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Truth #1: Many Opt-Out of Medicare?

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For All?

… like liberty and justice, Medicare is imagined by some to be All-American. But is it? Can it be? Should it be?

A Historical Perspective:

In 1965, the first year of Medicare, nearly 19 Million Americans enrolled, 56% of whom were previously uninsured according to a Kennedy-era study. It was a simple program back then, providing only acute hospital and physician coverage for Americans over age 65. It was the only real health insurance option for people over age 65, virtually all of whom retired by that age back then.

Today, an estimated 63 Mil or 18% of the US population are eligible for Medicare. And after decades of major program changes, the 2018 program covers more than just older Americans, and Medicare coverage is more complex and broader than the original program. Like the original program (Traditional Medicare), the coverage still has substantial patient exposures for deductibles, co-payments and lifetime / per-incident limits. And, despite popular folklore, it is far more expensive due to the same pressures that impact coverages for the rest of us.

Along the way, other alternative or complementary coverages have emerged. No surprise, this dynamic reflects in part, the vastly different nature and demands of American consumers including older American consumers. These newer coverage sources include private insurers, employers, unions, states, municipalities and school districts as well as expanded coverages for the poor (including the older poor).

Does Medicare ALONE Work For Those That Have Access Today?

Consider this:

  • 38 Mil, or only 60% of those eligible are enrolled in Traditional Medicare. But because of indexing coverage limitations, only 19% of these Traditional Program participants do not have some form of supplemental or alternative coverage.
  • Another 9 Mil are over 65 but still working, and only because of their employer wrap-around coverage, Medicare is workable.
  • Another 21 Mil are enrolled in Private Alternatives to Medicare called Advantage Plans after opting out of Traditional Medicare. In 2018 there were 2,317 such Medicare Advantage plans available nationwide allowing the average beneficiary to choose among 21, an increase from 19 in 2017. This is anything but single-payer and becoming less single-payer-like each year due to natural market dynamics.
  • Finally, 12 Mil of all of these are also enrolled in Medicaid (dually eligible), due to low income, disability, etc. Most are part of the 38 Mil people with Traditional Medicare, but only because of the Medicaid program, their Medicare is coverage and price affordable and/or relevant.

What Does This Say About Medicare For All?

Nearly 1/2 of all who are offered Medicare today choose a private market alternative, or can only make it work due to other private market wraparound safety nets. So why do we think Medicare will be attractive to the rest of the population without similar private market protections?

 

THEY’RE CALLED ‘CRITICAL ACCESS HOSPITALS’ FOR A REASON

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It’s staggering to think of the challenges that CAHs face. Now OIG is calling for a re-examination of a program that it says has overpaid CAHs billions of dollars to provide skilled nursing services using hospital swing beds.

They’re called “Critical Access Hospitals” for a reason. These tiny healthcare outposts provide “critical access” to people who live in remote areas.

That was the intent of the legislation that created CAHs in 1997 at a time when rural hospitals were shuttering at an alarming rate. Congress understood that rural America needed extra Medicare dollars to keep the doors open at hospitals that serve an older, sicker and poorer patient mix.

It’s staggering to think of the challenges that CAHs face:

  • Because of their location and size, CAHs have few economies of scale, little leverage with vendors or payers, or a sufficiently large patient mix or volume of commercial payers to help cover costs.
  • CAHs are often limited in their ability to provide some of the more lucrative services that are cash cows for larger hospitals in urban areas.
  • Recruiting clinicians to rural areas is a slog.
  • And because of all those challenges, it’s also more difficult to merge or collaborate with other healthcare providers from such an isolated perch. It’s surprising to learn that only 40% of CAHs operate in the red.

Unfortunately, some people in Washington, DC have short institutional memories.

For the past couple of years, reports from the Office of the Inspector General at the Department of Health and Human Services have made it clear that they believe the CAH designation and funding scheme should be overhauled.

In its latest shot across the bow, OIG this week called for a re-examination of the swing bed program that allows CAHs to provide long-term care. The OIG audit claimed that the federal government has overpaid CAHs $4.1 billion over the past six years for services that could have cost less in relatively nearby skilled nursing and long-term care facilities.

Tavenner Pushes Back
Rural healthcare advocates rallied around the reply to the OIG recommendations from former Centers for Medicare & Medicaid Services Administrator Marilyn Tavenner, who challenged the OIG findings and recommendations in her formal response, and suggested that auditors don’t understand healthcare delivery in rural areas.

