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Saturday, January 22, 2022

Health Care Reform Articles - January 22, 2022

Editor's Note -

This recent report of health insurance experience by Mainers from Altarum is very interesting. Just click on the link.

https://www.healthcarevaluehub.org/advocate-resources/publications/maine-residents-struggle-afford-high-healthcare-costs-covid-fears-add-support-range-government-solutions-across-party-lines 

 - SPC      

The fight for single-payer health care moves to the states

by Mike Bebernes - Yahoo News - January 19, 2022

California lawmakers advance universal, single-payer healthcare bill

The Assembly Health Committee voted 11-3 Tuesday to advance the measure, which would establish and create the CalCare program. It still faces many hurdles, including several deadlines and opposition from Republicans and some Democrats.

 

A proposal that would make California the first state in the U.S. with a single-payer health care system passed a significant legislative hurdle last week, setting up a crucial vote in the state Assembly later this month.

If enacted, the plan would eliminate private health insurance and move all California residents to a new, state-run insurance program called CalCare funded by new business and payroll taxes. CalCare would be similar to Medicare for All, a proposal for a nationwide single-payer that has gained support among progressive lawmakers in recent years and was a centerpiece of Vermont Sen. Bernie Sanders’s bid for the Democratic presidential nomination in 2020.

Single-payer — so named because a single entity, the government, would pay for all health care — has been promoted by advocates for decades, and public support for a national government-run system has increased over the past few years. But federal action on single-payer is close to unimaginable for the foreseeable future. President Biden, a significant share of congressional Democrats and every Republican member of Congress all oppose the idea.

That stalemate in Washington has shifted the debate to the states. In addition to California, lawmakers in New York, Massachusetts and more than a dozen other states have proposed bills to establish statewide single-payer. These efforts have looked promising at certain points, but no state has ever enacted its own single-payer system. Vermont’s Legislature actually passed a bill to do so in 2011, but the plan was abandoned three years later after the state government failed to find a way to fund the program.

Why there’s debate

The arguments for and against a national single-payer system are well established at this point: Supporters say ditching private insurance would save both lives and money, while opponents warn of massive tax increases and care rationing. Shifting the focus to the states, though, changes the parameters of the debate.

Advocates say states are an ideal place to start single-payer health care. They argue that progressive policies are more likely to pass through state legislatures in blue states, many of which are much further to the left than Congress and are free from procedural hurdles like the filibuster. Backers also point to a number of studies that suggest that though they would require tax increases, single-payer systems would ultimately be cheaper for a state’s residents than the current system.

Conservatives generally argue that the shortcomings of single-payer systems don’t disappear when shrunk to the state level. In fact, they say, smaller state budgets and limits on deficit spending make the idea even more untenable. Others point out that states have their own unique procedural roadblocks that may stifle single-payer efforts — California, for example, would have to have its funding plan approved by voters. There are also concerns among some progressives that the pursuit of state-level single-payer could undermine efforts to enact the system at the national level.

What’s next

It may be years before the fate of California’s single-payer proposal is known. If the state Legislature approves the plan, which is far from certain, the issue would then be put to voters, likely in 2024.

Perspectives

Optimists

There may finally be the political will to enact single-payer health care at the state level

“It’s well understood that the obstacles to enacting single-payer health coverage in California, as in the country as a whole, arise less from policy than from politics.” — Michael Hiltzik, Los Angeles Times

The pandemic has made the case for universal health care more potent

“If we want to protect people from the next disaster or pandemic and ensure that healthcare is a human right, our legislature has this unique opportunity to make history in our great state. Let’s not allow our traumas, sacrifices and losses to be in vain.” — Keriann Shalvoy and Judy Sheridan-Gonzalez, City Limits (New York)

States could create the pathway for a national single-payer system

“In short, small-scale policy innovations can kickstart widespread adoption on a national level. Enacting a single-payer system on the state level could overcome the legislative and political hurdles that currently impede its implementation on a national level.” — Casey Buchholz, Stephanie Attar and Gerald Friedman, Jacobin

The idea that voters are desperate to keep their private insurance is a myth

“If you’ve been part of the larger conversation, though, you are also likely to have heard a talking point along the lines of ‘But people love their health plans.’ … What Americans like, overwhelmingly, is their public health insurance. What they find inefficient and costly — and what the health care giants are desperate to keep propping up — is a megabillion dollar private insurance industry that consistently ranks below every public option available to consumers.” — Mark Kreidler, Sacramento News & Review

Some U.S. states have larger economies than countries that effectively run single-payer

“It sounds too good to be true but in fact, New York would be joining every other rich nation in the world, all of which already provide guaranteed health care regardless of employment status and whose systems protect public health, not insurance company profits.” — Lori DeBrowner, Daily News (New York)

Skeptics

States face many of the same barriers that hold back national health care reform

“Even with overwhelming Democratic majorities in both legislative houses, it may be difficult to advance the [single-payer plan], since they will face very stiff opposition from private employer groups … and much, if not most, of the current health care industry. There are, moreover, some serious practical hurdles.” — Dan Walters, CalMatters

Blue state lawmakers have no intention of actually enacting single-payer health care

“Democrats like to go on record supporting single-payer healthcare given that it’s a core demand of progressive groups, but even they aren’t about to pass a law that lacks an independent fiscal analysis or a non-laughable funding mechanism.” — Editorial, Los Angeles Daily News

States don’t have the capacity to run a massive health care system on their own

“The lawmakers will enjoy their press conferences and overdone speeches about the matter. But they need to ask themselves if the state is actually prepared to take on such a tall task. Anyone who has spent any time looking at the track record of Sacramento knows one thing for certain: this is a bridge too far.” — Editorial, the Sun (San Bernardino, Calif.)

Single-payer plans always fall apart when faced with the reality of what they would cost

“Still, give California progressives some credit for being open about what it will take to pay for such a system. In the past, support for state-level universal health care proposals has collapsed when the cost of the promised benefits became clear. … There’s no such thing as ‘free’ health care, after all.” — Eric Boehm, Reason

Democrats should put their energy into smaller, more realistic reforms

“Bold plans with no chance of passing are a waste of time. We applaud lawmakers who want expanded access to health care. But their energy is best spent on ideas with a chance of being enacted.” — Editorial, San Diego Union-Tribune

A national system is the only feasible way to achieve universal health care

“Some healthcare activists and their progressive allies, suffering from the frustration and disillusion brought on by the refusal of President Joe Biden and Congress to consider structural reform, have accepted this defeat and turned to state-based reform, jeopardizing Medicare across the country. Healthcare is a national responsibility. To palm it off to states is a step backwards.” — Ana Malinow and Kay Tillow, Common Dreams

https://news.yahoo.com/the-fight-for-single-payer-health-care-moves-to-the-states-160829656.html?guccounter=1
 
 

An Obscure Agency Is Threatening to Hand Medicare Over to Wall Street

by Ana Malinow - Truthout - December 3, 2021

In the face of massive support for Medicare for All and the failure of the U.S.’s for-profit health care system, the inevitable fall of the medical-industrial complex can be predicted, if not with precision, with certainty. Everyone is aware of the impending demise, none more so than those in charge of the for-profit health care system and their supporters in Congress, as evidenced by the frenetic activity at the Centers for Medicare and Medicaid Services (CMS) to transfer the traditional Medicare program to the insurance industry as fast as humanly possible. Given this urgency, physicians representing Physicians for a National Health Program delivered a petition signed by 13,000 individuals, including 1,500 physicians, to Health and Human Services Secretary Xavier Becerra this week demanding the end to the privatization of Medicare.

Privatization, the transfer of a public good to private, for-profit entities, is already true for over 40 percent of Medicare in the form of Medicare Advantage, private insurance plans that have been persistently and pervasively overpaid by Medicare for decades. As Kip Sullivan recently described in “Single Payer Health Care Financing,” this fraud has been going on for decades.

In 1995, the U.S. General Accounting Office (GAO) warned Congress that Medicare was overpaying Health Maintenance Organizations (HMOs), the precursors to Medicare Advantage plans, by 6 to 28 percent compared to what it would have paid had all those HMO enrollees remained in traditional Medicare because most HMOs benefited from “favorable selection,” meaning, healthier patients enrolled in HMOs. In 1999, the GAO again warned Congress that Medicare spent more on beneficiaries enrolled in HMOs than it would have had those beneficiaries been enrolled in traditional Medicare. The following year, the GAO told Congress that it was largely excess Medicare payments to HMOs, not their efficiencies, that allowed plans to attract large numbers of beneficiaries, again exceeding costs expected under the traditional program, adding billions to Medicare spending.

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Twenty-six years later, in its 2021 report to Congress, the Medicare Payment Advisory Commission wrote, “The Commission estimates that Medicare currently spends 4 percent more for beneficiaries enrolled in MA [Medicare Advantage] than it spends for similar enrollees in traditional fee-for-service (FFS) Medicare.” This low number is difficult to square with the profit that insurance companies are making and the extra benefits that they offer. What has been clear to Congress for decades, is that Medicare Advantage, which inserts a middleman to “manage” care between CMS and doctors and hospitals, costs more than traditional Medicare, which does not require a middleman between the senior and the provider. From 1972 to 2004, overpayment by Medicare to HMOs was the rule and due mostly to favorable selection. After 2004, overpayment persisted for Medicare Advantage plans (formerly known as Medicare + Choice) for two reasons: favorable selection (“cherry picking,” or selecting healthy patients, as well as “lemon dropping,” or getting rid of sick patients, perfected by HMOs) and upcoding.

