Today's Datapoint

1% … of base Medicare payments will be reduced for nearly 300 hospitals as CMS begins to penalize hospitals for readmission rates that it considers to be too high, with another 2,000 hospitals losing reimbursement of less than 1%, according to an analysis of Medicare data by Kaiser Health News.

Conversion Settlement Hits WellPoint Earnings

By Allison Bell

July 25, 2012

A $90 million lawsuit settlement contributed to a drop in second-quarter net income at WellPoint Inc. (NYSE:WLP), but the company says accelerating increases in medical costs and uneven demand for group health coverage also affected results.

WellPoint, Indianapolis, is reporting $644 million in net income for the latest quarter on $15 billion in revenue, compared with $702 million in net income on $15 billion in revenue for the second quarter of 2011.

WellPoint ended the quarter providing or administering medical coverage for about 34 million people, down 1.9% from the total it reported a year earlier.

Because of the drop in enrollment and rising medical cost trends, WellPoint expects to report slightly lower earnings for the full year than it had originally predicted, according to WellPoint President Angela Braly.

The results include $34 million in costs related to a lawsuit settlement.

Lawyers brought the class-action suit on behalf of 700,000 former members of a company that's now part of WellPoint, Anthem Insurance Companies Inc. Members of the class say Anthem paid them less cash than it should have when it converted from being a member-owned mutual insurer to a stock company in 2001.

WellPoint executives say they also see some challenges in day-to-day operations.

Originally, for example, the company was predicting that the medical cost trend for 2012 could range  from 6.5% to 7.5%. The company now believes the full-year trend will be "towards the upper half of the range," according to Wayne DeVeydt, the company's chief financial officer.

The cost of the services being used is up, and use of services also increased, the company says.

WellPoint also is seeing softness in demand for commercial group health coverage.

Some insurers have reported that demand for benefits products has improved in recent quarters.

WellPoint is finding "economy-related in-group membership attrition and competitive situations in certain local group markets," the company says.

The company will continue to invest in expanding its senior business and push ahead with the $4.5 billion acquisition of Amerigroup Inc., Virginia Beach, Va. (NYSE:AGP), Braly said in a statement.

Those moves should help WellPoint compete as the Centers for Medicare & Medicaid Services (CMS) expands programs for managing care for people who are eligible for both Medicaid and Medicare, and they also should help the company compete on the exchanges that the Patient Protection and Affordable Care Act of 2010 (PPACA) calls for states to create, Braly said.

During a call with analysts, one analyst asked about the possible effects of the recent U.S. Supreme Court ruling on the constitutionality of PPACA. The court ruled that Congress has the constitutional authority to impose a tax on individuals who fail to buy a minimum level of health coverage but no authority to cut existing Medicaid funding for states that refuse to expand Medicaid eligibility.

The analyst asked whether the ruling might hurt WellPoint Medicaid program growth.

Braly said she thinks WellPoint will continue to get more Medicaid plan administration business.

"When you look at the penetration of managed care into Medicaid, it's woefully low compared to the commercial market," Braly said.

State efforts to manage and control Medicaid costs should continue to create opportunities for companies like WellPoint, Braly said.

Even if Medicaid expansions is slower than expected, the PPACA exchanges should still lead to an increase in Medicaid enrollment, Braly said.

And Then There Were...Not Many at All

By James Gutman - August 22, 2012

It may have been predictable, but it is nonetheless striking. With the Aug. 20 deal for Aetna Inc. to acquire Coventry Health Care, Inc. for $5.7 billion in cash and stock, the number of sizable independent Medicare Advantage (MA) and managed Medicaid players remaining probably can be counted on two hands. Consolidation, of course, is nothing new for the managed care industry, but there seems little doubt that the health reform law — with both the opportunities and challenges it poses and also the economies of scale many contend that it requires — has intensified "the urge to merge." Coupled with the continued weakness in the U.S. economy, which has translated into stagnation or worse in the commercial market for health insurance, government programs look like the business sector in which health plans have the best growth prospects for the foreseeable future.

Consider the deals that have taken place in MA and managed Medicaid just since the March 2010 enactment of the reform law. Among others, HealthSpring, Inc. acquired Bravo Health, Inc. and was itself acquired by Cigna Corp.; Munich Reinsurance Co. bought Windsor Health Group, Inc.; WellPoint, Inc. bought CareMore Health Group and is in the process of acquiring Amerigroup Corp.; Humana Inc. bought Arcadian Management Services; and UnitedHealth Group acquired XLHealth Corp. and is buying Florida MA operators Preferred Care Partners and Medica HealthCare Plans in separate transactions. And that's not even figuring in a host of smaller deals that also have been plentiful in the past two and a half years.

Where will this end? Will an MA or managed Medicaid firm need to have more than a million members to survive in the post-reform era? Is this a healthy situation for consumers — or even for states and the federal government given the power of the remaining entities they will have to contract with? Who will be left to turn the lights off when the consolidation is over?

Today's Datapoint

30% … of health care organizations surveyed in a recent poll by the Health Care Compliance Assn. and Society of Corporate Compliance and Ethics indicated they have policies that prohibit gifts of entertainment (e.g., tickets to events), versus 23% for all types of organizations.

Will PPACA Give Us "Medicare for All"?

