CMS gives another boost to Medicare Advantage plans

Centers for Medicare and Medicaid Services (CMS)
April 6, 2015
Fact Sheet: Moving Medicare Advantage and Part D Forward

On April 6, CMS released final updates to the Medicare Advantage and
Part D programs through the 2016 Rate Announcement and Call Letter. The
finalized policies will continue to strengthen the growing Medicare
Advantage program, and continue the successful implementation of the
Affordable Care Act's reforms that improve quality and provide greater
protections for beneficiaries and value for taxpayers.

Recent Trends in Medicare Advantage and Part D

* Enrollment continues to grow – MA enrollment has increased by 42
percent since passage of the Affordable Care Act in 2010 to an all-time
high of more than 16 million beneficiaries, with nearly 30 percent of
Medicare beneficiaries enrolled in an MA plan.

* Plan quality continues to improve – In 2015, 60 percent of MA
enrollees will be enrolled in a 4 or 5 star plan, compared to an
estimated 17 percent back in 2009.

* Premiums remain affordable – Average premiums today are lower than
before the Affordable Care Act went into effect, dropping 6 percent
between 2010 and 2015.

2016 Rate Announcement

Expected Average Change in Revenue

1.05% - 2016 Advance Notice
3.25% - 2016 Rate Announcement

Effective Growth Rate

1.7% - 2016 Advance Notice
4.2% - 2016 Rate Announcement

Updated Growth Rate

The 2016 rate announcement reflects an underlying per capita growth of
1.9 percentage points of additional FFS spending for 2014 and 2015 and
0.6 percent for 2016, and 0.1 percent for the assumption that Congress
will enact the pending legislation to permanently fix the SGR. The
updated growth rates reflect the Office of the Actuaries' best estimate
of Medicare spending and are not the product of discretionary CMS
policy. The underlying per capita FFS costs continue to demonstrate a
historically slow health care growth rate and that growth rate remains
below the per capita gross domestic product growth rate. Initial
information from Medicare actuaries suggests that contributing factors
behind the change from the preliminary growth rate include higher than
expected spending on inpatient hospitalizations and some intermediary
services such as therapy, rural health clinics and federally qualified
health centers. As always, when changes occur, we'll continue to watch
developments closely and work to understand these factors in greater detail.

Value-Based Contracting

In January 2015, the Secretary announced the Administration's vision for
moving the health care system toward paying providers based on quality
rather than the quantity of care they provide. In the Call Letter, CMS
continues to signal an intention to begin working with plans
participating in Medicare Advantage to better understand, through a
voluntary effort, the extent to which they use value-based payment
models to compensate providers offering services to their enrollees.

http://www.cms.gov/Newsroom/MediaReleaseDatabase/Fact-sheets/2015-Fact-sheets-items/2015-04-06.html

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Morning Consult
March 30, 2015
Seniors Love Their Medicare (Advantage)
By Meghan McCarthy

Whether enrolled in traditional Medicare or Medicare Advantage, Morning
Consult polling shows Americans aged 65 and older expressing high levels
of satisfaction with their federal health benefits. But when asked about
individual pieces of their insurance—like prescription drug coverage,
the benefits that are covered, and preventive care—seniors using
Medicare Advantage reported higher satisfaction rates, sometimes by
double-digits.

The poll of 3,975 seniors found that 85 percent of seniors on
traditional Medicare said they were satisfied with their plan, compared
to 88 percent of seniors on Medicare Advantage.

Despite registering nearly identical satisfaction levels for the overall
programs, 80 percent of seniors on Medicare Advantage said they were
satisfied with the overall cost of their plans, compared to 68 percent
of traditional Medicare seniors. The gap in satisfaction appeared in
every individual measure, with Medicare Advantage proving more popular
every time.

Robert Berenson, a Medicare expert at the Urban Institute who previously
served on the Medicare Payment Advisory Commission, said seniors on
Medicare Advantage often get more benefits and have to pay less out of
pocket, because the federal government ends up paying more per
beneficiary when compared to traditional Medicare.

"Medicare Advantage plans provide better benefits, and overall costs are
less, but plans get paid more—with favorable selection—to be able to do
that," Berenson said in an interview. A March MedPAC report found that
Medicare Advantage plans would be paid 2 percentage points more than
traditional Medicare in 2015.

