For-profit systems fare better than nonprofits in weathering COVID-19 cash crisis, MedPAC says

https://www.fiercehealthcare.com/hospitals/medpac-for-profit-systems-do-better-job-than-nonprofits-weathering-covid-19-cash-crisis?mkt_tok=eyJpIjoiTlRJM05qVmhOVEptWm1ZNSIsInQiOiJaRHlaWHpyaHVZUHlvTFwvZmRaZDZKUVY2aEJka25ncStYSmcxZXo3bTR5TzV3NFE0YzdpYlpGMGRrbUxkcWVYT0Z4ZTVMa0VPN3BuSElkMldQRXBpTk1pbnN1T3VoalNXd0JzTU9aYngwazltVXRud0hISVppZnF2OHU0bFwvVzN6In0%3D&mrkid=959610

For-profit health systems have been better able to weather a financial crisis caused by COVID-19 than their nonprofit counterparts because they could reduce more expenses, a new analysis from the Medicare Payment Advisory Commission finds.

The analysis released Thursday during MedPAC’s monthly meeting comes as providers struggle to recover from low patient volumes stemming from the COVID-19 pandemic. The report also explored how physician offices have fared.

Hospitals faced a massive dip in patient volume in March and April at the onset of the pandemic, which forced facilities to cancel or delay elective procedures. Patient volumes have since recovered to near pre-pandemic levels, MedPAC found.

But the recovery has been mixed depending on the hospital system.

MedPAC looked at earnings for three large nonprofit systems in the U.S. and four large for-profit systems in the second quarter and found a variation in how they handled the decline in revenue.

Aggregate patient revenue for the nonprofit systems declined by $1.5 billion and this led to a $621 million loss for the systems in the second quarter compared to the same period in 2019. Overall the systems had operating profit margins ranging from negative 13% to positive 5%.

The four for-profit systems saw a $3.5 billion decline in patient revenue. However, the systems posted an increase of $634 million in operating income.

This led to a range of operating margin increases of 1 to 14% in the second quarter compared to 2019.

The for-profit systems got more relief funding ($1.9 billion compared with $782 million) from a $175 billion federal provider relief fund created by the CARES Act.

But the biggest difference between for-profit and nonprofit systems was how they handled expenses.

“For-profit systems substantially reduced expenses in the second quarter, in aggregate reduced by $2.3 billion and that made up for lost revenue,” said Jeff Stensland, a MedPAC staff member, during the meeting.

Nonprofit systems only saw a $13 million decline in expenses.

The analysis comes as some larger for-profit systems like HCA Healthcare generate profits in the second quarter, while nonprofit systems such as Providence posted losses.

MedPAC did not name the systems that it analyzed nor did it delve into what expenses were reduced and how.

Some systems have taken to furloughing employees but all systems have faced increased expenses for personal protective equipment and some staff.

The analysis also looked at the financial impact of the pandemic on physician offices. MedPAC found that federal grants, loans and payment increases offset a majority of the revenue lost in March and May due to patient volume declines.

MedPAC estimated physician offices lost between $45 to $55 billion. However, offices got $26 billion in loans from the Paycheck Protection Program, which don’t have to be repaid if the majority of the funds go to payroll.

Physician offices also received $5 billion out of the $175 billion provider relief fund passed as part of the CARES Act.

Physicians also got $1 billion in savings from the temporary suspension of a 2% decline in Medicare payments created under sequestration.

 

 

 

Congress Should Redirect The Medicare Shared Savings Program To Address The COVID-19 Emergency

https://www.healthaffairs.org/do/10.1377/hblog20200518.386084/full/?utm_source=Newsletter&utm_medium=email&utm_content=COVID-19%3A+Redirecting+The+Medicare+Shared+Savings+Program%2C+The+Hidden+Homeless%2C+Senior+Housing+Communities+Need+Support%3B+Reimagining+Involuntary+Commitment%3B+Book+Reviews&utm_campaign=HAT+5-22-20

Congress Should Redirect The Medicare Shared Savings Program To ...

The COVID-19 virus has unleashed a rolling series of crises among fee-for-service providers. First, and most directly affected, providers in areas with major outbreaks have suffered extreme personal hardship and risked infection themselves with inadequate equipment and protective gear when treating patients. Second, everywhere in the country, physician practices and hospitals have seen revenue drops from 20 percent to 60 percent due to the need to follow social distancing practices to minimize infection. This revenue collapse has perversely resulted in staffing reductions that are likely to accelerate unless Congress provides further assistance to the industry. Third, and only partially observed so far, there is a pending “second wave” of health crises discernible in the “missing heart attacks” and reports from nephrologists and oncologists of patients making difficult decisions about whether to continue necessary care. In some cases, emergency care has shifted out of the hospital, and some triage is conducted on the street to avoid risk of COVID-19 infection.

