Medicaid/Medicare

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CMS 2010 Requirements for Medicare Part D Plan MTM Programs

September 2, 2010 in Medicare Part D, Pharmaceuticals | No comments

In an effort to standardize the provision of medication therapy management (MTM) within Medicare Part D, CMS has outlined specific requirements for Part D Plan MTM programs in 2010.  The APhA’s Medication Therapy Management Digest (March 2010) reviews these requirements.

MTM programs must:

  • Enroll targeted beneficiaries using an opt-out method only (i.e., beneficiaries are automatically enrolled unless they choose not to be)
  • Target beneficiaries for enrollment at least quarterly.
  • Include the following enrollment criteria for targeted beneficiaries:
    • Does not require more than three chronic disease states.
    • Does not require more than eight medications.
    • In defining multiple chronic diseases, sponsors must target at least four of seven core chronic disease states.
    • Likely to incur annual costs of $3,000 for covered Part D drugs (a reduction from the previous requirement of $4,000).

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Moving Medicaid Policy Decisions to the Feds

August 26, 2010 in Medicaid | 2 comments

Tyler Cowen thinks that one way to reduce the fiscal burden on States is to move Medicaid to the Feds.  Wisconsin may be taking a first step in that direction.  Wisconsin Governor Jim Doyle, having to make $400 million in Medicaid cuts, left these cuts up to Federal Medicaid officials.  Newsweek reports that “The fixes, most of which kicked in this summer, were a predictable mix of new contracts and procedures (incentives for natural birth will save $4 million in C-sections).”

Although the State/Federal funding arrangement is the same, Wisconsin’s shifting decisionmaking power to the Feds may augur for a more centralized Medicaid program.  Governor Doyle believes that shifting these decision reduce the power of lobbyists.  According to teve Barton, president of the hospital lobby Wisconsin Hospital Association believes that shifting decisions to the Feds means lobbyists lost influence, officials were insulated from blame, and lawmakers were shielded from “tough votes.”

This politics-free honeymoon, however, will likely be short-lived.  If State Medicaid decisions are made at the Federal level, lobbyists will simply move from Madison to Washington.  In fact, lobbying may increase since the cost of these political wrangling will be less expensive if all Medicaid decisions are centralized.

As long as some form of government–State or Federal–runs healthcare, believing that these decisions will be free of lobbying influence interests is naive.

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Wage Index Reclassifications

August 16, 2010 in Hospitals, Medicare | No comments

Should Medicare pay hospitals located in New York City more for the same care as hospitals in Montana?  Prima facie, one might believe that New York hospitals should receive higher wages since the costs of operating a hospital are much higher in New York.  Labor (i.e., nurses, doctors, etc.) may prefer to live in an urban environment and thus it is possible that the cost to attract labor in Montana would be higher.

To adjust inpatient prospective payments to hospitals, Medicare created a wage index system.  Each hospital’s wage index value determines whether their payments will be adjusted upwards or downwards depending on the cost of labor in their area.  The cost of labor is currently defined as the average hospital worker wage (adjusted for occupation) in a given metropolitan statistical area (MSA).

This simple methodology, however, is complicated by exceptions.  Today, I review some of those exceptions where hospitals can reclassify to MSAs where they’d receive a higher wage index value.

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How will Health Reform affect State Finances?

August 13, 2010 in Health Reform, Medicaid | 1 comment

How will health reform affect state health care costs?  Will reform bankrupt states as some Republicans say?  Or will costs be negligible, as Democrats claims?  According to a study by Holahan and Dorn (2010) the answer is somewhere in the middle.

Most of the additional costs will come from expanding Medicaid to newly eligible population, individuals between 100% and 133% of the federal poverty line.

“These state cost increases range from $21.1 billion to $43.2 billion over the 2014-2019 period, with the difference depending on the extent of beneficiary participation. These represent increases in state spending of 1.4 to 2.9 percent relative to what states would spend on such adults in the absence of reform.”

Although there will likely be a significant increase in the number of Medicaid beneficiaries, the federal government is financing a large share of this expansion.

“the federal government will pay 100 percent of health care costs between 2014 and 2016. In 2017, this percentage will drop to 95 percent, and continue to decline until 2010—falling to 94 percent in 2018, 93 percent in 2019, and 90 percent in 2020 and thereafter.by advocacy groups and providers. Even with higher participation rates, the increased cost to states will be limited. States that will be affected the most from increased participation among those who are currently eligible are those with more current.”

Although the federal government is footing most of the bill, Tyler Cowen thinks it should go a step further.  ”The correct fiscal policy move would have been, and still is, to take Medicaid away from the states and make it fully federal.”

Another area where states will lose money is through the  additional administrative costs needed to process more Medicaid applicants.

