Tuesday, October 6, 2015

Fwd: qotd: High-cost patients exit private Medicare Advantage plans

Quote-of-the-day mailing list

-------- Forwarded Message --------
Subject: qotd: High-cost patients exit private Medicare Advantage plans
Date: Tue, 6 Oct 2015 10:50:11 -0700
From: Don McCanne <don@mccanne.org>
To: Quote-of-the-Day <quote-of-the-day@mccanne.org>

Health Affairs
October 2015
High-Cost Patients Had Substantial Rates Of Leaving Medicare Advantage
And Joining Traditional Medicare
By Momotazur Rahman, Laura Keohane, Amal N. Trivedi and Vincent Mor


Medicare Advantage payment regulations include risk-adjusted capitated
reimbursement, which was implemented to discourage favorable risk
selection and encourage the retention of members who incur high costs.
However, the extent to which risk-adjusted capitation has succeeded is
not clear, especially for members using high-cost services not
previously considered in assessments of risk selection. We examined the
rates at which participants who used three high-cost services switched
between Medicare Advantage and traditional Medicare. We found that the
switching rate from 2010 to 2011 away from Medicare Advantage and to
traditional Medicare exceeded the switching rate in the opposite
direction for participants who used long-term nursing home care (17
percent versus 3 percent), short-term nursing home care (9 percent
versus 4 percent), and home health care (8 percent versus 3 percent).
These results were magnified among people who were enrolled in both
Medicare and Medicaid. Our findings raise questions about the role of
Medicare Advantage plans in serving high-cost patients with complex care
needs, who account for a disproportionately high amount of total health
care spending.

From the Introduction

Each year Medicare beneficiaries can choose between two options for
health coverage: traditional Medicare and Medicare Advantage. Although
each option covers the same core set of benefits, the two may differ in
terms of beneficiaries' out-of-pocket expenses, choice of providers, and
access to additional services. Approximately 30 percent of Medicare
beneficiaries in 2014 were enrolled in Medicare Advantage plans.

Because Medicare Advantage plans receive prospective, capitated payments
to finance and deliver services for their enrollees, they operate under
strong incentives to manage their members' health care costs. Policy
makers have been concerned that capitated payments give Medicare
Advantage plans an incentive to enroll healthier beneficiaries and to
avoid enrolling those with chronic conditions. Indeed, a large body of
literature based on data from the 1990s and early 2000s found that
Medicare Advantage plans disproportionately enrolled healthier
beneficiaries. This phenomenon, known as favorable risk selection, has
historically yielded substantial overpayments to Medicare Advantage plans.

From the Discussion

We examined the relationship between use of hospital, nursing home, and
home health care in 2010 and beneficiaries' switching between Medicare
Advantage and traditional Medicare by January 2011. Among traditional
Medicare beneficiaries, we observed lower rates of switching into
Medicare Advantage among people who used nursing home, home health, or
acute inpatient care, compared with beneficiaries who did not use these
services. In contrast, among Medicare Advantage beneficiaries, we found
increased rates of switching into traditional Medicare among people who
used nursing home and home health care, compared with beneficiaries who
did not use these services.

Our results are consistent with other studies reporting that
beneficiaries who report poorer health, use more health services, and
have higher health care spending are more likely than their counterpart
Medicare Advantage beneficiaries to leave Medicare Advantage plans,
despite the recent reforms to the Medicare Advantage payment formula.

Our results raise questions about whether current Medicare Advantage
regulations and payment formulas are designed to meet the needs of
Medicare Advantage members who use postacute and long-term care. First,
the enhanced payments to Medicare Advantage plans for dual eligibles or
people who receive extended nursing home care do not appear to be
effective in retaining these beneficiaries in Medicare Advantage plans.
The unidirectional flow of these high-risk and often high-spending
patients from Medicare Advantage to traditional Medicare appears to
transfer responsibility to traditional Medicare just as patients enter a
period of intensive health care needs.