Berenson also noted that traditional Medicare often covers the sickest
and poorest seniors, and they might have a more negative view of their
insurance, and health care in general.

With more seniors signing up for the program, insurers are getting more
help from Congress to pressure the Obama administration to protect
payment rates from any reductions.

http://morningconsult.com/2015/03/seniors-love-their-medicare-advantage/

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Comment by Don McCanne

CMS has done it again. For the fourth year in a row, CMS has used
innovative methods to boost the payment rates for Medicare Advantage
plans, more than compensating for the required reductions in
overpayments mandated by the Affordable Care Act.

Although this year's Advance Notice called for a 1.05% increase in
Medicare Advantage revenue, CMS has responded to an intensive campaign
orchestrated by AHIP - the insurance lobby organization - by increasing
revenue by 3.25% instead. Members of both parties in Congress were
involved in this lobbying function - 239 from the House and 53 from the
Senate.

Although many factors are considered when determining payment increases
for Medicare Advantage plans, this year's surprise discovery of new
funds was predominantly in the updated effective growth rate of
fee-for-service (FFS) Medicare - a rate of 4.2% as opposed to their
Advanced Notice estimate of 1.7%. They explain that this is their "best
estimate" of FFS Medicare spending and "not the product of discretionary
CMS policy," though they say, "the underlying per capita FFS costs
continue to demonstrate a historically slow health care growth rate."

This continued overpayment to private Medicare Advantage plans has
allowed the insurers to offer greater benefits with lower out-of-pocket
costs, and that is what has made the plans popular - demonstrated by a
40 percent increase in enrollment between 2010 and 2015. Little is said
about the fact that the majority of the overpayments are retained by the
insurers for administrative costs and profits. Robert Berenson confirms
how these overpayments have made the plans more popular in polls such as
that from Morning Consult, whereas "traditional Medicare often covers
the sickest and poorest seniors, and they might have a more negative
view of their insurance, and health care in general." The Happy Healthy
are in the private plans, and the Sad Sick are in traditional Medicare.

The march to Medicare privatization moves forward, aided and abetted by
both Democrats and Republicans in Congress and in the Administration.
Enabling better benefits and lower beneficiary costs for private
Medicare Advantage plans, while leaving those in the traditional, less
expensive FFS Medicare program devoid of these additional benefits,
continues to incentivize the shift to private plans. Next week another
step forward will occur with the enactment of the "SGR fix" which will
expand somewhat the use of premiums and deductibles in the traditional
Medicare program, but not in the Medicare Advantage plans.

Where is citizen action on all of this? Are we headed to "Medicare for
None" with "Private Plans for All." Keep in mind that the purpose of
privatization is to shift the costs of health care from the government
(collectivism) to individuals (freedom). That surely cannot be what
Martin Luther King Jr meant when he dreamed of being "free at last."
What are we doing to his dream?

What impact do consumer-directed health plans really have?

National Bureau of Economic Research
March 2015
NBER Working Paper 21031
Do "Consumer-Directed" Health Plans Bend the Cost Curve Over Time?
By Amelia M. Haviland, Matthew D. Eisenberg, Ateev Mehrotra, Peter J.
Huckfeldt, and Neeraj Sood

Abstract

"Consumer-Directed" Health Plans (CDHPs) combine high deductibles with
personal medical accounts and are intended to reduce health care
spending through greater patient cost sharing. Prior research shows that
CDHPs reduce spending in the first year. However, there is little
research on the impact of CDHPs over the longer term. We add to this
literature by using data from 13 million individuals in 54 large US
firms to estimate the effects of a firm offering CDHPs on health care
spending up to three years post offer. We use a
difference-in-differences analysis and to further strengthen
identification, we balance observables within firm, over time by
developing weights through a machine learning algorithm. We find that
spending is reduced for those in firms offering CDHPs in all three years
post. The reductions are driven by spending decreases in outpatient care
and pharmaceuticals, with no evidence of increases in emergency
department or inpatient care.

From the Introduction

At the firm level, we find that CDHP offer is associated with an
approximately 5 percent reduction in total health care spending in each
of the three years after CDHPs were introduced relative to cost growth
observed for non-offering employers. The long term decreases in spending
are focused in outpatient care and drugs and there is little impact on
inpatient or emergency department spending. If these effects are due
only to changes in health care spending among those enrolled in CDHPs,
they imply local average treatment effects for those enrolled in CDHPs
of an approximately 15 percent reduction in total spending in each the
first three years. Differences in impacts by CDHP plan structure are not
statistically significant. However, consistent with our hypotheses, the
pattern of the point estimates suggests that the impact of CDHPs is
greater when paired with HSAs (versus HRAs) and when employers make
smaller account contributions.