The COVID-19 public health emergency has generated a massive set of emergency changes in Medicare payment policy, loosening regulation of acute hospital care, dramatically expanding use cases for telehealth and other types of virtual care, and, through the Coronavirus Aid, Relief, and Economic Security (CARES) Act and subsequent relief legislation, releasing a $175 billion pool of money that attempts to prop up Medicare providers dependent on in-person, fee-for-service revenue. Now, with that first batch of changes handled, a debate has started among proponents of value-based purchasing as to the appropriate direction for the Medicare Shared Savings Program (MSSP) and other value-based initiatives during the emergency.

In this context, a number of stakeholders have begun to call on the Centers for Medicare and Medicaid Services (CMS) to modify existing MSSP parameters to maintain the program through the emergency. CMS has responded by eliminating downside risk for accountable care organizations (ACOs) for the duration of the public health emergency and taking COVID-19 costs out of ACO financial calculations. These are welcome changes but don’t completely address the serious problems ACO participants face. We urge a different focus—the federal government should charge these existing networks with addressing the “second wave” of health care needs going largely unaddressed, as patients with serious, non-COVID-19-related chronic conditions see procedures and visits postponed indefinitely. Commensurately, Congress should suspend all financial impacts from the MSSP for the duration of the public health emergency—and consider excluding any data from 2020 for performance years 2021 and beyond. We describe key elements of these changes in this post.

A Growing Call For MSSP Modifications

The Medicare Payment Advisory Commission (MedPAC) issued a comment letter urging CMS to allow ACO providers to focus on COVID-19, rather than shared savings. MedPAC, acknowledging the dramatic shifts in care delivery necessitated by the COVID-19 crisis, made several recommendations about treatment of savings and losses in the MSSP for 2020. MedPAC asked CMS not to use 2020 data for purposes of ACO quality, bonuses, and penalties. MedPAC would also have CMS disregard 2020 claims when assigning beneficiaries to ACOs, since a shift to telehealth, with physicians and patients potentially located far apart, could distort the ACO assignment with unintended effects. Finally, MedPAC recommended extending all ACO agreement periods, keeping everyone in the current risk arrangement for one year, a recommendation CMS adopted.

William Bleser and colleagues recently suggested immediate and short-term actions that could help preserve ACOs through this crisis. Their blog post identifies the decision point, coming on June 30, 2020, for ACOs to stay in the program and be accountable for losses in 2020. The impact of the emergency on ACOs will still be unclear at that time, and the authors recommend that CMS allow ACOs to completely opt out of downside risk for 2020 while accepting a capped amount of potential shared savings. Eliminating the downside and offering a limited upside might just convince ACOs not to leave the program entirely. CMS has taken these concerns seriously and removed all COVID-19–related costs from ACO financial calculations and eliminated shared losses during the public health emergency.  

Another recent blog post by Travis Broome and Farzad Mostashari makes the case that the population health focus and financial incentives for ACOs position them uniquely, not just to survive, but to lead the way for primary care during the COVID-19 crisis. ACO participation may protect these practices because of the program’s unique financial metrics. Unlike Medicare managed care, MSSP ACOs are measured against a benchmark that trends forward at actual regional and national spending growth rates. During an unusual spending year, as 2020 is sure to be, those factors are included in the trend, and the ACO is not heavily penalized for the spending pattern. Broome and Mostashari recommend that CMS focus on shielding primary care practices from certain quality reporting and information collection requirements to pave the way for high-quality care and solid financial performance.

A More Focused Re-Envisioning Of The MSSP

Foundational to the MSSP is an agreement between groups of providers and the federal government to align their financial relationship with patient and taxpayer goals: to improve the quality of care for their patients and reduce the growth of health care spending. Both of those elements must take a back seat during a massive public health emergency.

Reducing overall health care costs is not an appropriate consideration for providers today. Even though national and regional growth factors will track actual changes in expenditures and may allow for identification of more efficient providers, this objective is second order to directly responding to the threat of the emergency. Given the overwhelming need to respond to the COVID-19 crisis in their communities, the ability of any health system or ACO to influence costs this year is likely to be dwarfed by factors outside its control. This type of highly infectious, novel pandemic is a risk that can only be properly assumed by the federal government. Neither physician practices, nor hospitals, nor any other ACO participants can realistically budget and prepare for such an event on their own. Congress and CMS should adopt MedPAC’s suggestion to suspend charging penalties or paying bonuses for all of 2020, no matter how long the public health emergency is in effect.

Similarly, while the prevention and care management metrics embedded in the MSSP remain appropriate indicators directionally, difficulties in seeing patients for well visits and new standards for documentation during telehealth visits will make any precise differentiation of quality in primary care practices near impossible. MedPAC is correct that using 2020 data for performance evaluation would undercut the legitimacy of the program, and the commissioners are right to support the call to suspend the use of such data in establishing bonuses, penalties, and benchmarks in 2020 and beyond.