What is upcoding? When a doctor bills the insurance company or Medicare for a patient, the doctor uses a diagnosis code. For example, a patient who is seen for pneumonia will be billed with the diagnosis code for pneumonia. But what if instead of just billing for pneumonia, the physician also coded for shortness of breath, hypoxia (low oxygen level), productive cough and exposure to tuberculosis, some of which might or might not be accurate, but could certainly be present in someone with pneumonia? This would be upcoding and would be considered fraud, but in the Medicare Advantage world, upcoding is known as risk-score gaming, and it is perfectly legal.

Risk-score gaming is how Medicare Advantage has been drawing serious overpayments since its full implementation in 2006. Medicare Advantage does this by submitting diagnosis codes that create more CMS Hierarchical Condition Categories (HCCs) for each patient. For example, a 76-year-old female with obesity, type 2 diabetes, major depression and congestive heart failure has an HCC risk score of 1.03. For this patient, CMS pays a Medicare Advantage plan that does not upcode $9,000.

If however, the Medicare Advantage plan upcodes — same patient, same medical conditions but more codes: morbid obesity instead of obesity, diabetes with retinopathy instead of diabetes; a mild, single episode of major depression instead of unspecified major depression; chronic obstructive lung disease instead of asthma and a stage 3 ulcer instead of ulcer — her risk score jumps to 3.63, and CMS pays the Medicare Advantage plan for the same patient $32,000. The plan reaps obscene profits, some of which goes to marketing, some of which goes to improve benefits driving up the number of new members, but most of which go back into profits, all the while draining the Medicare trust fund, driving up Part B premiums (monthly payments made by beneficiaries to Medicare) and diverting taxpayer funds from other social services.

For each 0.1 increase in risk score at current enrollment levels, there are $15 billion in overpayments ($13 billion from CMS, and $2 billion from Part B beneficiaries) and the Medicare Advantage plan takes $3.5 billion in profits. Risk-score gaming is the business model for Medicare Advantage and creates a major transfer of wealth to Medicare Advantage from taxpayers and traditional Medicare recipients.

In addition to greater costs to the federal government, Medicare Advantage plans deny care for enrollees, create cost-related problems for enrollees, limit specialized care due to narrow networks (especially at the end-of-life), have worse health outcomes (including higher mortality), and unenroll high-cost beneficiaries (“lemon drop”) who are in poor health.

All evidence points against using the multibillion-dollar health insurance industry to improve outcomes and save money. But evidence is no match for profit. In 2019, the Medicare budget approached $800 billion, and by 2026, it is projected to be $1.35 trillion. This amount of taxpayer money keeps capitalists up at night, especially the medical-industrial complex types, scheming up ways to grab some for themselves. Lucky for these capitalists, CMS is continuing its march towards privatization, or what is known in the parlance of health economists, “de-risking” all of Medicare, meaning eliminating the risk of providing health insurance to seniors by having someone else bear the risk. But the truth is the exact opposite: These overpayments are allowing the insurance industry to pretend they bear risk when in fact it’s the taxpayer who is bearing risk.

There is much profit to be gained by “bearing the risk” for Medicare through favorable selection and upcoding, as evidenced by the outsized profits for insurers in Medicare Advantage compared to margins in the group or individual market. There should be little surprise, then, that the industry is chomping at the bit to “bear the risk,” that is, be overpaid to insure the remaining 60 percent of seniors who have deliberately chosen not to enroll in Medicare Advantage, those that are safely (or so they thought) enrolled in traditional Medicare.

But safe they are not, and every enrollee in traditional Medicare should take note: A program known as the Global and Professional Direct Contracting model in a little-known government agency known as the Center for Medicare and Medicaid Innovation (“The Innovation Center”) is already moving them, without their knowledge or consent, to “risk-bearing,” for-profit middlemen known as Direct Contracting Entities (DCEs). The goal: to end what’s left of traditional Medicare.

The Innovation Center was created under the Affordable Care Act (ACA) in 2010 with a mandate to test “innovative” payment and service delivery models for Medicare that would decrease costs, and if not improve, at least not worsen care. The ACA gave full authority to the Innovation Center to scale up any model it deemed fit, to all of Medicare without congressional approval. In the past 10 years, 54 models have been developed, 50 of which failed and all of which continue to use market-driven models of care. Not one model has been developed to test out single-payer, which actually would decrease costs and save lives. The latest demonstration project, created in the waning days of the Trump administration and greenlighted by the Biden administration, is the DCE model, which is being rolled out to traditional, fee-for-service Medicare beneficiaries without congressional approval or anyone’s vote.

What is a Direct Contracting Entity? Simply put, it is a “risk-bearing,” for-profit middleman to manage health care for traditional Medicare beneficiaries, just like Medicare Advantage plans are for seniors who have signed up for Medicare Advantage plans. The difference is that while 26 million seniors have voluntarily signed up for a middleman when they chose Medicare Advantage, the 38 million seniors in traditional Medicare have not.

How do you get seniors who have specifically chosen traditional Medicare to switch to a non-traditional Medicare-Advantage-like plan with a mysterious name like “Direct Contracting Entity”? You don’t tell them! You lure their primary care providers to participate in a DCE by promising the doctors much better Medicare reimbursement rates and more time with their patients, and once the doctors sign up with a DCE, all their patients are automatically “aligned” by CMS with the DCE the doctor has chosen. The DCE sends patients a letter they are likely not going to read or understand, and presto! Millions of seniors previously on traditional Medicare now belong to a DCE. That’s how DCEs leverage and monetize the doctor-patient relationship for the profit of corporations.

DCE middlemen accept capitated payments for seniors in traditional Medicare just like Medicare Advantage plans, “cherry pick and lemon drop,” deny care, upcode, spend as little as 60 percent on health care for beneficiaries (compared to Medicare Advantage’s 85 percent), and keep the rest as profit. The playbook is an old one, and it works.

There are 53 DCEs in 38 states and Washington, D.C., mostly owned by for-profit, private equity firms, investor-owned primary care practices, Accountable Care Organizations (a network of doctors and hospitals that is jointly accountable for the health of a group of Medicare patients and that receives financial incentives from Medicare to save money on patient care while meeting certain quality metrics) and Medicare Advantage plans. Many DCEs are owned by publicly traded corporations straight out of Wall Street. These are the corporations that will potentially manage the care of up to 30 million seniors who thought they were free of insurance companies. Instead, their health will be weighed against profit. And in a market-driven, for-profit health care system, the bottom line always wins.

But the most important question still remains: Why the urgency to “de-risk” (privatize) Medicare, no matter the cost? Enter Liz Fowler, architect behind the ACA, an industry darling who ensured health insurance companies would reap billions every year under the ACA, the new director of the Innovation Center brought in by the Biden administration to oversee the full privatization of Medicare. Industry giants and Washington insiders can read the writing on the wall as well as anyone else. They are acutely aware that a majority of Americans say it is the government’s responsibility to provide health care for all. They know that a pandemic has shined a light on the inefficiencies, inequities and indifference of our health care system. They know that Americans died in greater numbers and at increased rates compared to countries with universal health care systems in place. In the face of this inevitability, what would the medical-industrial complex and Congress do? Sell off Medicare, and fast, before Americans actually get Medicare for All.

Health and Human Services Secretary Becerra, a supporter of Medicare for All, and CMS Administrator Chiquita Brooks-Lasure have the authority to terminate the Direct Contracting model program. Congress has the power to hold hearings on the Innovation Center and pass legislation to provide congressional oversight to the Center’s pilot programs. The Innovation Center has put a hold on new DCE applications, to the consternation of industry, but all signs point to the continuation of using DCEs to privatize traditional Medicare. The Innovation Center will put a pretty bow around DCEs and talk about “equitable outcomes” and “person-centered care” but we should not be fooled: The end of Medicare is near. It is up to us to demand DCEs, not Medicare, be ended.

https://truthout.org/articles/an-obscure-agency-is-threatening-to-hand-medicare-over-to-wall-street/ 

 

Medicare Advantage, Direct Contracting, And The Medicare ‘Money Machine,’ Part 1: The Risk-Score Game | Health Affairs Forefront

Richard Gilfillan and Donald M. Berwick - Health Affairs - December 29, 2021

While the COVID-19 pandemic rages, the past two years have seen another epidemic of a far different type—in financing and acquisitions of firms focused on serving Medicare beneficiaries. These firms include physician practices, notably primary care practices (PCPs); management services organizations (MSOs) that aggregate practices; and Medicare Advantage (MA) insurers. In this arena, the combined activity of private equity and venture capital firms, initial public offerings, special purpose acquisition companies (SPACs), and insurance company purchases of MA-focused firms has soared: more than $50 billion in valuation has been created in the past 18 months, dwarfing the speculative bubble for physician practice management companies in the 1990s.

One indicator of the exuberance underlying this “Medicare Gold Rush” is the amount per covered life implicit in a firm’s overall valuation. Historically, per-life valuations in MA have ranged from $4,000 to $10,500. Exhibit 1 shows per-life valuations for a sample of recent transactions. The average is $87,000 per beneficiary. Most of the firms acquired or financed are PCPs or MSOs that typically produce no margins—just an average take-home income of $240,000 per physician. The first six are participants in the Centers for Medicare and Medicaid Services’ (CMS) new Direct Contracting Model, which we shall discuss further in Part Two of this post.

