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New Health Policy Brief: The Two-Midnight Rule


January 23rd, 2015

A new policy brief from Health Affairs and the Robert Wood Johnson Foundation (RWJF) examines the so-called “two-midnight rule,” which takes effect on April 1 of this year for new Medicare hospital claims. The rule, announced in 2013, is an effort by the Centers for Medicare and Medicaid Services (CMS) to clarify when a patient will be considered by Medicare as an inpatient for hospital billing purposes. Under this rule, only patients that a doctor expects to need two nights in the hospital would be considered inpatients for the purpose of Medicare claims.

In the past, CMS provided little guidance to hospitals on this matter. This is important because the Medicare payment structures are very different for inpatients versus outpatients: Hospitals are reimbursed with a single comprehensive payment for all care provided to an inpatient during his or her time at the hospital, but they are paid standard fees for each unique service they provide to outpatients. This brief describes the perceived need by CMS for the two-midnight rule, how it would work, the implications for Medicare payment, and the heated response to the rule by the hospital industry.

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Early Evidence On Medicare ACOs And Next Steps For The Medicare ACO Program (Updated)


January 22nd, 2015

Note: Pratyusha Katikaneni and Carmen Diaz also contributed to this post. They are both research assistants at the Engelberg Center for Health Care Reform, The Brookings Institution.

On December 1, CMS released a Notice of Proposed Rulemaking (NPRM) for the Medicare Shared Savings Program (MSSP), which requests feedback for changes CMS is considering for the Medicare accountable care organization (ACO) programs in 2016 and beyond. The proposal suggests significant potential alterations to the program, many of which we recently reviewed, that would address major issues that ACOs and others have raised: uncertainty and inexperience at transitioning to increasing levels of risk, lack of timely and accurate data, changes in attributed patient populations from year-to-year, and financial benchmarks that fail to account for regional variations and continue to reward high ACO performance over time.

The proposed rule raises more issues than it settles, but it clearly indicates that CMS is open to meaningful public comments and will make important revisions in the MSSP. However, the proposal also illustrates the challenges of resolving these issues in a way that both assures substantial ACO participation and improvement, as well as Medicare savings.

Ideally, big changes in key features in a major program like the MSSP would be based on extensive empirical evidence on what determines success in the program. Unfortunately, only limited evidence, including case studies and some comparative data, is available on the determinants of success for Medicare ACOs, and thus on the MSSP. Data released by CMS in September, which we previously reviewed, showed that the MSSP has generated over $700 million in savings to date relative to the spending benchmarks in the program. This is around 1 percent of the costs of care for beneficiaries affected by Medicare ACO initiatives.

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Unpacking The Medicare Shared Savings Proposed Rule: Geography And Policy


January 22nd, 2015

The Centers for Medicare and Medicaid Services (CMS) recently announced a Notice of Proposed Rulemaking (NPRM) for Medicare Shared Savings Program (MSSP) Accountable Care Organizations (ACOs). The rulemaking contains several proposals that if enacted, would fundamentally change the underlying incentives for providers to participate in the program. These proposed reforms address issues such as data sharing, renewals of participation agreements, beneficiary attribution, incentives to move to two-sided risk, and lastly, reforms to the benchmark calculations against which ACOs compete to earn savings.

The NPRM comes on the heels of a September 16, 2014 release of performance results for MSSP ACOs that began their performance years by 2013. Under the current program rules, ACOs that successfully reported quality performance data and whose savings exceeded their “minimum savings rate” were eligible to share in savings with Medicare. The MSSP program allows ACOs to choose either one-sided risk (Track 1, only upside potential to earn savings) or two-sided risk (Track 2, both upside and downside potential to earn savings/incur losses) with the final sharing amount based on achieving quality targets (up to 50 percent for Track 1 and 60 percent for Track 2). A vast majority of ACOs enrolled in Track 1, the one-sided risk option. Of the 220 ACOs in the program that participated in the first performance year, 53 earned shared savings, 52 saved money but not enough to meet the required “minimum savings rates,” and the other 115 did not accrue savings (spending on patients assigned to the ACO was greater than projected).

In February 2014, the CMS asked stakeholders for input as to how to improve its ACO programs, feedback which they used to generate the NPRM. Many ACOs and other stakeholders argued that failures to achieve savings over and above minimum savings rates were a partial result of residing in low spending areas. In this post, we examine the merits of this contention and consider the policy implications of our results and their bearing on some of the modifications of the MSSP program that CMS has proposed. We also discuss other strategies for improving the program CMS did not mention in the NPRM.

