Health Affairs

As life spans increase and birth-rates decrease, the world’s population is aging. From 2000 to 2025, the over-60 demographic segment will double from 600 million to almost 1.2 billion. By 2050, it will nearly double again, surpassing two billion and accounting for an incredible 22% of the total global population. A society this “old” has never before existed, and it is a social, ethical, and economic imperative to keep older adults healthy and engaged. It is timely for the global public health community to re-align its thinking, policies and activities to this new demographic reality.

Organizations at national and global levels have begun to pursue initiatives to promote healthy aging, and these efforts are going to intensify in the coming years. Thus far, the progress has been admirable, with the World Health Organization, the United Nations, the Organisation for Economic Co-operation and Development, and others taking leadership roles. Yet, despite many promising developments, the potential of “life-course immunization,” which stresses the administration of vaccines throughout all stages of life – including for adults – to prevent disease and promote health, has been largely overlooked, especially among adults.

This is a missed opportunity. There is a growing body of research and data to show that immunizations against some of the more specific age-related health challenges – such as pneumococcal disease, herpes zoster, and others – are economically feasible investments that can create large public health benefits.

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.

Dr. Jonathan Welch’s Narrative Matters essay in the December, 2012 edition of Health Affairs, regarding the cascade of errors and omissions he witnessed in connection with the care provided to his mother, should raise profound questions about how the hospital allowed those failures of care to happen. Dr. Welch, an emergency medicine physician, watched helplessly as his mother received indifferent care from various nurses and doctors and ultimately died. Despite having classic signs of evolving sepsis, she was not closely monitored by the nursing staff which ignored alarming signs, was not put on a sepsis treatment protocol by her oncologist, and was not put in an intensive care unit where she could receive more intense monitoring and aggressive treatment from specialists.

While it is tempting to blame the nurse (for not taking vital signs frequently enough and not reacting to abnormal vital signs) and the oncologist (for not following the patient closely enough, not initiating appropriate treatment, and not involving other specialists), Dr. Welch’s story suggests that there were more deeply rooted systemic problems at the hospital that went beyond the shortcomings of the individuals involved in his mother’s care.

As health care attorneys who represent hospitals and physicians, we believe there are some fundamental questions which should be asked by this hospital’s administration, medical staff leadership and governing body to ensure Dr. Welch’s experience is not repeated. Those questions, which the leaders in all hospitals should consider, include the following:

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

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.

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.

A new study, released today as a Web First by Health Affairs, reports that cancer patients in Washington state were 2.65 times more likely to file for bankruptcy than people without cancer. Of 197,840 cancer patients age 18 or older in the western district of Washington between 1995 and 2009, 4,408 (2.2 percent) filed for bankruptcy protection after being diagnosed with cancer. Among a control group of 197,840 people from that same region who did not have cancer, only 2,291 (1.1 percent) filed for bankruptcy.

“Although the risk of bankruptcy for cancer patients is relatively low in absolute terms, bankruptcy represents an extreme manifestation of what is probably a larger picture of economic hardship for cancer patients,” conclude Scott Ramsey of the Fred Hutchinson Cancer Research Center and coauthors. “As a policy issue, there may be a role for employers and governments in creating programs or incentives to reduce the likelihood of financial insolvency, given that bankruptcies are ‘lose-lose’ events for debtors and creditors alike.”

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.

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.

If you missed last week’s Health Affairs briefing on our May issue, “Tackling The Cost Conundrum,” or if you just want to see it again, video and speaker materials are now available on the Health Affairs website. You can watch the whole briefing or select particular panels or speakers.

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.

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).

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.

Health Affairs’ May issue, released today, analyzes the recent slowing in the growth of health care expenditures and explores whether the trend will last. The issue also addresses major cost drivers in Medicare and presents proposals for putting the program on a more sustainable path. Another article tracks federal spending on mental health during severe state budget constraints throughout the recession.

