By Rebecca Adams, CQ HealthBeat Associate Editor

May 31, 2012 – It's common knowledge among Medicaid experts that about 5 percent of beneficiaries use more than half of the program's spending each year. Those costs might be reduced by tracking high-cost patients better, delaying the use of long-term care, avoiding problems when a patient moves to a different facility, and providing for such other basic needs as housing, according to a white paper recently released by the Partnership to Fight Chronic Disease.

The chairman of the group, former Emory University professor Kenneth Thorpe, presented the paper at a congressional briefing with several other panelists. Thorpe, an advisor to President Clinton, noted that 83 cents of every dollar spent in Medicaid goes to treat chronic diseases, including diabetes, asthma, and hypertension. The white paper describes several initiatives around the nation that seem to have lowered medical costs without harming beneficiaries.

In Indiana, for instance, the state's "Right Choices" program, run by a WellPoint affiliated health plan, identifies which beneficiaries have gone to the emergency room more than once for non-emergency care or used a large number of drugs that different physicians prescribed. Those Medicaid beneficiaries are assigned to one primary care doctor, one pharmacy and one hospital. They also are overseen by care coordinators who try to help them avoid overusing medical services. The paper said that after the first six months of the program, emergency department use fell by 72 percent and the use of controlled substance decreased by 38 percent. The program saved more than $200,000 overall over the first six months, a reduction of 48 percent.

Another problem that the paper highlighted occurs when patients are transferred from a hospital to a nursing home or between other settings. The white paper found that a program in 39 states known as the Care Transition Model has reduced expensive rehospitalizations. The program provides a health coach for patients with complex care needs and their families. The coach reminds them to take medicine as prescribed, get follow-up care, and respond quickly if certain problems emerge. The cost savings for 350 chronically ill adults may be as much as $300,000, according to the paper.

Helping Medicaid patients delay the use of long-term care also can save a significant amount of funding if done appropriately, the paper found. One example is the GRACE program, an integrated care model that sends a nurse practitioner and a social worker to the homes of low-income seniors. The nurse practitioner and social worker come up with an individualized plan that they track. The plan typically includes 12 care protocols that guide patients on medication management, depression, mobility issues, vision concerns, and other common conditions. In a randomized control trial of 951 low-income seniors, GRACE participants experienced fewer emergency room visits, hospitalizations, and readmissions. The program did not cost more in the first year and saved about $1,500 per enrolled patient in the second year, the paper said.

And the paper found that sometimes spending money on nonmedical issues, such as housing, can prevent big medical bills later. The Chicago Housing for Health Partnership has provided housing and case management services to homeless adults with chronic illness. An 18-month study showed that after gaining housing and help in managing their care, patients had 29 percent fewer hospitalizations and 24 percent fewer emergency visits.

"Policymakers need to focus on the true cost driver within the health care system – chronic disease – and support long-term programs that help prevent and manage these conditions," Thorpe said.

By John Reichard, CQ HealthBeat Editor

June 1, 2012 – Many policy analysts are focused on the impact of a possible U.S. Supreme Court ruling in June that finds the individual coverage mandate in the health care law unconstitutional. But what will happen if the high court leaves the mandate unscathed and states are then under the gun to open exchanges by 2014 as the overhaul requires?

Two things: more states may be ready to open their own exchanges than doomsayers say. And the coverage that these new marketplaces offer may be very pricey.

Those were a couple of the takeaways from a Washington, D.C., forum last week about the exchanges created by the health overhaul law. Another: exchanges opened by Democratically controlled state governments won't necessarily be markedly different from those in Republican-dominated states.

Perhaps most heartening to health care law (PL 111-148, PL 111-152) supporters were remarks by Bill Hazel, Virginia's secretary of health and human resources. Virginia is in the vanguard of states opposing the law but still it's been busy getting ready to open an exchange if the court doesn't strike down the measure.

"We've done a lot of the planning," he told the forum sponsored by Politico Pro. He said Virginia is in the "weird position" of being in relatively good shape to launch its exchange while opposing the law. "Virginia's done it and we don't want to," he said.

One of the most difficult things for states to pull together even if they are enthusiastic about exchanges is the information technology required. "We are one of the handful of states that could probably pull the IT piece off" if the Court upholds the law, Hazel said.

Hazel added that he thinks it's a mistake for states opposed to the law to sit idle and watch the federal government struggle to open exchanges to fill the gap.

"There is a group of individuals who believe that the states should just stop all work now, default into a federal plan, and assume that the feds can't get it done," Hazel said. "That's not a bet that I would recommend yet that the Governor [Robert F. McDonnell] take because there's been a tremendous amount of work at the federal level."

But Hazel wasn't predicting smooth sailing for exchanges if and when they do open. "I think one of the problems people are going to have is sticker shock" when they first price insurance on exchanges, he said.

Daniel Durham, executive vice president of America's Health Insurance Plans made that point too. Durham predicted that insurers would be active participants in exchanges but asserted that health law provisions would drive premiums sharply upward, particularly for the young.

