Health Affairs

Medicare is caught between two countervailing impulses: the desire of beneficiaries (and providers and the adult children of beneficiaries) to have a benefit package that covers more, rather than less, and the desire to restrain program spending due to its impact on the federal budget. This tension is heightened by the transition of the Baby Boomers from paying taxes into Medicare to receiving benefits.

The default is that Medicare covers acute care therapies, tests, and procedures if there is a patient that wants to receive them and a provider who is willing to deliver them, whether there is evidence of any benefit to the patient or not. As I tell students in my Introduction to Health Policy Course, while Medicare sets payment rates (and is therefore like Marlon Brando in The Godfather: “I have an offer you can’t refuse”), when it comes to what is covered in the acute care setting, it is more like my Grandmother serving lunch (“whatever you would like, honey.”)

There are exceptions. Recently, the Medicare Evidence Development and Coverage Advisory Committee decided not to approve the payment of PET scans to aid in the diagnosis of Alzheimer’s disease. However, such a move is rare, and both provider and patient groups are protesting this decision. Read the rest of this entry »

The release of average charges for common procedures in more than 3,000 U. S. hospitals last week by the Centers for Medicare and Medicaid Services (CMS) elicited divergent reactions – not surprisingly.  On one hand, it was front-page news for most of the major newspapers: “Hospital Billing Varies Wildly, Government Billing Data Shows,” was the headline in the New York Times.  The article went on to speculate that these new data would likely “intensify a long debate over the methods that hospitals use to determine their charges.”

On the other hand the data were “old hat” to most health policy analysts.  Several colleagues mentioned to me that “this is old news” and “it isn’t meaningful at all because we all know that charges don’t mean anything.”

“No one pays charges” is the common refrain.  “Charges are merely an accounting fiction.”

Charges Do Matter — They Matter A Great Deal

Counter to the belief of both hospital industry representatives and many of my colleagues, hospital charge levels and rapidly escalating charges matter a great deal. While individual states and the Affordable Care Act (ACA) have instituted limits on the amounts low-income uninsured patients pay hospitals, insured patients that receive care at hospitals that are “Non-Par” or “out-of-network” are still victims of hospital’s exorbitant charging practices. When patients receive emergency services at an out-of-network hospital, the patient and/or insurance company (depending on insurer cost sharing for out-of-network care) pay full charges.

High and increasing hospital charges, combined with increasing proportions of cases admitted through the hospital Emergency Department (ED), are major factors behind the ever-declining negotiating leverage of private health insurers. This situation, coupled with the increased pricing power of the ever-more-concentrated provider industry, will be a major contributor to the almost certain rapid escalation in total U.S. health care costs in coming years. Read the rest of this entry »

Affordable Care Act guidance is now literally arriving on a daily basis from the implementing agencies, particularly HHS.  Major rules remain to be finalized, including a lengthy eligibility and appeals rule, a rule on wellness, the employer and individual responsibility rules, and a number of shorter rules.  More proposed rules or amendments to rules are also promised.  These could arrive any day.  But in the meantime there is the steady flow of frequently asked questions (FAQs) and other guidances, which often appear unannounced.

This post deals with three sets of FAQS released by HHS on May 13 and 14. (It may be updated on May 15 or May 16 to note further guidance released over the course of those days.)  Two of the FAQs concern the use of section 1311 funding, one dealing with section 1311 funding in state partnership marketplaces and in states with federally facilitated marketplaces, the other addressing the use of such funding in consumer partnership marketplaces.  The third FAQ is simply titled “Frequently Asked Questions on Health Insurance Marketplaces,” but primarily deals with enforcement, reporting, and administration requirements.  (Since HHS seems irrevocably committed to the unfortunate term “marketplace,” I am going to try to use the term from now on, rather than “exchange,” in these posts.)