There could be several reasons for the switching of high-risk Medicare
Advantage enrollees. One possibility is that Medicare Advantage plans
may not have sufficient incentives to spend their enhanced payments on
better services for their beneficiaries.

Second, our findings suggest that Medicare Advantage members who use
home health or nursing home services might be dissatisfied with the
Medicare Advantage program. Medicare Advantage beneficiaries may find
that their plans' network restrictions make it harder to access these
services that would be the case in traditional Medicare, creating an
incentive to switch.

Additionally, some Medicare Advantage plans have been criticized for
imposing high cost sharing for services such as the skilled nursing
facility care that can be necessary for seriously ill beneficiaries.


We observed substantial switching from Medicare Advantage to traditional
Medicare by beneficiaries who used nursing home and home health care,
particularly those who were also eligible for Medicaid, and virtually no
entry into Medicare Advantage plans by traditional Medicare
beneficiaries who used these services or acquired dual eligibility. We
found that a high proportion of beneficiaries with nursing home or home
health care use choose to exit the Medicare Advantage program by the
start of the next plan year. Thus, our study raises questions about the
role of Medicare Advantage plans in serving high-cost patients with
complex health care needs that span acute, postacute, and long-term care



The New England Journal of Medicine
July 17, 1997
The Medicare-HMO Revolving Door — The Healthy Go in and the Sick Go Out
By Robert O. Morgan, Ph.D., Beth A. Virnig, Ph.D., M.P.H., Carolee A.
DeVito, Ph.D., M.P.H., and Nancy A. Persily, M.P.H.

Enrollment in Medicare health maintenance organizations (HMOs) is
encouraged because of the expectation that HMOs can help slow the growth
of Medicare costs.


The rate of use of inpatient services in the HMO-enrollment group during
the year before enrollment was 66 percent of the rate in the
fee-for-service group, whereas the rate in the HMO-disenrollment group
after disenrollment was 180 percent of that in the fee-for-service group.



Comment by Don McCanne

In 1997, The New England Journal of Medicine published a landmark
article that showed that Medicare patients who enrolled in private
Medicare HMOs exited them when they developed a need for a greater
amount of health care: "The Medicare-HMO Revolving Door — The Healthy Go
in and the Sick Go Out"

After nearly two decades of refinement of payment methods for the
private Medicare Advantage plans, this new study from Health Affairs
shows that "a high proportion of beneficiaries with nursing home or home
health care use choose to exit the Medicare Advantage program."
Specifically, "Our results are consistent with other studies reporting
that beneficiaries who report poorer health, use more health services,
and have higher health care spending are more likely than their
counterpart Medicare Advantage beneficiaries to leave Medicare Advantage
plans, despite the recent reforms to the Medicare Advantage payment

The healthy go in and the sick go out. With Medicare Advantage plans,
the patients and the taxpayers end up as losers.

Monday, October 5, 2015

Fwd: qotd: Risk corridor stabilization fund - another ACA failure

Quote-of-the-day mailing list

-------- Forwarded Message --------
Subject: qotd: Risk corridor stabilization fund - another ACA failure
Date: Mon, 5 Oct 2015 14:08:24 -0700
From: Don McCanne <don@mccanne.org>
To: Quote-of-the-Day <quote-of-the-day@mccanne.org>

CNN Money
October 2, 2015
Big shortfall in Obamacare risk program could hurt insurers
By Tami Luhby

A key federal program designed to cushion health insurers' risks in the
Obamacare exchanges has a massive shortfall, which could throw some
insurers into financial turmoil.

Insurers requested $2.87 billion in so-called "risk corridors" payments
for 2014, but will only receive $362 million, or 12.6%, said the Centers
for Medicare & Medicaid Services, which oversees Obamacare.

