Leukemia Lymphoma Society (LLS) supports actions that regulate or prohibit “junk insurance” plans that discriminate against people with pre-existing conditions, offer no meaningful coverage in the case of a cancer diagnosis or neglect to cover essential healthcare services like prescription drugs
The problem
LLS advocate Sam Bloechl thought he was doing everything right. After experiencing back pain that wouldn’t go away, he spoke to an insurance broker about upgrading his insurance plan to better cover any treatment he might need. Sam’s broker insisted she had the perfect plan for him. It wasn’t.
A month later, Sam was diagnosed with non-Hodgkin lymphoma. After chemotherapy and radiation, Sam achieved remission. But his health plan refused to cover the bill, leaving Sam with more than $800,000 in medical debt. It turns out he was sold a short-term, limited-duration plan—a type of “junk insurance.”
Sam isn’t alone. Patients with pre-existing conditions are penalized by low-quality policies, known as “junk insurance” Because such plans are exempt from important consumer protections, they can leave patients vulnerable when they most need timely access to quality, affordable care.
The patient impact
Most short-term, limited-duration plans leave patients on the hook for thousands of dollars if they face serious health problems—much more than they’d face if they had traditional health insurance, a recent Milliman study funded by LLS reveals. The plans often rely on misleading marketing and are misunderstood by consumers who buy them. And patients have no right to appeal plan decisions.
Moreover, junk plans drive up more than a patient’s out-of-pocket costs—they threaten prices across the health insurance market. As younger and healthier individuals choose these cheaper “junk plans” over comprehensive insurance, premiums for comprehensive insurance are expected to rise.
Solutions
LLS supports actions that regulate or prohibit “junk insurance” plans that discriminate against people with pre-existing conditions, offer no meaningful coverage in the case of a cancer diagnosis or neglect to cover essential healthcare services like prescription drugs. These plans include:
• Short-term, limited-duration insurance • Health care sharing ministries • Farm Bureau plans • Grandfathered plans • Multiple employer welfare arrangements and association health plans • Spurious single-employer self-insured group health plans • Minimum essential coverage-only plans • Excepted benefit plans
A report published by 30 patient organizations, including LLS, explains these types of plans in depth—and details how state and federal lawmakers can help protect patients and consumers from these dangerous plans.
LLS works to stop policy proposals that would allow insurers to reinstitute lifetime limits, eliminate the current cap on patient cost-sharing and cover fewer essential services for cancer patients.
Political will seems to be growing to reshape the increasingly popular Medicare Advantage program.
At a House Energy and Commerce committee hearing on Tuesday, lawmakers on both sides of the aisle called for more oversight of MA following watchdog reports that found impediments to receiving covered care, including improper denials of prior authorization requests, and plans gaming the system in exchange for more funding from Medicare.
“Medicare Advantage is an important tool for helping seniors and we want it to succeed. We’re going to continue to conduct the oversight necessary,” said Oversight and Investigations Subcommittee Chair Diana DeGette, D-Colo.
Witnesses at the hearing — officials from the Government Accountability Office, HHS Office of Inspector General and congressional advisory board MedPAC — also pointed to higher rates of beneficiary disenrollment in their last year of life and opaque plan data, which can complicate oversight efforts.
Surveys have shown MA remains extremely popular with beneficiaries, attracted by lower co-pays and supplemental benefits like vision coverage and telehealth. In the program, Medicare pays private plans a capitated monthly rate to provide care for their beneficiaries based on the severity of their beneficiaries’ needs.
The hearing comes amid inflamed industry debate over the future of MA.
For-profit hospital lobby Federation of American Hospitals submitted a letter for the record sharing concerns over some MA plans denying patient care and having inadequate care networks.
Meanwhile, MA trade group Better Medicare Alliance sent a letter to the CMS on Monday urging the agency to safeguard the program as Congress mulls changes to Medicare.
But as Medicare’s hospital benefit — part of which funds MA — limps towards insolvency, lawmakers appear poised to target the growing MA program in a bid to crack down on improper payments and care denials.
“This is something that I think is very much bipartisan,” said Rep. Gary Palmer, R-Ala.
Coverage delays and denials
It’s not the first time lawmakers have zeroed in on MA oversight as a strategy to save Medicare money: In a Senate hearing on Medicare insolvency in February, Sen. Elizabeth Warren, D-Mass., said “the Medicare system is hemorrhaging money on scams and frauds” due to insurers taking advantage of the program’s rules to increase profits.
Even amid rising congressional criticism of MA, lawmakers on Tuesday reiterated their support for the program overall, which covered roughly 27 million Americans in 2021.
