Ohio Shuts Out Three ‘Pure Play’ Firms in New Medicaid Awards

Reprinted from MEDICARE ADVANTAGE NEWS, biweekly news and business strategies about Medicare Advantage plans, product design, marketing, enrollment, market expansions, CMS audits, and countless federal initiatives in MA and Medicaid managed care. By Judy Packer Tursman, Contributing Editor April 12, 2012 Volume 18 Issue 7 When Ohio awarded $1.2 billion worth of contracts to managed care organizations April 6, the three incumbent pure-play Medicaid MCOs — Amerigroup Corp., Centene Corp. and Molina Healthcare, Inc. — were excluded. In response, Centene said it intends to file a formal protest. And securities analysts said Medicaid MCOs remain capable of strong revenue growth over the next few years, and described pure-plays as unlikely to be shut out from many state awards going forward. Of the five companies getting Ohio Medicaid contracts for coverage starting Jan. 1, 2013, two are publicly traded: UnitedHealth Group is an incumbent, while Aetna Inc. is a new entrant. Other winners are CareSource, a not-for-profit plan covering 870,000-plus members in the Buckeye State and Michigan; Meridian Health Plan of Ohio and Paramount Advantage. Meridian also is new to Ohio’s Medicaid managed care program, which now has eight plans. Statewide, Ohio has about 2.1 million Medicaid recipients, of which more than 1.5 million are enrolled in managed care plans, says Benjamin Johnson, spokesperson for the Ohio Department of Job and Family Services (ODJFS). That includes roughly 1.5 million in Ohio’s Covered Families and Children (CFC) program; 129,000 in the state’s Aged, Blind & Disabled (ABD) program; and 37,000 children with special needs. Ohio’s Medicaid managed care system now has eight regions covering the state with two or three plans per region, and there are separate contracts for the CFC and ABD populations. Under the overhaul, there will be a consolidation into three regions, and all five plans will serve the three regions and both populations under a single contract. Johnson says plans could bid on any or all of the regions, and the five winning plans applied for all three. ODJFS said in an April 6 statement that plans were “selected through a fair and open application process and an objective scoring methodology that was based on applicants’ past performance in coordinating care and providing high-quality health outcomes.” The department added that selections are “preliminary,” and plans still must meet a thorough readiness assessment. “There were three main components to the scoring: experience, care management and clinical performance,” Johnson tells MAN. He says the state’s intent was to design a program that rewards better outcomes — and to work with plans that demonstrated improved outcomes. Asked whether the state had specific concerns with unsuccessful incumbents’ work, he responded that the five winning plans “scored the highest.” Johnson says ODJFS is not aware of any protests being filed yet, but bidders have until April 16 to do so. “If a protest is filed, we can still proceed with the readiness assessments. However, we would not execute a contract until all protests have been resolved,” he tells MAN. He says that plans’ readiness reviews are scheduled to wrap up this summer. Yet Centene, whose Ohio subsidiary, Buckeye Community Health Plan, lost out on the Ohio Medicaid business, intends to appeal. “We are extremely disappointed in the state’s decision and plan to formally protest the outcome,” Jesse Hunter, Centene’s executive vice president of operations, said in an April 9 statement. “We believe there were fundamental flaws in the procurement process, and we plan to pursue all available remedies.” Centene said it now serves 159,900 members in four regions in Ohio and has about 300 local employees. The company has covered Ohio CFC enrollees since 2004 and ABD members since 2007. Steven White, Buckeye’s president and CEO, noted that Buckeye was the highest-rated Ohio Medicaid plan in the NCQA rankings for 2011-12. A ‘Big Win’ for Aetna, United Describing this as a “big win” for Aetna Better Health of Ohio and UnitedHealthcare Community Plan of Ohio, securities analyst Michael Wiederhorn of Oppenheimer & Co. said in an April 9 equity research note that Ohio is an important state because of its size and potential expansion opportunities. He said stock prices of Medicaid pure-plays “should be weak on this news, especially considering how resilient they have been recently” — but nevertheless the pure-plays already are anticipating “a significant amount of new business, and should be able to recapture this lost market share in future RFPs.” Pete Haytaian, Amerigroup’s regional CEO for the North Region, which includes Ohio, said his company is disappointed in its unsuccessful bid on covering the CFC and ABD populations starting in 2013. But Amerigroup “remains committed to our members and the state of Ohio,” he told MAN in a statement April 9. “We are currently reviewing the state’s scoring of the submissions and will evaluate our options once the analysis has been completed.” Securities analyst Carl McDonald of Citigroup Global Markets Inc. said in an April 9 note that the announcement is “most problematic” for Molina since its Ohio business is expected to generate almost $1.2 billion in revenue in 2012. “We just raised our Molina revenue projection by over $1.5 billion last week following the California [Medicare-Medicaid] dual eligible award” (see story, below), he stated, “but it’s not exactly a fair trade, since the California business will take time to become profitable, whereas Ohio generated a nice margin.” McDonald noted that Amerigroup and WellCare Health Plans, Inc., another unsuccessful bidder, had only a small presence in the state, “so the loss isn’t all that meaningful.” He said that Ohio Medicaid’s decision will cost Centene about 25 cents per share if its protest fails.

Today's Datapoint

57% of Medicare Part D beneficiaries with heart conditions were more likely to drop their cardiovascular medications while in the “doughnut hole” compared with those with consistent drug coverage, according to a study in the April 17 issue of Circulation: Cardiovascular Quality and Outcomes.

Quote of the Day

“If you look at the three provisions that wed quality with payment [readmission reduction programs, penalties for hospital acquired conditions, and value-based purchasing] and what happens when everything is fully implemented, up to 6% of [a hospital’s] bottom line is being affected by quality of care. That could be real money.” — Andy Ruskin, an attorney with Morgan, Lewis & Bockius in Washington, D.C., told AIS’s Report on Medicare Compliance.

Fact vs. Fiction: Medicare is not Going "Bankrupt"

