Tag Archives: Medicare Advantage

Nursing home study raises questions on Medicare managed care networks

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https://www.reuters.com/article/us-column-miller-medicare/nursing-home-study-raises-questions-on-medicare-managed-care-networks-idUSKBN1F71NS

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Managed care is the hot trend in Medicare, with the number of seniors enrolled in Medicare Advantage plans projected to soar over the coming decade.

These plans offer simplicity by combining all the different parts of Medicare into a single buying decision – and they can save you money.

But before you sign up, ask this question: What happens if I get really sick?

Most Medicare Advantage plans are HMOs or PPOs. When you join, Medicare provides a fixed payment to the plan to cover Part A (hospitalization) and Part B (outpatient services). Advantage is growing quickly, fueled by its value proposition of savings and simplicity – the plans bundle together prescription drug coverage and the out-of-pocket protection of Medigap plans.

But like any type of managed care coverage, there is a trade-off: you must use in-network healthcare providers. For example, one recent study found shortcomings in the quality of providers in some Medicare Advantage provider networks – one out of every five plans did not include a regional academic medical center – institutions that usually offer the highest-quality care and specialists (reut.rs/2DGIvhy).

Now, a new study raises questions about the quality of skilled nursing facilities (SNFs) that are included in Medicare Advantage provider networks.

Researchers at Brown University’s School of Public Health examined Medicare beneficiaries entering skilled nursing facilities (SNFs) from 2012 to 2014. The yardsticks for quality were Nursing Home Compare – Medicare’s own database of nursing home quality ratings – and rates of hospital readmission for those admitted to SNFs. Their key finding: Medicare Advantage enrollees appear more likely to enter lower-quality skilled nursing facilities than people enrolled in traditional fee-for-service Medicare.

Medicare Advantage plans also are subject to a quality rating system, but the researchers found that enrollees in both lower- and higher-quality plans were admitted to SNFs with significantly lower quality ratings.

The SNF quality gaps could impact a large group of people, considering the large – and growing – Medicare population. David Meyers, one of the Brown University study authors, calculates that about 315,000 patients from lower-rated Advantage plans need to use an SNF annually. “If those people had used fee-for-service Medicare, up to 13,000 more of them might have gone to a higher-quality nursing home,” he said.

UNCLEAR HEALTH OUTCOMES

The study does not conclude that healthcare outcomes are necessarily worse for Medicare Advantage enrollees – that was outside the scope of the research. Some researchers have correlated NHC star ratings with patient outcomes, but the jury really is out on this question – partly because of the shortcomings of NHC itself. Much of the data that determines ratings is self-reported by nursing homes, and reviews of this system have found numerous cases of facilities attempting to “game” the system to inflate their ratings.

A large trade group representing the private companies that sponsor Advantage plans – America’s Health Insurance Plans (AHIP) – argues that actual outcomes are better. The group points to another study that found MA enrollees had shorter lengths of stay and were less likely to be readmitted to a hospital and more likely to return home within 90 days of admission than FFS beneficiaries.

But the Brown researchers found that patients from lower-rated Advantage plans tended to go to SNFs with higher readmission rates than fee-for-service patients.

And a review by the Kaiser Family Foundation in 2014 of a large body of research comparing the quality of care provided by Advantage plans and traditional Medicare concluded that the available research is unsatisfying, and that better evidence is needed.

Even if current research is inconclusive, this much is clear: we need much greater transparency to help consumers understand at the point when they are shopping for Medicare Advantage plans using the online Medicare plan finder  (bit.ly/2DKlL0o). “It’s not very clear what SNFs are part of any given Advantage plan,” said Meyers.

Going beyond information in the plan finder also presents challenges, said Tricia Neuman, senior vice president and director of the program on Medicare policy at Kaiser. “You would need to get the provider directory from every Advantage plan she is considering – and those are not available in a uniform format,” she said.

”Then, you’d have to go compare the different nursing home providers online for their quality ratings.”  No one – including AHIP – is even tracking data on how many SNFs are offered by the typical Advantage plan.

Meyers doubts that even a good research tool would help. “Most people don’t think about a nursing facility until they need one  – and it’s really difficult to make decisions about this at a time of crisis,” he said.

Gaining a better understanding of quality in Medicare Advantage plans is going to be urgent as the aging of the nation accelerates. Overall Medicare enrollment will jump nearly 30 percent by 2027 according to projections by the Congressional Budget Office. And Advantage plan enrollment will increase from 19 million to 31 million, which would represent 44 percent of eligible Medicare beneficiaries.

And the need for greater consumer vigilance in choosing SNFs will increase as the Trump administration moves aggressively to deregulate the industry.