Exhibit 1: Recent valuations of Medicare-focused firms.

Source: Authors’ analysis of publicly available information

 

If these valuations for PCP Practices and MSOs look hard to believe, that is because they are. Annual Medicare Part A and B spending per individual is roughly $12,000. PCPs typically receive only 5 percent of that amount. By what logic would an investor pitch in at a rate equal to almost eight times the total annual health care expenditure per capita for PCPs with no margin? Investment at this level is smoke; what is the fire?

In this two-part post, we will attempt to explain the perverse MA business model that underlies this elevated level of investment, and we will explore its connection to the Direct Contracting model now being tested by CMS. The story is complex, but we think it is worth telling because the stakes for beneficiaries, the public treasury, and our health care system are very high. This business model is distorting health care delivery, creating excessive costs for taxpayers and Medicare beneficiaries, draining the Medicare Trust Fund, obstructing the badly needed value transformation of American health care, and diverting the money needed to fund other social services and goods.

Part one of this post focuses on MA. Part two, to be published tomorrow, will discuss Direct Contracting and suggest some reforms for both MA and Direct Contracting. We also offer a broader reform agenda that calls for expanding the accountable care organization (ACO) model by working directly with providers, rather than investors.

The Perverse Marketplace And Business Model Of Medicare Advantage

Four main business realities drive the interest in Medicare-related acquisitions. First is the expected doubling of Medicare spending from $800 billion in 2019 to $1.6 trillion in 2028 as Baby Boomers age. Second is the reality that MA harbors an arbitrage game in which CMS consistently overpays MA Plans with no demonstratable clinical benefit to patients. Third is the heavily subsidized and distorted market dynamics that result from these overpayments. Fourth is the Trump administration’s creation of the Direct Contracting Model as a vehicle for privatizing Medicare’s projected 2028 $1.6 trillion spend.

The Magnitude Of MA Overpayments:

As exhibit 2 shows, the Medicare Payment Advisory Committee (MedPAC) has documented approximately $140 billion in MA overpayments over the past 12 years. MedPAC further concludes that risk adjustment overpayments are currently increasing. Kronick and Chua have estimated savings at $355 billion over the next eight years if just risk-score related overpayments were eliminated. (Exhibit 3)

Exhibit 2: MA overpayments (in billions of $) due to quality system, benchmark policy, and risk adjustment scores (total = $143 billion).

Source: The MedPAC Blog, March 3, 2021 (authors’ conversion of MA overpayments to dollars from percent of FFS payments as calculated by MedPAC)

Exhibit 3: Potential Medicare annual risk adjustment savings (in billions of $), 2023-2030 (total=$355 billion).

Source: Estimating Impact of Coding Intensity Adjustment: Exhibit A.7, DECI (Demographic Estimate of Coding Intensity) p.28

MedPAC has documented MA plans’ ability to obtain overpayments by cherry picking counties with favorable benchmarks and escalating quality bonus payments through contract manipulation. These tactics add 8 percent in program costs in 2021, leading to MA payments 2 percent above fee-for-service (FFS) Medicare payments. MedPAC has made important recommendations to Congress to address these issues. We will focus primarily on the “risk-score gaming” that increases MA payments and the resulting marketplace dynamics impacting health care delivery across America.

The Dynamics And Worth Of MA Risk Adjustment System Overpayments For Plans: Risk-Score Gaming

The shortcomings of CMS’s Hierarchical Condition Category (HCC) risk adjustment system have been well described since its full implementation in 2006. Simply stated, MA plans can draw enormous overpayments by submitting diagnosis codes that create more HCCs per person. While the codes are, presumably, accurate, the dollar coefficients used in MA payment logic are inflated because they were modeled using markedly under-coded FFS data. “Risk-score gaming” overpayments come from inaccurate pricing of HCCs. Congress and every administration since 2006 have avoided fixing this inaccuracy, in part because of plans’ enormous political clout.

Exhibit 4 illustrates how the MA bid model rewards increased coding. (Part D costs are excluded).  Total CMS Premium includes two pieces.  One is the Plan bid to provide A and B services including profit and administration, multiplied by the risk score. The other is a rebate Medicare pays to the plan, calculated on average as 65 percent of the amount it bids below the risk adjustment benchmark; CMS retains the other 35 percent. Both pieces increase as the risk score goes up. The A and B Medical Expense in each column is unchanged since the population is the same. 

Column A shows the resulting financials for a 2021 average plan described by MedPAC.  Despite the 1.0 Risk Score, Medicare pays roughly 1 percent more than FFS, due to the benchmark and quality issues noted above. Column B illustrates the theoretical results for a very highly competitive market where the Plan uses most extra revenue to increase rebates, not profits.   CMS overpayments increase by $58 million annually per 100,000 beneficiaries, with beneficiaries paying $12 million more in Part B Premiums. 

Exhibit 4: Fundamentals of risk-score gaming: the impact of risk scores on plan financial outcomes.

Source: Authors’ model. MLR includes additional expense for code collection.

Researchers in multiple studies have demonstrated that MA markets are not so competitive, and that Plans tend to use additional revenue to improve profits more than member benefits. Plan bid documents are not public, so we cannot show this directly.  Columns C and D in exhibit 4 result from our more conservative model based on MedPAC's 2021 Bid Analysis and Jacobs and Kronick’s empirical analysis. The resulting estimates are that for each 0.1 increase in risk score, an average plan would use roughly $11 PMPM for profit and $14 to improve premiums and benefits.  For each 0.1 increase, estimated profits increase about 25 percent, Medicare overpayments for 100,000 beneficiaries increase by $58 million, of which $8 Million will be paid by Part B beneficiaries. Individual plans’ actual use of risk score revenue will vary widely depending on their strategic weighting of profitability vs. growth.

The Demographic Estimate of Coding Intensity (DECI) estimates in exhibit 3 include a 2021 MA coding intensity difference of approximately 0.13. Projected across the MA population of 26 million, each 0.1 increase in risk scores in our model results in an additional $15 billion in overpayments and $3.5 billion in additional MA plan profits at current enrollment levels. CMS would pay $13 billion of the overpayments and Medicare Part B beneficiaries would pay the other $2 billion in inflated Part B premiums. Risk-score gaming creates a major transfer of wealth from taxpayers and Medicare beneficiaries to MA plans, and it lies at the heart of the business model for most MA plans.

The Perverse Marketplace Of Medicare Advantage

Supporters of MA point to the program’s growth as evidence that the privatized model works. The reality is that MA grows because the structural and risk-score gaming overpayments subsidize MA plans to offer some improved benefits, lower Part D costs, an average $5,000 out-of-pocket cap, and underutilized supplemental benefits. Low-income beneficiaries remain underinsured and subject to significant copayments and deductibles. As plans code more, risk scores go up, CMS provides more subsidies, benefits and premiums get better, and buyers choose the improved plans that cost taxpayers more. This is one distorted dynamic in the MA marketplace: the costlier the plan is to the payer (CMS), the easier it is to sell it to the customer, and the greater the profit.

This subsidized marketplace is the major reason that over the past 15 years MA plans have been by far the most popular form of health insurance company start-ups. Firms that initially targeted other segments, such as the exchanges (viz. Bright and Oscar) or Medicaid (viz. Centene and Molina), have all found their way to MA as their preferred business opportunity. Most recently new MA startups have been prominent, including Clover Health, Devoted Health, and Alignment Health.

One potential restraint on risk-score gaming is that as risk scores go up plans begin approaching the 85 percent Minimum Loss Ratio requirement under the Affordable Care Act. Plans have found a solution for that, which we label the “MA Money Machine,” the next major component of the distorted MA Marketplace.

How The “MA Money Machine” Works

Given the dollar magnitude, risk-score gaming becomes a central part of every MA plan’s strategy. The starting point is to get as many diagnosis codes as possible. An entire industry been created to do just that, leading to billion dollar valuations for firms, like Signify Health, that provide analytical tools to enable coding efforts or make home visits for plans and providers. Most Plans now use Artificial Intelligence (AI) HCC Tools to identify coding opportunities.

In a recent investor call, United Health remarked on the importance of home visits, noting that, as the COVID pandemic waned, their HouseCalls nurses were back in the home collecting diagnoses that should lead to improved profits in their MA plans. MedPAC and the HHS Inspector General have identified these home visits as key drivers of overpayments. But MA plans know that the best sources of more codes are providers. They have developed three well-established schemes to get more codes directly from providers, which we call “Deal 1,” “Deal 2,” and Deal 3.”

Provider Coding Deal 1: Pay Providers For Submitting More Codes

Some plans pay providers to code more diagnoses by using pay for performance metrics like HCC Gaps Closure and Recapture Rates and using AI tools to direct their efforts. Clover Health simply pays MA (and now Direct Contracting) physicians $30 per visit to use its “Clover Assistant” AI platform, which identifies coding opportunities.

Provider Coding Deal 2: Share The Risk Premium With Providers

Many MA insurers distort the value-based care (VBC) contract model to make it a vehicle to drive more coding. Column A in exhibit 5 illustrates the results of a legitimate value-based contracting approach similar to that used in Medicare ACOs. A medical expense target is set based on historical experience. If actual costs are less than historical costs, the provider keeps a portion of savings, contingent on quality-of-care metrics. ACOs operating under VBC models have saved CMS $1.9 billion in 2020 and more than $4 billion over the past eight years.

