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June 11, 2012

Washington Health Policy Week in Review Archive cc498482-3a48-4307-9063-164073006cf9

Newsletter Article


Commonwealth Fund Report: Young Adults Care, Know They Need Insurance

By Dena Bunis, CQ HealthBeat Managing Editor

June 8, 2012 -- A new study by The Commonwealth Fund challenges the common notion that young adults are not interested in health insurance and says that of the 13.7 million people ages 19 to 25 who stayed on or enrolled in their parents' plans in 2011, 6.6 million were able to do so because of the health care overhaul.

The online representative sample of 1,863 adults ages 19 to 29 found that among those working young adults who could get insurance through their jobs, 64 percent did. Of those who did not, only 6 percent said they did not need coverage. The others who did not enroll either said they have insurance under their parents' health plans, were covered through a spouse or partner or said they couldn't afford their employer's plan.

The bottom line, Commonwealth Fund President Karen Davis told reporters on a conference call, is that when affordable coverage is available, young people will enroll. "They don't think they are immortal.''

Another surprising finding was that based on the survey, 36 percent of 19-to-29 year-olds, or 16.8 million young adults, had trouble paying their medical bills, and 41 percent, or 18.9 million, delayed necessary medical care because of cost.

The researchers pointed out that even with the health care law's provisions on parental policies, 39 percent of young adults—18 million—went without health insurance at some time in 2011.

Another surprising finding was the level of medical debt some young people are carrying. More than one-third of young adults had a problem with a medical bill or were paying off a medical debt over time. And one-quarter of those paying off their medical bills had a debt of more than $4,000. Nine percent said their debt was $10,000 or more.

Sara Collins, vice president for affordable health insurance at The Commonwealth Fund and lead author on the study, said one explanation may be that for those young people who do not have insurance on the job or through their parents, policies they get in the individual market often won't cover what they need.

"We know, even though a stereotype of young adults is they are very healthy, certain health conditions and health needs are very prevalent,'' Collins said. "One is maternity. If someone in this age range does have a child, they are likely exposed to full costs."

This age group also has the highest rate of injury-related visits to emergency rooms than any other age group, Collins said. They also have high rates of HIV/AIDS and human papillomavirus (HPV).

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Medicare, Insurers Offer Financial Incentives for Better Primary Care Management

By CQ Staff

June 6, 2012 -- Federal Medicare officials are teaming up with other government and private insurers to provide financial incentives to primary care practices to better manage patient care.

Under the program announced last week, 45 commercial, federal, and state insurers in seven markets will collaborate with the Centers for Medicare and Medicaid Services (CMS) in a four-year initiative administered by CMS' innovation center. About 75 primary care practices from each market will be selected to participate, and the application period is open until July 20.

Under the Comprehensive Primary Care initiative, CMS will pay participating primary care practices a care management fee averaging $20 per month per Medicare beneficiary. At the same time, the other insurance partners will offer payments to these practices to provide similar services for those payors' members. CMS officials said they don't yet know how much the total project will cost.

Insurers in Arkansas, Colorado, New Jersey, Oregon, New York's Capital District-Hudson Valley Region, Ohio's and Kentucky's Cincinnati-Dayton region, and greater Tulsa, Okla., signed agreements with CMS to participate in this initiative, CMS officials said, adding that the markets were selected based on a diverse pool of applicants from commercial health plans, state Medicaid agencies, and self-insured businesses who hoped to work alongside Medicare to support comprehensive primary care.

In order to receive the new care management fee from CMS and insurers, primary care practices must agree to provide enhanced services for their patients, including offering longer and more flexible hours, using electronic health records, delivering preventive care; coordinating care with patients' other health care providers, engaging patients and caregivers in managing their own care, and providing individualized, enhanced care for patients living with multiple chronic diseases and higher needs.

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Medicaid DSH Payment Cuts Could Add to Financial Woes of Safety-Net Hospitals

By Nellie Bristol, CQ HealthBeat Associate Editor

June 4, 2012 -- Cuts to Medicaid disproportionate share hospital payments required by the health care law could leave safety-net facilities unable to pay for necessary modernizations in health care delivery, experts recently said.

No matter how the Supreme Court rules on the law, according to Arthur Gianelli, president and CEO of NuHealth System in New York, payment changes in the health care system have already begun and will not stop. In response, hospitals, including safety net facilities, are reducing admissions, forging partnerships with other providers, expanding primary care and care management and entering into quality-based shared savings arrangements with payers. However, he said, lower DSH payments required by the health overhaul will leave already undercapitalized public hospitals with even less money to develop such alternatives. Gianelli spoke at an event sponsored by the Alliance for Health Reform and The Commonwealth Fund.

