Health Affairs

Millions more Americans are expected to join the ranks of the insured in 2014 under the Affordable Care Act (ACA) — and with the expansion in coverage will come additional expense. Even so, the rate of spending growth in the health sector will head in the opposite direction, continuing a slowdown that has lasted well beyond the 2009 recession.

In its eight annual report on health spending, PwC’s Health Research Institute (HRI) projects that 2014 medical cost trend will be 6.5 percent–a full percentage point lower than our estimate of 7.5 percent for 2013. Taking into account typical adjustments to benefit design such as higher deductibles, HRI projects a net growth rate of just 4.5 percent. That’s encouraging news for the people and companies purchasing care but presents enormous challenges for a sector already feeling a financial squeeze.

The recession and slow economic recovery have clearly affected health care spending. But we have identified other factors. More efficient care delivery combined with creative cost-reduction efforts by employers and the health industry, have acted to dramatically slow what had been double-digit growth for the sector. Early elements of the ACA are beginning to nudge down payments. What we don’t know yet is whether this slowdown represents early signs of the move away from fee-for-service medicine or merely the latest squeeze on the spending balloon in which costs pop up elsewhere.

On June 14, 2013, the Department of Health and Human Services released a notice of proposed rulemaking (NPRM) entitled “Program Integrity: Exchange, SHOP, Premium Stabilization Programs, and Market Standards.” Although the proposed rule does include a number of provisions related to program integrity, it covers a great deal more. It resolves a host of outstanding issues that must be tied up before the exchanges, premium stabilization programs, and market reforms become fully operational in 2014. (The proposal, by the way, uses the term “exchange” throughout rather than “marketplace,” which I have never gotten used to).

In some instances the NPRM modifies existing rules, as when it modifies the exchange final rule of March 2012 to allow states to operate SHOP exchanges only, ceding the individual exchange to the federal government. In many instances, it puts into regulation form guidance that has been issued earlier, such as the May 1, 2013 guidance on agents and brokers and the May 14, 2013 Frequently Asked Questions on Health Insurance Marketplace. It also, however, addresses problems that have only recently been identified, such as the problem of the “unbanked,” persons who will be eligible for premium assistance but are unable to pay premiums with checks because they do not have bank accounts.

The Affordable Care Act (ACA) will dramatically expand Medicaid in a number of states starting in January 2014. In this month’s issue of Health Affairs, new research from DeLeire and colleagues on Wisconsin’s 2009 BadgerCare expansion and from Price and Eibner on predicted cost and coverage impacts of the Medicaid expansion provides insights on the implications of state decision-making about whether to expand the program.

Since 2010, six states have already expanded Medicaid to cover some or all of the low-income adults targeted for coverage under health reform. To provide additional information on the impacts of such expansions, we undertook an in-depth exploration of the experiences of these states – California, Connecticut, the District of Columbia, Minnesota, New Jersey, and Washington – through qualitative interviews with 11 high-ranking Medicaid officials across all six states. In analyzing these interviews, we identified several key policy lessons that help elucidate the opportunities and challenges of expanding Medicaid under the ACA. Below are some of our preliminary findings.

Community benefit investments have been an obligation of nonprofit hospitals as a condition of their federal tax-exempt status for decades, and most states impose similar expectations. The financial advantage that accrues to the nonprofit hospital industry as a result of their special tax-favored status was valued by the Joint Committee on Taxation at $12.6 billion in 2002 alone. Neither Congress nor the IRS has established a minimum expenditure level for valuing the community benefit; indeed, the IRS allows hospitals “broad latitude” in determining their activities and contributions. However, in the wake of increasing scrutiny by Congress, the IRS established a nationwide reporting system that enables a deeper dive into the question of nonprofit hospital community investment.

Two recent studies – one released by the hospital industry, the other, by academic researchers — provide a look behind the numbers. The industry study offers up a deceptively rosy spin, but a close look at both studies reveals strikingly small levels of true community benefit spending by many hospitals – particularly in states where hospitals are not required to report spending levels to state regulators.

A new Health Policy Brief from Health Affairs and the Robert Wood Johnson Foundation examines a range of policy issues surrounding the concept of Medicaid premium assistance. States that decide not to expand Medicaid under the Affordable Care Act (to date, 19 states fall in that category) could create large coverage gaps for many of its low-income residents. One potential solution to this problem would be to use federal Medicaid expansion funds as “premium assistance,” enabling eligible Medicaid beneficiaries to purchase insurance through its newly minted exchange.

