An estimate from the Partnership for America’s Healthcare Future predicts that nearly four out of five 60- to 64-year-olds would enroll in Medicare, with two-thirds transitioning from existing commercial plans, if “Medicare at 60” becomes a reality.
In the graphic above, we’ve modeled the financial impact this shift would have on a “typical” five-hospital health system, with $1B in revenue and an industry-average two percent operating margin.
If just over half of commercially insured 60- to 64-year-olds switch to Medicare, the health system would see a $61M loss in commercial revenue.
There would be some revenue gains, especially from patients who switch from Medicaid, but the net result of the payer mix shift among the 60 to 64 population would be a loss of $30M, or three percent of annual revenue, large enough to push operating margin into the red, assuming no changes in cost structure. (Our analysis assumed a conservative estimate for commercial payment rates at 240 percent of Medicare—systems with more generous commercial payment would take a larger hit.)
Coming out of the pandemic, hospitals face rising labor costs and unpredictable volume in a more competitive marketplace. While “Medicare at 60” could provide access to lower-cost coverage for a large segment of consumers, it would force a financial reckoning for many hospitals, especially standalone hospitals and smaller systems.
The largest union for registered nurses in the U.S. called on the Centers for Disease Control and Prevention (CDC) to bring back recommendations for universal masking in public regardless of people’s vaccination status.
The National Nurses Union (NNU) in a Monday letter to CDC Director Rochelle Walensky requested that the agency reinstitute guidelines for all people to wear masks in public and in close proximity to those outside their household.
NNU Executive Director Bonnie Castillo pointed to a 16 percent uptick in U.S. COVID-19 cases from last week, according to CDC data, as well as rises in case counts in more than 40 states and hospitalizations in more than 25 states as reasons to return to previous, stricter guidelines.
“NNU strongly urges the CDC to reinstate universal masking, irrespective of vaccination status, to help reduce the spread of the virus, especially from infected individuals who do not have any symptoms,” Castillo wrote in the letter. “Our suggestions are based on science and the precautionary principle and are made in order to protect nurses, other essential workers, patients, and the public from Covid-19.”
The union also cited the World Health Organization’s (WHO) call for vaccinated people to continue wearing masks in public amid the spread of the highly transmissible delta variant. Several U.S. officials and experts have said the WHO’s guidance reflects the state of the pandemic worldwide, which overall has seen lower vaccination rates than the U.S.
Castillo acknowledged that COVID-19 vaccines are effective at preventing severe illness and death but noted “no vaccine is 100 percent effective, and the emergence and spread of variants of concern may reduce vaccine effectiveness.”
The NNU in its letter also appeals for the CDC to update its guidance to “fully recognize aerosol transmission,” mandate tracking and reporting of cases among health care and essential workers, and keep records of cases, including mild and asymptomatic infections, among fully vaccinated people to measure the shots’ effectiveness.
The CDC did not immediately return a request for comment on the letter, but officials have consistently defended the updated mask guidance, saying fully vaccinated individuals are protected against the virus.
The NNU vocally opposed the CDC’s current mask guidance updated in May to permit fully vaccinated individuals to go maskless in virtually all settings. The union has argued that the change in recommendations endangered patients, front-line workers and nurses as the pandemic continues.
In the Monday letter, the union wrote that the CDC’s relaxation of mask guidance “failed to account for” the possibility of fully vaccinated people contracting and spreading the virus. It also said the agency’s guidelines do not protect people, including children, who cannot get the vaccine.
The NNU sent the letter days after the CDC urged schools to reopen for full in-person learning in the fall, saying that fully vaccinated teachers and students do not need to wear masks.
It also comes after Los Angeles County and St. Louis County recommended their residents to wear masks in public indoors.
The average number of new daily COVID-19 cases has increased 94 percent over the past two weeks, according to data from The New York Times, as worries over outbreaks climb nationwide.
The U.S. recorded a seven-day average of more than 23,000 daily cases on Monday, almost doubling from the average two weeks ago, as less than half of the total population is fully vaccinated.