However, many practices have made significant investments in population health technology, staff, and training that remain as valuable as ever during this emergency. And the public has an interest in maintaining those staff and those skills, as the basis for a better health system in the future. All told, like much of the rest of the economy, putting the MSSP and other ACO arrangements “on ice” to allow providers to focus on near-term priorities would best serve the public interest. That includes delaying or freezing requirements to step up to higher-risk tracks in the Pathways to Success program, as well as delaying or canceling quality submission requirements. These delays, however, should be paired with public funding to reflect the work that ACOs have already undertaken, as well as work that they can do to help manage through the crisis, discussed further below.

Taking steps to preserve ACOs through 2020 is a good start, but we believe Congress and CMS should think bigger and empower ACOs to focus directly on the current crisis for the next two years.

Adapting ACOs To Serve The Current Emergency

ACOs are a valuable asset for the Medicare program, reflecting nearly 10 years of work across hundreds of thousands of providers serving tens of millions of beneficiaries. Disbanding them by indifference would be a mistake. The current collapse in fee-for-service volume is a problem of fee-for-service medicine primarily, and ACOs represent an infrastructure for a further step away from volume-focused medicine once the danger from this emergency passes.

Suspending financial considerations and consequences for the duration of the emergency is insufficient. Without the responsibility for managing risk and sharing in any savings, the ACO contract with CMS loses its organizing force, and the program becomes “a solution in search of a problem.”

We see two opportunities for ACOs to redirect their energies productively this year and next. First, ACOs should be directed to follow best practices in testing and public health data collection, in collaboration with local and state officials. Managing the spread of the virus in their communities is already a daily task for these providers; additional surveillance and data collection could be adopted and updated continuously as recommendations evolve. By providing resources to ACOs to support this work directly, CMS would help ensure providers can keep up.

Second, and perhaps more important in most of the country to date, ACOs should be charged with meeting explicit virtual care management requirements to identify, contact, and serve patients in their panel with multiple high-risk chronic diseases. These patients are underserved today, and efforts to address their needs are piecemeal. In place of the current financial incentives, we propose that CMS require ACOs to perform a variety of care management and COVID-19 surveillance functions in exchange for a care management fee. Congress could enable and CMS could specify that ACOs place 10 percent to 15 percent of their patients under virtual care management programs, for example, and require that ACOs maintain regular contact with these patients as well as others at higher risk. The 10 percent to 10 percent figure is a fairly low bar, considering that more than 60 percent of Medicare patients have multiple chronic conditions, according to CMS. Additionally, COVID-19 patients could be offered principal care management, a new service for Medicare beneficiaries with one serious health condition, for a month or more after their diagnosis. New flexibilities for remote patient monitoring and virtual care make this far easier to implement than it had been before the pandemic.

CMS could quickly adapt existing financial models to support this work, drawing from analysis and design of the Primary Care FirstComprehensive Primary Care Plus, and other care management programs. ACOs are by design collaborative and can rapidly learn and share best practices for establishing virtual care management services. Behavioral health services and outreach, as well as other valuable preventive care, could also be directly funded through this structure. As an alternative to the fee for care management and surveillance, Congress could allow ACOs to receive their 2019 shared savings amounts again for 2020, for ACOs continuously operating in each year.

Looking Ahead

The steps we have outlined here will accomplish several worthwhile ends in this crisis:

  • directly funding primary care capacity at a time when volumes are nosediving;
  • keeping the nearly 500,000 physician and other clinicians already in ACOs working together, maintaining the infrastructure that has already been built; and
  • providing upfront resources to manage patients whose conditions could deteriorate in the coming months, potentially catching them before they do.

These modifications should be executed first by Congress, not CMS, to ensure that such changes to the program do not become commonplace. This would invigorate the ACO programs by focusing them on the unique set of problems of this crisis, unencumbered by requirements better suited to peacetime than wartime. And when the war is over, these organizations can resume their longer-term mission to manage total costs and quality with all of the new tools and capabilities they have acquired during the crisis.

 

 

 

 

MedPAC’s report to Congress: 7 takeaways

https://www.beckershospitalreview.com/finance/medpac-s-report-to-congress-7-takeaways.html?utm_medium=email

Image result for MedPAC

The Medicare Payment Advisory Commission released its March 2020 report on Medicare payment policy to Congress, which includes a chapter analyzing the effects of hospital and physician consolidation in the healthcare sector.

Here are seven takeaways:

1. Medicare’s Insurance Trust Fund is likely to run out without changes. Trustees from Medicare estimate that the program’s Hospital Insurance Trust Fund, mostly funded through a payroll tax, will be depleted by 2026. To keep the fund solvent for the next 25 years, Medicare trustees advise that the payroll tax immediately be raised from 2.9 percent to 3.7 percent, or Part A spending to be reduced by 18 percent.