Medicaid disproportionate share payments (DSH), which provide funds to hospitals that treat large numbers of Medicaid and uninsured patients, will be reduced by a total of $18 billion, between 2014 and 2020 under the health law (PL 111-148, PL 111-152). Medicaid DSH payments currently total about $11.5 billion today. The overhaul assumes that decreases in the number of uninsured will make up for the lost revenues.

In addition to losing DSH funds, hospitals will be more limited in their ability to use commercial insurers to cross subsidize care since the health overhaul provides for a review of premium increases for private insurance, Gianelli added. "You're going to see a true tightening of the resources that are available to hospitals and certainly a tightening of the resources that are available to public hospitals and safety net facilities," he said.

Gianelli says public hospitals already are struggling as they straddle between service delivery systems based on fee for service payments and new arrangements focused on value. The first system rewards volume of care while the second rewards continuity and quality. Hospitals are being encouraged to reduce unnecessary admissions, but the payment system still does not yet adequately reward facilitating other types of care. "Hospitals are being asked to ... destroy their own demand," he said. "You almost can't find another example in any sector in the economy where a major economic player is asked to do less of what they do, but that's precisely what's going on in health care. It's critically important by the way that hospitals succeed in doing that for the health care system to be sustainable in the long run."

Policymakers can mitigate the squeeze by focusing Medicaid and disproportionate share dollars better, providing organizational flexibility to the facilities and clearing up anti trust issues at the state level to allow better integration of health facilities, Gianelli said.

Deborah Bachrach, special counsel for Manatt Health Solutions, also expressed concern about declining DSH payments. "The DSH cut is premised on the success of the [health overhaul]," she said. If the law is completely successful, there will be 20 million to 26 million uninsured remaining, she added. Policymakers need to ensure that DSH funding is adequate to cover the cost of services to the remaining uninsured. She recommended allocating the funds along a sliding scale based on actual services provided to patients.

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ACO-Type Models Growing in Medicaid

By Rebecca Adams, CQ HealthBeat Associate Editor

June 5, 2012 -- For the past couple of years, health policymakers have been developing new ways of delivering care in Medicare, most notably accountable care organizations (ACOs). But less attention has been given to similar models that are a growing trend in Medicaid.

Within the next week or so, the Center for Medicare and Medicaid Innovation is expected to announce a round of "innovation awards" that could support Medicaid demonstration projects that test out methods of coordinating care in a manner similar to ACOs. Medicare ACOs require medical providers to coordinate care for patients. They then share in any savings from this new model of care and, depending on the amount of risk a group is willing to assume, they could face penalties for not meeting savings goals.

The Medicaid versions are not all labeled ACOs and, in keeping with the experimental state-by-state nature of Medicaid, do not all have identical features. But at least a dozen states have begun testing different types of programs that emphasize closer communication and shared budgets among providers. Many of the state-based models do not emphasize sharp payment reductions for medical providers in ACOs that do not meet cost savings targets.

However, as in the Medicare ACO models, reducing costs is one goal. State officials are interested in the ideas behind ACO-type payment models in part because many are facing difficult fiscal situations and hope to lower costs through more effective coordinated care.

The innovation center, which will have up to $1 billion in Innovation Awards to give out, may serve as a significant catalyst for the expansion of these types of arrangements. Demonstration projects that go through the innovation center are expected to be able to begin operating more quickly than those that go through Medicaid state plan amendment negotiations with Centers for Medicare and Medicaid Services (CMS) officials.

The awards that will be announced this month will be the second round of Innovation Award funding. The goal of the center's grants is to reduce costs while improving care for patients.

Among the applicants waiting for news on the awards is the Boston Medical Center (BMC), which hopes to work with community health centers and health plans in a three-year project that will prepare the integrated system to become a Medicaid ACO. About half of BMC patients are Medicaid beneficiaries.

Last summer, the health center had talked to White House officials about participating in a multistate Medicaid demonstration project that would have used global capitation rates. The demonstration project had been included in the 2010 health care law (PL 111-148, PL 111-152) with the help of Sen. John Kerry, D-Mass. Officials in Boston had teamed with other health industry executives in Colorado, Florida and New York to push for the demonstration to proceed. They estimated that costs would decline by about 3 percent per year.

Federal officials did not move ahead with the five-state demonstration project but did tell the group about the innovation center awards. BMC and the Denver Health and Hospital Authority, another participant in last summer's proposal for a demonstration project, both applied for the innovation center grants and are optimistic that their proposals will be funded.

"There is a hunger at the state level to do better," said Kate Walsh, BMC's president and CEO.

The Denver Health and Hospital Authority, an integrated system with a hospital and health plans, is already participating in a state-run Medicaid program known as the Accountable Care Collaborative (ACC). State officials divided Colorado into seven regions and is allowing an ACO-type program to start enrolling Medicaid patients in each region.

