Category Archives: Center for Medicare and Medicaid Services (CMS)

Red states’ Medicaid gamble: Paying more to cover fewer people

Posted on by • Posted in 2020 Election Issues, ACA, Block Grants, Center for Medicare and Medicaid Services (CMS), Health Policy, Medicaid, Medicaid Block Grants, Medicaid Expansion • Leave a comment

https://www.axios.com/republicans-medicaid-affordable-care-act-expensive-d7057a8e-0a55-4f0d-906e-e42aa3f00ba9.html

Illustration of a price tag hanging from an IV stand

Red states are getting creative as they look for new ways to limit the growth of Medicaid. But in the process those states are taking legal, political and practical risks that could ultimately leave them paying far more, to cover far fewer people.

Why it matters: Medicaid and the Children’s Health Insurance Program cover more than 72 million Americans, thanks in part to the Affordable Care Act’s Medicaid expansion. Rolling back the program is a high priority for the Trump administration, and it needs states’ help to get there.

The big picture: The Centers for Medicare & Medicaid Services, under the leadership of Administrator Seema Verma, has made clear that it wants to say “yes” to new limits on Medicaid eligibility, and has invited states to ask for those limits.

  • But CMS hasn’t actually said “yes” yet to some of the most significant limits states have asked for.
  • In the meantime, states are left either with vague ambitions they’re not sure how to implement, or with risky plans that put their own budgets on the line.

What we’re watching: State-level Republicans are waiting for CMS to resolve two related issues: how much federal funding their versions of Medicaid can receive, and the extent to which they’re able to cap enrollment in the program.

  • “These issues are going to continue to be intertwined,” said Joan Alker, the executive director of Georgetown University’s Center for Children and Families.

Verma has reportedly told state officials that she wants to use her regulatory power to convert Medicaid funding into a system of block grants — which would be an enormous rightward shift and probably a big cut in total funding.

  • CMS probably cannot do that on its own, experts said, but it could achieve something similar by approving caps on either enrollment or spending.

Where it stands: GOP lawmakers in a handful of states are looking to Utah, which has bet big on Verma’s authority, for signals about what’s possible.

  • Utah voters approved the full ACA expansion last year, but the state legislature overruled them to pass a more limited version.
  • By foregoing the full expansion, Utah passed up enhanced federal funding. It’s still asking for that extra money — a request CMS has never previously approved.
  • Utah will also ask CMS to impose a per-person cap on Medicaid spending — a steep cut that was part of congressional Republicans’ failed repeal-and-replace bill, and which may strain CMS’ legal authority.
  • If Utah doesn’t get those two requests, its backup plan is simply to adopt the full expansion.

What’s next: Utah is not the only red state leaning into Verma’s agenda, but it’s further out on a limb than any other.

  • Idaho, like Utah, overruled its voters to pass a narrower Medicaid bill. But it preserved an option for people to buy into the ACA’s expansion.
  • Alaska Gov. Mike Dunleavy has said he wants to take Verma up on her offer of block grants; so have legislators in Tennessee and Georgia. But in the absence of any detail about what that means, or what CMS will approve, that’s all pretty vague right now.

If CMS does move forward on any of this, it could face the same threat of lawsuits that have stymied its first big Medicaid overhaul — work requirements.

  • Those rules are on ice in two states because a judge said they contravene Medicaid’s statutory structure and goals. The same argument could await a partial expansion or tough spending caps.

“There’s a clear agenda here to get a handful of states to take up these waivers, which fundamentally undermine the central tenets of the Medicaid program — which [are] that it is a guarantee of coverage, and a guarantee of federal funding,” Alker said.

 

 

 

 

The Problematic Law And Policy Of Medicaid Block Grants

Posted on by • Posted in 2020 Election Issues, Center for Medicare and Medicaid Services (CMS), Medicaid, Medicaid Block Grants, Office of Management and Budget (OMB) • Leave a comment

https://www.healthaffairs.org/do/10.1377/hblog20190722.62519/full/?utm_source=Newsletter&utm_medium=email&utm_content=Health+Spending+Briefing%3B+Single-Payer%3B+Drug+Prices%3B+Cannabis+Patients%3B+ACA%3B+Access+To+Antidiabetic+Drugs%3B+Skilled+Nursing+Facilities&utm_campaign=HASU

Image result for Medicaid Block Grants

Recent news reports indicate that the Trump administration is seeking to authorize states to convert open-ended federal Medicaid funds into a block grant system, and a formal proposal to do so landed at the Office of Management and Budget on June 4. House Democrats have written to Health and Human Services (HHS) secretary Alex Azar to express their concerns about the legal and policy implications of a block grant system. 

Not only are there strong legal arguments against efforts to implement a block grant policy, but block grants would also create challenges for states that chose to implement such a program. These legal and policy concerns are foreseeable. The Centers for Medicare and Medicaid Services (CMS) is not only courting yet another legal battle but also threatening access to important health care services—such as prescription drugs, as discussed below—for many of the most vulnerable patients.

Understanding Capped Spending Proposals

The Medicaid Act provides for unlimited federal matching funds for all state spending under Medicaid’s federal rules. This federal match is required by law and encourages states to implement both Medicaid’s mandatory benefits and its optional benefits, such as prescription drugs. This unlimited federal funding also has been central in helping states respond to economic shocks such as recessions and natural disasters and to unplanned programmatic demands such as public health emergencies or expensive new treatments. Switching Medicaid to a block grant program has been proposed by prior administrations and most recently appeared in different bills during the Affordable Care Act repeal-and-replace debates in 2017, but such proposals have been rejected by Congress.

Despite Congress’s refusal to alter Medicaid in this way, and despite long-standing and clear benefits to states of open-ended entitlement funding, the Trump administration has been inviting states, such as Alaska, to discuss capped spending, and other states are poised to respond to the new policy guidance. For example, Alaska commissioned a study of block grants; Tennessee’s legislature enacted a law commanding the governor to seek a block grant; Utah submitted a waiver application seeking per capita caps for Medicaid spending; and Texas commissioned a block grant study in 2017.

To understand this drastic policy change, a little more background is helpful. Medicaid operates through joint funding by states and the federal government, with the federal government matching states’ spending at a set rate that is informed by the per capita income of a state. A poorer state such as Mississippi has a higher federal match rate (76 percent in 2019) than wealthier states (for example, New York at 50 percent). In either case, for every dollar a state spends on Medicaid, it receives a matching amount of federal funds—without limit—making Medicaid a statutory entitlement for states participating in the program.