2. MedPAC recommends boosting payment rate for three sectors:

  • Hospitals. MedPAC recommended a 3.3 percent raise in Medicare payments for hospitals next year. The commission said it wants to give hospitals a 2 percent boost overall and tie the other 1.3 percent to quality metrics to motivate hospitals to reduce mortality and improve patient satisfaction. Currently, CMS has scheduled a 2.8 percent increase in 2021 Medicare payments.
  • Outpatient dialysis services. MedPAC recommended that the End Stage Renal Disease Prospective Payment System base payment rate is raised by the amount determined under current law. This is projected to be a boost of 2 percent
  • Long-term care hospitals. The commission recommended a 2 percent increase in the payment rates for long-term care hospitals in 2021.

3. MedPAC recommends unchanged payment rates for four sectors:

  • Physicians: Under current law, there is no update to the 2021 Medicare fee schedule base payment rate for physicians who treat Medicare patients. MedPAC is recommending that CMS keeps the physician rate the same as it is this year.
  • Surgery centers. MedPAC recommended eliminating an expected 2.8 percent payment rate bump for surgery centers next year. It said its decision was due to not having enough cost data from surgery centers.
  • Skilled nursing. MedPAC is recommending skilled nursing facilities receive no change to their base rate next year to better align payments with costs while exerting pressure on providers to keep their cost growth low.
  • Hospice. MedPAC recommends that the hospice payment rates in 2021 be held at their 2020 levels

4. MedPAC recommends payment rate reductions for two sectors: 

  • Home health. The commission recommended a 7 percent reduction in home health payment rates for 2021.
  • Inpatient rehabilitation hospitals. MedPAC is recommending that CMS reduce the payment rate to inpatient rehabilitation facilities by 5 percent for fiscal year 2021.

5. MedPAC builds on its recommendation to revamp quality programs. MedPAC is furthering its recommendation to replace Medicare’s four current hospital quality programs with a single hospital value incentive program. MedPAC said it believes that this recommendation would provide hospitals  higher aggregate payments than they would get under current law.

6. MedPAC’s findings on hospital and physician consolidation. MedPAC said that consolidation gives providers greater market power, which has a statistically significant association with higher profit margins for treating non-Medicare patients. Higher non-Medicare margins also are associated with higher standardized costs per discharge. But the direct association between market power and standardized costs per discharge is statistically insignificant, the commission found.

“The effect of consolidation on hospitals’ costs is not clear in theory or from our current analysis. From a theoretical standpoint, the merger of two hospitals could initially create some efficiencies and bargaining power with suppliers. But over time, higher prices from commercial payers could loosen hospitals’ budget constraints and lead to higher cost growth, thus offsetting any efficiency gains,” MedPAC’s report states.

7. MedPAC’s findings on the 340B Drug Discount Program. MedPAC was asked to analyze whether the availability of 340B drug discounts creates incentives for hospitals to choose more expensive products than they would without the program. MedPAC studied the effect of 340B market share on higher drug spending on cancer treatments between 2009 and 2017. The commission found that for two of the five cancer types studied, 340B participation boosted prices by about $300 per patient per month. However, the boost in spending attributed to 340B was much smaller than the general increase in oncology spending, which includes rising prices and the launch of new products with high drug prices. For example, cancer drug spending grew by more than $2,000 per patient month for patients with breast cancer, lung cancer, and leukemia/lymphoma.

“The MedPAC report released today uses rigorous analysis and finds little evidence 340B participation influences cancer drug spending. Modest differences may be attributable to the types of patients treated in 340B facilities. The safety-net hospitals that participate in the 340B drug-pricing program are essential providers of cancer care in this nation, especially to patients who are living with low incomes, those living with disabilities, and patients requiring more complex oncology care,” said Maureen Testoni, president and CEO of 340B Health, an association that represents more than 1,400 hospitals participating in the 340B program.

Access MedPAC’s full report here. 

 

 

 

 

MedPAC: 340B hospitals spent more on lung, prostate cancer drugs compared to other facilities

https://www.fiercehealthcare.com/hospitals-health-systems/medpac-340b-hospitals-spent-more-cancer-drugs-compared-to-other-facilities?mkt_tok=eyJpIjoiTTJaaE5EY3lZMlEzTVdZdyIsInQiOiI1UEZJUjBpbldUSVBteFl3OGpnd0FPRnIxMFJFUXIzSjE1YUJDMVdDSSsrdDlibDI1KzU5bXZsU1RIUjBZUWNPR2s1OTdwQXV5ZVY2cUhuWXkzYnpDWE55akhCczMxOVEyRWdpdkNYK1hKcjdIV01qNTdPemxyWkFVK1pDUmNzNyJ9&mrkid=959610

Image result for 340b drug pricing program

Hospitals in the 340B drug discount program spent more on drugs for prostate and lung cancers compared to facilities not in the program, a new analysis found.