In that same response to OIG, however, Tavenner said the Obama 2016 budget has called for reducing the Medicare reimbursement that CAHs receive from 101% to 100% of allowable costs, and reassessing and eliminating CAH status for hospitals that are within 10 miles each other.

 

 

Hospitals Stand to Lose Billions Under ‘Medicare for All’

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For a patient’s knee replacement, Medicare will pay a hospital $17,000. The same hospital can get more than twice as much, or about $37,000, for the same surgery on a patient with private insurance.

Or take another example: One hospital would get about $4,200 from Medicare for removing someone’s gallbladder. The same hospital would get $7,400 from commercial insurers.

The yawning gap between payments to hospitals by Medicare and by private health insurers for the same medical services may prove the biggest obstacle for advocates of “Medicare for all,” a government-run system.

If Medicare for all abolished private insurance and reduced rates to Medicare levels — at least 40 percent lower, by one estimate — there would most likely be significant changes throughout the health care industry, which makes up 18 percent of the nation’s economy and is one of the nation’s largest employers.

Some hospitals, especially struggling rural centers, would close virtually overnight, according to policy experts.

Others, they say, would try to offset the steep cuts by laying off hundreds of thousands of workers and abandoning lower-paying services like mental health.

he prospect of such violent upheaval for existing institutions has begun to stiffen opposition to Medicare for all proposals and to rattle health care stocks. Some officials caution that hospitals providing care should not be penalized in an overhaul.

Dr. Adam Gaffney, the president of Physicians for a National Health Program, warned advocates of a single-payer system like Medicare for all not to seize this opportunity to extract huge savings from hospitals. “The line here can’t be and shouldn’t be soak the hospitals,” he said.

“You don’t need insurance companies for Medicare for all,” Dr. Gaffney added. “You need hospitals.”

Soaring hospital bills and disparities in care, though, have stoked consumer outrage and helped to fuel populist support for proposals that would upend the current system. Many people with insurance cannot afford a knee replacement or care for their diabetes because their insurance has high deductibles.

Proponents of overhauling the nation’s health care argue that hospitals are charging too much and could lower their prices without sacrificing the quality of their care. High drug prices, surprise hospital bills and other financial burdens from the overwhelming cost of health care have caught the attention (and drawn the ire) of many in Congress, with a variety of proposals under consideration this year.

But those in favor of the most far-reaching changes, including Senator Bernie Sanders, who unveiled his latest Medicare for all plan as part of his presidential campaign, have remained largely silent on the question of how the nation’s 5,300 hospitals would be paid for patient care. If they are paid more than Medicare rates, the final price tag for the program could balloon from the already stratospheric estimate of upward of $30 trillion over a decade. Senator Sanders has not said what he thinks his plan will cost, and some proponents of Medicare for all say these plans would cost less than the current system.

The nation’s major health insurers are sounding the alarms, and pointing to the potential impact on hospitals and doctors. David Wichmann, the chief executive of UnitedHealth Group, the giant insurer, told investors that these proposals would “destabilize the nation’s health system and limit the ability of clinicians to practice medicine at their best.”

Hospitals could lose as much as $151 billion in annual revenues, a 16 percent decline, under Medicare for all, according to Dr. Kevin Schulman, a professor of medicine at Stanford University and one of the authors of a recent article in JAMA looking at the possible effects on hospitals.

“There’s a hospital in every congressional district,” he said. Passing a Medicare for all proposal in which hospitals are paid Medicare rates “is going to be a really hard proposition.”

Richard Anderson, the chief executive of St. Luke’s University Health Network, called the proposals “naïve.” Hospitals depend on insurers’ higher payments to deliver top-quality care because government programs pay so little, he said.

“I have no time for all the politicians who use the health care system as a crash-test dummy for their election goals,” Mr. Anderson said.

The American Hospital Association, an industry trade group, is starting to lobby against the Medicare for all proposals. Unlike the doctors’ groups, hospitals are not divided. “There is total unanimity,” said Tom Nickels, an executive vice president for the association.

“We agree with their intent to expand coverage to more people,” he said. “We don’t think this is the way to do it. It would have a devastating effect on hospitals and on the system over all.”

Rural hospitals, which have been closing around the country as patient numbers dwindle, would be hit hard, he said, because they lack the financial cushion of larger systems.

Big hospital systems haggle constantly with Medicare over what they are paid, and often battle the government over charges of overbilling. On average, the government program pays hospitals about 87 cents for every dollar of their costs, compared with private insurers that pay $1.45.

