Medicaid/Medicare

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The Bernie Madoff of Medicare?

March 2, 2012 in Medicare | No comments

Physicians earn high salaries.  The Bureau of Labor Statistics notes that the median primary care physicians made $186,044, and specialists typically earn  $339,738.   Some physicians earn much more than that, but not always through legitimate means.

Consider the case of Dr. Jacques Roy:

Federal law enforcement officials announced charges in the largest healthcare fraud scam in the nation’s history, indicting a Dallas-area physician for purportedly bilking Medicare of nearly $375 million after he reportedly sent out “recruiters” to round up patients and get them to sign for treatments he never provided...

Authorities allege that Roy and his office manager in DeSoto, Texas, Teri Sivils, who was also charged, sent the healthcare recruiters door-to-door asking residents to sign forms that contained the doctor’s electronic signature and stated that his practice had seen them professionally in their own homes.

They also allegedly dispatched more recruiters to a homeless shelter in Dallas, paying them $50 every time they coaxed a street person to go to a nearby parking lot and sign the bogus forms.

The long-running ruse began in the Dallas-Fort Worth area in 2006, and over the last five years collected more Medicare beneficiaries than any other medical practice in the United States.

Also charged were five owners of home health agencies. Health and Human Services Department officials suspended payments worth about $2.3 million a month to 78 other Texas home health agencies.

Despite the enormity of the fraud, $375 million is just a drop in the buck relative to overall Medicare spending.  This represents only 0.07% of total Medicare spending in 2010 (Medicare spending in 2010 was $524 billion).  Although reducing fraud waste and abuse is important, it will not drastically decrease Medicare spending.

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Does expanding insurance coverage improve access to care?

February 27, 2012 in CHIP, Health Reform, Medicaid | 3 comments

Although Health Reform did little to reduce the cost of health care, it did make significant strides to expand access to care.  For low-income individuals, the increased access comes along two dimensions: expanded Medicaid eligibility and increased physician fees.  Specifically, Health Reform required to

  • Make all individuals with incomes below 138% of the Federal Poverty Line (FPL) eligible for Medicaid, and
  • Increase their Medicaid physician fee schedules, so that they are no lower than Medicare’s for evaluation and management services provided by primary care physicians.

Whereas the first provision is permanent, the second provision is to be in effect only for 2013 and 2014.

Which one will have a bigger effect? According to a paper by White (2012), paying doctors more improves access.

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Medicare Reforms Linking Reimbursement Rates with Hospital Performance

February 23, 2012 in Health Reform, Hospitals, Medicare, P4P | No comments

Health reform not only changes the health care market for the demand side (e.g., patients, insurers), but also for the supply side (e.g., hospitals, physicians).  In the Medicare setting, a number of initiatives have aimed to pay providers who provide high-quality or low-cost care more money, and pay providers who provide low-quality or high-cost care less money.  CSC provides a nice overview of some of these initiatives.

  • Performance Value-Based Purchasing (VBP) — Offers increased update to diagnosis-related group (DRG) payment rates to hospitals according to demonstration of performance or improvement in designated performance areas relative to performance standards and benchmarks.
  • Shared Savings Program — For groups of providers who form an Accountable Care Organization (ACO), potentially shares a portion of financial savings in caring for Medicare patients if performance standards are met, according to performance rated on a sliding scale against benchmarks.
  • Readmission Reduction Program (RRP) — Decreases annual adjustments to DRG payment rates for hospitals that are in the lowest performance quartile for excess readmissions of Medicare patients with selected discharge diagnoses.
  • HAC Payment Limitation — Decreases annual adjustments to DRG payment rates for hospitals that are in the lowest performance quartile for a designated set of Hospital-Acquired Conditions (HACs).
  • Bundled Payments for Care Improvement Initiative — One of several initiatives of the CMS Innovation Center to give doctors and hospitals new incentives to coordinate care, improve the quality of care and save money for Medicare. Bundle care for a package of services patients receive to treat a specific medical condition during a single hospital stay and/or recovery from that stay. Applicants pick conditions to target and one of four ways to define the extent of pre- and post-hospital care included in the bundled payment.

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Less Money for Preventive Care, More Money for Docs

February 22, 2012 in Medicaid/Medicare, Physician Compensation | No comments

Merrill Goozner reports that paying for the “doc fix” comes at the cost of preventive services.