 

Credit rating agency, researchers give vote of confidence to health insurance sector

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https://www.fiercehealthcare.com/payer/financial-performance-a-m-best-kaiser-family-foundation-insurers?mkt_tok=eyJpIjoiTjJRNU5qUXlZVEJqWmpjNCIsInQiOiJOR2V2bEp4NkdoeVB3VndhZE43TVBjZXdaTGJcLzk1Z3hBd1wvZ05teDMrcjZ5UzJhb0tzUkpQbWlaSmVvUmJFazVDcERmajBTREhCTXJxR3BBaGtoY1MrZlVtQW5xeXRSbFwvYVhPOE44VE9uYUhNZWNnbGtoR3c3S0xHUlp5SlwvS2kifQ%3D%3D&mrkid=959610

Health insurance, pen and stethoscope

Two new reports offer evidence that policy uncertainty aside, the health insurance industry is doing just fine.

In one report, A.M. Best explains why it decided to change its outlook for the health insurance sector from negative to stable. The credit rating agency said the change “reflects a variety of factors that have led to improvement in earnings and risk-adjusted capitalization.”

While insurers have experienced losses in the individual exchange business, this market segment has improved in 2016 and 2017—in part due to consecutive years of high rate increases, a narrowing of provider networks and a stabilizing exchange population, the report said.

A.M. Best also predicted that Congress won’t make repealing and replacing the Affordable Care Act a high priority in 2018. And even if it does, health insurers will have time to make adjustments, since legislative changes won’t take effect for two or more years.

The rating agency’s findings about the individual market echo those of a new report from the Kaiser Family Foundation, which examined insurers’ financial data from the third quarter of 2017.

It found that insurers saw significant improvement in their medical loss ratios, which averaged 81% through the third quarter. Gross margins per member per month in the individual market segment followed a similar pattern, jumping up to $79 per enrollee in the third quarter of 2017 from a recent third-quarter low of $10 in 2015.

One caveat is that KFF’s findings reflect insurer performance only through September—before the Trump administration stopped reimbursing insurers for cost-sharing subsidies. “The loss of these payments during the fourth quarter of 2017 will diminish insurer profits, but nonetheless, insurers are likely to see better financial results in 2017 than they did in earlier years of the ACA marketplaces,” KFF said.

As promising as these observations about the individual market are, A.M. Best pointed out that this market segment is just a small portion of most health insurers’ earnings and revenues. In fact, health plans largely owe their overall profitability to the combined operating results of the employer group, Medicaid and Medicare Advantage lines of business.

Looking ahead, the agency predicted that Medicare and Medicaid business lines will remain profitable for insurers—though margins will likely compress for both. It said the employer group segment will also remain profitable, but noted that membership will continue to be flat.

 

Report sheds light on Clover Health’s financial struggles, strategy missteps

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https://www.fiercehealthcare.com/payer/clover-health-struggles-lab-bills-medicare-advantage-members?mkt_tok=eyJpIjoiWVRNeE1HSTFPREkwTmpsbSIsInQiOiJtcHFUTmw4bU5UWE0rbE44Q0ExcUc5cEI5SSt0UVdcL0ZYVDllbUhMN3VNXC9ab2JTTlwvKzVYOXMyTmVmRlwvZjJ2VzNZWmp5Z2VJeERzVytyWUZOdkVyRmdnVWNWSEV6SVhkSWVHSFljSkhRV05rMUt5WFwvemVvM2dsMEpUeW1rYUx2In0%3D&mrkid=959610

Clover Health, the Medicare Advantage startup with a data-driven strategy, is struggling financially and operationally—and in some cases, members have paid the price.

Such is the conclusion of a new report from CNBC, which relied on interviews with six anonymous former Clover employees and advisers. Here are some highlights of what they told the publication:

  • To obtain leverage over LabCorp and Quest Diagnostics in its bid to collect patient data, Clover delayed paying bills for its members’ lab tests. Some members were then “harassed with bills” from the labs—though Clover eventually paid the lab bills after learning the full extent of the issue.
  • Clover has missed its internal financial targets and other growth goals. For example, while an investor said the company predicted early on that it would book $500 million in revenue from premiums by the end of 2017, a PwC analysis found that its annual revenue is actually closer to $270 million. Its membership growth has also fallen well short of its early projections.
  • The insurer experienced a bug in one of its core software projects, which was supposed to create a list of members ranked from sickest to healthiest to call and remind about getting an annual checkup. The glitch reversed the list, resulting in Clover representatives calling the healthiest members first for several months.
  • Marco Rogers, a former senior engineer at Clover, stirred controversy online when he discussed the company’s approach to people of color. In a series of now-deleted tweets, Rogers said he was “passive aggressively pushed out by people who found me ‘adversarial.’”