Medicare Trustees issued their annual report on Medicare's financial status on April 23, 2012. According to this year's report, the Hospital Insurance (Part A) Trust Fund has sufficient reserves to pay out the full amount of Medicare Part A benefits until 2024 – the same projection made in last year's report. Should nothing else change, and the Trust Fund reserves be depleted in 2024, the Trust Fund would still receive sufficient income from the payroll taxes and other revenue through which it is funded to pay 87% of anticipated Part A expenses.[1] As described in previous Alerts, the Trust Fund is a victim of the economy.[2] Health care costs typically rise at a much faster rate than general inflation. This, combined with a high unemployment rate which means that fewer people are working and contributing payroll taxes into the Trust Fund, leads to the changes in the projected solvency of the Trust Fund. Since 1970, the trustees have projected Trust Fund insolvency in as little as 4 years or as much as 28 years.[3] The longest projected solvency period occurred in years in which the country experienced high economic growth and budget surpluses. In short, contrary to assertions made by some, Medicare is not going "bankrupt" or running out of funds.[4] Medicare does, however, face funding challenges. While changes to the Medicare program pursuant to the Affordable Care Act (ACA) have improved Medicare's cost outlook by extending trust fund solvency by 8 years,[5] more needs to be done to bring down program costs.[6] More: see "Outlook is Not as Bleak as You Think" in the Des Moines Register at http://www.desmoinesregister.com/article/20120426/OPINION03/ 304260023/?odyssey=nav|head ________________________________________ [1] 2012 Annual Report of the Boards of Trustees of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds (April 23, 2012), available at: https://www.cms.gov/Research-Statistics-Data- and-Systems/Statistics-Trends-and-Reports/ReportsTrustFunds/downloads//tr2012.pdf [2] See, e.g., Weekly Alert "2011 Medicare Trustees Report" (May 19, 2011), available at: http://www.medicareadvocacy.org/2011/05/19/2011-medicare-trustees-report/ [3] "Trustees Issue Warnings on Medicare But Make No Changes to Solvency Projections" by Marilyn Werber Sarafini and Phil Galewitz, Kaiser Health News (April 23, 2012), available at: http://www.kaiserhealthnews.org/Stories/2012/ April/23/medicare-trustees-long-term-forecast.aspx [4] See, e.g., "Medicare is Not Bankrupt" by Paul N. Van de Water, Center on Budget and Policy Priorities (April 24, 2012), available at: http://www.cbpp.org/cms/index.cfm?fa=view&id=3532 [5]See, e.g., CMS Press Release: "Medicare Stable, But Requires Strengthening" (April 23, 2012), available at: http://www.cms.gov/apps/media/press/release.asp?Counter=4341&intNumPerPage=10&checkDate= &checkKey=&srchType=1&numDays=3500&srchOpt=0&srchData=&keywordType=All& chkNewsType=1%2C+2%2C+3%2C+4%2C+5&intPage=&showAll=&pYear=&year=&desc=&cboOrder=date [6] For examples of ways to achieve cost-savings to the Medicare program while improving benefits, see, e.g., previous Weekly Alerts, including: including: "Real Solutions For Medicare Solvency" (June 9, 2011), available at http://www.medicareadvocacy.org/hidden/so-what-would-you-do-real-solutions-for-medicare-solvency-and-reducing-the-deficit/; "Real Solutions to Save Medicare Dollars in Skilled Nursing Facilities" (June 30, 2011), available at: http://www.medicareadvocacy.org/2011/06/real-solutions-to-save-medicare-dollars-in-skilled-nursing-facilities/; and "Debunking Medicare Myths: Drug Rebates for Dual Eligibles" (July 21, 2011), available at: http://www.medicareadvocacy.org/2011/07/debunking-medicare-myths-drug-rebates-for-dual-eligibles/.

Is UnitedHealth Gearing Up for Reform?

By Jennifer Lubell - April 24, 2012 UnitedHealth Group has been racking up acquisitions of Medicare Advantage (MA) plans, not to mention several contract awards that previously belonged to Blues plans. As one health care observer explains, larger plans like United are seeking to expand their presence nationally, to prepare for whatever happens with health reform. United in particular has been successful in winning several contracts to cover state employees over Blues carriers in Nebraska and Texas, not to mention a military health system contract that TriWest Healthcare Alliance Corp., a coalition of several Western state Blues plans, held for many years. It’s also been busy acquiring several MA-focused plans in Florida, as well as Baltimore MA plan XLHealth Corp. If larger plans are able to control access and gain a large membership base, “they will be well positioned to leverage” reforms in the accountable care and state exchange environments, Deb Mabari, CEO of Cody Consulting Services, Inc., a health care consulting firm in Tampa, Fla., suggests. Even if the Supreme Court ends up striking the entire health reform law, these plans will still be able to maintain a competitive advantage, “as controlling access equals controlling members,” she explains. Blues plans in turn have been responding to United’s actions by trying to block such competitors from gaining access to their provider network, Mabari says. The Nebraska Blues plan in particular is challenging the contract it lost to United by issuing a lawsuit against the state. As recently reported in The AIS Report on Blue Cross and Blue Shield Plans, the Blues plans argue that United’s benefits are limited and would not serve the best interests of customers in their respective states. What do readers think? Are major insurers like United, Humana and others engaging in these acquisitions and going after more contracts to prep for health reform?

Today's Datapoint

Just 14.5% of seniors enrolled in Medicare Advantage plans between 2006 and 2008 had hospital readmissions, which is 22% lower than Medicare fee-for-service patients for the same period, according to a new AHIP report.

Today's Datapoint

20% to 50% ... longer sentences are being handed down in Medicare fraud cases that involve more than $1 million as a result of the Affordable Care Act, according to officials from HHS and the Department of Justice.

In MA and Part D Marketing, Here's What Not to Say

By James Gutman - April 20, 2012 If Medicare Advantage plans sometimes wonder why CMS puts so much emphasis on marketing surveillance and compliance, they may have gotten the answer in a presentation by a CMS official at the agency's 2012 MA and Part D spring conference in Hunt Valley, Md., April 12. CMS's "secret shopping" during last fall's Annual Election Period for 2012 turned up some statements by plan representatives that might be enough to make anybody wonder, "What were they thinking?" Specifically, as outlined by Christine Reinhard, an attorney in CMS's Division of Surveillance, Compliance and Marketing within the Medicare Drug & Health Contract Group, first there were the inaccurate statements such as "a 3.5 [star] rating is excellent," "there are no five-star plans" and "we have 3.5 stars, but most plans only have two stars." Then there are what she called "inappropriate statements," such as "I don't know how long you'll have a choice," "original Medicare is a disaster" and "you can't win with CMS." Said Reinhard of the last statement: "That one I take a little personally." Beyond that, there were what Reinhard called "scare tactics." Among the examples she cited was the statement, "If other plans have a zero-dollar copay, they will get their money somewhere...[perhaps] cut the number of hospitals...authorization for all medical tests...not letting your doctor make the decision." Imagine the impact on seniors, many of whom have major health problems and understandably are not knowledgeable about Medicare to begin with, as Reinhard noted. How do these kinds of statements get made by plan representatives? What should be done by the plans themselves to make sure their marketers don't cross into these areas? Are there some basic scruples and common sense missing here?

Quote of the Day

“Moving this population [of people dually eligible for Medicare and Medicaid] to managed care will not be easy given resistance among advocacy groups, rural senators and even within CMS….CMS has been reluctant to share both current and historical [Medicare] data.” — Christine Arnold, a securities analyst with Cowen & Co., commented in a recent research note.

Health Care Law Protects Against Fraud, Saves Nearly $1.6 billion

Law requires stronger standards for ordering and certifying medical services, equipment, and supplies.

The Centers for Medicare & Medicaid Services (CMS) announced a final rule today that prevents fraud in Medicare and is estimated to save taxpayers nearly $1.6 billion over 10 years.
Today’s rule ensures that only qualified, identifiable providers and suppliers can order or certify certain medical services, equipment and supplies for people with Medicare. The rule also helps ensure beneficiaries receive quality care because CMS will verify the credentials of a provider who is ordering or certifying equipment and supplies.
“Thanks to the Affordable Care Act, we are expanding our work to combat fraud,” stated Deputy Administrator for Program Integrity Peter Budetti. “This rule will save money for taxpayers and ensure people with Medicare get high-quality care.”
In addition, the final rule continues to require that all providers and suppliers who qualify for a unique identification number - the National Provider Identifier (NPI) - include their NPI on applications to enroll in Medicare and Medicaid and on all reimbursement claims submitted. This gives CMS and States the ability to tie specific claims to the ordering or certifying physician or eligible professional and to check for suspicious ordering activity.