By Allison Bell

August 23, 2012

A networking group in California polled health care executives and found that many agree with the statement that the Patient Protection and Affordable Care Act of 2010 (PPACA) "got us one step closer to Medicare for all."

The group, the Adaptive Business Leaders Organization, Santa Ana, Calif., also found that participating executives in the health insurance and life sciences sectors are much more skeptical about PPACA than participating executives who are involving with providing health care or with health information technology (IT).

The group has developed a report based on responses from 249 executives.

About 44% of the participants are involved with providing health care, and 21% are at life sciences organizations. Another 16% are at services proviers, 10% at health IT organizations, and 9% at "payers."

The group found that 35% of all participants said they agreed with the prediction that PPACA will lead to PPACA for all, or some kind of government-run health care system.

The group did not specify whether "Medicare for all" would like the traditional Medicare program, in which the government interacts with enrollees and insurers handle only back-office functions, or like the Medicare Advantage program, in which private companies sell coverage in a framework managed by the government.

About 37% of the health care providers and 39% of the service providers think PPACA could make Medicare for all the futures. Only 25% of the insurance executives said they shared that view.

The group also asked executives to react to a statement that PPACA "was a great thing, regardless of what it does to our tax structure."

Only 20% of the insurance executives and 19% of the executives in the life sciences said they agreed with that statement; 29% of the providers, 39% of the service providers and 52% of the health IT executives said they think PPACA is a great thing.

http://www.lifehealthpro.com/2012/08/23/will-ppaca-give-us-medicare-for-all?eNL=50367edf160ba0c91a0000f5&utm_source=LifeHealthProDaily&utm_medium=eNL&utm_campaign=LifeHealthPro_eNLs&_LID=97614151

New health care standards to save up to $6 billion

U.S. Department of Health & Human Services

News Division                               

202-690-6343

media@hhs.gov

www.hhs.gov/news

FOR IMMEDIATE RELEASE

Friday, August 24, 2012 

                                                  New health care standards to save up to $6 billion

Today, Department of Health and Human Services (HHS) Secretary Kathleen Sebelius announced a final rule that will save time and money for physicians and other health care providers by establishing a unique health plan identifier (HPID). The rule is one of a series of changes required by the Affordable Care Act to cut red tape in the health care system and will save up to $6 billion over ten years.

“These new standards are a part of our efforts to help providers and health plans spend less time filling out paperwork and more time seeing their patients,” Secretary Sebelius said.

Currently, when a health care provider bills a health plan, that plan may use a wide range of different identifiers that do not have a standard format. As a result, health care providers run into a number of time-consuming problems, such as misrouting of transactions, rejection of transactions due to insurance identification errors, and difficulty determining patient eligibility. The change announced today will greatly simplify these processes.

The rule also makes final a one-year proposed delay – from Oct. 1, 2013, to Oct. 1, 2014– in the compliance date for use of new codes that classify diseases and health problems. These code sets, known as the International Classification of Diseases, 10th Edition diagnosis and procedure codes, or ICD-10, will include codes for new procedures and diagnoses that improve the quality of information available for quality improvement and payment purposes.

The rule announced today is the fourth administrative simplification regulation issued by HHS under the health reform law:

•    On July 8, 2011, HHS adopted operating rules for two electronic health care transactions to make it easier for health care providers to determine whether a patient is eligible for coverage and the status of a health care claim submitted to a health insurer. The rules will save up to $12 billion over ten years.
•    On Jan. 10, 2012, HHS adopted standards for the health care electronic funds transfers (EFT) and remittance advice transaction between health plans and health care providers. The standards will save up to $4.6 billion over ten years.
•    On Aug. 10, 2012, HHS published an IFC that adopted operating rules for the health care EFT and electronic remittance advice transaction. The operating rules will save up to $4.5 billion over ten years.

More information on the final rule is available in a fact sheet (8/24) at: http://www.cms.gov/apps/media/fact_sheets.asp.

The final rule may be viewed at www.ofr.gov/inspection.aspx or http://www.ofr.gov/(X(1)S(vp32o25ckyhpvspfpzx3owe4))/OFRUpload/OFRData/2012-21238_PI.pdf

CMS Announces Primary Care Practices to Participate in Historic Public-Private Partnership to Strengthen Primary Care

CMS NEWS

FOR IMMEDIATE RELEASE                              Contact: CMS Media Relations

August 22, 2012                                                                              (202) 690-6145

CMS Announces Primary Care Practices to Participate in Historic Public-Private Partnership to Strengthen Primary Care

Seven regions will test unique investment in coordinated care

In support of more effective, more affordable, higher quality health care, 500 primary care practices in seven regions have been selected to participate in a new partnership between payers from the Centers for Medicare & Medicaid Services (CMS), state Medicaid agencies, commercial health plans,  self-insured businesses, and primary care providers.  This partnership is designed to provide improved access to quality health care at lower costs.

Under the Comprehensive Primary Care Initiative, CMS will pay primary care practices a care management fee, initially set at an average of $20 per beneficiary per month, to support enhanced, coordinated services on behalf of Medicare fee-for-service beneficiaries.  Simultaneously, participating commercial, state, and other federal insurance plans are also offering enhanced payment to primary care practices that are designed to support them in providing high-quality primary care on behalf of their members. 