But the preliminary analysis from the Medicare Payment Advisory Commission (MedPAC) couldn’t find that the controversial program incentivizes hospitals to pursue higher-priced drugs. The analysis, released Friday as part of MedPAC’s monthly meeting, was requested by Congress on the program, which has faced major cuts by the Trump administration.

Some lawmakers have argued that 340B, which offers safety-net hospitals discounts on drugs, has not worked as intended and led to hospitals specifically choosing higher-priced drugs to get a big discount.

So MedPAC looked at the spending from 2013 to 2017 of 340B and non-340B hospitals as well as physicians’ offices for five types of cancers: breast, colorectal, prostate, lung and leukemia and lymphoma.

MedPAC’s analysis found that 340B hospitals spent between 2% and 5% higher on average on cancer drugs than non-340B hospitals. But there were mixed results when 340B hospitals were compared to physicians’ offices, with 340B facilities spending 1% lower to 7% higher than physicians’ offices on cancer drugs.

The reason 340B hospitals spent more on cancer drugs than hospitals not in the program was linked to two types of cancer: lung and prostate.

For lung cancer, a possible reason for the higher spending is that a larger share of patients in 340B hospitals received new immuno-oncology therapies that are more expensive, MedPAC said. Prostate cancer also had higher drug prices per unit for both drugs in Medicare Part B, which reimburses for physician-administered drugs, and Part D.

However, MedPAC staff cautioned they couldn’t conclude 340B is incentivizing the spikes in spending.

The reason is “we lack access to the discount data,” said MedPAC staffer Shinobu Suzuki at the commission’s meeting Friday in Washington, D.C.

MedPAC also didn’t find that gaining 340B status led to a spike in average cancer drug spending, suggesting that 340B discounts “may not have had any effects on them,” the report said.

The analysis also found that the higher cancer spending would likely have a small, if any, impact on cost sharing for Medicare patients depending on the type of cancer and supplemental coverage.

The study will be finalized and likely included in MedPAC’s March report to Congress. It comes with some caveats, including a small sample size and that it did not examine the impact of a 22.5% cut to 340B payments that went into effect in 2018.

The hospital industry has been fighting the Trump administration in court over the cuts, which the industry claims are unlawful.

Despite the caveats, MedPAC’s findings could play a major part in lawmaker deliberations on the program, which some Republicans claim has gotten too big and led to hospitals bilking the federal government.

The pharmaceutical industry has also led an extensive campaign to shed more light on the program. 340B requires pharmaceutical companies to provide discounts to safety-net hospitals in exchange for participating in Medicaid.

The Government Accountability Office has also called for greater oversight of 340B.

340B industry group 340B Health praised the findings.

“The thoughtful analysis MedPAC presented today sheds important light on the role 340B hospitals play in treating people living with cancer,” said Maureen Testoni, 340B Health president, in a statement.

 

MedPAC recommends 3.3% payment boost for hospitals in 2021

https://www.beckershospitalreview.com/finance/medpac-recommends-3-3-payment-boost-for-hospitals-in-2021.html?utm_medium=email

Related image

The Medicare Payment Advisory Commission voted unanimously Jan. 16 to recommend a 3.3 percent raise in Medicare payments for hospitals next year.

The commission said it wants to give hospitals a 2 percent boost overall and tie the other 1.3 percent to quality metrics to motivate hospitals to reduce mortality and improve patient satisfaction.

CMS has scheduled a 2.8 percent increase in 2021 Medicare payments.

MedPAC said it is recommending the payment boost to reduce the disparity in payments at different care sites and is part of a larger effort to introduce site-neutral payments.

Congress is not required to implement the recommendation.

 

 

 

Hospital M&A spurs rising healthcare costs, MedPAC finds

https://www.healthcaredive.com/news/hospital-ma-spurs-rising-healthcare-costs-medpac-finds/566858/

Dive Brief:

  • Both vertical and horizontal hospital consolidation is correlated with higher healthcare costs, according to a congressional advisory committee on Medicare, in yet another study finding rampant mergers and acquisitions drive up prices for consumers.
  • The Medicare Payment Advisory Commission found providers with greater market share see higher commercial profit margins, leading to higher costs per discharge, though the direct relationship between market share and cost per discharge was not statistically meaningful itself.
  • MedPAC also found vertical integration between health systems and physician practices increases prices and spending for consumers. The top-down consolidation leads to higher prices for commercial payers and Medicare alike, as hospitals have more bargaining heft and benefit from Medicare’s payment hikes for hospital outpatient departments.

Dive Insight:

Hospital consolidation has become a major point of concern for policymakers, antitrust regulators and patient advocacy groups.slew of prior studies have found unchecked provider M&A contributes to higher healthcare costs, with the brunt often borne by consumers in the form of higher premiums and out-of-pocket costs.

Since 2003, the number of “super-concentrated” markets has increased from 47% to 57%, according to the MedPAC analysis of CMS and American Hospital Association data. Those markets, with a high amount of consolidation, rarely see new providers enter, which stifles competition, and are rarely reviewed by the government.

