Why We’re in a New Gilded Age

By Paul Krugman
The New York Review of Books, May 8, 2014

Review of “Capital in the Twenty-First Century”

By Thomas Piketty, translated from the French by Arthur Goldhammer
Belknap Press/Harvard University Press, 685 pp., $39.95

Thomas Piketty, professor at the Paris School of Economics, isn’t a household name, although that may change with the English-language publication of his magnificent, sweeping meditation on inequality, Capital in the Twenty-First Century. Yet his influence runs deep. It has become a commonplace to say that we are living in a second Gilded Age — or, as Piketty likes to put it, a second Belle Époque — defined by the incredible rise of the “one percent.” But it has only become a commonplace thanks to Piketty’s work.

The big idea of Capital in the Twenty-First Century is that we haven’t just gone back to nineteenth-century levels of income inequality, we’re also on a path back to “patrimonial capitalism,” in which the commanding heights of the economy are controlled not by talented individuals but by family dynasties.

This is a book that will change both the way we think about society and the way we do economics.

Capital in the Twenty-First Century is, as I hope I’ve made clear, an awesome work. At a time when the concentration of wealth and income in the hands of a few has resurfaced as a central political issue, Piketty doesn’t just offer invaluable documentation of what is happening, with unmatched historical depth. He also offers what amounts to a unified field theory of inequality, one that integrates economic growth, the distribution of income between capital and labor, and the distribution of wealth and income among individuals into a single frame.

The current generation of the very rich in America may consist largely of executives rather than rentiers, people who live off accumulated capital, but these executives have heirs. And America two decades from now could be a rentier-dominated society even more unequal than Belle Époque Europe.

But this doesn’t have to happen.

At times, Piketty almost seems to offer a deterministic view of history, in which everything flows from the rates of population growth and technological progress. In reality, however, Capital in the Twenty-First Century makes it clear that public policy can make an enormous difference, that even if the underlying economic conditions point toward extreme inequality, what Piketty calls “a drift toward oligarchy” can be halted and even reversed if the body politic so chooses.

The key point is that when we make the crucial comparison between the rate of return on wealth and the rate of economic growth, what matters is the after-tax return on wealth. So progressive taxation — in particular taxation of wealth and inheritance — can be a powerful force limiting inequality. Indeed, Piketty concludes his masterwork with a plea for just such a form of taxation. Unfortunately, the history covered in his own book does not encourage optimism.

Piketty ends Capital in the Twenty-First Century with a call to arms — a call, in particular, for wealth taxes, global if possible, to restrain the growing power of inherited wealth. It’s easy to be cynical about the prospects for anything of the kind. But surely Piketty’s masterly diagnosis of where we are and where we’re heading makes such a thing considerably more likely. So Capital in the Twenty-First Century is an extremely important book on all fronts. Piketty has transformed our economic discourse; we’ll never talk about wealth and inequality the same way we used to.

http://www.nybooks.com/articles/archives/2014/may/08/thomas-piketty-new-gilded-age/

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Comment:

By Don McCanne, MD

Hopefully the excerpts above from Paul Krugman’s review of Thomas Piketty’s “Capital in the Twenty-First Century” will entice you to read Krugman’s full review, and then that will entice you to read Piketty’s full book. If you do so, you’ll understand why Krugman says, “we’ll never talk about wealth and inequality the same way we used to.”

Although a book on capital would seem to be off the topic of health care, Piketty provides us with the background to understand why we can’t seem to get health care financing right here in the United States, though he doesn’t discuss it specifically.

We do use progressive tax policies to partially fund health care through general revenues, but we also burden wage earners with the cost of health plans partially financed through regressive tax expenditures – the tax deductibility of employer-sponsored plans paid by employees through forgone wage increases.

Whereas median household income in the United States is now about $50,000, the cost of health care for the typical family of four is now about $22,000 (Milliman Medical Index). These numbers no longer compute, but they tend to be lost in the fragmented, dysfunctional way in which we finance health care. They cry out for reform.

There are two general approaches – on spending and on revenues – that seem to be imperative. One would be to reduce the wasteful spending in health care that occurs from our profound administrative excesses, our high prices, and the maldistribution of our resources due to a lack of adequate public oversight. A single payer system would redirect our resources to much better use.

The other approach that we need – as the disconnect between income and health costs demonstrates – would be to fund the single payer system through much better defined progressive taxes. Piketty’s treatise shows us that we really don’t have any other alternative. And since we already spend such a large portion of our GDP on health care, a progressively financed single payer system would provide a significant step in the visionary direction that Piketty has laid out for us.

Why We’re in a New Gilded Age

By Paul Krugman
The New York Review of Books, May 8, 2014

Review of “Capital in the Twenty-First Century”

By Thomas Piketty, translated from the French by Arthur Goldhammer
Belknap Press/Harvard University Press, 685 pp., $39.95

Thomas Piketty, professor at the Paris School of Economics, isn’t a household name, although that may change with the English-language publication of his magnificent, sweeping meditation on inequality, Capital in the Twenty-First Century. Yet his influence runs deep. It has become a commonplace to say that we are living in a second Gilded Age — or, as Piketty likes to put it, a second Belle Époque — defined by the incredible rise of the “one percent.” But it has only become a commonplace thanks to Piketty’s work.