Friday’s payroll tax cut extension bill included $18 billion to maintain Medicare physician salaries at current levels for the rest of this year. Unlike the payroll tax extension, Congress insisted on paying for the doc-fix with offsetting budget cuts.  They raised nearly a third of the money by cutting $5 billion from prevention programs initiated under the Affordable Care Act. The rest came from reduced payments to hospitals, nursing homes, and clinical labs, and reduced Medicaid payments to Louisiana.

Smoking cessation programs? Cut. Outreach to schools to get kids to eat more fruits and vegetables? Cut. More programs at local YMCAs to prevent diabetes? Cut.“The idea of paying for a ten-month fix in physician payments with a ten-year cut in prevention programs is the ultimate penny-wise, pound-foolish move,” said Richard Hamburg, deputy director of Trust for America’s Health, which lobbies for community prevention programs and more funding for state and local health departments.

Preventive care programs may improve the quality of life for some individuals, but according to the CBO expanded use of preventive care “leads to higher, not lower, medical spending overall.”  Thus, although cutting preventive care may seem to increase medical costs in the long-run, in practice the deal to cut preventive care services should save enough move to pay for this year’s doc fix.

 

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Where can I get my health care?

February 20, 2012 in Data, Medicare | 1 comment

Most people think that medical services typically provided in a physician’s office of a hospital.  However, medical services can be provided in a variety of settings.

Medicare categorizes providers according to a place of service variable.  The place of service include the following settings:

Pharmacy; School; Homeless Shelter; Indian Health Service Free-standing Facility; Indian Health Service Provider-based Facility; Tribal 638; Free-standing Facility; Tribal 638 Provider-based Facility; Prison/Correctional Facility; Office; Home; Assisted Living Facility; Group Home; Mobile Unit; Temporary Lodging; Walk-in Retail Health Clinic; Urgent Care Facility; Inpatient Hospital; Outpatient Hospital; Emergency Room – Hospital; Ambulatory Surgical Center; Birthing Center; Military Treatment Facility; Skilled Nursing Facility; Nursing Facility; Custodial Care Facility; Hospice; Ambulance – Land; Ambulance – Air or Water; Independent Clinic; Federally Qualified Health Center; Inpatient Psychiatric Facility; Psychiatric Facility-Partial Hospitalization; Community Mental Health Center; Intermediate Care Facility/Mentally Retarded; Residential Substance Abuse Treatment Facility; Psychiatric Residential Treatment Center; Non-residential Substance Abuse Treatment Facility; Mass Immunization Center; Comprehensive Inpatient Rehabilitation Facility; Comprehensive Outpatient Rehabilitation Facility; End-Stage Renal Disease Treatment Facility; Public Health Clinic; Rural Health Clinic; Independent Laboratory; Other Place of Service.

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Do Disease Management and Value-Based Purchasing Programs Work?

February 15, 2012 in Medicare, P4P | 2 comments

In short, the answer is no. The CBO released an issue brief examining two types of demonstrations.

  • Disease management and care coordination demonstrations have sought to improve the quality of care of beneficiaries with chronic illnesses and those whose health care is expected to be particularly costly.
  • Value-based payment demonstrations have given health care providers financial incentives to improve the quality and efficiency of care rather than payments based strictly on the volume and intensity of services delivered.

“The evaluations show that most programs have not reduced Medicare spending: In nearly every program involving disease management and care coordination, spending was either unchanged or increased relative to the spending that would have occurred in the absence of the program, when the fees paid to the participating organizations were considered. Programs in which care managers had substantial direct interaction with physicians and significant in-person interaction with patients were more likely to reduce Medicare spending than other programs, but on average even those programs did not achieve enough savings to offset their fees.”

Today, the healthcare economist looks at these programs in more detail.

Disease Management Demonstrations

These demonstrations were made up of 34 programs operated by disease management companies. “The programs used nurses as care managers to educate patients about their chronic illnesses, encourage them to follow self-care regimens, monitor their health, and track whether they received recommended tests and treatments. In most programs, the care managers were not integrated into physicians’ practices, and their contact with patients was primarily by telephone.”

These programs targeted Medicare beneficiaries with specific chronic diseases. Most programs were not tailored to focus on chronically ill beneficiaries who were expected to have the highest cost of care. The results are displayed in the chart:

test

CBO found that the lack of integration into the physician practice and the lack of physical presence made most of these disease management programs not useful.

