Maryland Gov. Larry Hogan signed a contract with the federal government on Monday to enact the state’s unique all-payer health care model, which he said will create incentives to improve care while saving money.
Hogan signed the five-year contract along with the administrator of the federal Centers for Medicare and Medicaid Services, Seema Verma.
“The Maryland Model provides incentives across the health system to provide greater coordinated care, expanded patient-care delivery and collaboration of chronic-disease management … all while improving the quality of care at lower cost to the consumer,” Hogan said.
He said the model emphasizes the quality of care over the quantity of care.
The Hogan administration said the new contract is expected to provide an additional $300 million in savings a year by 2023, totaling $1 billion in savings over five years.
Maryland is the only state that can set its own rates for hospital services, and all payers must charge the same rate for services at a given hospital. The policy has been in place since the 1970s, though Maryland modernized its one-of-a-kind Medicare waiver about four years ago to move away from reimbursing hospitals on a fee-for-service basis to a fixed budget.
Because that change focused on hospitals only, the federal government required the state to develop a new model that would provide comprehensive coordination across the entire health care system.
Under the agreement, Maryland will be relieved of federal restrictions and red tape that the other 49 states face in the Medicare program. However, the state will have to meet benchmarks of improving access to health care while improving quality and reducing costs.
Verma said the model is the first involving the Centers for Medicare and Medicaid Services that holds the state “fully at risk for total Medicare costs for all residents.”
“The state and CMS have agreed on the goals, and now our job is to get out of the way and give the state the maximum flexibility to achieve success.”
Maryland health secretary Robert Neall says if successful, the plan could be replicated around the country to address financial strain on Medicare. Neall described the model as being “less transactional and more just taking care of the total person.”
“The incentives are going to be aligned so that it’s right place, right time, right purpose, right price, instead of, ‘Come back and see me in two weeks, and we’ll run the same set of tests on you,'” Neall said.
Health insurers warned that a move by the Trump administration on Saturday to temporarily suspend a program that was set to pay out $10.4 billion to insurers for covering high-risk individuals last year could drive up premium costs and create marketplace uncertainty.
The Affordable Care Act’s (ACA) “risk adjustment” program is intended to incentivize health insurers to cover individuals with pre-existing and chronic conditions by collecting money from insurers with relatively healthy enrollees to offset the costs of other insurers with sicker ones.
President Donald Trump’s administration has used its regulatory powers to undermine the ACA on multiple fronts after the Republican-controlled Congress last year failed to repeal and replace the law propelled by Democratic President Barack Obama. About 20 million Americans have received health insurance coverage through the program known as Obamacare.
America’s Health Insurance Plans (AHIP), a trade group representing insurers offering plans via employers, through government programs and in the individual marketplace, said the CMS suspension would create a “new market disruption” at a “critical time” when insurers are setting premiums for next year.
“It will create more market uncertainty and increase premiums for many health plans – putting a heavier burden on small businesses and consumers, and reducing coverage options. And costs for taxpayers will rise as the federal government spends more on premium subsidies,” AHIP said in a statement.
It could also encourage more insurers to bow out of Obamacare.
“This is occurring right at the time of year that people (insurers) are making decisions about whether to participate in the exchanges and what premiums to charge if they do,” said Eric Hillenbrand, a managing director at consultancy AlixPartners. “This will affect their thinking on both of those decisions.”
The Centers for Medicare and Medicaid Services (CMS), which administers ACA programs, said on Saturday that months-old conflicting court rulings related to the risk adjustment formula prevent them from making payments.
CMS was referring to a February ruling from a federal court in New Mexico that invalidated the risk adjustment formula, and a January ruling from a federal court in Massachusetts that upheld it.
CMS administrator Seema Verma said in a statement the administration was “disappointed” in the February ruling and that CMS has asked the court to reconsider and “hopes for a prompt resolution that allows CMS to prevent more adverse impacts on Americans.”
But supporters of the ACA criticized the CMS announcement as the latest move by the Trump administration to undermine Obamacare.