Some hospitals make money on Medicare, but most rely on higher private payments to cover their overall costs.

Medicare, which accounts for about 40 percent of hospital costs compared with 33 percent for private insurers, is the biggest source of hospital reimbursements. The majority of hospitals are nonprofit or government-owned.

The profit margins on Medicare are “razor thin,” said Laura Kaiser, the chief executive of SSM Health, a Catholic health system. In some markets, her hospitals lose money providing care under the program.

She says the industry is working to bring costs down. “We’re all uber-responsible and very fixated on managing our costs and not being wasteful,” Ms. Kaiser said.

Over the years, as hospitals have merged, many have raised the prices they charge to private insurers.

“If you’re in a consolidated market, you are a monopolist and are setting the price,” said Mark Miller, a former executive director for the group that advises Congress on Medicare payments. He describes the prices paid by private insurers as “completely unjustified and out of control.”

Many hospitals have invested heavily in amenities like single rooms for patients and sophisticated medical equipment to attract privately insured patients. They are also major employers.

“You would have to have a very different cost structure to survive,” said Melinda Buntin, the chairwoman for health policy at the Vanderbilt University School of Medicine. “Everyone being on Medicare would have a large impact on their bottom line.”

People who have Medicare, mainly those over 65 years old, can enjoy those private rooms or better care because the hospitals believed it was worth making the investments to attract private patients, said Craig Garthwaite, a health economist at the Kellogg School of Management at Northwestern University. If all hospitals were paid the same Medicare rate, the industry “should really collapse down to a similar set of hospitals,” he said.

Whether hospitals would be able to adapt to sharply lower payments is unclear.

“It would force health care systems to go on a very serious diet,” said Stuart Altman, a health policy professor at Brandeis University. “I have no idea what would happen. Nor does anyone else.”

But proponents should not expect to save as much money as they hope if they cut hospital payments. Some hospitals could replace their missing revenue by charging more for the same care or by ordering more billable tests and procedures, said Dr. Stephen Klasko, the chief executive of Jefferson Health. “You’d be amazed,’ he said.

While both the Medicare-for-all bill introduced by Representative Pramila Jayapal, Democrat of Washington, and the Sanders bill call for a government-run insurance program, the Jayapal proposal would replace existing Medicare payments with a whole new system of regional budgets.

“We need to change not just who pays the bill but how we pay the bill,” said Dr. Gaffney, who advised Ms. Jayapal on her proposal.

Hospitals would be able to achieve substantial savings by scaling back administrative costs, the byproduct of a system that deals with multiple insurance carriers, Dr. Gaffney said. Under the Jayapal bill, hospitals would no longer be paid above their costs, and the money for new equipment and other investments would come from a separate pool of money.

But the Sanders bill, which is supported by some Democratic presidential candidates including Senators Kirsten Gillibrand of New York, Cory Booker of New Jersey, Elizabeth Warren of Massachusetts and Kamala Harris of California, does not envision a whole new payment system but an expansion of the existing Medicare program. Payments would largely be based on what Medicare currently pays hospitals.

Some Democrats have also proposed more incremental plans. Some would expand Medicare to cover people over the age of 50, while others wouldn’t do away with private health insurers, including those that now offer Medicare plans.

Even under Medicare for all, lawmakers could decide to pay hospitals a new government rate that equals what they are being paid now from both private and public insurers, said Dr. David Blumenthal, a former Obama official and the president of the Commonwealth Fund.

“It would greatly reduce the opposition,” he said. “The general rule is the more you leave things alone, the easier it is.”

 

 

 

HEALTHCARE INDUSTRY MOST FOCUSED ON CONSOLIDATION, CONSUMERISM IN 2019

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A new Definitive Healthcare survey polled healthcare leaders on the most important trends of the year.

KEY TAKEAWAYS

Industry consolidation was listed as the most important trend of the year, leading the way with 25.2% of the votes, followed by consumerism at 14.4%.

Definitive tracked 803 mergers and acquisitions along with 858 affiliation and partnership announcements last year, a trend that is not expected to slow in 2019.

Thirty-five percent of healthcare M&A activity occurred in the long-term care field, according to CEO Jason Krantz.

Widespread industry consolidation as well as the growing influence of consumerism registered as the most important trends healthcare leaders are paying attention to in 2019, according to a Definitive Healthcare survey released Monday morning.

Industry consolidation was listed as the most important trend of the year, leading the way with 25.2% of the votes, followed by consumerism at 14.4%.