The federal match developed out of states’ inability to provide adequate medical support for their poor residents. Although the federal government gave states a kind of block grant (grants in aid) before Medicaid was enacted in 1965, the unlimited federal match that the Medicaid Act provides was designed to increase help for poor people while still allowing states to provide for the needs of their particular populations within a federal statutory baseline.

A block grant scheme would be very different from Medicaid’s statutorily required open-ended funding. Caps on spending could be designed in a number of ways, such as a block grant under which states would receive a limited, pre-budgeted amount of money from the federal government, or a per capita cap, which would pre-determine the amount of money spent per person enrolled in Medicaid. No matter the specific form of spending limitation, the administration’s planned policy is not lawful. 

Legal Barriers To Capped Spending Proposals

More specifically, the administration would have to grant Section 1115 demonstration waivers to states seeking these limits, because the Medicaid Act does not contemplate such spending limitations. Demonstration waivers can be approved under Section 1115 of the Social Security Act, which gives the secretary of HHS authority to waive Section 1902 of the Medicaid Act if a state’s proposed waiver will further the purposes of Medicaid. The goal of these waivers is to allow states to experiment with certain aspects of the Medicaid program to improve beneficiary coverage or care. Section 1115 does not limit federal spending on demonstration waivers, but since the Carter administration, it has been HHS policy to seek federal budget neutrality in 1115 waivers, although states may spend as much as they like.

At least two statutory problems exist for such waivers in this context. First, Medicaid spells out federal payment within Section 1903, which states that the HHS secretary “shall pay to each State…the [federal match] of the total amount expended…as medical assistance under the State plan….” This language is not waivable under Section 1115, which explicitly permits waivers of Section 1902 but not Section 1903. (HHS can approve more spending than Section 1903 contemplates to match a state’s expansion of Medicaid coverage, but it cannot waive Section 1903.) As a result, HHS cannot cap the Medicaid funds it disburses to states, either per person or programmatically, because it must pay the federal match for the “total amount” of a state’s spending. Even if a state wanted to cap its own Medicaid spending, that would necessitate disenrollment and require waiver of many other Medicaid Act requirements such as sufficient state Medicaid funding, equal coverage of beneficiaries across the state, and adequate payment to providers.

Second, block grants are not “likely to assist in promoting the objectives” of Medicaid, the legal standard for HHS to authorize states’ proposals for demonstration waivers. Medicaid’s statutory purpose is to “furnish medical assistance” to eligible beneficiaries, a phrase that recently has been dissected in the context of HHS’s authorization of several 1115 waivers for Medicaid work requirements. The federal court hearing challenges to the legality of work requirements has interpreted “furnish medical assistance” to mean that Medicaid must pay for care, not simply promote a generalized idea of “health” or decrease cost. Spending caps would certainly decrease enrollment (like work requirements already have in Arkansas) and limit care across all kinds of Medicaid coverage, the opposite of furnishing medical assistance.

Any new CMS policy will likely follow the same pattern as the 2018 State Medicaid Director policy letter authorizing work and other conditions of eligibility. That letter promotes waivers for work requirements under the guise of “health” and cost concerns (although, more generally, CMS has been clear that it disagrees with Medicaid expansion). HHS is likely to offer similar reasoning here, allowing new limitations with a predictable impact on the “undeserving” expansion population. 

HHS’s recent losses in the work requirement cases may pose an obstacle to capped spending proposals. A recent US Supreme Court case may also create barriers. In Department of Commerce v. New York, the Court concluded that an agency cannot engage in sham regulatory processes. The Roberts-led majority expressed deep concern about the secretary of commerce’s predetermined goal of adding a citizenship question to the 2020 census, calling the secretary’s reasons for adding the question a “pretext” and “contrived” because the publicly stated reason for adding the question was totally unrelated to the actual rationale.

This kind of mismatch is likely to exist in the block grant context as well. No state would be able to serve the purposes of Medicaid, that is, to furnish medical assistance, through a cap on spending, because no matter the structure, such a cap would foreseeably result in disenrollment. But HHS cannot permit state waiver applications that seek to disenroll beneficiaries, which means that HHS and states may offer pretextual reasons for authorizing block grants.

Policy Harms To Patients From Capped Spending

Even putting aside legal obstacles to a capped spending system, block grants are simply bad policy. Proposals of this kind are predictably harmful to both beneficiaries and to state economic interests. The Congressional Budget Office has recognized that block grants encourage states to take actions that include restricting enrollment for legally eligible beneficiaries, limiting mandatory and optional benefits, decreasing already low reimbursement rates (which may lead providers to abandon the program), a combination of all three, and more. In some cases, states may pursue such restrictions but then face unexpected economic pressures, such as a natural disaster or a recession. For example, Puerto Rico, which already exists under an alternative and limited Medicaid program, has experienced these problems acutely in the wake of terrible hurricane damage to the island.

Take just one example of a foreseeable area in which a state might seek to limit benefits under a capped spending regime: prescription drug coverage. Prescription drugs have always been an optional category of care under the Medicaid program, but all states have chosen to cover them. That choice comes with a set of obligations as well as a set of benefits for states and beneficiaries. States must cover essentially all Food and Drug Administration-approved drugs, so that beneficiaries are able to access medically necessary products. However, because this coverage requirement limits states’ bargaining power with drug manufacturers, state Medicaid programs are legally entitled to preferred pricing benefits. Medicaid programs receive large statutory discounts off the average market prices of the products they purchase, obtain the “best price” among private market payers if that price is lower, and are protected if the price of a drug increases faster than inflation.

Even with these discounts, Medicaid prescription drug spending is projected to grow faster than spending on other health care services, putting steady pressure on limited state budgets. These pressures are likely only to increase, as new drugs are introduced at ever-higher launch prices. Indeed, Novartis has just launched a drug with a list price of $2.1 million, setting a new standard. Even if these drugs represent good value for the price, states will struggle even harder to pay for these products if they are operating within an inherently limited monetary environment.

Capped spending would prompt states to make dangerous choices for patients. Initially, states might try to exclude individual drugs from coverage, if only to increase their bargaining power and obtain greater discounts on particular drugs. Massachusetts recently requested a waiver to do just that, asking CMS to allow it to exclude particular drugs from its Medicaid formulary that have demonstrated little or no evidence of efficacy. Massachusetts was undoubtedly concerned that spending on some of these high-cost, low-value drugs was crowding out valuable spending elsewhere in its Medicaid program.