Monday’s count of 32,105 newly confirmed cases pushed the seven-day average up from its Sunday level of more than 19,000 new cases — a 60 percent increase from two weeks prior.
All but four states — West Virginia, Maine, South Dakota and Iowa — have seen increased daily averages in the past 14 days, and the average in 16 states at least doubled in that period.
This comes as the highly transmissible delta variant was declared the dominant strain in the U.S. last week.
At the same time, vaccinations have stalled, with the daily rate reaching its lowest point during President Biden’s tenure on Sunday at slightly more than 506,000. Monday saw a small uptick in the average rate to more than 527,000 per day, according to Our World in Data.
The rise in case counts comes as the Centers for Disease Control and Prevention says just 48 percent of the total population is fully vaccinated. Officials have said fully vaccinated people are protected from the virus, while unvaccinated people are at much higher risk for serious illness and death.
This leaves a majority of Americans still vulnerable to the virus, particularly children under 12 years old, who are not authorized to get the vaccine. More than 56 percent of the eligible population aged 12 and older is fully vaccinated.
The Biden administration has strived to boost vaccination numbers over the past few months and signaled a new strategy focused on grassroots campaigning to promote the vaccine last week. The country fell short of the president’s goal to get 70 percent of adults at least one dose by the Fourth of July.
Increases in COVID-19 cases have previously signaled during the pandemic an upcoming rise in hospitalizations and deaths. The Times data shows that average deaths are still decreasing, but average daily hospitalizations are climbing, with a 16 percent increase from two weeks ago.
Still, case counts are much lower than the devastating peak that hit the U.S. in January, and experts say the country will not reach that level of infection again, as vulnerable populations have gotten vaccinated. Seventy-nine percent of those aged 65 and older are considered fully vaccinated.
This is a guest post by Taylor J. Christensen, M.D. (@taylorjayc). Dr. Christensen is an internal medicine physician and health policy researcher with a background in business strategy and health services research.
Since any mystery in the healthcare system intrigues me, I’ve been working on understanding pharmacy benefit managers (PBMs) lately.
Why did PBMs arise in the first place, and how did they come to have this somewhat strange role in the drug market? Let’s look at the evolution of PBMs, which I will categorize into three distinct phases.
Forewarning: There isn’t a lot of publicly available information on this stuff, so some of this is my best piecing together of things I’ve read plus supplemented by direct communications with people who work for insurers or PBMs.
Phase 1
Way back before PBMs, people used to pay for medications 100% up front out of pocket. They’d keep their receipts and then submit them all to their insurer later for partial reimbursement according to their insurance plan’s formulary.
That clearly had some downsides. If a patient couldn’t afford the full price up front, they would be stuck choosing which of their meds they’re not going to get, which is bad for both patients (nonadherence) and pharmacies (lost sales). Insurers also had to spend tons of time reconciling shoeboxes full of receipts.
If only there were a way to integrate an insurer’s formulary into the pharmacy’s computer system so that patients only pay their exact copay at the time they fill a prescription! Everyone would be a lot happier. Patients wouldn’t have to forego quite so many medications, pharmacies wouldn’t lose out on as many medication sales, and insurers wouldn’t have to deal with people sending in shoeboxes full of receipts. Win win win.
Enter the precursors to pharmacy benefit managers—they were essentially groups of software engineers tasked with working with pharmacies to get insurers’ formularies into the pharmacies’ computer systems. And they succeeded! After that, when a patient showed up to fill a prescription, the pharmacy would simply enter the patient’s insurance information into their system and the exact co-pay for that medicine would magically appear on the cash register’s screen. The patient paid their amount, and the transaction was then sent to the insurer to reimburse the rest.
But how did these precursor PBMs evolve into today’s PBMs that, among other things, “manage benefits”? My guess is that it went something like this . . .
