rich), we now know that it is also a regressive method hidden by what appeared to be the generosity of employer sponsorship actually paid by forgone wages and salaries. We also discuss in a recent HJM post that private insurance, whether or not employer-sponsored, is no longer effective in paying medical bills because large cost-sharing is a major cause of unmanageable medical debt.

Now that we know that there are significant problems with both buying and using private health insurance, it’s quite clear that we should be looking for a health care financing system that serves everyone well.

The obvious solution is a single payer, improved version of Medicare. Rather than the flawed premiums and deductibles that we’ve shown are very unfair, the system is paid through progressive taxes. Low-income individuals pay a lower level of taxes that allows them to keep enough income to meet essential needs. High-income individuals pay more taxes, but keep enough for essentials as well as optional possessions and investments that maintain their status as individuals of wealth.

There remains a political divide over the definition of fairness of progressive taxes. In the past, we were concerned about the injustices of tolerating profound poverty, impairing access to food, housing, health care, education, and other needs, while we protected the elegant lifestyles of millionaires from the tax collectors. Now we protect the billionaires. The business elites are looking forward to the category of trillionaire.

Which public policy should we as a nation support? Using our cumulative excess wealth to address financial and social justice deficiencies such as our impaired health care system by using a progressive tax system that will still keep the wealthy exceptionally comfortable, ensconced in their luxury? Or should we ignore our social injustices while we establish policies that would enable one individual to accumulate the equivalent wealth of one thousand billionaires, thus becoming a trillionaire? It seems obvious: yes on social justice, no on trillionaires.

We would still have to deal with health system ownership issues so that the health care system is designed to benefit patients rather than to create wealth for investors, and we would also have to elect public stewards who would want to support our public financing system rather than the trillionaires, but considering the system we could have that would take care of all of us, wouldn’t that be worth the effort?

https://healthjusticemonitor.org…

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Majority of debtors to US hospitals now people with health insurance, The Guardian, January 11, 2024, by Jessica Glenza

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People with health insurance may now represent the majority of debtors American hospitals struggle to collect from, according to medical billing analysts.

This marks a sea change from just a few years ago, when people with health insurance represented only about one in 10 bills hospitals considered “bad debt”, analysts said.

In 2018, just 11.1% of hospitals’ bad debt came from insured “self-pay” accounts, or from patients whose insurance required out-of-pocket payments, according to Kodiak Solutions. By 2022, the proportion who did (or could) not pay their bills soared to 57.6% of all hospitals’ bad debt. Kodiak receives every billing transaction for a little less than one-third of all hospitals in the country.

A recent investigation by KFF Health News and NPR found more than 100 million Americans have medical debt of some kind, debt which often forces families to make heart-wrenching sacrifices. Hospitals refer patients to aggressive debt collectors, use state courts to garnish wages, place liens on people’s homes and report debt to credit agencies, which can drastically worsen future job and housing prospects.

“Obamacare” plans are notorious for high deductibles. Federal regulations allow insurers on state exchanges to charge an individual as much as $9,450 out of pocket in 2024 – not including monthly premiums.

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Comment:

By Don McCanne, M.D.

Health insurance is designed to assure that a person can access health care when they need it by removing financial barriers to care. But private insurers want to keep their premiums for their insurance products competitive in the marketplace, and, even more important to them, they want to guarantee generous profits for their investors and executives.

With premiums that must be kept competitive, how do they increase profits? Obviously, they attempt to reduce spending on patient care. There are several mechanisms they use, but one of the most important is to have the patient pay a share of the costs of the care through copayments and especially through high deductibles (many thousands of dollars). That way, theoretically according to insurers, patients will obtain only the care that they need. Actually, health care experts find that patients can’t reliably prioritize care based on medical need.

Well, it’s not working out as insurers promise. Americans need and seek a lot of care and the large deductibles are pushing ever more of them into intolerable levels of debt, defeating the very purpose of health insurance.

Since the marketplace has not worked, this is where the government needs to step in, and they did, with the Affordable Care Act, aka Obamacare. But wait a minute. The ACA provided us with insurance exchanges that are selling us, guess what, high deductible plans! The ACA encouraged higher deductibles with job-based insurance. Maybe the ACA helps with coverage rates and subsidies for premiums, but it fosters flawed high deductible plans in the hands of the private insurance industry.

Though it is imperative that we make a fundamental change, fortunately we don’t have to go back to the drawing board to create it. We’ve already designed a single payer system – an improved and expanded version of our traditional Medicare program. We need to enact and implement that.

But that will only be the first step. We will need to follow through with addressing the ownership issue of the delivery system so that our patient care dollars will be going to patient care rather than to wealth building for billionaire investors. For instance, instead of hospital funds going to private equity and other investors, they will go to fund hospital operating budgets. Single payer will obviate the need for designated patient payments.

The ultimate responsibility is going to lie with us, the people. We select our legislators and the heads of the administrations (governors and the president) to carry out our wishes. If we want a health care system that is universal, comprehensive, affordable and equitable for all, then we need to educate our legislators as to the clear benefits of such a system that would serve all of society well. We could try by beginning with the difficult task of convincing the conservatives and neoliberals of how great it would be to pass legislation that would serve the US population so well, or we could simply go ahead and elect all progressives to run the government. Of course, I’m not crazy. Either way, it won’t be easy. But we have to do it!

https://healthjusticemonitor.org…

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