As some states explore this option, proponents hope the program will allow states to enroll more people, improve beneficiaries’ care, and reduce churning between Medicaid and the exchange. However, skeptics believe the program’s cost-efficiency is yet to be proven.

Last week’s annual report from the Medicare Trustees reflects small but noteworthy improvements in the financial outlook of part of the program. Annual growth in Medicare spending per beneficiary slowed to less than 1 percent last year, well below the per capita growth of the economy as measured by gross domestic product (GDP) and enough to push back the projected insolvency date for the Hospital Insurance (HI) Trust Fund (Part A, which pays for inpatient care) to 2026 — two years later than last year’s report.

This is good news but should be seen in context. As Figure 1 shows, annual estimates of HI solvency since 1990 have ranged from four years to 28 years, averaging 13.6 years. So this year’s projection falls just below the 24-year average.

The Trustees Report includes various ways to view Medicare’s fiscal health over time. One metric is to look at long-term projections of Medicare as a share of GDP over the next 75 years. Total Medicare spending includes Supplementary Medical Insurance (SMI, or Part B, which covers physician, outpatient hospital, and some home health costs that are unrelated to a stay in a hospital) as well as prescription drug benefits (Part D). Under the Trustees’ intermediate assumptions, total Medicare expenditures will grow from 3.7 percent of GDP in 2012 to 3.9 percent of GDP in 2020 and 6.5 percent of GDP in 2087, as shown in Figure 2. In the near term — that is, from now through about 2035 — the increase is being driven largely by the increasing numbers of Medicare-eligible baby boomers, who began entering the ranks of beneficiaries in 2011.

Dana Goldman and Adam Leive’s effort to discredit the single payer, Medicare-for-All model of financing health care — or as they put it, make “any conclusion decidedly more nuanced” — is sorely lacking in nuance, defined by Merriam-Webster as “made or done with extreme care or accuracy.”

Acknowledging Medicare’s greater success at controlling costs than private insurance plans, Goldman and Leive raise the specter of “underprovision of services” and doctors leaving the system if Medicare were universal. But Medicare patients are significantly less likely to have problems with access to care and medical bills than non-elderly adults with private insurance, according to a recent study by The Commonwealth Fund. The same study found that Medicare beneficiaries are also more satisfied with their coverage than people with private insurance. Only 6 percent of beneficiaries in traditional Medicare rated their coverage as fair or poor in 2010, compared with 20 percent with employer-sponsored private insurance.

Among physicians who treat Medicare patients, 90 percent of all physicians and 96 percent of specialists are accepting new Medicare patients according to the Medicare Payment Advisory Commission. In contrast to the limited networks of doctors available to the privately insured, and the appalling “underprovision of services” to those left uninsured and underinsured by today’s for-profit, market driven system, a Medicare-for-All system would expand choice and access.

Under the Affordable Care Act, certain provider groups can take on escalating levels of financial risk as they became more accountable for the quality and cost of the care delivered to Medicare beneficiaries. These Accountable Care Organizations (ACOs) as defined by the Centers for Medicare and Medicaid Services (CMS) encompass three types of Medicare Shared Savings programs — upside risk only, up and downside risk, and advance payment — and the Pioneer ACO program. All are required to demonstrate that they can promote evidence-based medicine and patient engagement, coordinate patient centered care, and report on quality and cost measures for internal use as well as to CMS. A number of commercial insurers are also offering similar types of risk-based accountable care arrangements to selected provider groups, whether or not they are engaged in one of the federal programs. To date, there are over 400 provider organizations engaged in some form of accountable care.

Unlike the capitation models contracted by commercial insurers as Health Maintenance Organization (HMO) products in the 1990s, today’s arrangements emphasize quality and patient-centered care. They also rely on health information technologies which hold significant potential to enable high value care. But the promise of accountable care is tempered by a dearth of experience with care-process redesign and culture change and of knowledge about the health information technology (HIT) infrastructure necessary to optimally support health care transformation. There are many factors that will contribute to the success or failure of an organization in the accountable care environment. One that will determine an ACO’s success is the presence or absence of a focused HIT roadmap that aligns an organization’s limited resources with its goals and objectives for accountable care. Without clear guidance in identifying and prioritizing their HIT needs, many provider organizations are struggling to develop their roadmaps.