The risk corridors program's goal is to help insurers transition into
the individual exchanges, which opened in 2014. Insurers had a tough
time setting premiums since they didn't know how sick their new
customers would be.

Under the three-year program, insurers whose premiums exceeded claims
pay into the fund, while their peers who didn't charge enough premiums
to cover claims could draw from it.

But too many insurers miscalculated when they set their rates for 2014.

"Insurers underestimated the riskiness of their customer base and set
their premiums too low," said Tim Jost, a health law professor at
Washington and Lee University School of Law.

The shortfall could put a financial strain on some insurers, especially
some smaller ones who were counting on the funds. Some firms have
reported losses in their Obamacare line of business, while four health
insurance cooperatives are shutting down because of financial pressures.

Obamacare insurers have already set their premiums for 2016 and can't
adjust them now. The shortfall in risk corridor payments could prompt
insurers to raise premiums in future years or exit the program.

The administration said the remaining 2014 risk corridor claims will be
paid out of the 2015 and, if needed, the 2016 collections.

Insurers are still getting billions from two other Obamacare risk
programs. They will receive $7.9 billion from the reinsurance program,
designed to spread the cost of very large insurance claims across all
insurers. And they will receive $4.6 billion from the risk adjustment
program, which requires insurance companies with healthier consumers in
a state to help offset some of the costs of those insurance companies
with sicker customers in that state.



Health Affairs
Health Policy Briefs
February 19, 2015

With the new restrictions on premium setting and the unpredictability of
medical expenses from the newly insured, insurers faced a high level of
uncertainty when setting their premiums. To buffer insurers from high
losses in the initial years, keep premiums affordable, encourage
insurers to participate in the Marketplaces, and minimize year-to-year
premium fluctuations, the ACA authorized three premium stabilization
programs: risk adjustment, reinsurance, and risk corridors.

The risk corridor program has proven to be one of the more controversial
aspects of the ACA with critics, including a number of Republicans in
Congress, characterizing the program as an insurer bailout. They argue
that as a result of HHS and state officials putting pressure on insurers
to keep premiums low in the Marketplaces, the federal government will
end up picking up the tab to bail out insurers if they underpriced.

Critics also claim that the program encourages insurers to underprice
their plans in order to gain market share, knowing the government will
offset their losses.

While the Consolidated and Further Continuing Appropriations Act of
2015, which funded the government for the 2015 fiscal year, did give HHS
the authority to collect user fees, an amendment was included that
specifically prohibited HHS from transferring money from either trust
fund. The amendment did not eliminate the risk corridor program, nor did
it prevent HHS from using payments received from insurers to pay out
claims under the program (that is, user fees), but it effectively made
the risk corridor program budget neutral unless HHS can find another
source of funding.

If risk corridor claims exceed receivables and HHS does not find an
alternative source of funding, it seems likely it will revert to its
earlier proposal to prioritize paying off shortfalls from previous years
before making new payments. If the shortfalls were great enough, this
could effectively eliminate payments to insurers for the final two years
of the program.



Comment by Don McCanne

Although the media are covering this story as a shortfall in the risk
corridor stabilization funds, the real story here is about the behavior
of private insurers competing in the insurance exchanges established
under the Affordable Care Act (ACA). An explanation is in order.

So what are the risk corridors and why do they exist? It was understood
that insurers could be exposed to significant losses if they attracted
more than an expected number of enrollees who had greater health care
costs. So for the first three years, a portion of losses above a certain
threshold (the upper margin of the corridor) would be covered by a
stabilization fund. Likewise, if the insurers were successful in
enrolling more individuals with very low health care costs (below the
lower margin of the corridor), those insurers would be required to pay a
portion of their net gain into the stabilization fund ("user fees").