The big idea of Capital in the Twenty-First Century is that we haven’t just gone back to nineteenth-century levels of income inequality, we’re also on a path back to “patrimonial capitalism,” in which the commanding heights of the economy are controlled not by talented individuals but by family dynasties.

This is a book that will change both the way we think about society and the way we do economics.

Capital in the Twenty-First Century is, as I hope I’ve made clear, an awesome work. At a time when the concentration of wealth and income in the hands of a few has resurfaced as a central political issue, Piketty doesn’t just offer invaluable documentation of what is happening, with unmatched historical depth. He also offers what amounts to a unified field theory of inequality, one that integrates economic growth, the distribution of income between capital and labor, and the distribution of wealth and income among individuals into a single frame.

The current generation of the very rich in America may consist largely of executives rather than rentiers, people who live off accumulated capital, but these executives have heirs. And America two decades from now could be a rentier-dominated society even more unequal than Belle Époque Europe.

But this doesn’t have to happen.

At times, Piketty almost seems to offer a deterministic view of history, in which everything flows from the rates of population growth and technological progress. In reality, however, Capital in the Twenty-First Century makes it clear that public policy can make an enormous difference, that even if the underlying economic conditions point toward extreme inequality, what Piketty calls “a drift toward oligarchy” can be halted and even reversed if the body politic so chooses.

The key point is that when we make the crucial comparison between the rate of return on wealth and the rate of economic growth, what matters is the after-tax return on wealth. So progressive taxation — in particular taxation of wealth and inheritance — can be a powerful force limiting inequality. Indeed, Piketty concludes his masterwork with a plea for just such a form of taxation. Unfortunately, the history covered in his own book does not encourage optimism.

Piketty ends Capital in the Twenty-First Century with a call to arms — a call, in particular, for wealth taxes, global if possible, to restrain the growing power of inherited wealth. It’s easy to be cynical about the prospects for anything of the kind. But surely Piketty’s masterly diagnosis of where we are and where we’re heading makes such a thing considerably more likely. So Capital in the Twenty-First Century is an extremely important book on all fronts. Piketty has transformed our economic discourse; we’ll never talk about wealth and inequality the same way we used to.

http://www.nybooks.com/articles/archives/2014/may/08/thomas-piketty-new-…

Hopefully the excerpts above from Paul Krugman’s review of Thomas Piketty’s “Capital in the Twenty-First Century” will entice you to read Krugman’s full review, and then that will entice you to read Piketty’s full book. If you do so, you’ll understand why Krugman says, “we’ll never talk about wealth and inequality the same way we used to.”

Although a book on capital would seem to be off the topic of health care, Piketty provides us with the background to understand why we can’t seem to get health care financing right here in the United States, though he doesn’t discuss it specifically.

We do use progressive tax policies to partially fund health care through general revenues, but we also burden wage earners with the cost of health plans partially financed through regressive tax expenditures – the tax deductibility of employer-sponsored plans paid by employees through forgone wage increases.

Whereas median household income in the United States is now about $50,000, the cost of health care for the typical family of four is now about $22,000 (Milliman Medical Index). These numbers no longer compute, but they tend to be lost in the fragmented, dysfunctional way in which we finance health care. They cry out for reform.

There are two general approaches – on spending and on revenues – that seem to be imperative. One would be to reduce the wasteful spending in health care that occurs from our profound administrative excesses, our high prices, and the maldistribution of our resources due to a lack of adequate public oversight. A single payer system would redirect our resources to much better use.

The other approach that we need – as the disconnect between income and health costs demonstrates – would be to fund the single payer system through much better defined progressive taxes. Piketty’s treatise shows us that we really don’t have any other alternative. And since we already spend such a large portion of our GDP on health care, a progressively financed single payer system would provide a significant step in the visionary direction that Piketty has laid out for us.

Primary Care Access for New Patients on the Eve of Health Care Reform

By Karin V. Rhodes, MD, MS; Genevieve M. Kenney, PhD; Ari B. Friedman, MS; Brendan Saloner, PhD; Charlotte C. Lawson, BA; David Chearo, MA; Douglas Wissoker, PhD; Daniel Polsky, PhD
JAMA Internal Medicine, April 7, 2014

The goal of the current study was to simulate the experience of nonelderly adults with 1 of 3 insurance types—private, Medicaid, and uninsured—seeking new patient appointments in 10 diverse states to obtain precise estimates of primary care access before the ACA coverage expansions.

Between November 13, 2012, and April 4, 2013, we made 12,907 calls to 7788 primary care practices requesting new patient appointments. Across the 10 states, 84.7% of privately insured and 57.9% of Medicaid callers received an appointment. Appointment rates were 78.8% for uninsured patients with full cash payment but only 15.4% if payment required at the time of the visit was restricted to $75 or less.

http://archinte.jamanetwork.com/article.aspx?articleid=1857092

****

Comment:

By Don McCanne, MD

This study reveals the success rates in obtaining a primary care appointment as a new patient by non-elderly adults, prior to full implementation of the Affordable Care Act. So what was it like then, what will the Affordable Care Act do for that, and what would single payer have done to change the results?

