On Wednesday, CMS unveiled the ACO Primary Care Flex Model, which will offer participating accountable care organizations (ACOs)—whether new or renewing—in the Medicare Shared Savings Program (MSSP) a one-time, advanced payment along with monthly prospective payments, rather than shared savings at the end of a given performance year.
Set to begin in January 2025, the five-year, voluntary model is targeted at “low-revenue” ACOs (as defined by their share of Medicare Parts A and B spending for assigned beneficiaries). The National Association of ACOs (NAACOS), which supports the ACO Primary Care Flex Model, has asked that CMS reconsider its exclusion of high-revenue ACOs, saying that the exclusion prevents independent primary care practices that have already joined a health system ACO from being able to access the benefits of the new model.
The Gist: This new model is designed to better support smaller ACOs—which tend to be physician-only—by giving them access to a more stable cash flow.
The highest-performing ACOs in the MSSP have been smaller, physician-only ACOs with relatively more primary care physicians and fewer specialists.
With less than half of traditional Medicare beneficiaries in an ACO as of January 2024, CMS must entice more providers to join or form ACOs if it is to achieve its goal of getting every Medicare beneficiary into an accountable care arrangement by 2030.
Wall Street has fallen out of love with big insurers that depend heavily on the federal government’s overpayments to the private Medicare replacement plans they market, deceptively, under the name, “Medicare Advantage.”
I’ll explain below. But first, thank you if you reached out to your members of Congress and the Biden administration last week as I suggested to demand an end to the ongoing looting by those companies of the Medicare Trust Fund.
As I wrote on March 26, the Center for Medicare and Medicaid Services was scheduled to announce this week how much more taxpayer dollars it would send to Medicare Advantage companies next year. On January 31, CMS said it planned to increase the amount slightly to account for the increased cost of health care, based on how much more the government likely would spend to cover people enrolled in the traditional Medicare program. It uses traditional Medicare as a benchmark.
Big insurers like UnitedHealthcare, Humana and Aetna, owned by CVS, howled when CMS released its preliminary 2025 rate notice that day. They claimed they wouldn’t be getting enough of taxpayers’ dollars. So they launched a high-pressure campaign to get CMS to give them more money. They demanded extra billions because, they said, their Medicare Advantage enrollees had used more prescription drugs and went to the doctor more often in 2023 and January of this year than the companies had expected.
CMS announced after the market closed Monday that it was sticking to its plan to increase payments to Medicare Advantage plans by 3.7% – more than $16 billion –from 2024 to 2025. That would mean that it would pay companies that operate MA plans between $500 and $600 billion next year, considerably less than insurers wanted.
Shocked investors began running for the exits right away. When the New York Stock Exchange closed at 4 p.m. ET on Tuesday, more than 52 million shares of the companies’ stock had been traded–many millions more than average–driving the share prices of all of them way down. And the carnage has continued throughout this week.
By the end of trading yesterday, UnitedHealth, Humana and CVS/Aetna had lost nearly $95 billion in market capitalization. To put that in perspective, that’s more than the entire market cap of CVS, which fell to $93 billion yesterday.
All seven of the big for-profit companies with Medicare Advantage enrollment had a bad week, although Cigna, where I used to work and which announced recently it is getting out of the Medicare Advantage business next year, suffered the least. Its shares were down a little more than 1% as of yesterday afternoon.
Humana, the second largest MA company, which last year said it was getting out of the commercial insurance business to focus more fully on Medicare Advantage, by contrast, was the biggest loser of the bunch–and one of the biggest losers on the NYSE. Its shares fell more than 13% on Tuesday. As of yesterday, they were still down nearly 12%.
Noting that Humana’s stock has fallen 40% this year, he wrote:
Last fall, the insurer Humana was on top of the world. The stock was trading above $520 per share, as the company’s major bet on Medicare Advantage—the privately-run, publicly-funded insurance program for U.S. seniors—seemed to be paying off.
Long a darling of Wall Street’s analyst class, the stock had returned nearly 290% since the start of 2015, handily outperforming the S&P 500 over the same period.
Over the past five months, that position has crumbled. Humana shares were down to $308 Tuesday morning, as the outlook for Medicare Advantage and, by extension, for Humana’s business, has grown dimmer and dimmer.
Humana shares dived 12.3% early Tuesday, after the latest blow to the future prospects for the profitability of the Medicare Advantage business. Late Monday, the Centers for Medicare and Medicaid Services announced Medicare Advantage payment rates for 2025 that fell short of investor expectations.