For patients, this means these physicians may offer longer and more flexible hours, use electronic health records; coordinate care with patients’ other health care providers; better engage patients and caregivers in managing their own care, and provide individualized, enhanced care for patients living with multiple chronic diseases and higher needs.

The initiative started in the fall of 2011 with CMS soliciting a diverse pool of commercial health plans, state Medicaid agencies, and self-insured businesses to work alongside Medicare to support comprehensive primary care. Public and private health plans in Arkansas, Colorado, New Jersey, Oregon, New York’s Capital District-Hudson Valley region, Ohio and Kentucky’s Cincinnati-Dayton region, and the Greater Tulsa region of Oklahoma signed letters of intent with CMS to participate in this initiative.  The markets were selected in April, 2012 based on the percentage of the total population covered by payers who expressed interest in joining this partnership.

Eligible primary care practices in each market were invited to apply to participate and start delivering enhanced health care services in the fall of 2012.  Through a competitive application process, primary care practices within the selected markets were chosen to participate in the Comprehensive Primary Care initiative.  Practices were chosen based on their use of health information technology, ability to demonstrate recognition of advanced primary care delivery by leading clinical societies, service to patients covered by participating payers, participation in practice transformation and improvement activities, and diversity of geography, practice size, and ownership structure. CMS estimates that over 300,000 Medicare beneficiaries will be served by over 2,000 providers through this initiative.

“Primary care practices play a vital role in our health care system and we are looking at ways to better support them in their efforts to coordinate care for their patients” said Acting CMS Administrator Marilyn Tavenner.

The Comprehensive Primary Care initiative is a four-year initiative administered by the Center for Medicare and Medicaid Innovation (CMS Innovation Center).  The CMS Innovation Center was created by the Affordable Care Act to test innovative payment and service delivery models that have the potential to reduce program expenditures while preserving or enhancing the quality of care.

For more information, please go to: http://www.innovation.cms.gov/initiatives/Comprehensive-Primary-Care-Initiative

Big Ticket Deals Are Betting on Reform Law — and Obama — Remaining in Place

By Patrick Connole - August 22, 2012

An article in The New York Times Aug. 21 proposes that Aetna Inc.’s $5.7 billion purchase of Coventry Health Care Inc. is actually a bet by the insurer’s management that President Obama and his health care reform law will remain in place and Republicans will lose the Nov. 6 presidential election. Aetna’s leaders deny thinking that way. They say a good deal for the insurer is a good deal. But the article posits that the move to lay out billions for such an acquisition is proof-positive that Aetna and others like it see value in buying companies “with a foothold in government-sponsored programs because the prevailing view is that margins for private customers are going to steadily erode.” Other recent purchases in the health care sector seem to support this line of reasoning, notably WellPoint Inc.’s move to acquire Amerigroup Inc. for $5 billion last month and, earlier, Cigna Corp.’s $3.8 billion acquisition of HealthSpring Inc. How do these deals strike you? Are they plays to get in line with a permanent “Obama” health care system? And do you expect private customer margins to fall off as reform law implementation continues to occur?

Today's Datapoint

$30 … per month will be the average monthly Medicare Part D premium in 2013, according to new data from HHS.

States continue to move forward, build Affordable Insurance Exchanges

U.S. Department of Health & Human Services

News Division                                          

202-690-6343

media@hhs.gov 

www.hhs.gov/news

FOR IMMEDIATE RELEASE

Thursday, August 23, 2012

                        

States continue to move forward, build Affordable Insurance Exchanges

Today, Health and Human Services (HHS) Secretary Kathleen Sebelius announced that California, Connecticut, Hawaii, Iowa, Maryland, Nevada, New York, and Vermont have received new grants to help support the establishment of Affordable Insurance Exchanges. Starting in 2014, consumers and small businesses will have access to high-quality, affordable health insurance through an Exchange – a one-stop marketplace where consumers can choose a private health insurance plan that fits their health needs and have the same kinds of insurance choices as members of Congress.

“We continue to support states as they move forward building an Exchange that works for them,” Secretary Sebelius said. “Thanks to the health care law, Americans will have more health insurance choices and the ability to compare insurance plans.”

In every state, Exchanges will allow consumers to shop for and enroll in private health plans that meet their needs. Consumers will be able to learn if they are eligible for tax credits and cost-sharing reductions, or other health care programs like the Children’s Health Insurance Program. Small employers will be eligible to receive tax credits for coverage purchased for employees through the Exchange. These competitive marketplaces make purchasing health insurance easier and more understandable and offer consumers and small businesses increased competition and choice.

Today’s awards will give states additional resources and flexibility to establish an Exchange. California, Hawaii, Iowa, and New York today have been awarded Level One Exchange Establishment grants, which provide one year of funding to states that have begun the process of building their Exchange. Connecticut, Maryland, Nevada, and Vermont were awarded Level Two Establishment grants, which are provided to states that are further along in building their Exchange and offers funding over multiple years. 

Previously, 49 states, the District of Columbia and four territories received grants to begin planning their Exchanges. With today’s awardees, 34 states and the District of Columbia have also received Establishment grants to begin building their Exchanges.

On June 29, HHS announced a funding opportunity providing states with 10 additional opportunities to apply for funding to establish a state-based Exchange, state Partnership Exchange, or prepare state systems for a Federally-facilitated Exchange. States can apply for Exchange grants through the end of 2014, and may use funds during the initial start-up year. This schedule ensures that states have the support and time necessary to build an Exchange that best fits the needs of their residents. 