As Health Affairs Founding Editor John Iglehart notes on his “From The Founding Editor” page (quoted at length below), the new thematic volume, “Tackling The Cost Conundrum,” continues the journal’s coverage of a topic that has been a “driving theme” of the journal since its inception. The May issue will be discussed at a National Press Club briefing tomorrow morning, Tuesday, May 7. The issue and briefing are supported by a grant from the Robert Wood Johnson Foundation.

Researchers writing in the new issue are cautiously optimistic that the slowdown in health care spending is here to stay. A study by Michael Chernew, Alexander Ryu, and colleagues at Harvard Medical School looks at two factors potentially contributing to the record slowdown in growth to 3.1 percent during 2007-11: job loss and benefit changes shifting costs to the insured. Analyzing National Health Expenditure Accounts and large-employer data, the authors found that benefit design changes that increased enrollees’ out-of-pocket costs were responsible for about one-fifth of the observed decrease in the rate of growth. However, the slowdown occurred even when benefit generosity at large firms was held constant. The authors suggest that other factors are largely responsible and that major events, such as health reform, shifts in payment methodology, and the transformation of the delivery system’s organization may contribute to a longer-term trend of slower spending growth.

In a related article, David Cutler and Nikhil Sahni of Harvard University conclude that fundamental changes, including less-rapid development of imaging technology and new pharmaceuticals, increased patient cost-sharing, and greater provider efficiency, led to the majority of the slowdown in health care spending growth; if this path continues for the next ten years, public-sector health care spending could wind up $770 billion under projections, they write.

Tens of millions of uninsured people will soon have the ability to gain health coverage as the first enrollment period under the Affordable Care Act (ACA) begins on October 1, 2013, with actual coverage starting in January 2014. New marketplaces will be established for the purchase of private insurance, pre-existing coverage exclusions and discriminatory premiums will end, and comprehensive benefits will be included in health plans.

Most significantly for the vast majority of uninsured Americans, the ACA offers unprecedented financial assistance (in the form of a tax credit) to make private health plan premiums more affordable and, in many states, expanded Medicaid coverage.

The ACA represents a truly historic series of improvements – a legislative triumph that eluded many presidents before Barack Obama. As noteworthy as this achievement is, however, substantial coverage expansion will only occur if uninsured families learn about these new opportunities and actually get enrolled in private or public health coverage.

Enroll America was formed in 2011 with that goal of educating consumers about the new law and helping them to enroll in the plan that is right for them. There remains an enormous amount of work to do and challenges to overcome to make sure the ACA lives up to its potential.

In a publication released in numerous states as well as a JAMA Forum article and a recent list of ten supposed “myths” about Medicaid expansion, the Heritage Foundation repeatedly cites our paper for the proposition that “40 of 50 states are projected to see increases in costs due to the Medicaid expansion,” and that expansion would force such states “to dig deep into their already overstretched budgets.” Even in the 10 remaining states, according to Heritage, the budget gains we projected to result from expansion were speculative and uncertain, since they supposedly relied on states cutting payments for hospital uncompensated care.

These claims distort our work. We identified 10 states in which Medicaid expansion would yield net savings based on just one factor—namely, unusually generous prior Medicaid coverage, for which states could claim enhanced federal matching funds. The modest additional gains resulting from uncompensated care savings did not tip any state from the red into the black.

Medicaid Expansion Offers Budget Savings, Revenue, and Economic Gains to States

More importantly, Heritage ignored our explanation that, because we were limited to “data available for all 50 states and the District of Columbia, we were unable to estimate several potential sources of state fiscal gain;” and that if additional, state-specific factors were considered, “many more states could realize net fiscal gains.” Nor did Heritage acknowledge that all states must pay for national health reform but only those that expand Medicaid will receive large, offsetting allotments of federal Medicaid dollars, with resulting economic activity, jobs, and state revenue.

