Tag: Affordable Care Act (ACA)

Reform Update: States test Medicaid ACOs to cut costs

Looking to control Medicaid costs, several states are launching accountable care initiatives that mirror experiments underway with Medicare and private insurers but vary significantly in their approaches.

The Medicaid programs are contracting with networks of doctors, clinics and hospitals that agree to provide more integrated care of beneficiaries while reining in costs. In most versions, participating providers are eligible to receive shared-savings payments if the ACO meets quality benchmarks.

Despite generally low Medicaid reimbursement rates—60% of Medicare rates on average—interest among hospitals and providers is high. That’s not only because of the potential to earn bonus payments, but also because hospitals hope their efforts will reduce unnecessary ER visits. Various incarnations of Medicaid ACO programs are underway or are about to launch in Alabama, Colorado, Maine, Massachusetts, Minnesota, Oregon, Texas, Utah and Vermont.

The models differ significantly from state to state. Only some allow Medicaid managed-care plans to participate, for example. And some lock patients into getting care through an ACO while others allow patients to opt out, said Jennifer Flynn, senior director of state affairs at Premier, a company that provides performance-improvement and group-purchasing services to hospitals.

In New Jersey, applications are due July 7 for providers to join a three-year Medicaid ACO demonstration project. The applicants must assume responsibility for coordinating the care of residents within specific geographic areas. The alliances must include all of the acute-care hospitals in that area, as well as 75% of the primary-care providers and four behavioral health providers. Two community residents must serve on the organization’s board.

“If we can keep them healthy and out of the hospital, you can significantly decrease expenses associated with admissions,” said Dr. John Brennan, president and CEO of Newark Beth Israel Medical Center and chairman of the Greater Newark Healthcare Coalition, which is planning to participate in New Jersey’s ACO program.

New Jersey officials turned to ACOs as a way to bring down program costs after managed Medicaid plans failed to achieve the goal, said Derek DeLia, associate research professor at Rutgers Center for State Health Policy.

“This is the next step,” DeLia said. “Medicaid expenditures continue to grow and quality outcomes are not where we would like them to be.”

Medicaid expenditures increased an average of 4% a year from 2007-2012, even though 98% of the Medicaid population was in managed-care programs, according to a 2012 report from New Jersey’s State Budget Crisis Task Force.

New Jersey health officials say the ACO experiment could save as much as $284 million in inpatient costs by the end of the pilot, according to a report by Rutgers Center for State Health Policy.

One advantage Medicaid ACOs may have over Medicaid managed care plans is community outreach. While most plans offer a care manager to make sure patients’ medical and social needs are being addressed, most of the outreach tends to be telephone based, according to Dr. Ruth Perry, executive director of the Trenton Health Team, an alliance that includes the City of Trenton, all three of its hospitals and the Henry J. Austin Health Center, a federally qualified health center.

Medicaid ACOs will have the ability to send providers into neighborhoods and apartment complexes to reach patients directly, Perry said.

The challenges of implementing an ACO for Medicaid are many, providers say, especially because of the low health literacy levels and more serious chronic conditions. It will take an intense outreach effort to inform beneficiaries of the endeavor, according to Michael Randall, vice president of clinical innovation at Advocate Health Care in Illinois.

Creating a successful Medicaid ACO in Illinois is complicated by the low penetration of managed care in the state. Under a 2011 Medicaid reform law passed in the state, 50% of beneficiaries must be enrolled in risk-based coordinated-care programs by January 1, 2015.

That has required Advocate Health Care, which hopes to launch its Medicaid ACO in August, to invest in new staff members to help beneficiaries navigate the system, as well as a new IT system to better track patient treatment, Randall said.

Healthcare spending set to spike by 6.8% in 2015, report predicts

Healthcare spending is expected to jump by 6.8% next year, spurred by the recovering economy and increased insurance coverage, according to an analysis by PwC’s Health Research Institute.

The boost in spending follows a span in which healthcare expenditures had grown at a slower clip than the often double-digit increases of the 1990s and early 2000s. That’s spurred an ongoing debate over whether the trend could be attributed primarily to reforms associated with the Patient Protection and Affordable Care Act or the economic malaise brought on by the Great Recession.

“The improvement in the economy is finally coming to healthcare,” said Ceci Connolly, managing director of the Health Research Institute. “It’s a lag, but it’s a very direct relationship.”