Column B, C, and D in Exhibit 5 show how MA plans distort VBC contracts to increase CMS costs. These MA “non-value-based care” contracts sets the target based on a percentage of the premium the plan receives for a provider’s panel of patients. The provider has good reason to focus on increasing the risk score. In column B, the risk-score increase of 0.1 drives higher premium, the target goes up, and the resulting contrived “medical cost savings” of $56 PMPM, without any actual change in costs or care, “drop through” to become provider profits. Insurer profits increase as well, since insurers collect 15 percent of a larger premium. CMS ends up paying $120 million more and beneficiaries pay for $14 million in Part B premiums.

Columns C and D show how each 0.1 RAF increase creates $87 PMPM more in Part A and B revenue, with $71 going to the provider and $15 to the plan, which can use it as profit or to improve benefits. Rebates go up $14 PMPM as well, due to the benchmark increase. Column D also shows that, any decrease in medical costs just becomes additional profit. CMS shares in none of the savings, and costs still go up $370 M in total per 100,000 beneficiaries.

These MA Percentage of Premium contracts create a continuous “Money Machine,” that allows the provider firm and plan to harvest a financial windfall just by finding more codes. As a result, providers look hard for diagnoses using various AI-enabled platforms. A current popular tactic, for example, is to screen beneficiaries for peripheral vascular disease (HCC 108), which delivers an extra $2,800 per year per patient, by ordering carotid ultrasound studies, even though the US Preventive Services Task Force recommends against such screening for the general population.

Exhibit 5: Comparison of value-based care and MA percentage-of-premium contracts.

Source: Authors’ analysis

Key points comparing Deal 1 provider payment tactics (in exhibit 4) to Deal 2 Percentage of Premium contracts (in exhibit 5) include the following:

  1. CMS overpayments in Percentage of Premium contracts in exhibit 5 are almost double the overpayments in the risk-score gaming model in exhibit 4, because CMS does not share in the phantom “Medical Cost Savings” as they do with rebate calculations.
  2. Extrapolated across the entire MA population Percentage of Premium contracts increase costs by $30 billion, or 10 percent, for every 0.1 increase in RAF score.
  3. The financial returns for providers in Deal 2 are enormous. Providers can reach 400 percent or more of usual PCP payments, and provider profits can reach more than 200 percent of plan profits.
  4. Rebates under Deal 2, although not as high as in the Deal 1 risk-score gaming model, still increase, facilitating enrollment growth.
  5. Any medical cost savings simply drop through to become more provider incentive payments rather than savings to CMS.
  6. The 85 percent MLR requirement is enfeebled because the extra claims keep the MLR high.

Provider Deal 3: Own The Providers

Recognizing that the largest share of the MA Money Machine profits goes to providers, some insurers have decided to own the providers outright. This tactic ensures optimal use of their sophisticated AI coding by employed staff. The parent collects both the insurance profits and the Money Machine profits. MedPAC raised the issue of whether plans with Deal 3 arrangements may be inaccurately reporting related provider incentive payments in ways that overstate medical expenses. The final row in exhibit 5 demonstrates that if such claims, which could ultimately result in profits for the plan, were excluded, the actual MLR could be in the low 70s.

United Healthcare, the most profitable of the large national MA Plans, seems to have used Deal 3 for seven years following the purchase, through its OptumHealth subsidiary, of Monarch and Applecare PCP Networks in 2014. With over 50,000 physicians owned or in affiliated independent practice associations (IPAs), United may today be the largest employer of physicians in America, and it plans to add 10,000 more physicians in 2021. The Money Machine model was described as a core driver of profitability in a recent United Healthcare C-Suite fireside chat: “OptumHealth . . . revenue per consumer served increased 29 percent for 2020 driven by expansion . . . in value-based care arrangements and increasing acuity of the care services provided.”

The Current Status Of The MA Money Machine

Over the past 15 years, the MA Money Machine has been growing as an essential business model component for many prominent physician groups, IPAs, PCP/MSOs and even some integrated systems. United Healthcare and Humana today control 12 million MA lives, almost 50 percent of the national total. Both are rapidly expanding their use of the MA Money Machine. Humana reports that two-thirds, or 2.4 million, of its individual beneficiaries are in these models. They have relied on Deal 2 historically, but recently announced the creation of Centerwell as their new Money Machine Deal 3 vehicle. United Healthcare, with a particular focus on acquiring non-profit physician groups like Reliant and Atrius Health, has said that Optum now has 2 million of its MA lives in “Value-Based Contracts” and is rapidly increasing that number. Thus at least 4.4 million people, or 17 percent of all MA members, and almost $60 billion, are involved in Deal 2 or Deal 3 Money Machine contracts today, with rapid growth ahead.

Exhibit 6 (modeling a hypothetical physician’s panel of 400 MA patients) illustrates how these contracts turn break-even primary care practices into very profitable “assets” that have attracted the attention of private investors

Exhibit 6: Effects of risk scores on PCP profitability.

Source: Authors’ analysis

Over the past eight years a number of new start-up venture capital backed PCP firms have been created using the Money Machine as their core business model. They share many common features:

  1. Primary, if not exclusive, focus on MA patients, not traditional FFS patients.
  2. A business model driven by “Percentage of Premium” MA contracts (Deal 2).
  3. A high-touch clinical model focused on coding and decreasing medical costs.
  4. Easy PCP access using low patient-to-provider ratios, open appointments, and free transportation to the office.
  5. Proprietary AI-based digital platforms that drive high risk scores, in the 1.3 – 1.7 range (according to former employees).
  6. Deep relationships with one or more MA plans, some of which have funded new practice sites.

Recent PCP and MSO partnerships with Humana, for example, include Iora, Oak Street, Agilon, Cano Health, and Landmark. VillageMD has partnered with Aetna/Anthem, and ChenMed has partnered with Independence Blue Cross. As shown in Exhibit 1, financing for these firms has been extraordinary. Another set of PCPs and MSOs are following closely behind, including Miami Beach Family Practice and several other Direct Contracting Entities (DCEs). The primary business model for all is the MA Money Machine.

Why the rush of investors into MA primary care space? Because it is an MA Money Machine. While all can agree that we should improve compensation for primary care, these extraordinary profits are more likely to be captured by the for-profit parent entities rather than passed through to physicians delivering care.

The toll of the MA coding game, though high, has heretofore been confined to the MA portion of Medicare, that is 42 percent of all CMS beneficiaries. Under the Trump Administration, that changed. The Trump Administration avowed its intention to de-risk CMS by moving the 58 percent of Medicare beneficiaries who chose traditional coverage into MA-like full risk capitated arrangements. This full privatization of Medicare coverage would require new entities to act as financial intermediaries between CMS and non-MA beneficiaries. CMS officials decided that the same firms that benefited from risk-score gaming overpayments in MA—insurers and MA-focused Primary Care Firms (PCF’s)—should be given the opportunity to manage the $350 billion in Medicare spending for the majority of beneficiaries not in Medicare Advantage. They needed a new program to accomplish this overarching goal. The Direct Contracting Model was announced in April of 2019 as the vehicle.

https://www.healthaffairs.org/do/10.1377/forefront.20210927.6239/full/ 

 

Medicare Advantage, Direct Contracting, And The Medicare ‘Money Machine,’ Part 2: Building On The ACO Model


 

In Part one of this two-part post, we explored the reasons for surging growth and profits in the Medicare Advantage (MA) program and the dynamics, largely related to risk-coding games, that make MA a costly form of transfer of public and beneficiary dollars into private hands. In Part two below, we explore the approach fostered originally by the Trump Administration to implant those same dynamics into the traditional Medicare side of the Centers for Medicare and Medicaid Services (CMS) ledger in the form of the misnamed “Direct Contracting” model. We then offer policy recommendations to restore balance and efficiency to MA and further alternative payment models for traditional Medicare.

Direct Contracting: The Path To Medicare Privatization

Given an Orwellian title, Direct Contracting, launched by Center for Medicare and Medicaid Innovation (CMMI), was anything but direct. “Indirect Contracting” would have been a far more accurate name, since the cornerstone of the program was CMS’s opening the door to non-provider-controlled “Direct Contracting Entities (DCEs)” to become the fiscal intermediaries between patients and providers.

Originally CMS proposed three Direct Contracting Models: Professional, Global, and Geographic (GEO). The GEO Direct Contracting model was the most extreme, proposing to auto-assign every fee-for-service (FFS) beneficiary in a number of large geographic regions into a fully capitated MA-like “Geo DCE.” Beneficiaries were not given the right to opt out. GEO DCEs were expected to assume total responsibility for all FFS beneficiaries in their region. This responsibility included beneficiaries in any accountable care organizations (ACOs) or other Alternative Payment Models (APMs), except those assigned to other types of DCEs. With full capitation, as with MA, GEO DCEs would be responsible for most claims payments as well as medical management. This was, therefore, straightforward privatization of traditional Medicare, differing from MA only in that GEO Direct Contracting beneficiaries retained the right to see any Medicare provider under standard Medicare coverage.

