If it followed the path of traditional Medicare, it would end up paying for a lot of coverage that has little medical value.
In the first congressional hearing held on “Medicare for all” in April, Michael Burgess, a Republican congressman from Texas and a physician, called such a proposal “frightening” because it could limit the treatments available to patients.
The debate over Medicare for all has largely focused on access and taxpayer cost, but this raises a question that hasn’t gotten much attention: What treatments would it cover?
A good starting place for answers is to look at how traditional Medicare currently handles things. In one sense, there are some important elements that Medicare does not cover — and arguably should. But a little digging into the rules governing treatments also reveals that Medicare allows a lot of low-value care — which it arguably should not.
Many countries don’t cover procedures or treatments that have little medical value or that are considered too expensive relative to the benefits. American Medicare has also wrestled with the challenge of how to keep out low-value care, but for political reasons has never squarely faced it.
You might remember the factually misguided “death panel” attack on the Affordable Care Act, which preyed on discomfort with a governmental role in deciding what health care would or would not be paid for. (This discomfort also extends to private plans, exemplified by the backlash against managed care in the 1990s.)
Perhaps as a result, Americans don’t often talk about what treatments and services provide enough value to warrant coverage.
Two classes of Medicare
You can divide current Medicare coverage into two layers.
The first is relatively transparent. Traditional Medicare does not cover certain classes of care, including eyeglasses, hearing aids, dental or long-term care. When the classes of things it covers changes, or is under debate, there’s a big, bruising fight with a lot of public comment. The most recent battle added prescription drug coverage through legislation that passed in 2003.
Over the years, there have also been legislative efforts to add coverage for eyeglasses, hearing aids, dental and long-term care — none of them successful. Some of these are available through private plans. So a Medicare for all program that excluded all private insurance coverage and that resembled today’s traditional Medicare would leave Americans with significant coverage gaps. Most likely, debate over what Medicare for all would cover would center on this issue.
But there is a second layer of coverage that receives less attention. Which specific treatments does Medicare pay for within its classes of coverage? For instance, Medicare covers hospital and doctor visits associated with cancer care — but which specific cancer treatments?
This second layer is far more opaque than the first. By law, treatments must be “reasonable and necessary” to be approved for Medicare coverage, but what that means is not very clear.
Local versus national
We think of Medicare as a uniform program, but some coverage decisions are local. What people are covered for in, say, Miami can be different from what people are covered for in Seattle.
Many treatments and services are covered automatically because they already have standard billing codes that Medicare recognizes and accepts. For treatments lacking such codes, Medicare makes coverage determinations in one of two ways: nationally or locally.
Although Medicare is a federal (national) program, most coverage determinations are local. Private contractors authorized to process Medicare claims decide what treatments to reimburse in each of 16 regions of the country.
In theory, this could allow for lots of variation across the country in what Medicare pays for. But most local coverage determinations are nearly identical. For example, four regional contractors have independently made local coverage determinations for allergen immunotherapy, but they all approve the same treatments for seasonal allergy sufferers.
There are more than 2,000 local coverage determinations like these. National coverage decisions, which apply to the entire country, are rarer, with only about 300 on the books.
When Medicare makes national coverage decisions, sometimes it does so while requiring people to enter clinical trials.
It has been doing this for over a decade. The program is called coverage with evidence development, and its use is rare. Fewer than two dozen therapies have entered the program since it was introduced in 2006. But it allows Medicare to gather additional clinical data before determining if the treatment should be covered outside of a trial. To be considered, the treatment must already be deemed safe, and it must already be effective in some population. The aim is to test if the treatment “meaningfully improves” the health of Medicare beneficiaries.
Only one therapy (CPAP, for sleep apnea) that entered this process has ever emerged to be covered as a routine part of Medicare. The others are in a perpetual state of limbo, neither fully covered nor definitively not covered. CAR-T cell therapy, a type of cancer immunotherapy, which appears to be very successful but is also very expensive, is one of the most recent to enter this process.
Unwillingness to talk about cost-effectiveness
Despite the complexity of all these coverage determination methods — local, national, contingent on clinical trials — the bottom line is that very few treatments are fully excluded from Medicare, so long as they are of any clinical value. And this suggests that it’s not very likely that Medicare for all would deny coverage for needed care.
A 2018 study in Health Affairs found only 3 percent of Medicare claims were denied in 2015. And traditional Medicare doesn’t limit access to doctors or hospitals either, as it is accepted by nearly every one. (This is in contrast with Medicare Advantage.)
Medicare has a troubled history in considering cost-effectiveness in its coverage decisions. Past efforts to incorporate it have failed. For example, regulations proposed in 1989 were withdrawn after a decade of internal review.