Section 1311 of the ACA establishes the marketplaces.  It also appropriates an unspecified amount of funding, to be determined by the Secretary of HHS, to make awards to the states as necessary to establish the exchanges.  HHS has issued more than $3.5 billion in establishment grants to date.  Section 1311 is one of the few uncapped sources of implementation funding available to the agencies, which are otherwise being starved by Congress of necessary ACA appropriations. Read the rest of this entry »

The Affordable Care Act survived the Supreme Court and a presidential election, so why does it face such an uncertain future?  One reason is that it was essentially silent on how to control costs.  This has led many pundits — including the likes of Paul Krugman and Robert Reich — to argue that the best approach would be to extend Medicare to everyone.  A January National Research Council report on the relative disadvantage of America in global health outcomes, especially compared to countries with national health insurance, added further fuel to the fire.  But is a larger government role in health insurance the best approach?

The idea of universal Medicare is powerful and attractive. Mr. Krugman points out that in the last forty years, average Medicare costs per person have grown by 400 percent while those for private insurance have increased more than 700 percent. His numbers suggest that if everyone had Medicare for the last 40 years, we might now spend only 14 percent of GDP on health care instead of nearly 18 percent, while also reaching universal coverage. Mr. Reich argues that “Medicare-for-All” would save between $58 billion and $400 billion annually, and similarly concludes: “Medicare isn’t the problem. It’s the solution.” Critics of the U.S. system are also quick to point out that Americans don’t live as long as their counterparts in countries that spend much less, suggesting universal Medicare could save money and improve our health.

The argument for universal Medicare basically comes down to three key claims:  (1) Medicare gets lower prices; (2) Medicare’s administrative costs are lower; and (3) greater spending does not mean better health.  Each of these deserves closer attention. Read the rest of this entry »

New regulatory issuances and guidances are appearing on a daily basis from the federal agencies responsible for implementing the Affordable Care Act.  In order to keep up, my posts are likely to appear even more frequently for the immediate future.  This post addresses four issuances: an HHS proposed rule on Medicaid disproportionate share hospital payment reductions; a set of frequently asked questions (FAQ) on essential community providers; an IRS notice of proposed rulemaking on medical loss ratios for Blue Cross and Blue Shield plans that receive certain tax preferences; and a set of frequently asked questions on the Utah SHOP exchange.

Medicaid DSH payments.  The Department of Health and Human Services issued a proposed rule for cuts in disproportionate share hospital payments on May 13, 2013.  The DSH program has since 1981 provided federal funding to state Medicaid programs to allow those programs to offer additional support to hospitals that serve a disproportionate share of low-income patients with special needs.  The Medicaid DSH program, together with a similar Medicare program, has provided essential support to hospitals that have often borne the brunt of providing services to the uninsured.

With the Affordable Care Act’s expansion of coverage of the uninsured through the expanded Medicaid program and premium tax credits and cost-reduction payments, Congress concluded that DSH payments would be less necessary and cut both the Medicaid and Medicare programs.  Since 1998, Medicaid DSH payments to each state have been limited to an annual allotment.  The ACA requires reductions in these allotments, beginning with $500 million in 2014 and increasing to $5.6 billion in 2019 before dropping to $4 billion in 2020.  It also lists five factors that HHS must consider in reducing the state allotments. It does not specify, however, how those factors should be applied or weighted. The proposed rule addresses this question. Read the rest of this entry »

As Affordable Care Act implementation inexorably moves into place, guidance continues to issue forth from the implementing agencies — now almost on a daily basis — shoring up the edifice that is becoming the reality of health care reform.  On May 8, the Department of Labor’s Employee Benefits Security Administration released a guidance detailing the notices that employers must give to their employees concerning the employee’s coverage options under the ACA, as well as an updated model election notice under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA).  The ACA amends the Fair Labor Standards Act (FLSA) to require employers to give their employees notice of the coverage options that are available to them under the marketplace (formerly known as the exchange).