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Health Affairs Web First: New Medicare Per Capita Spending Shows A Rise With Age, Then A Decline After 96


January 14th, 2015

New analysis of Medicare spending from 2000–11 found that in 2011 per capita spending increased with age, from $7,566 for beneficiaries age seventy to $16,145 at age ninety-six, and then declining for even older beneficiaries. The study authors Patricia Neuman, Juliette Cubanski, and Anthony Damico also found that since 2000, the age that Medicare per capita spending peaks has increased each year: In 2000, the highest spending was found to be among those age ninety-two.

They also found that Medicare beneficiaries ages eighty and older, who comprised 24 percent of the beneficiaries, accounted for a disproportionate share (33 percent) of traditional Medicare spending in 2011. This study, being released by Health Affairs as a Web First, is part of its re-established DataWatch series, which features timely health-related data and surveys.

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Graduate Medical Education: The Need For New Leadership In Governance And Financing


January 14th, 2015

With the creation of the Medicare program in 1965, a funding stream was established to support the training of medical residents who provided care for Medicare beneficiaries. In subsequent years, Medicare has maintained these payments to teaching hospitals and remains the largest payer for Graduate Medical Education (GME), with expenditures totaling about $10 billion annually. This represents two-thirds of Federal GME support, with another $4 billion per year provided to hospitals through State Medicaid GME support.

This expenditure was a major motivation for the Senate Finance Committee to request the Institute of Medicine (IOM) to issue a report entitled “Graduate Medical Education That Meets the Nation’s Health Needs.”  The Report proposed major reforms to create a GME system with greater transparency, accountability and strategic direction, in order to increase its contribution to achieving the nation’s health goals. Prior to publication of this long awaited report on July 29, 2014, GME financing policies received substantial attention in the last two sessions of Congress, with a particular focus on increasing the number of federally funded GME positions. The House and Senate committees with GME jurisdiction produced multiple legislative initiatives.

However, there was considerable opposition from primary care stakeholders to some of the proposed changes because of inadequate emphasis on ambulatory training. Possible redistribution of Medicare GME funding was also of concern to many. This seemed to dissuade Congress from passing reform of GME policies. Nevertheless, 1,500 new GME positions were authorized in the recent Veterans Health Administration legislation.

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The Challenge Of Financing Sustainable Community-Based Palliative Care Programs


December 29th, 2014

Since its publication in September 2014, there has been widespread praise for the Institute of Medicine (IOM) report, Dying in America: Improving Quality and Honoring Individual Preferences Near the End of Life. It is a masterful piece of scholarship that summarizes the spectrum of issues facing palliative care.

We hope the report will influence key decision-makers in medicine and various legislatures to promote the many changes outlined in the document, enabling palliative care to further improve the quality of life for those with advanced illness.

Yet, despite the encyclopedic scope of Dying in America, the report did not make suggestions about how to achieve sustainable funding for community-based palliative care. Freestanding programs provide special value to some of the sickest members of the population who struggle with their serious illness while living in the community, outside any facility or hospice program.

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The Medicare Shared Savings Program: CMS Turns To Stakeholders On Incentivizing ACO Risk


December 19th, 2014

On December 1, 2014, the Centers for Medicare & Medicaid Services (“CMS”) released its long awaited Proposed Rule to update regulation and operation of the Medicare Shared Savings Program (“MSSP”). In response to concerns raised by participating accountable care organizations, CMS proposes to revise the MSSP program in several ways to provide greater flexibility for ACOs.

However, in important areas CMS may not have gone far enough. This post describes the framework CMS has set forth and then suggests several ways in which the proposal could, in our view, be improved to achieve the CMS objective of encouraging ACOs to bear more risk. In particular, CMS should consider using its waiver authority more robustly; allowing Medicare beneficiaries to designate their primary care providers, and by extension their ACO; and revising the MSSP risk-adjustment methodology to better reflect the changing risk profiles of ACOs.

CMS is actively seeking stakeholder input, which may indicate agency recognition that further changes beyond those in the propose rule are needed. By all indications, stakeholder input will be seriously considered; more than any time in recent memory, stakeholder comments will make a difference in the shape of the Final Rule. This presents a unique opportunity for stakeholders and we urge concerned parties to share their perspectives through comments – the deadline for submitting comments is February 6, 2015.

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ACO Quality Results: Good But Not Great


December 18th, 2014

On September 23, 2014, the Centers for Medicare and Medicaid Services (CMS) released Year 1 Quality Performance results for Accountable Care Organizations (ACOs) that began participating in the Medicare Shared Savings Program (MSSP) in 2012 or 2013. Another report, released shortly before, outlined financial performance of the ACOs and showed that only 49 ACOs, or 22 percent of those ACOs, qualified for shared savings payments by successfully reducing total spending.