There’s been little change in antitrust regulation since the 1980s and, though the Federal Trade Commission has won several challenges to hospital consolidation in the 2010s, the agency only challenges 2% to 3% of mergers annually.

MedPAC also found super-concentrated insurance markets actually led to lower costs per discharge compared to lower levels of payer concentration, deflating somewhat hospital lobbies’ arguments that payer consolidation is driving prices higher.

Committee members called for more analysis of how macro trends like an aging population and federal policy could be driving consolidation and impacting prices, leading some to call for a revamp of the hospital payment framework itself.

“We have to change the way hospitals are paid. I don’t see another solution,” said Brian DeBusk, CEO of Tennesse-based DeRoyal Industries, a medical manufacturer. “Are you going to undo a thousand hospital mergers? Are you going to enact rate setting? I don’t see another way.”

MedPAC also looked at vertical integration, where hospitals snap up physicians practices downstream. According to the Physician Advocacy Institute, only 26% of physician practices were owned by hospitals in 2012, but by last year that number had spiked to 44%.

Since 2012, billing has shifted from physician offices to hospital outpatient departments, especially in specialty practices. In chemotherapy administration, for example, physician offices saw almost 17% less volume between 2012 and 2018, while outpatient centers saw a 53% increase in volume, according to MedPAC.

Physicians in hospital-owned practices also refer more patients to the hospital’s facilities and, despite a common stumping point that integration improves quality through care coordination, its effect on quality is “ambiguous,” MedPAC analyst Dan Zabinski said Thursday at the committee’s November meeting.

Despite the mountain of evidence, the AHA published a widely-decried study in September claiming acquired hospitals see a reduction in operating expenses and a statistically significant drop in readmission and mortality rates. The study was criticized for not using actual claims data in its analysis among other methodological and conflict of interest concerns.

Republican leaders in the House Energy and Commerce Committee asked MedPAC to study provider consolidation in August, and the body’s full findings will be included in its March report to Congress.​

 

 

 

 

 

Trump’s Plan To Privatize Medicare

Trump’s Plan To Privatize Medicare

Image result for medicare privatizing

Last week, President Donald Trump signed an executive order titled “Protecting and Improving Medicare for Our Nation’s Seniors.” The order is the latest example of how Trump says one thing while doing another. Rather than strengthening Medicare, Trump envisions turning large swaths of the 54-year-old program for the elderly over to the private sector while directing the federal government to dismantle safeguards on seniors’ health care access, shift costs onto beneficiaries, and limit seniors’ choice of providers.

Among other things, the executive order lays out a path to:

  • Shift the Medicare program toward private plans
  • Expand private contracting between beneficiaries and providers, putting seniors at risk for higher costs and surprise medical bills
  • Further restrict seniors’ choice of providers in Medicare Advantage
  • Expand Medicare Medical Savings Accounts as a tax shelter for the wealthy

President Trump rolled out the executive order in a speech at a retirement community in Florida, during which he echoed his administration’s previous attacks on progressive health reform proposals by referring to them as “Medicare for None.” In fact, several recent congressional proposals would offer new choices for coverage, expand the benefits of insurance, and strengthen Medicare benefits for the elderly. Unlike these Medicare for All-type proposals, Trump’s plan fails to address some more common problems in Medicare, such as high out-of-pocket costs or difficulties navigating Medicare Advantage networks.

A shift toward Medicare privatization

Today, about one-third of seniors are enrolled in private plans through Medicare Advantage; the other two-thirds are in traditional, fee-for-service Medicare. The share of beneficiaries enrolled in Medicare Advantage has grown over the past two decades. Medicare Advantage attracts a relatively healthier, less expensive pool of enrollees than that of traditional Medicare, and its per-beneficiary spending is lower. Some of that difference is attributable to lower health care utilization, although local market conditions and beneficiary health status also contribute. A number of studies have shown how Medicare Advantage plans profit from selection by attracting relatively healthier enrollees while also gaming the Centers for Medicare and Medicaid Services’ (CMS) risk adjustment program to make their enrollees appear sicker. Medicare Advantage plans also enjoy distinct advantages over the traditional Medicare program, including integrated plan designs and the ability to avoid providers involved in graduate medical education.

Last week’s executive order emphasizes so-called market-based approaches, signaling that President Trump envisions an even bigger role for the private sector in Medicare. In fact, Trump has already taken steps to accelerate enrollment in private plans. Last year, the administration bombarded beneficiaries with email messages promoting Medicare Advantage to such an extent that one former CMS official described the effort as “more like Medicare Advantage plan advertising than objective information from a public agency.”