A detailed breakdown of each grant award and what each state plans to do with its Exchange funding is available through the map tool on Healthcare.gov, http://www.healthcare.gov/news/factsheets/2011/05/exchanges05232011a.html.

For more information on Exchanges, including fact sheets, visit http://www.healthcare.gov/exchanges.

Universal American Bets on Medicare ACOs

By Jill Brown - August 21, 2012

Although the Medicare Shared Savings Program (MSSP) is open only to providers operating in the traditional Medicare fee-for-service program, that hasn’t stopped Medicare Advantage plan operator Universal American Corp. from getting involved.

The insurer, which has a long history of collaborating with provider groups in the MA market, has launched a subsidiary that provides financial and other support to providers participating in the MSSP.

Already, CMS has selected 16 providers partnered with Universal American as ACOs. Those 16 ACOs, which operate in 11 states, include approximately 1,700 participating physicians covering about 150,000 Medicare beneficiaries — about the same number of members as Universal American’s MA book of business. And Kirk Clove, president of Collaborative Health Systems, the Universal American unit that’s setting up these ACO collaborations, says the company is seeking to expand the overall effort further.

Collaborative Health Systems provides back-office support in the form of technical infrastructure, data management tools to identify at-risk members and care management services, as well as legal support and benchmarking data. The firm also provides financial support, so providers “don’t need any capital. We’re confident we can generate savings through the program — so much so that we’re willing to provide the capital up front,” says Clove. Financial arrangements between the groups and Universal American vary, but the MA plan operator always receives some percentage of the savings paid by Medicare, Clove says. He declined to specify what percentage the company receives but notes that “we wouldn’t be doing this if it wasn’t worthwhile.”

But investment analysts are taking a more cautious approach: Deutsche Bank research analyst Scott Fidel notes that Universal American’s move into ACOs is designed to spur growth in the Medicare market, but he adds that “the economic profile of this new venture is not yet clear.”

What do you think? Is there a path to profitability for health plans seeking to support providers in the Medicare ACO program?

Today's Datapoint

$3.5 billion … in 2011 U.S. sales were taken in by Merck for its best-selling allergy/asthma drug Singulair, which is the latest blockbuster drug to go generic.

5th Circuit Throws Out PPACA Medicare Pay Suit

By Allison Bell

August 21, 2012

A 3-judge panel at the 5th Circuit U.S. Court of Appeals has rejected efforts by a trade group and a physician-owned hospital to overturn Section 6001 of the Patient Protection and Affordable Care Act of 2010 (PPACA).

The panel held that, in most cases, health care providers that want to challenge the constitutionality of PPACA Medicare provisions must start by exhausting the Medicare program administrative review process.

PPACA Section 6001 puts new limits on Medicare enrollees use of physician-owned hospitals.

Physician Hospitals of America, Washington, and the and the Texas Spine & Joint Hospital Ltd., Tyler, Texas, sued to try to overturn PPACA Section 6001, contending that the provision would limit patients' access to high-quality hospitals, failed to offer the hospitals due process, and failed to offer the hospitals protection equal to that extended to other hospitals.

In May 2011, a judge in the U.S. District Court for the Eastern of Texas dismissed a the suit.

The district court judge said in a ruling on Physician Hospitals of America et al. vs. Sebeliusthat Congress had a rational basis for enacting Section 6001, that PPACA does not constitute a real or regulatory taking, and that Section 6001 is clear enough to be constitutional.

Paul Keckley, a health policy specialist at the Deloitte Center for Health Solutions, Washington, suggested earlier this year that the PHA case might prove to be a vehicle PPACA opponents could use to overturn PPACA, or a part of PPACA, if the U.S. Supreme Court blocked challenges to the constitutionality of a PPACA provision imposing a tax on many individuals who fail to have a minimum amount of health coverage in place by 2014.

The Supreme Court upheld the constitutionality of the uninsurance tax provision June 27.

In the new ruling, the 5th Circuit holds that the district court had no jurisdiction over the case to start with, because the Medicare Act requires that most legal attacks involving the act must first go through the Medicare administrative process rather than starting in the courts.

Circuit Judge Leslie Southwick writes in an opinion explaining the 5th Circuit ruling that the court drew from a 2000 Supreme Court ruling on Shalala vs. Illinois Council on Long Term Care Inc.

In that case, providers challenged the constitutionality of Medicare Act provisions that require the providers to channel reimbursement claims through an administrative process.

The limits on the providers' ability to start by going directly to court is the price the system pays for protecting Medicare against an endless series of court challenges, Southwick writes.

"The ever-evolving landscape of health care in the United States may one day prompt a new structure for judicial review in a case such as this," Southwick says of the PHA suit.  

But, "'if the balance is to be struck anew, the decision must come from Congress” and not from the courts," Southwick says, quoting the Shalala ruling.

Officials at the department in charge of Medicare, the U.S. Department of Health and Human Services and at the U.S. Department of Justice to comment on the ruling.

Representatives for the PHA were not immediately available to comment.