This rule builds on the work CMS is also doing in Medicare Part D by requiring that all prescriptions include an NPI for prescribing physicians. In conjunction with Part D, these efforts will help better safeguard the Medicare Trust Funds by giving CMS the ability to know which providers are ordering, certifying and prescribing items and services to Medicare beneficiaries.
To see the final rule, visit:
https://s3.amazonaws.com/public-inspection.federalregister.gov/2012-09994.pdf

Social Security Board of Trustees: Projected Trust Fund Exhaustion Three Years Sooner Than Last Year

The Social Security Board of Trustees today released its annual report on the financial health of the Social Security Trust Funds. The combined assets of the Old-Age and Survivors Insurance, and Disability Insurance (OASDI) Trust Funds will be exhausted in 2033, three years sooner than projected last year. The DI Trust Fund will be exhausted in 2016, two years earlier than last year’s estimate. The Trustees also project that OASDI program costs will exceed non-interest income in 2012 and will remain higher throughout the remainder of the 75-year period.

In the 2012 Annual Report to Congress, the Trustees announced:

•The projected point at which the combined Trust Funds will be exhausted comes in 2033 – three years sooner than projected last year. At that time, there will be sufficient non-interest income coming in to pay about 75 percent of scheduled benefits.
•The projected actuarial deficit over the 75-year long-range period is 2.67 percent of taxable payroll -- 0.44 percentage point larger than in last year’s report.
•Over the 75-year period, the Trust Funds would require additional revenue equivalent to $8.6 trillion in present value dollars to pay all scheduled benefits.

“This year’s Trustees Report contains troubling, but not unexpected, projections about Social Security’s finances. It once again emphasizes that Congress needs to act to ensure the long-term solvency of this important program, and needs to act within four years to avoid automatic cuts to people receiving disability benefits,” said Michael J. Astrue, Commissioner of Social Security.

Other highlights of the Trustees Report include:

•Income including interest to the combined OASDI Trust Funds amounted to $805 billion in 2011. ($564 billion in net contributions, $24 billion from taxation of benefits, $114 billion in interest, and $103 billion in reimbursements from the General Fund of the Treasury—almost exclusively resulting from the 2011 payroll tax legislation.)
•Total expenditures from the combined OASDI Trust Funds amounted to $736 billion in 2011.
•Non-interest income fell below program costs in 2010 for the first time since 1983. Program costs are projected to exceed non-interest income throughout the remainder of the 75-year period.
•The assets of the combined OASDI Trust Funds increased by $69 billion in 2011 to a total of $2.7 trillion.
•During 2011, an estimated 158 million people had earnings covered by Social Security and paid payroll taxes.
•Social Security paid benefits of $725 billion in calendar year 2011.

There were about 55 million beneficiaries at the end of the calendar year.
•The cost of $6.4 billion to administer the program in 2011 was a very low 0.9 percent of total expenditures.
•The combined Trust Fund assets earned interest at an effective annual rate of 4.4 percent in 2011.

The Board of Trustees is comprised of six members. Four serve by virtue of their positions with the federal government: Timothy F. Geithner, Secretary of the Treasury and Managing Trustee; Michael J. Astrue, Commissioner of Social Security; Kathleen Sebelius, Secretary of Health and Human Services; and Hilda L. Solis, Secretary of Labor. The two public trustees are Charles P. Blahous, III and Robert D. Reischauer.

The 2012 Trustees Report will be posted at www.socialsecurity.gov/OACT/TR/2012/ on Monday afternoon.

New report: Competitive bidding saving money for taxpayers and people with Medicare

Health care law expands second round, program will save up to $42.8 billion

People with Medicare are already saving money on durable medical equipment (DME) through the Medicare competitive bidding program, according to a report released today by Health and Human Services Secretary Kathleen Sebelius.

According to the report, the program saved $202 million in its first year in nine metropolitan statistical areas – a reduction of 42 percent in costs and, as the program expands under the Affordable Care Act and earlier law, it could save up to $42.8 billion for taxpayers and beneficiaries over the next 10 years.

“Thanks to the Affordable Care Act, we can expand this successful example of health care reform to include more areas and achieve savings on a national level over the next few years. People with Medicare across the country will get the medical equipment they need to live their lives, while saving them and other taxpayers money in the process,” Secretary Sebelius said. “The law is already saving those with Medicare hundreds of dollars on their health care needs-- from medical equipment to prescription drugs—and they will continue to save in the years to come.”

The report also released results that show, after extensive monitoring by the Centers for Medicare & Medicaid Services (CMS), there have been no negative effects on the health of people on Medicare or their access to needed supplies and services.

“Seniors, and people with disabilities on Medicare, are saving money thanks to our successful competitive bidding program," said CMS Acting Administrator Marilyn Tavenner. "By expanding this successful program, we will save tens of billions of dollars for beneficiaries and taxpayers over the next 10 years."

Key information in the report:

* Seniors, and people with disabilities in Medicare, will directly save a projected $17.1 billion due to lower co-insurance for durable medical equipment and lower premiums for Medicare over the next decade, while taxpayers are projected to save an additional $25.7 billion through the Medicare Supplementary Medical Insurance Trust Fund because of reduced prices.

* In the first year of implementation in nine metropolitan statistical areas, through a combination of lower prices and fewer unnecessary services, the competitive bidding program saved Medicare $202 million.

* Medicare beneficiaries in the nine areas had substantial reductions in their co-insurance for DME.

* Last year alone, people with Medicare saved up to $105 on hospital beds, $168 on oxygen concentrators, and $140 on diabetic test strips.

* A real-time claims monitoring system, set up to ensure that access to supplies was not compromised, has found that people on Medicare continue to have access to all necessary and appropriate items.

The Affordable Care Act expands Round 2 of the DME competitive bidding program from 70 to 91 metropolitan statistical areas across the country. CMS is evaluating bids from suppliers for the 91 areas. By 2016, all areas of the country will benefit from either the competitive bidding program or lower rates based on the competitively bid rates.

View the full report here: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/DMEPOSCompetitiveBid/index.html

Aging workforce strains Social Security, Medicare

By STEPHEN OHLEMACHER | Associated Press

WASHINGTON (AP) — An aging population and an economy that has been slow to rebound are straining the long-term finances of Social Security and Medicare, the government's two largest benefit programs.

Those problems are getting new attention Monday as the trustees who oversee the massive programks release their annual financial reports.

Medicare is in worse shape than Social Security because of rising health care costs. But both programs are on a path to become insolvent in the coming decades, unless Congress acts, according to the trustees.

Last year, the trustees projected the Medicare hospital insurance fund for seniors would run out of money in 2024. Social Security's retirement fund was projected to run dry in 2038, while the disability fund was projected to be drained by 2018.

New projections in March gave a more dire assessment of the disability program, which has seen a spike in applications as more disabled workers lose jobs and apply for benefits.

The nonpartisan Congressional Budget Office said the disability fund would run out of money in 2016. Social Security's trustees are again urging Congress to shore up the disability system by reallocating money from the retirement program, just as lawmakers did in 1994.

If the Social Security and Medicare funds ever become exhausted, both programs would collect only enough money in payroll taxes to pay partial benefits, the trustees said.

"I don't know how to make it clear to the public, but in my mind the sirens are going off," said Mary Johnson, policy analyst for the Senior Citizens League. "I wouldn't say we're under attack, but we are in a very, very serious position."