However, states will also receive some savings.  States and local governments often provide medical care for poor, non-Medicaid eligible individuals.  Because more of these individuals will receive Medicaid coverage, this should displace a significant share of state/local spending in these areas.  Additional areas of savings include:

  • states could stop covering individuals with incomes above 133% FPL
  • CHIP beneficiaries (children) with incomes below 133% FPL will be transitioned to Medicaid
  • states that currently cover parents between 133 and 200 percent of FPL can, in effect, shift these parents to full federal funding by implementing PPACA’s “basic health program” option, through which states convert PPACA’s tax credits to funding for contracts with health plans serving adults in this income range.  Alternatively, they could just end coverage altogether.

Who are the winners?  The poor and near-poor who receive additional coverage.  Who are the losers?  Providers who must accept lower payment for Medicaid and the rich who must pay higher taxes to cover these individuals.

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No Wrong Door

August 2, 2010 in Medicaid, Nursing Homes | No comments

In Virginia, there are over one million people age 60 and older and over 90,000 Virginians age 85 and older. These figures will only grow in the upcoming decades.  Thus will put increasing strain on public programs and will require service providers to reorient medical care toward providing continued, high-quality long term care services.  Long term care is of growing importance to health care sector.  Although the aged and disabled populations make up 30% of Virginia’s Medicaid population, these individuals account for 70% of the state’s $4 billion Medicaid budget.

Yet providing long term care to those in need is a confusing a bureaucratic process.  For instance, in Virgina, there are 6 agencies that provide long term care services:

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Does Medicare use CPT codes for payment?

July 13, 2010 in Medicaid/Medicare, Part B | 2 comments

For Part B services, Medicare pays physicians based on the services they provide.  The American Medical Association (AMA) developed Current Procedural Terminology (CPT) codes to create a taxonomy of procedures that physicians perform.  Does the Centers for Medicare and Medicaid Services (CMS) use these codes for payment?

The answer is yes and no.  Officially, CMS uses Healthcare Common Procedure Coding System (HCPCS) codes.  These codes are used to classify about 6,700 distinct services. Although CMS does not officially use CPT codes, the HCPCS are closely related to CPT codes.  In fact, there are two sets of HCPCS codes. “The first set, HCPCS Level I, are based on and identical to CPT codes…Level II HCPCS codes are used by medical suppliers other than physicians, such as ambulance services or durable medical equipment.”

The Medicare Administrative Contractor (MAC) actually process the payment for these claims.  There are 4 MACs for durable medical equipment claims and 15 MACs for processing Part A and B claims.

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Medicaid’s humble beginings

July 11, 2010 in Medicaid | 1 comment

Although Medicaid is currently one of the largest programs in any state’s budget, Congress enacted this welfare health insurance scheme as almost an afterthought.

Consider the news coverage for Medicaid at the time.  According to the chart below, the New York Times didn’t even mention Medicaid an any article in 1965 and Medicaid was mentioned in less than a third of the articles that Medicare was.  For comparison, the coverage did not nearly approach the media coverage in the 1930s after Social Security was enacted.

Source: Laura Katz Olson (2010), The Politics of Medicaid, Columbia University Press, New York, 426 pages.

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Measuring Variation in Labor Costs for the NHS

July 6, 2010 in International Health Care Systems, Labor Economics, Medicaid/Medicare | No comments

The cost of running a hospital in New York City is much higher than running a hospital in Bozeman, Montana.  To take into account these cost differences, the Centers for Medicare and Medicaid Services (CMS) has created a wage index to adjust the inpatient prospective payment system (IPPS) for differences in labor costs.

However, the U.S. isn’t the only country where public health agencies adjust payments based on labor costs.  For the past 30 years, England’s Staff Market Forces Factor (MFF) adjusts National Health Service (NHS) payments for medical care.  The MFF’s origin began in a1976 report from the Resource Allocation Working Party (RAWP).  Although the goal of the MFF is to control for geographic variation in input costs, labor costs make up 65% of these input costs.  Although drug and equipment costs also make up 26% of input costs, the prices of these goods are fairly constant across all English regions.  A paper by Elliot et al. (2010) investigates the construction of the labor portion of MFF in more detail.

The MFF is calculated based on standardized spatial wage differentials (SSWDs).  These SSWDs in essence calculates the difference in labor input costs for each region compared to the national average.  The paper divides the country into regions through three different mechanisms:  a region in one of three ways: 303 primary-care trusts (PCTs), 354 local authority districts (LADs) and 207 travel-to-work areas (TTWAs). LADs and PCTs are administrative areas while TTWAs are intended to constitute largely self-contained labor markets based on commuting patterns.  Using these three definitions, the authors calculate the SSWD from the Annual Survey of Hours and Earnings (ASHE) as:

  • ln(wij)=xijβprivate + vjprivate + εij
  • ln(wij)=xijβNHS + vjNHS + εij

The first equation is used to measure wage differentials for a variety of workers whereas the last only examines NHS nurses.  The variable xij contains information on age, age-squared, gender, year dummies, industry dummies and occupational dummies.  The fixed effect variable vj measures the difference in log wages from in region j from the national mean.  In the case of the NHS regression, year and occupational dummies are removed because nurses constitute working in a single industry.