Phase 2
These precursor PBMs got pretty good at integrating formularies into pharmacies’ systems, so they began to expand their customer base by helping lots of other insurers do the same thing.
Soon they became more familiar with all the complexities and intricacies of formularies than anyone else. And, as companies are wont to do, they leveraged that competency to make more money by offering a new service, which they maybe pitched to insurers like this:“Hey insurer, we already know all the details of your formulary. And we know where you could save money since formularies are kind of our thing. Why don’t you outsource your formulary-making efforts to us? We’ll make you a better formulary and charge less than it’s costing you to do it in-house right now. No-brainer, right?” And thus, not too long after their inception, PBMs officially started managing pharmacy benefits.
But that’s not where the story ends.
Phase 3 (dun dun dun)
Soon these PBMs found that they had amassed significant indirect control over which medicines patients get. Set a lower copay for a medicine and, sooner or later, more patients will end up taking it. And the one making the formulary is the one who sets the copays.
What did PBMs do with that power? They tried to leverage it to get better drug prices from manufacturers, which would allow them to offer an equivalent but cheaper formulary to their customers (insurers). But how, if they are not actually in the drug supply chain (that goes from drug manufacturers à drug wholesalers à pharmacies à patients) could they do that?
They cleverly reached out to the drug manufacturers directly and said something like this:“Hey drug manufacturer, we don’t actually have a direct financial relationship with you (yet). But we have significant control over how many sales you get because we set patients’ copays. How about we guarantee that your drug will, from now on, be the only one from its category in the lowest-copay tier? This will increase your sales quite a bit! And, in exchange for helping you get more sales, you can send us a “rebate” on every sale. So this is how it will work. We already keep track of every drug transaction, so every quarter we will send you the data to show how many patients using our formulary bought your drug, and you will send us a $10 rebate for each one.”
Contrary to popular belief, PBMs don’t keep all of this rebate money. Remember, their goal is to outbid other PBMs to offer the best formulary for the cheapest. And if the PBM market is competitive, they will have some degree of price competition that will force them to pass along some of those rebates on to their customers (insurers) in the form of lower fees.
I spoke with someone who works at an insurer and is in charge of contracting with their insurer’s PBM, and this person indicated that it is very possible for an insurer to get multiple bids from PBMs and identify which one is the best deal. Although, with the complexity involved, this process generally requires a specialist healthcare consultant who is an expert on navigating PBM contracts. I spoke with such a consultant, who had also worked for PBMs directly before becoming a consultant to insurers, and this person estimated that PBMs only keep about 20% of the rebates they receive from drug manufacturers. Other studies have been done on this topic, but attribution is tricky since PBMs are able to rename the monies they are receiving from drug manufacturers to fudge the numbers, which is probably why the Government Accountability Office reported in 2019 that PBMs only retain about 1% of rebates.
Well, there you have it. Phase 3 was the start of all the wheeling-dealing complexities that give PBMs their shady reputation.
I believe this is helpful background to have when you’re trying to improve the drug market (i.e., solve the problem of expensive drugs) because without understanding the incentives of the parties involved, you cannot get to the root of the problems with that system.
Telehealth claim lines as a percentage of all medical claims dropped 13% in April, marking the third straight month of declines, according to new data from nonprofit Fair Health.
The dip was greater than the drop of 5.1% in March, but not as large as the decrease of almost 16% in February. However, overall utilization remains significantly higher than pre-COVID-19 levels.
The decline appears to be driven by a rebound in in-person services, researchers said. Mental health conditions bucked the trend, however, as the percentage of telehealth claim lines associated with mental conditions — the No. 1 telehealth diagnosis — continued to rise nationally and in every U.S. region.
Dive Insight:
The coronavirus spurred an unprecedented increase in telehealth utilization early last year. But early data from 2021 suggests demand is slowing as vaccinations ramp up and COVID-19 cases decrease across the U.S.
Fair Health has used its database of over 33 billion private claims records to analyze the monthly evolution of telehealth since May last year. Telehealth usage peaked among the privately insured population last April, before easing through September and re-accelerating starting in October, as the coronavirus found a renewed foothold in the U.S.
