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April 18, 2016

Washington Health Policy Week in Review Archive aa650345-c66a-4287-8a40-1ad6d305dd75

Newsletter Article


Medicare Announces Major Test for Changing Pay for Primary Care

By Kerry Young, CQ Roll Call

April 11, 2016 -- Medicare officials announced on Monday a major plan to shift primary care for the nation's elderly and disabled toward a more coordinated approach through a large-scale test program. The initiative is part of the Obama administration's bid in its final months for an overhaul of how the federal health program pays for medical services.

The Centers for Medicare and Medicaid Services (CMS) described the new program as its largest initiative affecting primary care. Known as the Comprehensive Primary Care Plus model, the program is meant to involve more than 20,000 doctors and medical providers and more than 25 million consumers. CMS plans to kick off the five-year test in January. The program would be implemented in as many as 20 regions and may enroll as many as 5,000 practices.

"By supporting primary care doctors and clinicians to spend time with patients, serve patients' needs outside of the office visit, and better coordinate care with specialists we can continue to build a health care system that results in healthier people and smarter spending of our health care dollars," said Patrick Conway, the chief medical officer at CMS, in a statement.

CMS is working to move much of Medicare's more than $600 billion in annual payments away from the traditional fee-for-service approach to care, which is seen as a root cause of poor coordination of care. Doctors tend to work in silos, with specialists and primary care physicians sometimes failing to share test results, replicating each other's work or inappropriately prescribing treatments for patients.

CMS wants to tie more physician payments to measures of how well patients' care is coordinated or their health is preserved or regained. The agency has a goal of tying about half of its payments to alternative payment models by 2018. Among the major Medicare tests underway is a model that will tie payment for many hip and knee replacements to judgments about how well patients fare in the 90 days after surgery.

The primary care program announced Monday includes two approaches. In its Track 1, CMS would pay a monthly care management fee in addition to the usual fee-for-service payments for doctors' care. In Track 2, practices also would get a monthly care management fee while shifting to a hybrid of reduced Medicare fee-for-service payments and upfront comprehensive primary care payments for those services. The intent is to allow greater flexibility in how practices deliver care outside of the traditional face-to-face encounter, CMS said.

Primary care practices in both tracks will get feedback through data on their costs and use of health services. Those enrolled in Track 2 will sign an agreement with CMS to commit to supporting enhanced health information technology capabilities.

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Medicare Expenses Outpaced Savings in Early Results of Key Test

By Kerry Young, CQ Roll Call

April 14, 2016 -- Medicare on Wednesday reported disappointing early results from its Comprehensive Primary Care Initiative, which is designed to shape an eventual overhaul of federal payments for basic medical services for the elderly and disabled. The savings in the program's first two years failed to offset its expenses, while the quality of medical care did not improve as expected, Medicare officials reported.

"It's a cautionary note that after two years we haven't seen those goals achieved yet. There's still the prospect of further improvement" in the program's last two years, said John Ayanian, a University of Michigan researcher who studied the initial results of the program, in an interview. "But it may also signal the need for more substantial changes to primary care."

Monthly expenses fell by an average of about $11 per patient in the program, with reductions ranging from $1 to $21, according to a Mathematica Policy Research report for the Centers for Medicare and Medicaid Services (CMS). That adds up to about $91.6 million in total savings, possibly because closer contact between doctors and patients reduced the need for hospitalizations and use of skilled nursing centers. The reduced costs, though, were not enough to offset a fee averaging $18 a month per person enrolled in Medicare, the report said. The New England Journal of Medicine on Wednesday published the initial results.

The program should be viewed as a "down payment" on broader changes that Medicare officials are seeking to make in the program, said Ayanian, director of the University of Michigan's Institute for Healthcare Policy and Innovation and the author of an editorial accompanying the results. The Obama administration is moving away from the traditional fee-for-service program, which some say results in uncoordinated patient care and needless expenses, such as duplicated tests and hospitalizations.

The authors of The New England Journal of Medicine paper included Patrick Conway, the chief medical officer for CMS. Conway on Monday announced plans for another primary-care test program.

"There are a few possible reasons why these findings were not more favorable," the authors wrote, explaining that doctors may need more time to adjust to a coordinated approach to care and greater incentives may be needed to shift away from the fee-for-service approach. 

