Blog Home

Archive for the 'Payment' Category




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.

Read the rest of this entry »

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:

Read the rest of this entry »

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.

Read the rest of this entry »

An Emerging Consensus: Medicare Advantage Is Working And Can Deliver Meaningful Reform


November 6th, 2014

Since enactment of the Affordable Care Act (ACA) in 2010, much of the attention in the policy community has been on modernizing Medicare’s traditional fee-for-service (FFS) program.  Through Accountable Care Organizations (ACOs), larger “bundles” of payments to fee-for-service providers for episodes of care, and tests of pay-for-performance models, the hope is that the traditional Medicare model can be remade through sheer force of bureaucratic will.  The stated intent is to find a way to pay for value, not volume.

These efforts may or may not bear much fruit, but, over the longer term, it’s not likely to matter much.  That’s because a more important transformation of Medicare is already well underway and is occurring despite more resistance than assistance from the program’s bureaucracy.  According to the 2014 Medicare Trustees’ report, enrollment in Medicare Advantage – the private plan option in Medicare — has been surging for a decade.  In 2005 there were 5.8 million Medicare beneficiaries enrolled in MA plans — 13.6 percent of total enrollment in the program.  Today, there are 16.2 million beneficiaries in MA plans, or 30 percent of program enrollment. (See Table IV.C1)  In addition, the Medicare drug benefit, which constitutes about 12 percent of total program spending, is delivered entirely through private plans. (See Table II.B1)

As MA enrollment has surged, so has recognition of its improved value.  A recent, comprehensive review of the evidence conducted by Joseph Newhouse and Thomas McGuire of Harvard University makes a compelling case that MA plans are providing higher value services at less societal cost than the traditional FFS program.  Based on their findings, Newhouse and McGuire argue for policies that would provide incentives for even more beneficiaries to enroll in MA plans in the future.

Read the rest of this entry »

The Law Of Medicare And Medicaid At Fifty


November 4th, 2014

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

This post introduces an online symposium in connection with The Law of Medicare and Medicaid at 50, an upcoming interdisciplinary conference at Yale Law School.  Many thanks to Health Affairs for its co-sponsorship of the conference and for this opportunity to preview some of the work to be presented.

Why focus on the law of Medicare and Medicaid?  These two programs are almost always analyzed from a policy perspective, but one of the most significant changes that the 1965 legislation wrought was bringing two major federal statutes—and, with them,  the three branches of the federal government—squarely into the center of  health care and regulation.  To be sure, Congress had passed laws related to health prior to 1965, but until Medicare and Medicaid, most health policy was made at the local level, by state courts and state governments, and by the medical profession itself.

Medicare and Medicaid brought not only Congress, but the Supreme Court and the rest of the lower federal courts into the picture. It also made the federal administrative apparatus—federal agencies ranging from Health and Human Services, to Treasury, to the Department of Justice—central players in the world of health policy and enforcement.  Nevertheless, amidst the thousands of pages that have been written about the two programs, there has been relatively little reflection on how the distinct features of law—and federal law in particular—have affected the programs’ development and successes.

Read the rest of this entry »

The Payment Reform Landscape: Benefit And Network Design Strategies To Complement Payment Reform


November 4th, 2014

For the past ten months on Health Affairs Blog, we’ve been discussing the evidence for different models of payment reform, examining everything from pay for performance to nonpayment. But no discussion of payment reform is complete without addressing benefit and network designs and how they can help or hinder various payment reforms.  When the right payment method is paired with the right benefit and/or network design, they can work together to help reduce costs and improve care.  There are a number of payment approaches that pair well with specific benefit and network design strategies to yield higher-quality, lower-cost care. Below we discuss a few of these effective pairings.

But before we get into the specifics, why it is important to motivate providers to deliver and patients to seek higher-value care?  Health care providers may not only respond to direct financial incentives, but they are also likely to respond to knowing information about their performance is being put in front of prospective and current patients.  They also may be more willing to accept new forms of payment if acceptance means payers will encourage more patients to seek their care.