So how would private insurers respond? For the first year of marketing
plans on the exchanges, they would want to have lower, competitive
premiums in order to corner market share. Their losses for high cost
enrollees would be largely covered (up to 80%) so they could accept some
losses for those with average health care needs, knowing that they could
later adjust fees modestly upwards after having gained market dominance
(a version of the insurance underwriting cycle). As would be expected of
the private insurers who are masters at gamesmanship, they were able to
show that not many of their enrollees fell under the lower margin of the
corridor, thus their payments to the stabilization fund (user fees) were
kept to a minimum.

As a result, the stabilization fund is able to cover only about 13% of
of the losses above the upper margin of the corridor. Although HHS says
that they would find the funds, Congress has created barriers to using
funds other than the user fees authorized by the risk corridor
stabilization program. Since they are budgeting 2015 and 2016 user fees
to pay for 2014 losses, obviously the funds will be rapidly depleted,
with little or none available for the second and third years of the program.

Risk corridors, risk adjustment, and reinsurance are not for the benefit
of patients, rather they are to protect the insurers. Not only do they
add to our profound administrative waste, they also open up
opportunities for insurers to profit even more through chicanery and

We could completely do away with this and all of the other insurer
excesses by simply enacting a single payer national health program. Why
not now? Are not the voters in charge?

Friday, October 2, 2015

Fwd: qotd: Can Sec. 1557 be used to prevent discriminatory adverse tiering?

Quote-of-the-day mailing list

-------- Forwarded Message --------
Subject: qotd: Can Sec. 1557 be used to prevent discriminatory adverse
Date: Fri, 2 Oct 2015 11:46:15 -0700
From: Don McCanne <don@mccanne.org>
To: Quote-of-the-Day <quote-of-the-day@mccanne.org>

Health Affairs Blog
September 21, 2015
The Section 1557 Regulation: What's Missing, And How We Can Include It
By Douglas Jacobs

Kristin Agar, a 63-year-old social worker, was diagnosed with lupus in
2008, a rare disease in which the body's own immune system can cause
serious damage to the kidneys, brain, skin, and joints. Unfortunately,
despite having insurance coverage, Kristin has found that the drug she
needs to treat her lupus is unaffordable. All around the United States,
Kristin joins other patients with chronic conditions like HIV, Hepatitis
C, Multiple Sclerosis, Rheumatoid Arthritis, and Leukemia, who are
having trouble paying for their medications.

In June, Robert Restuccia and I wrote a Health Affairs Blog post showing
that discrimination in our health care system is evolving. Some insurers
that once refused outright to offer coverage to patients like Kristin
are now resorting to more surreptitious means to discourage enrollment,
like increasing the cost of all medications for certain conditions. This
practice, called "adverse tiering," has been regulated under Section
1302 of the Affordable Care Act (ACA), which grants the Department of
Health and Human Services (HHS) the authority to define essential health
benefits under the ACA.

However, the Section 1302 regulation has so far been limited. The rule
states that adverse tiering may be discriminatory, but also appears to
allow an exemption for expensive drugs like Kristin's lupus medication.
Additionally, insurers that are "caught" practicing adverse tiering only
have to provide written justification for their actions to HHS or comply
by fixing their benefit design.

Even without practicing adverse tiering, insurers could discourage the
most expensive beneficiaries from enrolling by increasing the cost of
wheelchairs, nursing homes, or even specific surgeries. If HHS wanted to
categorize any future insurance practices as discrimination under
Section 1302, the regulatory process could take years. As such, these
new forms of discrimination have prompted many to call on the Obama
Administration for a stronger response.

The Section 1557 Regulation

Earlier this month, over five years after the Affordable Care Act was
adopted, the Obama Administration finally proposed the highly
anticipated rule that implements the ACA's main nondiscrimination
provision: Section 1557. The rule prevents discrimination on the basis
of race, color, national origin, sex, age, and disability, and broadly
applies to all health programs and activities that receive assistance
through HHS.