Clover Health declined to comment about the claims made by CNBC’s sources. However, those are not the only struggles that Clover has had, according to previous reporting by FierceHealthcare. In 2016, the Centers for Medicare & Medicaid Services fined the company after receiving a “high volume of complaints” from new enrollees who were denied services by out-of-network providers after being told by Clover that they could see any provider they wished.

And last month, Clover co-founder and Chief Technology Officer Kris Gale stepped down from his post. Gale, who remains an adviser for the company, helped “build a foundation from which we can realize the true potential of this business,” Clover Health CEO Vivek Garipalli said in a previous statement.

However, Clover’s vision for using data analytics to disrupt the health insurance industry has won the San Francisco-based company a significant amount of investment capital. In a funding round in May, it raised $130 million, putting its total value at $1.2 billion. The insurer also began serving Medicare customers in Georgia, Texas and Pennsylvania in 2018, a significant expansion since it previously sold plans in only New Jersey.

 

Health insurer Oscar nears $1 billion in revenue

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https://www.axios.com/oscar-2518896548.html

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Oscar, the healthcare insurance upstart co-founded by Joshua Kushner, tells Axios that it is expecting to generate nearly $1 billion in premium revenue for 2018. That’s up from “more than $300 million” in 2017 premium revenue. It also says that its insurance underwriting business is profitable for the first time, although the overall company remains in the red.

Why it matters: Oscar continues to grow, despite having originally launched to provide health insurance to individuals under an Affordable Care Act that the Trump Administration has been slowly dismantling.

  • More numbers: The company expects around 250,000 members in the individual markets, including in New York and California where open enrollment continues, representing around a 2.5x increase over last year, and doesn’t include Oscar’s recent expansion into employer plans.

Oscar CEO Mario Schlosser tells Axios that he isn’t too concerned about how the new tax bill repeals the ACA’s individual mandate, saying that much of the early instability has dissipated:

“It took a while to figure out how things work, but a lot of people now just have come around to thinking it’s smart to have health insurance. The loss of the mandate will have some impact on some states around country, but it won’t affect the overall stability of the individual markets.”

Oscar’s big marketing pitch is that it leverages technology to provide a more efficient healthcare experience, through such techniques as tele-medicine (25% of Oscar members have used it) and concierge teams that include both nurses and “care guides” (70% have used). It has taken steps to apply this tech-centric approach to the Medicare Advantage market, but tells Axios that it has slowed down those efforts a bit (i.e., no 2018 launch).

 

AARP to Congress: Don’t Cut Medicare

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https://www.aarp.org/politics-society/advocacy/info-2017/medicaid-medicare-tax-reform-fd.html?cmp=EMC-DSO-NLC-WBLTR—MCTRL-120817-F1-2613065&ET_CID=2613065&ET_RID=33152417&mi_u=33152417&mi_ecmp=20171208_WEBLETTER_Member_Control_Winner_251100_391403&encparam=rGtTYC48LtlDepUYFPD2E6KmzkAw6WgcgwvDlv37DZs%3D

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The tax bill would trigger an automatic funding cut in the vital program.

AARP Chief Executive Officer Jo Ann Jenkins called on congressional leaders Thursday to keep their promise to America’s seniors and prevent a large cut to Medicare that the tax bill now being debated on Capitol Hill would trigger.

The tax measure would result in a $1.5 trillion increase in the federal deficit over the next decade, according to the nonpartisan Congressional Budget Office (CBO). Such a deficit would prompt an automatic $25 billion cut to Medicare as soon as January because of the “pay-as-you-go” law, commonly referred to as PAYGO.

The law was designed to keep the deficit in check by requiring the administration to reduce spending in many mandatory federal programs if Congress enacts a law that increases the deficit but doesn’t provide offsetting revenue.

In a letter to Senate Majority Leader Mitch McConnell, Minority Leader Charles Schumer, House Speaker Paul Ryan and Minority Leader Nancy Pelosi, Jenkins reminded McConnell and Ryan that they had recently issued a statement promising that “we will work to ensure these spending cuts are prevented.”

In their statement, the Republican leaders pointed out that the PAYGO law has never been enforced since it was passed in 2010 and “we have no reason to believe that Congress would not act again” to forestall the cuts PAYGO would require.

Medicaid, Social Security, food stamps and some other social safety net programs are exempt from the PAYGO law. But Medicare and programs like federal student loans, agricultural subsidies and the operations of U.S. Customs and Border Protection are not exempt.

The law caps how much the government can trim from Medicare at 4 percent. That’s $25 billion the first year, according to CBO. The amount could be higher in subsequent years, depending on the size of the deficit and Medicare’s budget.