However, CMS denied Massachusetts’ waiver request. Although CMS did not explain the legal reasoning behind its denial, it did suggest that a state may choose to exclude drugs if it forgoes Medicaid’s statutory discounts. This strategy, though, is unlikely to lead to savings larger than the program was able to obtain already. Only if a state severely restricts the drugs it will cover, and therefore severely restricts patients’ access to care, could cost savings occur.

States could make other choices that are even more harmful to patients. For example, nearly half of states impose limits on the number of prescriptions Medicaid beneficiaries are able to fill at one time. States that do not have such policies might adopt them, and states that have already implemented such limitations might seek to tighten them—even though recent research suggests that such limits may be harmful to patients. An extreme cost-cutting decision would be to drop prescription drugs from coverage, although this likely would not be states’ first choice for constraining Medicaid expenditures.

States already have significant flexibility within the Medicaid program, which always has been state specific. The administration’s desired policy change attempts to bypass the law, raising serious separation of powers concerns. And capped spending would very likely involve disenrollment and other cost-cutting measures that endanger the lives of the most vulnerable patients. Under a capped spending policy, it is foreseeable that states would face cost-cutting choices that harm the health of Medicaid beneficiaries of all kinds and especially those relying on access to care such as the medications necessary to manage chronic diseases and other life-threatening conditions.

 

 

 

As HHS muses more MA flexibility, payers see roadblocks to nonmedical benefits

Posted on by • Posted in Center for Medicare and Medicaid Services (CMS), Health Policy, Medicare, Medicare Advantage • Leave a comment

https://www.healthcaredive.com/news/as-hhs-muses-more-ma-flexibility-payers-see-roadblocks-to-nonmedical-benef/559350/

Image result for medicare advantage

New regulatory flexibility letting Medicare Advantage plans sell supplemental benefits has opened up a new world of services, from transportation to nutrition, for tens of millions of beneficiaries. But implementation challenges, uncertain return on investment and a lack of clarity on what benefits are allowed may be giving payers, especially the smaller ones, pause on offering the options, experts say.

CMS expanded supplemental benefits in the popular privately-run Medicare plans in an April final rule. Now, Medicare Advantage plans can offer a host of non-traditional benefits, such as at-home grocery delivery, non-emergency medical transportation to doctor appointments or home modifications like installing air conditioning for beneficiaries with asthma and home renovations for fall-prone elderly.

And the department wants to go further than the MA supplemental benefits introduced in April, HHS Secretary Alex Azar said this week at a Better Medicare Alliance annual conference. Because MA plans have budgetary restrictions and a higher risk appetite, the government is comfortable granting them more leeway if it lowers costs and boosts health outcomes.

“We want to open up more opportunities for MA plans and entities they work with, including creative value-based insurance design arrangements, moving care to the home and community and new ways for MA plans to improve a patients’ health over the long term,” Azar said Tuesday.

A number of payers have increased their MA offerings recently to till the fertile ground set up by CMS, including startups Bright Health and Oscar along with heftier players like Centene and UnitedHealthcare.

Currently, MA plans enroll more than one-third of all Medicare beneficiaries, and enrollment is rising steadily every year. At least 40% of those plans offered non-medical benefits in the current plan year at no additional cost to beneficiaries, according to consultancy Avalere.

But further flexibility could present a problem for payers already struggling to assimilate to the increased flexibility and the administrative burden it entails.

Not enough time, money or guidance

Though it approved of the flexible benefit options, payer lobby America’s Health Insurance Plans was concerned in April about the regulatory changes coming just two months before the submission deadline for plan offerings for the 2020 plan year.

That’s because shaping a new benefit can take two to three years, Robert Saunders, research director at the Duke-Margolis Center for Health Policy, told Healthcare Dive. Plans have to work with their actuaries to price what a potential benefit is worth and then incorporate that into their bid.

“Just because you have policy flexibility doesn’t mean you can just now, tomorrow, offer new services,” Saunders said.

While the April rule also increased MA payment rates by 2.5% in 2019 (and rates are expected to hike another 1.6% for 2020), payers also have only a finite amount of funds they can pay back toward medical care. Medicare reimburses MA plans a fixed amount each month, so to provide auxiliary benefits payers have to trim down in other areas.

“If you’re paying for groceries, what else is getting cut?” Jennifer Callahan, executive director of MA product strategy and implementation for Aetna, said. “Is groceries more important than dental coverage? We don’t know.”

Under the CMS regulatory guidance, MA organizations can only develop and offer non-traditional medical benefits if they have a reasonable expectation the services will boost health. That has injected a lot of confusion into the system for payers that may not know what that means, how to measure it and whether they’ll be penalized for slipping up.

“Health plans, especially the small ones, are still looking for clarification on what’s actually allowed,” Nick Johnson, principal at actuarial and consulting firm Milliman, said. Smaller payers often don’t have a large enough sample size to draw conclusions about the positives and negatives of offering specific supplemental benefits, especially in light of substandard quality measures issued from CMS.

A subset of the expanded nonmedical benefits that address social determinants of health factors are officially called “Special Supplemental Benefits for the Chronically Ill” (SSBCI) and can only be offered to an “eligible chronically ill enrollee”: those who have at least one chronic condition and a high risk of hospitalization or adverse health outcomes and require coordinated care.

MA plans can currently offer nonmedical benefits to enrollees for a limited duration of time — typically four weeks, a CMS spokesperson told Healthcare Dive. But only under SSBCI can plans provide these benefits over the long term.

That pigeonholes MA plans from providing additional benefits for a wider spectrum of patients — for example, a person recuperating with serious injuries following a fall who can’t go out and get groceries themselves might appreciate getting them delivered.

However, “just because you were perfectly healthy before, you by definition don’t qualify,” Aetna’s Callahan said. “For me that’s one of the biggest gaps.”

More flexibility unlikely to help rural enrollees

Another concern is that the supplemental benefits could potentially exacerbate health disparities, including the divide between services offered in rural versus urban areas. Non-metropolitan markets tend to be highly concentrated, meaning just one or two insurers dominate the space.

