More on the employer health plan churn

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A lot of readers gave us feedback on yesterday’s lead item about how millions of working Americans lose or change their employer health plans every month, usually through quitting a job or getting fired/laid off.

One point that came up several times: Employees who don’t leave their jobs sometimes have to switch to new health plans, Bob reports.

  • Larry Levitt of the Kaiser Family Foundation reminded us that 61% of companies that offer health benefits shopped around for new employee plans in 2018, and a quarter of them changed insurers, according to KFF’s annual employer survey.
  • Changing or cutting health benefits for current employees is no small matter — doing so was the driving force behind teachers striking in West Virginia last year.

The bottom line: Employer coverage changes all the time, both when people leave their jobs and when companies decide to tinker with their benefits packages.

 

 

 

Wall Street is still selling off health care stocks

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Yesterday, UnitedHealth Group posted $3.5 billion of profit in the first quarter — its second-most profitable quarter ever — and collected more than $60 billion of revenue, Axios’ Bob Herman reports.

Yes, but: UnitedHealth’s stock price tanked by 4%, which consequently dragged down shares of the other major health insurers and hospital chains. Cigna’s stock price plummeted 8%, and Anthem and Humana were close behind. HCA tumbled 10%.

Driving the news: Wall Street remains fearful of “Medicare for All” becoming a reality, and UnitedHealth CEO Dave Wichmann tried to get ahead of the message by telling investors that single-payer would “jeopardize” people’s care.

  • Many investment bank analysts were perplexed by the sell-off, considering that UnitedHealth has more cash than it knows what to do with.
  • Steven Halper of Cantor Fitzgerald wrote to investors: “What more can you ask for? Take advantage of poor sentiment.”

The big picture: Medicare for All discussions matter far more to Wall Street right now, and that makes the industry’s Q1 financial reports a lot less important.

 

 

 

Red states’ Medicaid gamble: Paying more to cover fewer people

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Red states are getting creative as they look for new ways to limit the growth of Medicaid. But in the process those states are taking legal, political and practical risks that could ultimately leave them paying far more, to cover far fewer people.

Why it matters: Medicaid and the Children’s Health Insurance Program cover more than 72 million Americans, thanks in part to the Affordable Care Act’s Medicaid expansion. Rolling back the program is a high priority for the Trump administration, and it needs states’ help to get there.

The big picture: The Centers for Medicare & Medicaid Services, under the leadership of Administrator Seema Verma, has made clear that it wants to say “yes” to new limits on Medicaid eligibility, and has invited states to ask for those limits.

  • But CMS hasn’t actually said “yes” yet to some of the most significant limits states have asked for.
  • In the meantime, states are left either with vague ambitions they’re not sure how to implement, or with risky plans that put their own budgets on the line.

What we’re watching: State-level Republicans are waiting for CMS to resolve two related issues: how much federal funding their versions of Medicaid can receive, and the extent to which they’re able to cap enrollment in the program.

  • “These issues are going to continue to be intertwined,” said Joan Alker, the executive director of Georgetown University’s Center for Children and Families.

Verma has reportedly told state officials that she wants to use her regulatory power to convert Medicaid funding into a system of block grants — which would be an enormous rightward shift and probably a big cut in total funding.

  • CMS probably cannot do that on its own, experts said, but it could achieve something similar by approving caps on either enrollment or spending.

Where it stands: GOP lawmakers in a handful of states are looking to Utah, which has bet big on Verma’s authority, for signals about what’s possible.

  • Utah voters approved the full ACA expansion last year, but the state legislature overruled them to pass a more limited version.
  • By foregoing the full expansion, Utah passed up enhanced federal funding. It’s still asking for that extra money — a request CMS has never previously approved.
  • Utah will also ask CMS to impose a per-person cap on Medicaid spending — a steep cut that was part of congressional Republicans’ failed repeal-and-replace bill, and which may strain CMS’ legal authority.
  • If Utah doesn’t get those two requests, its backup plan is simply to adopt the full expansion.

What’s next: Utah is not the only red state leaning into Verma’s agenda, but it’s further out on a limb than any other.

  • Idaho, like Utah, overruled its voters to pass a narrower Medicaid bill. But it preserved an option for people to buy into the ACA’s expansion.
  • Alaska Gov. Mike Dunleavy has said he wants to take Verma up on her offer of block grants; so have legislators in Tennessee and Georgia. But in the absence of any detail about what that means, or what CMS will approve, that’s all pretty vague right now.

If CMS does move forward on any of this, it could face the same threat of lawsuits that have stymied its first big Medicaid overhaul — work requirements.