The Global and Professional Direct Contracting models, combined as GPDC, offered alongside GEO DC, look like an extension of the ACO approach. Like ACOs, DCEs create a defined provider network. Beneficiaries are either auto-aligned via claims history or voluntarily enrolled. Members maintain access to all Medicare providers under standard benefits. Benchmarks or capitation rates will include a defined discount to CMS. But GPDC DCEs differ in important ways from ACOs. GPDC DCEs can select varying degrees of capitation up to and including full capitation. Full capitation would require them to pay DCE preferred provider claims. Although beneficiaries do have the right to opt out of CMS data sharing, they remain aligned with the DCE for purposes of capitation payments and ultimate financial reconciliation.  

 

The ACO model was built as a direct contracting relationship between CMS and providers. ACOs were required to have 75 percent provider governance control. In Direct Contracting, CMS established a stated aim of bringing “organizations that currently operate exclusively in Medicare Advantage” into traditional Medicare, targeting the very MA insurers and investor-controlled provider firms that are driving the MA overpayments explored in Part One of this post. To help accomplish this, CMS decreased the provider governance requirement to just 25 percent.

CMS created other policies that were favorable for “New Entrants” in the Direct Contracting program. Liberalized marketing and sales opportunities, along with the ability to offer additional benefits, play to the sales strengths of MA firms. The New Entrant benchmark methodology was based more on an MA rate-book approach than the ACO historical cost-blended model that nets out prior savings. New voluntarily enrolled beneficiaries, expected to be the majority of beneficiaries for New Entrants, were excluded from the risk coding constraints for several years.

Another publicly stated Direct Contracting aim was to accelerate progress of Medicare coverage away from FFS payment toward value-based contracting (VBC) “alternative payment models” (APMs). The illogical hypothesis was that MA firms, so expert at driving costs up, could do a better job controlling costs than existing ACOs. While savings from ACOs have been modest (MedPAC reports 1 percent to 2 percent), accurate evaluation has been difficult, and the level of ACO success has been controversial, momentum has built every year in this voluntary program. CMS recently announced that ACOs in 2020 decreased costs by over $4 billion and saved CMS almost $2 billion. MedPAC projects that, at a minimum, MA will cost CMS $8 billion more than FFS in 2020.

Notwithstanding ACO success, the prior CMS administration also introduced their “Pathways to Success” ACO policy, which created more stringent requirements for provider-led ACOs and triggered a 15 percent decrease in the number of ACOs. The net result is that experienced MA firms are attempting to pull ACOs apart by soliciting ACO physicians to join their DCE networks.

Ironically, this is all reminiscent of the original, well-intended strategy for privatized Medicare: to bring health maintenance organization (HMO) savings and care improvements to Medicare. But the Direct Contracting model seems to have ignored the lessons learned from the experience of MA and its predecessors at a cost to CMS and taxpayers of hundreds of billions of dollars. As MedPAC confirmed recently, over 35 years, privatized Medicare has always cost more than traditional Medicare, not less.

Current Status Of Direct Contracting

The Trump Administration’s CMS attempted to launch GEO Direct Contracting in its waning days, but the Biden administration paused it. In January 2021, CMS announced the selection of the first tranche of 53 GPDCEs spread across 38 states, which, combined, hold 30 million of the 36 million FFS beneficiaries. A second tranche of DCEs, number unknown, were approved by CMS but elected to defer their start dates to January 1, 2022. CMS paused further entry into this 2022 tranche, with the exception of Next Generation ACOs, but is believed to be considering an additional solicitation for another set of DCEs.

The January tranche did include some traditional, provider sponsored DCEs. However, a majority of the DCEs (28) are investor-, not provider-, controlled, most with roots in MA. Six of these, owned by four different MA insurers, are approved to operate in 19 states, with potential access to over 20 million traditional Medicare beneficiaries, over 60 percent of the national total. (See exhibit 1)

Exhibit 1: Examples Of MA-focused and investor-controlled DCE firms.

MA Insurer-Sponsored GP DCEs


MA PCP/MSOs

MA Insurers

# of States

Status


MA PCP/MSOs

# of States

Status

Aetna

NA

Deferred


Agilon

3

Active

Alignment Health

2

Active


IORA

10

Active

Anthem

5

Active


Landmark

NA

Deferred

Clover Health

10

Active


OakStreet

11

Active

Humana

8

Active


BestValue Health

1

Active

Source: Authors’ analysis. MA = Medicare Advantage; DCE = direct contracting entity; PCP = primary care practice; MSO = management services organization.

While CMMI has not identified firms that have deferred until 2022, Cigna is currently recruiting DCE providers. Aetna’s Activehealth subsidiary was originally approved, and United Healthcare is rumored to be acquiring Landmark, which had also been announced as a DCE. In short, the largest national insurers are positioning to become DCEs. Each of these national MA companies has a broad national network. The possibility of their using these networks to enroll millions of Traditional Medicare beneficiaries is very real. Currently, CMS has stated publicly no limits on the growth of DCE networks and geographies.

Direct Contracting Implications For Beneficiaries

DCEs have the option of selecting varying degrees of capitation from CMS, up to and including full capitation for DCE participating provider services. It is likely that insurer DCEs will choose this approach given their history and operating capabilities. Insurer DCEs then will be responsible for paying claims, and they will bring their MA-based medical, claims payment and possibly other managed care administrative  practices  into Direct Contracting. This environment will be even more confusing than MA, with three different parties processing claims: the DCE, CMS, and the Medicare supplemental insurance payer. In short, millions of traditional Medicare beneficiaries, who made a specific choice not to enroll in MA, will find themselves in an MA-like managed care environment.

Direct Contracting And The Medicare Money Machine

There was a catch in CMS’s strategy to enlist MA firms in Direct Contracting. Would the firm­s accept the risk without the ability to increase risk scores? CMS seems to have been trying to finesse this issue for the past 18 months. Direct Contracting does have significant constraints on risk score increases. For individuals aligned via claims, there is a 3 percent symmetrical cap on risk adjustment factor (RAF) score increases year to year. However, there is no cap on the base year, so DCEs can increase their score over time. A program-wide Co­ding Intensity Factor (CIF) does retrospectively adjust the capped risk adjustment scores for DCEs to correct for aggressive coding at the overall program level. The base year for the CIF is fixed. Thus, while the CIF will decrease code creep for CMS, it will allow the most aggressive coders to benefit at the expense of those who are less aggressive. This reality will lead to major retroactive adjustments to risk scores, financial reconciliation changes, and likely program instability. Alternatively, it is possible that CMS will decide to not enforce the CIF, thereby rewarding gaming.

Originally, voluntarily enrolled individuals who are not aligned with claims, expected to be the majority for new DCEs, would have been excluded from these controls for several years. In response to input from concerned policy and industry experts, CMS has now decreased that exclusion to one year. However, how the voluntarily enrolled individuals will be treated under the cap and the CIF adjustment remains unclear.

DCEs over the past year have already begun evading these constraints by simply increasing risk scores for people before they enroll them. This is exactly what MA firms do with their 64-year-old commercial members prior to enrolling them in MA. As we have heard said by industry insiders, “There is no bad time to work on risk scores.” Overall, it appears that, under current DCE rules, aggressive risk coders might still garner 20-40 percent of MA Money Machine profits. That at least seems to be the story DCE representatives are telling PCPs and investors. The other commonly heard story line is that, even if Direct Contracting does not prove profitable, it provides a perfect pathway for wholesale movement of beneficiaries into MA at a much lower cost of sales.

MA Plans are required to use at least 85 percent of premium revenues to pay for claims. As we showed in Part one, the Money Machine eliminates that constraint in MA. Direct Contracting does not have an explicit MLR requirement. The only limit on profits is a risk corridor methodology that provides for graduated CMS sharing in savings or losses that are greater than 25 percent of the Benchmark, a level DCEs are unlikely to attain without risk score gaming. The net result is that Direct Contracting has an implicit but irrelevant MLR requirement of approximately 60 percent, leaving DCEs well positioned to keep virtually all savings as profits.

The Medicare Gold Rush

MA-focused firms, insurers, and investor-controlled primary care practices (PCPs)/management services organizations (MSOs), can now add Direct Contracting profits to their financial prospectus, and they have. The first six firms in Exhibit 1 in Part One of this post are all investor-controlled DCEs that were recently financed at extraordinary levels. All have cited DCE participation in their investor road shows. Clover Health attributed about 70 percent of their $3.7 billion valuation to Direct Contracting.

These favorable MA and Direct Contracting business model dynamics are enhanced by the strong ambient tailwinds in the Medicare space. One special purpose acquisition company (SPAC) pitch deck highlights the reality that growth in the MA and Direct Contracting market segments, driven by baby boomer aging and increasing per capita costs, will exceed $600 billion in annual Medicare premiums over the next 5 years. This is probably the largest short-term revenue growth opportunity of any current US industry sector. With such massive financial opportunity available, it is no surprise that speculative fever runs high on Wall Street. The evident lack of political will to address the distorted, subsidized MA marketplace and the growing power of the artificial intelligence- (AI) enabled MA Money Machine add fuel to the speculative fire. The result is IPO, SPAC, and private equity investments that have pushed billions of private investment dollars into acquiring MA-focused firms at prices-per-patient-life that beggar imagination. From early April, 2010 through the end of August, 2021, the average stock price for five MA-focused insurers—United Health, Humana, Cigna, Anthem, and CVS/Aetna—increased 825 percent (compared to 280 percent for the entire S&P 500), and the market capitalization for the same five entities increased by 497 percent (as opposed to 245 percent for the S&P 500 as a whole). The market thus seems to affirm MA as the must place to be.

