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How Medi-Cal’s Fiscal Balancing Act Could Soon Become More Challenging

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How Medi-Cal’s Fiscal Balancing Act Could Soon Become More Challenging

Many Californians know that Medi-Cal is our state’s health coverage program for residents with low incomes, including children, people with disabilities, and workers who may not get affordable health insurance through their jobs.

What many Californians don’t realize — call it Medi-Cal’s best-kept secret — is that even with the program’s rising enrollment and costs in recent years, Medi-Cal’s financial impact on our state’s General Fund (the account that receives most state tax revenues) has been relatively small. This matters because General Fund dollars support an array of vital services in addition to Medi-Cal, many of which — such as income supports and subsidized childcare for low-income working families — also promote Californians’ health and well-being. If Medi-Cal had claimed a larger share of General Fund revenues over the past decade, fewer state dollars would have been available to support other critical public supports and services.

This article first looks at how our state has expanded Medi-Cal to meet the health care needs of one in three Californians while minimizing the program’s impact on the General Fund. It then highlights key Medi-Cal financing issues on the horizon that could hamper state policymakers’ efforts to continue balancing Medi-Cal’s funding needs with those of other important public services. This article is adapted from a presentation I gave at the February 25 Medi-Cal Explained briefing hosted by the California Health Care Foundation.

As Medi-Cal Enrollment Doubled, State General Fund Support Rose Modestly

Medi-Cal, California’s Medicaid program, has seen enrollment and expenditures grow substantially since 2007–08 (PDF), the last fiscal year before the Great Recession sent California’s economy and state budget into a tailspin. Enrollment for the current fiscal year (2018–19) is expected to be 13.2 million, about double the 2007–08 level. Total Medi-Cal spending is anticipated to reach $98.5 billion, roughly $53 billion (114%) higher than in 2007–08. (All 2007–08 expenditures are adjusted for inflation.)

State General Fund dollars accounted for only $3 billion of this $53 billion increase in Medi-Cal spending between 2007–08 and 2018–19. This relatively small jump in General Fund support for Medi-Cal is remarkable in light of periodic concerns that the program is putting the squeeze on California’s General Fund budget. Instead, Medi-Cal’s spending growth has largely been supported with non-General Fund sources of revenue. Specifically, the remainder of the $53 billion spending increase between 2007–08 and 2018–19 — around $50 billion — came from federal funds ($35.3 billion) and other non-federal funds, such as state taxes paid by managed care organizations (MCOs) and fees paid by hospitals ($14.2 billion). Since 2007–08, federal funding for Medi-Cal has increased by 129%, while other non-federal funds have grown by more than 1,600%.

The substantial increase in non-General Fund support for Medi-Cal has been driven by several factors, including:

  • More generous federal cost-sharing. California and the federal government equally split the cost of services for most Medi-Cal enrollees. However, the Affordable Care Act (ACA) included more generous federal cost-sharing for certain beneficiaries. The federal government pays 93% of the cost for the Medi-Cal expansion population, which consists of low-income non-elderly adults who became newly eligible in 2014. In addition, federal dollars fund 88% of the cost for children who are enrolled in Medi-Cal as part of the Children’s Health Insurance Program (CHIP). Like a see-saw, higher federal cost-sharing leads to lower state cost-sharing, freeing up state General Fund dollars.
  • Creative financing. California has tapped into alternative in-state financing sources to support Medi-Cal, including local matching funds (such as from counties and public hospital systems), provider fees, and a tax on MCOs. These alternative sources of financing allow California to draw down more federal funding for Medi-Cal while minimizing the impact on the General Fund.
  • The 2016 state tobacco tax increase. Proposition 56 raised the state’s excise tax on cigarettes by $2 per pack and triggered an equivalent increase in the state tax on other tobacco products. Medi-Cal’s share of these revenues — roughly $1 billion per year — is primarily used to boost payments to doctors and other Medi-Cal providers, relieving the need for the General Fund to support such rate increases.

What about General Fund support for Medi-Cal as a percentage of the total General Fund budget? Medi-Cal’s share of the General Fund has increased by just seven-tenths of a percentage point over the past decade — from 13.63% in 2007–08 to an estimated 14.35% in 2018–19. Yes, Medi-Cal receives a slightly larger slice of the General Fund “pie” than it did 2007–08. But this increase has been modest given the substantial benefit experienced by millions of Californians newly covered by the program. As a result, more state dollars have been available for other public services and systems than if General Fund support for Medi-Cal had risen at a much faster pace.