Redesign of Medicare.gov to improve online experience for beneficiaries

A redesign of the medicare.gov website is now complete, making content more accessible and easier for beneficiaries, their families and caregivers to understand.  Today’s redesign, announced by Centers for Medicare & Medicaid Services (CMS) Acting Administrator Marilyn Tavenner, supports CMS’s commitment to provide better customer service.

The new site will allow most users to find the content they’re looking for directly from the home page. 
These features include:
•  A search for whether a specific test, item, or service is covered under original Medicare;
•  The ability to get customized information based on a beneficiary’s specific situation;
•  Quick links to replace a lost Medicare card, find a Medicare Advantage or prescription drug plan, and get help with health care costs.

To see examples of these new features, please visit: http://www.cms.gov/apps/files/Medicare-gov-LB.pdf.

“We did a lot of research into what sort of information beneficiaries and their caregivers really wanted most at their fingertips, and I think users will find this redesign very helpful,” said Acting Administrator Marilyn Tavenner.  “We’ve simplified the language and the homepage layout to make it easier and faster for visitors to get answers and a better understanding of Medicare necessary to get more control over their health care.”

The new design responds to mobile devices, like tablets and smartphones. Users can get information such as coverage and cost details, anytime, anywhere, and in the most convenient format. Medicare beneficiaries, counselors, and caregivers can check if a letter they received in the mail is an official communication from Medicare by viewing descriptions of Medicare mailings. The popular “Medicare & You” handbook now has its own landing page for an easy access complement to the annual print mailing.

This new website design is the result of more than two years of research, design, and development work by CMS.  Using various mechanisms, such as call center questions, website analytics and online survey results, CMS found out what users want, including finding out what Medicare covers, cost and coordination of benefits information, and finding Medicare drug and health plans.

Comprehensive and thorough user testing with consumers ensured that the new site is successfully meeting the needs of its primary consumer audience.

To view and start using the new tools and additional information, users are invited to visit www.Medicare.gov.

PEOPLE WITH MEDICARE SAVE OVER $4.1 BILLION ON PRESCRIPTION DRUGS THANKS TO THE HEALTH CARE LAW

18 million with Medicare also receive free preventive services in the first seven months of 2012

As a result of the Affordable Care Act – the health care law enacted in 2010 – nearly 5.4 million seniors and people with disabilities have saved over $4.1 billion on prescription drugs since the law was enacted, Health and Human Services (HHS) Secretary Kathleen Sebelius announced today. Seniors in the Medicare prescription drug coverage gap known as the “donut hole” have saved an average of $768.

In addition, during the first seven months of 2012, the new health care law has helped nearly 18 million people with original Medicare get at least one preventive service at no cost to them.

“The health care law has saved people with Medicare over $4.1 billion on prescription drugs, and given millions access to cancer screenings, mammograms and other preventive services for free,” said Secretary Sebelius. “Medicare is stronger thanks to the health care law, saving people money and offering new benefits at no cost to seniors.”

The health care law includes benefits to make Medicare prescription drug coverage more affordable. In 2010, anyone with Medicare who hit the prescription drug donut hole received a $250 rebate. In 2011, people with Medicare who hit the donut hole began receiving a 50% discount on covered brand-name drugs and a discount on generic drugs. These discounts and Medicare coverage gradually increase until 2020 when the donut hole is closed.

The health care law also makes it easier for people with Medicare to stay healthy. Prior to 2011, people with Medicare had to pay extra for many preventive health services. These costs made it difficult for people to get the health care they needed. For example, before the health care law passed, a person with Medicare could pay as much as $160 for a colorectal cancer screening. Thanks to the Affordable Care Act, many preventive services are offered free of charge to beneficiaries, with no deductible or co-pay, so that cost is no longer a barrier for seniors who want to stay healthy and treat problems early.

In 2012 alone, 18 million people with traditional Medicare have received at least one preventive service at no cost to them. This includes 1.65 million who have taken advantage of the Annual Wellness Visit provided by the Affordable Care Act – over 500,000 more than had used this service by this point in the year in 2011. In 2011, an estimated 32.5 million people with traditional Medicare or Medicare Advantage received one or more preventive benefits free of charge.

For state-by-state information on savings in the donut hole, please visit: http://www.cms.gov/apps/files/donut-hole-data-chart.pdf

For state-by-state information on utilization of free preventive services, please visit: http://www.cms.gov/apps/files/preventive-data-chart-first-seven-months-2012.pdf

Aetna to Acquire Coventry for $7.3 Billion

By Allison Bell

August 20, 2012

Mark Bertolini says time to make a deal is running out.

Aetna Inc. (NYSE:AET) has tried to position itself better for the world of Patient Protection and Affordable Care Act (PPACA) health insurance exchanges by agreeing to pay $7.3 billion in cash and stock for Coventry Health Care Inc. (NYSE:CVH).

Aetna, Hartford, is starting with 18 million enrollees, 437,000 Medicare Advantage enrollees, 1.2 million Medicaid enrollees, and $36 billion in projected 2012 revenue.

Coventry, Bethesda, Md., has 4 million enrollees, 253 million Medicare Advantage enrollees, 932,000 Medicaid enrollees, and $14 billion in projected 2012 revenue.

Aetna and Coventry need to get approval for the deal from Coventry shareholders, antitrust regulators and state departments of insurance. The companies hope to complete the transaction by mid-2013.