  • Those rules are on ice in two states because a judge said they contravene Medicaid’s statutory structure and goals. The same argument could await a partial expansion or tough spending caps.

“There’s a clear agenda here to get a handful of states to take up these waivers, which fundamentally undermine the central tenets of the Medicaid program — which [are] that it is a guarantee of coverage, and a guarantee of federal funding,” Alker said.

 

 

 

Does Beneficiary Switching Create Adverse Selection For Hospital-Based ACOs?

https://www.healthaffairs.org/do/10.1377/hblog20190410.832542/full/?utm_source=Newsletter&utm_medium=email&utm_content=Beneficiary+Switching+And+Hospital-Based+ACOs%3B+Biologics+Are+Natural+Monopolies%3B+An+Average+Lifetime+Earnings+Standard+For+Drug+Prices&utm_campaign=HAT+4-15-19&

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Despite the many uncertainties in the current health care delivery environment, payers and providers continue to demonstrate considerable interest in alternative payment models, including Medicare Shared Savings Program (MSSP) accountable care organizations (ACOs). At the same time, concerns persist about the ability of the MSSP to provide a sustainable pathway toward transformation for health care providers and to generate savings to the Medicare program, a key outcome measure. In fact, an August 2018 Health Affairs blog post by Seema Verma, director of the Centers for Medicare and Medicaid Services (CMS), concludes that the net financial impact of the program is negative to taxpayers, and that hospital-based ACOs tend to be the drivers of this overall negative performance.

This analysis has influenced recent changes to the MSSP under the “Pathways to Success” rule, with major policy implications for participants and the program’s long-term sustainability. In particular, CMS’s analysis describes physician-led ACOS as low revenue and hospital-based ACOs as high revenue, concluding that the former had net savings of $0.182 billion, while the latter had net losses of $0.231 billion. Similarly, J. Michael McWilliams and colleagues conclude that physician-group ACOs had significantly larger savings than hospital-integrated ACOs. It has been suggested that these differences are due to hospitals continuing to pursue the high-cost activities that physician-led ACOs do not pursue, due to differing reimbursement incentives (for example, hospital revenue is more dependent on admissions, and so care management activities that avoid admissions are less robust in hospital-based ACOs). This finding has influenced new program rules allowing physician-led ACOs to stay in a lower-risk track of the MSSP longer than hospital-based ACOs.

Our MSSP experience at University of Wisconsin (UW) Health—the academic health system partner of the University of Wisconsin School of Medicine and Public Health—leads us to believe that there is an alternative explanation for hospital-based ACOs’ seemingly poorer financial performance. Specifically, as Medicare beneficiaries develop new and more complex diseases, the increased utilization they require leads them to facilities that have more specialized care, which may more likely be part of a hospital-based ACO than a physician-led one. 

A Closer Look At The Research

Several recent analyses have countered that the CMS analysis, which assesses program financial performance by comparing ACO spending to a benchmark target below which the ACO may share in savings, does not use a valid counterfactual. A more valid counterfactual would instead compare ACO actual spending to what the same providers’ Medicare spending would have been had they not participated in the ACO program. Analyses using this counterfactual have found that the MSSP has in fact produced savings for the taxpayers overall, although some have also concluded, such as CMS, that hospital-based ACOs perform worse than physician-led ACOs.

More recently, the Medicare Payment Advisory Commission analyzed spending at the individual beneficiary level, rather than the ACO level. The analysts found that individuals who were continuously attributed to the same ACO year after year had lower spending growth compared to those whose attribution was switched to a different, existing ACO from one year to the next. At UW Health, our experience as an MSSP ACO from 2013 through 2017 supports this finding and illustrates some of the potential pitfalls in the recent policy changes for MSSP ACOs. 

UW’s Analysis: Adverse Selection Among “Switchers”

UW Health participated in the MSSP Track 1 from 2013 through 2017, before switching to the Next Generation ACO program. We compared patient characteristics and use for the cohort of our attributed beneficiaries older than age 65 for whom we had 12 months of claims data in 2015 and who, in 2016, continued to be attributed to us, versus beneficiaries who were newly attributed to us in 2016 (Exhibit 1).

Exhibit 1: Spending And Use of Continuously And Newly Attributed Medicare Beneficiaries, UW Health ACO, 2015–16

Source: Authors’ analysis. Notes: HCC is Hierarchical Condition Category. PBPY is per beneficiary per year. aHCC scores are calculated to assess patient complexity and risk. A higher score is associated with increased complexity and increased expected cost. Under 2016 MSSP rules, PBPY costs are adjusted based on beneficiary HCC scores calculated from the prior year, adjusted up only for demographic changes. Therefore, the 2016 PBPY average costs in the exhibit reflect risk adjustment using 2015 HCC scores. 

