Thursday, February 28, 2013

Opportunity for Help with Medicare Cost Sharing Ends Soon

The 2013 Medicare Part A and B general enrollment period runs from January 1 through March 31, 2013. As detailed below, this enrollment period is especially important for many individuals who are not eligible for premium-free Medicare Part A. Most people do not pay a premium for Medicare Part A because they have sufficient work history. However, for people who do not have this work history, the Part A premium can cost several hundred dollars per month.
In addition to the important benefits covered under this component of Medicare (primarily hospital, skilled nursing facility and some home health and hospice coverage), Part A entitlement triggers eligibility for the Qualified Medicare Beneficiary (QMB) program. QMB helps certain low-income people with health care costs associated with Medicare, including all of Medicare Part A and Part B premiums and cost-sharing and nearly all of Part D premiums and cost-sharing.   Without being enrolled in Part A first, however, beneficiaries cannot enroll in QMB.

What is QMB?

Under the QMB program, state Medicaid programs pay all Medicare premiums, deductibles and co-insurance for aged and disabled people with:
·         Countable incomes below 100% of Federal Poverty Levels (FPL);
·         Countable resources below $6,940 for an individual and $10,410 for a couple.
These resource amounts are new for 2013.[1]  The current income eligibility limits for QMB in the 48 contiguous states and the District of Columbia is $950.83 per month for an individual and $1,460.83 per month for a couple.[2] This amount includes a universal $20 income disregard.[3]


QMB benefits for 2013 include payment of:
·         The individuals' part B premiums, which range between $1,156.80 and $1,384.80 per year (depending primarily on when the individuals became eligible for Medicare and for QMB);
·         The hospital deductible of $1,184.00 per spell of illness (note some beneficiaries may incur more than one Part A hospital deductible in a year, depending on whether subsequent hospital admissions during the year constitute a new spell of illness);
·         The $296 or $592 per day co-payment for inpatient hospital service (depending on the number of days in the hospital, after the 60th day)
·         The $148.00 per day co-payment for skilled nursing facility services after the 20th day;
·         The Part B  annual deductible of $147;
·         The 20% co-insurance on most Part B services;
·         For those without premium-free Part A, payment of between $2,916 and $5,292 per year in Part A premiums (depending on the individual's earnings record in the Social Security system);
·         The full Medicare Part D Low-Income Subsidy is also available through QMB; it is estimated by the Social Security Administration (SSA) to have an average value of about $4,000. 

Connection to Medicare Part A

Eligibility for the QMB program is dependent upon an individual's enrollment in Medicare Part A.  Most Medicare beneficiaries receive Part A benefits without payment of a premium because of their employment history.  People age 65 and over who are not entitled to premium-free Part A but who elect to purchase Part B coverage (or for whom Part B premiums are paid by the State Medicaid program) may also purchase Part A, but it is very expensive – $441/month for those with 29 or fewer quarters of Social Security coverage and $243/month for those with 30-39 quarters. Though both of these figures are lower than they were in 2012, the full payment is still nearly 50% of the monthly income of one who is financially eligible for the QMB program.

Part A Buy-In States vs. Group Payer States
States are authorized by the Social Security Act to enter into formal "Buy-In" agreements with CMS to pay Medicare premiums for low-income beneficiaries.  One benefit of having such an agreement is that individuals can be enrolled in Part A (and subsequently in the QMB program) at any time during the year and penalties that are otherwise assessed for late enrollment are waived.  Most states have such agreements; they are called Part A Buy-In States.

Attention advocates for residents of the following states: Alabama, Arizona, California, Colorado, Illinois, Kansas, Kentucky, Missouri, Nebraska, New Jersey, New Mexico, South Carolina, Utah and Virginia. According to the Centers for Medicare & Medicaid Services (CMS), your state only allows enrollment in Medicare Part A during the General Enrollment Period to become eligible for help with Medicare cost-sharing under the Qualified Medicare Beneficiary (QMB) program.