MA is no different. In 619 U.S. counties that account for 4% of overall Medicare beneficiaries, no more than 10% of beneficiaries are enrolled in the privately-run Medicare plans, according to the Kaiser Family Foundation. Many of these low-penetration counties are in rural areas, and less competition means less reason to offer diversified, comprehensive coverage.

“At a national level, what we’re seeing is other places in the country where there’s at least one new benefit offered tend to be urban,” Saunders said.

Many of the add-on services require a specialty workforce — for example, at-home caregivers for long-term services and supports or drivers for non-emergency medical transportation. That makes it harder for plans to introduce them in rural areas that may already be suffering from workforce shortages, a lack of primary care physicians or health facilities, experts said.

For non-emergency medical transportation, companies like Uber and Lyft are combating lower use in rural areas with scheduled rides. Larger NEMT brokers will also partner with transportation companies in the community.

But offering supplemental benefits such as NEMT must be profitable for the insurer and its local partners, experts said. Initiatives that don’t yield a strong return on investment will likely be phased out for the next plan year.

“It’s a really difficult space to be in terms of scalability right now,” Callahan said. “It’s going to take some time.”

 

 

 

Kaiser Permanente, American Cancer Society join blood test startup’s $160M funding round

Posted on by • Posted in Biotech, Cancer, Center for Medicare and Medicaid Services (CMS), Food and Drug Administration (FDA), Life Sciences, Venture Capital • Leave a comment

https://www.beckershospitalreview.com/healthcare-information-technology/kaiser-permanente-american-cancer-society-join-blood-test-startup-s-160m-funding-round.html?oly_enc_id=2893H2397267F7G

Image result for freenome funding

South San Francisco-based biotech company Freenome announced the close of a $160 million funding round, with participation from Kaiser Permanente Ventures, the American Cancer Society’s BrightEdge Ventures and Alphabet’s GV and Verily Life Sciences.

The Series B financing will be used to further develop Freenome’s blood test for early cancer detection. The startup uses an artificial intelligence-powered multiomics platform to analyze routine blood draws for often-missed biomarkers of early-stage cancer. Development of the platform has so far centered on use in detecting colorectal cancer.

Beyond further refinement of the platform, Freenome will also conduct a validation study to be submitted to the FDA and CMS for review and, eventually, expand the test to detect other forms of cancer and disease, according to CEO Gabe Otte.

 

UnitedHealth to jumpstart Q2 results with eyes on volume, ‘Medicare for All’

Posted on by • Posted in 2020 Election Issues, Center for Medicare and Medicaid Services (CMS), Health Insurance Industry, Health Policy, Medicare for All, Pharmaceutical Industry, Pharmacy Benefits Management, Utilization Trends • Leave a comment

https://www.healthcaredive.com/news/unitedhealth-to-jumpstart-q2-results-with-eyes-on-volume-medicare-for-all/558855/

UnitedHealth Group on Thursday kicks off second quarter earnings as the first major healthcare firm to report results, setting the tone and expectations for the quarter. Wall Street analysts expect the insurance giant to post a strong showing, buoyed by its Optum business.

Volume trends, talk of “Medicare for All” on the campaign trail and emerging CMS payment models are among the topics likely to bubble up as payers begin reporting their earnings over the next few weeks.

Utilization subdued

Utilization is slowing in the second quarter, according to a June survey of 48 hospital administrators. SVB Leerink analysts noted this is a positive for payers and their medical cost trends and for hospital operators heavily invested in outpatient settings, including HCA and Tenet Healthcare with its outpatient surgical unit, USPI.

“Share of procedures in [inpatient] declined across all service lines except for spine, reinforcing the shift from [inpatient],” SVB Leerink analysts said.

Lab data is another good indicator of overall utilization and volume trends, Brian Tanquilut, an analyst with Jefferies, said. Tanquilut said he’ll be watching LabCorp and Quest closely next week to get a better idea of utilization trends for the quarter.

Drug rebate reform may not be dead

The White House last week pulled its proposal to ban drugmaker rebates to pharmacy benefit managers in Medicare and Medicaid in a win for payers. Stocks for UnitedHealth, CVS and Cigna rose sharply following the announcement.

That may not be the end for the proposal, however.

“It’s still alive and moving along in Congress,” Tanquilut said, referencing the Lower Health Care Costs Act sponsored by Sen. Lamar Alexander, R-Tenn., which was passed out of committee and is expected to be brought to the floor soon.

That legislation is broad reaching and includes efforts to ban surprise billing and boost price transparency, other payer hotspots.

With the rebate proposal, the administration had proposed to fundamentally alter the way drugs are paid for in the U.S. But federal budget forecasters warned it would increase spending by $177 billion over the next decade, given many of those rebates are used to lower premiums for Part D beneficiaries.

PBMs, most of which are owned by major payers, have come under fire as many grow skeptical of whether rebates really drive down drug spending.

The Alexander bill includes limitations on spread pricing — which have also garnered intense criticism — and would require PBMs to pass all of the rebates back to insurance plans.

Kidney overhaul positive for most payers

One issue on payers’ minds is the Trump administration’s recent effort aimed at overhauling the country’s approach to kidney care. The plan includes an executive order intended to incentivize home dialysis, increase prevention, make more organs available for transplant and spur development of artificial and wearable kidneys.

The Center for Medicare and Medicaid Innovation also introduced five new payment models, including one that’s mandatory. The center’s chief, Adam Boehler, told reporters the plan would “be broad and sweeping, impacting half the country.”

Analysts at SVB Leerink called the announcement a medium-term win for payers like CVS, Humana, UnitedHealth Group and Anthem. Humana in particular has upside potential because of its focus on Medicare Advantage and with Kindred at Home, which it acquired a year ago.

Cigna stands to benefit from its investment in Cricket Health, which aims to improve early detection of high-risk kidney patients, and UnitedHealth’s Optum arm continues to invest in home dialysis, analysts said.

They also noted CVS executives discussed early detection of kidney disease at the company’s recent investor day, saying home hemodialysis could drive as much as $1 billion in new business through 2022 (possibly accelerated by the CMS announcement). With CVS’ experience in complex patient home care and chronic disease management and the acquisition of Aetna, the company is “an ideal partner to manage chronic kidney disease.”

‘Medicare for All’ debate continues

With the 2020 campaign heating up among Democrats, Medicare for All was a hot topic during last quarter’s calls. A number of executives singled the idea out for criticism, sending payer stocks tumbling.