The health law prevents insurers from varying premiums based on age by anything greater than a factor of three-to-one. Now insurers often charge older people six times higher premiums than younger policyholders. The three-to-one limit would mean much higher premiums for young people in exchanges than are charged now in the marketplace. And rather than pay such premiums, young people would likely pay penalties for not meeting the coverage mandate, Durham said.

But Ron Pollack, executive director of Families USA, downplayed the idea that coverage will be unaffordable to the young. He noted that young people at the lower end of the income scale will get the highest subsidies available to buy coverage under the health law.

Pollack also called Virginia an "important lesson" regarding what is happening nationally. His point: states opposed to the law may be doing more to get ready for exchanges than many realize. The narrative in press coverage is that only a few more than a dozen states will be ready to open exchanges by 2014, an assessment he said is based on the relatively small number of states that have passed laws to open the marketplaces.

But, he said, a more telling sign of readiness is the number of states that have gotten the first round of grants to set up exchanges: 34, according to Pollack.

"Behind the scenes there is work being done to set up exchanges," he said. Pollack added that it makes a significant difference that the federal government is willing to share in the work of opening state exchanges by entering into partnership arrangements.

Both Pollack and Joshua Sharfstein, Maryland's secretary of Health and Mental Hygiene, struck an upbeat tone when talking about the health law in sharp contrast to the mostly gloomy talk of late about implementation struggles. Sharfstein downplayed the difficulty of opening an exchange and said he's looking forward to a time when people without access to care can get insurance and when "people are happier, they're healthier." Pollack said the fact that the health law will help millions of uninsured people get coverages "makes my heart sing."

It appears—initially at least—that the Maryland and Virginia exchanges would not be markedly different, assuming the health law survives and they both open. Left-leaning states are thought to be more likely to drive a hard bargain with insurers by excluding those that don't offer relatively low rates. But Sharfstein says that's not in the cards right now at least; Maryland officials first want to get their exchange up and running for a while before they think about becoming an "active purchaser."

By Jane Norman, CQ HealthBeat Associate Editor

May 30, 2012 – A top Medicare official recently predicted that the private Medicare Advantage program will continue to grow at double-digit rates, although payment reductions in the program are included in the health care overhaul law.

"Despite the rhetoric you hear that the Affordable Care Act has killed the private plan side of Medicare that's contrary to the truth," deputy administrator and director of the Center for Medicare at the Center for Medicare and Medicaid Services (CMS), Jonathan Blum said. Blum was speaking at the National Medicaid Congress, a privately sponsored gathering of Medicaid professionals.

"Over the last several years the program has grown by about 10 percent a year," Blum said. "I personally predict it's going to continue to grow for the next several years at that same trend rate."

His remarks continue a trend in which Medicare officials have strongly defended the vitality and future of the program, and have sought to cement its place in Medicare policy. Republicans during the debate over the health care overhaul law (PL 111-148, PL 111-152) predicted that Medicare Advantage would wither and die because of funding cutbacks, which would be a major political problem for Democrats in states with many seniors enrolled in the program.

The private plans in the past have been paid about 13 percent more per patient than traditional fee-for-service Medicare, which critics, including the Medicare Payment Advisory Commission, viewed as too generous and detrimental to the future of Medicare. Democrats reduced the private programs' subsidies by $68 billion through 2016 under the overhaul law. About 27 percent of beneficiaries now are enrolled in the private plans.

A continuing enrollment increase over the next several years would contradict a March 2011 report by the Congressional Budget Office predicting that enrollment would peak in 2012 and then enter a sharp decline due to the cutbacks.

But enrollees, who accept managed care in return for better benefits, may be lured in by a more competitive marketplace. Medicare premiums fell by 7 percent on average this year compared with last year, probably contributing to the enrollment increases.

Blum said the program is strong and Medicare officials are working to make it equally as strong as the traditional fee-for-service plan.

"We at CMS have to believe there will be more beneficiaries in private plans in the future than there are today," he said. Blum said Medicare officials are testing ways to improve quality. That includes a demonstration project criticized by the Government Accountability Office earlier this year because it is so costly it offsets the savings from cuts in subsidies during the years it is in effect.

Medicare Advantage plans are given quality ratings of up to five stars, with five being the best. The GAO criticized the demonstration project because it extended bonuses to plans with ratings as low as three stars. But Blum said that it is an incentive to those lower-rated plans to improve to four or five stars. "We have a high degree of confidence that our quality measure, our five-star scale, is a very good measure for what quality of care is," he said.

"An overall message I want to leave folks with is CMS is not just focused on the traditional fee-for-service program for quality improvements and cost savings," he said. "We have to be focused on the private side of Medicare given that we expect to see the vast majority of growth going to that side of the program."

Like other Obama administration health care officials, Blum, in answering questions, declined to speculate on what might happen in the event the U.S. Supreme Court finds the health care overhaul law to be unconstitutional in a challenge brought by states and a small business organization. "We are operating with confidence the Supreme Court will uphold the Affordable Care Act and that's how I'm operating," he said.