Therefore,  if potentially QMB-eligible beneficiaries living in these states do not currently have Medicare Part A, they must enroll in Part A (and in Part B, if they do not already have Part B) before March 31, 2013 to be entitled to QMB benefits in 2013.  For those who cannot afford the Part A premium, a conditional application process, described below, is available to protect them from financial liability.

Individuals without Part A who are otherwise eligible for QMB benefits and reside in these states are, unfortunately, penalized by the fact that these states have no Buy-In agreement with CMS. These states are called Group Payer States.  Individuals in group payer state face greater barriers to participation in the QMB program than individuals in Part A Buy-In States.

Again, Individuals in Group Payer States who did not enroll in Part A when they were first eligible to do so can only enroll in Part A during the General Enrollment period described above.  This period will end on March 31st for 2013.  Individuals who do not enroll in Part A by March 31, 2013 will have to wait until January 2014 to do so; their QMB eligibility will be postponed until July 1, 2014 at the absolute earliest. 

Beneficiaries who believe they have been given erroneous information by SSA concerning Medicare Part A, such as not being told of the possibility of conditional enrollment, may be able to have their enrollment date moved back by seeking equitable relief from the agency.  See section HI 00830.005 of the SSA Program Operations Manual System (POMS) for more detail.

The conditional enrollment process described above may also apply in Part A Buy-In States, but the process can be used at any time, not just during the General Enrollment period.  It is only applicable if the individual must also enroll in Part B. See SSA Program Operations Manual System HI 00801.140.  See also EM 08071

(, which instructs District Offices how to process an enrollment outside the General Enrollment Period. 

Procedure for Purchasing Part A

Typically, after their Initial Enrollment Period,[4] individuals are entitled to enroll in Part A or Part B only during the Medicare General Enrollment Period that runs from January 1 through March 31 of each year.  Eligibility for Part A and B coverage begins July 1 of the same year for those enrolling during the General Enrollment Period.  Except in special circumstances, Medicare assesses a 10% penalty on the monthly premium for enrollment after the Initial Enrollment Period.  The Part A enrollment penalty does not last indefinitely. For people enrolled in QMB, the state pays the penalty for late enrollment.

Conditional Part A Application Process for Potential QMB Participants

Usually, enrollment in QMB happens after a beneficiary already has Part A and B. A "conditional application" process has been created to address the dilemma of people who wish to enroll in Part A and to participate in QMB, but who cannot afford to pay the Part A premium while waiting for QMB to start to pay the Part A premium.  Under conditional enrollment, the individual is considered to be enrolled in Part A for QMB purposes but if the state later finds s/he is not eligible for QMB, the Part A enrollment is dropped so that s/he is not personally liable for the premium.   Persons in this situation should call both their local Social Security office and state Medicaid agency to learn specifics of how the process works in a given state.  Information on Social Security's role in conditional enrollment is available through the SSA Program Operations Manual System (POMS) at!OpenView.  Click on HI and look for HI 00801.137 and HI 00801.140.

If unable to get a clear answer from Social Security, one might pursue conditional enrollment as follows:
1.    Secure a Form 795 from the Social Security Administration (SSA) (available online at  
2.    Type or write  into the large blank (lined) space the following:  "I wish to enroll for Hospital Insurance under Medicare on a monthly premium basis, which is in addition to my current coverage for Medical Insurance (or "I also wish to apply for Medical Insurance" if the client does not have Part B).  I understand that the State will pay my premium based on my eligibility for Medicaid (Medical Assistance) as a Qualified Medicare Beneficiary.  I also understand that if I am terminated under Medicaid (Medical Assistance) as a Qualified Medicare Beneficiary, I will have to pay my premium if I want to keep my Medicare Part A Insurance."
3.    Submit the form to SSA with a completed application for Part A
4.    Go to the Medicaid office to apply for QMB with a copy of the Part A application and SSA Form 795

Consequences of Failure to Enroll in Part A: Help with Part D

The possible consequences of not obtaining Medicare Part A coverage increased in 2006 with the advent of Medicare Part D.  As noted earlier, QMB status entitles the beneficiary to automatic qualification for the Medicare Part D full Low-Income Subsidy to help pay for prescription drugs.  This significant subsidy entitles the beneficiary to minimal co-payments, no premium or deductible and no coverage gap.  In addition, under the Part D program, coverage is not available for drugs covered by Parts A or B, even if the particular beneficiary needing such drugs does not have Parts A or B. (Note that QMB is not the only path to the Part D Low-Income Subsidy; anyone can apply directly to the Social Security Administration for that assistance.)