While 96 percent of continuing beneficiaries in 2016 were attributed to us through services from a primary care provider, only 73 percent of those new to the ACO in 2016 received their attribution this way. In other words, more than one in four of the “switchers” were assigned to the ACO due to services from a specialty care provider. Costs for these two populations (calculated from data CMS provides to ACOs as part of program participation) were very different. The average per-beneficiary-per-year (PBPY) cost in 2015 for continuously attributed beneficiaries was $8,123, or $1,380 higher than the newly attributed population’s PBPY cost of $6,743. However, in 2016, the average PBPY cost for continuously attributed beneficiaries was $723 lower than the 2016 average PBPY cost for newly attributed beneficiaries, and costs for the newly attributed cohort rose by 49.3 percent, compared with 15.1 percent for the continuously attributed group. This suggests that the newly attributed beneficiaries experienced a significant change in their health status after being attributed to our ACO, resulting in a dramatic rise in use, and also potentially explaining their high degree of specialty care attribution.

Our findings suggest that adverse selection among individuals whose attribution “switched” into hospital-based ACOs may at least partly explain the differential financial performance of physician-based versus hospital-based ACOs. As noted previously, it is possible that the increased use these patients require leads them to facilities that have more specialized care, which may more likely be part of a hospital-based ACO than a physician-led one. For example, our ACO, made up of not only the faculty physician group but also the hospital and clinics and school of medicine and public health, includes a comprehensive cancer center. Beneficiaries newly attributed to our ACO in 2016 were almost twice as likely to have a new diagnosis of cancer in 2016 compared with continuously attributed beneficiaries (6.1 percent versus 3.3 percent—not shown).

Current MSSP Risk Adjustment May Not Adequately Address The High Complexity Of “Switchers”

Because many of the newly attributed beneficiaries were both high cost during the performance year and low cost during the prior year, they entered our program with low Hierarchical Condition Category (HCC) scores, under the system used by CMS to adjust for risk. In fact, almost 10 percent of newly attributed beneficiaries in 2016 had no health care use at all in 2015 (Exhibit 1). Prior to the Pathways to Success program, negative health status changes for continuously enrolled beneficiaries were not included in risk adjustment. For continuously attributed beneficiaries, CMS adjusted risk scores down from the previous year if the HCC score decreased but used only demographic changes to adjust up. Those beneficiaries who were healthy with little to no health care use in 2015 but with a significant change in health status in 2016 had low HCC scores coming into 2016, despite both high risk and use during the 2016 performance year. As a result, a cohort of relatively high-cost beneficiaries in 2016 would not be accounted for in that year’s risk score, resulting in an unfavorable assessment of an ACO’s true financial performance.

New program rules attempt to address concerns about adequate risk adjustment in the MSSP, allowing for a one-time benchmark increase of up to 3 percent to account for unexpected higher use due to increased complexity and health care needs among all attributed beneficiaries. While this change is generally welcomed by the MSSP community, our experience suggests it may be inadequate to account for the added complexities of switchers. The average HCC score for newly attributed beneficiaries to our ACO was 1.01 (Exhibit 1). These scores are based on the group’s health care use in 2015, when the newly attributed cohort was still “healthy,” but they were used during the 2016 performance year. However, calculated scores from the actual experience of the patients during 2016 reveals an average HCC score of 1.34, again indicating that they experienced significant changes in health status. While the new policy of allowing for an increase helps account for these changes, 3 percent may not be adequate.

Prospective Attribution May Mitigate Some Of The Impact Of Adverse Selection

The methodology for attribution of Medicare beneficiaries to ACOs has been a topic of debate since the inception of the MSSP. Under the original model, individuals were assigned to an ACO based on retrospective attribution, meaning that they received a plurality of their services from primary care providers throughout the performance year. If they received no services from a primary care provider, they could be attributed based on services from a specialty care provider. Over the years, CMS has refined the process to increase the likelihood that attribution is based on services from a primary care provider. This results in an ACO not knowing until after the year is over who exactly are their ACO beneficiaries, making it possible for individuals who were in a different ACO the previous year (or not in an ACO at all) to become part of an ACO without that ACO becoming aware until after the fact.