Opportunity for continued quality improvement aside, a troublesome snag for the program could be a very low correlation between improved quality and earned savings: our analysis shows that, in performance year one, improved quality and earned savings only correlate at 8.6 percent, so low that it is statistically insignificant (Figure 1).

In practice, this means that better quality is not associated with better financial results. Twenty-one of the 49 ACOs that did earn shared savings actually scored below the average quality of the group. For the first year, quality outcomes did not affect the size of shared savings payments, but in future years ACOs that perform poorly on quality measures will lose a portion of any shared savings.

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New Health Policy Brief: Physician Compare


December 16th, 2014

A new policy brief from Health Affairs and the Robert Wood Johnson Foundation (RWJF) looks at the evolution and current development plans for Physician Compare, a website mandated by the Affordable Care Act (ACA). A simple version of the site first launched in 2010.

Since then the Centers for Medicare and Medicaid Services (CMS) has slowly been adding limited sets of data listing the various physician groups participating in a number of Medicare quality improvement initiatives. In 2015 the site will expand to include more recent and extensive information about physician performance and quality of care, in a format that’s similar to the other ACA-generated websites — Hospital Compare, Nursing Home Compare, Home Health Compare, and Dialysis Facility Compare.

These sites, which encompass tens of thousands of facilities nationwide, are credited with advancing accountability and motivating improvements in care and quality. They are also faulted as poorly organized and inadequately audited when the data are submitted by facilities.

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The Accidental Administrative Law Of Policymaking In The Medicare Program


December 11th, 2014

Editor’s note: This post is part of a series of several posts stemming from presentations given at “The Law of Medicare and Medicaid at Fifty,” a conference held at Yale Law School on November 6 and 7.

When Congress establishes a new regulatory program, it lodges the program in a regulatory agency or executive department. A regulatory agency generally has presidentially appointed commissioners with staggered terms and expert staff. This design provides insulation from politics and facilitates applying technical expertise to regulatory problems. Also, administrative agencies make rules and policy and have the powers of investigation, adjudication, and sanction to enforce compliance. Administrative law, an essential instrument of democracy, regulates the operation and procedures of government agencies.

The Social Security Amendments of 1965 established Medicare in the Social Security Administration (SSA). Medicare initially contained two parts, hospital insurance for hospital and related services and supplementary medical insurance for physician and other outpatient services. Pursuant to contract, Medicare contractors handle claims and pay providers as well as adjudicate appeals and make program policy.

This post chronicles the development administrative law, policymaking, and regulation in the Medicare program. It describes how the program evolved a revolutionary collaborative model of regulation that could provide a useful guide for other programs.

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Two Theologies Have Blocked Medicare-For-All


December 11th, 2014

Editor’s note: This post is part of a series of several posts stemming from presentations given at “The Law of Medicare and Medicaid at Fifty,” a conference held at Yale Law School on November 6 and 7.

In the 50 years since Medicare was enacted, Congress has never seriously considered extending Medicare to all Americans, nor even lowering Medicare’s eligibility age below 65. This pattern persisted even during those periods when national health insurance was at the top of the national agenda. This is not what the original advocates of Medicare anticipated when Medicare was enacted in 1965. They saw Medicare as the cornerstone of a national system of health insurance that would eventually cover all Americans.

Two Myths that Undercut Medicare-for-All: Managed Care and Competition

In the paper we presented at the Yale conference, we reviewed short- and long-term factors affecting the debate about Medicare over its lifetime, and then turned to a discussion of two long-term factors: the rise of what came to be called the managed care movement, and the resurgence of a longstanding campaign promoting the idea that competition can right the wrongs of American medicine.

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CMS Proposes Coverage For Lung Cancer Screening With Low Dose CT


December 9th, 2014

On November 11, the Centers for Medicare and Medicaid Services (CMS) released its Proposed Decision Memo for Screening Lung Cancer with Low Dose Computed Tomography (LDCT), which is expected to be finalized in mid-December. Despite a negative assessment by its own advisory committee, CMS has proposed coverage with evidence development (CED) for an annual “lung cancer screening counseling and shared-decision-making visit” and, for appropriate beneficiaries, additional screening with LDCT.

Under CED, Medicare provides conditional coverage for a new treatment or technology while additional data is collected to confirm its effectiveness and make a final determination. Through this proposed decision, CMS has followed the lead of numerous other expert and advisory groups, which have concluded that the overall benefits of such screening for at-risk individuals outweigh concerns regarding gaps in evidence, generalizability and potential harms.