To calculate the MFF for area j, the authors impose a log-to-level wage transformation for the variable vj and normalize this differential based on the national mean.

  • MFFj=100*exp[vjprivate]/exp[J-1 (Σj vjprivate)]

The authors also conduct estimate regional variation in labor costs for doctors.  Because the ASHE sample of NHS doctors is too small to estimate robust SSWDs, the authors instead obtain data on the annual financial returns of NHS trusts through the Department of Health.

How well are these adjustments working?  To answer this question, the authors examine how the differential between private and NHS pay affect the vacancy rate for NHS positions for doctors and nurses.  When private pay is higher than NHS pay, the authors find that the nurse vacancy rate increases.  This makes sense since when the private sector pays more, nurses will be more likely to take jobs outside the NHS.  On the other hand, when private sector pay for doctors is higher, the NHS vacancy rate for physicians is lower.  This seems counterintuitive that physicians would be attracted to lower paying NHS areas.  One explanation is that areas with relatively less generous NHS pay have higher private sector pay.  Thus, these physicians can take the NHS job, but also spend part of his time working for higher private-sector pay.  Using this information, the authors conclude that “The case for additional funding in high-cost low-amenity areas to employ doctors is not supported by this analysis. The MFF adjustment in the NHS funding formula should be amended to reflect this.”

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Center for Medicare and Medicaid Innovation

June 30, 2010 in Health Reform, Medicaid/Medicare | 1 comment

Medicare and Innovation in the same sentence?  Yes indeed.

As part of Health Reform [i.e, Patient Protection and Affordable Care Act (PPACA)], the government mandated the creation of the Center for Medicare and Medicaid Innovation (CMI).

What does CMI do?  ”The stated purpose of the CMI is to test innovative payment and service delivery models to bring about a reduction in Medicare and Medicaid program expenditures while preserving or enhancing quality of care.”  Items that CMI might consider are implementing payment mechanisms using accountable care organizations, or pay-for-performance systems using episode grouping technology.  CMI will be especially interested in reforming coverage rules for “dual-eligibles,” beneficiaries who are both eligible for Medicare and Medicaid.  There are 9 million dual eligibles who are, by definition, both elderly and poor.

CMI shall be the research and development arm for CMS.  In addition, CMI will undertake the following roles as well:

  • Lead the design, implementation and evaluation of Medicare and Medicaid demonstrations and pilot programs to test the feasibility, cost effectiveness and quality outcomes of new health care delivery models.
  • Disseminate findings from literature reviews, basic research and program evaluations to inform law makers, academics, and industry about health care delivery issues, new innovative concepts, and demonstrations and pilot programs.
  • Sift through the information and evaluative findings to develop new objectives for basic research and new research demonstrations and provide guidance for the formulation of new program policy proposals and their implementation within the Medicare and Medicaid Programs.

According to Wikipedia, before CMI, “CMS historically has relied on several research and demonstration authorities: §1115(a) of the Social Security Act (which authorizes the HHS Secretary to undertake demonstrations related to Medicaid program design and administration); and other provisions of the Social Security Act which permit demonstrations related to payment, delivery systems, and benefits and coverage.”

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Getting Poor/Old People Drug Coverage: Part II

June 29, 2010 in Medicaid/Medicare | No comments

Yesterday, I mentioned that low-income individuals on Medicare can also qualify for Medicaid and, as full-beneift dual eligible beneficiaries, they have significantly lower cost sharing than the typical Part D beneficiary.  How does CMS identify these individuals?

For currently beneficiaries on Medicaid who ‘age’ into Medicare, this process is fairly easy.  CMS can auto-enroll these individuals prospectively into Medicare drug plans.  The “Medicaid–>Medicare” population makes up 25% of all new full benefit dual eligible (FBDE) individuals each month.

For individuals who are currently Medicare eligible who become poor, this process is more complex.  Oftentimes, these beneficiaries only receive the more generous coverage months after they are initially eligible.  Thus, CMS must retroactively reimburse these beneficiares for the additional incurred expense.

To eliminate the lag in identifciation of these new FBDE individuals, CMS has taken a number of steps such as: increasing the rate at which state data are reviewed and eligibility and provided additional guidance to states on how to backdate FBDE coverage already in Medicare Prescription Drug Plans (PDP).

In addition, a new demonstration aims to make the transition between regular beneficiary and dual-eligible state more transparent.  The Limited Income Newly Eligible Transition (LI NET) “will cover all claims during retroactive auto-enrollment periods for full-benefit dual eligible (FBDE) beneficiaries and Supplemental Security Income (SSI)-only beneficiaries plus immediate need claims for all Low- Income Subsidy (LIS)-eligible beneficiaries.”  Humana won this contract for 2 years.  In particular, the LI NET will do the following:

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