In January, virtual care claims made up 7% of all medical claim lines, but that fell to 5.9% in February, 5.6% in March and just 4.9% in April, suggesting a steady deceleration in telehealth demand.
The deceleration in April was seen in all U.S. regions, but was particularly pronounced in the South, Fair Health said, which saw a 12.2% decrease in virtual care claims.
The trend doesn’t bode well for the ballooning virtual care sector, which has enjoyed historic levels of funding during COVID-19. Just halfway through the year, 2021 has already blown past 2020’s record for digital health funding, with a whopping $14.7 billion. This latest data suggests dampening utilization could throw cold water on the red-hot marketplace.
And policymakers are still mulling how many telehealth flexibilities should be allowed after the public health emergency expires, expected at the end of this year. Virtual care enjoys broad support on both sides of the aisle and the Biden administration’s top health policy regulators, including CMS administrator Chiquita Brooks-LaSure, have said they support permanently adopting virtual care coverage waivers, but returned restrictions on telehealth access could also stymie use.
Fair Health also found that nationally, mental health conditions increased from 57% from all telehealth claims in March to 59% in April. That month, psychotherapeutic/psychiatric codes jumped nationally as a percentage of telehealth procedure codes, while evaluation and management codes dropped, suggesting a continued need for virtual access to mental health services, which can be some of the rarest and most expensive medical services to find in one’s own geographic area.
Also in April, acute respiratory diseases and infections increased as a percentage of claim lines nationally, and in the Midwest and South, while general signs and symptoms joined the top five telehealth diagnoses in the West. Both trends suggest a return to non-COVID-19 respiratory conditions, like colds and bronchitis, and more ‘normal’ conditions like stomach viruses, researchers said.
The US Supreme Court recently announced that it will hear an ongoing debate over cuts to 340B drug payments to Medicare hospitals.
The case will be heard during the Supreme Court’s upcoming term, which starts in October. A decision is expected sometime next year.
The case was brought on by the American Hospital Association (AHA) and other national hospital groups seeking to overturn HHS’ decision to reduce Medicare reimbursement to hospitals in the 340B Drug Pricing Program by nearly 30 percent.
HHS had finalized the cuts in the 2018 Outpatient Prospective Payment System (OPPS) rule. The federal department said in a fact sheet that the cuts address the “recent trends of increasing drug prices, for which some of the cost burden falls to Medicare beneficiaries.”
Hospital groups led by the AHA challenged the cuts, arguing that reduced drug payments would harm access to care since the 340B Drug Pricing Program includes safety-net hospitals. An appeals court did not agree with their arguments in August 2020, ruling in favor of HHS.
“We are pleased that the U.S. Supreme Court has agreed to hear the compelling arguments in our case on payments cuts to the 340B drug pricing program that are adversely impacting care to patients,” Melinda Hatton, the AHA’s general counsel, said publicly on Friday.
“We are hopeful that the Court will reject the appellate court decision deferring to the government’s interpretation of the law that clearly imperils the important services that the 340B program helps allow eligible hospitals and health systems to provide to vulnerable communities, many of which would otherwise be unavailable,” Hatton continued.
Other hospital groups also cheered the Supreme Court’s decision to hear the 340B drug payment case.
“We are pleased that the Supreme Court has agreed to review the appellate court decision, which we believe was legally flawed,” Maureen Testoni, CEO of 340B Health, said on the group’s website.* “We are hopeful that the justices will reverse the lower court decision that upheld these damaging cuts to many 340B hospitals treating patients with low incomes. In the meantime, we continue to urge the Biden administration to change this harmful policy by abandoning the payment cuts for 2022 and beyond.”
The other plaintiff, Association of American Medical Colleges (AAMC), also said it is looking forward to the consideration of the case.