Don't expect the finances to look much better, if at all, in the new report. Tax revenues have started to rebound but they are still below pre-recession levels. Also, this year's cost-of-living adjustment, or COLA, was much higher than the trustees projected it would be.

Last spring, the trustee's projected that Social Security recipients would get a benefit increase of 0.7 percent for this year, but higher-than-expected inflation pushed it to 3.6 percent. That was good news for seniors but it drained more resources from the system.

The trustees who oversee the programs are Treasury Secretary Timothy Geithner, Labor Secretary Hilda Solis, Health and Human Services Secretary Kathleen Sebelius and Social Security Commissioner Michael Astrue. There are also two public trustees, Charles Blahous and Robert Reischauer.

More than 56 million retirees, disabled workers, spouses and children receive Social Security. The average retirement benefit is $1,232 a month; the average monthly benefit for disabled workers is $1,111.

About 50 million people are covered by Medicare, the medical insurance program for older Americans.

One bright spot for Medicare is that the pace of cost increases has eased somewhat, even as baby boomers are turning 65 at the rate of 10,000 a day and becoming eligible for the program. So instead of speeding toward a budget cliff, Medicare is merely steering toward insolvency.

"The trends in Medicare are more modest than the cost increases we have seen in the private commercial sector," said economist David Blitzer, who oversees Standard & Poor's index of health care costs. "But both Medicare and the commercial sector face rising cost pressures no matter what, and they seem to come from virtually all directions."

Because Medicare is a government program, it sets prices on take-it-or-leave-it terms for hospitals and doctors, who complain it doesn't pay enough and that causes them to charge more to privately insured patients.

Many experts say the longer Congress waits to address the two programs, the more difficult it could become to impose adequate changes. If Congress acts soon, it can phase in changes over time, perhaps sparing current retirees while giving those closing in on retirement time to prepare.

But Washington has struggled to make tough political choices that could involve raising taxes, cutting benefits or some combination of both.
Advocates for seniors oppose benefit cuts in either program. They say Social Security's finances are secure for decades to come.

"No one is saying you don't have to maintain it," said Eric Kingson, co-chair of the Strengthen Social Security Campaign and a professor of social work at Syracuse University. "What I worry about is reducing the benefit structure or radically changing the system."

Kingson and other advocates say Social Security could be shored up by simply increasing the amount of wages subject to Social Security taxes — an idea that most Republicans in Congress flatly oppose.

Social Security is financed by a 6.2 percent tax on the first $110,100 in wages. It is paid by both employers and workers. Congress temporarily reduced the tax on workers to 4.2 percent for 2011 and 2012, though the program's finances are being made whole through increased government borrowing.

The Medicare tax rate is 1.45 percent on all wages, paid by both employees and workers.
___
Associated Press writer Ricardo Alonso-Zaldivar contributed to this report.
___
Online:
2011 reports: http://www.ssa.gov/OACT/TRSUM/index.html
http://news.yahoo.com/aging-workforce-strains-social-security-medicare-073549082.html

Medicare Stable, But Requires Strengthening

The Medicare Trustees Report released today shows that the Hospital Insurance (HI) Trust Fund is expected to remain solvent until 2024, the same as last year’s estimate, but action is needed to secure its long-term future. In 2011, the HI Trust Fund expenditures were lower than expected.

Without the Affordable Care Act, the HI Trust Fund would expire 8 years earlier, in 2016. The law provides important tools to control costs over the long run such as changing the way Medicare pays providers to reward efficient, quality care. These efforts to reform the healthcare delivery system are not factored into the Trustees projections as many of the initiatives are just launching.

“The Trustees Report tells us that while Medicare is stable for now, we have a lot of work ahead of us to guarantee its future,” said Acting CMS Administrator Marilyn Tavenner. “The Affordable Care Act is giving CMS the ability to do this work, with tools to lower costs, fight fraud, and change incentives so that Medicare pays for coordinated, quality care and not the number of services.”

The report projects that the Supplementary Medical Insurance (SMI) Trust Fund is financially balanced because beneficiary premiums and general revenue financing are set to cover expected program costs. Spending from the Part B account of the SMI trust fund grew at an average rate of 5.9 percent over the last 5 years.

SMI Part D, the Medicare prescription drug program, had an average growth rate of 7.2 percent over the last 5 years. Cost projections for Part D are lower than in the 2011 Trustees report, due to lower spending in 2011 and greater expected use of generic drugs.

HI expenditures have exceeded income annually since 2008 and are projected to continue doing so under current law in all future years. Trust Fund interest earnings and asset redemptions are required to cover the difference. HI assets are projected to cover annual deficits through 2023, with asset depletion in 2024. After asset depletion, if Congress were to take no further action, projected HI Trust Fund revenue would be adequate to cover 87 percent of estimated expenditures in 2024 and 67 percent of projected costs in 2050. In practice, Congress has never allowed a Medicare trust fund to exhaust its assets.

The financial projections for Medicare reflect substantial cost savings resulting from the Affordable Care Act, but also show that further action is needed to address the program’s continuing cost growth.

The Medicare Trustees are Treasury Secretary and Managing Trustee Timothy F. Geithner, Health and Human Services Secretary Kathleen Sebelius, Labor Secretary Hilda L. Solis, and Social Security Commissioner Michael J. Astrue. Two other members are public representatives who are appointed by the President, subject to confirmation by the Senate. Charles P. Blahous III and Robert D. Reischauer began serving on September 17, 2010. CMS Acting Administrator Marilyn B. Tavenner is designated as Secretary of the Board.

The report is available at: https://www.cms.gov/ReportsTrustFunds/downloads/tr2012.pdf

Today's Datapoint

$9.3 million … in nonequity incentive pay went to Cigna Corp. CEO David Cordani in 2011. When coupled with stock awards and option awards, Cordani’s total compensation package of more than $19 million made him the highest paid executive in 2011 among publicly traded health insurers, according to the annual analysis performed by AIS’s Health Plan Week.

Quote of the Day

“Medicare is a governmental rate table that does not purport to reflect market rates. It embodies certain policy decisions by the federal government applicable to the elderly and disabled. It was not intended to be a benchmark for out-of-network reimbursement in the general public, which is why we are hearing so many complaints from consumers and other stakeholders.”
Robin Gelburd, president of FAIR Health, Inc., told AIS’s Health Plan Week.

New Affordable Care Act program to improve care, control Medicare costs, off to a strong start

Over 1.1 million beneficiaries now served by Accountable Care Organizations

A new program that will help physicians, hospitals, and other health care providers work together to improve care for people with Medicare is off to a strong start, the Centers for Medicare & Medicaid Services (CMS) announced today.

Under the new Medicare Shared Savings Program (Shared Savings Program), 27 Accountable Care Organizations (ACOs) have entered into agreements with CMS, taking responsibility for the quality of care furnished to people with Medicare in return for the opportunity to share in savings realized through improved care. The Shared Savings Program and other initiatives related to Accountable Care Organizations are made possible by the Affordable Care Act, the health care law of 2010. Participation in an ACO is purely voluntary for providers and beneficiaries and people with Medicare retain their current ability to seek treatment from any provider they wish.

The first 27 Shared Savings Program ACOs will serve an estimated 375,000 beneficiaries in 18 States. This brings the total number of organizations participating Medicare shared savings initiatives on April 1 to 65, including the 32 Pioneer Model ACOs that were announced last December, and six Physician Group Practice Transition Demonstration organizations that started in January 2011. In all, as of April 1, more than 1.1 million beneficiaries are receiving care from providers participating in Medicare shared savings initiatives.