Medi-Cal’s Big Financing Issues Create Uncertainty for Medi-Cal and the General Fund

Over the past decade, state policymakers have deftly balanced the needs of a growing Medi-Cal program with those of other public services and systems. However, Medi-Cal faces a number of near-term financing issues that could make this balancing act more challenging in the coming years. These financing issues include:

  • Reductions in federal cost-sharing. The federal government is scheduled to reduce its share of costs for CHIP-funded children as well as for adults enrolled in Medi-Cal starting in 2014 under the ACA. The state’s share of CHIP costs will increase in two steps, rising from 12% to 23.5% on October 1, 2019, and then to 35% on October 1, 2020. For the expansion population, the state’s share of cost will rise from 7% to 10% on January 1, 2020, where it will remain unless revised by Congress. Upon full implementation, these changes will increase annual state General Fund spending on Medi-Cal by more than $1 billion compared to 2018–19, according to estimates from the state’s nonpartisan Legislative Analyst’s Office (LAO).
  • The pending expiration of the MCO tax. California’s MCO tax expires on June 30, and Governor Gavin Newsom is not proposing to extend it. If the MCO tax expires, California would forgo a net annual General Fund benefit of $1.5 billion, based on the current structure of the MCO tax package. These dollars could help to pay for a number of state policy advances, including efforts to move California closer to universal health coverage. The governor “has not laid out a convincing rationale” for declining to seek an extension of the MCO tax, according to the LAO. If the tax were allowed to expire, annual state General Fund costs for Medi-Cal would ultimately increase by well over $1 billion but without any additional benefit to the Medi-Cal program. Instead, state General Fund dollars would simply replace lost MCO tax revenues in order to keep the program whole.
  • The pending expiration of two major federal waivers. California’s current Section 1915(b) waiver expires on July 1, 2020. Under this waiver, counties are allowed to deviate from standard Medicaid rules and provide or arrange for a broad array of “specialty mental health services” for eligible Medi-Cal beneficiaries. In addition, California’s Section 1115 Medi-Cal 2020 waiver expires at the end of 2020. Under this waiver, the federal government is providing the state with billions of dollars to help improve access to care as well as to transform how care is delivered. Will the Trump administration agree to renew these waivers without significantly reducing federal funding or imposing new requirements that California would find objectionable? Time will tell.
  • The next recession. Medi-Cal could face spending cuts when the next recession comes and policymakers seek ways to close budget shortfalls. Fortunately, California has been building up its reserves. The state expects to have more than $15 billion in its constitutional reserve, the Budget Stabilization Account, by the end of 2019–20. In addition, Governor Newsom wants to add $700 million to the state’s new Safety Net Reserve for Medi-Cal and CalWORKs. (The balance now is $200 million.) These reserves will reduce the need for state budget cuts during the next downturn, although Medi-Cal would not be guaranteed a specific share of the funds. State reserves will be crucial to shoring up Medi-Cal’s budget because the federal government may do little to help states pay for their rising Medicaid costs when the next recession arrives.

One of the biggest challenges — and opportunities — that California lawmakers and the governor face each year is allocating the state’s limited General Fund revenues among many vital priorities. The financing issues that Medi-Cal is facing — and how these issues are resolved — will help to determine whether policymakers can continue improving the Medi-Cal program while also ensuring that other vital public services are adequately funded.

 

 

 

Judge rules Trump AHP expansion unlawful ‘end-run’ around ACA

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https://www.healthcaredive.com/news/judge-rules-trump-ahp-expansion-unlawful-end-run-around-aca/551601/

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Dive Brief:

  • A federal judge on Thursday struck down a Trump administration expansion of association health plans, which aren’t bound by the requirements of the Affordable Care Act. U.S. District Judge John Bates said the June rule from the Department of Labor that loosened restrictions on what groups could band together to offer AHPs “is clearly an end-run around the ACA.”
  • The ruling stems from a lawsuit 11 states and the District of Columbia filed to challenge the DOL rule. It comes the same week the Trump administration stepped up its attacks against the ACA, arguing in a court filing Monday the law should be eliminated in its entirety following a Texas judge’s decision the act is unconstitutional without the individual mandate penalty.
  • The judge had strong language condemning the administration’s attempt to allow for easier creation and use of AHPs, calling the regulatory change a “magic trick” that allowed for “absurd results” undermining the intent of Congress.