Some of the newer ACO models, notably the Next Generation ACO program, use prospective attribution, whereby only those beneficiaries who received care from the ACO providers in the prior year can be included in the performance year. This method allows for removal of beneficiaries throughout the year but no additions. Under the previous regulations, beneficiaries in MSSP Track 1 were attributed retrospectively, potentially resulting in ACOs becoming responsible for previously healthy individuals who were not part of the ACO in the prior year but whose health status deteriorated during the performance year, thereby driving up average costs without the ACO having meaningful opportunity to intervene. Under the new MSSP regulations, ACOs annually choose whether beneficiaries are assigned through retrospective or prospective attribution, potentially mitigating some of the adverse selection concern.

Looking Ahead

Going forward, it will be important for policy makers and evaluators alike to consider unique program elements that may result in adverse selection or other untoward consequences that are beyond the control of an individual ACO. In the meantime, CMS and ACO leaders can make some choices that help ameliorate some of the unintended or undesirable consequences. CMS can continue to look for ways to evolve program rules, including consideration of additional risk-adjustment methodologies. ACO leaders can choose prospective attribution to avoid adverse selection, especially if their ACO includes hospitals or large specialty groups. CMS can also eliminate the disparities in the program rules between hospital-based and physician-led ACOs, at least until there is increased clarity around differential performance. Ultimately, continued evaluation and program refinement, allowing for successful participation by all different types of ACOs, will be necessary to ensure that all Medicare beneficiaries receive the highest-quality, affordable care and that the program is a good steward of taxpayer funds.

 

 

Millions already lose or change health plans every year

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Millions of Americans lose their health insurance plans every month, by leaving the job through which they got that coverage, Axios’ Bob Herman reports.

Why it matters: Critics and skeptics of “Medicare for All” worry about eliminating people’s existing coverage because most people are relatively satisfied with their employer-based plans.

  • But millions of workers and their families already switch or lose their insurance from their jobs.

By the numbers: More than 66 million Americans voluntarily quit their jobs, were laid off or otherwise separated from their employers in 2018, and that high turnover rate has continued into 2019, according to data from the Bureau of Labor Statistics.

Details: The BLS data does not measure whether separated jobs offered health insurance.

  • However, close to half of all private employers provide coverage to their workers, and more than 90% of companies with at least 100 employees offer health benefits.
  • It’s therefore reasonable to estimate that at least 2 million workers and their families lose or transfer to new commercial health plans every month.

The bottom line: Behavioral economics teaches that people don’t like to lose what they have, a concept known as “loss aversion.”

Go deeper:

 

 

 

 

Considering “Single Payer” Proposals in the U.S.: Lessons from Abroad

https://www.commonwealthfund.org/publications/2019/apr/considering-single-payer-proposals-lessons-from-abroad

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ABSTRACT

  • Issue: When discussing universal health insurance coverage in the United States, policymakers often draw a contrast between the U.S. and high-income nations that have achieved universal coverage. Some will refer to these countries having “single payer” systems, often implying they are all alike. Yet such a label can be misleading, as considerable differences exist among universal health care systems.
  • Goal: To compare universal coverage systems across three areas: distribution of responsibilities and resources between levels of government; breadth of benefits covered and extent of cost-sharing in public insurance; and role of private insurance.
  • Methods: Data from the Organisation for Economic Co-operation and Development, the Commonwealth Fund, and other sources are used to compare 12 high-income countries.
  • Key Findings and Conclusion: Countries differ in the extent to which financial and regulatory control over the system rests with the national government or is devolved to regional or local government. They also differ in scope of benefits and degree of cost-sharing required at the point of service. Finally, while virtually all systems incorporate private insurance, its importance varies considerably from country to country. A more nuanced understanding of the variations in other countries’ systems could provide U.S. policymakers with more options for moving forward.

Background

Despite the gains in health insurance coverage made under the Affordable Care Act, the United States remains the only high-income nation without universal health coverage. Coverage is universal, according to the World Health Organization, when “all people have access to needed health services (including prevention, promotion, treatment, rehabilitation, and palliation) of sufficient quality to be effective while also ensuring that the use of these services does not expose the user to financial hardship.”1

Several recent legislative attempts have sought to establish a universal health care system in the U.S. At the federal level, the most prominent of these is Senator Bernie Sanders’ (I–Vt.) Medicare for All proposal (S. 1804, 115th Congress, 2017), which would establish a federal single-payer health insurance program. Along similar lines, various proposals, such as the Medicare-X Choice Act from Senators Michael Bennet (D–Colo.) and Tim Kaine (D–Va.), have called for the expansion of existing public programs as a step toward a universal, public insurance program (S. 1970, 115th Congress, 2017).