“We are encouraged by this strong start and confident that by the end of this year, we will have a robust program in place, benefitting millions of seniors and people with disabilities across the country,” said CMS Acting Administrator Marilyn Tavenner.

Anyone who has multiple doctors may have experienced the frustration of fragmented and disconnected care: lost or unavailable medical charts, trouble scheduling an appointment or talking to a doctor, duplicated medical procedures, or having to share the same information over and over with different doctors.

Accountable Care Organizations are designed to lift this burden from patients, while improving care and reducing costs. The Shared Savings Program was created by the Affordable Care Act after a number of efforts in the private sector showed that improving care can lead to lower costs. The selected ACOs include more than 10,000 physicians, 10 hospitals, and 13 smaller physician-driven organizations in both urban and rural areas. Their models for coordinating care and improving quality vary in response to the needs of the beneficiaries in the areas they are serving. CMS is reviewing more than 150 applications from ACOs seeking to enter the program in July.

To ensure that savings are achieved through improving and providing care that is appropriate, safe, and timely, an ACO must meet strict quality standards. For 2012, CMS has established 33 quality measures relating to care coordination and patient safety, appropriate use of preventive health services, improved care for at-risk populations, and the patient and caregiver experience of care.

CMS also announced today that five ACOs are participating in the Advance Payment ACO Model beginning April 1. This model will provide advance payment of expected shared savings to rural and physician-based ACOs participating in the Shared Savings Program that would benefit from additional start-up resources. These resources will help build the necessary care coordination infrastructure necessary to improve patient outcomes and reduce costs, such as new staff or information technology systems. CMS is reviewing more than 50 applications for Advance Payments that start in July.

To learn more about the ACOs announced today, visit: http://www.cms.gov/apps/media/fact_sheets.asp

For more information on the Advanced Payment ACO Model, including the participating ACOs, visit: http://innovations.cms.gov/initiatives/ACO/Advance-Payment/.

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APPENDIX

LIST OF ACCOUNTABLE CARE ORGANIZATIONS STARTING APRIL 1, 2012

Accountable Care Organization/Collaborative Health Systems Partnerships
• Accountable Care Coalition of Caldwell County, LLC
Lenoir, NC
• Accountable Care Coalition of Coastal Georgia
Ormond, FL (Serving beneficiaries in GA and SC)
• Accountable Care Coalition of Eastern North Carolina, LLC
New Bern, NC
• Accountable Care Coalition of Greater Athens Georgia
Athens, GA
• Accountable Care Coalition of Mount Kisco, LLC
Mount Kisco, NY
• Accountable Care Coalition of the Mississippi Gulf Coast, LLC
Clearwater, FL (Serving beneficiaries in the Mississippi Gulf Coast area)
• Accountable Care Coalition of the North Country, LLC
Canton, NY
• Accountable Care Coalition of Southeast Wisconsin, LLC
Milwaukee, WI
• Accountable Care Coalition of Texas, Inc.
Houston, TX

AHS ACO, LLC
Morristown, NJ (Serving beneficiaries in NJ and PA)
AppleCare Medical ACO, LLC
Buena Park, CA
Arizona Connected Care, LLC
Tucson, AZ
Chinese Community Accountable Care Organization
New York, NY

CIPA Western New York IPA, doing business as Catholic Medical Partners
Buffalo, NY

A-1
Coastal Carolina Quality Care, Inc.
New Bern, NC
Crystal Run Healthcare ACO, LLC
Middletown, NY (Serving beneficiaries in NY and PA)
Florida Physicians Trust, LLC
Winter Park, FL
Hackensack Physician-Hospital Alliance ACO, LLC
Hackensack, NJ (Serving beneficiaries in NJ and NY)
Jackson Purchase Medical Associates, PSC
Paducah, KY
Jordan Community ACO
Plymouth, MA
North Country ACO
Littleton, NH (Serving beneficiaries in NH and VT)
Optimus Healthcare Partners, LLC
Summit, NJ
Physicians of Cape Cod ACO Description of Organization
Hyannis, MA
Premier ACO Physician Network
Lakewood, CA
Primary Partners, LLC
Clermont, FL
RGV ACO Health Providers, LLC
Donna, TX
West Florida ACO, LLC
Trinity, FL

Quote of the Day

“Some aspects of reform are likely to persist even if the [law] was to be struck down. For example, state-run insurance exchanges have gained acceptance as a better way to organize the individual and small-group health insurance markets, and would likely be pursued by many states even in the absence of incentives from the federal government.”
— Matt Coffina, a health care analyst at Morningstar, Inc., told AIS’s Health Plan Week.

Extra Benefits for MA Enrollees Average $73, Vary Widely by State

Reprinted from MEDICARE ADVANTAGE NEWS, biweekly news and business strategies about Medicare Advantage plans, product design, marketing, enrollment, market expansions, CMS audits, and countless federal initiatives in MA and Medicaid managed care.

By James Gutman, Managing Editor
March 29, 2012 Volume 18 Issue 6

Medicare Advantage beneficiaries generally are getting substantial amounts of supplementary benefits and/or reduced cost sharing now, and that is likely to continue through next year, according to a new analysis by consulting firm Avalere Health LLC and comments in an interview with its CEO. Specifically, Avalere’s analysis issued March 12 of newly released CMS data found that MA enrollees in 2010 got a weighted average of $73 worth of supplementary benefits or lower cost sharing per month, with the figures ranging widely from a high of $154 in Florida to zero in Alaska.

The figures seem to correlate with underlying fee-for-service (FFS) costs in the state, Avalere noted. That’s because where underlying FFS costs are highest, it tends to be easier for MA plans to operate more efficiently than FFS Medicare and thus to be able to bid under the “benchmarks” for that area. Bids below the benchmark in a service area, which may be a county rather than the whole state, result in CMS giving the plans “rebates” that must be used either to furnish extra benefits or to lower premiums.

The Avalere analysis shows that MA HMOs were more likely to offer large amounts of supplementary benefits to enrollees than were local or regional MA PPOs. The consulting firm, which excluded MA private-fee-for-service plans from the analysis since many of them exited the market after “deeming” of PFFS networks ended Dec. 31, 2010, attributed the HMO dominance in these figures to the higher ability to control costs in this form of care.

“What the [overall] analysis showed is there are significant subsidies for enrollees in Medicare Advantage,” Avalere CEO Dan Mendelson tells MAN.
Asked how the coming cuts in MA pay rates under the health reform law would affect these extra benefits, he responds that there will be an impact “over time.” However, Mendelson adds, CMS is offsetting some of the effects with its star-rating quality bonuses, and he doesn’t expect to see many changes in the supplementary-benefits patterns through next year. He notes that minimum medical loss ratio requirements, which could affect extra benefits and cost-sharing levels, begin for MA plans in 2014 (MAN 5/19/11, p. 1).

Mendelson points out this is the first time CMS has released the extra-benefits data, which he says are “very useful.” They show, for instance, how closely the extra benefits and/or lower cost sharing track with prevailing FFS costs in high-cost states such as Florida and Louisiana, which placed second in Avalere’s analysis at an average of $143 per month.
Mendelson acknowledges that the intense competition for a large number of seniors could be a factor contributing to Florida’s top figure, noting the state is “one of the most competitive markets” (MAN 3/15/12, p. 1). The continued reliance on prevailing FFS costs as the base for MA payments as reform-law provisions are being phased in means “you can carry this legacy forward” for a while in terms of Florida’s high supplementary benefits, he adds.