“The current reimbursement rates reduce the 340B drug discounts granted to safety-net providers, many of which are teaching hospitals,”explained David J. Skorton, MD, AAMC president and CEO. “These hospitals use the current savings to deliver critical health care services to low-income and vulnerable patients, which includes providing free or substantially discounted drugs to low-income patients, establishing neighborhood clinics, and improving access to specialized care previously unavailable in some areas. A reversal of the cuts will ensure that low-income, rural, and other underserved patients and communities are able to access the vital services they need.”
Neither HHS nor CMS provided a public statement regarding the Supreme Court’s decision to hear the 340B drug payment case.
If you were anything like my family over the July 4 holiday, there were bowls of potato salad, casseroles of baked beans and platters of hotdogs, hamburgers and chicken all pulled from the grill and served family-style. For a lot of us, it was the first time seeing a wide net of our family in more than a year and we took advantage of ditching the masks, probably wrongly assuming our circles were vaccinated at higher levels than they were and maybe even handing kids lighters for sparklers they shouldn’t be wielding.
Our increasing return to normal makes it easy to believe the pandemic is almost over. Sure, we still had to wear masks on the flights, trains and buses. Grocery markets and big-box stores in some communities still asked that we wear them, too. The staff at Nationals Park here in D.C. and Progressive Field in Cleveland wore theirs as I visited both for MLB games. But the worst of the pandemic feels behind us here in the U.S., as vaccinations are climbing, deaths and new cases are sinking and headlines seem to be shifting to more run-of-the-mill topics like tropical storms.
A new and unusually long report from Congress’ independent think-tank is a stark warning to the U.S. government that even COVID-19 seems over, it actually isn’t, particularly when it comes to Americans’ well being. Released on Friday, the wonks at the Congressional Research Service (CRS) urged officials going into the long holiday weekend to remember amid the celebrations that we still don’t know the final toll of the pandemic, especially when it comes to long-term consequences for behavioral and mental health. Its notes about substance-abuse challenges are particularly worrying, given that lawmakers cannot ignore the already troubling fight against opioids.
Anecdotally, we know the last 18-or-so-months have taken a toll on our friends, colleagues and neighbors. Those of us lucky enough to have been allowed to work from home adapted in fits and starts. My colleagues with children or dependents were stretched to the points of breaking, but most have made it to the other side. Those in complete isolation actually came to look forward to Zoom meetings and telemedicine appointments. And tech-slow people like my grandmother probably wouldn’t have made it through without the good folks at the local public library loading her loans into the trunk through a touch-free lending system.
But you cannot make public policy on anecdotes alone, which is why the CRS report offers a roadmap for lawmakers. Noting upfront that the data is still coming in and comparisons so quickly after—and during, really—a so-recent period are imprecise, there are still warning signs that America has not healed the way we’d like to believe. The share of Americans suffering simultaneously from depression and anxiety grew five-fold, year-over-year, in just the first three-months of the pandemic-mandated lockdown, from April to June 2020, when the death toll still hovered around 120,000. Fatal overdoses grew 11% between March and May last year, and non-fatal overdoses rose 19% during that same short window. In the three months that followed, there were almost equal levels of depression or anxiety among households that had lost jobs and those that had not. No one was spared, but the hit came hardest for less-educated, essential and lower-paid workers.
Why is this Washington’s problem? An estimated 10% to 20% of Americans who needed mental-health services during the pandemic received no treatment. Another survey cited in the report estimates that up to a quarter of adults with depression or anxiety went untreated. As many as 27,000 Americans who survived COVID-19 may end up dead over the next decade as a result of behavioral health-related challenges, and that number may ultimately reach more than 154,000. At the moment, federal law does not require mental health services to be treated on par with treatments for physical health. Not Medicare. Not CHIP. Not even fancy private insurance plans.