From the Summary and Discussion

This study substantially adds to our knowledge on the long term cost
impacts of CDHPs. We estimated spending trends for three years across
over 13 million people across the country in an analysis estimating CDHP
impacts without the threat of individual level selection bias. We find
that health care cost growth among firms offering a CDHP is
significantly lower in each of the first three years after offer. This
result suggests that, at least at large employers, the impact of CDHPs
persists and is not just a one-time reduction in spending. However, an
important caveat is that the decrease in spending may be smaller in year
3 compared to year 1 post-offer. Recognizing that the differences are
not statistically significant, these results are suggestive and
consistent with a decreasing impact of CDHPs over time.

The decreases in total spending growth observed are primarily due to
reductions in spending on outpatient care and pharmaceuticals. In
contrast, by the third year there are no differences in either emergency
department or inpatient spending.

The results presented here are limited to large employers and therefore
may not extend to Medicaid beneficiaries, the individual or small group
market, or to the health insurance exchanges where, on average,
deductibles and out of pocket maximums are higher and/or enrollees have
fewer financial resources. While the firms in this study were
specifically selected to have lower income employees, all families had
at least one adult working full time with benefits so they are typically
better off than families not offered employer sponsored insurance.

In summary, in the first large multi-employer study to investigate long
term CDHP spending impacts we find reductions in health care cost growth
in all three years post CDHP offer and do not detect increases in any
component of health care spending. These findings do not support either
the concern that decreases in spending will be a one-time occurrence or
that short-term decreases in spending with a CDHP will result in
increases in spending in the long term due to complications of forgone
care. We cannot rule out either of these concerns developing over an
even longer time frame.

http://www.nber.org/papers/w21031

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Comment by Don McCanne

This study will no doubt be used to claim that high deductible health
plans with health savings accounts (CDHPs - consumer-directed health
plans) are effective in reducing health care spending without causing
any harm. However, the conclusions that can be drawn are far more limited.

The observed reductions of spending by those offered CDHPs by their
employers were in outpatient care and drugs. The nature of these
services may enable shopping for lower prices, but they also are
services that frequently are used for medical problems of lower acuity
which enables patients to make decisions as to whether or not they will
forgo the medical services and/or prescriptions offered. These services
may be for important interventions that could improve quality of life or
even longevity, or they could be for interventions that would have no
significant impact on health, or they could be for interventions in
between these extremes that might have only a modest beneficial impact
such as transient symptom relief. From other studies it is known that
patients decline not only care that they perceive to be of little value,
but when faced with deductibles, they often do decline care that is
clearly beneficial.

Those who would claim that this study shows that no harm was done after
enrolling in a CDHP point to the observation that being in a CDHP did
not increase hospitalizations nor increase the use of emergency
departments during the first three years of enrollment.

The reason this conclusion should be challenged is based on the fact
that the population studied was the relatively healthy workforce and
their healthy families in healthy years of their lives. It is highly
unlikely that a very modest decline in outpatient visits and
prescriptions would have directly resulted in crisis care requiring
emergency department visits or hospitalizations during the first three
years on the program, and thus these outcomes were an insensitive
indicator of harm. The rate of these interventions in the relatively
healthy control group was the same, as would be expected. Also, by
limiting the outcomes studied to only these two, the study remained
insensitive to other potentially beneficial results of obtaining health
care, if nothing more than relief on receiving reassurance over concerns
that patients may have had about their health.

This study has the same limitation of the oft-cited RAND Health
Insurance Experiment which also studied a healthy population for a
limited time in healthy years of their lives. These studies may have
intrinsic validity for the populations studied, but they do not have
extrinsic validity, particularly for an older, sicker population that
also has been shown to forgo care when faced with deductibles.

This study asked if CDHPs bend the cost curve over time (title). The
study showed that spending by employers was reduced 5 percent in each of
the three years following the introduction of CDHPs. Since not all
employees were enrolled in CDHPs, they theorized that the reduction in
spending for those in CDHPs was about 15 percent. Even there, a 15
percent reduction in spending on a population that has minimal need for
hospitalization and emergency department visits - where much of our
total health care spending lies - certainly does not equate to anywhere
near a 15 percent reduction in our total health care spending.