The processes described in this Alert are not necessarily easy to use.  Advocates from both Group Payer States and Part A Buy-In States report difficulties in finding state and SSA personnel who are familiar with conditional enrollment.  Clients, too, may be skeptical of taking this action, especially if agency personnel cannot reassure them they will not be billed for the Part A premium.  In addition, individuals without Part B must also enroll in Part B to enroll in Part A.  There is no conditional enrollment for Part B, so the individual may be concerned about having to pay Part B premiums, even though the QMB benefit will cover those once it is in place.  Regulations direct that Part B becomes effective when QMB becomes effective, so there should be no personal financial liability.

The Center for Medicare Advocacy is interested in the myriad challenges of QMB enrollment and would appreciate hearing from advocates about their experiences with SSA and their state Medicaid agencies relating to it.

Advocates wishing to create an information piece for beneficiaries might want to look at the example, created by Legal Services of Eastern Missouri, which we have posted at\News\WeeklyAlerts\AlertPDFs\2006\
Please note that this document has 2007 information and information specific to Missouri; it must be carefully updated and adapted to meet your needs.  If your organization has created a similar flier, with more up to date information, we would be delighted to have a copy to post on our website.

For more information, contact attorney Andrea Callow ( in the Center for Medicare Advocacy's Washington, DC office at (202) 293-5760.

[1] Some states allow larger amounts of resources or have no resource limit at all.  Check your state's rules.
[2] Amounts are higher for Alaska and Hawaii
[3] (The monthly income eligibility changes each year after the publication of annual income poverty guidelines, usually published in January or February.)

Consumer Advocates Submit Joint Testimony in Opposition to Cost Shifting

In testimony submitted February 26, 2013 to the U.S. House Committee on Ways & Means, the Center for Medicare Advocacy, California Health Advocates, and the Medicare Rights Center urged lawmakers to reject Medicare redesign proposals that burden older adults and people with disabilities with added health care costs. The joint statement pressed policy makers to adopt cost saving proposals that eliminate wasteful spending on pharmaceutical drugs and private plans and to encourage value-driven payment systems.
See the full testimony at