Being privately insured provided the greatest probability of success in obtaining an appointment – 85% were able to do so. Close to that – at 79% – were new patients who would pay cash in full at the time of the visit. Medicaid patients had more difficulty – with only 58% being able to make an appointment. Worst of all was for those who would pay cash, but no more than $75 at the time of the visit – only 15% were successful.

Of course, this is what we’ve known all along. Privately insured patients have good access, Medicaid patients have poorer access by virtue of being covered by an underfunded welfare program, and uninsured patients with limited resources have the worst access of all. Those willing to pay cash in full may have been covered by a high-deductible plan but, in any event, were likely to to have the means to pay upfront charges. So money or good insurance will open the doors, whereas Medicaid is dependent on the willingness of the primary care provider to participate in the Medicaid program, and being poor and uninsured… well, good luck.

What will happen now that ACA is well on its way to full implementation? The answer is complex, which is no surprise because the ACA model is itself complex. Let’s look at each category of coverage.

For the very wealthy who are quite willing to pay full fees in cash, and the scheduling staff of the primary care practice understands that, access should approach 100%. If any queues exist, those individuals likely can buy their way to the front of the queue.

For privately insured individuals, whether obtaining coverage through employment or through individually purchased plans within or outside of the exchanges, access may be less than it is now since insurers with the new narrower networks exclude many primary care professionals from their panels. Most individuals will not want to select an out-of-network primary care professional, especially since out-of-pocket costs could be staggering since the cap applies only to in-network care (except for certain emergencies).

Even those employer-sponsored plans that ACA was designed to protect are now moving in the direction of higher deductibles, narrower networks, and even private exchanges with a shift to defined-contribution vouchers. Although the percentage of practices accepting specific insurance plans will decline because of the doctor being excluded from the networks, patients will probably still choose private plans as being their best option. It’s just that they will have to shop more before they find practices that accept their specific insurance.

Finding primary care practices that accept Medicaid may be more difficult. Although there is a temporary increase in primary care evaluation and management payments, that will end very soon. It is likely that there will not be much of an increase in the number of physicians who will agree to accept the low Medicaid payment rates. If those who do accept Medicaid find that the increased volume is crowding out their privately insured patients, then they may feel that they have to cut back or eliminate accepting new Medicaid patients as well.

With an increase in Medicaid managed care organizations, Medicaid patients may have this option, but then that limits their access since they must go to the managed care providers. Also the low payment rates for Medicaid managed care organizations may result in relatively spartan care merely because of the insufficiency of funds. Another possibility is that federally-qualified health centers may be able to increase their capacity because of new funds authorized by ACA. Hopefully these two expansions will provide enough capacity to ensure access of Medicaid patients to at least some form of primary care.

Access for the low-income uninsured – and there will be tens of millions of them – will certainly continue to be impaired. If Congress further expands the funding of federally-qualified health centers, then the uninsured will have that option. But specialized care will likely be out of reach for most.

So, in general, access to primary care is unlikely to change to any major degree as the result of the provisions of ACA. Patients will have less choice of providers, more exposure to out-of-pocket costs, but an increase in funding should improve access to other options such as Medicaid managed care organizations or federally-qualified health centers – especially important for low-income individuals.

What if we had a single payer system instead? Primary care practices would never have to ask a new patient what insurance they had, or whether they intended to pay cash. Patients would never have to check network lists to see whom they could call. (There would still be some “networks” such as Kaiser Permanente, but they would be integrated health systems that patients would choose because of their own preferences.)

With single payer, never again would a new patient have to hear this response from a receptionist: “New patient? What kind of insurance do you have? Oh, I’m sorry. The doctor isn’t able to accept any new patients now.”

Primary Care Access for New Patients on the Eve of Health Care Reform

By Karin V. Rhodes, MD, MS; Genevieve M. Kenney, PhD; Ari B. Friedman, MS; Brendan Saloner, PhD; Charlotte C. Lawson, BA; David Chearo, MA; Douglas Wissoker, PhD; Daniel Polsky, PhD
JAMA Internal Medicine, April 7, 2014

The goal of the current study was to simulate the experience of nonelderly adults with 1 of 3 insurance types—private, Medicaid, and uninsured—seeking new patient appointments in 10 diverse states to obtain precise estimates of primary care access before the ACA coverage expansions.

Between November 13, 2012, and April 4, 2013, we made 12,907 calls to 7788 primary care practices requesting new patient appointments. Across the 10 states, 84.7% of privately insured and 57.9% of Medicaid callers received an appointment. Appointment rates were 78.8% for uninsured patients with full cash payment but only 15.4% if payment required at the time of the visit was restricted to $75 or less.

http://archinte.jamanetwork.com/article.aspx?articleid=1857092

This study reveals the success rates in obtaining a primary care appointment as a new patient by non-elderly adults, prior to full implementation of the Affordable Care Act. So what was it like then, what will the Affordable Care Act do for that, and what would single payer have done to change the results?

Being privately insured provided the greatest probability of success in obtaining an appointment – 85% were able to do so. Close to that – at 79% – were new patients who would pay cash in full at the time of the visit. Medicaid patients had more difficulty – with only 58% being able to make an appointment. Worst of all was for those who would pay cash, but no more than $75 at the time of the visit – only 15% were successful.