That’s more than a third of all Medicare beneficiaries, though MA is expected to swell to cover half of all Medicare members by 2030.
But lawmakers said they are increasingly concerned about disparities in the quality of coverage offered by Medicare Advantage plans compared to traditional Medicare plans, along with unscrupulous practices in the program resulting in higher reimbursement for MA organizations.
A GAO report found MA beneficiaries in their last year of life disenroll from MA in favor of traditional Medicare at a rate two times higher than other MA members, suggesting the plans may not support high-cost and specialized care, testified Leslie Gordon, GAO’s acting director for healthcare.
Gordon called it a “red flag” for the program that requires more scrutiny from CMS.
In addition, an HHS OIG report published April found MA organizationswrongly denied members care, with plans turning down 18% of payment requests that should have been approved.
Erin Bliss, OIG assistant inspector general in the Office of Evaluation and Inspection, testified plans sometimes use internal critical criteria that are not required by Medicare. In one example, an MA plan denied a medically necessary CT scan to diagnose a serious disease, citing that the patient hadn’t yet received an x-ray, Bliss said.
When appealed, plan denials were reversed 75% of time, a rate DeGette called “alarmingly high.”
“We are concerned that patients are receiving the timely care they need in those situations,” Bliss said.
OIG also found plans denied 13% of prior authorization requests that would have been approved under traditional Medicare.
Rep. Michael Burgess, R-Texas, suggested policymakers consider requiring insurers to forego prior authorization for doctors with a consistent track record of submitting accurate data. That strategy, called “gold carding,” is already used in some states, including Texas and West Virginia, to pare back on prior authorization delays.
MA payment reform
Along with coverage restrictions, lawmakers at Tuesday’s hearing asked witnesses about the scope and severity of improper MA payments in a bid to zero in on specific solutions Congress and the CMS can enact.
Though MA has potential to save the Medicare program money, “the current incentives for MA plans are not adequately aligned with the Medicare program,” said James Mathews, MedPAC executive director.
“Substantial reforms are urgently needed,” especially in light of Medicare’s “profound” financial problems, Mathews said.
In 2022, the average MA plan bid was 85% of fee-for-service spending, Mathews said. However, Medicare pays plans 104% of fee-for-service costs.
That imbalance is partially due to plans making patients appear sicker than they are to get extra payments from the government, witnesses said. The practice, called “coding intensity,”resulted in an estimated $12 billion in excess Medicare spending in 2020, according to MedPAC data.
Methods include chart reviews, where plans identify and add patient diagnoses that aren’t included in the service record, and health risk assessments, where plans contract with vendors to visit beneficiaries homes and conduct assessments, finding new diagnoses that often aren’t backed up by other records, according to Bliss.
GAO estimates that roughly a tenth of Medicare payments to MA plans in 2021 were improper, Gordon said.
To try to tamp down on coding intensity, the CMS should conduct targeted oversight of MA plans that routinely use these tools, and reassess whether chart reviews and in-home assessments are allowed to be sole sources of diagnoses for payment purposes, witnesses said. In addition, MA should improve care coordination for enrollees who receive health risk assessments.
The CMS should also consider replacing the quality bonus program and change its approach to calculating MA benchmarks, Mathews said.
In addition, the agency should require and validate data for completeness and accuracy before risk-adjusting payments through methods like medical record reviews, Gordon said.
Gordon also suggested the agency conduct more timely audits, as the CMS is currently missing out on recouping hundreds of millions of dollars in improper payments.
Policymakers appeared open witnesses’ suggestions to ensure MA is running as smoothly as possible, with Rep. Frank Pallone, D-N.J., calling for an additional hearing on the matter.
“This is bipartisan … You can be assured that we’re going to be following up,” DeGette said.
Nothing kills the momentum and excitement of race day more than the yellow flag and deployed safety car. Unsafe track conditions, usually caused by an accident, debris on the track or a stopped vehicle, can cause the marshals to slow down the race. Momentum moderates and adrenaline wanes. Drivers are forbidden from overtaking, and victory is temporarily out of sight for all but the lead car. As I watched the Indy 500, 24 Hours at Le Mans and a handful of Formula One grand prix over the last several weeks, it struck me that postacute sector M&A (home health, hospice, Medicaid PCS, pediatric PDN/therapy) is currently racing under yellow flag conditions. Temporary, but nonetheless frustrating for all constituents involved.