“We urge the Trump administration to back off of this dangerous and destabilizing plan, and instead begin working on bipartisan solutions to make coverage more affordable,” said Brad Woodhouse, the executive director of Protect Our Care, a progressive group that supports Obamacare.
The administration has made several other moves in recent years to scale back or halt implementation of certain aspects of the ACA.
Late last year, it said it would halt so-called cost-sharing payments, which offset some out-of-pocket healthcare costs for low-income patients.
It has also scaled back the advertising budget for Obamacare healthcare plans during the open-enrollment period by about 90 percent.
“What you are effectively doing is dismantling pieces of [the ACA] without replacing them,” Hillenbrand said. “It moves us back to some extent to the status quo where people with pre-existing conditions found it very difficult to get insurance.”
A reckoning is coming, outgoing BlueCross executive says.
A reckoning is coming to American healthcare, said Chester Burrell, outgoing CEO of the CareFirst BlueCross BlueShield health plan, here at the annual meeting of the National Hispanic Medical Association.
Burrell, speaking on Friday, told the audience there are five things physicians should worry about, “because they worry me”:
1. The effects of the recently passed tax bill. “If the full effect of this tax cut is experienced, then the federal debt will go above 100% of GDP [gross domestic product] and will become the highest it’s been since World War II,” said Burrell. That may be OK while the economy is strong, “but we’ve got a huge problem if it ever turns and goes back into recession mode,” he said. “This will stimulate higher interest rates, and higher interest rates will crowd out funding in the federal government for initiatives that are needed,” including those in healthcare.
Burrell noted that 74 million people are currently covered by Medicaid, 60 million by Medicare, and 10 million by the Children’s Health Insurance Program (CHIP), while another 10 million people are getting federally subsidized health insurance through the Affordable Care Act’s (ACA’s) insurance exchanges. “What happens when interest’s demand on federal revenue starts to crowd out future investment in these government programs that provide healthcare for tens of millions of Americans?”
2. The increasing obesity problem. “Thirty percent of the U.S. population is obese; 70% of the total population are either obese or overweight,” said Burrell. “There is an epidemic of diabetes, heart disease, and coronary artery disease coming from those demographics, and Baby Boomers will see these things in full flower in the next 10 years as they move fully into Medicare.”
3. The “congealing” of the U.S. healthcare system. This is occurring in two ways, Burrell said. First, “you’ll see large integrated delivery systems [being] built around academic medical centers — very good quality care [but] 50%-100% more expensive than the community average.”
To see how this affects patients, take a family of four — a 40-year-old dad, 33-year-old mom, and two teenage kids — who are buying a health insurance policy from CareFirst via the ACA exchange, with no subsidy. “The cost for their premium and deductibles, copays, and coinsurance [would be] $33,000,” he said. But if all of the care were provided by academic medical centers? “$60,000,” he said. “What these big systems are doing is consolidating community hospitals and independent physician groups, and creating oligopolies.”
Another way the system is “congealing” is the emergence of specialty practices that are backed by private equity companies, said Burrell. “The largest urology group in our area was bought by a private equity firm. How do they make money? They increase fees. There is not an issue on quality but there is a profound issue on costs.”
4. The undermining of the private healthcare market. “Just recently, we have gotten rid of the individual mandate, and the [cost-sharing reduction] subsidies that were [expected to be] in the omnibus bill … were taken out of the bill,” he said. And state governments are now developing alternatives to the ACA such as short-term duration insurance policies — originally designed to last only 3 months but now being pushed up to a year, with the possibility of renewal — that don’t have to adhere to ACA coverage requirements, said Burrell.
5. The lackluster performance of new payment models. “Despite the innovation fostering under [Center for Medicare & Medicaid Innovation] programs — the whole idea was to create a series of initiatives that might show the wave of the future — ACOs [accountable care organizations] and the like don’t show the promise intended for them, and there is no new model one could say is demonstrably more successful,” he said.