At the state level, legislators in many states, including Michigan (House Bill 6285),2 Minnesota (Minnesota Health Plan),3 and New York (Bill A04738A)4 have also advanced legislation to move toward a single-payer health care system. Medicare for All, which enjoys majority support in 42 states, is viewed by many as a litmus test for Democratic presidential hopefuls.5 In recent polling, a majority of Americans supported a Medicare for All plan.6

Medicare for All and similar single-payer plans generally share many common features. They envision a system in which the federal government would raise and allocate most of the funding for health care; the scope of benefits would be quite broad; the role of private insurance would be limited and highly regulated; and cost-sharing would be minimal. Proponents of single-payer health reform often point to the lower costs and broader coverage enjoyed by those covered under universal health care systems around the world as evidence that such systems work.

Other countries’ health insurance systems do share the same broad goals as those of single-payer advocates: to achieve universal coverage while improving the quality of care, improving health equity, and lowering overall health system costs. However, there is considerable variation among universal coverage systems around the world, and most differ in important respects from the systems envisioned by U.S. lawmakers who have introduced federal and state single-payer bills. American advocates for single-payer insurance may benefit from considering the wide range of designs other nations use to achieve universal coverage.

This issue brief uses data from the Organisation for Economic Co-operation and Development (OECD), the Commonwealth Fund, and other sources to compare key features of universal health care systems in 12 high-income countries: Australia, Canada, Denmark, England, France, Germany, the Netherlands, Norway, Singapore, Sweden, Switzerland, and Taiwan.

We focus on three major areas of variation between these countries that are relevant to U.S. policymakers: the distribution of responsibilities and resources between various levels of government; the breadth of benefits covered and the degree of cost-sharing under public insurance; and the role of private health insurance. There are many other areas of variation among the health care systems of other high-income countries with universal coverage — such as in hospital ownership, new technology adoption, system financing, and global budgeting — that are beyond the scope of this discussion.

 

 

 

 

 

 

Safety-net providers operated with an average margin of 1.6% in 2017

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This is less than half their 2016 average and below the 7.8 percent average of other U.S. hospitals, according to the annual study.

Hospitals that serve vulnerable patients have much lower average margins that other providers, according to America’s Essential Hospitals.

The safety-net providers have persistently high levels of uncompensated and charity care that pushed average margins down to one-fifth that of other hospitals in 2017, according to the annual study, Essential Data: Our Hospitals, Our Patients. They operated with an average margin of 1.6 percent in 2017 — less than half their 2016 average and far below the 7.8 percent average of other U.S. hospitals, according to the data from Essential Hospitals’ 300 members.

While these hospitals represent about 5 percent of all U.S. hospitals, they provided 17.4 percent of all uncompensated care, or $6.7 billion, and 23 percent of all charity care, or $5.5 billion in 2017, the study said.

THE IMPACT

Amercia’s Essential Hospitals fears further financial pressure from $4 billion in federal funding cuts to disproportionate share hospitals slated to go into effect on October 1. This represents a third of current funding levels.

The DSH payments are statutorily required and are intended to offset hospitals’ uncompensated care costs. In 2017, Medicaid made a total of $18.1 billion in DSH payments, including $7.7 billion in state funds and $10.4 billion in federal funds, according to the Medicaid and CHIP Payment and Access Commission, or MACPAC.

MACPAC recommends starting with cuts of $2 billion in the first year.

The association and other organizations have been urging Congress to stop or phase-in the cuts. Speaker Nancy Pelosi said Congress must take action to ease the DSH cuts.

TREND

Since 1981, Medicaid DSH payments have helped offset essential hospitals’ uncompensated care costs.

The study data shows essential hospitals provide disproportionately high levels of uncompensated and charity care.

In 2017, three-quarters of essential hospitals’ patients were uninsured or covered by Medicaid or Medicare and 53 percent were racial or ethnic minorities. They served 360,000 homeless individuals, 10 million with limited access to healthy food, 23.9 million living below the poverty line, and 17.1 million without health insurance, the study said.

The association’s members averaged 17,000 inpatient discharges, or 3.1 times the volume of other acute-care hospitals. They operated 31 percent of level I trauma centers and 39 percent of burn care beds nationally.

ON THE RECORD

“Our hospitals do a lot with often limited resources, but this year’s Medicaid DSH cuts will push them to the breaking point if Congress doesn’t step in,” said association President and CEO Dr. Bruce Siegel. “Our hospitals are on the front lines of helping communities and vulnerable people overcome social and economic barriers to good health, and they do much of this work out of their own pocket. They do this because they know going outside their walls means healthier communities and lower costs through avoided admissions and ED visits.”