The deal should help Aetna increase its market share in the Midwest and Mid-Atlantic states and put it on a more even footing with WellPoint Inc., Indianapolis (NYSE:WLP), and UnitedHealth Group Inc., Minnetonka, Minn. (NYSE:UNH), which each have about 36 million enrollees, Aetna says.

Aetna likes Coventry's emphasis on efficient, low-cost plans with relatively narrow provider networks, Aetna says.

The deal also should help give Aetna the mix of plans and products it will need to succeed on the exchanges, Aetna Chairman Mark Bertolini said today during a conference call.

PPACA calls for states and federal agencies to create a new system of exchanges, or Web-based health insurance supermarkets, that individuals and small groups can use to buy health coverage starting in 2014. PPACA also calls for all health carriers to offer coverage on a guaranteed issue, mostly community-rated basis.

Aetna itself emphasizes the uncertainty surrounding PPACA in a discussion of deal risk factors.

"Components of the legislation will be phased in over the next 6 years, and Aetna will be required to dedicate material resources and incur material expenses during that time to implement health care reform," the company says. "Many significant parts of the legislation...require further guidance and clarification both at the federal level and/or in the form of regulations and actions by state legislatures to implement the law. In addition, pending efforts in the U.S. Congress to repeal, amend, or restrict funding for various aspects of health care reform, the 2012 presidential and congressional elections, and the possibility of additional litigation challenging aspects of the law continue to create additional uncertainty about the ultimate impact of health care reform."

If PPACA takes effect on schedule and the exchanges work as expected, many individuals will be able to move relatively freely between small group, commercial individual and Medicaid plans, and having the right mix of different types of plans should help a company compete in that environment, Bertolini said.

Bertolini said Aetna believes it had to move on making any acquisition designed to help the company compete in 2014 quickly.

"We would say time is running out to get a transaction done," Bertolini said.

Bertolini said Coventry is especially attractive as 2014 nears.

"They're ahead of most of the other businesses in getting ready for health care reform," Bertolini said.

Aetna is announcing the deal about 10 years after health insurers were rushing to flee from the predecessor to the Medicare Advantage private Medicare plan program, the Medicare + Choice program.

Aetna said in late 2011, for example, that federal changes in Medicare + Choice funding rules were making offering coverage through the program unsustainable.

Today's Datapoint

$86 million to $183 million … is the “addressable” market for managed care organizations in caring for Medicare-Medicaid dual eligibles over the next five years, according to Sundar Subramanian, a principal in the consulting firm of Booz & Company who spoke at a recent World Congress Leadership Summit on Medicare.

Aetna Gets Pact to Move 226,000-Member Teacher Retirement Plan From ASO to MA

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

August 2, 2012 Volume 18 Issue 15

In what could be one of the largest shifts of an employer’s retiree medical plan to Medicare Advantage, Aetna Inc. said July 17 it obtained a contract to convert its current administrative-services-only (ASO) plan for the Teacher Retirement System of Texas (TRS) to MA effective Jan. 1, 2013. The change for the 75-year-old retirement system, an Aetna client for more than 25 years, affects more than 226,000 retired public school employees and dependents who may move to an MA PPO with an extended service area (ESA).

While TRS is not the first large state teacher retirement plan to move to MA, notes consultant Jean LeMasurier, senior vice president, public policy at Gorman Health Group, LLC, it may be another indicator that employers finally are beginning to step up the pace in long-awaited moves of retirees to both MA and stand-alone Medicare Prescription Drug Plans (MAN 5/24/12, p. 1). Changing to an MA PPO rather than an HMO, LeMasurier says, is an “easier shift” for a retiree plan such as TRS that is accustomed to provider choice.

The TRS MA plan, according to materials distributed to plan members and obtained by MAN, provides for automatic enrollment of current beneficiaries in the ASO plan but does allow those beneficiaries to opt out. However, those who do opt out will have a plan year ending next Aug. 31, meaning they will have a shorter period to meet deductible and coinsurance requirements before incurring new annual deductible and coinsurance obligations.

The materials describing the changes, including an article in the TRS member newsletter, tout “richer benefits, including lower deductibles, and lower premiums.” They explain that TRS members in an MA plan may visit providers in or out of the plan’s large network without incurring larger cost sharing as long as the providers are willing and eligible to accept the plan. “Historically, more than 90% of retiree medical services provided to TRS-Care participants were from providers who have accepted Aetna’s Medicare Advantage plans,” the brochure for TRS members adds.

The conversion of current eligible TRS commercial ASO beneficiaries to the new MA product “could yield over $800 million of additional Medicare premiums in 2013, subject to the number of members that convert,” Rick Frommeyer, head of group Medicare at Aetna, tells MAN. That figure, Chairman and CEO Mark Bertolini said in Aetna’s July 31 second-quarter earnings call with investors, is based on converting 60,000 to 70,000 of the beneficiaries to MA, but the insurer would not forecast how many beneficiaries actually will convert.

The move of employer retirees into MA plans, says Frommeyer, “is a trend we have seen already in recent years in the commercial Medicare space. In addition, there’s a growing opportunity in state and municipal governments to address their unfunded retiree health obligations, which are estimated to be $600 billion and severely stressing state budgets.”