On the flip side, patients are unlikely to know how their providers are paid.  But if motivated (financially and otherwise), patients may act on meaningful distinctions in price and quality by choosing higher-value providers, saving money for themselves and whoever else is footing the bill for their care.

Read the rest of this entry »

Grand-Aides And Health Policy: Reducing Readmissions Cost-Effectively


October 29th, 2014

Hospital readmissions for the same condition within 30 days likely should not occur, and most often indicate system failure. Readmitted patients are either discharged too early, should be placed into palliative care or hospice, or most often are victims of a failure in transition of care from hospital to home. Most hospitals and physicians would like to eliminate such readmissions, particularly now that payers like Medicare are penalizing hospitals for high rates of readmission. Numerous approaches have been tried to reduce readmissions, with recent published improvements between a 2 percent and 26 percent reduction.

The Grand-Aides® program features rigorous training of nurse aides or community health workers to work as nurse extenders, 5 Grand-Aides to one RN or NP supervisor, with approximately 50 patients per Grand-Aide per year. The Grand-Aides visit at home daily for the first 5 days post-discharge and then as ordered by the supervisor (e.g. 3 days the next week) for at least 30 days, extending as long as desired.

Read the rest of this entry »

The $500 Billion Medicare Slowdown: A Story About Part D


October 21st, 2014

A great deal of analysis has been published on the causes of the health care spending slowdown system-wide — including in the pages of Health Affairs. Much attention in particular has focused on the remarkable slowdown in Medicare spending over the past few years, and rightfully so: Spending per beneficiary actually shrank (!) by one percent this year (or grew only one percent if one removes the effects of temporary policy changes).

Yet the disproportionate role played by prescription drug spending (or Part D) has seemingly escaped notice. Despite constituting barely more than 10 percent of Medicare spending, our analysis shows that Part D has accounted for over 60 percent of the slowdown in Medicare benefits since 2011 (beyond the sequestration contained in the 2011 Budget Control Act).

Through April of this year, the last time the Congressional Budget Office (CBO) released detailed estimates of Medicare spending, CBO has lowered its projections of total spending on Medicare benefits from 2012 through 2021 by $370 billion, excluding sequestration savings. The $225 billion of that decline accounted for by Part D represents an astounding 24 percent of Part D spending. (By starting in 2011, this analysis excludes the direct impact of various spending reductions in the Affordable Care Act (ACA), although it could still reflect some ACA savings to the extent that the Medicare reforms have controlled costs better than originally anticipated.) Additionally, sequestration is responsible for $75 billion of reduced spending, and increased recoveries of improper payments amount to $85 billion, bringing the total ten-year Medicare savings to $530 billion.

Read the rest of this entry »

Arkansas Payment Improvement Initiative: Private Carriers Participation In Design And Implementation


October 15th, 2014

Editor’s note: This post is part of a periodic Health Affairs Blog series, which will run over the next year, looking at payment and delivery reforms in Arkansas and Oregon. The posts will be based on evaluations of these reforms performed with the support of the Robert Wood Johnson Foundation. The authors of this post are part of the team evaluating the Arkansas model.

Since the inception in 2011 of the multi-payer Arkansas Payment Improvement Initiative (APII), the state’s Medicaid program and some of its largest private insurers, including Arkansas Blue Cross Blue Shield (BCBS) and QualChoice, have worked together to help create critical mass toward systemic change.

With private payer alignment on design elements and implementation strategy, providers in Arkansas are now responding to common expectations from payers, including consistent financial incentives, standardized reporting tools and congruent targets for both quality and outcomes. While we’ve referenced the role of private carriers in our previous blog posts, here we provide more detail on this collaborative effort.

Read the rest of this entry »

Implementing Health Reform: Reference Pricing And Network Adequacy


October 12th, 2014

On October 10, 2014, the Departments of Labor, Treasury, and Health and Human Services issued a frequently asked question (FAQ) regarding the use of reference-based pricing in non-grandfathered large group employer plans.  Although the issue the FAQ addresses specifically is the use of reference pricing, the FAQ is remarkable insofar as it is the first departmental guidance that I am aware of that addresses the use of networks by self-insured ERISA plans.