The other companies also had a disastrous week. Shares of UnitedHealth, the biggest of the group in terms of Medicare Advantage enrollment (and overall revenues and profits), had fallen by 7% by the end of the day yesterday. CVS/Aetna’s shares were down 7.1%; Elevance’s were down 3.37%; Molina’s were down 7.15%; and Centene’s were down 7.33%.
When I was at Cigna, one of my responsibilities was to handle media questions when the company announced quarterly earnings, mergers and acquisitions, and whenever there was a major event like the CMS rate notice. The worst days of my 20-year career in the industry were when some kind of news triggered a stock selloff. I had to try to put the best spin possible on the situation. But my job was relatively easy compared to what the CEO, CFO and the company’s investor relations team had to do.
You can be certain they have been on the phone and in Zooms all week with Wall Street financial analysts, big institutional investors and even the company’s big employer customers in attempts to persuade them that the sky has not fallen.
You can also be certain that the companies will now shift their focus to the political arena. To keep this from happening again, they will begin pouring enormous sums of your premium dollars into campaigns to help elect industry-friendly candidates for Congress and the presidency this November. We provided a glimpse of where they’re already sending those donations in a story last November. We will continue to monitor this in the months ahead.
Last Monday, CMS announced the base payment rate it will pay Medicare Advantage plans in 2025: plans will see an average 3.7%, or $16 billion, increase in payments once risk scores are factored in but a cut to base payments of 0.16% since 2025 risk scores were expected to be 3.86%. That’s the math.
It came as a surprise to insurers and investors who had imagined CMS would modify its November proposed rule to increase payments as has been the precedent in prior years. Per Bloomberg:
Then on Wednesday, CMS released a 1327-page final rule with sweeping directives about how Medicare Advantage plans should operate starting next year:
“This final rule will revise the Medicare Advantage (Part C), Medicare Prescription Drug Benefit (Part D), Medicare cost plan, and Programs of All-Inclusive Care for the Elderly (PACE) regulations to implement changes related to Star Ratings, marketing and communications, agent/broker compensation, health equity, dual eligible special needs plans (D-SNPs), utilization management, network adequacy, and other programmatic areas. This final rule also codifies existing sub-regulatory guidance in the Part C and Part D programs.”
When first proposed in November, insurers pushed back. In response, most of the 3463 comment letters received by CMS said they needed more time to modify their plans. CMS replied: “We appreciate the commenter’s concern regarding the plans having enough time to understand the impact of finalized regulations. We will take their recommendation into consideration for future rulemaking.” P20). Accordingly, all MA plans must get approvals from CMS reflecting these changes on or before June 3, 2024.
Arguably, CMS took this hardline approach because bona fide studies by MedPAC, USC Shaeffer and others found widespread risk-score upcoding by Medicare Advantage plans that resulted in 6%-20% annual overpayments by Medicare.
Recent high-profile missteps by two of the biggest and most profitable MA players no doubt reinforced CMS’ get tougher posture: UnitedHealth Group’s Change Healthcare cybersecurity breech and Cigna’s $172 million Fraud and Abuse penalty for inflating its MA risk coding.
So, the transition from Medicare Advantage circa 2024 to Medicare Advantage 2025 will be its most significant since Medicare Choice was included in the Balanced Budget Act of 1997. In 2024, Medicare Advantage experienced enrollment growth and profitability to which its players were accustomed despite a late-year spike in utilization:
33.8 million Medicare enrollees (or 51% of total Medicare enrollment) get their coverage from Medicare Advantage plans—up 6.4% from 2023.
The average Medicare beneficiary has access to 43 Medicare Advantage plans in 2024, the same as in 2023, but more than double the number of plans offered in 2018. The majority of options do not require an extra payment above what Medicare pays private issuers on their behalf and the majority offer supplemental benefits including dental, eyecare, wellness et al.
And Medicare Advantage insurers entered the year on solid financial footing: the biggest issuers posted strong profits in 2023 i.e. UnitedHealth Group: $22.4 billion, CVS (Aetna) Health: $8.3 billion, Elevance Health: $6 billion, Cigna Group: $5.2 billion, Centene: $2.7 billion, Humana: $2.5 billion
In 4Q 2023, pent-up demand for services by Medicare Advantage enrollees pushed utilization of doctors, hospitals and other providers up 8.1% above prior year levels including 4Q 2023 increases for outpatient surgery 14.4%, outpatient visits excluding ER and surgery 8.7%, physician visits 6.0%, inpatient adult care 5.3%, Part B drugs 5% and ER visits 4%.