For those who have experienced discrimination in its many forms, the
regulation includes a number of provisions to protect consumers. Each
health entity must provide appropriate aids and services to those with
limited English proficiency and disabilities. The rule extends
protections for transgender persons unlike ever before, including it as
a form of sex discrimination. Furthermore, all services must be made
available for gender transition (like a hysterectomy) that are available
to a person seeking non-transition related care. All transgender persons
must be treated consistent with their own gender identity.

The proposed rule also establishes a private right of action, giving
individuals the ability to file a lawsuit under Section 1557 (courts had
already begun to authorize private Section 1557 lawsuits, but this makes
it official). This is an important step forward, because unlike the
Section 1302 regulation, insurers will be highly motivated to comply
with the 1557 regulation or face costly litigation. Insurers will think
twice about changing their benefit design to discourage enrollment by
individuals of a certain race, color, national origin, sex, age, and
disability. Instead of taking years to pass a new regulation, a private
cause of action allows the justice system to "keep pace" with quickly
evolving insurer practices.

However, these positive developments are tempered by some noticeable
omissions. Namely, the rule is conspicuously silent about discrimination
on the basis of health status. As Timothy Jost stated in his recent
post, "Surprisingly, the proposed rule does not directly address one of
the most salient current discrimination questions: whether insurers can
impose high cost sharing or otherwise limit access to expensive drugs
needed by certain disabled populations."

Kristin Agar, who can't afford her lupus medication, may not be assisted
by the Section 1557 regulations. Insurers could continue to discourage
enrollment by the sickest consumers through manipulation of their
benefit designs.

Without directly addressing the issue, HHS seems to have made a
distinction between two different types of discrimination:
discrimination by categorically excluding certain individuals from care,
and discrimination by "pricing out" certain enrollees by making specific
services unaffordable. In other words, making drugs or services
unaffordable seems to be an effective way for insurance companies to
discourage enrollment and improve their bottom lines.

The reticence to address "price-based" discrimination likely stems from
insurers historically charging different prices for medications and
services. Insurers argue that this pricing structure allows them to
encourage the use of more low-cost services and medications.

However, this omission even has the potential to undermine the very
forms of discrimination that the proposed Section 1557 regulation aims
to protect against. For example, despite the new transgender protections
in the rule, plans could still discriminate against transgender people
by making hormonal treatments and transition-related care unaffordable.
A plan could more broadly still discriminate on the basis of sex by
increasing costs for medications predominantly used by women (like
breast cancer treatment), increasing costs for pregnancy care, or
severely limiting the number of gynecologists in the plan network. It is
clear that in order to have a strong Section 1557 regulation, HHS must
also address cost.

A Way Forward

HHS should adopt a standard way of addressing cost-based discrimination
in the final Section 1557 rule. When does changing the cost of a drug or
service make it "unaffordable," thus discouraging enrollment and
constituting discrimination? The answer to this question appears in
other ACA regulations.

The Internal Revenue Service (IRS) defines "unaffordable" in the ACA as
a percentage of income, which could set a standard for price-based
discrimination as well. An "unaffordable" medication or service would
become discriminatory if there is no lower-cost, but similarly
efficacious drug or service. This would preserve an insurer's ability to
encourage the selection of lower cost drugs and services, while still
protecting consumers from discriminatory pricing schemes. Even if the
final Section 1557 regulation does not include cost-based
discrimination, standards of discrimination may evolve with ongoing
litigation. As individuals increasingly file Section 1557 cases, it is
entirely possible that courts will find cost-based discrimination unlawful.

However, Kristin Agar and others with chronic conditions need more than
a federal regulation recognizing cost-based discrimination: HHS should
ban discrimination on the basis of health conditions in their final
rule. HHS has the authority to interpret Section 1557 broadly as part of
an overall statutory and regulatory regime to make health care more
accessible to those who need it the most, and also have the
responsibility to counter long standing and pervasive discriminatory
practices by insurers.