“So beware — there’s a reckoning coming,” Burrell said. “Maybe change occurs only when there is a rip-roaring crisis; we’re coming to it.” Part of the issue is cost: “As carbon dioxide is to global warming, cost is to healthcare. We deal with it every day … We face a future where cutbacks in funding could dramatically affect accessibility of care.”
“Does that mean we move to move single-payer, some major repositioning?” he said. “I don’t know, but in 35 years in this field, I’ve never experienced a time quite like this … Be vigilant, be involved, be committed to serving these populations.”
Value-based payment (VBP) models are an effort to rein in the growth of health care costs and improve quality. However, it’s unclear what overall impact VBP models are having on health care costs. Even though health care is provided at the local level, most evaluations examine health care spending at the national level. To address this disconnect, we conducted quantitative and qualitative market-level assessments. Our goals were to examine the impact of population-based, value-based care within a market; identify what measurable factors were associated with differing costs; and understand how business leaders are thinking about value-based care and cost reduction.
Leavitt Partners, the Healthcare Financial Management Association (HFMA), and McManis Consulting, with participation from Mark McClellan at Duke University, conducted three mixed-methods studies:
Key findings from the studies include:
VBP dates back to 2005 with the Physician Group Practice Demonstration. The Affordable Care Act (ACA) significantly accelerated the proliferation of VBP models with the creation of the Medicare Shared Savings Program(MSSP) and the Center for Medicare and Medicaid Innovation, which was tasked with developing and testing innovative new models. Commercial VBP arrangements have also taken hold in the years since the ACA’s passage.
Given the growth of VBP, we wanted to examine whether, in the first few years following the ACA, these models were influencing the total cost of care. We used Medicare data from 2012 to 2015 and commercial data from 2012 to 2014 to assess the early impact of these models. We restricted our study to population-based VBPs, which included models with upside risk only (shared savings), both upside and downside risk, and global budgets, but excluded episode-based (bundled) payments.
We did not find a statistical relationship between the level of penetration of population-based VBPs in a market and a decline in health care costs for Medicare or commercial payers. Nor did we find an improvement in quality. When we limited our analysis to just those markets with higher levels of population-based VBP penetration (at least 30 percent), our results suggested a very modest, not statistically significant, market-level decrease in cost growth. Despite this null finding, our results provide an important baseline for future research.
There are several potential explanations for the null findings. For one, our study period (2012–15) may simply have been too early to see signs of population-based VBP lowering health care costs. Although today 561 MSSP accountable care organizations (ACOs) (the largest of Medicare’s ACO programs) cover 10.5 million beneficiaries, at the beginning of our study period in 2012 and 2013, only 220 MSSP ACOs covered 3.2 million beneficiaries. Many interviewees told us not enough lives were covered under VBP. Indeed, in some markets, less than 1 percent of lives were part of a VBP arrangement.
Second, although participation in population-based VBP models is growing, few models involve the provider taking on downside risk. As of 2018, the majority (82 percent) of MSSP ACOs were in the non-risk-bearing Track 1, which means they share in savings if they spend less money than their assigned benchmark, but they will not incur financial losses if they spend more than the benchmark. Our site visits found that although different markets had varying levels of population-based VBP activity, no market had significant numbers of providers participating in downside risk. Several interviewees stressed the need to take incremental steps to more risk.
Fee-for-service payment remains quite profitable for many providers and health systems. Even for those that have begun to take on risk-based contracts, fee-for-service payment represents the majority of total revenue. As long as the status quo remains lucrative, it’s difficult to make the business case for why a provider should undertake the effort to switch to a value-based focus that may lead to a reduction in use and total revenue.
Still, several interviewees said they believed the move toward paying for value would continue, even if there’s some uncertainty over whether Medicare or private payers will lead the movement. It’s possible that when VBP models outweigh fee-for-service payments in a market, we’ll reach a “tipping point” and health care cost growth will decline. Many interviewees expressed enthusiasm for other VBP models, such as those based on episodes of care (bundled payments) and those designed for specific populations (for example, the frail elderly). These models may make more sense for specialty providers who perform a certain type of procedure or care for a certain type of patient.