Network adequacy is an issue that has long been addressed in the nongroup and insured group market in many states by state insurance law.  The ACA also requires qualified health plans, and arguably any individual and small group plan subject to the essential health benefits requirements, to have adequate provider networks.  Special rules implementing ACA section 2719A of the ACA limit cost-sharing for out-of-network coverage for emergency services.

The departments also stated in an earlier FAQ that cost sharing cannot be applied by any non-grandfathered health plan for preventive services provided by out-of-network providers if the services are not available in network.   But I am unaware of the departments otherwise attempting previously to regulate group health plan network requirements, at least under the ACA.

Read the rest of this entry »

Posts On ACA Tax Forms, Replacement Plan Lead September Health Affairs Blog Top-Ten List


October 10th, 2014

Tim Jost’s post on complicated Affordable Care Act (ACA) tax forms and his review of Avik Roy’s ACA replacement plan were the most-read Health Affairs Blog posts for September. These were followed by a CVS Health post from Troyen Brennan and coauthors on rethinking the sale of tobacco products in pharmacies and a post on bundled payments and innovation from Rebecca Paradis of the Network for Excellence in Health Innovation.

The full list is below.

Read the rest of this entry »

The Latest Health Wonk Review


October 10th, 2014

At Managed Care Matters, Joe Paduda provides this week’s edition of the Health Wonk Review. Joe’s post is an interesting read and includes a Health Affairs Blog post on from Suzanne Delbanco on results from the National Scorecard on Payment Reform.

Read the rest of this entry »

A Patient Advocate’s Perspective On Paying For Value


October 9th, 2014

When patient-centered outcomes research “is used well, it can be a powerful tool in making medical care better informed, without limiting patients’ and providers’ choices.” That was the promise that I, and many others, held out with creation of the Patient-Centered Outcomes Research Institute (PCORI) in 2010. Will PCORI achieve this goal? It is increasingly clear that evolving “value-based” payment models in health care, accelerated via the Affordable Care Act (ACA), will play a central role in how that question gets answered.

The movement to place greater financial risk on providers in an effort to pay for value rather than volume will have the effect of fundamentally changing the way health care providers interact with patients. But the question in value-based payment remains: value to whom? The answer should be, of course, value to the patient. And the answer will be, intrinsically, shaped by application of evidence.

While I applaud efforts to improve and advance our health care system through payment and delivery reforms, I am also mindful that such value-based payment systems must be built upon the foundation of “patient-centeredness.” Indeed, lawmakers and policy experts have long agreed that a “patient-centered healthcare system” is the Holy Grail of bipartisan health care reform. Yet despite significant progress in advancing patient-centeredness in our health system, much more work remains to be done.

Read the rest of this entry »

Drug Discount Analysis Misses The Mark


October 8th, 2014

Rena Conti and Peter Bach’s analysis of disproportionate share (DSH) hospitals in the 340B drug discount program — published in the October issue of Health Affairs — neglects an essential point: compared to non-340B DSH hospitals, 340B DSH hospitals provide over twice as much care to Medicaid and low-income Medicare patients, and almost twice as much uncompensated care. 340B DSH hospitals across the board provide high levels of uncompensated care. For these and other reasons enumerated below, the article does not support the criticism that 340B DSH hospitals are no longer serving vulnerable patients.

First, Conti and Bach misconstrue the 340B program’s intent. 340B is not – and never was – a direct assistance program for the poor. According to the Government Accountability Office, “The 340B program allows certain providers within the U.S. health care safety-net to stretch federal resources to reach more eligible patients and provide more comprehensive services, and we found that the covered entities we interviewed reported using it for these purposes.”

For example, 340B savings help The Henry Ford Hospital fund four oncology clinics and related services in Detroit and surrounding townships. The program is also enabling Henry Ford to hire pharmacists and nurses to follow up with their patients to ensure they are taking their medicines properly and that the treatment is effective.

