Learning to live on Medicare margins

Posted on February 15, 2020 by henrykotula • Posted in 2020 Election Issues, ACA, Cost Management, Cost Reduction, Health Policy, Health System, Hospital, Hospital Industry, Medicare, Public Option • Leave a comment

https://mailchi.mp/0ee433170414/the-weekly-gist-february-14-2020?e=d1e747d2d8

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“If Democrats take back the Senate and win the White House, there’s a good chance they’ll implement some version of a public option or Medicare buy-in, and that would be devastating for the fragile economics of our health system.” That was the message delivered by the CEO of a system we were visiting recently, in her report to the board of directors.

That kind of alarmist message might seem career-limiting, but given the way the politics of healthcare are playing out at both the national and state levels (see Colorado and Washington State), it’s past time for executives to get beyond the rhetoric and begin to prepare for the real financial consequences of public option proposals.

That’s what this CEO had done—what followed the dire warning was a detailed analysis (which we helped assemble) of what would happen in various scenarios—what if one percent of our revenue shifted from commercial rates (around 250 percent of Medicare) to possible public option rates (somewhere between 140 and 180 percent of Medicare)? That’s a knowable number, and you can begin to make assumptions about how much business would shift under different scenarios, and how quickly.

The reality for health systems is that most of the margin comes from the 55-to-65-year-old population—who use more healthcare services but whose care is reimbursed at commercial rates. That cohort cross-subsidizes much of the rest of a typical hospital’s business.

The presentation to the board laid those economic realities out in concise detail—and provided a bracing wake-up call that the system needs to be prepared to live on a different level of margin than they enjoyed in the past.

That means radical cost controls, sharp reductions in “system bloat”, and a laser-like focus on shifting care to lower-cost settings. For years, hospital leaders have tossed around the notion that “we have to learn to live on Medicare margins”.

Given the rising popularity of public option policies (67 percent of Americans support the idea according to a recent poll, as do 42 percent of Republicans), that lesson may need to be learned sooner rather than later.

Do employers want to buy “population health”?

Posted on February 15, 2020 by henrykotula • Posted in Chronic Care Management, Chronic Conditions, Chronic Diseases, Direct Contracting, Employer-Based Health Insurance, Episodic Care, Health System, Population Health • Leave a comment

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I’ve had two conversations this week with health system leaders who have been struggling to navigate conversations about direct contracting with large employers in their market. A system chief innovation officer expressed frustration about the pace of discussions with a regional employer: “They’re clearly interested in our network, and we’ve been designing a program for them. They’ve seen our performance results from our accountable care organization (ACO) and the savings we generated. But even after a year of meetings, I’m not sure it’s going anywhere.”

Direct-to-employer (DTE) contracting has proven much more difficult for health systems than anyone anticipated a decade ago, in the wake of highly publicized DTE contracts with Boeing and Intel. Most employers, even large ones, lack the sophistication and bandwidth to co-create DTE offerings with health systems.

But those two deals may have led health systems to mistake what employers are looking for in a relationship. Both Boeing and Intel keep their employees for decades, and are interested in solutions, like chronic disease management, that have a longer-term return on investment (think heart disease management for the 55-year-old engineer).

The average employer, on the other hand, keeps a worker for just a few years. They don’t have a “population health” problem: from a healthcare cost perspective, they won’t see an ROI from management of chronic conditions.

Their pressing healthcare cost problems result from high-cost events, like a premature baby in the NICU, an unexpected spine surgery or a new cancer diagnosis.

Most health system ACOs have been designed to manage the cost of aging Medicare beneficiaries with multiple chronic diseases via enhanced primary care—and are a mismatch for delivering what the average employer needs the most: high-cost episode management, behavioral health support, and ready, available, guaranteed access.

Striking successful DTE deals will require providers to augment their service offerings beyond traditional population health, and to demonstrate their success in managing the benefit costs of their own employees.