MA Plans Face Immense Challenges After CMS Warns of Deep Payment Reductions

Reprinted from HEALTH PLAN WEEK, the most reliable source of objective business, financial and regulatory news of the health insurance industry.
By Patrick Connole, Editor
February 25, 2013 Volume 23 Issue 7
CMS’s late Feb. 15 release of its “45-day notice” for 2014 Medicare payment rates left many stakeholders shocked at what they called a potentially crippling blow to Medicare Advantage (MA) plans across the country. The only positive part of the CMS proposal is its preliminary status, leaving stakeholders with slim hopes that heavy lobbying can bring some relief when the agency issues a final rate notice on April 1.
If left unchanged, health insurance executives say MA plans will have to re-evaluate their product offerings on a county-by-county basis, since payments vary by county. Many will likely quit selected markets after reviewing reimbursement levels, as the CEO of Universal American Corp. warned Feb. 19 (see story, p. 4).
What the rate notice proposes is staggering to MA plans. The most unexpected negative is that the MA portion of the 2014 payment rates tentatively will decline 2.3% for 2014 because of major downward revisions of that component for years 2012 and 2011 and smaller downward revisions for several other prior years. When coupled with a 2.1% reduction in the fee-for-service part of the rate structure for 2014, the result would be a base payment rate reduction of 2.2%.
This adds to revenue pressure on MA plans from other directions, notably health reform law-mandated payment reductions, a 4.91% coding intensity adjustment (up as required from 3.41% for 2013), the impact of the potential sequestration-related cuts starting on March 1 and the insurers’ fee that starts in 2014. CMS admitted to some extent that the reductions contained in the rate notice were coming at an inopportune time “and may present challenges for plans.” The agency did offer some relief by saying it would start the phase-in of its new risk-adjustment model, which it volunteered would produce lower risk scores (and thus lower pay) for MA plans, in a limited way in2014 such that the average risk score would be about the same as in 2013. However, the “normalization factor” for MA payment in 2014 is 1.026, and this also would shrink MA payments, though less than it did for 2013.
2014 Payment Rates Shock Plans
Humana Inc., considered the publicly traded insurer with the most exposure to CMS’s payment plan since it garnered 63.5% of its 2012 revenue from MA sales, said in a Feb. 19 Form 8-K filing to the U.S. Securities and Exchange Commission (SEC) that it would have to adjust its financial projections because of the CMS rate plan. In the filing, the insurer said its earlier Feb. 4 estimates for growth in Medicare membership and earnings for 2014 were “based upon management’s stated expectation that the base Medicare Advantage payment rate would be flat to slightly down.” Now, Humana “believes the preliminary base rates included in the CMS notice would result in a mid-single-digit decline in its benchmark payment rates [excluding the impact of the industry premium tax, county rebasing and risk factor recalibration, which are anticipated to be discussed in the final rate notice].” As a result, Humana said it is “closely analyzing all operational avenues available to address those preliminary rates and the related impact upon the company’s ability to grow both its Medicare membership and its earnings for 2014.” The insurer said it also will comment to CMS on the proposed rates, according to the SEC filing.
Tom Standring, vice president for Medicare operations at Molina Healthcare, Inc., which operates in the Medicare space via its Special Needs Plans for those dually eligible for Medicare and Medicaid, tells HPW that CMS is “unlikely” to change its proposed rates too much. But if the agency does, it would be in the range of 1%.
Brad Kieffer, spokesperson for another MA operator, Health Net, Inc., tells HPW that his company also expects to provide feedback to CMS during the comment period.
In a Feb. 19 investor note, Christine Arnold, a financial analyst for Cowen and Company, reflected the views of many on Wall Street. “The announcement of preliminary Medicare Advantage payment rates was surprisingly negative. While the challenges began with a 4.6% shortfall in the fee-for-service growth rate, a whole host of other issues make offsetting the rate shortfall difficult for companies. There is no doubt in our view that the announcement represents a profoundly unfavorable and unexpected deviation from history as well as Street and industry expectations,” she said.
Stifel Nicolaus analyst Thomas Carroll said in a Feb. 19 industry update that Medicare-heavy managed care operators like Humana, UnitedHealthcare, WellCare Health Plans, Inc. and Universal American should recognize the CMS plan as a “2014 headwind.” He still recommended investing in those companies’ stocks, however. “Given growth characteristics of government-sponsored business, and how the industry has proven its ability to manage adverse annual updates such as this, we recommend buying weakness related to this release.” Carroll said the MA program also is more robust these days than in previous years “and its participants are that much more sophisticated.”
Humana’s stock price took a hit on Feb. 19, the first trading session after the CMS announcement because of the Presidents’ Day holiday on Feb. 18, dropping nearly $5 or 6.4% to close at $73.01. The other major MA plans saw much smaller declines.
America’s Health Insurance Plans’ (AHIP) President and CEO Karen Ignagni on Feb. 19 called the proposed changes to MA payments a “crushing blow” to the 14 million seniors and people with disabilities who count on the program and put the cumulative price tag, along with other reductions, at $11 billion. “The combined effect of the ACA cuts and new proposed payment changes will likely result in seniors facing higher out-of-pocket costs, reduced benefits and fewer health care choices,” she said. “These cuts will compound the $200 billion in Medicare Advantage cuts and the new health insurance tax included in the health care reform law. The Congressional Budget Office projects that the reform law’s payment cuts alone will result in 3 million fewer people enrolled in Medicare Advantage.”
She said Oliver Wyman estimated that the health insurance tax would force seniors to pay an extra $220 in out-of-pocket costs and reduced benefits in 2014 and $3,500 in more costs over the next 10 years. “The cumulative impact of these changes will reduce Medicare Advantage payments next year by more than 8%, or approximately $11 billion, destabilizing the program and putting at risk the health care coverage upon which millions of beneficiaries rely,” Ignagni added.
Among other payment- and cost-related items included in the “45-day notice” are:
·         CMS again would “rebase” county pay for 2014, meaning that some MA plans’ service areas will move to lower-paid quartiles while others will move to higher-paid.
·         Chronic care MA Special Needs Plans would get changes in their risk-score calculations that stakeholders view as helpful for those plans’ payments in 2014.
·         CMS would cut the allowable increase in Part D plans’ total beneficiary costs for 2014 to $30 per member per month (PMPM) from $36 PMPM.
Separately, CMS on Feb. 15 also released the proposed rule for MA plans’ minimum medical loss ratios (MLRs) that takes effect in 2014. The rule would meet one MA industry objective by having the MLRs calculated at the contract level rather than at the state level as is done for commercial insurers’ MLRs. But it also would reject the industry’s argument that Part D-related operations, which tend to have lower MLRs, be exempt from the coming 85% minimum MLR requirement.
View the 45-day notice at by clicking on “Announcements and Documents,” and the MA MLR rule at