David Brody, the medical director of Denver Health's managed-care plans, said funding from the innovation center could help build the type of infrastructure that is needed to expand capitated payment systems and hopefully improve patients' care through more coordination.

Brody said it has been helpful to apply for the grant and better think through plans for the future. He said the current fee-for-service system doesn't drive the right kinds of changes that are needed to improve patients' care.

"Even if we don't get the challenge grant funding we're requesting, we've moved forward since we submitted our proposal," said Brody. "As we look toward the future, I'm convinced that at some point we'll move more patients into a capitated system of care."

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On Exchanges: Model Unveiled by States, Foundations

By Jane Norman, CQ HealthBeat Associate Editor

June 8, 2012 -- A model that states could use to create their own health insurance exchanges was unveiled last week by the states that took part in developing it, the Silicon Valley company that did the design, and the foundations that financed the project.

Called Enroll UX 2014, the goal of the project was to "develop a first-class user experience for state and federal health insurance exchanges," says the project website.

Its emergence appeared to be a sign that even in states where there's political resistance to the implementation of the health care law (PL 111-148, PL 111-152), there is some level of bureaucratic interest in how the new marketplaces for health insurance sales would function.

According to the California Healthcare Foundation, which helped provide funding and was the managing partner of the project, it was made public at a meeting of state and federal officials in San Francisco. Staff from the Centers for Medicare and Medicaid Services (CMS) assisted with developing the model.

Participating states are Alabama, Arkansas, California, Colorado, Illinois, Massachusetts (in a collaboration with Rhode Island and Vermont), Minnesota, Missouri, New York, Oregon and Tennessee. Some of them have Republican governors who have been reluctant to move forward with full implementation of exchanges until the Supreme Court rules on the constitutionality of the law, a decision expected by the end of the month.

In Alabama, for example, Republican Gov. Robert Bentley is saying he will set up an exchange at the last minute via executive order if the court upholds the law, according to the Mobile Press-Register. Alabama is also a party to the suit pending before the court.

In other participating states, disagreement on exchanges has prevailed even though the executive favors action. In Illinois, legislative action on an exchange is stalled despite the state's acceptance of a $32.8 million federal grant. Republican lawmakers have resisted implementation, and news reports in Illinois say Democratic Gov. Pat Quinn is considering an executive order setting up an exchange.

The foundations that provided funding included the Atlantic Philanthropies, Blue Shield of California Foundation, the California Endowment, Colorado Health Foundation, Kaiser Permanente Community Benefit, New York State Health Foundation, and the Robert Wood Johnson Foundation.

A briefing is scheduled in Washington for June 18 that will include an overview of the project, a look at the interactive prototype and a panel discussion of its benefits.

In other exchange news this week:

  • Vermont is the only state that mandates that individuals and small businesses take part in its exchanges and that's likely to be an issue in the race for governor, Vermont Public Radio reports. Democratic Gov. Peter Shumlin says the requirement will help move the state toward a single-payer system but GOP candidate Randy Brock wants voluntary participation, VPR says.
  • Joel Ario, former director of the office of exchanges at the Department of Health and Human Services, said in an interview with the St. Olaf College newspaper that the toughest challenge in his former position was "to find the right balance between state flexibility and minimum federal standards." Ario, who is a St. Olaf alumnus, also predicted that if the individual mandate of the law is struck down, "the exchanges will be in trouble" because individuals will be able to opt out of the system until they get sick, "unless we find another effective way to prevent freeloading."

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Competition in Part D: Is It All It's Cracked Up to Be?

By John Reichard, CQ HealthBeat Editor

June 7, 2012 -- A key question in the debate over whether Medicare should be redesigned based on the Part D prescription drug benefit is whether competition delivers savings.

The verdict at a forum this week sponsored by the Kaiser Family Foundation: Maybe so, but how much is murky.

The relatively low cost of the Part D benefit since it began in 2006 is one of the significant recent successes in health care policy making. Originally estimated by the Congressional Budget Office to cost $400 billion over 10 years, the benefit's cost has actually been about 30 percent lower.

Republicans, who developed Part D, the drug program, point to competition among Part D prescription drug plans as the reason for the lower-than-expected costs. Converting Medicare as a whole into a similar system of competing plans would save the entitlement program from financial ruin, they say.

However, a number of factors explain lower-than-projected Part D spending, Georgetown University Professor Jack Hoadley told the forum.

Hoadley, who was recently appointed to the Medicare Payment Advisory Commission, said CBO originally estimated that 87 percent of all Medicare beneficiaries would enroll in part D. But the actual figure in 2012 is estimated to be 73 percent, so the federal government has to pay out less.