If these initial population-based VBPs results don’t show a relationship to health care cost growth, then which market-level factors do correlate? For our second quantitative analysis, we used a variety of public and private data sources to examine the relationship among several market-level factors beyond value-based payment and Medicare costs and cost growth between 2007 and 2015. All the factors together explained 82 percent of variation in baseline Medicare costs (Exhibit 1).
The prevalence of chronic diseases was the most influential predictor of market costs, accounting for 41.5 percent of the variance. Hospital quality metrics, market socioeconomic status, and the concentration of hospitals and insurers also helped explain market-level costs.
Using these same factors to predict Medicare cost growth was less fruitful, explaining only 27 percent of the variation in Medicare cost growth—substantially less than the 82 percent of baseline costs. As Exhibit 2 shows, a much weaker association exists between chronic disease prevalence and Medicare cost growth. Significant additional research should be done to identify factors that predict cost growth.
These findings matter for several reasons. First, they reinforce efforts currently underway to contain costs, including strategies to prevent and better manage chronic conditions, reduce hospital readmissions, and reduce the number of individuals without insurance. Second, although we know less about what drives health care cost growth in a market, meaningfully reducing spending in a market relies on developing strategies that target cost growth, instead of baseline costs. More research that focuses on what’s driving cost growth is needed.
The interviews we conducted add insights into these market-level findings. We identified two distinguishing characteristics of higher- and lower-cost markets: type of competition in the market and degree of transparency in the market. We recognize that while there are some common lessons, health care markets differ significantly and their approaches to care, costs, and VBP models will vary.
We know competition can help drive down costs and increase quality in health care markets. However, how much competition, and what type, seems to make a difference. For example, we found that the lower-cost markets in our nine site visits had at least one integrated delivery system. Consolidation in these markets had resulted in two to four health systems with geographic coverage across the market. In these markets, physicians were generally employed by the health system or worked in close alignment with it. Health plan competition matters as well, particularly with respect to innovation in new payment and care delivery models. Portland, Oregon, and Minneapolis-St. Paul, Minnesota, two of the lowest-cost markets, both had competitive health plan landscapes.
Conversely, the markets we visited with less integration and seemingly more provider competition actually had higher costs. These included Los Angeles, California (which had higher Medicare costs only), Baton Rouge, Louisiana, and Oklahoma City, Oklahoma. One reason for this may be that there is less focus on addressing unnecessary use in these markets.
Transparency is often cited as a strategy that will help contain costs. Similar to competition, the type of transparency effort matters. We found that some lower-cost markets seemed to benefit from organized transparency mechanisms, including state-sponsored or endorsed reporting agencies and employer coalitions that made information on provider quality and costs publicly available. For example, in 2005, the Minnesota Medical Association and health plans in the state together formed MN Community Measure, a nonprofit organization tasked with the collection and dissemination of data on the quality and cost of providers across the state. Today, providers are required to submit data to the organization. Our interviewees expressed optimism but acknowledged more work is needed to optimize consumer-oriented transparency tools, which research has so far shown to have had only minimal use.
Although differences exist among each health care market, all markets can act to improve quality and reduce costs. Our studies suggest several actions different stakeholders in each market can take to improve care for their populations.
The Stark Law, enacted in 1989, aims to cut down on financial incentives impacting physician care decisions. It prohibits certain Medicare-payable referrals to entities they have a financial or familial relationship with, and stops such entities from filing Medicare claims for referred services, unless exempted under certain instances.
CMS says that it is issuing the RFI in response to comments it has received that raised concern that the Stark Law is impeding participation in healthcare delivery and payment reform efforts.
“We are particularly interested in your thoughts on issues that include, but are not limited to, the structure of arrangements between parties that participate in alternative payment models or other novel financial arrangements, the need for revisions or additions to exceptions to the physician self-referral law, and terminology related to alternative payment models and the physician self-referral law,” the CMS notice states.