By Nellie Bristol, CQ HealthBeat Associate Editor

June 1, 2012 – The public sector paid for 45 percent of total spending on health care in 2010, a significant increase over the roughly one-third share in 1987, according to a analysis released this week by the National Institute for Health Care Management Foundation.

Between 1987 and 2010, federal spending through Medicare nearly tripled as a share of overall spending from 3.4 percent to 9.8 percent. At the same time, federal spending for Medicaid doubled as a share of total spending from 5.4 percent to 10.7 percent. Spending for health care by private business and households fell during the period.

Although federal insurance programs showed the largest increases, the study notes that federal spending on health care includes other areas, such as medical research and public health.

The study is the first in a series on "big picture" health spending planned by the foundation. Future topics include government spending on health entitlements and the concentration of health spending. The foundation's board members largely represent major insurers.

Overall, the report found, total spending on health care in the U.S. made up 18 percent of the gross domestic product and is projected to reach nearly 20 percent of GDP by 2020. By 2010, spending totaled $2.6 trillion, or more than $8,400 per capita. The vast majority of spending, 84 percent, paid for personal health care services. Sixteen percent of the total supported administrative costs for insurance, and public and private investments in research, structures and equipment and public health activities.

Hospital care accounted for the largest portion of total spending and grew more rapidly than other sectors. From 2006-2010, hospital care spending increased 21 percent, or $451 per person. "The combined impact of a large base and rapid growth was that this sector alone accounted for almost 40 percent to the total change in per-capita spending between 2006-2010," the report says. Increases in spending for physician and clinical services, home health and long term care each accounted for another 17 percent of the total increase in per-capita spending.

Although spending growth has slowed in the last three years, health spending continues to exceed economic growth, the analysis notes. The decrease in growth is attributed to the recession-related losses of employer sponsored health insurance and reluctance to spend money on health care. But, the analysis says, the slowdown "is part of a longer trend that preceded the recession" and could be partially attribute to policy changes and payment changes. "Such factors include an ongoing shift to value-based purchasing, the expiration of patents for numerous blockbuster drugs coupled with continued movement toward use of generics and reductions in provider payment rates by Medicare and Medicaid," the study says.

By Jane Norman, CQ HealthBeat Associate Editor

May 31, 2012 – Medicare officials announced an initiative last week to improve dementia care for residents of nursing homes, including a goal to reduce the use of antipsychotic drugs by 15 percent by the end of the year.

Marilyn Tavenner, acting administrator of the Centers for Medicare and Medicaid Services, said the agency will seek to work with state regulatory officials, nursing homes, advocacy groups and caregivers as part of the Partnership to Improve Dementia Care. "We want our loved ones with dementia to receive the best care and highest quality of life possible," Tavenner said in a written statement.

Overuse of antipsychotics in nursing homes is a major problem, medical professionals testified at a November hearing of the Senate Special Committee on Aging. Jonathan M. Evans, vice president of the American Medical Directors Association, which represents long-term-care doctors, said that he and other physicians "feel tremendous pressure in all care settings to prescribe medication to make patients with dementia behave."

The Department of Health and Human Services inspector general in 2011 found that 14 percent of nursing home residents, or more than 300,000 patients, had Medicare claims for atypical antipsychotic drugs. Half of the claims, totaling almost $116 million, should not have been paid, because they were not used for medically accepted indications, the inspector general said.

Medicare officials said they believe that more than 17 percent of nursing home residents in 2010 had daily doses of antipsychotic drugs exceeding recommended levels. Another CMS survey in 2010 found that almost 40 percent of residents with signs of dementia received such drugs even if there was no diagnosis of dementia.

The goal of a 15 percent reduction in use by the end of year, which Tavenner called "ambitious," will include a training series for nursing home staff members that emphasizes prevention of abuse and high-quality care. The agency also will better train state and federal regulators on behavioral health.

In addition, data on every nursing home's antipsychotic drug use will be available beginning in July on Medicare's "nursing home compare" website, and Medicare officials who work with nursing homes will emphasize alternatives other than drugs for nursing home patients. Those alternatives will include consistent staff assignments, so staff members are familiar with the patients they see; more exercise or time outside; and better management of acute and chronic pain.

A CMS research study is under way as well in about two dozen nursing homes to gain better understanding of the process through which nursing homes decide to use antipsychotic drugs.

By CQ Staff

May 31, 2012 – Health care cost growth is continuing to slow and costs will increase by a relatively modest 7.5 percent next year, according to an analysis recently released by the Health Research Institute (HRI).

Health care spending is a major concern for policymakers and for Medicare as the program seeks to keep quality high while containing costs.

"Medical cost trend in 2013 will surprise the industry with another year of historically low growth," the report says. HRI is the health research division of PwC. Factors include a slow economy, more focus on cost containment by the health care industry, less use of health care services by patients spending less money and more work by employers to keep expenses low, the report says.

Health care providers like doctors and hospitals may have to take a look at their business models to adjust to a "new normal" of lower spending growth, the analysis also says.

• PwC Report (pdf)