The post-acute sector’s two record setting years in terms of transaction activity, valuation multiples and quality of companies acquired, 2020 and 2021, now appear to be in the rearview mirror. In their stead is a sluggish 2022, with companies staying in their lanes, focused inwardly on operations and trying to regain levels of growth and profitability of prior years. It should come as no surprise that sector activity has slowed: (i) the supply of actionable platforms is materially lower than in the prior two years; (ii) the COVID spawned labor market continues to create one of the most challenging operating environments in recent memory; (iii) home health reimbursement faces a potentially challenging outlook when the CY 2023 HH PPS rule is finalized in the Fall; and (iv) buyers are less willing to give credit for COVID-related EBITDA adjustments.
Lower Inventory of Actionable Platforms Many of the most actionable privately-held and sponsor-owned platforms transacted at a kinetic pace in 2019, 2020 and 2021. As a result, the number of available platforms is relatively low, and the sector is currently in a holding pattern, where businesses are (i) focused on operating in a challenging environment, (ii) too early in their hold period, or (iii) waiting for financial performance to improve, before coming to market. There is a large and growing backlog of businesses that we expect to come to market when overall conditions improve, potentially as early as Q4 2022. But in the meantime, the market is generally in wait and see mode.
Labor Market’s Impact on Performance Q4 2021 was one of the most challenging quarters for post-acute operators, particularly hospice, as the Omicron variant wreaked havoc on staffing and admissions volumes. Despite strong referral volumes and demand for post-acute services, the inability to
sufficiently hire and retain clinical staff has had a material impact on monthly sequential growth and TTM performance. For many, Q1 2022 was only marginally better, and for some, Q2 2022 continues to present challenges, although, anecdotally, the clinical labor market appears to be improving and may even accelerate due to the looming recession. As a result, companies are deciding, or being forced, to delay sale processes as they attempt to replace poor financial performance in Q4 2021 and Q1 2022 with improved 2H 2022 growth and profitability.
Pending CY 2023 Home Health PPS Rule Based on the proposed rule released last week, CMS estimates that Medicare payments to home health agencies in CY 2023 would decrease in the aggregate by -4.2%, or -$810 million compared to CY 2022. Without getting too technical and comprehensive, this decrease reflects the effects of the proposed 2.9% home health payment update percentage ($560 million increase), an estimated 6.9% decrease that reflects the effects of the proposed prospective, permanent behavioral assumption adjustment of -7.69% ($1.33 billion decrease), and an estimated 0.2% decrease that reflects the effects of a proposed update to the fixed-dollar loss ratio (FDL) used in determining outlier payments ($40 million decrease). Prospective home health sellers will most likely wait for better clarity on the final rule before coming to market.
Market Push Back on COVID-Related EBITDA Adjustments Buyers and lenders have materially increased their scrutiny of COVID-related volume adjustments to EBITDA. Early in the pandemic, the market was quite willing to pay sellers for normalized volumes and financial performance, as if “COVID had not happened.” 27 months later, the market is taking a harder line. “What if” earnings credit is no longer being given wholesale. The market has taken the position that labor staffing challenges and higher labor wage expense are here to stay (for now), and, unless a seller has clearly demonstrated a trend to the contrary, little to no valuation / leverage credit will be given for such adjustments. As a result, prospective sellers must increasingly rely on actual earnings to ensure the achievement of valuation expectations.
Returning to our racing analogy, post-acute sector M&A is currently under a yellow flag. And while yellow flag conditions produce little to no racing action, and can last for many laps, they are still only temporary. Drivers and their teams can use the time to their advantage – to “box” or “pit” in order to change tires, refuel or tweak the car – so that they are ready to drop the hammer once the yellow flag is lifted. This is exactly what the higher quality post-acute platforms are doing. Some of the most exciting action in a race comes once the safety car exits the track and green flag racing resumes. Given the strong near- and long-term demographic and sector trends supporting the post-acute sector, and the almost unlimited demand for high quality post-acute platforms, there is little doubt that M&A activity will resume with a vengeance.
Steward Health Care is abandoning its proposal to sell five Utah hospitals to HCA Healthcare, and New Jersey-based RWJBarnabas Health dropped its plan to purchase New Brunswick, NJ-based Saint Peter’s Healthcare System. These pivots come just weeks after the Federal Trade Commission (FTC) filed suits to block the transactions, saying they would reduce market competition. The FTC said in a statement that these deals “should never have been proposed in the first place,” and “…the FTC will not hesitate to take action in enforcing the antitrust laws to protect healthcare consumers who are faced with unlawful hospital consolidation.”
The Gist: These latest mergers follow the fate of the proposed Lifespan and Care New England merger in Rhode Island, and the New Jersey-based Hackensack Meridian Health and Englewood Health merger, which were both abandoned after FTC challenges earlier this year.