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The Council On Graduate Medical Education (COGME)—Not Yet Ready For End-Of-Life Care


December 4th, 2014

In November, 1985, twenty-nine years ago, members of the first session of the 99th Congress addressed growing concern and controversy regarding Graduate Medical Education (GME). Although Medicare had financed GME for the previous twenty years, Congress began to recognize that our rapidly evolving health care system could require significant changes in the composition of our physician workforce, and that these changes could impact the appropriate governance and funding of GME.

In this setting, the Council on Graduate Medical Education (COGME) was conceived and underwent rapid gestation, with its birth achieved via enactment of authorizing legislation in 1986. Its charter charged the Secretary of Health and Human Services (HHS), under Title VII of the Public Health Service Act, with responsibility for taking national leadership in the development of policies related to GME, and in the research, development, and analysis of such policies that impact on the health workforce needs of the nation. COGME was instructed to provide advice and make policy recommendations to the Secretary and committees of the House and Senate within their jurisdiction.

Contrary to a sunset provision in the legislation, COGME still survives. While continuing to function on very limited support, it recently issued a noteworthy report entitled “Improving Value in Graduate Medical Education” in 2013. COGME presently is preparing its 22nd Report, which addresses the need for change in GME due to changes in the U.S. health care system and focuses on opportunities to improve training through more effective targeting of public resources.

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Health Affairs Web First: National Health Spending In 2013 Continued Pattern Of Low Growth


December 3rd, 2014

A new analysis from the Office of the Actuary at the Centers for Medicare and Medicaid Services (CMS) estimates that in 2013 health care spending in the United States grew at a rate of 3.6 percent in 2013 to $2.9 trillion, or $9,255 per person. The increase was slower than the 4.1 percent growth in 2012 and continued a pattern of low growth that has held relatively steady at between 3.6 percent and 4.1 percent annual growth for five consecutive years.

The continued low growth in health spending is consistent with the modest overall economic growth since the end of the recent severe recession and with the long-standing relationship between economic growth and health spending—particularly several years after the end of economic recessions, when health spending and overall economic growth tend to converge. As a result, health spending’s share of the nation’s gross domestic product (GDP) remained at 17.4 percent in 2013.

The study is being released today by Health Affairs as a Web First and will appear in the January issue of Health Affairs. It was discussed this morning at a reporters briefing in the National Press Club.

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Medicare, Medicaid, And Pharmaceuticals: The Price Of Innovation


November 20th, 2014

Editor’s note: This post is part of a series of several posts stemming from presentations given at “The Law of Medicare and Medicaid at Fifty,” a conference held at Yale Law School on November 6 and 7.

Through much of the last half century, Medicare and Medicaid (MM) have not for the most part supported research intended to lead to new drugs. For their role in drug development, we need to look to infrastructure and incentives. The record of the National Institutes of Health (NIH) illustrates the potential of both for pharmaceutical innovation. The current budget of NIH, the big elephant in the zoo of the federal biomedical enterprise, is $30 billion, but apart from a dozen small programs devoted to targeted drug development, most of these billions are not aimed directly at pharmaceutical innovation (See page 234).

Yet the NIH investment in biomedicine has indirectly fueled drug development in the private sector to a huge degree. It has paid for the training of biomedical scientists and clinicians, many of whom went on to staff the drug industry, especially its laboratories. NIH-sponsored research has also generated basic knowledge and technologies and it has encouraged universities to spin out their potentially useful findings into the industry by allowing for the patenting and licensing of the findings.

Like NIH, MM has helped fuel drug development indirectly by supporting selected experimental cancer treatments, medical education, and some clinical research and training. But investment in these activities has been small and their impact on drug development apparently very limited. In contrast to NIH, the MM stimulus to drug innovation has resided not in the production of new scientists or the patented uses of new knowledge, but principally in markets and pricing.

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Analysis Of Medicare Spending Slowdown Leads Health Affairs Blog October Most-Read List


November 17th, 2014

Loren Adler and Adam Rosenberg’s examination of the causes of slower Medicare spending growth was the most-read Health Affairs Blog post in October. Their post was followed by Jeff Goldsmith’s interview with former Kaiser Permanente CEO George Halvorson.

Next on the top-ten list was J. Stephen Morrison’s look at the US response to Ebola and the role of Centers for Disease Control and Prevention Director Tom Frieden, followed by Tim Jost’s post on reference pricing and network adequacy.

The full list is below:

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Risk And Reform Of Long-Term Care


November 14th, 2014

Editor’s note: This post is part of a series of several posts stemming from presentations given at “The Law of Medicare and Medicaid at Fifty,” a conference held at Yale Law School on November 6 and 7.