Of course, this is what we’ve known all along. Privately insured patients have good access, Medicaid patients have poorer access by virtue of being covered by an underfunded welfare program, and uninsured patients with limited resources have the worst access of all. Those willing to pay cash in full may have been covered by a high-deductible plan but, in any event, were likely to to have the means to pay upfront charges. So money or good insurance will open the doors, whereas Medicaid is dependent on the willingness of the primary care provider to participate in the Medicaid program, and being poor and uninsured… well, good luck.

What will happen now that ACA is well on its way to full implementation? The answer is complex, which is no surprise because the ACA model is itself complex. Let’s look at each category of coverage.

For the very wealthy who are quite willing to pay full fees in cash, and the scheduling staff of the primary care practice understands that, access should approach 100%. If any queues exist, those individuals likely can buy their way to the front of the queue.

For privately insured individuals, whether obtaining coverage through employment or through individually purchased plans within or outside of the exchanges, access may be less than it is now since insurers with the new narrower networks exclude many primary care professionals from their panels. Most individuals will not want to select an out-of-network primary care professional, especially since out-of-pocket costs could be staggering since the cap applies only to in-network care (except for certain emergencies).

Even those employer-sponsored plans that ACA was designed to protect are now moving in the direction of higher deductibles, narrower networks, and even private exchanges with a shift to defined-contribution vouchers. Although the percentage of practices accepting specific insurance plans will decline because of the doctor being excluded from the networks, patients will probably still choose private plans as being their best option. It’s just that they will have to shop more before they find practices that accept their specific insurance.

Finding primary care practices that accept Medicaid may be more difficult. Although there is a temporary increase in primary care evaluation and management payments, that will end very soon. It is likely that there will not be much of an increase in the number of physicians who will agree to accept the low Medicaid payment rates. If those who do accept Medicaid find that the increased volume is crowding out their privately insured patients, then they may feel that they have to cut back or eliminate accepting new Medicaid patients as well.

With an increase in Medicaid managed care organizations, Medicaid patients may have this option, but then that limits their access since they must go to the managed care providers. Also the low payment rates for Medicaid managed care organizations may result in relatively spartan care merely because of the insufficiency of funds. Another possibility is that federally-qualified health centers may be able to increase their capacity because of new funds authorized by ACA. Hopefully these two expansions will provide enough capacity to ensure access of Medicaid patients to at least some form of primary care.

Access for the low-income uninsured – and there will be tens of millions of them – will certainly continue to be impaired. If Congress further expands the funding of federally-qualified health centers, then the uninsured will have that option. But specialized care will likely be out of reach for most.

So, in general, access to primary care is unlikely to change to any major degree as the result of the provisions of ACA. Patients will have less choice of providers, more exposure to out-of-pocket costs, but an increase in funding should improve access to other options such as Medicaid managed care organizations or federally-qualified health centers – especially important for low-income individuals.

What if we had a single payer system instead? Primary care practices would never have to ask a new patient what insurance they had, or whether they intended to pay cash. Patients would never have to check network lists to see whom they could call. (There would still be some “networks” such as Kaiser Permanente, but they would be integrated health systems that patients would choose because of their own preferences.)

With single payer, never again would a new patient have to hear this response from a receptionist: “New patient? What kind of insurance do you have? Oh, I’m sorry. The doctor isn’t able to accept any new patients now.”

(Unless you are a masochist, skip down to the comment at the end. The following excerpts from the CMS documents are merely to provide verification for the statements in the comment.)

CMS Ensures Higher Value and Quality for Medicare Health and Drug Plans

CMS, April 7, 2014

Today, the Centers for Medicare & Medicaid Services (CMS) issued the 2015 rate announcement and final call letter for Medicare Advantage and prescription drug benefit (Part D) programs.

Payments to Medicare Advantage Plans:

*  CMS estimates that the overall net change to plan payments between 2014 and 2015 to be +0.4 percent, compared to the estimated overall net change to plan payments of -1.9 percent for the proposals in the Advance Notice Individual plan payments will vary by plan based on, but not limited to, its location and star rating.

*  Before the Affordable Care Act, Medicare Advantage plans were paid more than 10 percent compared to traditional Medicare, costing the program more than $1,000 per person each year, while quality and health outcomes were similar to those enrolled in traditional Medicare. The changes underway reduce excessive payments to Medicare Advantage plans, while incentivizing quality improvements by basing part of Medicare Advantage payment on plan quality performance.

*  To provide for continued stability in the Medicare Advantage program, CMS will implement a new phase-in schedule for the Part C risk adjustment model introduced in 2014. In addition, to improve payment accuracy, CMS has refined its risk adjustment methodology to account for the impact of the influx of baby boomers. In addition, for 2015, CMS will not finalize the proposal to exclude diagnoses from enrollee risk assessments.

http://www.cms.gov/Newsroom/MediaReleaseDatabase/Press-releases/2014-Press-releases-items/2014-04-07.html

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Announcement of Calendar Year (CY) 2015 Medicare Advantage Capitation Rates and Medicare Advantage and Part D Payment Policies and Final Call Letter

CMS, April 7, 2014

Key Changes from the Advance Notice:

Growth Percentages

CMS-HCC Risk Adjustment Models for CY2015

Medicare Advantage Enrollee Risk Assessments

Normalization Factors

RxHCC Risk Adjustment Model

International Classification of Diseases-10 (ICD-10) Code Sets and Diagnosis Data Sources for 2015 Risk Scores:

Attachment III

Section A. Final Estimate of the National Per Capita Growth Percentage and the Fee-for- Service (FFS) Growth Percentage for Calendar Year 2015

Comment: Several commenters had concerns about the magnitude of changes proposed in the Advance Notice and the potential impact to Medicare beneficiaries and plans. Commenters raised concerns that the payment reductions described in the Advance Notice would lead to significantly higher MA premiums, significantly reduced benefits, or both. Some commenters argued that these cuts would lead to MA plans exiting the market. Some providers noted that the reductions to MA contained in the Advance Notice would seriously threaten their ability to provide high quality care to beneficiaries. We also received comments that the cuts would lead to market contraction, less competition, and ultimately less access for beneficiaries. Commenters requested that we keep Medicare Advantage revenue flat for 2015.

Response: We are committed to a strong, stable Medicare Advantage program and to continued access to high quality plan choices for Medicare beneficiaries. Over the past several years, even as the Medicare Advantage program transitioned to payments that are more aligned with FFS Medicare costs, enrollment in Medicare Advantage has increased to an all-time high of approximately 15 million beneficiaries. Today, nearly 30 percent of Medicare beneficiaries are enrolled in a Medicare Advantage plan and benefits remain stable. We believe that the proposals outlined in the Advance Notice will continue the transition to payments that are more comparable to FFS costs, while at the same time continuing the trend toward greater enrollment in high quality plans.

Section G. CMS-HCC (Hierarchical Condition Category) Risk Adjustment Model for CY 2015

Comment: We received a few comments opposing our proposal to use a blend of the 2013 CMS-HCC model and 2014 CMS-HCC model in 2015, and supporting instead calculating risk scores using exclusively the 2013 CMS-HCC model. Many commenters were in support of continuing to use a blend of risk scores from two different models. Two commenters were in favor of ending the phase-in of the clinically revised model introduced in 2014 and calculating risk scores in 2015 using only this model.

Response: As we remain committed to the clinically revised model introduced for the 2014 payment year, we will not use risk scores exclusively from the 2013 CMS-HCC model as recommended by some commenters. Because we still believe that additional time to transition to the 2014 model is needed, we also will not use risk scores from the 2014 model exclusively as recommended by two commenters, and will continue for 2015 payment year to blend the risk scores calculated using the 2013 CMS-HCC and 2014 CMS-HCC models.

In light of the impact of the final payment updates and changes for 2015, however, we are concerned that the use of the 2014 blend percentages of 75% and 25% that we proposed to continue in the Advance Notice would not have the same effects on payment stability that they had last year, and that we assumed they would have when proposing them this year. As in 2014, we will continue to blend the risk scores from the old and new models, in order to both support our intention to move to the updated model while also providing time for plans to transition to its use in payment. Thus, to further our goal of promoting stability and given concerns about the impact of payment changes for 2015, we will blend the two scores using a 67 percent and 33 percent blend, respectively. Specifically, we will blend the risk scores calculated using the 2014 CMS-HCC model with risk scores using the 2013 CMS-HCC model, each appropriately normalized, weighting the normalized risk scores from the 2013 model by 67 percent and the normalized risk scores from the 2014 model by 33 percent. These risk scores from the 2013 and 2014 CMS-HCC models will include the risk scores calculated from the community, institutional, new enrollee, and C-SNP new enrollee segments of the model and will be used in Part C payment for aged/disabled beneficiaries enrolled in MA plans. See Section II.G of the 2014 Advance Notice and Section III.D of the 2014 Rate Announcement for more details on the clinically revised CMS-HCC model.

Section H. Medicare Advantage Enrollee Risk Assessments

Comment: Many commenters opposed the proposal to exclude diagnoses that resulted from home visits, including enrollee risk assessments, unless there was a subsequent clinical encounter.

Response: CMS continues to support the use of enrollee risk assessments for wellness, care coordination, and disease prevention; however, we remain concerned that many home visits are being used primarily for the gathering of diagnoses for payment rather than to provide treatment and/or follow-up care to beneficiaries. We recently instituted a new requirement for MA organizations to identify, in the diagnoses they submit to CMS, which diagnoses are from home visits. These new data will enable CMS, for the first time, to evaluate how many diagnoses are identified in home visits and to assess what effect the home assessments have on the care provided to beneficiaries. In order to allow our policy to be informed by this analysis, we have decided not to implement the proposal to exclude diagnoses from home visits for 2015 payments. We will study the data submitted by MA organizations to determine appropriate policy options for consideration for 2016 and future years.

Section J. Normalization Factors

Comment: The majority of commenters supported CMS’ proposal to calculate the normalization factors for the CMS-HCC and RxHCC risk scores using a methodology to better capture the increased proportion of younger beneficiaries known as the “baby boomers.” Several commenters recommended that CMS make retroactive adjustments to the normalization factors.