The reduction would affect the payments that doctors, hospitals and other health care providers receive for treating Medicare patients. Individual benefits would not be directly cut, but the reduction could have implications for the care beneficiaries receive.

“The sudden cut to Medicare provider funding in 2018 would have an immediate and lasting impact, including fewer providers participating in Medicare and reduced access to care for Medicare beneficiaries,” Jenkins wrote. Health care providers might stop taking Medicare patients, she added, even as 10,000 older adults are enrolling in the health program each day.

In addition, Medicare Advantage plans and Part D prescription drug plans may compensate for the cuts by charging higher premiums or shifting more costs to beneficiaries in future years.

“Our members and other older Americans are counting on you to preserve their access to Medicare services, including their doctors and hospitals,” Jenkins wrote.

Why payers are flocking to the Medicare Advantage market

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https://www.healthcaredive.com/news/why-payers-are-flocking-to-the-medicare-advantage-market/510589/

Medicare Advantage (MA) and the Affordable Care Act (ACA) exchanges are both federal programs, but they couldn’t be more different in payers’ eyes. Insurance companies are entering or expanding their footprints in the MA market, while simultaneously pulling back or out of the ACA exchanges. They’ve found success in MA. Not so much in the ACA exchanges.

Payers see MA as a stable market. That’s evident in the fact that MA premiums are expected to decrease by 6% next year. Insurance companies like stability. Insurers increase premiums by double digits when there isn’t stability, which is the case with the ACA exchanges.

A large part of the ACA exchanges’ problems is linked to actions and inaction in Washington, D.C. President Donald Trump’s administration stopped paying cost-sharing reduction payments to insurers, cut the exchanges’ open enrollment in half, reduced the exchanges’ advertising budget by 90%, offered proposed rules and executive orders that hurt the ACA and threatened not to enforce the individual mandate that requires almost all Americans to have health insurance.

Congress, meanwhile, has tried and failed to repeal the ACA this year. All of this created an unstable exchanges market, which resulted in payers leaving the exchanges or jacking up premiums by 20% or more for 2018.

Meanwhile, the MA market is a picture of stability and payer success.

  • There is a steady stream of new people eligible for Medicare daily, and many choose MA.
  • People usually don’t switch back from MA plans after leaving traditional Medicare.
  • Payers can easily convert members from traditional Medicare to MA via marketing campaigns.
  • The MA demographics are usually people who once had an employer-based plan, so they know insurance and how healthcare works. That also means they usually don’t have pent-up healthcare needs.
  • The CMS pays MA plans upfront for covering people with high healthcare costs and payers have enjoyed stable MA payments from the CMS.

So, MA members are easier to get and keep, they usually have fewer health needs and payers like the MA payment structure better than the exchanges, which get compensated at the end of the year. All of that equals a stable market for payers.

One-third of Medicare beneficiaries are enrolled in an MA plan this year compared to 25% just six years ago. Enrollment grew by 8% between 2016 and 2017 and the CMS recently announced that MA membership will grow by 9% to 20.4 million members in 2018.

Gretchen Jacobson, associate director with the Kaiser Family Foundation’s (KFF) Program on Medicare Policy, told Healthcare Dive that more than half of those in Medicare will have MA plans in many counties next year.

That growth isn’t expected to slow — especially with Republicans controlling both houses of Congress and the White House, according to Steve Wiggins, founder and chairman of Remedy Partners.

“With Republican control of the federal government, it is conceivable that Medicare Advantage will become a centerpiece of CMS’ strategy to control spending growth,” Wiggins told Healthcare Dive.

What more MA members and payers mean for hospitals and providers

With more MA members expected next year, the continual shift to MA will have mixed benefits for providers. Jacobson said it’s not entirely clear how more MA members will affect hospitals and providers. “One of our studies recently showed that the provider networks for Medicare Advantage plans greatly varies and these networks will become even more important as enrollment in Medicare Advantage plans grows,” she said.

Fred Bentley, vice president at Avalere Health, told Healthcare Dive that MA’s growth will present a whole new set of challenges for hospitals and health systems.

Bentley listed two issues:

  • Narrow networks
  • Tighter utilization management compared to Medicare’s fee-for-service model

A recent KFF report found that 35% of MA enrollees were in narrow-network plans in 2015. Payers have increasingly turned to narrow networks to control costs and improve quality of care. To take part in the narrower networks, physicians usually have to agree to payer demands concerning cost and quality.

“Differences across plans, including provider networks, pose challenges for Medicare beneficiaries in choosing among plans and in seeking care, and raise questions for policymakers about the potential for wide variations in the healthcare experience of Medicare Advantage enrollees across the country,” KFF said.