Senators, experts support current Medicare policy

February 27, 2013

Wholesale cuts in the Medicare program have no political support and will backfire because that will merely shift health care costs elsewhere if implemented, several senators and health care policy experts agreed Wednesday at a Senate hearing on the issue.

Instead, the most effective way of reducing federal health care costs is moving across-the-board away from the current fee-for-service reimbursement system.

That comment, by David Blumenthal, M.D., president of the Commonwealth Fund, appeared to represent a consensus of opinion of those who testified at the hearing.
Fee-for-service reimbursement policies, he said, “encourages volume rather than value.”
Instead, what should be done is “put in place policies to reduce unnecessary utilization, increase care coordination and improve outcomes.”
Blumenthal said that would align “incentives for providers, consumers and payers to reward choices that lead to better patient outcomes and use resources wisely.”
Blumenthal also testified that cutting Medicare spending was not a cure-all to the country’s health care cost problems.
“Solutions to the larger health spending problem are not likely to be effective if pursued only in one part of the health care system rather than system-wide,” Blumenthal said.
For example, “drastically cutting reimbursement rates in public programs could shift costs onto private payers and do little to solve the underlying problem,” Blumenthal said.
Indeed, consistent with that analysis, even the much-criticized Medicare Advantage system, which is currently facing serious cuts, was supported.
Kenneth E. Thorpe, Ph.D, and chairman of the of Health Policy and Management Department at Emory University, said research conducted through the experiences of the Medicare Advantage program as well as other research shows that care coordination and prevention play a key role in reducing spending and improving quality of health care.
The testimony took place at a hearing of the Special Committee on Aging on Strengthening Medicare for Today and the Future.
Juliette Cubanski, Ph.D., associate director, the Program on Medicare Policy, at the Henry J. Kaiser Family Foundation, testified at the hearing that “While Medicare faces long - term financial challenges, it is also important to remember that Medicare is a vital source of financial and health security for 50 million people today, and the vast majority of seniors say that Medicare is working well for them.
“Therefore, moving forward it will be important to assess the implications of proposed changes to the Medicare program for current and future beneficiaries,” she said.
At the same time, Cubanski cautioned that one of the issues Medicare beneficiaries face is significant out-of-pocket costs for both premiums and non-premium expenses to meet their medical and long-term care needs.
Another is that spending on hospital costs, Part B of Medicare, and Part D, prescription drug costs, are soaring. Blumenthal said that premiums and cost sharing as a share of annual average Social Security benefit payments has increased from 6 percent in 1970 to 26 percent in 2010.