Response: We appreciate the support for modifying the normalization factor methodology to account for the influx of baby boomers to the Medicare population. CMS uses historical data to develop normalization factors prior to a payment year in order to promote stability for bidding purposes. Given this policy, CMS will not retroactively change the normalization factors for prior years. However, we did consider whether using more historical data could better inform the calculation of the 2015 normalization factors (in the Advance Notice we proposed using 2012 and 2013 risk scores to estimate annual trends for the CMS-HCC models). By using a quadratic functional form fit to risk scores from 2010 through 2013, the normalization factors will better reflect more recent changes in the population trends. Thus, we are finalizing the 2015 normalization factors for the CMS-HCC and RxHCC models as shown in Table III-2:

Excerpts from Table III-2 2015 Normalization Factors:

0.992  CMS-HCC model implemented in 2013

0.978  Clinically revised CMS-HCC model implemented in 2014

Comment: A number of commenters asked for more transparency around the calculation of the normalization factors.

Response: In Table III-3. below, we show the risk scores used to calculate the normalization factors for 2015.

Excerpts from Table III-3. 2010-2013 Risk Scores Used to Calculate 2015 Normalization Factors

CMS-HCC model implemented in 2013

2010  0.986

2011  0.977

2012  1.009

2013  1.008

Clinically revised CMS-HCC model implemented in 2014

2010  0.978

2011  0.988

2012  0.997

2013  0.995

To access this 154 page announcement, at the following link select “Announcements and Documents” from the left column, and then select “”2015 Announcement” with a release date of “2014-04-07”: http://www.cms.hhs.gov/MedicareAdvtgSpecRateStats/

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Washington insiders crossing the line in defense of Medicare Advantage

Quote of the Day, April 3, 2014

The Affordable Care Act included provisions to reduce these overpayments to levels comparable to the costs of patients in the traditional Medicare program. AHIP has already used its influence to convince the administration to use chicanery to reduce the cutbacks in the first two years of the reductions (by issuing phony quality awards and by using accounting gimmickry with the scheduled but deferred SGR adjustments). Since the administration seems to be resisting further chicanery (we’ll soon find out) AHIP has intensified its public campaign using some of Washington’s “finest.”

https://www.pnhp.org/news/2014/april/washington-insiders-crossing-the-line-in-defense-of-medicare-advantage

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Comment:

By Don McCanne, MD

In an effort to privatize Medicare, conservatives in Congress enacted legislation to provide private Medicare Advantage plans with a 14 percent overpayment in order to unfairly compete with the traditional Medicare program. The Affordable Care Act included measures to gradually eliminate this overpayment. CMS appears to be thwarting the intent of Congress to correct this injustice.

Because of pressure from the insurance industry, the Obama administration used chicanery in the first two years of the ACA implementation to maintain higher Medicare Advantage rates. This year the reduction was to have been 1.9 percent. So the insurance industry initiated an intensive campaign to reverse these reductions. Once again, CMS has used more chicanery to convert their reduction into a 0.4 percent gain – reassuring private insurers that they can continue to expand their private takeover of Medicare.

There are numerous gimmicks that were used, and some of them are quite obscure. For instance, perhaps the most important revision was in the “normalization factors.” Because of the influx of baby boomers into the Medicare program, it was decided to use “a quadratic functional form fit to risk scores from 2010 through 2013” in the CMS Hierarchical Condition Category. To provide “transparency around the calculation of the normalization factors,” they showed “the risk scores used to calculate the normalization factors for 2015.” Glad that’s clear.

Seriously, CMS has used innovative accounting to increase payments to Medicare Advantage plans based on the fact that there is an influx of baby boomers – a subset of Medicare beneficiaries that is younger, healthier, and less expensive than the older beneficiaries already enrolled. Taxpayers will pay more for lower cost beneficiaries. I remember the quadratic equation, but I don’t remember it ever being used to cheat taxpayers and reward the private insurer rentiers.

Rentiers? Those are individuals whose income is derived from capital, and now our nation’s capital is being concentrated in the top centile. If you missed yesterday’s Quote of the Day on Thomas Piketty’s “CAPITAL,” you should not bother reading the CMS song and dance above, and instead read yesterday’s message.

Congress and the Obama administration are serving the interests of the rentiers, and this Medicare Advantage payment scam is only one example. It is time for the people to take control. As Thomas Piketty wrote, “if we are to regain control of capitalism, we must bet everything on democracy.”

qotd: Thomas Piketty – “CAPITAL in the Twenty-First Century”: https://www.pnhp.org/news/2014/april/thomas-piketty-capital-in-the-twenty-first-century

(Unless you are a masochist, skip down to the comment at the end. The following excerpts from the CMS documents are merely to provide verification for the statements in the comment.)

CMS Ensures Higher Value and Quality for Medicare Health and Drug Plans

CMS, April 7, 2014

Today, the Centers for Medicare & Medicaid Services (CMS) issued the 2015 rate announcement and final call letter for Medicare Advantage and prescription drug benefit (Part D) programs.

Payments to Medicare Advantage Plans:

*  CMS estimates that the overall net change to plan payments between 2014 and 2015 to be +0.4 percent, compared to the estimated overall net change to plan payments of -1.9 percent for the proposals in the Advance Notice Individual plan payments will vary by plan based on, but not limited to, its location and star rating.

*  Before the Affordable Care Act, Medicare Advantage plans were paid more than 10 percent compared to traditional Medicare, costing the program more than $1,000 per person each year, while quality and health outcomes were similar to those enrolled in traditional Medicare. The changes underway reduce excessive payments to Medicare Advantage plans, while incentivizing quality improvements by basing part of Medicare Advantage payment on plan quality performance.