The Risks Of Insurer-Controlled And Investor-Controlled DCEs

Risk-score gaming in Medicare Advantage, now encroaching into Direct Contracting, is creating an accelerating immediate threat to our health care system. Traditional health care providers typically have a longstanding commitment to their patients and communities. The large national MA plans have shown a distinctive ability to destroy value by increasing costs, not adding value, with little local community commitment. As DCEs they will likely find ways to profit through coding or alternatively attempt to move beneficiaries into their MA plans. Either way they will increase Medicare costs at a time when the Trust Fund is in severe jeopardy.

New start-up MA-focused plans are likely short-term players and unlikely in the long run to be able to match the economies of scale of the large national insurers. They will use risk-score gaming to increase rebates, attract new customers, burn through their start-up money, and ultimately be acquired by large insurers.

Investor backed PCP/MSO firms are playing a short-term game. Several offer innovative variations on the intensive PCP clinical-care model that probably deliver better, more convenient care and improved utilization. But all are dependent on the Money Machine to cover their added service costs and their owners’ profits. None offers a sustainable competitive advantage. They likely face either financial failure, rollup, or acquisition by larger firms. This happened in 1990s with Physician Practice Management Companies—the same hype, investment froth, story lines, and then roll-up followed by bankruptcy.

ACOs and DCEs both acquire aligned beneficiaries through their participating PCPs. PCPs cannot be in both for traditional Medicare patients. DCEs are now actively soliciting PCPs to drop their ACO affiliations and join them. Across the country, well-funded DCEs are offering PCPs and ACOs multi-million dollar guarantees. Some are holding out the allure of MA Money Machine-like coding opportunities. Thus, in yet another ironic twist, CMS is enabling the agents of MA cost increases to undo the ACO initiative, which has decreased costs. The Direct Contracting program poses a direct threat to the ACO experiment now underway in the nation.

A Policy Agenda For Reform

For 35 years, privatized Medicare plans have failed to achieve their primary objective of controlling costs while preserving the quality of care. Aside from some notable exceptions with group model and staff model HMOs, capitation of privatized Medicare plans has simply allowed insurance companies to collect from CMS a toll of 15 percent or more on the total cost of care, to deny or downgrade provider claims, and then to pass through the dollars they finally pay using Medicare’s FFS payment systems and prices. Their ability to game the Medicare “star quality rating” system rivals Lake Wobegon: most plans are now rated above average. It is far easier to game the codes than to improve the care or change health care delivery. Based on this track record, insurers should be eliminated from the Direct Contracting initiative.

Risk-score gaming is today necessary for business success in MA. Low risk scores lead to higher prices and lower benefits, a recipe for health plan failure. It is extremely costly to continue to ignore the corrosive, insidious effects of the defective MA HCC risk adjustment system. It undercuts the many dedicated hardworking plan and provider teams caring for MA patients. It is fundamentally redefining our primary care networks, turning PCP practices into insurer-owned or investor-owned coding shops, and impacting large integrated systems the same way. If this trend is left unchecked, CMS will witness even more rapid MA growth and, with it, a more rapid approach to Trust Fund insolvency.

Direct contracting should be indeed “direct,” that is, an arrangement with provider-governed organizations, not financial intermediaries. If primary care needs invested capital, that capital should be tied to the expectation that providers will control how it is used. If CMMI wants to test investor-backed start-up firms, it should do it only at the limited scale needed for the test and only through direct providers of care, not through reconstituted or renamed MA Plans. If the scale of Direct Contracting outpaces the evidence, the Direct Contracting model will instead be what the Trump Administration seemed to intend: an effort, driven by ideological doctrine to turn over to private hands Medicare, the nation’s most popular universal public program.

Our health care system has responded to the COVID pandemic with heroic work by nurses, physicians, hospital employees, and leaders. We will continue to need all of those services in the future. But we also need to redesign our care system. A far better system is not hard to imagine. It would be based in homes and community settings, using hospitals only as a last resort. It would invest heavily both in primary prevention—addressing the true social drivers of illness, injury, and disability—and secondary prevention, helping people with chronic illness anticipate and intercept deterioration. It would focus sharply on what matters to patients. It would assure continuity of care for patients across time and among care settings. The Triple Aim—better care for individuals, better health for populations, and lower per capita cost—can be, and should be, its North Star. That can only be achieved through major changes and improvements in the actual delivery of care, itself, not through financial gaming.

Change Medicare Advantage

The MA program is fundamentally flawed. Most sensible business-minded large employers in America do not give an insurer all their health care money upfront. They know that would cost them more. Instead, they hire administrators, not financial optimization firms. Although politically difficult, the following changes in policy would better position the Medicare Advantage program to meet its original, valuable objectives: to foster innovation in care and coverage, to improve the quality of care, and to reduce per capita costs without harm to patients.

MA overpayments are the consequences of policy decisions, and those decisions could be changed. Congress should instruct CMS to announce an intention to replace the current Hierarchical Condition Category (HCC) RAF scoring system in the next three  years. It should sponsor a major developmental effort to design a replacement risk adjustment methodology that does not rely on provider reporting and that is resistant to gaming. The model would need to address plan-specific and contract-specific risk scores. Potential approaches could include the DECI approach, expansion of the Beneficiary Survey, or potentially the use of small-area social determinants of health models such as the Area Deprivation Index (ADI) and the Child Opportunity Index (COI).

Congress should order CMS to follow the MedPAC recommendations for fixing the structural overpayments related to benchmarks and the Quality Bonus Program.

In the absence of eliminating the HCC system, CMS should move immediately toward a more realistic Coding Intensity Factor (CIF), increasing it by at least the 1 percent per year differential between MA and FFS coding creep. This would freeze MA RAF overpayments at the current level, eliminate the threat of benefit cuts from MA Plans, and provide significant out year savings. CMS should also constrain the MA Money Machine contracting approaches that incent and reward coding and ensure that such incentive payments to owned physician groups are excluded from MLR calculations.   

Importantly, CMS should assure a level playing field for comparing and transparently reporting results in beneficiary care, disease prevention, and total per capita health care costs between the ACO programs and Medicare Advantage.

Replace Or Redesign The Direct Contracting Model Experiment

The best way to mitigate the undesirable effects of Direct Contracting would be to stop the program. Ideally, CMS should announce that the Direct Contracting Model will be replaced in 2023 by a new Medicare Shared Savings Program (MSSP) model that uses CMMI authority to create more advanced tracks for providers, including full capitation. Features should include:

  1. Primary Care Capitation
  2. Use of the taxpayer identification number-national provider identifier combination
  3. Upfront discount and 100 percent of savings option
  4. Full capitation
  5. A way to let new entrants into the program
  6. Easier voluntary enrollment per the Direct Contracting model
  7. Enhanced benefits for beneficiaries; and extended care delivery waivers
  8. More upfront investment for providers without access to capital.

The HHS Secretary should pursue a path to mandating ACO participation by hospitals, physicians and other providers over five years using CMMI authority based on evidence of success from Pioneer, MSSP, and other ACO models. The MSSP advanced tracks should include only entities that follow the 75 precent provider governance rule, and they should provide guardrails for MA-focused investor-backed entities.

If CMS cannot simply stop the Direct Contracting experiment, at a minimum CMS should make clear that Direct Contracting is a small experiment, not a path to replacement of ACOs. (See Appendix 1) The number of beneficiaries should be limited to 1.3 million, (about the size of the Next Gen ACO test, or about 10 percent of the MSSP) and CMS should limit the size of any specific DCE. CMS should also establish disincentives and rules for DCEs to prohibit movement of beneficiaries to MA, such as fixing the risk score of beneficiaries that move from Direct Contracting to MA at 1.0 in perpetuity.

As with Medicare Advantage, CMS should take specific steps to eliminate risk-score gaming opportunities for DCEs, and to substitute an alternative risk adjustment methodology as discussed above. CMS should assure public transparency for the progress and results of the Direct Contracting model, including access to primary data to facilitate independent evaluations. As detailed in Appendix 1, CMS should also create guardrails for remaining investor controlled DCEs.

In any event, CMS should eliminate all insurers from the Direct Contracting model. MA insurers should focus their attention on delivering the Triple Aim (not higher costs) in MA, not to invading the traditional Medicare space. CMS and CMMI should proceed cautiously in any new Direct Contracting model test to avoid excessive and unwise distortions of investment and impediments to the (simultaneous) ongoing development, improvement, and expansion of ACO models, built on the decade of ACO experience so far. CMS should reinstate the 75 percent provider governance rule for DCEs. Direct Contracting should be with providers, not investors. It would take a major redesign, addressing many of the issues identified above, to make Direct Contracting the future path for provider-based value transformation. 

Advance And Build Upon The Accountable Care Organization Experience

Health care costs as a percent of gross domestic product  have flattened since the ACA. While spillover effects are hard to measure and many components of the ACA affected Medicare spending, Medicare per capita spending growth since ACOs were introduced has been the lowest in decades, notwithstanding the higher trend in MA spending per capita. In their first eight years, ACOs have brought tens of thousands of providers and virtually all segments of the health care industry toward population heath management. CMS data shows that ACOs, which care for over 12 million beneficiaries in 2021, have now generated gross savings of nearly $14 billion and net savings to CMS of over $4 billion.