But 2025 will be different. The 4Q spike in utilization and impact of the new rules will have profound impact on Medicare Advantage: the biggest players like United and Humana will adapt and be OK, but others downstream will be disrupted or impaired:
Smaller MA plan sponsors and their lobbyists: AHIP, ACHP, BCBSA, Better Medicare Alliance and the army of lobbyists deployed to defeat these rules took a hit. Members pay dues for results. These rules were disappointing (though it could have been worse).
MA brokers, agents and marketing organizations: The limits on compensation, constraints on MA marketing tactics and enrollee protections around transparency may reduce revenues for many third-party marketing organizations that sell their services to the plans. A shakeout is likely.
Supplemental services providers: lower payments by CMS will force some to reduce/eliminate supplemental benefits that are valued less by enrollees. Dental and prescription drug benefits appear safe but others (i.e. fitness programs) might be cut by some.
Hospitals and physicians: Cuts by CMS to MA plans will trickle-down as reimbursement cuts to direct providers of care. Hardest hit will be smaller and rural providers in communities with large MA enrollment.
MA enrollees: Though the rule adds behavioral health benefits, data privacy protections and equity considerations in utilization management decisions by the plans, the likely impact of the rate cut is fewer plan options for enrollees and higher premiums. Margin compression for MA plans will hurt bigger plans who will adapt but incapacitate smaller plans unable to survive.
The Presidential campaigns: MA sponsors must submit their proposed 2025 plans to CMS on or before June 3, 2024—in the midst of Campaign 2024. And open enrollment will begin in October as MA plans launch marketing for their newly-revised offerings. No doubt, the Campaigns will opine to Medicare security in their closing rhetoric recognizing MA covers more than half its enrollees.
My take:
These rules are a big deal. CMS appears poised to challenge the industry’s formidable strengths and force changes.
Together, these rules will disrupt day to day operations in every MA plan, intensify friction with providers over network design, coverage and reimbursement negotiations and confuse enrollees who might have to pay more or change plans.
Medicare Advantage remains a work-in-process. Stay tuned.
On Tuesday, the Centers for Medicare and Medicaid Services (CMS) published a final rule redefining how disproportionate share hospital (DSH) payments are determined.
Hospitals used to calculate their Medicaid shortfalls based on the costs and payments associated with all of their Medicaid-eligible patients, even if some of those patients used a different primary payer. Prompted by Congress to address this issue in 2021, CMS is now limiting the scope of Medicaid shortfall to only patients for whom Medicaid is their primary payer. The rule exempts safety-net hospitals providing care to the highest percentages of low-income patients, defined as those in the 97th percentile of inpatient days treating Medicare SSI (Social Security Income) recipients.
This change is expected to amount to an $8B annual reduction in DSH payments over the next four years. Congress has repeatedly delayed the implementation of these cuts, which are now set to go in effect on March 8, 2024.
The Gist: Though the formula for calculating appropriate DSH payments has always been complex, the point of the program is to provide additional support to hospitals caring for underserved, low-income populations.
This $8B cut may be targeted at hospitals with slightly better payer mixes, but it will be felt heavily by many safety-net providers reliant on the payments, especially in today’s challenging financial operating environment where over 40 percent of hospitals are still losing money on operations.
Jayne Kleinman is bombarded with Medicare Advantage promotions every open enrollment period — even though she has no interest in leaving traditional Medicare, which allows seniors to choose their doctors and get the care they want without interference from multi-billion-dollar insurance companies.
“My biggest problem with being barraged is that so many of the ads were inaccurate,” Kleinman, a retired social services professional in New Haven County, Connecticut, told HEALTH CARE un-covered.
“They neglect to say that the amount of coverage you get is limited. They don’t talk about what you are losing by leaving traditional Medicare. It feels like insurance companies are manipulating us to get Medicare Advantage plans sold so that they can control the system, as opposed to treating us like human beings.”
Seniors face a torrent of Medicare Advantage advertising: an analysis by KFF found 9,500 daily TV ads during open enrollment in 2022. A recent survey by the Commonwealth Fund found that 30% of seniors received seven or more phone calls weekly from Medicare Advantage marketers during the most recent open enrollment (Oct. 15 to Dec. 7) for 2024 coverage.