The executive order directs the secretary of the U.S. Department of Health and Human Services (HHS) to ensure that traditional Medicare “is not advantaged or promoted over [Medicare Advantage] with respect to its administration.” For example, one way the administration could nudge more enrollees into Medicare Advantage would be to further relax CMS guidelines governing how plans market to beneficiaries. A more aggressive tactic to shift enrollees into private plans would be to make Medicare Advantage, rather than the traditional Medicare program, the default for more seniors. While auto-enrollment could result in lower costs for some beneficiaries, others could find themselves stuck in plans with limited networks or insufficient coverage for services they need. In addition, studies of the private drug plans offered through Medicare Part D have shown that seniors find it cumbersome to switch plans, even when the one they have is not the best value.

CMS’ existing Medicare Advantage auto-enrollment mechanism, though limited to a small subset of beneficiaries, caused enough problems that the agency suspended expansion of the process in 2016. In some instances, beneficiaries subject to “seamless conversion,” which allows insurance companies to auto-enroll their marketplace or Medicaid customers into Medicare Advantage, were unaware what type of Medicare coverage they had until they were assigned a new primary care doctor or they already had received out-of-network care. Even if a future Trump administration plan allowed people automatically enrolled in Medicare Advantage to opt back into traditional Medicare, the switch could cause seniors to miss enrollment deadlines for private Medigap plans. Unable to obtain supplemental benefits for traditional Medicare coverage, those people would effectively be stuck in Medicare Advantage.

Another part of the order asks the HHS secretary to align Medicare’s reimbursement rates with the prices paid by Medicare Advantage plans and commercial insurers. Broad application of market-based pricing in Medicare could raise expenses for beneficiaries and taxpayers and drain the Medicare trust fund: Bloated provider rates for commercial insurance show that the market does not work in patients’ interests and cannot be trusted to ensure fair prices. Dominant provider systems leverage their market power to demand prices well above the cost of care. A recent RAND Corporation study found that private insurance typically pays hospitals about 241 percent of Medicare rates, with wide variation across geographic regions. While Medicare Advantage plans’ negotiated rates for individual items or services can be lower or greater than those in the traditional Medicare fee schedule, reimbursement rates in the two programs are generally close, on average. The administratively set rates in Medicare keep the prices for hospital and physician services reasonable not only for traditional Medicare beneficiaries but also for those in Medicare Advantage plans. Allowing traditional Medicare prices to float up toward commercial rates while also delinking Medicare Advantage rates from Medicare rates could cause traditional Medicare premiums and the overall cost of the program to skyrocket and deplete the Medicare trust fund.

The executive order could also give new life to a deeply unpopular, longstanding conservative scheme to privatize Medicare. Under so-called premium support plans, seniors would receive vouchers that they would use to purchase either a private Medicare plan or traditional Medicare. Past premium support proposals differ in how they set the amount of the voucher: Some plans set the voucher amount arbitrarily, while others put a thumb on the scale to encourage beneficiaries to choose a private plan.

The executive order calls for using Medicare Advantage negotiated rates to set traditional Medicare rates and instructs the HHS secretary to develop a transition plan to adopting “true market-based pricing” for the traditional Medicare program, including through competitive bidding, which in the past has been a method for setting the voucher amount. Traditional Medicare—saddled with now-higher costs—would have to bid against private Medicare plans in order to compete for beneficiaries. Past premium support plans would then cap the yearly growth of the voucher, and as costs exceeded those caps, Medicare beneficiaries would pay a greater share of the costs of the program over time.

Expansion of private contracting would weaken Medicare’s financial safeguards

The executive order also directs the HHS secretary to “identify and remove unnecessary barriers to private contracts.” Today, Medicare protects beneficiaries from surprise medical bills by limiting the amount that doctors who see Medicare beneficiaries can charge these patients. Physicians may opt out of the Medicare program and enter into private contracts that set higher prices than Medicare will pay; in these cases, the patient is responsible for the entire billed amount. However, less than 1 percent of doctors have chosen to opt out of the program, in large part because Medicare’s rules protect consumers from these arrangements.

For example, doctors must give Medicare beneficiaries written notice that they have opted out of Medicare, and the patient must sign the document acknowledging that they understand they are responsible for paying the entire charge. Doctors may not enter into private contracts with patients who qualify for both Medicare and Medicaid or with patients experiencing a medical emergency. In addition, if a physician opts out of the Medicare program, they must do so entirely instead of cherry-picking beneficiaries or services. The opt-out period is a minimum of two years. Together, these limits protect beneficiaries by providing greater certainty about their doctors’ status and avoiding confusion about which visits and services Medicare will reimburse.

Loosening these rules could allow doctors to more easily circumvent Medicare consumer protections; opt out of Medicare; and charge higher prices to Medicare patients, who have lower incomes and greater health needs than privately insured individuals, on average. While wealthy beneficiaries might benefit from expanded access to nonparticipating providers, higher private prices could make it difficult for most Medicare patients to keep their doctors or afford to see other providers. Nevertheless, Trump’s first HHS secretary, Tom Price, sponsored legislation to permit private contracting and supported allowing doctors to balance bill Medicare beneficiaries.