Antitrust observers find these recent challenges unsurprising, as all were horizontal, intra-market deals of the kind that commonly raise antitrust concerns. What will be more telling is whether antitrust regulators can successfully mount challenges of cross-market mergers, or vertical mergers between hospitals, physicians, and insurers.
An analysis published in the Annals of Internal Medicine finds that if Medicare had purchased 77 common generic drugs from Mark Cuban’s Cost-Plus Pharmacy in 2020, it would have saved $3.6B dollars. That translates to more than a third of the $9.6B Medicare spent on generic drugs that year.
In January, Dallas Mavericks owner and billionaire Cuban launched the generic drug company as a transparency play, cutting out pharmacy benefit managers (PBMs), negotiating directly with manufacturers, and selling drugs at a flat 15 percent markup.
The Gist:This isn’t the first study to find that Medicare overpays for generic drugs, as it’s unable to negotiate drug prices under current law. Another recent analysis found that Costco can offer consumers lower prices than Medicare drug plans for half of the most common generic drugs.
The fact that both Costco’s and Cuban’s pharmacies, neither of which accepts health insurance, can offer consumers cheaper generics is another indication of how PBMs’ perverse incentives and opaque pricing and rebate models lead to consumers being steered to higher priced drugs. We’re hopeful that the FTC’s new investigation into PBMs will shed light on their pricing practices, and create a path for lawmakers to finally address unsustainably high prescription drug prices.
What role should the federal government play in addressing major healthcare issues? And does the way you vote affect your prospects for a long and healthy life? We talked about it on today’s episode of the 4sight Friday Roundup podcast.
David Johnson is CEO of 4sight Health.
Julie Vaughan Murchinson is Partner of Transformation Capital and former CEO of Health Evolution.
David Burda is News Editor and Columnist of 4sight Health.
In a unanimous decision, the Justices found that the Department of Health and Human Services (HHS) exceeded its legal authority when it cut Medicare reimbursement rates for outpatient drugs by 28.5 percent at 340B-eligible hospitals in 2018. The justices wrote that the Centers for Medicare and Medicaid Services (CMS) shouldn’t have cut payments to these hospitals without first surveying their average drug acquisition costs, as required by statute.
CMS must now figure out how to repay 340B hospitals the difference in reimbursement for 2018 and 2019, the two years the unlawful cuts were in effect, during which time it redistributed those savings to all hospitals in the form of higher reimbursement for outpatient services. (For an explainer on the mechanics of the 340B program, see our overview here, and for more details on this Supreme Court case, see our summary here.)
The Gist: This decision was a narrow ruling on administrative grounds, and did not touch on the larger policy debates concerning the 340B program. While 340B-eligible health systems can breathe a momentary sigh of relief, they are still facing significant, ongoing revenue disruptions as at least 17 pharmaceutical manufacturers are restricting discounted drug sales to contract pharmacies.
Scrutiny of the 340B program, which has grown to include over 40 percent of US hospitals, will continue to raise questions aboutwhether there are better ways to subsidize the operations of hospitals serving low-income patients, and to ensure that underserved patients have access to lifesaving treatments.
Consumers and employers recently filed lawsuits against Hartford HealthCare, HCA Healthcare, and Advocate Aurora Health, accusing the health systems of using their market power to increase prices through anticompetitive contracting practices. New reporting from the Wall Street Journal finds that all three suits are receiving funding from billionaire John Arnold, through his charitable foundation Arnold Ventures, which has sponsored several efforts to reduce healthcare spending. While the health systems say that the claims are baseless, the law firm leading the suits, Fairmark Partners, says that it’s attempting to enforce antitrust laws through the courts.
The Gist: Amid the Biden administration’s increased scrutiny of health system anticompetitive behavior, state governments and philanthropic groups are also taking a more active role in challenging hospital deals and contracting practices.
While these groups have targeted hospital prices because they’re a significant source of increased healthcare spending, these lawsuits do little to address the perverse underlying incentives that push hospitals to seek higher prices from commercial patients, to cross-subsidize what they view as insufficient pricing from public payers.
The U.S. Supreme Court sided with hospital groups June 15 in a case challenging HHS’ 340B payment cuts.
The case centered around whether CMS has the authority to make cuts to the program under its Medicare Outpatient Prospective Payment System. Under the payment rule, HHS cut the reimbursement rate for covered drugs by 28.5 percent in 2018, but it later lowered the reimbursement rate cut to 22.5 percent.
Under the 340B program, eligible hospitals can buy outpatient drugs at a discount. A hospital typically pays 20 percent to 50 percent below the average sales price for the drugs through the program.