“Overall, beneficiaries’ out-of-pocket health spending has risen faster than their incomes in recent years, from around 12 percent in 1997 to more than 15 percent in 2009, and Medicare households spend three times as much of their household budgets on health care compared with non-Medicare households,” Cubanski said.
Cubanski testified that recent polling by the Kaiser Foundation found that “While policymakers weigh potential Medicare savings options to reduce the deficit, the public does not perceive a need for significant cuts.”
She said the polling shows that a majority of the public (75 percent) believes that deficit reduction can occur without major reductions in Medicare spending. “In fact, 58 percent of Americans say they would not be willing to see any reductions to Medicare as part of deficit reduction discussions.”
She said when asked about specific proposals to reduce Medicare spending in the context of deficit reduction, a majority of Americans expressed support for two proposals:
  1. Requiring drug companies to give the federal government a better deal on medications for low-income people on Medicare; and
  2. Requiring high-income seniors to pay higher Medicare premiums; these proposals were supported by 85 percent and 59 percent of Americans, respectively.
“Notably, the survey also shows that relatively few Americans (roughly 20 percent) are aware that wealthier Medicare beneficiaries already pay higher premiums for their Medicare coverage,” she testified.
Cubanski testified that other proposals are opposed by a majority of Americans, including:
  1. Requiring all seniors to pay higher Medicare premiums;
  2. Increasing the payroll taxes workers and employers pay to help fund Medicare;
  3. Reducing payments to hospitals and other health care providers for treating people covered by Medicare; and
  4. Gradually raising the age of Medicare eligibility from 65 to 67 for future retirees.
These proposals were opposed by 85 percent, 55 percent, 51 percent, and 51 percent of Americans, respectively, Cubanski testified.
Sen. Bill Nelson, D-Fla., chairman of the committee, said he had learned from visits last week to care centers in Florida, his home state, added to that by saying that incentives to increase care coordination “offers more than just savings in dollars, it saves hours of time in a Medicare beneficiary’s life. Reducing hospital readmissions will not only save the Medicare program billions, it will save beneficiaries from potential infection and further out-of-pocket expense.”
The issue of vouchers, a key feature of presidential candidate Mitt Romney during last fall’s presidential campaign, did not come up at the hearing.
Nelson acknowledged that “Congress faces a budget crisis that once again puts the debate on exploding health costs — and by association the Medicare program — front and center.”

But he said that a recent report by the Congressional Budget Office had provided some “good news,” that federal spending on Medicare has been significantly lower than predicted over the past three years.

He said that Medicare spending in fiscal year 2012 grew by just 3 percent to $551 billion, according to CBO. “That represents the slowest rate of growth since 2000.

“While this is great progress, we all know financial challenges lie ahead. As more and more baby boomers retire and health care costs continue to rise, Medicare spending could reach $1 trillion by 2023. We’re making progress, but we know we can do better.”

Sen. Susan Collins, R-Maine, ranking minority member of the committee, also did not talk about vouchers.

She said she has opposed efforts in the past to restructure Medicare “in a way that could be harmful to the 50 million American seniors and disabled individuals who rely on the program.

“The real key to getting Medicare costs under control is to get health care costs under control. Today, the United States spends 18 percent of its gross domestic product on health care, more than any other industrialized country.”

Yet, Collins said, “We lag behind other nations on many measures of quality. In health care, quantity does not always equal quality, and clearly there is more that we can do to reward value rather than volume and quality rather than quantity.”