The Certification Commission for Health Information Technology (CCHIT) — a not-for-profit HIT certification body with an educational mission — recognized that, in the current accountable care environment, something is missing: a structured approach that would help providers identify the most effective, highest-value HIT investments that would meet their specific needs. Its Commissioners and a specially convened Expert Advisory Panel (listed in Figure 1 below) therefore developed a publicly available HIT Framework for Accountable Care. The Framework is designed to serve as a starting point not only for provider groups developing their HIT roadmaps, but also for payers looking to assess and/or complement the HIT capabilities of their contracted provider partners, and for developers designing systems and products to fill the gaps in currently available technologies.

The Affordable Care Act (ACA) proposed expanding health insurance coverage by: 1) requiring states to offer Medicaid to people with incomes up to 138 percent (133 percent plus a 5 percent income disregard) of the federal poverty level (FPL), with most of this expansion funded federally; and 2) offering subsidies to help those with incomes up to 400 percent FPL purchase private insurance through newly created insurance exchanges. The Congressional Budget Office (CBO) estimated in March 2012 that the ACA would newly insure 30-33 million people, leaving 26-27 million uninsured in 2016.

In June 2012, however, the Supreme Court ruled that states may opt-out of Medicaid expansion. Since then, the governors of 14 states have announced their intention to opt-out, 6 are undecided, 3 are leaning against and 2 toward the expansion. Opt-outs will likely leave several million more uninsured, but little is known about who is likely to remain uninsured under the ACA.

To estimate the number and characteristics of US residents who will remain uninsured in 2016, we analyzed data from the Census Bureau’s 2012 Current Population Survey, a nationally representative survey of the non-institutionalized US population.

Bob Berensons set of proposals to improve quality measurement topped May’s list of most-read Health Affairs Blog posts. This was followed on the top-ten list by Tim Jost on implementing the Affordable Care Act, Leah Zallman and Danny McCormick on immigration and Medicare finances, David Keller on medical homes, and John Lumpkin on the Oregon Medicaid experiment.

The full list appears below.

Racial disparities in health and healthcare are a persistent and troubling problem for the U.S. Despite substantial policy efforts to the contrary, racial and ethnic minorities, especially African-Americans, often receive a lower quality of care and have worse outcomes. The key questions, of course, are why do these disparities exist, and what might we do about them?

Over the past decade, two primary theories have emerged to explain disparities and propose solutions to address them. The first focuses on issues around cultural competence, and suggests that many of the gaps in care are due to poor communication between providers and patients. Given the long history of discrimination against black Americans, the cultural competency theory argues that low trust on the part of patients, combined with the ineffective communication and lack of cultural sensitivity, leads to black patients receiving worse care with resultant poor outcomes. Ultimately, the cultural competency theory begs an approach to health disparities that requires more effective training of providers that care for minority patients.

The second theory of racial disparities in care suggests that the site of care really matters — that disparities are driven by the fact that black patients are more likely to receive care at poor quality hospitals. There is ample evidence for this theory as well – our prior work showed that care for black patients is highly concentrated among a small number of hospitals and these places generally provide a lower quality of care for all their patients. This theory calls for a somewhat different set of solutions: focusing on helping the subset of “minority-serving” providers to improve.

The Dimick Study

Of course, there need not be any contradiction between these two theories and one may suspect that both are likely at play. It is in this context that we have a terrific new study by Justin Dimick and colleagues from the University of Michigan, in the newly released June issue of Health Affairs, that helps us better understand why black patients generally have higher mortality after major surgeries than their white counterparts, and how we might try to reduce this gap.

Health Affairs’ June issue, released today, examines the challenges and benefits for states deciding whether to embrace the law’s Medicaid expansion or opt out. Several studies in the issue also look at population disparities in health care, especially during the recent recession. Selected content in the issue is supported by grants from the New York State Health Foundation and Blue Shield of California Foundation.

Medicaid Opt-out: What Cost to States? Last summer’s US Supreme Court ruling about the Affordable Care Act allows states to decline the law’s Medicaid expansion provision, something fourteen governors have chosen to do. Carter Price and Christine Eibner, both of the RAND Corporation, analyzed how this would affect coverage and spending. They estimate that in these states 3.6 million fewer people would be insured, and federal transfer payments to those states could fall by $8.4 billion. According to the authors, those states will be spending some $1 billion in the short term on uncompensated care. They conclude that in terms of coverage, costs, and federal payments, states and their citizens would fare better by expanding Medicaid coverage.