The 50th Anniversary of Medicare and Medicaid offers an opportunity to reflect on how U.S. social policy has conceived of the problem of long-term care.

Social insurance programs aim to create greater security—typically financial security—for American families (See Note 1). Programs for long-term care, however, have had mixed results. The most recent attempt at reform, which Ted Kennedy ushered through as a part of the Patient Protection and Affordable Care Act (ACA), called the CLASS Act, was actuarially unsound and later repealed. Medicare and especially Medicaid, the two primary government programs to address long-term care needs, are criticized for failing to meet the needs of people with a disability or illness, who need long-term services or supports. These critiques are valid.

Even more troublesome, however, long-term care policy, especially in its most recent evolution toward home-based care, has intensified a second type of insecurity for Americans. This insecurity arises when someone becomes responsible for the long-term care of a loved one. In a longer forthcoming article, I argue that this insecurity—which I call “next-friend risk”—poses a serious threat to Americans and needs to be addressed. (I borrow the phrase next friend from a legal term for a person who in litigation represents someone with a disability who is otherwise unable to represent him or herself. Although not a legal guardian, the next friend protects the interests of an incompetent person.)

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Reforming Medicare: What Does The Public Want?


November 13th, 2014

Is Medicare adequately meeting the needs of seniors, or are there ways that its core attributes could be improved? Numerous elected officials, policymakers, and other thought leaders have offered perspectives on ways to change the program. Few efforts, however, have been directed at understanding how the public—given accurate information, a variety of options, and a valid structure for weighing the pros and cons—would change Medicare’s basic design.

The MedCHAT Project

Recently, the American Enterprise Institute and the Brookings Institution co-hosted a briefing on the results of a California project that did just that. The “MedCHAT” project, sponsored by the nonprofit, nonpartisan Center for Healthcare Decisions, asked 800 residents—the lay public, as well as health care professionals and community leaders—to consider Medicare’s current benefits and decide if those should be changed. Respondents represented the full spectrum of age, race, ethnicity, education, and income level.

Using an interactive, computer-based system, participants were asked to respond as “social decisionmakers;” they were tasked with making Medicare more responsive to the needs of current and future generations without imposing a greater cost burden on the country. The computer-based CHAT (“Choosing All Together”) program uses actuarial estimates to show the relative costs of health care benefits, allowing participants to make trade-offs with an understanding of the fiscal impact each benefit has on the program.

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The Short-Term And Long-Term Outlook Of Drug Coupons


November 12th, 2014

In the October 2014 Health Affairs article, “Specialty Drug Coupons Lower Out-Of-Pocket Costs And May Improve Adherence At The Risk Of Increasing Premiums,” Catherine Starner and coauthors explore the relationship between drug coupons and specialty drugs. Specialty drugs, primarily injectables and biologics, are costly drugs used to treat complicated, chronic conditions that typically require special handling, administration, and monitoring. Starner et al. report that specialty drugs have an average monthly cost to patients and payers of about $3,500.

In their innovative study, Starner et al. find that nearly half of the patients in their sample who were prescribed specialty drugs used personal drug coupons to reduce their personal financial responsibilities. Coupons come in the form of maximum copay and monthly savings cards, and can be accessed from the brand-name manufacturer’s website, printed out, and cashed in at the pharmacy.

Manufacturers promote drug coupons as supplementary patient assistance programs that can fill gaps in insurance coverage by reducing individual patients’ responsibilities for out-of-pocket health care costs related to high-cost specialty drugs or other pharmaceutical products. For example, patients taking etanercept (Enbrel), an expensive biologic specialty drug indicated for rheumatoid arthritis, can receive savings via the Enbrel Support plan, which reduces the monthly co-pay to $0 for the first six months and $10 per month thereafter.

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Yes, We Can Transcend Obamacare


November 6th, 2014

In a recent  Health Affairs Blog post, Washington and Lee University law professor Timothy Jost described a new health-reform plan designed by one of us (Roy) and fiscally modeled by the other (Parente) as a “serious proposal [that] deserves to be taken seriously.” Jost praises parts of the plan. Most notably, he writes that its suggested reform of Medicaid “makes a lot of sense and is similar to proposals made earlier by progressive commentators,” and describes its aim of enacting a uniform annual deductible for Medicare as a “common sense proposal.”

But much of Jost’s review is filled with ideological pique—there are various harrumphs about “nostrums” and “talking points” and “hobby horses.” His article contains some factual and analytical inaccuracies, but also a few good points worth discussing.

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