Fixing America’s health care system means more than just guaranteeing that everyone has coverage.  To address the rising costs of health care, we must improve the way that health care is delivered, including coordinating care better and improving the safety of care.
The Affordable Care Act includes steps to improve the quality of health care and, in so doing, lowers costs for taxpayers and patients.  This means avoiding costly mistakes and readmissions, keeping patients healthy, rewarding quality instead of quantity, and creating the health information technology infrastructure that enables new payment and delivery models to work.   These reforms and investments will build a health care system that will ensure quality care for generations to come. 
Already we have made significant progress:
Health care spending is slowing
According to the annual Report of National Health Expenditures, total U.S. health spending grew 3.9 percent in 2011.  That’s the same rate of growth as in 2009 and 2010, and in all three years spending grew more slowly than in any other year in the 51-year history of the report.  Medicare spending per beneficiary grew just 0.4 percent per capita in fiscal year 2012, continuing the pattern of very low growth in 2010 and 2011.  Medicaid spending per beneficiary also decreased 0.9 percent in 2011, compared to 0.6 percent growth in 2010. Average annual increases in family premiums for employer-sponsored insurance was 6.2 percent from 2004-2008, 5.6 percent from 2009-2012, and 4.5 percent in 2012 alone.  In 2011, the Affordable Care Act’s 80 / 20 rule (medical loss ratio policy) and strengthened rate review program resulted in an estimated $2.1 billion in savings to consumers of private health insurance.
Health outcomes are improving and adverse events are falling
This past year, we finalized several programs that tie Medicare reimbursement for hospitals to their readmission rates, when patients have to come back into the hospital within 30 days of being discharged. The 30-day, all-cause readmission rate is estimated to have dropped in the last half of 2012, to 17.8 percent, after averaging 19 percent for the past five years.  This translates to about 70,000 fewer readmissions in 2012. Additionally, as part of a new Affordable Care Act initiative, clinicians at some hospitals have reduced their early elective deliveries to close to zero, meaning fewer at-risk newborns and fewer admissions to the NICU.  Among 135 hospitals reporting common measures, early elective delivery rates have fallen (improved) by 48 percent.
Providers are engaged
In 2012, we debuted the Medicare Shared Savings Program and the Pioneer Accountable Care Organization Model.  These programs encourage providers to invest in redesigning care for higher quality and more efficient service delivery, without restricting patients’ freedom to go to the Medicare provider of their choice. 
Over 250 organizations are participating in the Medicare Accountable Care Organizations (ACOs), serving approximately 4 million (eight percent of) Medicare beneficiaries.  As existing ACOs choose to add providers and more organizations join the program, participation in ACOs is expected to grow. ACOs are estimated to save up to $940 million in the first four years.
Medicare beneficiaries are shopping for coverage according to quality
The Affordable Care Act tied payment to private Medicare Advantage plans to the quality of coverage they offer.  Since those payment changes have been in effect, more seniors are able to choose from a broader range of higher quality Medicare Advantage plans, and more seniors have enrolled in these higher quality plans as well.  Since the health care law passed, enrollment has increased by 30 percent and premiums have fallen by 10 percent in Medicare Advantage.
Below are specific examples of the reforms and investments that we are making to build a health care delivery system that will better serve all Americans.
Hospitals.  Two important programs that reward hospitals based on the quality of care they provide to patients began last fall.  On October 1, 2012, the Hospital Value-Based Purchasing Program began, linking a portion of hospitals’ Medicare payments to performance on important quality measures.  Examples of measures include whether a patient received an antibiotic before surgery, or how well doctors and nurses communicate with patients.  The Hospital Readmissions Reduction Program reduces Medicare payments to hospitals with relatively high rates of potentially preventable readmissions, to financially encourage them to focus on this key indicator of patient safety and care quality. 
Medicare Advantage Plans.  CMS strengthened the quality bonus incentives provided by the Affordable Care Act by providing additional payments for plans that improve the quality of care.  As a result, in 2013, the 14 million Medicare beneficiaries currently enrolled in Medicare Advantage have access to 127 five and four-star plans, which is 21 more high-quality plans than were available in the previous year.
Dialysis Facilities.  An End-Stage Renal Disease (ESRD) Quality Incentive Program, started in 2012, ties CMS payments directly to facility performance on quality measures, resulting in better care at lower cost for nearly 500,000 Americans with kidney disease.  In addition, a new comprehensive care model announced in January 2013 tests a new payment and service delivery approach to improve care for ESRD beneficiaries, by coordinating primary care with care for their special health needs.