In a statement submitted by AHA to the House Subcommittee on Health of the Committee on Ways and Means, the group urged Congress to step in to change Stark Law to allow hospitals and physicians to more closely work together.
“Congress should create a clear and comprehensive safe harbor under the anti-kickback law for arrangements designed to foster collaboration in the delivery of health care and incentivize and reward efficiencies and improvement in care,” AHA said. “In addition, the Stark Law should be reformed to focus exclusively on ownership arrangements. Compensation arrangements should be subject to oversight solely under the anti-kickback law.”
CMS Administrator Seema Verma appears to be sympathetic. In a Wednesday blog post, she said the Stark Law may be prohibiting value-based arrangements that HHS has made a priority to shift towards. Previously, Verma said that CMS was going to put together an inter-agency group to examine potential changes to the law.
“I think that Stark was developed a long time ago, and this gets to where we are going modernizing the program,” Verma told AHA President and CEO Rick Pollack during a webcast in January. “The payment systems and how we are operating is different, and we need to bring along some of those regulations and figure out what we can do. And I’m not sure that this is not going to require some congressional intervention as well.”
CMS is asking for comments to be submitted on the RFI by August 24.
Trump Administration Says ACA Protections for Preexisting Conditions Are Unconstitutional.
The Department of Justice said Thursday that it will not defend the constitutionality of key provisions of the Affordable Care Act in a lawsuit currently underway in Texas. Here’s what you need to know:
The background: Twenty states, led by Texas, sued the federal government in February as part of an effort to overturn the Affordable Care Act, arguing that, because the GOP tax bill eliminated the penalty for individuals who don’t buy health insurance, the law as a whole was unconstitutional. The Supreme Court’s 2012 ruling that upheld the Affordable Care Act called the individual mandate penalty a tax — and therefore legal. But the lawsuit argues that since the mandate can no longer raise any revenue, the mandate itself is now unconstitutional – and so is the entire ACA.
What they did: The Department of Justice filed a brief Thursday in support of the suit, saying “this Court should hold that the ACA’s individual mandate will be unconstitutional as of January 1, 2019,” and that some other provisions of the law – including those protecting people with pre-existing conditions being denied coverage or charged higher premiums – are inseparable from the mandate and therefore should be declared unconstitutional as well.
Why they did it: Republicans have targeted the Affordable Care Act for elimination ever since it passed, and President Trump continues to promise that it will be overturned. However, the federal support for the states’ lawsuit is unusual, since the Justice Department typically defends existing law. Attorney General Jeff Sessions wrote a letter to House Speaker Paul Ryan explaining that this is a “rare case” that warrants deviating from the Justice Department’s “longstanding tradition of defending the constitutionality of duly enacted statutes.” Tom Miller of the American Enterprise Institute told Politico that the refusal to defend key parts of the ACA shows that the Trump administration is going even further in its battle against the health care law.
What it means: If successful, the states’ lawsuit would allow insurers to charge much higher rates to people with pre-existing conditions, or deny them coverage altogether, effectively ending the ACA’s promise of providing health care for all Americans. If the Justice Department’s analysis is ultimately persuasive, however, other parts of the law, including Medicaid expansion, could stay in place. Some legal experts say the suit is weak, since it turns on the idea that if one part of a law is invalid, the whole thing is invalid, without recognizing that the Congress passed the law and is free to alter it while leaving the rest in place. But the lawsuit has been filed in a conservative court in Texas, and the Trump administration’s refusal to defend key parts of the law has likely boosted the plaintiffs’ chances.
Supporters of the health care law expressed considerable alarm on Friday. Andy Slavitt, who ran the Centers for Medicare and Medicaid Services under President Obama, tweeted that the Justice Department’s decision is the “biggest health care news of the year” and a blow to public health. Slavitt and others criticized the move as an unprecedented decision by the Justice Department to not defend the rule of law. Ultimately, the case may be heading for the Supreme Court.