Another issue for hospitals and providers is that more payers involved in capitated plans like MA will result in more pressure on providers and hospitals to focus on the cost of care, Michael Abrams, partner at Numerof & Associates, told Healthcare Dive.

“With Republican control of the federal government, it is conceivable that Medicare Advantage will become a centerpiece of CMS’ strategy to control spending growth.”

There’s also the issue of having too few MA payers in some regions. Aneesh Krishna, partner in McKinsey & Company’s Silicon Valley office, told Healthcare Dive the concentration of MA plans in certain markets is a worry for providers. “This concern would be magnified in markets where there is a similarly high concentration in commercial segments from the same payers, and where overall MA penetration is high,” he said.

There’s also a potential payment issue. MA generally reimburses at a slightly higher level than traditional Medicare, but utilization is managed more tightly. Krishna said providers willing and capable of sharing medical cost savings are “likely to see more benefit from the shift to Medicare Advantage plans.” However, MA networks are often narrow, which means providers will need to weigh the relative price/volume trade-offs of accepting MA.

More MA growth in the coming years

MA will have more payers and members than ever next year and the two largest payers, UnitedHealth and Humana, are expected to increase their footprint. Despite new payers showing interest in the market, Jacobson expects the market break down will look similar in 2018. She said small payers entering the market will offset the plans exiting MA next year.

The Congressional Budget Office (CBO) and HHS both project MA enrollment will continue to grow over the next decade. The CBO estimated that about 41% of Medicare beneficiaries will have an MA plan in 2027. UnitedHealth even predicted half of Medicare beneficiaries will eventually have an MA plan.

MA’s popularity with payers is easy to understand — 10,000 people turn 65 every day. The CBO expects 80 million Americans will be eligible for Medicare by 2035.

There’s also an opportunity in the MA market to sign up members quickly. Rachel Sokol, practice manager of research at Advisory Board, told Healthcare Dive that utilizing a strong marketing engine allows payers to grow MA membership. This is quite different from the employer-based market, which relies on payers working with companies.

Potential MA barriers

The MA market is largely positive for payers, but it does face challenges, including:

  • A small number of payers dominate the market
  • The CMS expects improved efficiency and savings
  • There is increased federal oversight, especially concerning possible overpayments to MA insurers

CMS is all in supporting MA plans and its marketspace. The agency last week proposed a rule with an aim toward improving quality and affordability in contract year 2019. According to the agency, the number of plans available to individuals will increase from about 2,700 to more than 3,100.

The agency is proposing to expand the definition of quality improvement activity to include fraud reduction activities, changing the medical loss ratio (MLR) requirements for Medicare Advantage plans. This change should excite payers because they can add the administrative service to the MLR ratio they are required to spend on healthcare, which is at least 85%. CMS states it believes the service will help combat fraud.

For now, the MA market is consolidated around only a handful of payers. UnitedHealth and Humana have more than 40% of the market. UnitedHealth has one-quarter on its own. KFF said UnitedHealth, Humana and Blue Cross Blue Shield affiliates make up 57% of MA enrollment and the top eight MA payers constitute three-quarters of the market.

Also, CMS is imposing improved efficiency in the traditional Medicare program. This could ultimately affect MA. Accountable care organizations (ACO) and bundled payments will “put downward pressure on the benchmarks used to set payment rates for Medicare Advantage plans,” Wiggins said.

This pressure will result in MA payers needing to either cut costs or trim benefits. “The former is difficult, except through narrow networks, and the latter will diminish the attractiveness of Medicare Advantage plans,” he said.

Then there’s the 800-pound gorilla in the market — potential overpayments. The Department of Justice (DOJ) has joined whistleblower lawsuits against UnitedHealth Group concerning MA overpayments. The lawsuits allege that UnitedHealth changed diagnosis codes to make patients seem sicker, which resulted in higher reimbursements to the insurer. A federal judge threw out one of the lawsuits in October.

The DOJ is investigating other MA payers for the same reason, and Congress is also interested. Sen. Charles Grassley (R-Iowa), chairman of the Senate Judiciary Committee, sent a letter to CMS Administrator Seema Verma in April questioning what CMS is doing to “implement safeguards to reduce score fraud, waste and abuse.” Grassley said there was about $70 billion in improper Medicare Advantage payments between 2008 and 2013 because of “risk score gaming.”

It’s understandable that investigators and Congress have grown interested in MA payers. The federal government paid $160 billion to MA payers in 2014. The CMS estimated about 9.5% of those payments were improper.

The combination of billions being paid to insurers, the potential for fraud and growing membership numbers make MA ripe for oversight. The stability of the market, particularly compared to other options for payers, however, will mean growth continues.