Since then, talk on the campaign trail of expanding government coverage has continued, although Medicare for All is just one of the ideas being discussed. This week, former Vice President Joe Biden rolled out a plan for building on the Affordable Care Act and increasing premium subsidies for people on the exchanges.

The issue will certainly resurface at the end of this month when candidates have their second primary debate.

 

 

 

Accountable Care Organizations: The case for “embracing” down-side risk

Posted on by • Posted in ACA, Accountable Care Organization (ACO), Center for Medicare and Medicaid Services (CMS), Health Policy, Health System, Hospital, Population Health, Risk-Based Contracting, Value-Based Healthcare • Leave a comment

https://www.linkedin.com/pulse/accountable-care-organizations-case-embracing-risk-thomas-campanella/

The picture above is not exactly on point, but who can resist a little boy “embracing” a bear.

Per the Centers for Medicare & Medicaid Services (CMS), Accountable Care Organizations (ACOs) are groups of doctors, hospitals, and other health care providers, who come together voluntarily to give coordinated high quality care to the Medicare patients they serve (and hopefully saves money in the process).

ACOs are a product of the Affordable Care Act of 2010 (ACA). The theory behind ACOs was based on the recognition that we have a fragmented healthcare system that contributes to poor quality and higher healthcare costs.

Hospital-based health systems aggressively jumped on the ACO bandwagon starting with the passage of the ACA and, in the process, established relationships with physicians, ancillary providers, long-term care organizations, etc. Many times these Health Systems acquired (especially physicians) rather than established collaborative agreements with these community providers.

As a result of these acquisitions and collaborations, the hospital-based ACO and, in turn, the parent health systems became an even greater force in their communities. They were also in a better position to negotiate with payers because of the increased leverage they had as a result of their enhanced local provider presence. 

This also had a negative impact on health systems, since it did increase their fixed costs and made them less flexible to respond to competitors of different forms, especially in the outpatient and home setting.

Have ACOs lived up to their promise?

There have been many articles and research studies on the value of ACOs to determine if they have lived up to their promise of increased quality and cost-efficiencies. The consensus of research seems to be that ACOs have had a positive impact on quality, especially with regard to continuity of care for individuals with chronic diseases.

The jury is still out on the cost savings side, especially for hospital-based ACOs. 

Recently CMS has required that hospital-based ACOs to take on both up-side and downside risk.

Historically, ACOs have had the ability to take on only upside risk (or rewards), but at a lower percentage of potential gain vs. what they would have received if they were also willing to take on downside risk.

As I have noted in prior blogs, I am believer in risk/value-based contracting with downside financial exposure for hospital systems. I support this approach, not in a vindictive way, but because I want hospitals to survive and prosper in this new world of healthcare.

I also believe that if we are to successfully evolve from a “sick-care” system to a true “health” system, hospitals need to enter into the appropriate payer contracts that reward them for keeping patients healthy, not just for providing additional services.

Breaking down the silos inside and outside the walls of the hospital

I have worked in the healthcare industry in a variety of sectors since the early 1980s and during that period of time, I constantly heard the refrain about the need to break down the silos of healthcare both inside and outside the walls of the hospital.

The fee-for-service payment methodologies that exist today “the more you do the more you make” creates no “real” incentives to break down these silos. ACOs that have downside risk exposure along with payment methodologies such at capitation and bundled payments have the real ability to break down these silos.

As long as the majority of payments from payers is based on the fee-for-service payment methodologies, hospitals will have no “real” incentives to break down the silos that prevent value-based care from being provided. It also does not provide any “real” incentives to keep people healthy.

Per the dictionary, “Accountability refers to an obligation or willingness to accept responsibility for one’s actions. … When roles are clear and people are held accountable, work is accomplished efficiently and effectively. Furthermore, constructive change and learning is possible when accountability is the norm.”

While this definition was not met for ACOs, it really does apply and was ultimately the goal of the original drafters of the ACO concept. ACOs must be held accountable, and only through downside risk along with appropriate rewards will that occur.

If we want to achieve our goals of a value-base healthcare system as well as an overall healthier society, we need to create the proper incentives in our payment methodologies. As I have stated repeatedly in past healthcare blogs, “a healthcare system is shaped by what you pay for and how you pay for it.” The “how you pay for it” gets to the heart of the “risk” linkage with regard to hospital-based ACOs.

All of this is not to say that physician-led ACOs should not have risk but, given their size, these independent practices are much more financially vulnerable. Payment models for physician-led ACOs need to recognize the current value they are bringing to the ACO world, and consider ways to gradually add a risk component.

Hospital-based ACOs are looking to exit (or walk away from) Medicare Shared Savings Programs if required to take on downside risk

Per a recent article (April 26, 2019), “Just over half of accountable care organizations (ACOs) said they would consider leaving (or walking away from) the Medicare Shared Savings Program (MSSP) if required to take on more downside risk, revealed a study published in Health Affairs.

Thirty-two percent of ACOs said they are extremely or very likely to leave, and 19 percent believe they are moderately likely to leave.

The results also showed that there were significant differences in responses from physician-based ACOs and hospital-based ACOs.

“Approximately two-thirds of physician-based ACO respondents reported that they were likely to remain in the program if required to accept downside risk, compared with only about one-third of hospital-based ACOs,” the team said.

“This reflects the fact that physician-based ACOs have performed better, and a higher proportion of these ACOs have earned shared savings, than hospital-based ACOs. Physician-based ACOs have generated substantial savings by reducing spending for both inpatient and outpatient hospital services, which has not been true for hospital-based ACOs.”

Hospital based ACOs and well as hospital systems in general are doing themselves “no favors” by not accepting risk. 

By entering into “risk-based” contracts, hospital systems will create the appropriate incentives to address their supply-chain costs. Hospitals would also find it easier to engage physicians in addressing the cost side of the equation if physicians also understood and embraced the risk-based payment methodologies.

Under risk arrangements, hospitals would also have even more motivation to develop strategic relations with their vendors (medical device, etc.), such as what the auto industry does with their suppliers.

These risk arrangements will also allow hospital systems to be better prepared for the new world of healthcare. In this new world there will be winners and losers and different types of competitors, especially in the outpatient and home setting.

As we have also noted in prior blogs, hospital inpatient admissions are decreasing and patients have a higher acuity. Hospital inpatient care has been evolving to some form of a center of excellence. As hospitals look to find ways to expand their revenue opportunities they should be looking to bundle services for prospective patients and employers. These bundled services would and should have a risk-component tied to them.