Dive Insight:

The ruling is a blow to the Trump administration’s efforts to circumvent the ACA, which ramped up significantly with the administration’s filing this week seeking complete repeal of the law. Another hit to those efforts came down Wednesday when a different federal judge struck down Medicaid work requirements in Arkansas and Kentucky.

The renewed fight comes as Democrats lining up for a 2020 presidential run are pushing for more progressive policies than have previously gained public traction. Some Democratic contenders are making Medicare for all and other single-payer models a central part of their platforms as healthcare shapes up to be a major issue for the next presidential election.

Experts have argued extended use of AHPs could siphon away young and healthy people looking for minimum coverage at a lower cost. If they choose AHPs they upset the balance on risk pools for more comprehensive coverage. Also, many consumers don’t understand the tradeoff and could be surprised by what isn’t covered when they are in need.

But even though the plans aren’t required to meet ACA standards, some that have formed have been adamant they provide adequate coverage, including the 10 essential ACA benefits. The plans are less obstructive to the regulatory environment than short-term health plans, which have also been granted more leeway under the Trump administration.

Land O’Lakes, for example, which said it was the first to offer an AHP under the more relaxed rules, said its plan covered essential benefits and pre-existing conditions, as well as “broad network coverage.”

The Society of Actuaries has said as many as 10% of people in ACA plans could leave for AHPs, which would also drive up premiums for plans in the individual market. Avalere predicted about 3.2 million people would shift and premiums would rise by 3.5%.

Supporters of AHPs decried the judge’s decision Thursday. Kev Coleman, founder of AssocationHealthPlans.com, said in a statement the ruling will hurt small businesses throughout the country.

“Thousands of employees and family members within the small business community have already enrolled in association health plans — which help lower health care costs — since they first became available last fall,” he said. “They have provided a means by which broad benefits may be accessed at more economical prices. While I do not believe today’s ruling will survive appeal, I believe Judge Bates’ decision is an unnecessary detour on small businesses’ path toward more affordable health coverage.”

 

 

Consumerism places ‘disproportionate burdens’ on patients to reduce cost, researchers argue

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https://www.beckershospitalreview.com/finance/consumerism-places-disproportionate-burdens-on-patients-to-reduce-cost-researchers-argue.html?origin=cfoe&utm_source=cfoe

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Patient consumer metaphors place “disproportionate burdens” on patients to solve healthcare’s cost and quality issues, researchers wrote in a blog post published by Health Affairs.

Academics from the Hastings Center, a nonprofit bioethics research institute in Garrison, N.Y., wrote that patient-centered care messages have begun to mesh with patient consumerism. The authors note while patient advocates began using consumerism as a means to challenge corporate and professional dominance in healthcare, “today, ‘consumer-driven’ healthcare has become associated with neoliberal efforts to emphasize market factors in health reform and de-emphasize government regulation and financing.”

The authors continue: “In our view, a narrow focus on consumerism is conceptually confused and potentially harmful. The consumer metaphor wrongly assumes that healthcare is a market in the usual understanding of that term, that the high cost of U.S. healthcare is a function of excessive consumer demand, and that price transparency and competition can deliver on the promise of reducing costs or ensuring quality.”

The researchers concluded if the consumer metaphor continues, they believe patient-centered approaches, which can lead to improvements in healthcare, would be undermined.

 

 

How Medicare Advantage steers the Silver Tsunami into coordinated, value-based care

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https://www.healthcarefinancenews.com/news/how-medicareadvantage-steers-silver-tsunami-coordinated-value-based-care

CMS and other health insurers are using the program to deliver innovative and unique value to customers, both in terms of cost and quality.

Today’s Medicare Advantage plans are flourishing and the Silver Tsunami is among the reasons.

“Over the last four years, Medicare Advantage enrollment increased by more than 30 percent, while the number of people eligible for Medicare grew by about 18 percent,” said Steve Warner, vice president of Medicare Advantage Product for UnitedHealthcare Medicare and Retirement.

Other reasons for the growth: Innovative models from big insurers and upstarts alike that improve care for health plan members and drive revenue for payers as they look beyond fee-for-service.

IT STARTS WITH THE CONSUMER

Consumers are finding unique value in MA, both in terms of the quality of care and in the financial value.

Medicare Advantage, in fact, makes it easier for consumers to navigate the healthcare system and choose providers, in a way that traditional Medicare does not, said those interviewed.