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HHS Report Shows Lower Premium Increase Than Expected

By Erin Mershon, CQ Roll Call

April 12, 2016 -- The Obama administration is hoping to stave off a repeat of last year's furor over rising insurance premiums on the public exchanges with a new report that highlights a 4 percent average premium increase for people getting tax credits under the Affordable Care Act.

That's a much lower rate than some of the double-digit premium hikes insurers initially proposed, when some were asking for rate hikes as high as 35 to 40 percent. Those requests sparked negative headlines and became a frequent punching bag for Republicans opposed to the health. House Speaker Paul D. Ryan, R-Wis., railed against "double digit premium increases," and Republican presidential frontrunner Donald Trump blasted the spike in costs.

The 4 percent average increase the administration highlighted only accounts for those consumers receiving tax credits, about 85 percent of consumers. A broader analysis of premium increases, leaving out the credits, showed an average premium increase of 8 percent.

This year, Richard Frank, director of the Office of the Assistant Secretary for Planning and Evaluation at the U.S. Department of Health and Human Services (HHS), is hoping to undercut Republicans' criticisms early.

"Marketplace consumers would do well to put little stock in those initial numbers," he wrote in a blog post Tuesday touting the administration's calculations.

In its new report, HHS emphasizes that those initial proposed rates don't predict what consumers will actually pay, because they don't take into account state insurance commissions' rate reviews, the ability consumers have to shop for cheaper coverage, or the tax credits consumers often receive under the health law, which increase if the cost of a benchmark plan increases.

"We've seen a lot of switching around of insurers offering the lowest cost option, and for that reason, people on the exchange who are shopping are also demonstrating that they're willing to switch to lower cost companies," said Cynthia Cox, an associate director at the nonpartisan Kaiser Family Foundation. "It seems that enrollees are particularly price sensitive when it comes to the premium, more so than what we've seen when it comes to other markets."

The report also underscored that more than 2.3 million people—43 percent of returning customers—chose a new plan for 2016, which the administration said greatly reduced the average premium increase and cut premiums by an average of $42 per month.

HHS also estimated that state regulator reviews saved consumers $1.5 billion last year.

A health insurance industry official suggested that plans are facing uncertainty in the new marketplaces that can affect premiums.

"Premiums reflect the rising cost of medical care driven by higher prescription drug prices and hospital costs," said Clare Krusing, a spokeswoman for America's Health Insurance Plans. "On top of that, this is a market that is still in the midst of a major transition. Between changes to the premium stabilization programs and uncertainty around special enrollment periods, there needs to be much greater focus on promoting a stable, affordable market for consumers."

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Hospitals Watch for News on Uncompensated Care in Medicare Rule

By Kerry Young, CQ Roll Call

April 13, 2016 --Hospital groups may soon learn whether they’ve made progress in bids to change how their customers’ unpaid bills factor into Medicare reimbursement calculations. The program for the elderly and disabled is poised to begin unveiling a series of its annual payment rules.

Medicare is expected to release soon its draft of the fiscal 2017 rule on payment for hospital stays. These payments for so-called inpatient stays are among the federal government’s single biggest expenses of any kind, costing Medicare about $110 billion. The White House’s Office of Management and Budget (OMB)  has been reviewing the hospital pay rule since March 21. OMB checks on major rules before federal agencies release them. OMB also already is reviewing a payment rule for skilled nursing care and a rate update for hospice, services that combined cost Medicare more than $40 billion a year.

The Centers for Medicare and Medicaid Services (CMS) likely will outline steps for a new uncompensated care framework in the fiscal 2017 hospital payment rule, given the agency’s past statements, lobbyists said. Implementing a change may take several years.

The Medicare Payment Advisory Commission (MedPAC) in March recommended a slow shift to using hospitals’ cost reports for these calculations. CMS now relies on a proxy measure that reflects hospital stays of low-income and disabled people in the Medicaid program.

“Given that the [cost reports] more closely tracks hospitals’ relative costs of caring for the uninsured, we have urged CMS to transition over three years,” MedPAC said, adding that this “will prevent financial shocks to hospitals and will create an incentive for them to more accurately report uncompensated care.”

The advisory panel found many flaws in the current CMS approach to uncompensated care payments for hospitals. Medicare's subsidies of Medicaid costs sends states a signal that they can underpay hospitals through Medicaid, MedPAC said.

The panel also noted that this current approach focuses on inpatient stays. “It ignores uncompensated care that occurs in the emergency department, which is problematic for rural hospitals that may provide much of their uncompensated care in an outpatient setting,” MedPAC said.