*  To provide for continued stability in the Medicare Advantage program, CMS will implement a new phase-in schedule for the Part C risk adjustment model introduced in 2014. In addition, to improve payment accuracy, CMS has refined its risk adjustment methodology to account for the impact of the influx of baby boomers. In addition, for 2015, CMS will not finalize the proposal to exclude diagnoses from enrollee risk assessments.

http://www.cms.gov/Newsroom/MediaReleaseDatabase/Press-releases/2014-Pre…

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Announcement of Calendar Year (CY) 2015 Medicare Advantage Capitation Rates and Medicare Advantage and Part D Payment Policies and Final Call Letter

CMS, April 7, 2014

Key Changes from the Advance Notice:

Growth Percentages

CMS-HCC Risk Adjustment Models for CY2015

Medicare Advantage Enrollee Risk Assessments

Normalization Factors

RxHCC Risk Adjustment Model

International Classification of Diseases-10 (ICD-10) Code Sets and Diagnosis Data Sources for 2015 Risk Scores:

Attachment III

Section A. Final Estimate of the National Per Capita Growth Percentage and the Fee-for- Service (FFS) Growth Percentage for Calendar Year 2015

Comment: Several commenters had concerns about the magnitude of changes proposed in the Advance Notice and the potential impact to Medicare beneficiaries and plans. Commenters raised concerns that the payment reductions described in the Advance Notice would lead to significantly higher MA premiums, significantly reduced benefits, or both. Some commenters argued that these cuts would lead to MA plans exiting the market. Some providers noted that the reductions to MA contained in the Advance Notice would seriously threaten their ability to provide high quality care to beneficiaries. We also received comments that the cuts would lead to market contraction, less competition, and ultimately less access for beneficiaries. Commenters requested that we keep Medicare Advantage revenue flat for 2015.

Response: We are committed to a strong, stable Medicare Advantage program and to continued access to high quality plan choices for Medicare beneficiaries. Over the past several years, even as the Medicare Advantage program transitioned to payments that are more aligned with FFS Medicare costs, enrollment in Medicare Advantage has increased to an all-time high of approximately 15 million beneficiaries. Today, nearly 30 percent of Medicare beneficiaries are enrolled in a Medicare Advantage plan and benefits remain stable. We believe that the proposals outlined in the Advance Notice will continue the transition to payments that are more comparable to FFS costs, while at the same time continuing the trend toward greater enrollment in high quality plans.

Section G. CMS-HCC (Hierarchical Condition Category) Risk Adjustment Model for CY 2015

Comment: We received a few comments opposing our proposal to use a blend of the 2013 CMS-HCC model and 2014 CMS-HCC model in 2015, and supporting instead calculating risk scores using exclusively the 2013 CMS-HCC model. Many commenters were in support of continuing to use a blend of risk scores from two different models. Two commenters were in favor of ending the phase-in of the clinically revised model introduced in 2014 and calculating risk scores in 2015 using only this model.

Response: As we remain committed to the clinically revised model introduced for the 2014 payment year, we will not use risk scores exclusively from the 2013 CMS-HCC model as recommended by some commenters. Because we still believe that additional time to transition to the 2014 model is needed, we also will not use risk scores from the 2014 model exclusively as recommended by two commenters, and will continue for 2015 payment year to blend the risk scores calculated using the 2013 CMS-HCC and 2014 CMS-HCC models.

In light of the impact of the final payment updates and changes for 2015, however, we are concerned that the use of the 2014 blend percentages of 75% and 25% that we proposed to continue in the Advance Notice would not have the same effects on payment stability that they had last year, and that we assumed they would have when proposing them this year. As in 2014, we will continue to blend the risk scores from the old and new models, in order to both support our intention to move to the updated model while also providing time for plans to transition to its use in payment. Thus, to further our goal of promoting stability and given concerns about the impact of payment changes for 2015, we will blend the two scores using a 67 percent and 33 percent blend, respectively. Specifically, we will blend the risk scores calculated using the 2014 CMS-HCC model with risk scores using the 2013 CMS-HCC model, each appropriately normalized, weighting the normalized risk scores from the 2013 model by 67 percent and the normalized risk scores from the 2014 model by 33 percent. These risk scores from the 2013 and 2014 CMS-HCC models will include the risk scores calculated from the community, institutional, new enrollee, and C-SNP new enrollee segments of the model and will be used in Part C payment for aged/disabled beneficiaries enrolled in MA plans. See Section II.G of the 2014 Advance Notice and Section III.D of the 2014 Rate Announcement for more details on the clinically revised CMS-HCC model.

Section H. Medicare Advantage Enrollee Risk Assessments

Comment: Many commenters opposed the proposal to exclude diagnoses that resulted from home visits, including enrollee risk assessments, unless there was a subsequent clinical encounter.