While the projected spike in healthcare spending is more than double the rate of inflation in recent years, the report concludes that emerging trends in coverage and delivery systems are actually tamping down costs. For example, employers continue to shift toward high-deductible plans that require workers to take on more financial risk. Roughly a quarter of workers are now in high-deductible plans, a more than 200% increase over the past six years. That trend is not likely to dissipate any time soon: 44% of employers surveyed by PwC indicated that they were considering offering only a high-deductible plan to workers.

“They are desperate for ways to hold down those costs,” Connolly said of employers. “We’re seeing the rise in high-deductible plans as the current strategy.”

Paralleling that trend is increased interest in private exchanges. Roughly a third of employers indicated that they are considering moving to a private marketplace that typically would offer workers more coverage choices, including high-deductible plans.

The uptick in the economy and expanded coverage aren’t the only factors driving spending upward. The PwC report also raises concerns about the influence of specialty drugs on the healthcare economy. The hepatitis C drug Sovaldi, which costs roughly $1,000 per pill, has attracted the most attention in recent months. But in 2013, 70% of the drugs approved by the FDA were specialty medications, such as those designed to fight cancer or HIV/AIDS. In addition, while only 4% of patients use specialty drugs, they accounted for 25% of pharmacy costs last year. Spending on specialty drugs is expected to top $400 billion by 2020, a more than fourfold increase in less than a decade.

But PwC also points out that such drugs—despite their headline-grabbing price tags—have the potential to save money in the long run. In the case of hepatitis C, a decade of treatment for someone with the liver disease could cost $270,000, far more than the $84,000 cost of a twelve-week course of treatment with Sovaldi.

“I think that this is one of the most difficult emerging issues before the healthcare sector and, frankly, our society today, and we’re just getting the tip of the iceberg,” Connolly said.

Another factor driving up costs is the continued absorption of physician groups into hospitals. The share of physicians in solo practices has decreased by 20% during the past three decades, according to the American Medical Association. This allows doctors to charge insurers a “hospital facility fee” even though procedures might not be performed in a hospital.

But there is some evidence that insurers are fighting back against the practice. In April, Pittsburgh-based insurer Highmark announced that it would no longer reimburse at the hospital-based rate for cancer treatment that occurs in outpatient offices. The insurer expects the change to reduce claims by $200 million a year.

“In many of our conversations with health plans they’re keeping an eye on that,” Connolly said.

PwC’s survey was completed by more than 1,000 employers from 35 industries. Combined, they provide healthcare coverage to 93 million individuals.

Power To The Health Data Geeks

A computer programmer and a kid in a Batman suit walk into a pancake house …

It sounds like a joke, but it really happened, and now the programmer — Dave Vockell — has a new product to bring to market. It’s an app to help seniors talk to their doctors about medical care.

“Like all great health care breakthroughs, it happened at the International House of Pancakes,” he says, half-jokingly.

Venture capitalists are pouring more money than ever into digital health startups — more than $2 billion so far this year alone, according to the venture capital firm Rock Health. These investors are betting that entrepreneurs can help doctors, hospitals and insurers become leaner — which the Affordable Care Act strongly encourages.

Vockell’s endeavor started back in April, when Medicare released a huge database detailing how much it pays individual doctors. The government health plan for the disabled and for adults ages 65 and older had kept that payment information secret for decades.

So when Medicare suddenly dumped an entire year’s worth of data, finally making public millions of transactions, coders like Vockell tried to figure out how to make it useful for seniors.

Enter the IHOP.

“My kids go there after school one day for [the] funny face pancake lunch,” he says. “There were lots of seniors there. And my kids run around, and the seniors love when they come up and sit with them.” That’s when it hit him, Vockell says: “I could totally use my kids to source a whole bunch of interviews pretty fast.”

His 3-year-old in a Batman suit proved a great icebreaker; over a lot of pancakes, 43 seniors told Vockell that knowing which doctors charge more and which charge less wouldn’t necessarily send them shopping for the lowest price. Seniors generally like their doctors and don’t want to shop for new ones.

But many in the pancake house that day did tell Vockell that they had some medical procedures on the horizon and weren’t sure what the procedures would cost, entail or require of them. “I’d love to get some insight into that,” they told him.

They also asked, “Could you make the print really big?” Vockell says. And several added, he says with a laugh, “The blueberry syrup is magnificent.”

So Vockell developed a website that helps seniors understand the procedures their doctors are recommending, and the costs — so they can start conversations with their doctors. The site also helps users print out the information in really big type.

It’s too early to say whether his product will be the hot new topic on the shuffleboard circuit, but it was a winner at the big Health Datapalooza conference this month in Washington, D.C

Big data on health care is the raw material for a whole new segment of the information technology sector. Entrepreneurs like Sean Power are also exploiting databases such as the price list that Medicare released this spring.