This provision requires employers to notify new employees, as well as current employees no later than March 1, 2013:
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1. of the existence of the marketplace, the services it offers, and how employees can contact it;
2. that if the employer’s share of total allowed costs of benefit provided by the benefits plan is less that 60 percent of total costs (that is, it does not meet minimum value requirements), the employee may be eligible for a premium tax credit through the marketplace; and
3. that if the employee obtains coverage through the marketplace, the employee will lose the employer’s contribution and corresponding tax benefits.

Read the rest of this entry »

The Affordable Care Act included provisions to accelerate the transition to value-based payment, including Accountable Care Organizations (ACOs). Many private sector insurers, providers and employers also are moving in this direction.

However, many of today’s measures are inadequate to the task of assessing and paying for value. Current measures focus on process and clinical outcomes, as opposed to health status, and few are based on patient-reported data that would measure the overall care experience.

In addition, most measures are add-ons to current work rather than an integral part of the care process, requiring manual chart reviews and retrospective data analysis. Not only does this make implementation burdensome, it limits opportunity for real-time feedback and adjustment.

These inadequacies create opportunities to implement new measures that will be more meaningful to consumers, clinicians, purchasers and policy makers. But to avoid a proliferation of measures that are inconsistent or questionable in terms of assessing value, a framework is needed to define specific measures for each component of value – health outcomes, patient experience and per capita cost (see Table 1, click to enlarge). Read the rest of this entry »

In less than nine months millions of Americans will receive new health care coverage through provisions of the Affordable Care Act. Most observers believe that strong physician leadership can help heath care reform succeed, through the optimization of care quality and cost management. But, at the same time, too many American physicians are dissatisfied with current medical practice and unsure of what to do about it. Many would not recommend a career as a physician to their own children.

There are multiple causes for this dissatisfaction where it exists, including unpredictable reimbursement for services, excessive work burden and long hours, and excessive time devoted to non-clinical activities, including “paperwork”.

One possible reaction to physician dissatisfaction is a shrug of one’s shoulders. Most physicians are well paid, compared to most Americans, and are highly respected. We suggest, however, that improving physician practice satisfaction should be important for both patients and policymakers. Read the rest of this entry »

States are beginning to release information on what health insurance premiums will be in 2014. That’s when the Affordable Care Act’s (ACA) market reform rules that apply to the individual and small group markets will go into effect. The natural temptation will be to simply compare the 2014 premiums to those in 2013 to determine how the ACA may have affected premiums beyond any usual changes due to rising medical spending. But such comparisons will mask not only the reasons for any premium changes, but also how premium changes will differ across states and individuals. Premiums will go up for some individuals and down for others.

When examining how premiums change beginning in 2014, it is important to understand the various factors underlying these changes. These factors include the effectiveness of the individual mandate and premium subsidies at attracting low-cost enrollees into the insurance market; the new benefit requirements that may lead to higher premiums but lower out-of-pocket costs; employer decisions regarding whether to continue offering insurance and the health status of those whose coverage is dropped; how each state’s current issue and rating rules compare to those beginning in 2014; and each individual’s demographic characteristics and health status (and income when determining premiums net of subsidies). Read the rest of this entry »

Much has been made of the slowdown in health spending growth and the role played by the economy.  I have to confess that my first take, after studying plots of business cycles and health spending, was that health spending “had a mind of its own” and paid no attention to business cycles.  Consider the two most recent recessions depicted in the chart below.  During the recession of 2001, health spending growth actually shot up at the same time that the growth in gross domestic product (GDP) was dropping, and continued to rise even after the recession officially ended.

During the Great Recession, spanning December 2007 through June 2009, the growth in health spending dropped by about 2 percentage points and then leveled off while GDP growth dropped by nearly 10 percentage points and then quickly rebounded to a more normal long run rate of growth (though not sufficient to make a large dent in unemployment).  I hope you can see why I was skeptical of a predictable relationship. Read the rest of this entry »