The Supreme Court reversed a federal appeals court’s 2020 ruling that HHS had the authority to make the $1.6 billion annual reimbursement cut.
Justice Brett Kavanaugh, writing the opinion for the court’s unanimous decision, said that absent a survey of hospitals’ acquisition costs, HHS may not vary the reimbursement rate for 340B hospitals.
“HHS’s 2018 and 2019 reimbursement rates for 340B hospitals were therefore contrary to the statute and unlawful,” he wrote. The American Hospital Association, Association of American Medical Colleges and America’s Essential Hospitals said in a joint statement emailed to Becker’s following the decision that they look forward to working with HHS and the courts to develop a plan to reimburse 340B hospitals affected by the cuts while ensuring other hospitals are not disadvantaged as they also continue to serve their communities.
Social factors impact a person’s health and their potential health outcomes. While this has long been discussed (especially by folks of color, individuals with lived experiences, and those in public health), it is finally now getting deserved mainstream attention, including by health insurers.
Medicare Advantage (MA) — a program that offers private plan alternatives to traditional Medicare — is one key player looking at social determinants of health. It’s a good thing, too; an estimated 42% of the Medicare population are enrolled in MA plans, and that share grows each year. MA plans have more flexibility in offering supplemental benefits and services, some of which can address social determinants of health.
In 2018, the Creating High-Quality Results and Outcomes Necessary to Improve Chronic (CHRONIC) Care Act passed with bipartisan support and marked a substantial shift in MA policy by including acknowledgment of the role of social determinants of health. It allows even greater flexibility for MA plans to help with the very conditions that impact how a person lives, such as providing financial assistance for nutritional needs, transportation to appointments, caregiver support, and even home construction projects. Interestingly, it does not mandate coverage, so it is still dependent on what plans an individual has access to and how health plans are choosing to move forward with this freedom.
The problem is, however, that most individuals aren’t eligible for Medicare until age 65 (there are some exceptions). If we wait until Medicare eligibility to act on social determinants of health, are we waiting too long?
The short answer is yes. Although addressing social determinants of health in the Medicare-eligible population is important, what we know suggests that more could be done earlier.
Why are social determinants important in Medicare Advantage?
Chronic disease is a significant issue among Medicare-eligible individuals, and one that’s exacerbated by social determinants of health. There are substantial implications for both beneficiaries and MA plans. For beneficiaries, chronic disease affects not only their quality of life, but also their wallet. From the plans’ perspectives, the presence of comorbid chronic diseases is a significant differentiator between so called “high cost” beneficiaries and those who are not.
Current MA enrollment trends also point to the need to sharpen the focus on social determinants of health. Although they make up a minority of MA enrollees, persons of color are enrolling in MA plans at a breakneck pace: especially among Black people, dual enrollees, and people living in disadvantaged neighborhoods.
Historically, these are folks most negatively impacted by social determinants of health, and the likelihood of poor health outcomes is only compounded when enrollees reside in disadvantaged neighborhoods. These are neighborhoods commonly characterized by high concentrations of poverty, crime, and harmful environmental exposures compounded by limited resources to support economic and social well-being, and research has consistently found strong associations between neighborhood disadvantage and health risks and outcomes.
Health systems must do more about social determinants earlier in life
Social determinants of health affect us all — regardless of age. Until recently, they have received relatively little attention from insurers.
It is difficult though to discern the extent that these actions are altruistic or opportunistic, especially when they can technically be both. While that might not be the worst thing, it does matter if it leaves out the very people it should be helping.
Let’s consider internet access, for example. If a patient isn’t connected to the web, they can’t participate in a telehealth visit, leaving in-person care as the only option. In a world where telehealth visits are reimbursed at a fraction of the in-person rate, there are substantial cost savings (read: profit) associated with facilitating and promoting virtual care. Critics have also pointed out that most of these steps can be attributed to insurers’ philanthropic apparatuses as opposed to any substantive change or innovation in member benefits.
What is also becoming readily apparent, is that while telehealth use is increasing, it does not make care accessible for everyone. It could even serve to increase disparities if it is not done properly.
However, administrative hurdles and societal stigma can challenge people’s willingness to participate in these programs no matter how beneficial they might be. We should all be asking what more the health system — providers, payers, and government — should be doing to improve social determinants of health earlier in life.
The CHRONIC Care Act has the potential to mitigate some of these harmful impacts of long-standing structural inequities by providing greater flexibility for plans to cover non-medical needs. The law illustrates that policymakers believe that health insurers should do more to address social determinants of health. Perhaps they should also focus on how plans can address these social factors earlier in the life cycle as well.
HENRY KOTULA 