“Actually it’s pretty hard to navigate the healthcare system on your own,” said Tip Kim, chief market development officer at Stanford Health Care. “Most Medicare Advantage plans have some sort of care navigation.”

Warner of UnitedHealth’s Warner added that Medicare Advantage also offers value and simplicity.

“It provides the convenience of combining all your coverage into one plan so you have just one card to carry in your wallet and one company to work with,” Warner said. “Most plans also offer prescription drug coverage and additional benefits and services not available through original Medicare, including dental, vision and fitness.”

REBRANDING FOR THE NEW ERA

MA plans did not emerge out of thin air. By another name, Medicare Advantage is managed care, a term that was the bane of healthcare during the height of HMOs in the 1980s.

“Medicare Advantage has rebranded ‘managed care’ to ‘care coordination,'” said consultant Paul Keckley of The Keckley Report. “Humana and a lot of these folks have done a pretty good job. Coordinating care is a core competence. Managed care seems to be working in this population.”

MA came along at the right time for CMS’s push to value-based care.

“I would suggest on the providers’ side, embracing Medicare Advantage is an opportunity to get off the fee-for-service mill,” said Jeff Carroll, senior vice president of Health Plans for Lumeris, which recently paired with Stanford Health Care on the Medicare Advantage plan, Stanford Health Care Advantage.

“Provider-sponsored Medicare Advantage plans are a way to put teeth into an accountable care organization,” Keckley added. “Medicare Advantage success is a silver tsunami among major tsunamis. Obviously it’s a profitable plan for seniors and profitable for underwriters. The winners in the process will get this to scale.”

MA is an innovative model that is not a government-run system, but a privately-run system essentially funded by the government.

PAYERS IN THE MA GAME

UnitedHealthcare has the largest MA market share of any one insurer.  Twenty-five percent of Medicare Advantage enrollees are in a UnitedHealthcare MA plan, followed by 17 percent in Humana, 13 percent in a Blue Cross Blue Shield and 8 percent in Aetna, according to the Kaiser Family Foundation.

Numerous insurers, in fact, have gotten into the MA market, including Clover Health in San Francisco, a five-year-old startup which has Medicare Advantage as its only business.

Clover is a tech-oriented company that boasts machine learning models that can accurately predict and identify members at risk of hospitalization.

Because Clover focuses only on MA, it can do a better job at problem solving the needs of an older population, said Andrew Toy, president and CTO of Clover Health.

“The problems we face in Medicare Advantage are very different from a younger generation,” Toy said.

Forty percent of the older population is diabetic. Most seniors will be dealing with a chronic disease as they get older.

In other insurance, whether its individual or commercial, the lower cost of the healthier population offsets the cost of the sicker population. MA has no way to offset these costs. Plans can’t cherry-pick consumers or raise premiums for a percentage of the population.

What MA plans can do is design plans that fit the varying needs of the population. A plan can be designed for diabetics. For younger seniors or those not dealing with a chronic disease, a plan can be designed that includes a gym membership.

“All these plans are regulated,” Toy said. “We have the flexibility to move dollars around. We can offer a higher deductible plan, or a nutrition plan. The incentives for us in Medicare Advantage are different than the incentives in Medicare. CMS has explored giving us more leeway for benefits. Consumers have a choice while still having the guarantees of Medicare.”

Toy believes regular Medicare is more expensive because MA offers a more affordable plan based on what an individual needs.

“When you need it, we get more involved in that care,” Toy said, such as “weight control issues for diabetics.”

The drawbacks are narrower networks, though Toy said Clover offers an out-of-network cost sharing that is pretty much in line with being in-network.

UnitedHealthcare’s Medicare Advantage LPPO plans offer out-of-network access to any provider who accepts Medicare, Warner said.

UnitedHealthcare also offers a wide variety of low and even zero-dollar premium Medicare Advantage plans and annual out-of-pocket maximums, Warner said. By contrast, original Medicare generally covers about 80 percent of beneficiaries’ healthcare costs, leaving them to cover the remaining 20 percent out-of-pocket with no annual limit.

“From a consumer value proposition, it makes Medicare Advantage a better deal,” Kim said. “One is Part B, 20 percent of an unknown number. Knowing what the cost will be in a predictable manner is a preferable manner.”

Stanford Health Care launched a Medicare Advantage plan in 2013. Lumeris owned and operated its own plan, Essence Healthcare, for more than eight years. Stanford and Lumeris partnered on Stanford Health Care Advantage in northern California, using Lumeris technology to help manage value-based reimbursementand new approaches to care delivery through artificial intelligence-enabled diagnostic tools and other methods.