In 2023, a critical milestone was passed: over half of seniors are now enrolled in privatized Medicare Advantage plans. The marketing for these plans nearly always fails to mention how hard it is to return to traditional Medicare once you are in Medicare Advantage, and that the MA plans have closed provider networks and require prior authorization for medical procedures. Instead, the marketing emphasizes the fringe benefits offered by Medicare Advantage plans like gym memberships.
U.S. Sen. Ron Wyden (D-Ore.), chairman of the Senate Finance Committee, criticized the widespread and predatory marketing of Medicare Advantage in a report in November 2022 and has continued to pressure the Biden administration to do more to address the problem.
The report said that consumer complaints about Medicare Advantage marketing more than doubled from 2020 to 2021 to 41,000. It cites cases such as that of an Oregon man whose switch to Medicare Advantage meant he could no longer afford his prescription drugs, as well as a 94-year-old woman with dementia in a rural area who bought a Medicare Advantage plan that required her to obtain care miles further from her residence than she had to travel before.
When open enrollment began last fall, it was “the start of a marketing barrage as marketing middlemen look to collect seniors’ information in order to bombard them with direct mail, emails, and phone calls to get them to enroll,” Wyden stated in a letter to the Centers for Medicare and Medicaid Services (CMS), which was signed by the other Democrats on the Senate Finance Committee.
Just three weeks after Wyden sent the letter, CMS released a proposed rule reforming Medicare Advantage practices that the main lobby group for Medicare Advantage plans, the Better Medicare Alliance, endorsed.
But key recommendations by Wyden were missing, including a ban on list acquisition by Medicare Advantage third-party marketing organizations, which includes brokers, and banning brokers that call beneficiaries multiple times a day for days in a row.
Among the prominent third-party marketing organizations is TogetherHealth, a subsidiary of Benefytt Technologies, which runs ads featuring former football star Joe Namath.
In August 2022, the Federal Trade Commission forced Benefytt to repay $100 million for fraudulent activities. The month before, the Securities and Exchange Commission levied more than $12 million in fines against Benefytt.
But CMS continues to allow Benefytt to work as a broker. Benefytt is owned by Madison Dearborn Partners, a Chicago-based private equity firm with ties to former Chicago mayor and current Ambassador to Japan Rahm Emanuel. Benefytt collects leads on potential customers, which they then sell to brokers and insurers to aggressively target seniors. CMS did not provide comment as to why they had not blocked Benefytt’s continuing work as a third-party marketing organization for Medicare.
Two different rounds of rule-making on Medicare Advantage marketing in 2023 instead focused on such reforms as reining in exaggerated claims and excessive broker compensation.
The enormous profits generated by Medicare Advantage plans — costing the federal government as much as $140 billion annually in overpayments to private companies — explains what drives the aggressive and often unethical marketing practices, said David Lipschutz, an associate director at the Center for Medicare Advocacy.
“The fact is, there is an increasingly imbalanced playing field between Medicare Advantage and traditional Medicare,” he said. “Medicare Advantage is being favored in many ways. Medicare Advantage plans are paid more than what traditional Medicare spends on a given beneficiary.
Those factors combined with the fact that they generate such profits for insurance companies, leads to those companies doing everything they can to maximize enrollment.”
Adding to the problem, Lipschutz argued, was the enormous influence of the health insurance industry in Washington. Health insurers spent more than $33 million lobbying Washington in just the first three quarters of 2023 alone.
“There is no real organized lobby for traditional Medicare, or organized advertising efforts,” he said. “During open enrollment, 80% of Medicare-related ads have to do with Medicare Advantage. We regularly encounter very well-educated and savvy folks who are tripped up by advertising and lured in by the bells and whistles. The deck is stacked against the consumer.”
Private equity firms have made a large investment in the Medicare Advantage brokerage and marketing sector, in addition to Madison Dearborn’s acquisition of Benefytt. Bain Capital, which Sen. Mitt Romney (R-Utah) co-founded, invested $150 million in Enhance Health, a Medicare Advantage broker, in 2021.
The CEO of EasyHealth, another private equity-backed brokerage, toldModern Healthcare in 2021 that “Insurance distribution is our Trojan horse into healthcare services.”
As federal law requires truth in advertising, a group of advocacy organizations–led by the Center for Medicare Advocacy, Disability Rights Connecticut, and the National Health Law Project–cited what they considered blatantly deceptive marketing by UnitedHealthcare to people who are eligible for both Medicare and Medicaid, in a complaint to CMS.