Other topics that received double-digit percentages of the vote were telehealth at 13.8%, AI and machine learning at 11.4%, and staffing shortages at 11.1%. Cybersecurity, EHR optimization, and wearables rounded out the list.

The top results are generally in-line with some of the top storylines from the past year in healthcare, including focus on several vertical megamergers and longstanding business models being redefined by consumer behavior.

Jason Krantz, CEO of Definitive Healthcare, told HealthLeaders that healthcare is becoming increasingly more complicated and leaders are looking at a host of business strategies to navigate industry challenges or emerging market conditions.

“Something that’s on the mind of all of the people that [Definitive Healthcare] has been talking to, whether they are pharma leaders, healthcare IT companies, or providers, is that they’re constantly grappling with all of these new regulations, consolidation, and new technologies,” Krantz said. “[They’re asking] ‘What does that mean for my business and how do I address my strategy as a result?'”

In 2018, Definitive tracked 803 mergers and acquisitions along with 858 affiliation and partnership announcements, a trend Krantz does not expect to slow in 2019.

While Krantz cited some of the major health system mergers from last year as examples, he said another area that is experiencing widespread M&A activity is the post-acute care side.

Thirty-five percent of healthcare M&A activity occurred in the long-term care field, according to Krantz, and this is indicative of hospitals seeking to control costs and drive down rising readmission rates.

It also relates to another issue likely to accelerate in the coming years, which are the staffing shortages facing providers.

The sector currently suffering the most are long-term care facilities, which struggle to maintain an adequate nursing workforce due to the advanced age of most doctors and nurses in the face of the rapidly aging baby boomer generation. Krantz warns that all providers are likely to face these issues going forward.

Krantz also expects consumerism to hold steady as a top issue facing healthcare, citing the growing popularity of urgent care centers and the interconnection of telehealth services to provide patients with care outside of the traditional delivery sites.

However, the growth of these are reliable business options are all dependent on figuring out an adequate reimbursement rates for telehealth services rendered, Krantz said, which has not been fully addressed.

“I think until [telehealth reimbursement rates] get completely figured out, it’s hard for the providers to invest heavily in it,” Krantz said. “This is why you see a lot of non-traditional providers getting into telehealth, but I think it is something that people are thinking about and they know they need to adjust to, though nobody’s stepping up and being first in [telehealth] right now.”

For AI, machine learning, wearables, and cybersecurity, though the responses are split into smaller amounts, Krantz emphasized their combined score, which encompasses more than 25% of total votes, as a sign that healthcare leaders are paying attention to the area despite market complexity.

He added that they are all interconnected issues that deal with technological changes health systems are aware they will have to address in the coming years.

One issue related to harnessing technological change is EHR optimization, which Krantz believes leaders on the provider side are finally starting to gain excitement around. He said most leaders who have waited years to set up a comprehensive EHR system and input data are in-line to now utilize the data in their respective system.

“There’s a lot of great data in there and people are starting to figure out how to utilize that and improve patient outcomes based on the sharing of data,” Krantz said. 

 

 

 

KROGER HEALTH PRESIDENT TALKS ‘FOOD AS MEDICINE,’ PRESCRIPTION DRUG PRICES

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Colleen Lindholz, president of Kroger Health, spoke about the grocery store’s plans to expand further into healthcare.

KEY TAKEAWAYS

Kroger is look to assist customers who have issues with the accessibility and affordability of prescription drugs.

To that end, the Cincinnati-based grocery store giant launched a pharmacy savings club in partnership with GoodRx last December.

Lindholz also impressed the need to incorporate ‘food as medicine’ into the company’s healthcare plans.

Cincinnati-based grocery and retail giant Kroger Co. has ambitions to continue its healthcare expansion mission, according to Colleen Lindholz, president of Kroger Health.

Kroger is one of the largest grocery stores and retail companies in the country, with about 2,300 pharmacies and 221 retail clinics, offering it a sizable footprint to compete in healthcare. Lindholz has been with the company for more than two decades and has helped craft its business strategy focused on health and wellness.

“Our vision is to help people live healthier lives, and our mission statement states that we’re going to simplify healthcare by creating solutions that combine health, wellness, and nutrition to connect with people on a personal level,” Lindholz told HealthLeaders.

From Lindholz’s perspective, there are several opportunities for Kroger to grow in healthcare, most notably through improving prescription drug delivery in a way that benefits consumers and focuses on promoting ‘food as medicine.’ However, she also spoke to the lingering challenges Kroger faces, including industry consolidation, difficult negotiations with pharmacy benefit managers (PBM), and rising direct and indirect remuneration (DIR) fees.