Accepting risk-based contractual arrangements with payers is also better than competing in the retail marketplace where hospitals are much more vulnerable to lower priced regional and national competitors, especially as the result of the increased push for transparency.

Payers: Medicaid Managed Care, Medicare Advantage, Commercial Carriers, Self-insured employers should be pushing risk contracts. 

As noted in this article in Health Affairs, there are two ways employers should push ACO arrangements to evolve:

Financial Risk

“As experts jest, if ACO providers don’t take on the financial risk of caring for their population of patients (for example, only shared savings), it is like “vegan barbeque…or gin and tonic without the gin.” Payers’ ability to change provider behavior is likely to be negligible if they only reward providers with small bonuses for effective care a year after the fact. Greater financial accountability would encourage providers to promote preventive care and look for ways to cut waste.

In fact, without downside risk, health systems may take advantage of the ACO model. Experts argue that health systems may take on the practice of “ACO squatting” (that is, they form ACOs, take on patients, but avoid looking for ways to cut waste, reduce total cost of care, and improve quality) and that “a migration to two-sided risk for ACOs…after a certain number of years, so that there is a cost [downside financial risk]…would help to address this issue.”

Alignment of Patient Incentives

“Providers would be loath to assume financial risk for a patient population without the ability to manage their care. Commercial payers can modify patients’ out-of-pocket spending to encourage them to seek care only within the ACO. For example, by treating the ACO as a narrow network, the payer could pair it with a benefit design that offers lower premiums and minimal out-of-pocket spending for care from an ACO provider but little to no coverage for care sought outside of the ACO.

If the vast majority of patient visits occur within the ACO, it might be more likely to stay within budget because those providers can coordinate care and reduce redundancies. In addition, the ACO leadership can communicate with ACO providers about the cost and quality implications of their care decisions.”

If Medicare Advantage and Medicaid Managed Care Plans are not pushing for risk arrangements with Hospital-based ACOs or health systems, and these Plans continue to rely on some form of fee-for-service, then the true payers, Medicare and the individual states, should be reevaluating their own payment formulas with these entities. The payment formulas maybe too rich and do not provide enough incentives for these Plans to enter into risk arrangements with the above providers.

CONCLUDING THOUGHTS:

If you have been a reader of my blogs, you know I like sprinkling in health economic concepts into them. It is natural for individuals and other entities to make decisions based on their own self-interest.By not embracing risk in a manageable, but continuous fashion, hospital-based ACOs as well as hospital systems are sacrificing their long-term self-interest for immediate gain.

Active purchasers of healthcare services will continue to demand value in the marketplace, and for hospital-based ACOs and hospital system to meet this demand they need to break down the silos which can only be done effectively by embracing risk-based contracting tied to appropriate rewards.

Finally, we, as a society, are recognizing the need to focus our attention on population health, not only because it is the right thing to do, but because it also represents the best uses of our resources. We will not be able to achieve our goal of population health unless hospitals fully embrace it. One true way to expedite the transition to population health is for hospitals and ACOs payment methodologies to incorporate in their reimbursement contracts the appropriate risk/rewards that incent them to keep people healthy both inside and outside the walls of the hospital.

 

 

 

Trump’s Next Phase on Health Care: Everywhere and Nowhere

Posted on by • Posted in 2020 Election Issues, Center for Medicare and Medicaid Services (CMS), Dept of Health and Human Services (HHS), Health Policy, Hodgepodge, Indecision, Leadership Alignment, Leadership Commitment, Uncertainty • Leave a comment

https://www.bloomberg.com/opinion/articles/2019-07-09/trump-health-care-reform-he-s-everywhere-and-nowhere

A scattershot and at times contradictory approach to fixing the system is impeding progress.

A hodgepodge of news this week is telling the confusing and contradictory story of President Donald Trump’s efforts to change American health care.  

On Monday, a federal judge blocked the administration’s efforts to force drugmakers to disclose the often astronomical list prices of medicines in their TV ads. It was intended to shame pharma into lowering prices, and would have been the first of the Trump administration’s major drug-cost initiatives to actually take effect.

On Tuesday, oral arguments were set for a Department of Justice-backed case that could wipe out the Affordable Care Act. 

Wednesday will reportedly see the president reveal an ambitious set of initiatives intended to rein in spending on kidney costs. 

The kidney initiative is among the administration’s better notions, along with its effort to index some drug costs covered by Medicare to the lower prices available abroad. Yet even when the administration lands on a good idea in health care, it seems to get in its own way. The Trump-backed ACA lawsuit, for example, would directly undermine the kidney initiative and price-indexing plan. And while the president has a variety of other proposals in the works – from an effort to pass drug discounts directly to consumers to a plan to force hospitals to make their pricing transparent – many could be exposed to the kind of legal risks that killed the drug-ad initiative. It’s all part of a scattershot and often incoherent approach that isn’t as effective as it could be.

Take the kidney-care push: this area of treatment is costly in part because the current system incentivizes expensive care at dialysis centers that are largely run by two companies: DaVita Inc. and  Fresenius Medical Care AG. (Peter Grauer, the chairman of Bloomberg LP, is the lead independent director at DaVita.) The Department of Health and Human Services reportedly wants to change that dynamic with new payment models intended to shift patients to more cost-effective treatment at home. At least part of the administration’s ability to implement those models comes from the Center for Medicare and Medicaid Services’ Innovation Center, which was created by the ACA and is threatened by the lawsuit.

The contradictions don’t end there. People with end-stage kidney disease are covered by Medicare, so the lawsuit wouldn’t strip their coverage. However, the administration’s plan reportedly emphasizes intervening before people get to the point where they need dialysis or transplants. Killing the ACA is at direct odds with that goal. It would see millions lose insurance coverage, would eliminate protections for people with pre-existing conditions like chronic kidney disease, and crimp access to preventative care.

Though it is a long shot, the court case demonstrates the administration’s inconsistency in health care. Just about every health initiative would be harmed by the disruption that would result if this lawsuit succeeds, especially considering that the administration doesn’t have a replacement plan. If it were serious about keeping people off of dialysis or curing HIV, it would oppose this suit and stop other ongoing efforts that harm the ACA’s individual market and Medicaid.