“We are not a traditional insurance company,” Kim said. “We’re thinking about benefits from a provider perspective. It’s a different outlook than an insurance company. By definition we’re local.”

MA MARKET STILL HAS ROOM TO GROW

While the Medicare Advantage market is competitive, it is also under-penetrated, Brian Thompson, CEO for UnitedHealthcare Medicare & Retirement, said during a 2018 earnings report.

Currently, about 33 percent of all Medicare beneficiaries are in an MA plan, he added, but UnitedHealth sees a path to over 50 percent market concentration in the next 5-10 years.

It’s a path not so subtly promoted by the Centers for Medicare and Medicaid Services.

As a way to encourage insurers to take risk and get in the market, around 2009, CMS gave MA insurers 114 percent of what it paid for fee-for-service Medicare. The agency began decreasing those payments so that by 2017, traditional Medicare and MA became about even.

MA insurers instead thrive on their ability to tailor benefits toward wellness, coordinate care and contain costs within the confines of capitated payments, the essence of value-based care.

They have received CMS support in recent rate notices that gives them the ability to offer supplemental benefits, such as being able to target care that addresses the social determinants of health. Starting in 2020, telehealth is being added to new flexibility for these plans.

WHAT THE FUTURE MAY HOLD FOR MA

Medicare Advantage plans have expanded and, in so doing, opened innovative new options for plans and their customers alike at the same time that the ranks of people eligible for Medicare continues to swell.

So where is it all going?

Medicare Advantage is changing the way healthcare is paid and delivered to the point that Keckley and Toy agreed the future may not lie in Medicare for All, but in Medicare Advantage for all.

“I think a reasonable place to end, is in some combination where the government is involved in price control, combined with the flexibility of Medicare Advantage,” Toy said. “That’s really powerful.”

 

 

Medicare buy-in polls better than single-payer

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https://www.axios.com/newsletters/axios-vitals-2bc1069a-f66e-4a33-8406-763284c3a0e1.html?utm_source=newsletter&utm_medium=email&utm_campaign=newsletter_axiosvitals&stream=top

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A Medicare buy-in is more popular than switching to a single-payer health care system, according to a new poll from Quinnipiac University.

By the numbers: Overall, voters were split on the wisdom of single-payer — 45% said it would be a bad idea, and 43% said it would be a good idea.

  • Respondents were more bullish on letting people buy into Medicare, with 51% saying it’s a good idea and 30% saying it’s a bad idea.

Republicans were the difference-makers. They overwhelmingly oppose single-payer (79% against), but a plurality of Republican voters (43%) support a Medicare buy-in.

Between the lines: Although the political battle between these rival plans is playing out primarily as a litmus test in the 2020 Democratic primary, Democrats seem fine with either proposal.

  • 69% of Democrats said single-payer is a good idea, compared to 62% who said the same for a Medicare buy-in.

Yes, but: Even a Medicare buy-in limited to people older than 50 — pretty much the smallest option on the table for Democrats — would still provoke a big fight from industry.

 

 

Trump’s all-or-nothing gamble

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The Trump administration’s new legal argument against the Affordable Care Act is a political risk. It may also be a liability in court.

How it works: The legal issue here is “severability” — if the ACA’s individual mandate is unconstitutional, can it be struck down in isolation? Or is it too intertwined with other parts of the law?

Flashback: We’ve seen this movie before — in 2012, at the Supreme Court.

  • According to behind-the-scenes reporting from the 2012 ACA case, four conservative justices wanted to strike down the entire law. Chief Justice John Roberts reportedly wanted to strike down the mandate and protections for pre-existing conditions while leaving the rest intact.
  • But the other conservatives wouldn’t budge, and faced with a choice between upholding or striking down the whole thing, Roberts chose the former.

The Justice Department has now forced that same all-or-nothing decision into the case now pending before the 5th Circuit Court of Appeals.

“There’s no way they were getting Roberts’ vote anyway … but this won’t help,” said Jonathan Adler, a law professor at Case Western Reserve University who helped spearhead a different challenge to the ACA.

  • “It’s contrary to everything he’s ever said and done on severability,” Adler argues.

It may not get that far. “I think the states ultimately lose,” Adler said. “I think the most likely outcome is they lose in the 5th Circuit. If they don’t lose at the 5th Circuit, they will lose at the Supreme Court.”