“That’s hot,” he says. “Anytime anybody releases a new set of data, we get excited.”

Power’s company, karmadata, is founded on the idea that software engineers can find ways to use big data to save the government or large companies money — and that such organizations will share some of their savings with him. There’s a lot of opportunity in streamlining health care, Power says.

“It’s a great time to be starting a company in the health care data space,” he says. “I think the gold rush is on.”

Just like in a real gold rush, hitting pay dirt requires a lot of prospecting. Entrepreneurs can’t always find the information they really need to make a truly useful product.

Dr. Omar Alvi is with a startup called Accordion Health. This firm’s big idea is to help families estimate future health care spending. So you could type in that Grandpa has hypertension, Mom has diabetes, and one of the kids has asthma, and then get some idea of how much that’s all going to cost — and maybe even shop for the best price. A great idea, Alvi says, but he adds: “Each patient is very different. And so in order to be able to make a meaningful prediction, you have to have a lot of data, so you can say [that] patients just like this went through these problems as they moved through the medical system. That’s really where it requires hundreds of millions of data points.”

And not even close to the millions of data points that Alvi’s company needs are available yet. A lot of information about procedures, cost and effectiveness remains locked up inside insurance company computers, or in hospitals’ and doctors’ medical records — information that insurers, hospitals and doctors don’t want to share.

CMS To Increase Medicare Advantage Pay Rate

After an aggressive lobbying push from the insurance industry, the CMS announced Monday that it would increase the overall rate it pays Medicare Advantage plans by 0.4% in 2015, despite a proposed policy issued in February that signaled a 1.9% rate cut.

The positive change is the result of “various policy changes” and “new estimates,” Jonathan Blum, CMS principal deputy administrator, said in a phone call with reporters.

These include the administration’s approach to phasing in a new risk model and a decision to walk away from a proposal to require that home risk assessments be confirmed by in-office assessments, Blum said.

The CMS announced the new rates after U.S. markets closed on Monday.

One factor that argued against raising rates next year is that “Medicare costs will continue to fall much more dramatically than we had projected back in February,” Blum said.

The increase came as a surprise. Analysts interviewed by Modern Healthcare prior to the release of the 2015 Medicare Advantage and Part D Rate Announcement and final Call Letter largely forecast a payment cut, not an increase.

Although the administration cited policy changes and new estimates as reasons for the positive shift, some analysts saw politics.

“History tells us that you have to be really, really careful on your early reads on these things,” said Sheryl Skolnick, managing director and senior healthcare analyst at CRT Capital Group, in a Monday evening interview. But, she added, “I’m very suspicious with what I’ve seen so far on how you get from their estimate of down 1.9 to plus (zero point) 4 when it just so happens to be exactly the kind of overall rate change that the Democrats need to support their election hopes.”

There are currently more than 15 million seniors enrolled in Medicare Advantage, and seven months until the general election. Beneficiaries enrolled in the plans, administered by private companies that contract with Medicare, account for approximately 30% of the total enrolled in Medicare.

Since the beginning of the year, political rhetoric surrounding the CMS’ decision has heated up, led by America’s Health Insurance Plans, an insurance company industry group, which vowed in January to launch its “largest-ever mobilization” to keep the administration from cutting Medicare Advantage rates, employing a combination of grassroots efforts and ad buys.

Karen Ignagni, president and CEO of America’s Health Insurance Plans, issued a statement late Monday noting “the tens of thousands of seniors, a majority of the U.S. Congress, and more than 170 stakeholder organizations” that raised concerns about the administration’s proposed policy. “The changes CMS included in the final rate notice will help mitigate the impact on seniors, but the Medicare Advantage program is still facing a reduction in payment rates next year on top of the 6% cut to payments in 2014,” Ignagni said.

Congressional Republicans were joined recently by a number of Democrats in their letters to the administration asking them to maintain the rates as they were. “I am concerned that the proposed payment rate reductions for 2015 will undermine the choices made by my fellow Arizonans by causing beneficiaries to lose needed services and to experience increases in premiums,” Kyrsten Sinema (D-Ariz.), said in a Friday statement. Several Democrats spoke out on this issue on the House floor last week.

“I think that this (CMS) press release certainly serves the purpose of satisfying the Democrats on the Hill who are standing for reelection by being able to go out and campaign that ‘hey, you know, our administration didn’t cut Medicare Advantage,’” Skolnick said.