Read the rest of this entry »

The Need For A Comprehensive, Current, And Market-Representative Health Care Cost Benchmark


October 7th, 2014

A recent post from Jonathan Skinner and colleagues on Health Affairs Blog posited an interesting solution to ever-increasing health care costs, suggesting that imposing price caps on all medical services, equal to 125 percent of the Medicare payment, would serve to eliminate wide variations in quoted prices for health care services.

While the overall idea of controlling costs through the establishment of a mutually agreed-upon and accessible benchmark is a sound one, the use of Medicare reimbursement levels as a ceiling for this purpose would present a number of challenges. For example, Medicare does not assign a value to all codes; a separate system would be needed to price services not addressed by Medicare’s fee schedule.

Also, Medicare’s reimbursement levels can be influenced by governmental imperatives and therefore may not be truly representative of market costs. And the establishment of a 125 percent of Medicare cap—a standard used by some health plans for in-network care where providers are guaranteed a high volume of patients—might not be adequate reimbursement for one-off, out-of-network services that lack a network’s compensatory volume economics.

We at FAIR Health suggest an alternative approach using measures that are acceptable to all stakeholders as reference points for out-of network charges to help achieve the proposal’s laudable goal: to provide quality health care at transparent prices that are reasonable for consumers and fair to providers.

Read the rest of this entry »

New Health Policy Brief: The Physician Payments Sunshine Act


October 3rd, 2014

A new Health Policy Brief from Health Affairs and the Robert Wood Johnson Foundation (RWJF) looks at a section of the Affordable Care Act (ACA), known as the Physician Payments Sunshine Act (PPSA). The PPSA
spells out how medical product manufacturers are required to disclose to the Centers for Medicare and Medicaid Services (CMS) any payments or other transfers of value made to physicians or teaching hospitals as well as physician ownership or investment interests in certain manufacturers or group-purchasing organizations.

These data, which have been collected since August 2013, were published for the first time earlier this week in a publicly searchable database and will be updated annually. There is a long history of financial relationships between physicians and medical product manufacturers, which can include anything from free meals to consulting, speaker fees, and direct research funding. This health policy brief looks at the PPSA and its impact on physician-manufacturer relationships.

Read the rest of this entry »

Establishing Vouchers For Veteran Health Care


October 2nd, 2014

Editor’s note: For more on this topic, stay tuned for additional Health Affairs Blog posts today from Jonathan Bush and Joel Kupersmith. 

Recent disclosures of long wait times at Department of Veterans Affairs (VA) facilities that are presumed to lead to adverse patient outcomes have led to calls for reorganization. Possible reorganization approaches include privatization and the provision of vouchers to enrolled veterans. However, this discussion must recognize that Medicare already provides comprehensive services to the majority of VA patients.

Provider care coordination accompanied by financial incentives such as subsidized co-pays and deductibles, or purchased MEDIGAP policies, could induce veterans who use relatively little VA care to choose most, if not all, of their health care from Medicare providers. This would affect budget allocations under current VA funding and the new funding under the PL 113-146 (Veterans’ Access to Care through Choice, Accountability, and Transparency Act of 2014), potentially freeing up VA resources to deal with increasingly complex patients, without creating another bureaucracy or insurance program. Combined with VA management reforms which should include provider productivity requirements and more intense quality reviews, financial incentives to focus VA care have the potential to help VA return to performing its core mission successfully.

Read the rest of this entry »

An Interview With George Halvorson: The Kaiser Permanente Renaissance, And Health Reform’s Unfinished Business


September 30th, 2014

For decades, health policymakers considered Kaiser Permanente the lode star of delivery system reform.  Yet by the end of 1999, the nation’s oldest and largest group model HMO had experienced almost three years of significant operating losses, the first in the plan’s history. It was struggling to implement a functional electronic health record, and had a reputation for inconsistent customer service.  But most seriously, it faced deep divisions between management and the leadership of its powerful Permanente Federation, which represents Kaiser’s more than 17,000 physicians, over both strategic direction and operations of the plan.