Remember that 80 percent of health care is used by the 20 percent of
people with serious health problems. Almost all of that spending is well
in excess of the deductibles and thus is not sensitive to consumer shopping.

Further, since employers insure the healthiest and least costly sector
of our population, the 5 percent savings that they gained is only a drop
in the bucket of our total national health expenditures. You won't see
much bend in this cost curve, especially if you alter policies so that
patients do receive the beneficial services that they should have, but
might otherwise forgo.

If we are going to bend the cost curve, let's not do it through methods
that reduce beneficial health care services. Let's do it though ways
that eliminate wasteful spending, such as the administrative excesses
imposed on us by the private insurers and public payers operating in a
fragmented, dysfunctional system. Let's enact a single payer national
health program instead.

Massachusetts’ reform failed to reduce racial and ethnic disparities

The BMJ
April 1, 2015
Effect of Massachusetts healthcare reform on racial and ethnic
disparities in admissions to hospital for ambulatory care sensitive
conditions: retrospective analysis of hospital episode statistics
By Danny McCormick, Amresh D Hanchate, Karen E Lasser, Meredith G Manze,
Mengyun Lin, Chieh Chu, Nancy R Kressin

Objectives

To examine the impact of Massachusetts healthcare reform on changes in
rates of admission to hospital for ambulatory care sensitive conditions
(ACSCs), which are potentially preventable with good access to
outpatient medical care, and racial and ethnic disparities in such
rates, using complete inpatient discharge data (hospital episode
statistics) from Massachusetts and three control states.

Results

After adjustment for potential confounders, including age, race and
ethnicity, sex, and county income, unemployment rate and physician
supply, we found no evidence of a change in the admission rate for
overall composite ACSC (1.2%, 95% confidence interval −1.6% to 4.1%) or
for subgroup composites of acute and chronic ACSCs. Nor did we find a
change in disparities in admission rates between black and white people
(−1.9%, −8.5% to 5.1%) or white and Hispanic people (2.0%, −7.5% to
12.4%) for overall composite ACSC that existed in Massachusetts before
reform. In analyses limited to Massachusetts only, we found no evidence
of a change in admission rate for overall composite ACSC between
counties with higher and lower rates of uninsurance at baseline (1.4%,
−2.3% to 5.3%).

Conclusions

Massachusetts reform was not associated with significantly lower overall
or racial and ethnic disparities in rates of admission to hospital for
ACSCs. In the US, and Massachusetts in particular, additional efforts
might be needed to improve access to outpatient care and reduce
preventable admissions.

From the Introduction

The Massachusetts reform was designed to achieve "near universal"
coverage, to improve access to care, and to decrease racial and ethnic
disparities in both coverage and access that are well documented within
the US healthcare system. In addition to extending coverage to the
lowest income individuals — disproportionately comprising racial and
ethnic minorities — the Massachusetts reform made reducing disparities
an explicit goal.

From the Conclusion and policy implications

Why might Massachusetts health reform have failed to affect preventable
admissions or narrow pre-existing racial and ethnic disparities in this
outcome? First, although estimates vary somewhat, the absolute decline
in the number of uninsured residents was about 6% of the non-elderly
population; this still left 6% of the non-elderly population uninsured
after full implementation of the reform. While gains were larger for
racial and ethnic minorities, so too was the proportion of uninsured
after reform. Second, before reform, Massachusetts had a robust
healthcare safety net system that provided free care to many of the
uninsured, who were disproportionately from minority backgrounds,
through the state's Uncompensated Care Pool program. Third, the public
insurance (Medicaid) and publicly subsidized (Commonwealth Care) and
unsubsidized (Commonwealth Choice) exchange based private insurance that
residents received under the reform might not have provided optimal
access to outpatient care because patients had to share costs or of
because of low provider reimbursement. In 2009 the Massachusetts Medical
Society found that only 60% of internist physicians in Massachusetts
accepted Medicaid and 40% accepted Commonwealth Care, and anecdotal
evidence suggests that finding a physician after reform became more
difficult. Lastly, there could have been insufficient capacity of
outpatient primary care providers to fully accommodate the influx of
newly insured residents, irrespective of insurance type.