The Patient Protection and Affordable Care Act sought to bring the cost of Medicare Advantage more closely in line with traditional Medicare. Right now, Medicare Advantage plans are typically paid more than their traditional counterparts.

“We are committed to the new model; however, for 2015, given the number of changes in other payment factors, we believe that providing a longer time frame for full implementation is appropriate,” the CMS said in a fact sheet issued Monday explaining the policy.

Another hot-button issue was a proposal to require in-home risk assessments to be verified by a “clinical encounter” before they could influence risk scores (and thus payments to insurers). The CMS dropped the provision from the final policy despite earlier rhetoric calling the value of these assessments into question.

“There appears to be little evidence that beneficiaries’ primary-care providers actually use the information collected in these assessments or that the care subsequently provided to beneficiaries is substantially changed or improved as a result of the assessments,” the CMS had said in its February proposal.

On Monday, Blum told reporters that the CMS would delay this proposal, as it had done with a similar proposal in 2014.

The American Hospital Association and other provider organizations lobbied hard against the methodology employed, Skolnick said. “That one actually was the least surprising to me when I saw that one was delayed.”

David Lipschutz, policy attorney at the nonprofit Center for Medicare Advocacy, said he was “disappointed” by that choice. “I would say we were more supportive of the proposed rule,” he said, adding that the delay didn’t surprise him, thanks to a “vigorous, well-financed campaign” by the insurance industry against any payment reductions.

Doctors Say Obamacare Rule Will Stick Them With Unpaid Bills

Doctors worry they won’t get paid by some patients because of an unusual 90-day grace period for government-subsidized health plans.

So several professional groups for doctors are urging their members to check patients’ insurance status before every visit. Consumer advocates say these checks could lead to treatment delays or denials for some patients.

If a person with subsidized insurance falls behind in paying the premiums, the Affordable Care Act requires insurers to cover his medical bills for 30 days.

But for the next 60 days, insurers can hold off paying those claims — and ultimately, deny them if the patient doesn’t pay the premiums in full. An insurer’s denial means doctors don’t get paid for their services. If the insurer ends up canceling the policy after 90 days, doctors can bill patients directly but may face difficulty collecting.

“This puts the physician and their patients in a very difficult situation,” said Dr. Ardis Dee Hoven, president of the American Medical Association, which advised physicians Wednesday about how to minimize their risk.

“If a patient is being treated for a serious illness that requires ongoing care, the physician is having to assume the financial risk for this,” she said. “That’s the bottom line.”

The way things work now, insurers generally cancel a policy if a subscriber falls behind more than 30 days. The insurer is usually on the hook for bills incurred before that cancellation.

The AMA and dozens of other physician groups have urged the administration to spell out how and when insurers must notify physicians when their patients fall behind on premiums.

Doctors’ groups got a prompt-notification law passed earlier this month by the Washington state Legislature.

But some consumer advocates fear that doctors who know they may not get paid have a strong incentive to withhold treatment. “The reason they want that notification is so they can start denying services,” said Brian Haile, senior vice president for health care policy at Jackson Hewitt Tax Service.

If the insurer notifies the physician that a patient is behind on premiums and the insurer is holding up claims payments, “Nine times out of 10 the doctor is not going to provide the services — no matter what their network contract says.”

“The doctors aren’t bad guys — they’re business people,” Haile added. “Any economically rational actor would do it.”

For some medical specialties, treating patients who have fallen behind on their payments could end up being quite costly.

Oncology practices that administer chemotherapy drugs costing thousands of dollars have to purchase them in advance. If a patient’s claims aren’t paid, the cost to the practice is high.

Obstetricians who provide prenatal care throughout pregnancy could also take a hit if women fall behind on payments when they’re about to deliver their babies.

Hoven, the AMA president, said physicians are contractually and ethically bound to continue caring for their patients. “Most physicians are not going to turn away these patients, particularly if someone comes in with a life-threatening condition,” she said.

The AMA’s guide to the grace period specifically warns physicians that postponing or rescheduling patients could be a breach of contract because of anti-discrimination clauses in many managed care contracts.

“This is the kind of thing we’re going to watch really closely, and it’s one of the reasons we want to make sure people are careful on the front end selecting plans that are affordable,” said Kirsten Sloan, senior policy director for the American Cancer Society Cancer Action Network.

Dr. Dan McCoy, vice president and chief medical officer for Blue Cross Blue Shield of Texas, said his plan will cover claims throughout the entire 90-day period as a result of a state prompt-payment law but can recoup payments from physicians if patients’ policies are terminated.