Asked about the oft-mentioned hesitance of employers to pull the trigger and make the long-contemplated moves to MA, Frommeyer replies, “We did see a fair am­ount of inertia among large employers this year, as many wanted to learn more about the Supreme Court decision on health care reform before making significant benefit changes. For large employers, the ruling came too late in the year to influence their 2013 benefits, so many chose to defer any strategic benefit changes for another year.”

Despite this, he continues, “in the public sector, states, counties, cities and other municipalities are taking a fresh look at their retiree obligations in light of significant budget shortfalls. Taft-Hartley plans and labor unions face similar challenges. They have multi-year, collectively bargained agreements in place that preclude rapid changes….We are actively involved now with a number of states as well as smaller municipalities and labor organizations that are trying to develop better solutions for their retirees. Medicare Advantage is proving to be a valuable solution for these employers.”

Accounting Guidelines Also Spur Moves to MA

There are other factors at work too, suggests LeMasurier, who heads the employer practice at Gorman. She tells MAN that many public retiree systems can no longer afford their promised medical benefits and that Government Accounting Standards Board accounting guidelines furnish incentives for them to shift risk. Among state teacher retirement systems, she says, Michigan, Pennsylvania and West Virginia made earlier moves to MA, although Michigan switched back from its MA private-fee-for-service plan after the 2008 Medicare law resulted in the exit of many PFFS plans.

There are additional incentives for these public retirement plans to shift now, LeMasurier contends, since Medicare Part D coverage has improved through the partial filling in of the “doughnut hole” gap as a result of the 2010 health reform law. While the end of the tax deductibility of the Medicare Retiree Drug Subsidy for employers in 2013 is another reason some retiree plans may shift to MA, it is less of a factor for the teacher retiree plans since they generally are not-for-profit entities, she adds.

Speaking of the overall trend of employer moves to MA, she says, “It’s been a very slow shift over the years.”

Humana Inc. benefited in 2010 from a move of several state retiree populations into managed care, recalls securities analyst Carl McDonald of Citigroup Global Markets in a July 20 research note. In 2011, however, he added, “many employers were preoccupied with figuring out the impact health reform legislation would have on their active populations, and weren’t really focused on making significant changes to the retiree benefit structure. Humana noted earlier in the year [i.e., 2012] that group retiree interest has picked up quite a bit, while United[Health Group] is projecting an uptick in enrollment growth due to the group retiree segment.”

First Indicator of 2013 Part D Bids: Very Aggressive

By James Gutman - August 10, 2012

It isn't often when three leading actuaries who work with Medicare Advantage and Part D plans all say they were "surprised" by a key bid-data measure released by CMS. But this is what happened Aug. 6, when the agency reported a $79.64 figure for the Part D national average monthly bid amount for 2013. That figure is a weighted average of the standardized bid amounts for each stand-alone Prescription Drug Plan (PDP) and MA prescription drug (MD-PD) plan and is down from $84.50 in 2012. While all three actuaries I queried had expected some decline, they all acknowledged not expecting anything like the nearly 6% drop CMS unveiled.

So what does it mean? It could be a variety of things, they told me, but there is one that seems clear: Major PDP players have decided to be very aggressive in seeking members — including low-income-subsidy beneficiaries auto-assigned to only PDPs that bid below the benchmark or, in the case of already-assigned beneficiaries, within a small "de minimis" range above the benchmark. This strategy was not uniformly in evidence last year, when, for instance, UnitedHealth Group bid above the benchmark in many regions and wound up losing lots of PDP beneficiaries for 2012 as a result. Since the average bid figure results from enrollment-weighted calculations, the actuaries surmise that United was not going to let this happen again for 2013. And another big PDP operator, Caremark, already has said it bid below the benchmark in 20 regions and within the de minimis range in 10 others, leaving only four regions above the benchmark.

Are plans such as these making the right decisions? Are the savings PDPs can achieve from taking advantage of the patent expirations of major brand-name drugs and thus the increasing use of generics enough to justify this kind of aggressive bidding? Have the plans lowered their administrative costs and improved their pharmacy benefit manager contracts enough for that? And what does this mean for smaller PDPs and for MA-PDs? Is the migration of Part D beneficiaries to lower-cost plans such an ingrained trend now that the days of enhanced-benefit products and smaller plans may be numbered?

Medicare Debate Heats Up Campaign Trail

By David Espo

August 15, 2012

WASHINGTON (AP) — Mitt Romney accused President Barack Obama in person and in TV advertising Tuesday of cutting Medicare "to pay for Obamacare," launching a strong counterattack to Democratic charges that he and running mate Paul Ryan would radically remake the popular health care program that serves tens of millions of seniors.

The charge drew a blistering response from Obama's campaign, which labeled the ad dishonest and hypocritical.

Obama "has taken $716 billion out of the Medicare trust fund. He's raided that trust fund," Romney said at a campaign stop in Beallsville, Ohio, as he neared the end of a multi-state bus trip punctuated by his weekend selection of a ticket mate.

"And you know what he did with it? He's used it to pay for Obamacare, a risky, unproven, federal takeover of health care. And If I'm president of the United States, we're putting the $716 billion back," he said.

Aides said a commercial containing the same allegation would begin airing immediately in several battleground states, although they declined to provide details.

In a campaign without summer doldrums, the rival sets of ticket mates campaigned in a half-dozen of the most hotly contested states, in settings as diverse as a coal mine in Ohio (Romney); a wind farm in Iowa (Obama) and a casino in Nevada (Ryan.)