There were, believe it or not, a few upsides to the COVID-19 pandemic that the CRS report notes. Under emergency powers granted in one of the relief bills, the Department of Health and Human Services waived the in-person requirement for some treatments, including mental health and substance abuse counseling. For now doctors can be paid for that phone call consultation rather than requiring patients to make a brick-and-mortar visit to qualify for Medicare and Medicaid money. The Department of Veterans Affairs allowed taxpayer dollars to help with mental health services via tech platforms, too. In all, billions of dollars were included in the raft of COVID-19 stimulus plans to shore up mental health and substance abuse programs.
But those were the bright spots. Not all of Washington’s urgent changes were for the better. The Drug Enforcement Agency allowed doctors to prescribe medicine without a physical appointment, Health and Human Services’ civil rights unit turned a lot of blind eyes to patients’ privacy rights as public health data seemed ubiquitous, and the Small Business Administration shoved piles of cash out the door to health clinics and larger rafts of money to hospitals with minimal upfront scrutiny.
So as Washington turns slowly toward the post-pandemic policies of this country, lawmakers have plenty to consider, especially if it wants to return America to its Before Times footing. As much as it may feel like the United States is rounding a corner—and it’s tough not to when you see big crowds gathering maskless for fireworks and parades—the reality is this: there’s still a lot of trauma under the surface that is all too easy to miss unless D.C. is looking for it.
On Thursday, the Biden administration issued the first of what is expected to be a series of new regulations aimed at implementing the No Surprises Act, passed by Congress last year and signed into law by President Trump, which bans so-called “surprise billing” by out-of-network providers involved in a patient’s in-network hospital visit.
The interim final rule, which takes effect in 2022, prohibits surprise billing of patients covered by employer-sponsored and individual marketplace plans, requiring providers to give advance warning if out-of-network physicians will be part of a patient’s care, limiting the amount of patient cost-sharing for bills issued by those providers, and prohibiting balance billing of patients for fees in excess of in-network reimbursement amounts.
The rule also establishes a process for determining allowable rates for out-of-network care, involving comparison to prevailing statewide rates or the involvement of a neutral arbitrator, but falls short of specifying a baseline price for arbitrators to use in determining allowable charges. That methodology, along with other details, will be part of future rulemaking, which will be issued later this year.
Of note, the rule does not include a ban on surprise billing forground ambulance services, which were excluded by Congress in the law’s final passage—even though more than half of all ambulance trips result in an out-of-network bill. Expect intense lobbying by industry interests to continue as the details of future rulemaking are worked out, as has been the case since before the law was passed.
While burdensome for patients,surprise billing has become a lucrative business model for some large, investor-owned specialist groups, who will surely look to minimize the law’s impact on their profits.
This week, the Supreme Court declined to hear an appeal challenging Medicare’s 2019 regulation calling for “site-neutral payment” for services provided by hospitals in outpatient settings, clearing the way for the rule’s implementation. The appeal was filed by the American Hospital Association (AHA), along with numerous hospitals and health systems, after a lower court ruling last year upheld the change to Medicare’s reimbursement policies.
The rule aims to level the playing field betweenindependent providers and hospital-owned clinics by curtailing hospitals’ ability to charge higher “facility fees” for services provided in locations they own. Site-neutral payment has been a longstanding target of criticism by health economists and policymakers, who cite the pricing advantage as a driver of consolidation in the industry, which has tended to push the cost of care upward.
The AHA expressed disappointment in the Court’s decision not to hear the appeal,saying that the changes to payment policy “directly undercut the clear intent of Congress to protect them because of the many real and crucial differences between them and other sites of care.” The primary difference, of course, is hospitals’ need to fully allocate their costs across all the services they bill for, making care in lower-acuity settings more expensive than similar care delivered by practices that don’t have to subsidize inpatient hospitals and other costly assets.
Over the years that legitimate business need has turned into adeliberate business model—purchasing independent practices in order to take advantage of higher hospital pricing. As Medicare looks to manage Baby Boomer-driven cost growth, and employers and consumers grapple with rising health spending, expect increasingly rigorous efforts to push back against these kinds of pricing strategies.
HENRY KOTULA 