Yesterday, Senator Orrin Hatch (R-Utah) and Representative Fred Upton (R-Mich.) released their plan for “Making Medicaid Work.” One of the blueprint’s key proposals is to implement per capita caps, which would impose a cap on the funds that the federal government contributes to states for each Medicaid beneficiary. In April Health Affairs released a Health Policy Brief that explains how a per capita cap would work and looks at the arguments for and against the approach:

Supporters contend that instituting a system of per capita caps would moderate the growth of federal spending on Medicaid. They describe the approach as a middle ground between the program as it currently operates and other proposals such as block grants, which would more dramatically change the way federal Medicaid funding is calculated.

Critics contend that a per capita cap approach would not necessarily slow the rate of growth of Medicaid spending. If it did, they say, it would do so by shifting the costs to the states, which would face even greater pressures to cut services or limit eligibility, ultimately limiting many poor Americans’ access to care. What’s more, they contend that setting up a system of per capita caps would be very complex and difficult to administer.

The torrent of Affordable Care Act guidance that marked the end of April has continued into May, as the Centers for Medicare and Medicaid Services (CMS) released on May 1, 2013, a Health Insurance Marketplace Guidance on the role of agents, brokers, and web brokers in the health insurance marketplaces, formerly known—and still referred to here—as the exchanges.

Agents and brokers are the traditional channel through which most Americans and their employers have purchased health insurance coverage. The ACA and implementing guidance offer new forms of assistance to help consumers enroll in insurance coverage, including navigators, in-person assisters, enrollment counselors, and the exchange itself with its call center and web portal. Nevertheless, if the exchanges are to fulfill expectations by signing up millions of Americans for health insurance coverage, agents and brokers, including web-based brokers, will pay a vital role. They will play a particularly important role in assisting small employers in signing up for the SHOP exchanges. This guidance describes their role.

Although the April 1 Call Letter from the Centers for Medicare and Medicaid Services (CMS) seemed to reverse proposed rate cuts to Medicare Advantage (MA) plans, the outlook for insurers still isn’t rosy. The “all-in” impact of the per capita rate increases will be offset by new risk coding intensity adjustments, shifts to fee-for-service parity, and the Health Insurance Tax, actually resulting in an expected 2-3 percent cut for MA plans for 2014.

The Call Letter also limits beneficiary cost sharing, a lever that plans have typically used to offset reductions. Such measures come on top of the potential risk of reductions from sequestration, which may lower fee-for-service (FFS) and health plan capitations by a further 2 percent per year.

The expected impact is lower than the original CMS proposal of 8 – 9 percent for 2014, but the announcement still serves as an urgent reminder of the endgame for Medicare— the rate cuts outlined in the Affordable Care Act (ACA) that will result in approximately 14 percent reductions in MA reimbursements, relative to pre-ACA reimbursements, by 2017. Traditionally MA has enjoyed a rate premium compared with FFS, often justified by the enhanced benefits available to members. These cuts, however, will put the plans roughly at parity.

Although most of the major rules necessary to implement the 2014 Affordable Care Act reforms are now in proposed or final form, gaps still remain to be filled. On April 30, 2013, the Internal Revenue Service released a notice of proposed rulemaking intended to answer some of the questions that remained open in the wake of May 2012 final regulations implementing the premium tax credit program.

Premium tax credits are not normally available to individuals who are offered health insurance coverage by their employer. Such individuals may, however, be eligible for premium tax credits if the employer coverage does not provide “minimum value” (MV) or if the employer coverage is “unaffordable” An employer that offers a health plan that fails to provide MV or that is unaffordable may also be assessed a penalty if one or more of its employees turns to the exchange for premium tax credits.

The primary focus of the proposed rule is defining the concept of MV, although it addresses several other issues as well. The proposed regulation follows up on an earlier notice requesting comment on MV and complements Health and Human Services regulations published in February of 2013 that also address MV.