As a result, Medicare covers some treatments that are extremely expensive for the program and that offer little benefit to patients. The Medicare Payment Advisory Commission recently studied this in detail. In a 2018 report to Congress, it noted that up to one-third of Medicare beneficiaries received some kind of low-value treatment in 2014, costing the program billions of dollars. If Medicare for all followed in traditional Medicare’s path, it could be wastefully expensive.
The United States has had a historical unwillingness to face cost-effectiveness questions in health care decisions, something many other countries tackle head-on. Some Americans favor Medicare for all because it would make the system more like some overseas. And yet, in choosing not to consider the value of the care it covers, Medicare remains uniquely American.
The House Energy and Commerce Committee next week will consider a full repeal of the Medicaid disproportionate share hospital cuts, a sign that hospitals are getting closer to securing the top lobbying priority for safety net providers and academic medical centers.
The committee will hold a hearing next Tuesday on proposed legislation from Rep. Eliot Engel (D-N.Y.), whose home state gets the single largest so-called Medicaid DSH allotment in the country. In fiscal 2018, New York received $1.8 billion of the roughly $12 billion in annual federal payments.
Engel has pitched a full repeal of the cuts mandated by the Affordable Care Act, which are set to take effect Oct. 1. Should those cuts move forward, they would reduce federal DSH payments to states by $4 billion in fiscal 2020 and $8 billion in fiscal 2021. An aide to Engel said that a full repeal “provides the long-term solution.”
Last week, 300 of the 435 U.S. House of Representatives lawmakers sent a letter to the chamber’s leadership urging a two-year delay to the DSH cuts, and hinted that some in Congress believe the Medicaid DSH formulas need to be reconfigured, calling for a “sustainable, permanent” solution.
“This delay will ensure that hospitals can continue to care for the most vulnerable in our communities,” the lawmakers wrote, led by Engel and Rep. Pete Olson (R-Texas).
The amount the federal government pays out for DSH varies enormously across states and is mostly arbitrary, reflecting the caps set by Congress in 1992 instead of a relevant benchmark.
Florida, where about 3.3 million people are uninsured, gets the exact same federal DSH allotment as Connecticut, where about 245,000 people are uninsured.
Finance Committee Chair Chuck Grassley (R-Iowa) has said he wants to see a reset. Sen. Marco Rubio (R-Fla.), whose state has a strong vested interest in a formula change, has used the Sept. 30 deadline to push a proposal that would base the federal dollar allotment on a particular state’s share of U.S. citizens living below the poverty level.
But the major trade groups representing DSH hospitals continue to push for a simple delay, since their constituents include hospitals in all the states. Dr. Bruce Siegel, CEO of America’s Essential Hospitals, said at a briefing to House staff earlier this month that he’d be open to a formula change as long as hospitals don’t see cuts to existing funding. That means Congress would have to allocate even more money to the program.
House Speaker Nancy Pelosi (D-Calif.) said she backed another delay when she addressed American Hospital Association’s annual meeting in April. She noted that she wouldn’t back a program overhaul.
“We cannot support efforts that will reward states for not expanding Medicaid or simply take DSH money from some other state and give it to others,” she said. “Who thought that was a good idea?”
The DSH debate doesn’t fall along the lines of which states expanded Medicaid or not. Alabama and Missouri haven’t expanded Medicaid but receive high federal DSH allotments, and would likely lose money if Congress decided to redistribute the existing payments.
Although the policy rationale behind the ACA-mandated cuts was that Medicaid expansion would shrink hospitals’ need for DSH money, high-DSH expansion states such as New York and New Jersey aren’t giving an inch.
Siegel framed the debate over expansion states’ need as being “a little more complicated now” than in the early years of the ACA.
“I think the market has changed in the last eight years or nine years when we started down the road of Medicaid expansion,” he said at the Capitol Hill staff briefing.
He pointed to the slight rise in the uninsured rate recently, as well as the increase of high-deductible plans that put more fiscal burden on enrollees.
“We are frankly concerned about any moves to move us toward skinny health plans,” he added.
Enrollment in more bare-bones commercial plans doesn’t really affect the Medicaid enrollment, but he argued that expansion still brings Medicaid shortfall — which is the difference between Medicaid and Medicare reimbursement.
“If you have 70% Medicaid patients which some of our hospitals do, you are in a terrible disadvantage in terms of payment streams, with the shortfall becoming enormous for you,” he said.
There is another Medicaid program that can help hospitals with shortfall: the “upper payment limit” supplement for Medicaid fee-for-service. States can deploy UPL payments to hospitals in order to increase their reimbursement based on rates Medicare would have paid for the same treatment.
UPL is the largest Medicaid supplemental funding program, with about $13 billion in annual spending according to the Medicaid and CHIP Payment and Access Commission data from fiscal 2017.
The UPL program is also under scrutiny by MACPAC, whose analysts found that 17 states have overspent billions of these payments.