The administration hasn’t detailed an ACA alternative because its previous effort to pass one was a political disaster that helped Democrats seize control of the House of Representatives in 2018. Instead, its health-care efforts have largely been confined to executive orders and rule-making. That approach narrows the scope of what the administration can accomplish, and comes with significant risks. If a federal judge thinks that forcing the disclosure of drug prices in ads is an overreach, there’s clearly a chance that the administration’s more ambitious plans will also have issues.

I’m rooting for the kidney effort. It targets a real problem and could have an impact, depending on the details. I’d be more optimistic about the plan’s chances if it were part of a cohesive set of policies that had Congressional backing, rather than the current jumble. 

How much does Medicare spend on prescription drugs?

Posted on by • Posted in 2020 Election Issues, Center for Medicare and Medicaid Services (CMS), Health Policy, Medicare, Medicare Part D, Out of Pocket Expenses • Leave a comment

https://usafacts.org/reports/facts-in-focus/medicare-part-d-prescription-drug-cost?utm_source=EM&utm_medium=email&utm_campaign=medicaredive

Image result for drug spending

As of 2017, the government now spends more on prescription drugs than private insurers or individuals out-of-pocket. Medicare payments alone account for 30% of the $333 billion spent on prescription drugs. In 2005, Medicare was responsible for just 2% of prescription spending.

Medicare’s expanding role at the pharmacy came with the 2006 creation of Medicare Part D, a program that offers supplemental prescription drug coverage plans to Medicare enrollees. The federal government tracks all claims paid for through Medicare Part D.

Sifting through the data allows one to see how spending on drug brands and drug types has changed for Medicare.

The graphs below show how spending has changed. Spending per claim, or simply the cost of a prescription, have gone up in drugs used for cancer treatments or diabetes. Meanwhile, prescription costs have gone down for blood pressure drugs, even as total claims for those drugs go up.

During 2017, Medicare Part D beneficiaries took out 1.4 billion prescription drug claims on 2,878 different brands of prescription drugs. The total spend, before rebates and discounts kick in, was $152 billion.

All those figures are up from 2013, when Medicare prescription drug spending stood at $102 billion on 1.2 billion claims on 2,294 different drugs. Between 2013 and 2017, prescription drug spending increased 15%, claims increased 18% and spending per claim increased 29% from $81.02 per claim to $104.56 per claim

The Centers for Medicare & Medicaid Services documents drug spending for three programs: Medicare Part B (drugs administered by health professionals), Medicare Part D (prescription drugs patients generally administer themselves) and Medicaid (prescription drugs).

The interactive graphic below shows Part D total spending (combining out-of-pocket costs with Medicare payments) and claims from 2013 to 2017.

 

SUPREME COURT TAKES UP $12B DISPUTE OVER ACA RISK CORRIDOR PAYMENTS

Posted on by • Posted in ACA, ACA Risk Corridor Payments, Center for Medicare and Medicaid Services (CMS), Dept of Health and Human Services (HHS), Government Accountability Office, Health Insurance Industry, Health Policy, Health System, Hospital, Individual Health Insurance, Supreme Court • Leave a comment

https://www.healthleadersmedia.com/finance/supreme-court-takes-12b-dispute-over-aca-risk-corridor-payments

U.S. Supreme Court

The justices agreed to hear arguments over whether Congress can pass riders that withhold funds in contravention of the relevant law’s intent without actually repealing the relevant law.

KEY TAKEAWAYS

The health plans argue the ACA’s mandate to issue risk corridor payments could not be repealed through an appropriations rider.

The approximately $12 billion in payments at issue in this dispute are for three benefit years: 2014-2016.

The U.S. Supreme Court agreed Monday to take up three consolidated cases from health plans challenging Congress’ refusal to authorize $12 billion in risk-mitigation payments under the Affordable Care Act.

The cases—which were brought by Maine Community Health Options, Moda Health Plan Inc., and Land of Lincoln Mutual Health Insurance Co.—argue that the ACA’s risk corridor program obligated Health and Human Services to make payments that the law intended “to induce insurer participation in the health insurance exchanges by mitigating some of the uncertainty associated with insuring formerly uninsured customers.”

Following the 2014 midterm election, lawmakers on Capitol Hill enacted an appropriations law for fiscal year 2015 that “would potentially allot money to HHS to cover” any such payments for the 2014 benefit year, but the law included a rider that required HHS to maintain the budget neutrality of the risk corridor program, the health plans said in their petition.

Because the amounts collected under the risk corridor program for 2014 “came nowhere close to what the government owed to insurers,” the government paid out only 12.6% of the total owed for the year, prorating the funds it owed to each insurer, the health plans wrote.

Similar riders were included in appropriations bills for fiscal years 2016 and 2017. But HHS used the funds it collected from benefit years 2015 and 2016 to further pay what it owed from the 2014 benefit year, making no payments for the 2015 and 2016 benefit years, the health plans wrote. (The program ended after three years.)

The health plans proposed two questions in the petition for a writ of certiorari for the justices to consider, but the justices agreed to hear argument only on the first: “Given the ‘cardinal rule’ disfavoring implied repeals—which applies with ‘especial force’ to appropriations acts and requires that repeal not be found unless the later enactment is ‘irreconcilable’ with the former—can an appropriations rider whose text bars the agency’s use of certain funds to pay a statutory obligation, but does not repeal or amend the statutory obligation, and is thus not inconsistent with it, nonetheless be held to impliedly repeal the obligation by elevating the perceived ‘intent’ of the rider (drawn from unilluminating legislative history) above its text, and the text of the underlying statute?”

In its response to the health plans’ petition, the U.S. government argued that a Government Accountability Office report identified only two possible sources of funding for the risk corridor payments: (1) the funds collected by HHS under the program itself, and (2) any lump-sum appropriation to manage certain Centers for Medicare & Medicaid Services programs. By enacting the appropriations laws as it did, Congress said that only the first funding source would be allowed, the response states.

America’s Health Insurance Plans (AHIP) President and CEO Matt Eyles said in a statement that insurers need stability from the government.

“Millions of Americans rely on the individual and small group markets for their coverage and care. Health insurance providers are committed to serving these patients and consumers, working with the federal government to deliver affordable coverage and access to quality care,” Eyles said. “The Supreme Court’s decision to hear this case recognizes how important it is for American businesses, including health insurance providers, to be able to rely on the federal government as a fair and reliable partner. Strong, stable and predictable partnerships between the private and the public sector are an essential part of our nation’s economy, and our industry looks forward to having this matter heard before the Court.”