In a related article, Thomas DeLeire of the University of Wisconsin and coauthors looked at Wisconsin’s four-year-old public insurance program—the BadgerCare Plus Core Plan—for childless adults with incomes of up to 200 percent of the federal poverty level. The authors compared administrative claims data from the first year of the program with the previous year. They found that program participants who were automatically enrolled in the program (and who tended to have very low incomes) showed a 29 percent increase in outpatient visits; a 46 percent increase in emergency department use; and a 59 percent decrease in hospitalizations, including a 46 percent decline for preventable hospitalizations. These results demonstrate that expanding public insurance coverage will increase access to outpatient care and reduce hospitalizations, but the authors caution that unless consumers have sufficient access to primary care, coverage expansions may also increase emergency department visits, shrinking any corresponding cost savings.

On May 31, 2013, the Department of Health and Human Services released a final rule amending its earlier regulations governing the Small Business Health Options Program (SHOP). The implementing agencies published a spate of proposed rules and amendments in late 2012 and early 2013, and are now beginning to finalize these, including the workplace wellness rule released on May 29 and the SHOP final rule released on May 31. HHS also released simplified forms for employers and employees to use to apply for SHOP coverage.

The final rule implements virtually unchanged a proposed rule published on March 11, 2013 The rule amends the general final exchange rules published in March of 2012. The amendments make changes in the earlier SHOP rules as to two issues: the nature of plan choice that will be permitted in the SHOP exchanges for 2014, and the length of time allowed for employees to enroll in SHOP coverage if they become eligible for special enrollment periods.

The original vision of the SHOP exchange was that the SHOP would afford employees of small employers access to plan choice, much like that permitted in the individual exchange. An employer might pick a metal level of coverage (bronze, silver, gold, or platinum), but the employee would be able to choose an insurer and qualified health plan offered within that level. The SHOP would aggregate premiums for the various insurers and QHPs and present the employer with a single bill. SHOP exchanges could also offer other approaches to plan choice, such as allowing the employer to select a single plan or set of plans to make available to employees.

The amendment recognizes that it is not going to be possible for the federally facilitated exchange and some state exchanges to permit plan choice in 2014. The federally facilitated exchange will only allow employers to choose and to offer their employees one plan (although employers may offer a stand-alone dental plan in addition to a single medical plan). Because employers will only be able to offer a single plan for 2014, the federal exchange will not be aggregating premiums for multiple insurers. It will, however, offer an employer a single composite premium for all employees if required by state law or requested by the employer.

On May 29, 2013, the departments of Labor, Treasury, and Health and Human Services released their final regulations governing Affordable Care Act workplace wellness programs. Everyone is in favor of wellness, but support for workplace wellness programs is far from universal. Indeed health-contingent wellness programs have proven to be among the most controversial initiatives authorized by the ACA.

Wellness programs have been adopted enthusiastically by employers, who view them as a way to cut health insurance costs and absenteeism while improving the health of their employees. Wellness is also itself big business. According to a recent Reuters article, workplace wellness is a $6 billion industry, with 500 vendors offering wellness programs. Many consumer advocates, however, are concerned that workplace wellness programs which use incentives or disincentives to encourage certain activities and outcomes may bring health status underwriting in through the back door; the ACA had otherwise promised to eliminate such underwriting. Consumers also chafe at the paternalistic nature of wellness programs and the time-consuming obligations they can impose.

Even as wellness programs are increasing in popularity, recent research questions their effectiveness in bringing down health care costs (as opposed to simply shifting costs to employees). A Rand study released by the agencies on May 29, 2013, in tandem with the final regulations reports that about half of us U.S. employers now offer wellness programs, most of which include wellness screenings and interventions. Employee participation in wellness programs remains limited, however, with fewer than half of employees undergoing clinical screenings or completing a health risk assessment, and far fewer engaging in fitness, smoking cessation, or weight loss programs.

The first few days of the week of May 20, 2013 were quiet on the regulatory front, with no new Affordable Care Act regulations or guidance (at least that I could find). HHS released power point slides from an earlier webinar that usefully describe the different kinds of assisters who will be available in the marketplaces (navigators, in-person assisters, certified application counselors, and agents and brokers). It also has apparently updated its navigator and assister frequently-asked-questions paper, although most of these FAQs were released earlier.

In other news, however, the Fourth Circuit Federal Court of Appeals has released the recording of the May 17, 2013, oral argument in the case of Liberty University v. Jacob Lew. The Liberty University case aroused quite a stir in November of 2012, when the Supreme Court reversed its earlier decision to deny certiorari in the case, granted certiorari, vacated the earlier decision of the Fourth Circuit rejecting the plaintiff’s case, and remanded the case to the Fourth Circuit for further proceedings.