Response: CMS continues to support the use of enrollee risk assessments for wellness, care coordination, and disease prevention; however, we remain concerned that many home visits are being used primarily for the gathering of diagnoses for payment rather than to provide treatment and/or follow-up care to beneficiaries. We recently instituted a new requirement for MA organizations to identify, in the diagnoses they submit to CMS, which diagnoses are from home visits. These new data will enable CMS, for the first time, to evaluate how many diagnoses are identified in home visits and to assess what effect the home assessments have on the care provided to beneficiaries. In order to allow our policy to be informed by this analysis, we have decided not to implement the proposal to exclude diagnoses from home visits for 2015 payments. We will study the data submitted by MA organizations to determine appropriate policy options for consideration for 2016 and future years.

Section J. Normalization Factors

Comment: The majority of commenters supported CMS’ proposal to calculate the normalization factors for the CMS-HCC and RxHCC risk scores using a methodology to better capture the increased proportion of younger beneficiaries known as the “baby boomers.” Several commenters recommended that CMS make retroactive adjustments to the normalization factors.

Response: We appreciate the support for modifying the normalization factor methodology to account for the influx of baby boomers to the Medicare population. CMS uses historical data to develop normalization factors prior to a payment year in order to promote stability for bidding purposes. Given this policy, CMS will not retroactively change the normalization factors for prior years. However, we did consider whether using more historical data could better inform the calculation of the 2015 normalization factors (in the Advance Notice we proposed using 2012 and 2013 risk scores to estimate annual trends for the CMS-HCC models). By using a quadratic functional form fit to risk scores from 2010 through 2013, the normalization factors will better reflect more recent changes in the population trends. Thus, we are finalizing the 2015 normalization factors for the CMS-HCC and RxHCC models as shown in Table III-2:

Excerpts from Table III-2 2015 Normalization Factors:

0.992  CMS-HCC model implemented in 2013

0.978  Clinically revised CMS-HCC model implemented in 2014

Comment: A number of commenters asked for more transparency around the calculation of the normalization factors.

Response: In Table III-3. below, we show the risk scores used to calculate the normalization factors for 2015.

Excerpts from Table III-3. 2010-2013 Risk Scores Used to Calculate 2015 Normalization Factors

CMS-HCC model implemented in 2013

2010  0.986

2011  0.977

2012  1.009

2013  1.008

Clinically revised CMS-HCC model implemented in 2014

2010  0.978

2011  0.988

2012  0.997

2013  0.995

To access this 154 page announcement, at the following link select “Announcements and Documents” from the left column, and then select “”2015 Announcement” with a release date of “2014-04-07”: http://www.cms.hhs.gov/MedicareAdvtgSpecRateStats/

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Washington insiders crossing the line in defense of Medicare Advantage

Quote of the Day, April 3, 2014

The Affordable Care Act included provisions to reduce these overpayments to levels comparable to the costs of patients in the traditional Medicare program. AHIP has already used its influence to convince the administration to use chicanery to reduce the cutbacks in the first two years of the reductions (by issuing phony quality awards and by using accounting gimmickry with the scheduled but deferred SGR adjustments). Since the administration seems to be resisting further chicanery (we’ll soon find out) AHIP has intensified its public campaign using some of Washington’s “finest.”

https://pnhp.org/news/2014/april/washington-insiders-crossing-the-lin…

In an effort to privatize Medicare, conservatives in Congress enacted legislation to provide private Medicare Advantage plans with a 14 percent overpayment in order to unfairly compete with the traditional Medicare program. The Affordable Care Act included measures to gradually eliminate this overpayment. CMS appears to be thwarting the intent of Congress to correct this injustice.

Because of pressure from the insurance industry, the Obama administration used chicanery in the first two years of the ACA implementation to maintain higher Medicare Advantage rates. This year the reduction was to have been 1.9 percent. So the insurance industry initiated an intensive campaign to reverse these reductions. Once again, CMS has used more chicanery to convert their reduction into a 0.4 percent gain – reassuring private insurers that they can continue to expand their private takeover of Medicare.

There are numerous gimmicks that were used, and some of them are quite obscure. For instance, perhaps the most important revision was in the “normalization factors.” Because of the influx of baby boomers into the Medicare program, it was decided to use “a quadratic functional form fit to risk scores from 2010 through 2013” in the CMS Hierarchical Condition Category. To provide “transparency around the calculation of the normalization factors,” they showed “the risk scores used to calculate the normalization factors for 2015.” Glad that’s clear.

Seriously, CMS has used innovative accounting to increase payments to Medicare Advantage plans based on the fact that there is an influx of baby boomers – a subset of Medicare beneficiaries that is younger, healthier, and less expensive than the older beneficiaries already enrolled. Taxpayers will pay more for lower cost beneficiaries. I remember the quadratic equation, but I don’t remember it ever being used to cheat taxpayers and reward the private insurer rentiers.

Rentiers? Those are individuals whose income is derived from capital, and now our nation’s capital is being concentrated in the top centile. If you missed yesterday’s Quote of the Day on Thomas Piketty’s “CAPITAL,” you should not bother reading the CMS song and dance above, and instead read yesterday’s message.

Congress and the Obama administration are serving the interests of the rentiers, and this Medicare Advantage payment scam is only one example. It is time for the people to take control. As Thomas Piketty wrote, “if we are to regain control of capitalism, we must bet everything on democracy.”

qotd: Thomas Piketty – “CAPITAL in the Twenty-First Century”:https://pnhp.org/news/2014/april/thomas-piketty-capital-in-the-twenty…