Value-Based Purchasing Demonstrations

The list below describes the four major VBP demonstration programs and their findings.

  • Physician Group Practice (PGP) Demonstration. 10 large practices were permitted to keep some of the estimated savings if they reduced total Medicare spending for their patients. In the second year of the demonstration, average Medicare spending excluding the bonuses paid to physician groups was about 1 percent below projections; with bonuses included, average
    Medicare spending was just 0.1 percent below projections—about $7 per beneficiary. Results for years 3 and 4 of the PGP demonstration are currently being analyzed.
  • Premier Hospital Quality Incentive Demonstration. 278 hospitals were offered bonuses if their scores on quality-of-care measures were in the top tier of participating hospitals.  This demonstration had no net effect on Medicare spending.
  • Home Health Pay-for-Performance Demonstration. This demonstration allowed 273 home health agencies to keep some of the estimated savings if they reduced total Medicare spending for their patients and met certain criteria regarding quality of care.  Initial results indicate that this demonstration had no net effect on Medicare spending.
  • Medicare Participating Heart Bypass Center Demonstration. Medicare made bundled payments to cover all inpatient hospital and physicians’ services for coronary artery bypass graft surgeries conducted at seven participating hospitals. Bundled payments reduced Medicare’s expenditures for heart bypass surgeries by about 10 percent, and there were no apparent
    adverse effects on patients’ outcomes.

Whereas the first three VBP programs aimed to give providers bonuses for reducing cost and increasing quality, the Heart Bypass Center demonstration relied on bundled payments to align the financial incentives offered to hospitals and physicians. The bundled payments reduced cost without decreasing quality. Of course, measuring quality is difficult and it is possible that the Bypass demonstration did not fully capture all important aspects of quality. Nevertheless, these initial results indicate that bundling may be a more promising cost-saving mechanism than provider bonuses.

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Will competitive bidding work in Medicare?

February 9, 2012 in Medicare | No comments

In my opinion the answer is yes.  A book by Coulam, Feldman and Dowd also would agree with me.

Recently, Medicare began a competitive bidding process for durable medical equipment.  Is it working?  According to the Wall Street Journal, the answer is no.

“Normally when the government wants to buy something, it asks companies how much they can provide and to name their price. Winners are selected from the lowest bid up until the government has what it needs at the lowest possible cost, and thereby finds competitive equilibrium prices.

Under Medicare’s highly unusual version of competitive bidding, it will pay the winners the median price of all the winning bids, rather than using the clearing price. Bids are also for some reason nonbinding.

This matters because it creates incentives for unscrupulous third-party companies to make low-ball “suicide bids.” If the median price shakes out high enough, they automatically win the contract, buy the medical products from manufacturers and turn a profit. If it isn’t, they can dump the contract since bidding involves no commitment.”

I still think competitive bidding in Medicare will work; the auctions just have to be set up in a more logical way.

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Have States made any progress towards implementing Health Exchanges?

February 6, 2012 in CHIP, Health Reform, Medicaid | 2 comments

The answer depends on the state. Today, I examine an Urban Institute research paper that looks at this progress in more detail.

Dividing States into 3 Group

The most advance States fall into Group 1 (CA, CO, CT, DC, HI, IN, MA, MD, NV, OR, RI, UT, VT, WA, WV). These states have either enacted an exchange establishment law or in which the governor has established one by issuing an executive order. Massachusetts and Utah had already passed exchange laws before enactment of the ACA. All Group 1 states (except Colorado, Massachusetts and Utah) have received an exchange establishment grant.

Group 2 states (AL, AZ, DE, IA, ID, IL, KY, ME, MI, MN, MO, MS, NC, NE, NJ, NM, NY, PA, TN, VA, WI) have not yet established exchanges, but have demonstrated significant interest in doing so. Most notably, 17 of the 21 states have received level 1 federal establishment grants, which represent a second round of funding for state exchange development work beyond the initial state planning grants. Although Wisconsin has not received a level 1 federal establishment grant, Wisconsin is using federal funds to develop an IT system to fully integrate exchange eligibility determination and enrollment with state-based public insurance programs (i.e., Medicaid and CHIP). Recently, however, Wisconsin Governor Scott Walker has rejected all federal funding for implementation of the ACA. Of the remaining four states, Virginia and Wisconsin have passed legislation stating its intent to develop an exchange, although they have not yet passed exchange establishment legislation, New Jersey has establishment legislation pending in its legislature, and Pennsylvania’s governor has recently announced that his administration is taking steps to establish a state exchange.