Below are some takeaways from Lindholz on what lies ahead for Kroger in the healthcare sphere.

MANEUVERING PBMS AND DIR FEES

Lindholz said that Kroger, like other healthcare players, is subject to the pressures produced by widespread vertical integration and consolidation. Kroger’s strategy to drive prescriptions into its stores has been affected by the fact that it contracts with multiple PBMs, the major ones being owned by large health plans.

“We’re seeing a lot of pressure as far as reimbursements are concerned and DIR fees, which are escalating out of control,” Lindholz said. “I know there’s some activity going on in Washington right now with a call for DIR reform and where should most of the cost reduction be.”

Lindholz added that Kroger remains a supporter of the concept of DIR fees, citing the purpose for their initial creation as a way to provide a higher quality of care for patients.

“However, we are getting hit with DIR fees that are 300% ahead of where we were in 2016,” Lindholz said.

PBMs also compound the problem for Kroger, according to Lindholz, since they act as a negotiator with the drugmakers but ultimately set the standards for how rebates are passed through to pharmacies.

“The way that they measure us and the way that we compete to get those rebates back, where 2,300 pharmacies are compared to an independent that has five pharmacies, is crazy,” Lindholz said. “I think the way that they’re measuring it is all for their gain, not necessarily for the patient’s gain. We want the lowest cost to be at the point of sale where the patient actually is.”

‘FOOD AS MEDICINE’

A key component to addressing chronic disease is addressing what people eat, Lindholz said. Kroger introduced its free “OptUp” app in an attempt to correct some of the root problems that contribute to chronic disease.

In 2017, Kroger conducted a study to analyze A1Cs, the average blood sugar over 90 days, and blood pressure in diabetic employees and leverage nutritional science to assist them in making food purchasing decisions.

Kroger was so encouraged by the results of the study that it had nutrition and technology experts at the company design an app driven by the Kroger loyalty card  as a way to “simplify Kroger customers’ ability to shop for healthier foods.”

“The results were so statistically significant that we decided to bring the app to the market because we believe that over time it can sustain behavior change,” Lindholz said. “What we’re trying to do is be in the prevention space, specifically around diabetes, where we’re helping our diabetics make those food choices that they critically need in order to keep from progressing with their disease and going from two oral medications onto insulin.”

A spokesperson from Kroger said the company will soon be rolling out an update to the app to allow customers the ability to shop for healthier foods, even if they do not shop at Kroger.

Lindholz also commented that healthcare is a fragmented industry, citing the lack of communication between different electronic medical records (EMR) systems.

Lindholz said the company sought to create a solution to foster a better line of communication with systems that run on Epic and Cerner.

“We’re building a platform that we’re going to be able to see across all of our pharmacies and will connect with the top 17 EMRs in the country,” Lindholz said. “It’s important in our quest to go after the triple aim and to decrease some of this fragmentation while closing gaps in care.”

“One of the unique pieces of that new platform is that it will be the first time that anyone’s ever included a food score. We’re going to test in Cincinnati with a cardiologist and an endocrinologist around getting to look at how customers eat, if we can help change their behavior, and will their overall outcomes be better over time?”

TACKLING PRESCRIPTION DRUG PRICES

Given Lindholz’s background as a pharmacist, it should come as no surprise that one of her major initiatives at Kroger is improving the availability and affordability of prescription drugs for customers. To that end, Lindholz noted that Kroger currently has three central prescription fill facilities around the country that fill prescriptions overnight so Kroger can have the lowest cost to fill.

“This allows us to spend more time with the patients that are in the store and deliver the highest quality of care that we can at the lowest cost,” Lindholz said. “We’re doing a lot more one-on-one counseling with customers, both at the counter and also through a center of excellence that we have. We’re up 320% in clinical interventions versus a year ago and that is due to us putting a system in place that queued up pharmacists at the time either when they’re with patients at the store or through our call center.”

Kroger also launched a pharmacy savings club in partnership with GoodRx last December to assist customers dealing with high prices and limited access to prescription drugs.

“What that club does is it brings transparency and pricing directly to the customer. It costs $36 for an individual, $72 for a family, and we are delivering a significant amount of savings to the consumer,” Lindholz said. “What we’re doing with the savings club is cutting out the middleman. We’re taking all the rebates that we would get from the manufacturers and passing them directly down to our customers, which is saving them a whole lot of money.”