Restriction of seniors’ choice of doctors in Medicare Advantage

During his Florida speech, Trump asked the crowd, “You want to keep your doctors, right?” Yet his order calls for changes that could restrict Medicare beneficiaries’ choice of doctors by favoring Medicare Advantage plans and by tinkering with the CMS network adequacy standards for those plans.

From a beneficiary perspective, a distinguishing feature of Medicare Advantage is that plans typically have restrictive provider networks. Under the Trump proposal, the network adequacy standards would take into account state laws affecting provider competition and the availability of telehealth services. If these changes lower the bar for Medicare Advantage plans and allow plans to include even fewer doctors in a particular area, a position the Trump administration has previously supported, they could make it harder for seniors to schedule in-person visits or see the provider of their choice. They could also increase costs for beneficiaries who need to see out-of-network specialists.

Lower-cost, narrower network plans could profit by cream-skimming healthier seniors because healthy individuals benefit most from the trade-off between lower premiums and fewer providers. Enrollees in traditional Medicare, including seniors who need the broad provider access that only traditional Medicare offers, could see their premiums rise as a result of a sicker risk pool and imperfect risk adjustment.

If networks become narrower, it may be increasingly hard for Medicare Advantage beneficiaries to identify and schedule visits with providers included in their plans. Moreover, online provider directories for Medicare Advantage are already filled with inaccuracies. A 2018 CMS report found that 45 percent of directories had inaccurate location information for providers. The CMS audit also found that 221 providers who were listed as in-network were not accepting new Medicare Advantage patients. This lack of accurate information, combined with Medicare Advantage’s relatively weak network adequacy standards, means that the Trump plan’s changes to the program could decrease, rather than increase, choice for seniors.

Savings accounts to benefit the wealthy and healthy

The executive order proposes wider access to Medicare Medical Savings Accounts (MSAs), which are available to those enrolled in high-deductible Medicare Advantage plans. Like health savings accounts (HSAs), the money in MSAs is tax-free and can be used toward health care costs, including dental, hearing, and vision. While high-deductible health plans and MSAs can be a good value for relatively healthy seniors who have high enough incomes to afford to fund these accounts, they may not provide adequate financial protection for those who need first-dollar coverage or have greater health needs.

President Trump has previously proposed turning MSAs into a tax shelter, which would chiefly benefit the wealthy. Trump’s FY 2020 budget proposed allowing seniors to deposit additional funds into MSAs beyond the plan’s contribution, as they can with HSAs. Data on HSA contributions show that higher-income individuals are more likely to contribute toward accounts and to benefit more from the tax exemption.

Trump sidesteps seniors’ most pressing concerns

A glaring omission in the president’s plan is any provision to directly take on one of seniors’ widespread concerns: the high cost of health care. Although Americans have overwhelmingly favorable experiences with the existing Medicare program, it is far from perfect. According to a report from the Commonwealth Fund, about 1 in 4 Medicare beneficiaries is underinsured, meaning their out-of-pocket health care costs are 10 percent or more of their income. A 2011 analysis by the Medicare Payment Advisory Commission (MedPAC) found that Medicare beneficiaries without supplemental plans, also known as “medigap” coverage, paid 12 percent of their medical costs out of pocket, on average.

For example, traditional Medicare has no limit on out-of-pocket costs. By contrast, the CMS limits out-of-pocket costs in Medicare Advantage to $6,700 for in-network services, and many individual plans offer lower out-of-pocket limits. In 2012, the MedPAC commissioners voted unanimously to recommend that Congress rework Medicare’s benefit design to include an out-of-pocket maximum. Doing so would give Medicare beneficiaries better financial protection against high health care costs.

President Trump claims that his executive order protects Medicare from “destruction.” In fact, not only would recent prominent Medicare for All and public option reforms proposed in Congress maintain the benefits of the existing Medicare program for seniors, but many also lay out improvements to the program in recognition of its shortcomings. For example, Sen. Bernie Sanders’ (D-VT) Medicare for All bill would almost immediately add an out-of-pocket limit for seniors in Medicare parts A and B. The Medicare for America Act, sponsored by Reps. Rosa DeLauro (D-CT) and Jan Schakowsky (D-IL), would also add out-of-pocket limits and strengthen Medicare Advantage network adequacy standards. And multiple proposals have provisions to lower beneficiaries’ prescription drug costs; eliminate the two-year waiting period for nonelderly disabled people; and add hearing, dental, and vision coverage to standard Medicare benefits.

Conclusion

President Trump has laid out a plan to privatize Medicare and undermine the program, breaking his promise that “no one will lay a hand on your Medicare benefits.” Furthermore, he is trying to scare seniors away from supporting congressional proposals that would genuinely improve Medicare beneficiaries’ access to health care and financial security. Although seniors need better protection against out-of-pocket medical costs and better access to care providers, the changes Trump has proposed will only make things worse.