In the case’s first incarnation, Liberty University challenged the authority of Congress under its constitutionally enumerated powers to adopt the Affordable Care Act’s individual and employer mandates. Liberty also claimed that the ACA violated the Constitution’s Establishment Clause, by granting privileges to certain religious groups but not to Liberty, and the Free Exercise Clause (and Religious Freedom Restoration Act), by requiring Liberty to purchase insurance that covered abortion. Liberty was joined by two individual plaintiffs in the case, who asserted similar rights for themselves.

Performance measurement — if done right — can be a core activity to move the health care system to higher value for the American public, while rewarding health professionals and health care institutions for doing the right thing for their patients. Yet, policy makers, private and public, have a duty to the public, patients, and providers to get it right — to measure and report accurately and meaningfully.

Harlan Krumholz and Peter Pronovost have been among the most important contributors to the development of performance measures for quality and safety of health care. At the same time, each has written powerful critiques of particular aspects of the current measurement enterprise with suggested improvements. I work mostly inside the Beltway in a world of policy makers who, despite good intentions, by their actions often display a lack of understanding of the challenges associated with measures, measurement, public reporting, and pay-for-performance. For example, the physician value-based modifier, which was mandated as part of the Affordable Care Act and now must be implemented by CMS, cannot produce a valid snapshot of an individual physician’s “value” but will be imposed nevertheless, unfortunately feeding those within the physician community who resist all efforts to improve accountability and transparency of performance.

With the encouragement of the Robert Wood Johnson Foundation, Harlan, Peter, and I joined in a collaborative endeavor to produce a comprehensive look at the state of play of performance measurement and public reporting — their conceptual underpinnings and limitations, successes and failures, and, perhaps most importantly, recommendations for major steps that are needed now to put the measurement enterprise on track to achieve its potential to improve the value of U.S. health care without doing harm.

Editor’s note: Health Affairs Blog has been proud to host Tim Jost’s series of posts, “Implementing Health Reform, tracking the implementation of the Affordable Care Act. In recent days the implementing agencies — Health and Human Services, Labor, and Treasury — have been issuing regulations, proposed regulations, frequently asked questions, and other guidances on an almost daily basis, and new posts by Tim have consequently often appeared almost daily as well. Going forward, to keep up with the flow of ACA guidance in an orderly fashion, Tim’s posts will generally appear twice a week, usually Mondays and Thursdays. When major rules or proposed rules are released, such as the final rules on eligibility and appeals, wellness, and the SHOP marketplaces currently under final review by the Office of Management and Budget, we will feature additional posts in Tim’s series.

You can continue to look to Tim’s post for current information on ACA implementation. When new guidance appears, Tim will update his most recent post (a practice we have in fact already begun); we will note that there has been an addition at the beginning of the updated post and normally add the new material at the end of the post, so you can skip rereading the rest. We will also Tweet significant updates. From time to time, we correct a post when we find a typographical error or Tim receives new information as to the meaning of an issuance. If the correction is more than trivial, we will note this as well.

We hope that this new approach will make this series even more useful to our readers.

On May 17, 2013, at the end of an otherwise quiet week, CMS released an interim final rule on the Preexisting Condition Insurance Plan (PCIP). CMS also released a letter to state Medicaid directors on Facilitating Medicaid and CHIP Enrollment and Renewal in 2014. This post will discuss these issuances

In the May Health Affairs Narrative Matters essay, two graduate students describe their fight with the bureaucracy to gain coverage for their son under the Children’s Health Insurance Program, and they express the hope that provisions of the Affordable Care Act will cut the red tape. The article, “To Cover Their Child, One Couple Navigates A Health Insurance Maze In Pennsylvania, is by Ari Friedman, a fifth-year medical-doctoral student in health economics at the University of Pennsylvania’s Perelman School of Medicine and Wharton School, and Tara Mendola is a sixth-year graduate student in comparative literature at New York University.

The list of most-read Health Affairs Blog posts for April includes four posts in Tim Jost’s ongoing series on implementing the Affordable Care Act; number one on the top-ten list is Tim’s post about proposed regulations on health insurance exchange navigators. The list also includes posts on accountable care organizations, patient-centered care, controlling health care costs. and more.

The full list is below:

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.