Louisiana ranks high mostly because of historical payment rates and not because of intense competition, according to Mendelson. He contends that what happens to supplementary benefits in states like this in the next couple years could be related partly to what star-rating bonuses plans there are getting, since the health reform law and CMS rules require that the bonus-related additional rebates be used to furnish additional benefits or reduce premiums. Plans with a rating of three stars or below will get only a 50% rebate beginning in 2014, while five-star plans will get 70%.

Given the various reform-related factors at play, including rebasing of county payment rates (MAN 3/1/12, p. 1) and gradual reduction of base pay rates to 100% of FFS, the market “will see more consistency” on supplementary benefits “over some period of time,” Mendelson predicts. But that won’t occur “next year or the year after; it’s more like a slow drip,” he says.

View the CMS data used in the Avalere analysis at www.cms.gov/Plan-Payment/PPData/list.asp

For Immediate Release: Monday, April 02, 2012
Contact: CMS Office of Public Affairs
202-690-6145


CMS ANNOUNCES 2013 PAYMENT AND POLICY UPDATES FOR MEDICARE DRUG AND HEALTH PLANS TO ENSURE CHOICE AND IMPROVE QUALITY
The Centers for Medicare & Medicaid Services (CMS) today announced payment and policy guidance for Medicare Advantage (Part C) and Medicare prescription drug (Part D) plans for Calendar Year (CY) 2013 that will continue the trend of lower premiums and stable or improved benefits that beneficiaries in these programs have experienced over the last two years. This guidance describes payment changes that reflect an estimated annual average growth rate of 3.07 percent, which will sustain a stable Medicare Advantage landscape next year.
For the 2013 benefit year, as in 2012, CMS combined the Rate Announcement and the Call Letter into one single guidance document that contains revisions to payment methodologies, and other policy and operational process updates for Part C organizations and Part D sponsors. This guidance includes:
• Growth Percentages: The MA Growth Percentage and the FFS Growth Percentage, which are trend factors applied to the county rates. The combined effect of these growth percentages is estimated to be 3.07 percent. This metric measures the estimated growth in per capita expenditures for Medicare beneficiaries and will help determine the benchmarks for Medicare Advantage plans.
• Benchmarks: Transition of MA benchmarks toward Medicare fee-for-service costs, as required by the Affordable Care Act, and incorporation of plan quality ratings into the MA payment system. CMS discusses the transition to fee-for-service-based rates and the quality bonus payments. Final benchmarks were also announced and posted today.
• Coding Pattern Adjustment: Continuing with a coding pattern adjustment of 3.41% that is applied to the risk scores of beneficiaries enrolled in MA plans to account for differences in coding between Medicare Advantage plans and Medicare Part A and Part B providers.
Other CY 2013 program guidance highlights:
• Controlling Beneficiary Costs and Premium Increases: CMS will again exercise its authority under the Affordable Care Act to deny bids, if it determines that the bid proposes too significant an increase in cost sharing or decrease in benefits from one year to the next.
• Lower drug costs: CMS will address improvements in the Medicare prescription drug benefit, specifically those provisions that close the Part D coverage gap, or “donut hole.” As a result of the Affordable Care Act, in 2013, eligible drug plan enrollees with liability in the donut hole will only pay 47.5 percent of the costs of covered brand-name drugs. For generic drugs in the gap, cost sharing shrinks to 79 percent, from 86 percent in 2012. People enrolled in Medicare Part D who do not receive the low income subsidy and enter the coverage gap will pay less each year until 2020, when they will pay only 25% for covered brand-name and generic drugs, closing the donut hole.
• Stronger Part D & MA plan quality: In 2013, CMS will alert plan members if their drug or health plan has failed for three straight years to achieve at least a three (out of five) star quality rating and offer a special enrollment period that will allow the member to move to a higher quality plan. For MA plans, the three-year Quality Bonus Payment demonstration will continue to provide financial incentives to improve quality of care for people with Medicare.
• Reducing inappropriate overuse of prescription drugs: For Part D plans, CMS describes drug utilization management improvements to address overprescribing and overutilization of opiates and other medications to ensure beneficiary safety and prevent fraud.
• Supplemental Benefits: CMS is clarifying its definition of certain supplemental benefits in an effort to ensure transparency and consistency across all MA plans that choose to offer such benefits. CMS is also extending additional supplemental benefit options to qualifying dual eligible special needs plans (D-SNPs).
• Part D Benefit Parameters: Statutory updates to the annual benefit parameters for the defined standard Part D prescription drug benefit in Calendar Year (CY) 2013.


The Rate Announcement and final Call Letter may be viewed using the following link: http://www.cms.hhs.gov/MedicareAdvtgSpecRateStats/ then click on “Announcements and Documents” for access to the 2013 files.

Access to the CMS final rule, filed today at the Federal Register, can be found at: http://www.ofr.gov/inspection.aspx?AspxAutoDetectCookieSupport=1

CMS Unveils 2013 Medicare Advantage Bidding Rules

By Allison Bell
APRIL 3, 2012

The federal Centers for Medicare & Medicaid Services (CMS) says it will let the Medicare Advantage health plan "growth rate," or cost trend, increase to 3.07% in 2013, from 0.7% this year.

CMS also is making good on earlier announcements indicating that it would try to put more teeth in its 5-star plan quality rating system.

CMS has released a Medicare program final rule that is set to appear in the Federal Register April 12. The agency also has released key 2013 Medicare Advantage and Medicare Part D program bidding documents: The rate announcement and the "final call letter."

The Medicare Advantage program and the Medicare Part D program give private carriers an opportunity to sell insurance to Medicare enrollees.
Provisions in the Patient Protection and Affordable Care Act of 2010 (PPACA) and other new federal laws have encouraged CMS to do more to encourage Medicare enrollees to use higher-performing plans.

In 2012, CMS rewarded plans that had 4-star or 5-star quality ratings by paying them more than it paid lower-rated plans.

In 2013, CMS will give itself the authority to terminate a Medicare Advantage plan or Medicare Part D prescription drug plan contract if the sponsor gets ratings lower than 3 stars for 3 consecutive years.

"The data used to calculate the plan ratings is plan performance data that serves as evidence that the sponsor has reached the substantial failure standard that CMS must use...to make a contract termination decision,"
officials say in a preamble to the final rule.

CMS officials say in the final call letter say they will write to consumers in the low-rated plans and help them switch to higher-rated plans, even if that means the consumers must switch outside the normal enrollment period.

Comments on the final rule will be due 60 days after the official Federal Register publication date, officials say.

The final rule is set to take effect Jan. 1, 2013.

CMS officials said in October 2011 that it wanted to give itself the authority to kick out low-scoring plan sponsors.

CMS Acting Administrator Marilyn Tavenner says the new rule should help Medicare plans offer solid value in 2013.

"The changes we're implementing today will lower costs for people with Medicare," Tavenner says in a statement.

Bids are due June 4.

Information about agent and broker compensation structures will be due in late July.

SMALL PLANS

CMS periodically takes a hard look at Medicare plans with few enrollment.

This year, officials say in the final call letter, CMS will begin to collect plan performance data for plans that had fewer than 1,000 enrollees in 2012.