He stressed that participating physicians are expected to care for patients throughout that period even if payments have lapsed. “We strongly feel that people who carry a Blue Cross Blue Shield card in their pocket should be treated as members,” he said.

The AMA, meanwhile, is encouraging doctors to broach financial concerns with their patients and explain why it’s important to maintain insurance coverage.

The group released materials Wednesday including a sample letter to patients explaining that while the doctor will continue to see them during the grace period, “you may be obligated to pay the full cost of services that we provide to you” if insurance is terminated. The letter also encourages patients to discuss changes in their financial circumstances with doctors.

House Passes SGR Repeal With Mandate Penalty Delay

Healthcare providers and policy analysts are increasingly anxious that Congress will fail to eliminate Medicare’s flawed physician payment formula and once again default to a temporary fix.

All eyes turned to the Senate after the House of Representatives passed a bill on Friday that repeals the sustainable growth-rate formula and also includes a five-year delay of the financial penalties for people who don’t purchase health insurance—which the Senate is sure to reject.

Congress will return from a weeklong recess on March 24, which gives lawmakers one week until the temporary SGR patch expires on March 31.

Under an amendment added by House Ways and Means Committee Chairman Dave Camp (R-Mich.), the House bill would keep the Patient Protection and Affordable Care Act’s individual mandate in place but would not penalize anyone for violating it until 2019. The nonpartisan Congressional Budget Office estimated this week that this move would increase the number of uninsured Americans by about 13 million in 2018.

The SGR Repeal and Medicare Provider Payment Modernization Act passed 238-181 and picked up support from 12 Democrats. Though cheered by House Republicans, the legislation is viewed by Democrats, policy analysts and healthcare providers as purely a political move that is not likely to go anywhere beyond the House floor.

“We’re dismayed that Congress sabotaged their own work by linking legislation to unrelated, ideological issues—particularly in light of the nearly universal opposition to such action from patients, insurers and the medical community,” Dr. Reid Blackwelder, president of the American Academy of Family Physicians, said in a statement reacting to the vote.

Even the conservative Heritage Foundation did not support Friday’s House vote. “If you are going to have a permanent repeal, which incurs permanent costs, you need permanent savings to offset those costs,” Robert Moffit, a senior fellow at Heritage, said in a statement.

Senate Finance Committee Chairman Ron Wyden, who introduced a version of the SGR repeal this week, said he is committed to sound, sensible policy over politics.

The Oregon Democrat also cautioned that hospitals, home health providers, drug companies and skilled-nursing facilities will once again be at risk if Congress doesn’t find approve a permanent SGR repeal. “Make no mistake about it: Those providers are going to be the ones who pay for yet another patch,” Wyden said on the Senate floor.

The bill that Wyden introduced this week—the Medicare SGR Repeal and Beneficiary Access Improvement Act of 2014—includes the compromise agreement from the Senate Finance, House Ways and Means and House Energy and Commerce committees to repeal and replace the SGR, as well as the extension of certain Medicare programs that are expiring.

It does not, however, include a way to pay for these provisions. Meanwhile, the House bill that passed on Friday includes the compromise agreement on SGR, no language on the Medicare extenders and the dead-on-arrival delay in the ACA’s individual mandate to pay for it.

“For me, the positive side is the House has done something,” said Julius Hobson, a senior policy adviser at law firm Polsinelli and a former lobbyist for the American Medical Association. “And when they get back from recess, the Senate will attempt to do something. It may heighten talks between the House and Senate, and that’s my hope.”

But others expressed more frustration than hope, given that lawmakers still are not talking seriously about how to pay for repealing the SGR, which the CBO estimates will cost $138.4 billion over 10 years. This week, the bipartisan Committee for a Responsible Federal Budget released a statement that criticized House Republicans for trying to pay for a permanent repeal of the SGR with a temporary delay of the individual mandate’s penalties, which the nonpartisan fiscal watchdog group said will only add to long-term deficits.

The organization also criticized House Democrats for proposing “phantom war savings” as a way to pay for the overhaul and the Senate for proposing none. The “phantom war savings” refers to funding for the Global War on Terrorism/Overseas Contingency Operations, most commonly referred to in Washington as “OCO funds.” Congress provided about $92 billion in OCO funding for 2014 and none for subsequent years, according to the CBO.

“There are ways to look at a package of things, from expanded means-testing to rationalizing co-payments to reforming Medigap plans,” said Maya MacGuineas, president of the Committee for a Responsible Federal Budget.