 

Trinity Health’s operating income climbs 76% to $266M

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https://www.beckershospitalreview.com/finance/trinity-health-s-operating-income-climbs-76-to-266m.html

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Livonia, Mich.-based Trinity Health’s operating income before other items increased 76 percent year over year to $266.1 million in fiscal year 2017, as the 93-hospital health system benefited from acquisitions, according to bondholder documents.

Trinity Health said revenues increased 7.9 percent year over year to $17.6 billion in the most recent fiscal year. The revenue was largely attributable to the acquisition of health systems in Connecticut, as well as volume growth, revenue cycle initiatives and payment rate increases. The system also benefited from ACO and bundled payment improvement initiatives and premium revenue from the system’s Medicare Advantage plans.

After factoring in expenses, which increased 7.3 percent year over year, as well as restructuring and impairment charges, Trinity ended the fiscal year with net income of $1.3 billion, up from $41.3 million for the year prior. The net income growth was primarily attributable to an increase in nonoperating items.

What’s Causing America’s Rural Health Insurance Crisis?

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http://www.realclearhealth.com/articles/2017/10/20/whats_causing_americas_rural_health_insurance_crisis_110736.html?utm_source=morning-scan&utm_medium=email&utm_campaign=mailchimp-newsletter&utm_source=RC+Health+Morning+Scan&utm_campaign=b4650c46a5-MAILCHIMP_RSS_EMAIL_CAMPAIGN&utm_medium=email&utm_term=0_b4baf6b587-b4650c46a5-84752421

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Over recent years, numerous rural health insurance markets have teetered on the brink of collapse. Rural areas have long posed a special challenge to health care policymakers, but a poorly-designed system of subsidies for rural hospital care has turned this into a crisis. It has fostered a rural hospital market structure that has crippled the ability of private insurers to negotiate reasonable payment rates, without fully securing the provision of essential care. By refocusing federal assistance on emergency care, it should be possible to restore rural insurance markets to health, while improving the affordability and access to care available to residents.

Warren Buffett once famously observed that “you only find out who is swimming naked when the tide goes out.” As the Affordable Care Act’s reforms have placed the nongroup market for health insurance under acute strain, it is rural areas that have been most exposed. Of 650 counties that have only a single insurer offering plans on their exchange, 70 percent are rural. For Medicare Advantage, despite total revenues roughly twice as large as the individual market, the situation is even worse—with 140 (mostly rural) counties lacking private insurance coverage options altogether.

It is more challenging to deliver healthcare services in sparsely populated areas. Small communities are unable to support full-time physicians for many medical specialties, and the fixed costs of multi-million-dollar hospital equipment cannot be spread across so many patients. As only 24 percent of rural residents can reach a top trauma center within an hour, rural areas suffer 60 percent of America’s trauma deaths, despite having only 20 percent of the nation’s population.

During the 1990s, economic pressures forced 208 rural hospitals to close. As a result, Congress established the Flex program to boost Medicare payments to isolated rural hospitals. Facilities designated as Critical Access Hospitals under the Flex program were intended to be more than 35 miles by major road from other facilities, but states were allowed to waive that requirement. As a result, the number of such hospitals grew from 41 in 1999 to more than 1,300 in 2011 – covering a quarter of U.S. hospitals, before Congress eliminated the states’ waiver power. By that time, 800 facilities exceeding the 35-mile requirement had been designated as CAHs, and these were grandfathered in.

What makes CAH status so attractive to hospitals? Instead of being paid standard Medicare rates for services, CAHs are allowed to claim reimbursement for whatever costs they incur in the delivery of covered inpatient, outpatient, post-acute and laboratory services to Medicare beneficiaries. Medicare pays more to facilities with the most expensive cost structures and eliminates incentives to control expenses – encouraging all to increase spending on new infrastructure and equipment.

Eighty-one percent of CAHs now have MRI scanners, for which they bill Medicare an average of $633 per scan—double the normal fee schedule rates. From 1998 to 2003, payments per discharge for acute care at CAHs rose by 21 percent, while post-acute care costs per day almost quadrupled. This upward pressure on costs has compounded over time: The longer a hospital has been a CAH, the more its costs have grown.

To check the capacity of CAHs to inflate their overheads, Medicare rules limit them to 25 beds. This has transformed the rural hospital landscape. In 1997, 85 percent of rural hospitals had more than 25 beds; by 2004 only 55 percent did. This makes it very difficult for the best-managed and most cost-effective facilities to win market share and has eliminated whatever competitive forces may have constrained costs. Nonetheless, excess capacity remains enormous: occupancy rates were only 37 percent in small rural hospital in 2014, compared with 64 percent in urban hospitals. Insurers covering care at such facilities must pay for equipment that is often unused and skilled physicians who spend much of their time idle.