"Currently, there is very little information available on the quality of care provided by low-enrollment contracts," officials say. "We are currently working on a strategy to create plan ratings scores for contracts with low enrollment."

Quote of the Day

“States will be the ones who will feel the pain of this unintended and misguided policy [for an excise tax on insurers, including Medicaid managed plans, that begins in 2014]. There seemed to be confusion and uncertainty about whether this fee applied to Medicaid health plans when it was originally considered by Congress, and they certainly didn’t think about the implications of this tax within Medicaid.”
— Thomas Johnson, president and CEO of Medicaid Health Plans of America, told AIS’s Medicare Advantage News.

Today's Datapoint

$20.5 billion is the estimated worth of UnitedHealth Group’s new contract for the TRICARE West Region.

Today's Datapoint

94% of employers surveyed recently by Aon Hewitt said they are committed to offering and financially supporting health coverage for their employees, with 70% very or somewhat interested in exploring a private corporate exchange model.

Today's Datapoint

$1 billion a year more is paid for health insurance by women for similar coverage to men, due to gender rating by insurance companies, according to a report released by the National Women’s Law Center.

From HEALTH PLAN WEEK.

Justice Department requires Divestitures in Humana's Acquisitiion of Arcadian Management Services Inc

JUSTICE DEPARTMENT REQUIRES DIVESTITURES IN HUMANA INC.'S ACQUISITION OF ARCADIAN MANAGEMENT SERVICES INC.

Divestitures and Additional Relief in Arizona, Arkansas, Louisiana, Oklahoma and Texas Preserve Competition for Medicare Advantage Plans Sold to Medicare Beneficiaries

WASHINGTON — The Department of Justice today announced that it will require Humana Inc. and Arcadian Management Services Inc. to divest assets relating to Arcadian's Medicare Advantage business in parts of five states in order for Humana to proceed with its acquisition of Arcadian. The department is requiring divestitures of health plans in 51 counties and parishes in Arizona, Arkansas, Louisiana, Oklahoma and Texas. The department said that the transaction, as originally proposed, would likely have resulted in higher prices, fewer choices and lower quality Medicare Advantage plans purchased by Medicare beneficiaries.

The department's Antitrust Division filed a civil lawsuit today in the U.S. District Court in Washington, D.C., to block the proposed acquisition. At the same time, the department filed a proposed settlement that, if approved by the court, would resolve the lawsuit and the department's competitive concerns.

"Protecting competition in health care has been and continues to be a top priority of the Antitrust Division," said Acting Assistant Attorney General Sharis A. Pozen in charge of the Department of Justice's Antitrust Division. "These divestitures preserve competition so that Medicare beneficiaries, primarily senior citizens, in Arizona, Arkansas, Louisiana, Oklahoma and Texas, benefit from lower prices, better quality services and more innovative products for their health care needs."

Individuals eligible for Medicare, primarily senior citizens, may elect to enroll in a privately provided Medicare Advantage plan instead of traditional Medicare. In establishing the Medicare Advantage program, Congress intended that vigorous competition among private Medicare Advantage insurers would lead insurers to offer seniors a rich set of affordable benefits, provide a wide array of health-insurance choices, and be responsive to the demands of seniors. Approximately 71,000 people are enrolled in Medicare Advantage plans in these 51 counties and parishes, accounting for more than $700 million in annual commerce.

According to the complaint, the original transaction would have eliminated competition between Humana and Arcadian, two of the few significant sellers of Medicare Advantage plans in 45 of the counties and parishes, allowing Humana to increase prices and reduce the quality of Medicare Advantage plans sold to seniors there. The original deal would have created a combined company controlling between 40 and 100 percent of the Medicare Advantage health insurance market in these counties and parishes.

Under the proposed settlement, Humana must promptly divest the Medicare Advantage plans in the 51 counties and parishes to one or more acquirers approved by the department that has the intent and capability to be an effective competitor. The department is requiring divestitures of health plans in five additional counties and one additional parish to facilitate the divesture of the plans in the other 45 counties and parishes and make those plans more administrable. Under the terms of the proposed settlement, current enrollees of Humana and Arcadian's Medicare Advantage plans will continue to have substantially the same access to providers, including doctors, hospitals and other medical services, after the divestitures as before the divestitures were required. The proposed settlement contains provisions that ensure the buyers of the divested

Medicare Advantage plans will have contracts with substantially all of the health care providers included in the Humana and Arcadian plans at substantially the same rates. The department said the requirements are important because to compete effectively, a health insurer needs a network of health care providers at competitive rates.

Humana Inc., a leading health insurer in the United States, is a Delaware corporation headquartered in Louisville, Ky. In 2010, Humana reported revenues of approximately $33.6 billion.

Arcadian Management Services Inc., with approximately 62,000 Medicare Advantage members in 15 states, is a Delaware corporation headquartered in Oakland, Calif. In 2010, Arcadian had revenues of $622 million.

The proposed settlement, along with the department's competitive impact statement, will be published in the Federal Register, as required by the Antitrust Procedures and Penalties Act. Any person may submit written comments concerning the proposed settlement within 60 days of its publication to Joshua H. Soven, Chief, Litigation I Section, Antitrust Division, U.S. Department of Justice, 450 Fifth St., N.W., Suite 4100, Washington, D.C. 20530. At the conclusion of the 60-day comment period, the court may enter the settlement upon a finding that it is in the public interest.

New York Releases Proposal to Integrate Benefits and Financing for Dual Eligibles

State proposals to integrate coverage for dually eligible individuals, or people with both Medicare and Medicaid, under the Centers for Medicare and Medicaid Services’ (CMS’) new demonstrations and financing models continue to be made public for comments by stakeholders. Last week, the New York State Department of Health posted its demonstration proposal, under which, beginning in 2014, dual eligibles will be automatically enrolled into private insurance plans that provide both Medicare and Medicaid benefits, including pharmacy and long-term care benefits.

The proposal describes New York’s plan in general terms: the state will pursue an integrated financing pathway, under which it will enter into a three-way contract with CMS and private insurance companies that receive capped payments to administer both Medicare and Medicaid benefits.

According to the proposal, although beneficiaries subject to the demonstration will be passively enrolled into plans, they will have the ability to disenroll or opt out of the model. The proposal also states that New York will engage independent enrollment brokers to help affected individuals navigate plan choices and enroll into plans. In addition, New York hopes to establish an integrated appeals process for both Medicare and Medicaid benefits, though the state did not provide specifics about the new appeals structure. Implementation of the demonstration will occur in eight designated counties throughout the state, including the five counties that comprise New York City.

Beginning July of this year, New York plans to enroll dual eligibles requiring long-term care under Medicaid into managed long-term care plans. The demonstration proposal released last week largely builds on this existing framework, which sees the conversion of the Medicaid long-term care benefit from a fee-for-service model into a private managed care model.

Many details about New York’s dual eligible integration demonstration remain unclear, requiring further clarification from the state. The public can comment on New York’s proposal until April 20, 2012.
New York was one of several states that released proposals last week. The National Senior Citizens Law Center (NSCLC) has developed a new website that provides information on state demonstration proposals as they become available. NSCLC’s website also features additional resources designed to help advocates engage in stakeholder processes and provide meaningful input on state plans.