This work on Medicare's uncompensated care involves addressing thorny issues that echo from the 2010 health overhaul. The measure changed how the federal government helps hospitals cover the expenses of treating people who can’t afford to buy their services, while also moving to bring millions of Americans into private insurance and Medicaid plans. The pool of money directly designated for uncompensated care dropped to about $6.4 billion for this year from $9.4 billion in 2014, according to MedPAC.

Under the current approach to setting payments from the uncompensated care pool, hospitals in states that didn’t expand Medicaid are being penalized, said Paul A. Salles, chief executive of the Louisiana Hospital Association, in a comment to CMS on the fiscal 2016 payment rule. Louisiana only this year began expanding its Medicaid eligibility.

Like many other hospital executives, Salles said that further work needed to be done on the form of cost reports before they could be used as a basis for payments.

"We urge the agency to take action to revise and improve both [the form of the cost report] and the instructions and, once stakeholders have had an opportunity to weigh in on the proposed changes, educate both the field and CMS’ contractors," he wrote to CMS last year.

Kerry Young can be reached at [email protected].

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States to Offer New Choices on Small-Business Exchanges

By Erin Mershon, CQ Roll Call

April 11, 2016 -- Twenty-one states opted to add a new option for choosing insurance coverage to their small-business insurance exchanges—a move that regulators hope will encourage more participation from employers.

The Small Business Health Option Program, or SHOP, exchanges, created under the health overhaul to help small-business owners offer their employees more options for health insurance coverage, have until now focused on letting employees choose between different insurers. Under the new option, called "vertical choice," employers can select a specific insurer and let employees choose from among different benefit levels that the company offers on the exchange. Those levels include bronze, silver, gold, and platinum plans.

The Centers for Medicare and Medicaid Services (CMS), which finalized the option for states using the federal SHOP exchange platform in a March regulation, announced late Friday which states will participate in the option. State-run SHOP exchanges have always had the flexibility to offer vertical choice, and a CMS spokesman said the option is popular among small employers in states that offer it.

"This is a win for small business owners," said David Chase, the healthcare policy director at the Small Business Majority advocacy group, which generally supports the health care law. "The SHOP exchanges haven't been as robust and as successful as we'd originally hoped, so adding new bells and whistles—we're hopeful that will increase its value proposition and help in recruiting more small-business owners to participate."

Regulators hope the option will draw new participants to the SHOP exchanges, which have enrolled fewer consumers than their designers had hoped. The marketplaces suffered an even rockier rollout than the federal website. Many weren't ready as the first open enrollment season launched, and several attracted just a single participating insurer. CMS has not released official enrollment data for the SHOP program and declined to offer details Monday.

"The SHOP only has a couple years to really prove itself or else I don't know what happens to it," said Kevin Kuhlman, manager of legislative affairs at the National Federation of Independent Businesses, which unsuccessfully challenged the health law's mandate in a lawsuit that the Supreme Court decided. "It's just kind of been an afterthought, unfortunately."

Kuhlman said adding vertical choice would help attract some employers, but probably would not be a "game changer."

Insurers also said the changes would not dramatically impact their business on SHOP. A spokeswoman for the industry's major trade group, America's Health Insurance Plans, pointed out that few employers have signed up for SHOP and noted the changes would only affect a small subset of the small employer market.

The health law requires SHOP exchanges to offer so-called "horizontal choice," under which small business employers select a metal tier offered on the exchanges, like the silver tier, and then let their employees choose their specific plan on that tier. States can no longer opt out of horizontal choice.

Under both the horizontal and vertical options, employers may pay a defined contribution toward an employee's plan; employees make up the difference if they choose a more expensive option.

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Health Insurers Stop Providing Cost Data to States

By Erin Mershon, CQ Roll Call

April 12, 2016 -- Some employer-sponsored insurance plan officials are refusing to give states information about health care costs, after a Supreme Court decision last month struck the states' power to compel those insurers to participate.

Plans that provide health insurance in Colorado, Utah, Maryland, Minnesota, and Oregon have dropped out or stopped sending cost data to state programs in recent weeks, officials in those states told CQ Roll Call. Advocates say the states' databases, which rely on submissions from all insurers to shed light on the cost of care, are an important tool in bringing down health care prices.