Medicare Advantage (MA) plans have been hit hardest by this arrangement. MA plans usually attract enrollees by providing supplemental benefits and reduced out-of-pocket costs, funded by preventing unnecessarily costly hospitalizations. But, as CAHs are able to claim unconstrained reimbursement for Medicare beneficiaries directly from the government, they have little reason to agree to reasonable fees with MA plans, who may constrain their claims or steer enrollees to cheaper sites of care. Even under relatively loose network adequacy requirements, MA plans can, therefore, be effectively locked out of states dominated by CAHs. While 56 percent of Medicare beneficiaries in Minnesota are enrolled in MA plans, only 3 percent of those in Wyoming and 1 percent in Alaska are covered.

Low volumes and the absence of competition have also resulted in a lower quality of care. CAHs are more poorly-equipped than other hospitals, fall short on standard processes of care and have higher 30-day mortality rates for critical conditions. As a result, patients are increasingly willing to travel longer distance for treatments, with rural residents receiving 48 percent of elective care beyond their local providers. This bypass of rural provider networks is particularly common for surgeries on eye, musculoskeletal and digestive systems and for complex procedures more generally.

Although CAH status gives each hospital an average additional $500,000 of revenues, falling volumes of inpatient procedures and the increased costs entailed by this arrangement nonetheless leaves many facilities struggling. According to the National Rural Health Association, 55 rural hospitals closed between 2010 and 2015, while 283 were on brink of closure.

Can the $2 billion total annual cost of additional hospital subsidies provided by the Medicare Flex program not be better spent to support essential care in rural areas?

MedPAC, the agency established by Congress to advise it on Medicare payment policy, has argued that CAHs are “not the best solution”, as “many small towns do not have the population to support efficient, high-quality inpatient services.” MedPAC has proposed that Congress provide lump-sum payments to cover the overheads needed to provide 24/7 emergency care at geographically isolated outpatient-only facilities and suggested that Medicare reimbursement be extended to care provided by standalone emergency departments.

This would focus subsidies to secure emergency services, which must be delivered locally, while leaving elective care to be located efficiently according to market demand. Such a reform would give emergency rural hospital care a firmer financial foundation while restoring payment rules for elective care that would make it possible for insurers to re-enter the rural marketplace.

Medicare Advantage will have more enrollment, lower premiums in 2018

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http://www.healthcaredive.com/news/medicare-advantage-will-have-more-enrollment-lower-premiums-in-2018/506293/

Dive Brief:

  •  The CMS says Medicare Advantage (MA) members will have more choices and lower premiums in 2018. Medicare open enrollment starts on Oct. 15.
  • The average MA monthly premium is expected to decrease by about 6% from $31.91 in 2017 to $30 in 2018. The CMS said 77% of MA enrollees who stay with their current plan will have the same or lower premiums in 2018.
  • MA’s enrollment is expected to increase by 9% to 20.4 million in 2018. The CMS expects that slightly more than one-third of Medicare enrollees will have an MA plan next year.

Dive Insight:

While the CMS has talked negatively about the Affordable Care Act (ACA), CMS Administrator Seema Verma is a big fan of MA. Verma (a candidate for HHS secretary in the wake of Tom Price’s departure) said MA and Medicare Part D “demonstrate what a strong and transparent health market can do — increase quality while lowering costs.”

Payers are enjoying positive financial numbers in the MA market. UnitedHealth Group said recently that it believes eventually half of all Medicare beneficiaries will have an MA plan. Payers are looking at the MA market for growth opportunities. In some cases, payers, such as Humana, are cutting back on ACA plans and investing more in MA.

Despite the CMS’ overall support of MA, the agency still sees one way to improve the program. The CMS wants MA payers to provide current and accurate information about their providers. The CMS found that 45% of MA provider directories had incorrect information, such as listing which providers are taking new patients, or providing the wrong phone numbers and addresses.

Currently, the CMS can only review MA plans’ provider networks when there is a triggering event. This can include when the insurance company starts in MA or extends its coverage, or the CMS receives a complaint about provider network issues. The CMS wants to have more oversight over provider network information, so that it can ensure the information is up to date.

While MA plans have been popular with the CMS, members and payers, there is a concern about a small number of payers monopolizing the market. The Kaiser Family Foundation said UnitedHealth controls nearly one-quarter of the MA market and is a major MA player in 42 states and the District of Columbia. KFF found UnitedHealth, Humana and Blue Cross Blue Shield affiliates make up 57% of MA enrollment and the top eight MA payers comprise three-quarters of the market.

Another issue for MA payers is that federal investigators are concerned about how much MA is paying insurers. The Department of Justice (DOJ) is investigating payments to insurance companies involved with MA.