The attractive economics of Medicare Advantage

Posted on February 15, 2020 by henrykotula • Posted in 2020 Election Issues, ACA, Health Insurance Industry, Health Policy, Medicare, Medicare Advantage • Leave a comment

https://mailchi.mp/0ee433170414/the-weekly-gist-february-14-2020?e=d1e747d2d8

After years of subsidizing Medicare Advantage (MA) plans in an effort to attract more insurers and beneficiaries to the market, the government has succeeded in its goal: the average beneficiary can now choose from 28 plans in 2020, and recent studies have shown MA plans are outperforming fee-for-service (FFS) Medicare on several key quality measures.

As shown above, this subsidy has decreased in recent years—as mandated by the Affordable Care Act—and per-beneficiary MA payments are roughly equal to those of FFS Medicare. (These numbers may be underreported, however, due to aggressive risk adjustment measures on the part of MA plans.) However, risk-adjusted average Medicare cost per MA beneficiary is actually 13 percent lower than per Medicare FFS beneficiary, due mainly to lower utilization of high-cost services and other efficiencies.

Insurers offering MA plans are profiting from this lucrative “spread.”

Growth in MA plans in recent years ensures that private insurers will continue to play an important role in the future of Medicare—the most recent projections estimate that 47 percent of Medicare beneficiaries will be in MA plans within a decade.

But inefficiencies in traditional Medicare may not make it the best standard on which to base MA payments. And ultimately, relative MA payment rates will have to continue to drop for the program to sustainably manage the healthcare costs of the gigantic Baby Boom generation.

Appeals court strikes down Trump approval of Medicaid work requirements

Posted on February 15, 2020 by henrykotula • Posted in 2020 Election Issues, ACA, District Court, District Court of Appeals, Health Policy, Medicaid, Medicaid Block Grants, Medicaid Expansion, Medicaid Work Requirements • Leave a comment

Appeals court strikes down Trump approval of Medicaid work requirements

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A federal appeals court on Friday struck down the Trump administration’s approval of Medicaid work requirements in Arkansas, the latest legal blow to one of President Trump‘s signature health initiatives.

The U.S. Court of Appeals for the D.C. Circuit affirmed a lower court ruling that the approval of the work requirements was “arbitrary and capricious.”

More than 18,000 people lost coverage in Arkansas due to the work requirements before they were halted by a lower court.

The court found that the Trump administration disregarded the statutory purpose of Medicaid — to provide health coverage — and did not adequately account for the coverage losses that would result from the work requirements.

“Failure to consider whether the project will result in coverage loss is arbitrary and capricious,” Judge David Sentelle, an appointee of President Reagan, wrote in the opinion.

Requiring Medicaid recipients to work or else lose coverage is a top priority of Centers for Medicare and Medicaid Services Administrator Seema Verma. She argues that the policy helps lift people out of poverty by getting them jobs and out of Medicaid into employer-based insurance.

But Democrats and health care advocates have denounced the move, saying it imposes burdensome paperwork requirements on low-income people that cause them to lose coverage even if they are working.

The policy has also faced a string of legal losses, with courts ruling that Congress would need to act to authorize the work requirements.

Arkansas was the only state where the requirements went into effect before being blocked by the courts. Several other states’ efforts were approved, but the initiatives have been halted as the issue works its way through the courts.

“The Court recognized the tragic harm that these work requirements have caused people in Arkansas doing their best to get ahead,” said Kevin De Liban, an attorney at Legal Aid of Arkansas, which helped challenge the requirements. “Now, more than two hundred thousand Arkansans on the program can rest easier knowing that they’ll have health care when they need it.”

Conservative changes to Medicaid have been a leading priority of the Trump administration, which also recently announced plans to let states block-grant their funding for the program. That move was also denounced by Democrats as inevitably leading to coverage losses and is also likely to be challenged in court.

Kentucky had originally also been part of the work requirement litigation, but a Democratic governor, Andy Beshear, was elected last year and ended the initiative.

Cartoon – Follow Your Dreams

Posted on February 15, 2020 by henrykotula • Posted in Cartoon, Dreams, Employee, Employee Engagement, Inspiration • Leave a comment

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