Also, the CBO based its projections on estimates of total public and private spending on prescription drugs. But according to Hoadley it overestimated how that spending would increase.

CBO assumed 9 percent annual spending growth on national prescription drug spending after 2006, but the actual figure has been 4 percent. "This lower growth trend in the health system as a whole has meant lower spending for Part D," Hoadley said in a May 2012 paper that was distributed as part of the briefing.

Fewer costly new drugs have been approved since Part D started compared to previous decades, Hoadley said. And a major factor in lower than projected Part D spending has been that Medicare patients are using more generic drugs than CBO seers foresaw, he added. Generics accounted for 75 percent of the prescription drugs Medicare enrollees used in 2010, up from 61 percent in 2007, according to Hoadley.

The professor hedged on the impact of competition.

"It's true there are lots of plans in the market so there is a lot of competition," he told the forum. "But there's also a pretty good amount of market consolidation and market concentration. We're really in a situation now where a large share of all the market is just concentrated in a handful of the big firms."

He also observed that it has gotten easier to compare plans and to make choices because of tools like Medicare's online Plan Finder, which allows shoppers to pick the cheapest plan for them given the particular drugs they take. "But we still don't see a lot of evidence of people switching," he said.

Hoadley said that absent robust switching there "is a limit on what competition can do in this market."

James Capretta, a budget official in the George W. Bush administration who supports Part D as a Medicare overhaul model, said that when one considers average monthly premiums for drug coverage—$30, he said—Part D has been "a pretty remarkable success.

"Remember at the time of enactment in 2003 an amendment was offered to say that the beneficiary should pay no more than $35. If that had been locked in, we probably would have blocked it in and indexed it to something. They certainly would be paying closer to 50 dollars today instead of 30 dollars a month."

Capretta added that while enrollment has been below projections, that only explains about one-fifth of the difference between actual versus projected spending on Part D. "Eighty percent of what's happened in terms of the spending below what CBO projected was due to factors other than enrollment."

Capretta noted further that the switch toward greater use of generics, though to some extent a part of an overall trend in society, reflected how aggressively plans were pushing Medicare enrollees to use generics. That would not have happened if government, instead of market forces, were driving the use of generics, he said.

"Imagine if back in 2003 there was an amendment offered ... to say, 'you know what, let's forget this business of trying to have competition ... let's just make 'em go into generics.'" There would have been "a huge counter offensive by the brand name drug industry with ads" saying there are clinical reasons to make exceptions to mandatory generic drug substitution. "Maybe the branded team would have won." If the amendment had passed, "it would have come with 55 exceptions that would have gutted the whole thing." Instead, the move to generics has happened "naturally" because people have wondered why they are paying more for branded drugs and plans have nudged or "slightly more than nudged" people into generics by saying "'look, you can get the branded drug but it's going to cost you a lot more." It's the main reason people are only paying $30 today, Capretta said.

A third speaker, Marilyn Moon, a former Medicare trustee, said that trying to figure out what is attributable to what in Medicare is very difficult "because it is a very complicated plan and lots of things are going on.

"I don't find I disagree with very much of what's been said and that's the nature of Part D." Moon said she totally agrees that plans energetically pushed people into generics and that it would have been hard to make that happen through government coercion.

But, she said that it's important to be careful about saying what effects are attributable to competition and what is the result of other things. Moon she'd she's been trying to analyze that "and the further I get into it the harder it is to do."

Added Moon: "Everybody has some challenges in figuring this out."

In addition to trying to sort out the cost impact of competition in Part D, panelists addressed the larger question of whether it should be a model for overhauling Medicare generally.

Capretta acknowledged that delivering health care services is more complicated than dispensing drugs. "Part D should serve as somewhat of a model," Capretta said. But "I don't claim that the prescription benefit, which is largely a commodity we can mail, is the same as delivering" doctor and hospital services. "There is more complexity to delivery system reform."

However, Part D "gets the relationships roughly right in terms of who should do what,'' he said. "The government is not trying to figure out the right price for every drug." What it is doing is overseeing the marketplace and providing fair rules for the bidding process, he said. "And then it says to the beneficiary: 'We are going to give you an entitlement toward that coverage. That entitlement assures you guaranteed coverage through the Medicare benefit. But if you want a more expensive plan you'll pay more out of your own pocket.'"

It "puts huge incentive on those delivering the services to try to figure out ways to save money. And... innovation can come into the program, it can evolve and change over time. It's all not locked into stone."

But Moon said proponents of the approach Capretta favors are not talking about the level of government oversight of the market that exists in Part D. "There are a lot of ways in which one would have to be very careful in extrapolating" from Part D, she said.

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