Vice President Joe Biden stirred controversy in Virginia when he said the Republicans would favor the big banks over the interests of consumers. He said Romney has said he is "going to let the big banks once again write their own rules. Unchain Wall Street."

Hundreds of black voters were in the audience that Biden told, "They're going to put y'all back in chains."

Romney's campaign reacted strongly to that, saying the comments were "not acceptable in our political discourse and demonstrate yet again that the Obama campaign will say and do anything to win this election." Biden later conceded using the wrong word but dismissed the Republican criticism and did not apologize.

At a speech closing his bus tour, Romney delivered a sweeping indictment of Obama's campaign. "Mr. President, take your campaign of division and anger and hate back to Chicago," he said in Chillicothe, Ohio, insisting that Obama had abandoned his 2008 campaign's messages of hope and change. The Obama campaign said Romney's comments seemed "unhinged."

The tempest over Biden's remark was modest compared to the building struggle over Medicare.

Romney's criticism on that subject appeared an attempt to gain some measure of control over an issue likely to play a significant role in the outcome of the election. Florida, Pennsylvania and Iowa are among the top five states in the country in the percentage of people 65 and over, and all three are battleground states.

In a rebuttal issued shortly after the Romney TV ad was released, Obama spokeswoman Lis Smith said the Patient Protection and Affordable Care Act did not "cut a single guaranteed Medicare benefit, and Mitt Romney embraced the very same savings when he promised he'd sign Paul Ryan's budget. ...The truth is that the Romney-Ryan budget would end Medicare as we know it."

In the days leading to Ryan's selection, opinion polls generally showed a close race with Obama holding a modest advantage despite a sluggish economy and unemployment of 8.3 percent. Romney's pick for a running mate drew enthusiastic support from conservatives pleased that he had tapped a lawmaker known as an intellectual leader of the effort to rein in big government benefit programs and reduce future deficits.

But Democrats, too, said they were happy with the selection. They have quickly set out to draw attention to Ryan's plans, which contain deep cuts in projected spending in social programs as well as changes to Medicare for future retirees, and to try and saddle Romney with their political ownership.

Polling generally shows that the public places more trust in Democrats' ability to handle Medicare than they do Republicans, and that people also generally oppose plans to replace the current program with one in which future seniors receive a fixed amount of money from the government to be used to purchase health coverage.

At the same time, polling shows the public strongly believes the financial security of Medicare as well as Social Security must be guaranteed for the long term, and government reports for years have warned of a looming shortfall if something isn't done to change course.

Ryan and Romney have both cited a desire to right the program's finances as a motive for their plans.

See also: Medicare: The Basics

Moreover, Romney's attack during the day suggests he hopes to overcome a generic Republican disadvantage on the issue by telling voters that Obama has cut spending for a program that is overwhelmingly popular, and put the money toward one that is controversial.

"So now the money you paid for your guaranteed health care is going for a massive new governmentprogram that's not for you," says the announcer in the ad, referring to the health care law that Obama signed into law in 2010. "The Romney-Ryan plan protects Medicare benefits for today's seniors and strengthens the plan for the next generation," the ad concludes.

Ryan, interviewed on Fox News Channel, said he and Romney believe Medicare can be a winning issue for Republicans in the fall. "Absolutely, because we're the ones who are offering a plan to save Medicare, to protect Medicare, to strengthen Medicare," he said.

Ryan didn't say so, but the budgets he has written in the House both called for leaving in place the cuts to Medicare that he is now criticizing. Romney has consistently favored restoring the funds, and his running mate said, "I joined the Romney ticket."

Romney decided to go on the attack on one issue as the president's re-election campaign sharply criticized him on another.

"Romney's plans would cut college aid for nearly 10 million students ... and eliminate the tax deduction for college tuition," says a new television commercial that Obama's re-election campaign said would run in several battleground states. The commercial cites estimates from the budgets that Ryan has prepared as chairman of the House Budget Committee, and Romney's own proposals.

Obama and Romney clashed over yet a third issue during the day, laying out different views on energy policy.

The president taunted his challenger for opposing an extension of a tax break for wind production, quoting him as once having said, "You can't drive a car with a windmill on it. ..."

"I don't know if he's actually tried that. I know he's had other things on his car," Obama joked, referring to the often-repeated tale of a Romney family road trip with their dog, Seamus, in a carrier strapped to the roof of the car.

Government estimates say that more than 6,000 jobs statewide and 20 percent of Iowa's electricity needs come from wind power, and the state's senior GOP leaders all support renewing an extension of a wind tax credit that Romney opposes.

The wind tax provision is one of dozens of credits that would be renewed in legislation making its way to the Senate floor, including several that deal with energy such as of biodiesel, geothermal, biomass and hydropower.

Romney's campaign did not respond to repeated quests for his position on the other portions of the bill, which includes items such as a tax break for developers of NASCAR facilities and purchasers of electric motorcycles.

The former Massachusetts governor sounded eager to challenge Obama's energy policy as he campaigned in coal country in southeastern Ohio. Accusing the president of waging a war on coal, he said Obama favors production of energy that comes only "from above the ground," a reference to wind power and other alternative sources.

"I'm for all of the above whether it comes from above the ground or below the ground," he said.