If that’s what happens, adopting this riskier legal strategy may ultimately be the only thing that saves Republicans from the political nightmare of wiping out 20 million people’s health care coverage with no strategy on how to replace it.

  • I’ll spare you a long list of quotes from President Trump’s trip to Capitol Hill yesterday. Suffice it to say that no, Republicans still do not have a plan for what happens next if they finally succeed in killing the ACA. Some things never change.

 

 

 

Justice Dept. now wants the entire ACA struck down

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The Justice Department now wants the courts to strike down the entire Affordable Care Act — not just its protections for people with pre-existing conditions.

This is a stunning escalation, raising both the real-world and political stakes in a lawsuit where both the real-world and political stakes were already very high.

Where it stands: Judge Reed O’Connor ruled in December that the ACA’s individual mandate has become unconstitutional, and that the whole law must fall along with it.

  • At the time, the Trump administration argued that the courts should only throw out the mandate and protections for pre-existing conditions — not the whole law.
  • But in a one-page filing last night, DOJ said the 5th Circuit Court of Appeals should affirm O’Connor’s entire ruling.

Why it matters: If DOJ ultimately gets its way here, the ripple effects would be cataclysmic. The ACA’s insurance exchanges would go away. So would its Medicaid expansion. Millions would lose their coverage.

  • The FDA would lose have the authority to approve an entire class of drugs.
  • The federal government would lose a lot of its power to test new payment models — in fact, the administration is relying on some of those ACA powers as it explores conservative changes to Medicaid.

Politically, this makes no sense. Chuck Schumer and Nancy Pelosi must be dancing in the streets.

  • Health care — specifically pre-existing conditions — was overwhelmingly a winning issue for Democrats in 2018.
  • This lawsuit already had Republicans in an unpleasant bind.
  • Now the administration is doubling down, putting even more people’s coverage on the chopping block.

What they’re saying:

  • “The bad faith on display here is jaw-dropping,” pro-ACA legal expert Nick Bagley writes.
  • “I was among those who cheered the selection of William Barr as Attorney General and hoped his confirmation would herald the elevation of law over politics within the Justice Department. I am still hopeful, but this latest filing is not a good sign,” said Jonathan Adler, a conservative law professor who helped spearhead the last big ACA lawsuit.

 

 

 

The Trump Administration Now Thinks the Entire ACA Should Fall

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The Trump Administration Now Thinks the Entire ACA Should Fall

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In a stunning, two-sentence letter submitted to the Fifth Circuit today, the Justice Department announced that it now thinks the entire Affordable Care Act should be enjoined. That’s an even more extreme position than the one it advanced at the district court in Texas v. Azar, when it argued that the court should “only” zero out the protections for people with preexisting conditions.

The bad faith on display here is jaw-dropping. Does the administration really think that the very position it advanced just month ago is so untenable that it must now adopt an even crazier view?

Much as it may dislike the fact, the Trump administration has an obligation to defend acts of Congress. Absent that obligation, the sitting administration could pick and choose which laws it wants to defend, and which it wants to throw under the bus. Indeed, the decision not to defend is close cousin to a decision not to enforce the law. If the ACA really is unconstitutional, wouldn’t continuing to apply the law would violate the very Constitution that empowers the President to act?

Even apart from that, the sheer reckless irresponsibility is hard to overstate. The notion that you could gut the entire ACA and not wreak havoc on the lives of millions of people is insane. The Act  is now part of the plumbing of the health-care system. Which means the Trump administration has now committed itself to a legal position that would inflict untold damage on the American public.

And for what? Every reputable commentator — on both the left and the right — thinks that Judge O’Connor’s decision invalidating the entire ACA is a joke. To my knowledge, not one has defended it. This is not a “reasonable minds can differ” sort of case. It is insanity in print.

Yet here we are. An administration that claims to support protections for people with preexisting conditions has now called for undoing not only the parts of the ACA that protect such conditions, but also the entire Medicaid expansion and parts of the law that shield those with employer-sponsored insurance from punitive annual or lifetime caps. Not to mention hundreds of rules having nothing to do with health insurance, including a raft of new taxes, mandatory labeling of calorie counts at chain restaurants, and rules governing biosimilars.

Maybe you think this level of disdain for an Act of Congress is to be expected from the Trump administration. Maybe it’s too much to process because of Russia and immigration and North Korea. But this is not business as usual. This is far beyond the pale. And it is a serious threat to the rule of law.