Health Care Reform on Trial

*Views expressed are not necessarily those of the poster*

This week, the Supreme Court heard arguments over the constitutionality of the Affordable Care Act (ACA, or healthcare reform). As we wrote last week, ACA helps millions of American families by extending health care to those who are either uninsured or underinsured.[1] As the arguments before the Court have revealed, the path to health care reform has been tortuous and contentious.[2] This Alert outlines several of the key elements and concerns that are in play.

What Might be Lost

If the entire law is found unconstitutional, with no parts severable (able to continue individually), it will set back a variety of important gains – for example, a finding that the whole law fails would eliminate a variety of protections and directions of import to an improved healthcare system, such as:[3]
• Pre-existing condition exclusions;
• The loss of the opportunity to buy insurance in insurance pools;
• Waste, fraud, and abuse protections;
• Medicaid expansions;
• Development of Best Practice standards for health care delivery;
• A focus on quality measures;
• Expanded data collection activities designed to achieve health equity for racial and ethnic minorities (as well as Lesbian, Gay, Bisexual, and Transgender (LGBT) people);
• Shared savings programs designed to hold down healthcare costs;
• Integration of the delivery of services for MMEs (people eligible for Medicare & Medicaid);
• Greater emphasis on care coordination;
• Health exchanges (allowing people to shop for healthcare coverage options);
• Insurance market reforms requiring insurers to provide more information about coverage and claims and pay-out history.

Importance to Low-Income People

Expanding services, particularly ACA's expansion of access to the Medicaid program, is very important. This expansion will allow more people to have access to health insurance by requiring states that choose to participate in the Medicaid program to cover nearly all non-disabled adults under age 65 with household incomes at or below 133% of the federal poverty level (FPL) as of January, 2014. Further, as shown below, states that take advantage of this expansion will receive significant increases in their Federal Medical Assistance Percentage (FMAP) toward the cost of providing expanded Medicaid coverage.

The Anti-Injunction Act

The key question here is whether a court has jurisdiction to hear a challenge to a federal law that is essentially a tax raising vehicle or instrument. Whether the ACA-prescribed penalties for not having insurance is a tax, given that the penalties are enforced through the tax code, is of major concern. If the Tax Anti-Injunction ACT (AIA)[4] does apply, it would mean that the Supreme Court doesn’t have jurisdiction to hear the case, and that challenges to the law would have to wait until after 2014, when someone would first experience a tax penalty because of the mandate.
People on both sides of the constitutionality of the ACA, would prefer that the Court find that the AIA does not apply. There needs to be clarity and continuity in program and system development for ACA implementation. Planners at the state and federal level need to feel that they are on solid ground in going forward with implementing the ACA's complicated rules for health exchanges. Likewise, insurance companies need clarity and certainty in building products and markets based on rules that are reasonably reliable and relatively certain.

Severability

Those in favor of the ACA are hopeful the Supreme Court will find that the several major provisions of the Act are severable. This means that if one or more parts of the law are found to be unconstitutional, the whole law is not struck down, allowing the unaffected portions to go forward.

The Individual Responsibility Provision

The individual responsibility provision or "the individual mandate" is the heart of the ACA. The law is predicated on the notion that everyone must have some level of health insurance or there will not be a sufficient number of people in the healthcare systems created by the ACA to make the law's delivery systems sustainable. Further, those who are uninsured and suffer a health incident add to the costs for society as a whole. Our notions of a civil society and our sense of good public policy is that we want a healthy population. Since few can afford to self-insure or set aside sufficient resources to cover a health crisis on their own, requiring that everyone enter the insurance pool is the best way to ensure coverage at reasonable cost, relative to health care costs in general.

Expanding Medicaid

States will get an increase in their Federal medical assistance percentage (FMAP) as follows: 100% of costs from 2014-2016, 95% in 2017, 94% in 2018, 93% in 2019 and 90% in 2020 and beyond.[5] Plus, states generally understand the Medicaid program and have the infrastructure on which to build and expand. Moreover, Medicaid participation is optional, but if a state decides to participate, it has to follow federal rules and standards.

Acknowledging the Cost of Reform

There are always unforeseen costs to implementing major programs involving health and social services. States and private entities stand to gain billions of dollars through ACA, which will help the overall economy. The general embrace of best practice paradigms in the ACA helps the government to be a "smarter payer" by paying for care and services that have some proven merit. In addition, ACA's focus on such goals as care coordination, physician and practitioner engagement, and registration and accountability add to bringing down the general costs of health care. Moreover, the timeline for program implementation will allow for greater individual participation in the system which will increase revenues and resources by expanding the pool of people using and paying into the healthcare system.

Making the Case for Congressional Action

The major issue is one of whether the Congress has laid out sufficient and factual groundwork to support its claims that it is acting within its powers. An affirmative answer to this central question by the Supreme Court is necessary in order to find that the ACA is a valid exercise of Congressional power under the Commerce clause, which would then allow it to take the "necessary and proper" steps to effectuate its intent with respect to the Commerce clause.

Conclusion

Those who have studied court arguments over the years know that it is folly to use the "ups and downs" of oral argument as an indication of how a court will in fact rule on an issue. Advocates on all sides remain vigilant. Access to healthcare for millions of Americans and their families is at stake. We at the Center for Medicare Advocacy continue to stand by the Affordable Care Act and the many innovative and patient-centered reforms that the law brings to the Medicare and Medicaid programs, and to the healthcare industry as a whole. ACA is already bringing much-needed relief to families. It will continue to do so if allowed to go forward.

For more information, contact attorney Alfred Chiplin (achiplin@medicareadvocacy.org) in the Center for Medicare Advocacy's Washington, DC office at (202) 293-5760.

A Recipe for Medicare Advantage Chaos

By James Gutman - March 30, 2012

It is a timetable from hell in 2012 for Medicare Advantage plans. As usual, they will be submitting to CMS their bids for next year by the first Monday in June. The difference this time is that is likely to be before the ruling by the Supreme Court on the health reform law, and the decision could change everything for MA. While most of the focus during this week of Supreme Court hearings was on the individual mandate for commercial coverage and on the Medicaid expansion, MA also has a huge stake in this decision.

Let’s review what goes up in the air for MA if the high court throws out the entire reform law — a result for which chances seemingly moved from remote to not remote after hearing the justices’ questions and comments during oral arguments this week. First, that means the CMS star-rating bonus payment program may be over since it was created by the reform law.

Second, the payment phasedown to 100% of fee-for-service rates would be out, since that also was established in the law. What would replace it? Plans can guess, but they probably won’t actually know anything by when their bids are due June 4.

In addition, there are all those tremendous opportunities in the new programs for Medicare-Medicaid dual eligibles. These demonstration programs are to be run by the CMS duals office and funded by the agency’s Center for Medicare and Medicaid Innovation, both of them created in the reform law. If the statute is gone, so are those entities, and it is doubtful that many states could fund these demos on their own. And then there’s the new accelerated Oct. 15-Dec. 7 Annual Election Period for MA and Part D. That was created by the reform law. If the statute is gone, does this mean we go back to the old Nov. 15-Dec. 31 dates and to the plan-to-plan switch period at the beginning of the next year?

How do you plan for these kinds of quantum changes? Is it safe to assume that CMS could find other ways to keep the new programs and schedules going? Is the roller-coaster ride just beginning?

Today's Datapoint

14% of Americans think the health reform law has already been overturned, according to the results of a national telephone survey of 1,000 people conducted for the Kaiser Family Foundations health Tracking Poll. 58% understand it remains intact.