Two of the bigger cases involve UnitedHealth. The payer is involved in two whistleblower lawsuits that allege MA overpaid the insurer by billions. The DOJ joined the lawsuits, which allege that UnitedHealth changed diagnosis codes to make patients seem sicker, which resulted in higher reimbursements to the insurer.

The CMS estimated that it overpaid $14.1 billion in 2013 to MA organizations. Medicare Advantage payers received about $160 billion in 2014. The CMS estimated about 9.5% of those payments were improper.

Health insurers working the system to pad their profits

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https://www.publicintegrity.org/2015/08/17/17863/health-insurers-working-system-pad-their-profits

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Commentary: taking advantage of Medicare Advantage

One of the reasons the health insurance industry worked behind the scenes in 2009 and 2010 to derail Obamacare was the fear that changes mandated by the law would cut their Medicare Advantage profits. Medicare Advantage plans are federally funded but privately run alternatives to traditional fee-for-service Medicare.

Although the industry’s biggest trade group, America’s Health Insurance Plans, said repeatedly that insurers supported Obamacare, the group was secretly financing the U.S. Chamber of Commerce’s TV campaign against reform. Among the companies most concerned about the law were those benefiting from overpayments the federal government had been making to their Medicare Advantage plans since George W. Bush was in the White House.

Bush and other Republicans saw the Medicare Advantage program as a way to incrementally privatize Medicare. To entice insurers to participate in the program, the federal government devised a payment scheme that resulted in taxpayers paying far more for people enrolled in the Medicare Advantage plans than those who remained in the traditional program. The extra cash enables insurers to offer benefits traditional Medicare doesn’t, like coverage for glasses and hearing aids, and to cap enrollees’ out-of-pocket expenses.

When the Affordable Care Act became law in 2010, the payments to Medicare Advantage plans exceeded traditional Medicare payments by 14 percent. To end what they considered an unfair advantage for private insurers, and to reduce overall spending on Medicare, Democrats who wrote the reform law included language to gradually eliminate the over-payments.  So far, the 14 percent disparity has been reduced to 2 percent.  The final reductions are scheduled to be made next year.

Despite that decrease, the fears by Republicans and insurance company executives that the reductions would lead to a steady decline in Medicare Advantage enrollees have proved to be completely unfounded. In fact, the plans have continued to grow at a fast clip.

In March 2010, the month Obamacare became law, 11.1 million people were enrolled in Medicare Advantage plans—one of every four people eligible for Medicare. That was an increase from the 10.5 million Medicare Advantage enrollees in March 2009. Since then, Medicare Advantage membership has grown by more than 8 percent annually. Now 17.3 million—one in three people eligible for Medicare—are enrolled in private plans.

As Center for Public Integrity senior reporter Fred Schulte has written over the past year, many insurers have discovered that even though the overpayments are being reduced, they can boost profits another way: by manipulating a provision of a 2003 law that allows them to get additional cash for enrollees deemed to be sicker than average.

A risk-coding program was put in place by the government primarily because insurers were targeting their marketing efforts to attract younger and healthier—and thus cheaper— beneficiaries. Under the risk-coding program, insurers are paid more to cover patients who are older and sicker; the idea was to encourage the firms to cover those folks by offering a financial incentive. They get more money, for example, to cover someone with a history of heart disease than they do for someone with no such risk.  Last week Schulte uncovered whistleblower accusations that a medical consulting firm and more than two dozen Medicare Advantage plans have been ripping taxpayers off by conducting in-home patient exams that allegedly overstated how much the plans should be paid.

The Center for Medicare and Medicaid Services has refused to provide information that would enable taxpayers to know just how widespread fraud and abuse in the Medicare Advantage program might be. But CMS announced earlier this year that it will implement plans designed to make it harder for insurers to manipulate the risk scores. As you can imagine, insurers have howled and have put on a full court press to get CMS to scuttle those plans, but so far the agency says it intends to go forward. We’ll see.

This all matters to insurers because more and more of their revenue and profits are coming from the Medicare and Medicaid programs. When Aetna announced a few weeks ago that it planned to buy Humana, which has more than three million Medicare Advantage members—second only to UnitedHealthcare—Aetna and Humana executives said 56 percent of revenues from the combined company would come from the government programs.

Indeed, some of the firms would not be growing at all if it weren’t for their government business. When Aetna announced second quarter earnings earlier this month, the company noted that its membership in Medicare and Medicaid programs was up 8 percent over the same period last year. By contrast, its commercial membership was down from last year.

Despite that dip in commercial membership, Aetna surprised Wall Street with stronger profits than financial analysts had expected.

So don’t expect the Medicare Advantage program to wither on the vine because of Obamacare. If anything, it will continue to grow—as will the profits of the private insurers that participate in the program.