In addition to being a key measure of access, preventable admissions
represent a clinical failure for patients and a needless expenditure of
scarce healthcare resources. Our findings therefore have important
policy implications. A large body of evidence suggests that insurance
substantially improves access to care across many settings, medical
conditions, and populations. In fact, recent US longitudinal studies
provide strong evidence that acquiring public forms of insurance such as
Medicaid and Medicare improves a broad array of health outcomes
including mortality. The fact that we found no evidence that the
Massachusetts reform diminished either preventable admissions or
disparities in such admissions, suggests that particular features of the
Massachusetts reform might need to be optimized to realize improvements
in access to outpatient care that can prevent admissions. Although our
results do not point to specific modifications, they might include
continued expansion of insurance to the remaining uninsured, reduction
in cost related barriers to outpatient care among those with insurance,
and more comprehensive outreach efforts to the insured and uninsured to
ensure adequate knowledge of the processes for applying for and
effectively utilizing insurance, particularly among residents with
limited proficiency in English language and low health literacy. Future
studies will need to define which of these or other improvements will
maximize outpatient access to care. While healthcare delivery systems
vary substantially internationally, our results could provide insight
into reforms of healthcare financing built on a mix of private and
public funding and individual mandates that both wealthy and less
wealthy countries could contemplate.

http://www.bmj.com/content/350/bmj.h1480

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Comment by Don McCanne

Goals of Massachusetts health care reform included extending coverage to
low-income individuals (disproportionately comprising racial and ethnic
minorities) and to reduce disparities in care. How well these goals have
been achieved is particularly important since it can predict how
effective the Affordable Care Act (ACA) - the same model as the
Massachusetts plan - will be in achieving these goals.

So how has Massachusetts done? This study looked specifically at the
rates of admission to hospitals for conditions that are sensitive to
ambulatory care. With better access to outpatient care hospitalization
rates should be lower, with racial and ethnic disparities diminishing.
These did not happen. The admission rates did not decrease and the
disparities for both blacks and Hispanics were unimproved.

Although many factors contribute to the disparities, insurance should
reduce financial barriers and thus improve access. Why didn't that
happen here? Some blame should lie with the model of reform selected. In
spite of mandates for coverage, many people still remain uninsured. Also
the cost sharing associated with health plans erect financial barriers
to care. Further, both narrow networks of the plans and the lack of
willing providers reduce access. These factors can be enough to explain
why there was no improvement in spite of the full implementation of the
Massachusetts reform. We can anticipate the same disappointing results
nationally in the years following full implementation of ACA since it
incorporates the same policy deficiencies.

As a remedy, the authors suggest more of the same. They would try to
expand coverage to the remaining uninsured - a very difficult feat in a
multi-payer system with varying qualifications for public assistance in
financing the care. They would reduce cost related barriers for those
with insurance, but not eliminate them. They would increase outreach
efforts to assist patients in negotiating the administrative quagmire of
the various insurance plans. They provide no suggestion for expanding
the networks of eligible providers. In their call for "reforms of
healthcare financing built on a mix of private and public funding and
individual mandates," they are explicitly endorsing the same model that
has already failed to reduce these disparities.

In a press release, one of the coauthors stated, "But we are more likely
to improve access to care and reduce preventable hospitalization rates
if we focus on offering residents insurance plans that minimize cost
barriers and are widely accepted by doctors." The problem is that the
ACA model of reform is driving the shift to ever greater cost barriers
and much narrower networks of physicians.

Instead of an individual mandate, everyone should be covered
automatically. Instead of erecting financial barriers to care, the
health care system should be fully prepaid with first dollar coverage.
Instead of perpetuating the administrative complexity of a multi-payer
system of public and private insurers, one single simplified system
should be put in place. Instead of separate restricted networks of
providers, all professionals and institutions should be covered by one
single program. Yes, the important model that they failed to mention is
a single payer national health program such as an improved Medicare that
covers everyone. That's what we need.



Note: One of the authors is a member of the Board of Directors of
Physicians for a National Health Program and an advocate of single payer
reform. Mention of the option of single payer was excluded from the
paper at the request of at least one of the other authors. They did
advocate for contemplation of "a mix of private and public funding and
individual mandates" - the ACA model, which their own study shows was
ineffective in reducing these disparities. If they really are interested
in correcting the deficiencies they list (financial barriers, provider
network inadequacy, and lack of universal coverage), they should have
included at least a mention of single payer.