UnitedHealthcare had purchased ads in the Hartford Courant asking seniors in large bold-faced type: “Eligible for Medicare and Medicaid? You could get more with UnitedHealthcare.”
People who are eligible for both Medicare and Medicaid due to their income level are better off in traditional Medicare than Medicare Advantage given that Medicaid covers their out-of-pocket costs, meaning that they have wide latitude to choose their doctors, hospitals and medical procedures.
Sheldon Toubman, an attorney with Disability Rights Connecticut who worked to draft the complaint, framed the ad in the broader context of poor marketing practices by the Medicare Advantage industry.
“I have been aware for a long time of basically fraudulent advertising in the MA insurance industry,” Toubman told HEALTH CARE un-covered. “There’s an overriding misrepresentation — they tell you how great Medicare Advantage is, and never the downsides.
“There are two big downsides of going out of traditional Medicare:
They don’t tell you that you give up the broad Medicare provider network, which has nearly every doctor. And should you need expensive medical care in Medicare Advantage, you will learn there are prior authorization requirements. Traditional Medicare does almost no prior authorization, so you don’t have that obstacle. They don’t ever tell you any of that,” he said.
But it is marketing to dual-eligible individuals that is arguably the most problematic, Toubman argued. “They have Medicare and they are also low income. Because they are low-income, they also have Medicaid.
“Medicaid is a broader program — it covers a lot of things that Medicare doesn’t cover.
In Connecticut, 92,000 dual-eligible seniors have been ‘persuaded’ to sign up for Medicare Advantage. What’s outrageous about the marketing is they get you to sign up by offering extra services. … If you look at the ad in the Hartford Courant, it says you could get more, with the only real benefit being $130 per month toward food. But you now have this problem of a more limited provider network and prior authorization. UnitedHealth is doing false advertising.”
It’s a nationwide problem, Toubman said. “All insurers are doing this everywhere. We’re asking CMS and the Federal Trade Commission to conduct a nationwide investigation of this kind of problem. The failure to tell people that they give up their broader Medicare network — they don’t tell anybody that.”
For Jayne Kleinman, the unending ads are about one thing only: insurance industry profits. “Medicare Advantage has been strictly based on the people who make millions of dollars at the top of the company making more,” she said. “It’s all about money, not about you as an individual. Every time I saw an ad I’d get angry every single time — because I felt they were misleading people. The Medicare Advantage insurers are trying to scam people out of an interest of making money.”
A pair of senators are asking CMS to require Medicare Advantage plans to cover stays in long-term care facilities at the same rate as traditional Medicare.
Chris Murphy, a Connecticut Democrat, and Thom Tillis, a North Carolina Republican, wrote a letter to CMS Administrator Chiquita Brooks-LaSure Dec. 21, asking the agency to clarify MA plans cannot use different standards to approve long-term care than traditional Medicare.
In their letter the senators wrote they have heard concerns from long-term care hospitals in states that “regularly receive denial letters from Medicare Advantage plans.”
“Unfortunately, Medicare Advantage plan prior authorization practices are creating significant barriers to [long-term hospital] care for critically and chronically ill patients,” the senators wrote.
In a final rule issued in April, CMS said Medicare Advantage plans cannot implement prior authorization criteria that are more stringent than traditional Medicare. In their letter, the senators asked the agency to clarify this statute also applies to long-term care hospitals.
“We write to ask CMS to confirm this interpretation is correct and to request such information be publicly clarified to eliminate confusion for Medicare Advantage plans and ensure that [long-term care hospitals] are treated the same as any other post-acute care provider under the Medicare Advantage regulations,” the senators concluded.
Last week, the Centers for Medicare and Medicaid Services (CMS) issued the final 2024 Physician Fee Schedule, which reduces overall payment rates for physicians by 1.25 percent, including a 3.4 percent decrease in the conversion factor for relative value units, compared to 2023.
The rule also implements a new add-on payment for complex evaluation and management visits, which is expected to boost pay for primary care physicians.
The American Medical Association (AMA) strongly opposes these cuts and immediately appealed to Congress for a reprieve. In response, the Senate Finance Committee unanimously advanced a bill to the Senate floor that would reduce the conversion-factor rate cut from 3.4 percent to 2.15 percent, while also delaying reductions in Medicaid disproportionate share funding for safety-net hospitals. Senate Majority Leader Chuck Schumer (D-NY) has indicated he intends to assemble a broad healthcare bill, including some or all of these provisions, by the end of this year.