Many of the 12 states with the databases required participation from all insurers. But in a 6–2 decision in Gobeille v. Liberty Mutual Insurance Company, the Supreme Court ruled that self-funded employer plans—which cover about half the nation's employees—don't have to participate, because a federal law governing those plans (PL 93-406) takes precedence. Under a self-funded plan, employers typically pay the medical claims of their workers, with some administrative help from an insurance company, rather than paying an insurer to assume the risk of covering the personnel.

"It's starting," said Al Gobeille, chairman of the Vermont Green Mountain Care Board, who brought the legal case to the Supreme Court. "They're making a statement. . . . It's not helpful to the health of the populations where their employees live."

Most states with databases are seeing at least some employer-run plans drop out, said Trish Riley, executive director of the National Academy for State Health Policy (NASHP), which is convening a group of administrators to work on this issue. Officials in the other states with databases didn't respond to inquiries by Tuesday afternoon.

"Given how big a part of the database self-funded plans are, this is a very big deal," Riley said, adding that even some plans not subject to the Supreme Court exemption have dropped out of participation, citing the decision. "There's a real need for clarity on what Gobeille does and doesn't say."

Employers' Perspective

Employers who use self-funded plans have said they don't oppose efforts to collect the data or lower health care costs. Rather, they oppose the costs associated with complying with the data collection, and fear a scheme under which they might be forced to submit different data sets to individual states.

"Most employers are all for some kind of national database and more transparency about what's going on and what are we paying for in health care, but they are concerned about having to spend the time and these administrative dollars on all kinds of requirements," said Steve Wojcik, vice president of public policy at the National Business Group on Health, which represents employers. He said he hadn't heard from any companies interested in dropping out since the Supreme Court ruling.

Proponents, however, argue that because most of the data from self-funded plans comes from commercial insurers, with which the employers contract to administer their plans, submitting the information shouldn't be too big a burden for the self-funded plans. Commercial insurers that are taking on the risk of covering workers are already legally obligated to submit their claims data under the state laws establishing many of the databases.

Norman Thurston, director of Utah's Office of Health Care Statistics, also said it isn't the employers who have not submitted the data, but the insurance companies that administer the benefits for them through the self-funded plans. He said plan administrators were evaluating what they need to submit, and some were "understandably cautious about submitting data" not legally required of them.

"It is our hope that the business community will continue to see the value of participating in the [database], even when it is voluntary, and that their administrators will continue to support and encourage businesses to participate," he said in an email.

Minnesota's state health economist also emphasized that it was the plan administrators, not the employers themselves, who had stopped submitting the plans' data.

Colorado database officials, meanwhile, said they're optimistic about convincing employers to continue to participate in the so-called all-payer claims database, and are considering an advertising and educational campaign to make their case. In that state, self-funded plans were able to opt out even before the court decision.

"We anticipate that once we really start promoting that to them full force, we will continue to have people voluntarily submit and we'll probably get back some of the people who decided to opt out," said Cari Frank, a spokeswoman for that database.

Protecting their Rights

Many of the database officials and other advocates believe self-funded employer plans are pulling out of the programs to make a statement about their rights under the federal law in question, the Employee Retirement Income Security Act, known by its acronym ERISA. The law regulates certain private insurance plans that aren't otherwise regulated by state insurance commissioners.

"They believe there's an iron wall around ERISA and they don't want to be parties to anything that reduces the exemption they have from state administration of their benefit program," David Lansky, chief executive officer of the Pacific Business Group on Health, told reporters at a briefing in Cleveland last week. "Whenever the ERISA flag is waved, they have a pretty strong reaction to that issue."

Raising the stakes is a high-profile court case in Michigan, in which self-funded plans sued Republican Gov. Rick Snyder for a tax levied on health care claims. The plans argued they should be exempt from the state tax because of the federal law, though they lost on appeal. The Supreme Court asked the Sixth Circuit Court of Appeals to reconsider that decision last month in light of its Gobeille decision.

Wojcik disagreed that the self-funded plans were leaving the databases in an effort to protect their rights under ERISA, saying it was more likely the employers wanted to avoid the financial burden of the reporting requirements.

Moving Forward

Advocates of the databases are hoping the Department of Labor will intervene with regulations that would require the plans to submit claims data at the federal level, which could be turned over to states for their own projects.

Riley, the NASHP director, said she has spoken with Labor officials about the issue and was told the agency is in the process of reviewing its authority and interest in the issue.

"This caught them by surprise, too," she said. "They're doing a full review of what their scope is, and once they complete that review, we hope to sit down with them about this."

A Labor Department spokesman did not comment.

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