Against this backdrop, Kaiser surprised the health plan community by announcing in March 2002 the selection of a non-physician, George Halvorson, as its new CEO.  Halvorson had spent most of his career in the Twin Cities, most recently as CEO of HealthPartners, a successful mixed model health plan.  Halvorson’s reputation was as a product innovator; he not only developed a prototype of the consumer-directed health plan in the mid-1990’s, but also population health improvement objectives for its membership, both firsts in the industry.

During his twelve year tenure as CEO, Halvorson not only guided the plan to solid profitability, but added a million members in California, its largest market, despite a devastating recession and a national retreat of commercial HMO membership.  He invested over $6 billion in computerized patient care systems and population health management infrastructure, healed the breach with Kaiser’s physicians, and markedly increased its consumer satisfaction scores, earning 5 STAR ratings under Medicare Advantage.  He left the organization at the end of 2013 with more than $53 billion in revenues and more than $19 billion in reserves and investments.

This interview covers Halvorson’s time at Kaiser, his views of health reform, including the unfinished reform agenda, and his public health activism.  It was conducted by Jeff Goldsmith, a veteran health industry analyst, and Associate Professor of Public Health Sciences at the University of Virginia.  Jeff is a member of the editorial board of Health Affairs.

Read the rest of this entry »

The Payment Reform Landscape: Value-Oriented Payment Jumps, And Yet …


September 30th, 2014

Today, Catalyst for Payment Reform (CPR) unveiled some potentially exciting news: Our 2014 National Scorecard on Payment Reform tells us 40 percent of commercial sector payments to doctors and hospitals now flow through value-oriented payment methods, defined as payment methods designed to improve quality and reduce waste.  This is a dramatic increase since 2013 when the figure was just 11 percent.

Traditional fee-for-service, where we pay for every test and procedure regardless of its value, may rapidly be becoming a relic.  While the Scorecard findings are not wholly representative of health plans across the United States, they are directionally sound and allow us to measure progress toward value-oriented payment in the commercial sector.  (Scorecard findings are based on data representing almost 65 percent of commercial health plans across the country.)

On the face of it, this is thrilling news for CPR, especially since our organizational goal is that at least 20 percent of payments to doctors and hospitals will flow through methods proven to improve value by the year 2020.  But we are not closing up shop just yet.  The proliferation of value-based payment arrangements only matters if they succeed at reducing costs and improving the quality of care. And for many value-oriented payment models, we still don’t have the evidence.

We also remain a bit circumspect because only about half of the value-oriented payments (out of that 40 percent figure) put providers at some financial risk if they fail to improve care or spend over budget.  To employers and others helping to foot the bill for health care, many new payment methods often feel like “cost plus arrangements.”  Instead, purchasers would like to see risk sharing across payers and providers.

Read the rest of this entry »

IOM Report Calls For Transformation Of Care For The Seriously Ill


September 24th, 2014

The new Institute of Medicine (IOM) report on care near the end of life in the United States was released last week. I had the privilege of serving on the Committee for the last two years, involved both in the writing of the report itself and in coming to consensus on its recommendations.

The name of the report and the charge to the Committee from the IOM was focused on “end of life.” However, the title, “Dying in America,” is something of a misnomer. The report itself focuses extensively on people with serious and chronic illness with indeterminate prognoses, why the current health care system fails so consistently to meet their needs, and what must change to improve the situation.

Hospice is the gold standard of care quality for those that are predictably dying and clearly at the end of life, and we are fortunate as a nation to have such a strong (mostly home) hospice infrastructure, but that’s not where most of the problems lie. The problems lie in the lack of options for people who are either not hospice-eligible (prognosis uncertain or continuing to want and benefit from disease treatment) or are referred to hospice much too late in their disease course to influence their experience and their families’.

The new report builds on the 1998 IOM report “Approaching Death” and goes well beyond the usual nostrums of calling for reimbursement for advance care planning and decrying all the “waste” in health care spending during the last year of life.

Read the rest of this entry »

Click here to email us a new post.