Group 3 states (AK, AR, FL, GA, KA, LA, MT, ND, NH, OH, OK, SC, SD, TX, WY) do not meet any of the criteria for Groups 1 and 2 and are the furthest from successfully implementing the ACA provisions.

Correlation between Exchange Progress and Potential Increases in State Health Insurance Coverage

A research article from the Urban Institute finds that States with the ‘most to gain’ from the ACA are actually the most likely to fall into Group 3. States that currently have the least generous Medicaid programs and the largest share of uninsured workers are the least likely to have made significant progress in implementing the ACA provisions.

I can think of two reasons for this finding. The first is philosophical. These States began with less generous health insurance programs. Thus, the residents (or politicians) in these States may prefer to have less generous health insurance programs than other States. Hence the natural aversion to implementing the ACA provisions. The second reason is financial. Because these States have the largest share of uninsured individuals, they would also incur the largest percentage increase in cost to finance the ACA provisions. Although it is true that these States would likely receive the largest subsidies, these subsidies will not cover the full cost of the ACA implementation.

Questions States need to answer to implement an Exchanges

  • Should the exchange be run by an existing government agency, a new agency, a quasi-governmental entity or a not-for-profit private entity?
  • What should the composition of the governing board be?
  • How should the administrative costs of running an exchange be financed?
  • Should the exchange be able to actively negotiate with plans over premiums?
  • Can plans be excluded, or must all qualified plans be allowed to participate?
  • In computing premiums, should enrollees in the Small Business Health Options Program (SHOP) exchange and nongroup exchange markets be pooled together, or should their premiums be set separately?
  • What will be the role of agents and brokers in the exchange?
  • Should state insurance regulations be identical inside and outside the exchange?
  • How will Medicaid/CHIP eligibility and enrollment be integrated with the exchange?
  • Should the Basic Health Plan option be implemented?

Source: Blavin F, Buettgens M and Roth J “State Progress Toward Health Reform Implementation: Slower Moving States Have Much to Gain.” RWJF and Urban Institute Real Time Policy Analysis, January 2012.

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How much is rent in your area?

February 1, 2012 in Data, Medicare, Physician Compensation | No comments

The Department of Housing and Urban Development (HUD) is responsible for answering just that question.  To determine what level Section 8 vouchers should be set, HUD measures the rents for every county across the nation.  Specifically, they measure the 40th percentile and 50th percentile (i.e., median) rents in each area.  They choose to use the median so that high prices for luxury residences do not skew the measure of rent for a “typical” person in each area.  How does HUD calculate these Fair Market Rents (FMR)?  Today I will explain.

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Medicare Payments for Hospitals in Under-served Areas

January 23, 2012 in Hospitals, Medicare | No comments

One of the goals of Medicare is to provide its beneficiaries access to quality care regardless of where they live.  Thus, the Medicare program provides financial incentives to providers located in these remote areas.

Whereas most Medicare pays most hospitals through the inpatient prospective payment system (IPPS), it pays certain rural hospitals based on their reported costs.  Medicare pays Critical Access Hospitals (CAH), for instance, 101 percent of its report cost for inpatient, outpatient, laboratory, and therapy services.  It also pays this providers 101 percent of their cost for post-acute care for CAH beds are “swing beds” (which are beds that can be used for either acute or post-acute care).

However, how should Medicare define ‘critical’? The simplest definition is just whether a hospital is in a rural (i.e., non-metropolitan) area. However, there are various gradations of ‘rural’. A rural hospital on the outskirts of a big city would be far less ‘critical’ then one very far from distant areas. One could define ‘critical’ based on facility volume. If the low volume is due to poor quality, however, defining these hospitals as critical could just reward poor hospitals. Third, could define a hospital as isolated based on its distance from other facilities who could provide comparable care. Alternatively, one could identify critical hospitals based on demographic factors such as population density in the surrounding areas.

Below, I provide more information on other types of types of rural hospital designations in Medicare.
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