The Gist: Physicians were hopeful that inflation’s toll on labor and supply costs would earn them a break from continued Medicare pay cuts, but CMS remains committed to reductions within its budget neutrality framework.
Earlier this year, the Medicare Payment Advisory Commission (MedPAC) recommended for the first time that physician payments be tied to an index of physician practice inflation, but that would require legislative intervention, which Congress has not taken up.
The AMA calculated that Medicare physician pay has lagged inflation by 26 percent since 2001, pointing to burnout and large numbers of physicians exitingthe profession as a result.
Until calls for Medicare payment reform are heeded, physicians, like health systems, will have to adopt new, lower-cost models of care to cope with what they will continue to see as insufficient reimbursements.
California Governor Gavin Newsom signed a bill directing the state’s Health and Human Services Agency to work with the federal government to create a waiver allowing Medicare and Medicaid funding to be reallocated toward a universal health insurance system for its residents.
The established timeline sets California on track to submit its final waiver for federal approval in 2026. The law does not specify whether universal coverage would be via a single-payer system, which is what Newsom favored in 2018. The California Nurses Association opposed the bill on the grounds that it does not commit to a single-payer outcome, while the California Association of Health Plans protested against its threat to end private coverage in the state.
The Gist: This is California’s 10th attempt at universal care, with all previous attempts having ended in failure because, despite both popular and political support in the state, there has not been consensus on how to pay for it.
This most recent bill only passed because it was separated from a funding bill, since shelved, addressing the over $300B in tax revenue needed to pay for it. This process-first approach may be seen as a calculated appeasement of the Democratic Party’s left wing, as Governor Newsom clearly holds aspirations for higher office—but so far,
healthcare has not ranked among the top issues for the current roster of candidates targeting the White House in 2024.
A piece published this week in the New York Times documents how Medicare spending per beneficiary has flattened since the early 2010s, coming in below projections by nearly $4T.
While the authors run through possible explanations, including changes made by the Affordable Care Act and to the Medicare Advantage program, the proliferation of effective cholesterol and blood-pressure medications, and fewer breakthroughs in new, expensive drug classes, they acknowledge that scholars have not reached a consensus on the primary drivers of this trend.
Beyond academic debate, there is also no agreement on how long the flattened spending pattern will hold—or what factors might reignite rapid cost growth.
The Gist:
Whatever the causes of this phenomenon, it has helped avert the kind of Medicare austerity measures that dominated political debates on the program in past decades.
We assume some of this flattening has to do with the fact that the average age of Medicare beneficiaries has dropped as Baby Boomers have entered the program in droves, given that younger beneficiaries are much less costly to insure.
In coming decades, the average age of Medicare beneficiaries will increase, along with their care costs, and the total number of Medicare beneficiaries will continue to rise.
By 2053, seniors will make up over 22 percent of the population and over 40 percent of the projected federal budget will be spent on programs for them.
On Tuesday, CMS announced the States Advancing All-Payer Health Equity Approaches and Development (AHEAD) Model, a new payment model that will give up to eight states or sub-state regions the ability to test global hospital budgets across an 11-year period.
Participating states will assume responsibility for managing healthcare costs for traditional Medicare and Medicaid populations, while encouraging private payers to pay hospitals under a similar relationship.
Primary care practices will have the option to participate in a primary care component of the model, called Primary Care AHEAD, in which they will receive a Medicare care management fee and be required to engage in state-led Medicaid transformation initiatives.
CMS is hoping that the AHEAD model will reduce healthcare cost growth, improve population health, and reduce health outcome disparities. It builds upon existing Innovation Center state-based models, including the Maryland Total Cost of Care Model, the Vermont All-Payer Accountable Care Organization Model, and the Pennsylvania Rural Health Model, which have all shown promise in lowering Medicare spending while improving patient outcomes.
Program applications will open late this year, and the first states selected would begin a pre-implementation period in summer 2024.
The Gist:
Shifting to a total-cost-of-care model will be a difficult undertaking for even the most motivated states.
Though a stable annual budget may be a welcome prospect to struggling hospitals, large regional systems may balk at the idea, especially as the Maryland Hospital Association has claimed that their state’s regulated rates have lagged hospital cost inflation by 1.3 percent per year.
With the Medicare Shared Savings Program (MSSP)saving only one quarter of one percent of Medicare’s total spending in 2022, CMS has good reason to explore other ways to reduce Medicare cost growth
—but these Innovation Center models will only achieve their goals if they can first induce sufficient participation.
HENRY KOTULA 