Medicare Providers Don’t Want Less Revenue

Roger Collier

Posted 2/9/12 on Health Care Reform Update

The Congressional Budget Office’s January issue brief on the failure of almost all of more than thirty Medicare demonstration projects to cut costs generated considerable discussion. Judging from the reactions of some health care policymakers, the CBO’s findings came as a surprise.

They shouldn’t have.

Aside from the fact that the results of virtually all of the demonstrations had previously been published, the failure to reduce Medicare spending is exactly what should have been expected.

Let’s take a look at the three payment models used by CMS for the demonstrations:

  1. Regular Medicare reimbursement plus a guaranteed no-risk fee or bonus for participating
  2. Regular Medicare reimbursement plus a fee or bonus dependent on performance
  3. Bundled payment for demonstration services

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Essential Benefits? What Essential Benefits.

Roger Collier

Posted 12/22/11 on Health Care Reform Update

Last week’s announcement from the Obama administration that it would not now define a single uniform set of “essential health benefits” to be provided by all insurers undoubtedly took most health care policy observers by surprise.

The Department of Health and Human Services’ decision to allow individual states to specify benefits within broad categories means that there could be significant variations across the nation, and smacks more of election year political pandering than practical policy. Although criticism of the decision was relatively muted, it may be one that leaves both consumers and employers unhappy.

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Affordable Care Act: A Date With Destiny

Roger Collier

Posted 12/19/11 on Health Care Reform Update

The schedule for the Supreme Court to hear arguments on the constitutionality of provisions of the Affordable Care Act was announced this week. The following is the agenda.

On March 26, the Court has allotted an hour to hear arguments on whether the Anti-Injunction Act makes challenges to the individual mandate premature until 2015. With neither the government nor the ACA’s opponents pressing the point, the argument for the precedence of the Anti-Injunction Act—an argument that four appellate judges had earlier found convincing—will be presented by Washington attorney Robert Long as a “friend of the court”.

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Reading the Supreme Court Leaves

Roger Collier

Posted 11/18/11 on Health Care Reform Update

The announcement on November 14 that the Supreme Court will review various aspects of the constitutionality of the Affordable Care Act has set legal experts to guessing possible outcomes.

The Court accepted just one of four Appeals Court decisions for review, but the one chosen, from the Eleventh Circuit, covered every major issue and included as plaintiffs twenty-six state attorneys general who oppose the ACA. The Eleventh Circuit ruled in August that the ACA’s individual mandate provision was unconstitutional, but ruled against the plaintiffs on all other issues.

It’s obviously naïve to think that the Justices haven’t already thought a great deal about the issues, and their thinking presumably influenced the decisions as to which questions raised in the lower courts they should address. So what can we guess from the four issues to be argued before the Court in the spring of next year?

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Yet Another Appeals Court Heard From

Roger Collier

Posted 11/12/11 on Health Care Reform Update

The final federal Court of Appeals decision on the constitutionality of the Affordable Care Act, before the Supreme Court meets to decide which cases to consider, was issued this week. It includes some interesting twists.

The DC Circuit upheld the law’s requirement that nearly all Americans must have health care coverage in a 2-1 ruling. However, the minority vote was cast not because of the constitutionality issue, but because the dissenting judge, Brett Kavanaugh, a George W. Bush appointee, considered that—under the Anti-Injunction Act, which limits attempts to strike down proposed taxes—no ruling was appropriate at this time. Judge Kavanaugh’s citing of the Anti-Injunction Act echoed an earlier decision by the full Fourth Circuit that imposition of the individual mandate’s penalties could not be considered until they were implemented and individuals had been forced to pay them, in effect interpreting the penalties as a form of taxation.

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ACOs: The Good and the Bad

To muted applause and some sighs of relief from providers, HHS released the final ACO regulations last week. 

The final version superseded the much-criticized draft regs published several weeks earlier. This previous draft was widely regarded as imposing overwhelmingly complex rules for the chance of sharing in any gains. As one commentator noted: “The promise of integrated, coordinated and cost-effective care provided by hospital-physician networks had run into the reality of having to invest millions dollars with a questionable ROI, a complex maze of up and downside risk calculations, reams of burdensome quality measures and overlawyered antitrust regulations.

So the final less-unwieldy rules have been relatively well-received. On the other hand, fundamental questions about the viability and impact of ACOs remain:

  1. Will the potential “bonuses” justify the financial investments? Major hospital systems (likely to be the primary ACO sponsors) seem to be willing to play so long as the regulations are not too onerous. And as with other HHS initiatives, those willing to participate are likely to be those who are most confident that they can readily cut costs and gain the savings bonuses. On the other hand, ACOs that aren’t able to do a much better job of coordinating care will be unable to recoup their investments.
  2. Will there be losers? Physicians and hospitals who don’t participate in ACOs may find HHS squeezing rates to be in line with costs of competing ACOs. And even in successful ACOs, hospital staff and individual physicians may be in danger of losing their jobs as the ACOs try to reduce variable costs in order to achieve the “bonus-eligible” level.
  3. Why are hospitals so interested in ACOs? It’s a great opportunity to tie physicians more tightly, thereby guaranteeing referrals and admissions and strengthening the hospitals’ rate negotiating positions.  At the same time, the hospital risk is small; the ACO component is expected to be tiny relative to the size of the Medicare program, and with beneficiary assignment made prospective in the final rules, the costs and risks for participating providers are even less.
  4. Will ACOs really enhance cost-effectiveness? In some cases the answer will be yes, with the ACOs achieving the objectives of their government designers. In other cases, however, the pros of better integrated care will be more than outweighed by the cons of quasi-monopolistic hospital systems able to dictate their terms to insurers and other payers.

There is one more fundamental problem with the present ACO design: by randomly assigning Medicare beneficiaries to ACOs, much of the opportunity to impact the highest cost cases may be lost. A more targeted approach might begin to show the savings that the Medicare program desperately needs. On the other hand, HHS’ track record of success with its chronic care demonstrations gives little confidence that the government could indeed achieve these potential savings.

The bottom line seems to be: ACOs will generally demonstrate the virtues of integrated care (something that was known already), while in too many cases encouraging monopolistic hospital systems to become even more entrenched.

Roger Collier used to be CEO of a large health care consulting practice. Now he writes at Health Care Reform Update.

CLASS is Dismissed

Roger Collier

Posted 10/16/11 on Health Care Reform Update

It happened in the usual Washington way: first, the rumor, then the denial, and then (on a Friday, so as to miss the weekday press), the official admission. The Affordable Care Act’s Community Living Assistance Services and Support program (the CLASS Act) has been abandoned by the Department of Health and Human Services.

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