 

 

FURTHER MEDICARE EXPANSION COULD DIMINISH HOSPITAL REVENUES, BUT ACTION REQUIRED

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Medicare for All

Potential Medicare expansion plans would drastically impact the financial standing of health systems, though some may be more pragmatic solutions than others.

KEY TAKEAWAYS

Implementing Medicare for All as a single payer healthcare system is estimated to create a 22.1% negative impact on a mid-size regional provider’s net margin.

However, a voluntary buy-in plan, also known as ‘Medicare for more,’ might result in only a slight dip to the net margin compared to the status quo.

Regardless, some amount of legislative action regarding Medicare expansion will be necessary in the next five years, according to the study’s authors.

Hospital and health systems should remain aware of the financial impact that several Medicare expansion proposals could have on their respect organizations, according to a Navigant study released Friday afternoon.

Fresh off the 2018 midterm elections where healthcare played a critical role in the electoral shift that saw Democrats retake the House of Representatives, 2020 presidential candidates are heralding sweeping policy proposals to expand coverage through Medicare. 

While several versions of Medicare for All legislation exist, other policy proposals such as ‘Medicare for more’ or the public option have drawn consideration from lawmakers as potentially more viable or pragmatic solutions to America’s healthcare problems.

In its analysis, Navigant found a medium-sized, nonprofit, multi-hospital system with revenues of more than $1 billion and a current operating margin of 2.3% would endure vastly different financial implications under several proposed federal healthcare policy changes.

Medicare for All would reduce revenues by around $330 million, a margin drop of just over 22%, the public option proposal would cause revenue declines in the neighborhood of $153 million, a margin impact of -6.3%, and the ‘Medicare for more’ expansion plan is estimated to have a neutral impact compared to the status quo.

Still, Navigant’s study points out that if Congress does not act on Medicare expansion until after the next presidential election, hospitals could face a scenario with a financial impact comparable to the public option proposal.

Using the model health system as an example, status quo projections without any cost reduction initiatives would see the organization’s net margin decline from 2.3% to negative 6.2% from 2018 to 2023, with operating costs rising between 4.5% to 5% per year and revenues growing at 2.5% to 3% per year.

“There’s going to be a need to control hospital cost structures going forward, regardless of whether it’s in the status quo with baby boomers aging into Medicare and payer mix shifts occurring, or in a scenario that has limited expansion, moderate expansion, or robust Medicare for All,” Jeff Leibach, director at Navigant, told HealthLeaders in an interview. “There are obviously varying degrees of impact on hospitals, but all of them are going to require a level of attention and and management of revenue strategy and cost structure that I think hospital CFOs are struggling with today and will benefit from through continued focus on performance improvement and revenue strategy.”

PLANS, DETAILS, AND IMPACT:

‘Medicare for more’

  • Voluntary buy-in at age 50 and over
  • In one scenario, choice between employer coverage and Medicare
  • No Medicare payment relief
  • No reduction in revenue cycle management operations compared to the status quo
  • 15% reduction in current disproportionate share hospital payments

Public option

  • All lives covered regardless of age
  • Choice between employer coverage and Medicare
  • Range from no Medicare payment relief to payments at 110% of Medicare rate
  • 1.5% reduction in revenue cycle management operations compared to the status quo
  • 70% reduction in current disproportionate share hospital payments

Medicare for All

  • All lives covered regardless of age
  • Single payer healthcare coverage
  • Range from no Medicare payment relief to payments at 120% of Medicare rate
  • 2.5% reduction in revenue cycle management operations compared to the status quo
  • 100% reduction in current disproportionate share hospital payments

Leibach said that the analysis arrives at the early part of the conversation surrounding widespread Medicare expansion at the federal level, which makes it difficult to gauge how health system leaders will react to Navigant’s findings.

Some may be hesistant to support plans that are projected to create such a negative material impact on their respective bottom lines, but others may be willing to consider a policy proposal that significant decreases or even eliminates bad debt costs associated with a large uninsured population.

Even before the report was released, however, the American Hospital Association declined to voice support for Medicare for All late last month. 

Leibach added that he was surprised by the “nominal impact” of the voluntary buy-in plan, arguing that could hospital leaders may rally around that proposal as a compromise to expanding Medicare without fully deteriorating their financial standing.

This approach would also be the least disruptive to the commercial insurance market, according to Leibach, assuming that the Medicare for All proposal would be a true single-payer platform that eliminates private insurers.