Some observers have questioned those numbers and recommended significant changes to encourage more ACO engagement and investments by providers. As CMS Administrator Chiquita Brooks-LaSure and coauthors recently wrote on Health Affairs Blog, “While voluntary models can demonstrate a proof of concept, they limit the potential savings and full ability to test an intervention . . . “ We believe the MSSP ACO program, further adapted, is poised to expand rapidly toward global payments and population-based payments, with many participants now ready to accept full risk, exiting at last from the shackles of FFS. CMS should, as fast as is feasible, develop more advanced MSSP ACO models using CMMI authority to include global payment models, and make the MSSP model more inclusive of physician practices at the threshold of participation.

Providers have vacillated for 10 years between FFS and an accountable, value-based care business model. While results from accountable care have not yet been optimal, enough ACO success is in hand to support the belief that providers would be successful if the models were further developed and made mandatory. CMS should provide a multi-year strategy to make FFS less attractive and the ACO opportunity more attractive, leading ultimately to a mandatory ACO program. That commitment would also discourage ACOs from trying to succeed simply by cherry picking efficient providers, rather than trying to improve the mainstream.

CMS should ensure that advancing other payment models, especially Direct Contracting, does not block or impede further development of ACOs, drawing on lessons learned so far.

Support A Constructive Role For Private Investment:

Change requires capital. Creating the health care delivery of the future requires investment, public and private, to help incumbent providers develop new skills and systems, and to help create new entrants with care designs usefully disruptive to legacy models. The non-profit health care sector (especially its primary care components) has had difficulty finding that capital. Investors backed such investment in ACO-enabling firms. These firms and their investors are now being lured into the MA world by easy money. It is essential to correct the HCC Risk Score system to appropriately align capital. We owe entrepreneurs a fair opportunity for return commensurate with risk. We do not owe them fish in a barrel, as MA offers.

As CMS becomes even more effective as a sponsor for care innovation, it will need the savvy and skills to distinguish between helpful private investment and exploitative private investment. Fixing the costly defects in MA and forbidding the importation of those same defects into traditional Medicare, while authentically testing new models of payment, is a good place to start.

Appendix 1: Direct Contracting Model Guardrails

Guardrails For The Global Professional Direct Contracting Model

  1. Direct Contracting Entities:
    1. Limit additional new entrants for 2022 to those who serve vulnerable communities with demonstrable health inequities and can demonstrate ability to improve care for beneficiaries.
    2. No further opening for new DCEs if targeted numbers cited below are met in 2021.
    3. Eliminate the insurer DCEs from the GPDC experiment.
    4. Reestablish the 75 percent provider-controlled requirement, as instituted in the original ACO regulations, for all DCEs.
  1. Overall Size of the Model Test:
    1. Limit the total size of the Direct Contracting model to approximately 1.3 million, the same as Next Generation ACO program, or to 10 percent of the MSSP
    2. Only exceptions to size should be for DCEs serving vulnerable populations with health/health care inequities.
    3. Primary consideration of size should be the number needed to get an overall evaluation of the model.
    4. Limit the geography and the number of providers for each DCE to that submitted in original application
    5. Confirm that GPDC is a limited test of a new model. It is not the major pathway for advanced ACOs
    6. No DCE should be larger than 100,000 = $1 B in potential capitation
    7. Limit auto-alignment of beneficiaries to 75,000 per DCE
    8. Limit Actual Capitation Payments to individual DCEs to $500 M.
  1. Risk-Score Gaming:
    1. Eliminate all potential for DCEs to engage in risk-score gaming by using risk scores from 2 years prior for voluntary enrolled beneficiaries and including voluntarily aligned beneficiaries in the risk-score caps and Coding Intensity Factor adjustments from the time they are aligned. (No one-year delay for voluntary enrolled beneficiaries.)
    2. Adjust the risk adjustment model to eliminate the ability of DCEs to gradually increase their reference year risk score for the 3 percent cap adjustment
    3. Develop DCE-specific CIF methodology that ensures overall program neutrality while adjusting for each DCE’s contribution to overall program coding increase.
    4. CMMI should be explicit in saying it will hold the line on risk adjusting e.g. - it will not hold DCEs harmless, as has been done in other circumstances, when the ultimate determination of risk scores is completed.
    5. CMMI should be explicit that it expects to move to an alternative risk adjustment methodology in the next three years that does not provide any coding gaming opportunity.
  1. Transparency:
    1. Publicly confirm which DCEs are already approved for the 2022 cohort.
    2. Confirm current populations for DCE and continuously update.
    3. Commit to providing public access to primary data to allow broad-based understanding of results and independent evaluations.
  1. Capitation:
    1. Require DCEs to pass all PCP capitation payments down to the PCP group level.

     6. MA Conversion

    1. Prohibit any direct MA marketing to DC-aligned beneficiaries, whether targeted or market-wide activity, with elimination from the program as a penalty for violations.
    2. Fix the risk score of any DCE beneficiary converted to an MA plan at 1.0 in perpetuity.
    3. Create conversion monitoring system to report and review MA conversion rates by DCE.
  1. Create an explicit Capitated Care Monitoring System to monitor patient access to and use of high-cost services including biologics, cancer care, etc.

     8. Financial Benchmarks and Reconciliation:

    1. Create common methodology for standard and new entrants.
    2. Revise Global risk corridors to provide 50 percent sharing of savings and losses at 15 percent of benchmark and a minimum MLR of 80 percent.

Guardrails For Investor Direct Contracting Entities

  1. Limit the size of Investor DCEs:
    1. Limit the total beneficiaries assigned to all investor DCEs to 250,000 now and 250,000 more for 2022 class for a total of 500,000.
    2. Limit assignment of beneficiaries to 50,000 per DCE.
    3. Limit Total Capitation Payments to individual investor DCEs to $500 million.
    4. Limit the growth of PCP network to only owned sites with employed physicians in existing region.
  1. Create Risk-Based Capital Reserve requirements for investor DCEs that accept more than 50 percent of the total medical cost in capitation payments.

     3. Require CMS Approval of DCE Acquisitions

    1. No automatic assignment of DCE contracts. CMS must review and approve all.
    2. Prohibit acquisition by or assignment of DCE contract to any insurance company or subsidiary.
    3. Limit the ultimate size of any DCE resulting from acquisition to 75,000 beneficiaries.
    4. Include review of history of prior interactions with CMS or other regulators or history of problematic marketplace behavior by firm or executives.
 

Authors’ Note

Dr. Gilfillan was the CEO of Trinity Health System from 2013 until 2019.  He is a Trustee for United States Pharmacopeia; a Director for the Health Care Transformation Task Force; a member of Advisory Committees for the Institute for Exceptional Care and several Robert Wood Johnson Foundation programs addressing health equity and SDOH (all uncompensated).  Dr. Gilfillan also recently consulted for an integrated health system (compensated).  Dr. Gilfillan was the Director of CMMI during the roll-out of several ACO Models and was involved in the development of CMS ACO regulations.  He has also been a leader and member of teams that managed multiple ACOs and Medicare Advantage plans.

Dr. Berwick served as Administrator of the Centers for Medicare and Medicaid Services from July, 2010, to December, 2011, during which he oversaw the issuing of the initial CMS regulations for Accountable Care Organizations, as well as numerous other regulations devolving from the Affordable Care Act.  He serves on the boards of LumiraDx (stock option compensation); Virta Health (stock option compensation); NRC Health (stipend and stock option compensation); Institute for Exceptional Care (uncompensated); CareVisor (stipend) Partners in Health (uncompensated); Results for Development (uncompensated). He also serves on Advisory Boards for the National Institute for Health Care Management Foundation, Datavant, and the Institute for Accountable Care, and on the  American Medical Association Journal Oversight Committee Dr. Berwick occupies multiple committee positions with the National Academies of Sciences, Engineering, and Medicine.

https://www.healthaffairs.org/do/10.1377/forefront.20210928.795755/full/ 

 

Court Battle Over a Ventilator Takes a Patient From Minnesota to Texas

By Maria Kramer - NYT - January 21, 2022

Scott Quiner, an operations manager at a transportation company in Minnesota, became sick with Covid-19 in October.

Mr. Quiner, 55, who was unvaccinated, was hospitalized the next month, and his case became so severe that he had to be placed on a ventilator, according to court records. For weeks, he remained on the ventilator at Mercy Hospital in Coon Rapids, Minn., a city of 62,000 people about 16 miles north of Minneapolis.

Then, on Jan. 11, hospital officials told Mr. Quiner’s wife, Anne, that they would be removing him from the ventilator in two days, over her objections.

What followed was a legal case that raised questions over who has the right to make wrenching life-or-death decisions when patients cannot speak for themselves. It also underscored the tensions between people who refuse the coronavirus vaccine and the hospitals that have been filled with patients sick with the virus, a majority of them unvaccinated.

In court papers, Mercy Hospital did not provide specific reasons for why it moved to take Mr. Quiner off the ventilator. Allina Health, which oversees the hospital, declined to comment on Mr. Quiner’s case, citing patient privacy. Ms. Quiner did not respond to messages seeking comment.