In the absence of an explicit ban, another way to achieve Section 1557
protection against discrimination is for HHS or courts to categorize
certain diseases as "disabilities." Courts have historically been
reluctant to do this, defining a "disability" as being restricted to an
"impairment that substantially limits one or more major life activities."

However, this was before the passage of the Americans with Disabilities
Act Amendments in 2008, and the subsequent final rule in 2011 that
broadened the definition of disability to include impairments to bodily
functions (such as the immune system, special sense organs, normal cell
growth, and digestive, genitourinary, neurological, bowel, respiratory,
cardiovascular, endocrine, hemic, lymphatic, musculoskeletal, and
reproductive functions, among others). Since the amendments passed,
courts have more broadly interpreted "disability," although they
continue to assess each case individually. This relatively untested new
version of disability could include protections for Kristin and many
others with chronic conditions under Section 1557.

Until HHS or a court decides, those with health conditions will continue
to rely on the slow, partial protections of Section 1302. Kristin
deserves a better system. She deserves a system that prospectively bans
discrimination on the basis of her race, color, national origin, sex,
age, disability, and health, either by being excluded from insurance
plans or by being priced out of them. Kristin deserves to be able to
file suit when she is being discriminated against. Kristin deserves to
be covered by Section 1557.



Federal Register
September 8, 2015
Nondiscrimination in Health Programs and Activities


The Department of Health and Human Services (HHS or "the Department") is
issuing this proposed rule on Section 1557 of the Affordable Care Act
(ACA) (Section 1557). Section 1557 prohibits discrimination on the basis
of race, color, national origin, sex, age, or disability in certain
health programs and activities. Section 1557(c) of the ACA authorizes
the Secretary of the Department to promulgate regulations to implement
the nondiscrimination requirements of Section 1557. In addition, the
Secretary is authorized to prescribe regulations for the Department's
governance, conduct, and performance of its business, including, here,
how HHS will apply the standards of Section 1557 to HHS-administered
health programs and activities.



Comment by Don McCanne

Insurers will always try to find a way to avoid paying for health care
whenever they can. This article explains "adverse tiering" - an
innovation by the insurers wherein needed services or products used by
individuals with high-cost disorders are placed in a higher tier of
coverage in which patient cost sharing is much higher. This adverse
tiering is being used by insurers to discourage enrollment in plans by
people with disorders such as HIV, hepatitis C, multiple sclerosis,
rheumatoid arthritis, or leukemia.

Section 1557 of the Affordable Care Act (ACA) - the nondiscrimination
section - states that an individual shall not "be excluded from
participation in, be denied the benefits of, or be subjected to
discrimination under, any health program or activity, any part of which
is receiving Federal financial assistance, including credits, subsidies,
or contracts of insurance, or under any program or activity that is
administered by an Executive Agency or any entity established under this
title (or amendments)."

After five years, HHS has finally released a proposed rule for Section
1557 nondiscrimination under ACA. As Douglas Jacobs explains in the
Health Affairs Blog, the proposed rule does not seem to adequately
address adverse tiering discrimination. Banning such discrimination can
be technically challenging since price tiering is encouraged by some in
the policy community as a means of discouraging patients from receiving
expensive care that they do not really need (the rhetoric of advocates
of consumer-directed health care). Another possibility that Douglas
Jacobs suggests is that the proposed rule could be modified to enable
lawsuits under the amended Americans with Disabilities Act (ADA).

After reviewing the 200 page proposed rule and considering the
complexities of defining how adverse tiering discrimination could be
banned while still leaving tiering in place, or considering the
complexities of lawsuits under ADA, even in defining whether these
expensive conditions are disabilities, it does seem clear that these
approaches further increase the wasteful administrative excesses that
already plague our heath care system.

In contrast, a single payer national health program would eliminate cost
sharing thereby eliminating the insurers' tool of adverse tiering, not
to state the obvious of eliminating the insurers themselves. Life for
patients and their health care professionals would be so much simpler.