 

 

 

 

Medicines Only Work if Patients Can Afford Them: Solutions For The High Drug Prices Era

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https://www.forbes.com/sites/sachinjain/2019/03/18/medicines-only-work-if-patients-can-afford-them-solutions-for-the-high-drug-prices-era/#631717742c7f

Since 2000, more than 500 new medicines have been approved by the Food and Drug Administration. Because of those medicines, many Americans are living longer, better and more active lives. However, new medicines often come with high price tags. And in an environment of rising drug costs, affordability isn’t just a simple matter of economics — it can play a significant role in determining health outcomes.

Perhaps no other drug better illustrates the effect of cost on health than insulin. Over the past decade, insulin prices in the United States have tripled. Most of that increase has been driven by analog insulin medications, which are the newest forms of synthetic insulin. For example, the price of one brand of analog insulin, Humalog, was just $20 per vial in 1996. Today, it’s $275 per vial — a 1,275% increase. (Eli Lilly, the drug’s manufacturer, announced it will soon offer an “authorized generic” of the drug at a 50% discount.)

With insurers’ and patients’ out of pocket costs on the rise, a new report from researchers at Yale University finds that one-quarter of patients with Type 1 or 2 diabetes say they ration their medication. 

This is, to put it simply, bad news all around. When patients don’t take their medications as prescribed, they not only get sicker, but their ailments also become more expensive to treat. One report showed that patients who didn’t take their Type 2 diabetes medications developed complications that cost the U.S. health system $4 billion a year.

Studies like these often leave doctors and nurses scratching their heads, wondering if anything can be done to bridge the affordability gap in order to make it more likely that patients will purchase and take life-saving medicines. One obvious solution is to prescribe less expensive medications. But that only works if the less expensive medications are just as effective as their more costly counterparts. 

Which can sometimes be the case with insulin.

Last year, CareMore, the healthcare system that I lead, partnered with independent researchers from Brigham and Women’s Hospital and Harvard Medical School to study the effects of a program CareMore implemented to switch Type 2 diabetic patients from analog insulin to less expensive humaninsulin. Human insulin first came on the market in the early 1980s and costs about one-tenth as much as analog insulin. (The names can be a bit confusing; both medications are synthetic forms of insulin produced in a laboratory.)

However, our study, published in the Journal of the American Medical Association (JAMA), found that human insulin was just as effective as analog insulin at stabilizing blood sugar levels. This conclusion, frankly, wasn’t entirely surprising. A 2018 study conducted by Kaiser Permanente found that patients who took human insulin were no more likely to need additional health care than their counterparts who took analog insulin.

Crucially, our study found that the switch to human insulin also translated into lower costs for patients. Before the switch, one-fifth of the patients we studied reached the Medicare Part D coverage gap, or “donut hole,” where patients pay substantially higher costs for prescription drugs. After the switch, just 11.1% reached that gap.

Moreover, our analysis found that the program can be replicated safely and at-scale. If even a small proportion of Medicare beneficiaries with Type 2 diabetes switched to human insulin, the resulting savings to the health care system would be substantial.

Switching to lower-cost, older, equivalent medications is one way to increase medication adherence and improve health outcomes. Another, it turns out, is simply to charge patients less. 

In a landmark 2011 study, researchers studied patients who had suffered heart attacks. Normally, these patients have a low rate of medication adherence. But Harvard Medical School professors Niteesh Choudhry and William Shrank, two of the study’s lead authors found that when drug copayments were eliminated, medication adherence rates increased while overall health costs remained constant. 

One might wonder why costs didn’t go up. After all, the co-pays were eliminated and, as adherence improved, the volume of prescriptions filled increased. University of Michigan researchers A. Mark Fendrick and Rajender Agarwal may have the answer.

In a 2018 report, they found that when insurers eliminated co-payments or took other actions to make drugs more affordable, their drug costs went up — but the total cost of insuring patients did not. In fact, in some cases the cost of providing care actually decreased. Fendrick and Agarwal say that’s because patients who take their medications stay healthier and are less likely to require hospitalizations and other expensive types of care. 

None of this is to say that new drug therapies or other cutting-edge treatments don’t have value. On the contrary, they help people live longer, better lives. But in a world of increasing health costs, prescribing life-saving medications for our patients isn’t enough. Physicians, health plans and pharmaceutical manufacturers have to ensure that patients can afford to take them, as well.