On Jan. 12, Ms. Quiner pleaded for a lawyer’s help on the “Stew Peters Show,” a podcast whose host has falsely called coronavirus vaccines “poisonous shots” and given a platform to pandemic conspiracy theories.

She said that aside from her husband’s lungs, his organs were functioning and “there was nothing wrong with his brain.” Only a couple of days earlier, she said, her husband had opened his eyes “and was more alert.”

“I’m thinking, ‘Why are you killing him?’” said Ms. Quiner, whose husband had made her his health care agent in 2017. Under Minnesota law, that means she has the authority to make medical decisions on his behalf if he is unable to himself. 

The day of her podcast appearance, she found a lawyer, Marjorie Holsten, who immediately filed a motion for a restraining order to keep the hospital from taking Mr. Quiner off the ventilator.

Judge Jennifer Stanfield, of the Tenth Judicial District Court in Anoka County, granted the order. On Jan. 15, Mr. Quiner was flown to a hospital in Texas, where, Ms. Holsten said, his condition has improved significantly. She declined to identify the hospital.

Ms. Holsten said: “He was cognizant until they administered a ton of sedatives. That was when he was put on the ventilator.” In Texas, she said on Wednesday, “the doctor said he was moving his hand” and “nodding and blinking his eyes in response.”

Mr. Quiner, who remains on a ventilator, had lost 30 pounds and was described as the “most malnourished patient” a doctor at the Texas hospital had ever seen, Ms. Holsten said.

Allina Health said in a statement that it “has great confidence in the exceptional care provided to our patients, which is administered according to evidence-based practices by our talented and compassionate medical teams.”

“Allina Health continues to wish the patient and family well,” the statement said.

In court papers, lawyers for Mercy Hospital said Mr. Quiner’s treatment was based “on best available medical science and authority.” In a motion, the lawyers asked Judge Stanfield to issue an order that said the hospital had the authority to remove the ventilator.

Specialists were consulted and the treatment was “in compliance with Mercy’s policies and procedures regarding medically nonbeneficial interventions,” the lawyers wrote.

Mr. Quiner did not specify whether he wanted to be kept alive on machines in his advance directive, a legal document declaring what treatments he does and doesn’t want.

On the form, he specified his wishes only under a section that asked about spiritual and religious beliefs.

“Request prayer from family and friends at bedside,” he wrote.

Hospitals in Minnesota have been overwhelmed by a combination of patients with Covid-19 and those with other conditions, particularly in the Minneapolis and St. Paul area, according to the Covid-19 Hospitalization Tracking Project at the University of Minnesota.

On Thursday, only 1 percent of adult beds in the intensive care unit were available, according to the Minnesota Department of Health.

Scarcity of resources can be a factor in a hospital’s decision to withdraw care, but it is rarely a top one, said Thaddeus Pope, a professor who teaches health law and bioethics at Mitchell Hamline School of Law in St. Paul.

Under Minnesota statute, medical providers who believe a health care agent is not acting in the best interest of a patient should go before a judge, he said.

“It’s an uncommon situation where you’re going to overrule what the agent says,” Professor Pope said. “The hospital doesn’t make health care decisions. The patient does, and if the patient lacks the capacity, the health care agent does.”

Before going to court, doctors should try to communicate effectively with a health care agent, he said. If that fails, doctors should present their argument before an ethics committee, which ideally would include community members in addition to health care workers, to determine if the health care agent’s authority should be overruled, Professor Pope said.

The decision to take away life-sustaining machines is more straightforward when doctors have determined that a patient meets the criteria for brain death, said Dr. Mary Groll, a professor of health sciences at North Central College in Naperville, Ill.

But if a patient’s brain function is intact and a meaningful life remains possible, the decisions about medical care fall more clearly on a patient or that patient’s proxy, Dr. Groll said. Doctors should then have frank conversations about the kind of future a patient may face, she said.

Medical training has become more focused on prioritizing the medical wishes of a patient, Dr. Groll said.

“At the end of the day, it all begins and ends with your patient,” Dr. Groll said. “Your care begins with that person and it ends with that person, and they should be at the center of the decision making.”

https://www.nytimes.com/2022/01/21/us/scott-quiner-covid-ventilator.html 

 

A Libertarian Appreciates Public Health Insurance

by Health Justice Monitor - January 21, 2022


Summary: Conservative columnist Ross Douthat of the NY Times wrote this week about his shifting views on health insurance. He evolved from supporting a fully free market, to public catastrophic coverage, to more generous public coverage. But he worries that centralized universal coverage would stymie life-saving innovation. He needn’t.

How Being Sick Changed My Health Care Views
New York Times
Jan. 19, 2022
By Ross Douthat

 
[bolded subheadings by HJM, followed by article excerpts]
 
2013, based on Oregon Medicaid experience: access to Medicaid helped people avoid “catastrophic expenditures” and reduced their depression rates. … ideal insurance system would cover genuinely catastrophic expenses, helping people avoid bankruptcy and the worst kind of mental stress — but avoiding the overtreatment and cost inflation that you get when you earmark too many public dollars for health 
 
2015, with an undiagnosed illness: I was sick and had absolutely no idea what was wrong with me — which meant that I went from doctor to doctor … object lesson in the ambiguities contained in terms like “overtreatment” and “unnecessary care.” Because considering my ultimate diagnosis, all of these visits were a form of overtreatment. … my perspective as a patient it was all reasonable and necessary…. Nor was I in any position to act as a discerning consumer or a good capitalist, … as a patient I was simply too vulnerable and desperate to do anything save throw myself on the medical system’s mercy.
 
limits of a libertarian vision of the patient as a cost-sensitive consumer. … the importance of insurance coverage for stable mental health, greater peace of mind, in situations where you’re worried that not only your body might be ravaged but also your finances as well.
 
But, disenchantment with official medical views:  entered a world where the official medical consensus had little to offer me. It was only outside that consensus, among Lyme disease doctors whose approach to treatment lacked any C.D.C. or F.D.A. imprimatur, that I found real help and real hope. … more skeptical of any centralized approach to health care policy and medical treatment. … if I couldn’t trust the C.D.C. to recognize the effectiveness of these treatments, why would I trust a more socialized system to cover them? 
 
Faith in profit as motivator: more free-market systems yield more inequalities but also more experiments, America [with higher drug prices] also produces an outsize share of medical innovations. Whatever everyday health insurance coverage is worth to the sick person, a cure for a heretofore-incurable disease is worth more. 
 
The ACA insight: clearest legacy was its Medicaid expansion, and that the attempts to build a thriving individual-insurance market and rein in unnecessary spending had met with less success, … skepticism about the patient-as-consumer hopes that undergird Obamacare’s exchanges. 
 
Cost control as impediment to cure: Once you’ve become part of the American pattern of trying anything, absolutely anything in order to feel better … the idea of medical cost control as a primary policy goal inevitably loses some of its allure, and the American way of medical spending looks a little more defensible. … sometimes what seems like waste on the technocrat’s ledger is the lifeline that a desperate patient needs.


Comment by: Jim Kahn

Libertarian NY Times columnist Ross Douthat describes his fascinating trajectory from public insurance skeptic to enthusiast, first supporting public catastrophic coverage and more recently – after an undiagnosed chronic illness led him to search widely for help – supporting broader coverage. He believes in the mental health and financial benefits of insurance. Yet he worries that the “medical cost control” focus of a centralized system like single payer would cost lives by disincentivizing life-saving medical discovery. He needn’t, for several reasons.
 
First, our biggest problem isn’t inventing life-saving drugs, it’s providing access to the life-saving treatments we already have. Single payer excels here. Remove financial barriers to care, and we avert 50,000-100,000 deaths per year. And hundreds of thousands of medical bankruptcies.
 
Second, single payer doesn’t focus on controlling costs. Yes, it controls costs – by removing massive spending on wasteful insurance administration and profits, reducing ineffective care, and lowering drug prices. But the focus is on providing broad access to care. The system would retain massive resources.
 
Third, negotiated drug prices under single payer would allow for continued substantial pharmaceutical profits. The 
sky-high returns in pharmaceuticalscould readily tolerate reduction to typical (substantial) corporate levels. The drug companies exaggerate their current research costs, and would continue to innovate vigorously.
 
Finally, Douthat’s notion that a universal system would impair access to as-yet unapproved therapies is wrong, and wrong-headed. It’s wrong because individuals will be just as able to pursue unapproved treatments under single payer as within the current fractious system, which as Mr. Douthat discovered does not pay for these therapies. Indeed, single payer with lifelong enrolment may be fairer and more generous in coverage decisions than private insurers, who have high beneficiary “churn”.
 
It’s wrong-headed because the processes we use to formally assess the value of new therapies – eg clinical trials overseen by the FDA – are critical to foster effective treatments, weeding out false hopes. Our system of drug evaluation is imperfect, but far superior to a less formal system or none at all. And post-marketing effectiveness surveillance should improve with excellent single payer claims data.
 
I’ll end with a cogent reflection by Don McCanne: The major point here is that Douthat, as a credible libertarian with a significant medical disorder, is now more comfortable with the “uneasy, unfinished place” where Obamacare has ended up. He has “more appreciation for the basic Medicaid guarantee, and more skepticism about the patient-as-consumer hopes.” Cloaked in these words is the concept that we have more security for our health care when we have a guaranteed government program of social insurance than we do when we are dependent on the marketplace for healthcare. That is quite a shift to the left for a libertarian.

 

 

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