The justices allotted one hour for oral argument on the dispute.

 

 

 

Wonky Supreme Court Ruling on Medicare DSH Formula to Affect More Than Money

Posted on by • Posted in Center for Medicare and Medicaid Services (CMS), Dept of Health and Human Services (HHS), Health Policy, Health System, Hospital, Medicare Disproportionate Share Reimbursement, Notice-and-Comment Rulemaking, Supreme Court, Transparency, Uncertainty • Leave a comment

https://www.healthleadersmedia.com/strategy/wonky-supreme-court-ruling-medicare-dsh-formula-affect-more-money?spMailingID=15780781&spUserID=MTg2ODM1MDE3NTU1S0&spJobID=1660471453&spReportId=MTY2MDQ3MTQ1MwS2

Moving forward, the government will have to complete notice-and-comment rulemaking for a broader set of its decisions.

KEY TAKEAWAYS

Monday’s decision by the Supreme Court kicks the dispute back to the District Court level. What happens next is unclear.

Beyond the money at stake, this case increases the rulemaking burden on HHS and CMS, though the extent of that burden is disputed.

Hospitals that treat high numbers of low-income patients secured a big win this week at the U.S. Supreme Court.

Seven of the justices agreed that officials in the U.S. Department of Health and Human Services stepped out of line when they rejiggered a Medicare reimbursement formula for disproportionate share hospitals (DSH) five years ago without a formal notice-and-comment process.

The decision carries implications well beyond the money hospitals say they are owed.

“It’s a big deal for the hospitals, obviously,” says Helen R. Pfister, JD, a New York–based partner with Manatt Health.

By the government’s estimates, the dispute implicates $3-4 billion in payments over nine years. That’s how much more the Centers for Medicare & Medicaid Services would have paid in DSH reimbursements, had the formula not been changed, according to court records.

“But I think it’s also a big deal in terms of the fact that the Supreme Court has clearly indicated that, going forward, CMS is going to have to do notice-and-comment rulemaking for a much more expansive set of agency decisions than they thought and argued in this case that they would need to do,” Pfister adds.

Precisely how much of the routine work completed by HHS and CMS will be affected by this broader take on notice-and-comment rulemaking remains to be seen. While some stakeholders have raised concerns the added burden could stifle the government’s work, others contend any inconvenience imposed will be both manageable and beneficial.

In any case, the impact of Monday’s decision will flow along two distinct paths, affecting not only hospital finances but also, for better or worse, the way HHS and CMS operate.

What’s Next, Procedurally?

In 2016, nine hospitals led by Allina Health Services lost their case against HHS at the U.S. District Court in D.C., where a judge ruled that notice-and-comment rulemaking wasn’t required. In 2017, however, three judges at the D.C. Circuit Court of Appeals reversed the lower court’s decision and sent the dispute back for further proceedings.

In 2018, attorneys for HHS asked the Supreme Court to review the appellate decision. Now that the justices have affirmed the Circuit Court’s decision, the parties have up to seven days to file a status report at the District Court level on where the case stands, according to court records. That filing, expected by early next week, could shed light on where things are headed procedurally.

Pfister says she doesn’t think anyone knows for the time being whether the government will automatically revise DSH payments for the affected fiscal years, pursue another round of notice-and-comment rulemaking, or take some other course of action in response to the Supreme Court ruling.

And the parties themselves aren’t saying much. When asked about the agency’s plans, a CMS spokesperson told HealthLeaders on Wednesday that the agency is still reviewing the decision. Allina referred questions to its law firm, which declined to comment.

Beyond the nine plaintiff hospitals involved in this week’s Supreme Court decision, there are hundreds of plaintiffs suing HHS on similar grounds. Dozens of follow-on lawsuits have been consolidated into a single docket pending before U.S. District Judge Amy Berman Jackson. Parties to that proceeding have up to 14 days to file a status report in light of the Supreme Court’s decision, according to court records.

An Overly Burdensome Decision?

The government’s attorneys had issued dire warnings about the potential consequences of the decision the Supreme Court ultimately reached.

The notion that CMS must go through a notice-and-comment process for the sort of routine process at issue in this case could “substantially undermine effective administration of the Medicare program” because it would apply not just to DSH formula calculations but to “nearly every instruction” the agency gives to its contractors as well, U.S. Solicitor General Noel J. Francisco argued on HHS’ behalf.

Pfister largely rejects the government’s dire take on the decision’s impact.

“I think that might have been a little bit hyperbolic,” she says.

But other stakeholders outside the government have taken the Supreme Court’s ruling as a troubling sign of uncertainty to come.

“This is a frightening decision, that throws a lot of doubt on the validity of thousands of pages of Medicare sub-regulatory guidance,” Adam Finkelstein, JD, MPH, counsel with Manatt Health and a former health insurance specialist with the CMS Innovation Center, wrote in a tweet.

Stephanie A. Kennan, senior vice president of federal public affairs for McGuire Woods Consulting in Washington, D.C., tells HealthLeaders that she thinks the government’s argument “is somewhat overblown.” Officials should be able to manage any added burden from this ruling, even if it slows them down a bit, she says.

“I think it may mean they cannot move as quickly on some policies as they would like to,” Kennan says.

A Boon to Public Input?

The benefits of a more-transparent process justify any added hassle that may stem from having to go through a mandatory comment process more often as a result of this decision, Kennan says.

“In this case, they have to do 60-day comment periods, which can seem like an eternity if you want to keep the process moving, regardless of whether you’re the agency or a stakeholder,” she says. “The transparency is probably worth the 60 days.”

But others reject the notion that this decision should be seen as balancing effective governance with transparency.

“Allina isn’t a vindication of the importance of public participation in agency decision-making. It’s a testimonial to the heedlessness of lawyers who impose silly procedural rules on an administrative state they only dimly understand,” Nicholas Bagley, JD, a law professor at the University of Michigan who teaches on administrative law and health law, wrote in a series of tweets.

“Bear in mind,” he added, “that CMS is a tiny, beleaguered agency … To further encumber it will make Medicare more capricious, not less, as staffers tend to senseless procedures instead of doing their jobs.”

Moving forward, HHS and CMS will continue to have discretion to determine whether to go through notice-and-comment with a given action, Pfister says. The difference now, she says, is that there’s a stronger incentive for government officials to cover themselves; otherwise, another case like Allina’s could pull them into another round of prolonged litigation.