Electronic Health Records (EHRs).  Adoption of electronic health records is making it easier for physicians, hospitals, and others serving Medicare and Medicaid beneficiaries to evaluate patients’ medical status, coordinate care, eliminate redundant procedures, and provide high-quality care.  Approximately 36 percent of health care professionals, and as many as 70 percent of hospitals, have already qualified for incentive payments for EHR systems that meet the standards and objectives established by the program. Electronic health records will help speed the adoption of many other delivery system reforms, by making it easier for hospitals and doctors to better coordinate care and achieve improvements in quality.
Partnership for Patients.  The nationwide Partnership for Patients initiative aims to save 60,000 lives by averting millions of hospital acquired conditions over three years, and save up to $35 billion in health care costs by reducing complications and readmissions, and improving the transition from one care setting to another.  At the core of this initiative are 26 Hospital Engagement Networks, which work with 3,700 hospitals, working with healthcare providers and institutions, to identify best practices and solutions to reducing hospital acquired conditions and readmissions.  These Hospital Engagement Networks have been actively involved in the effort to reduce the rate of early elective deliveries, in conjunction with the   Strong Start for Mothers and Newborns Initiative (described later). 
Healthy infants.  The Strong Start for Mothers and Newborns initiative aims to reduce early elective deliveries as well as test models to decrease preterm births among high-risk pregnant women in Medicaid and the Children’s Health Insurance Program (CHIP). The Strong Start initiative builds on the work of the Partnership for Patients, testing test ways to support providers in reducing early elective deliveries.  It also offers funds to states to test models lowering the risk of preterm birth among pregnant women with Medicaid or CHIP.
Hospital-acquired conditions.  Along with other data available on Hospital Compare, beneficiaries can now find information on the incidence of serious hospital-acquired conditions (HACs) in individual hospitals.  In FY 2015, hospitals with high rates of HACs will see their payments reduced. 
Community-Based Care. As part of the Partnership for Patients, the Community-Based Care Transition Program supports 82 community-based organizations, many of them partnered with multiple hospitals in 35 states to help patients make more successful transitions from hospital to home or to another post-hospital setting. $500 million in total funding has been appropriated for the program for 2011 through 2015.  
Integrating care for patients enrolled in Medicare and Medicaid.  Many of the nine million Medicare-Medicaid enrollees suffer from multiple or severe chronic conditions.  Total annual spending for their care exceeds $300 billion. Four states (Massachusetts, Ohio, Washington and Illinois) have received approval for demonstrations using managed care or health homes to coordinate care for Medicare-Medicaid beneficiaries.  Coordination strategies include more flexibility for home and community-based services and improving health IT systems.
Greater independence for Americans with disabilities and long-term care needs.  The Affordable Care Act includes a number of policies to promote non-institutional long-term care programs that will help keep people at home and out of institutions:
o Twelve additional states have joined the Money Follows the Person Program to help rebalance their long-term care systems to transition Medicaid beneficiaries from institutions to the community.  Forty-three states are now participating in Money Follows the Person.
o Nine states are participating in the Balancing Incentive Program, which gives states incentives to increase access to non-institutional long-term services and supports and provides new ways to serve more Medicaid beneficiaries in home and community-based settings.
o Ten states have approved Health Home State Plan Amendments to integrate and coordinate primary, acute, behavioral health, and long term services and supports for Medicaid beneficiaries.
Promoting care at home. A new Affordable Care Act demonstration, Independence at Home, tests whether providing chronically ill beneficiaries with primary care in the home will help them stay healthy and out of the hospital.  Fifteen physician practices and three consortia of physician practices, including the Cleveland Clinic, are participating in the Independence at Home Demonstration.
Center for Medicare and Medicaid Innovation. The Innovation Center is charged with testing innovative payment and service delivery models to reduce expenditures in Medicare, Medicaid, and CHIP, and at the same time, preserving and enhancing quality of care.  Already the Innovation Center is engaged in projects with more than 50,000 health care providers to improve care.
System-wide reforms going on now.  Critical reforms already underway include reducing adverse drug events; improving cardiac care and outcomes; reducing health disparities; using health IT and data analytics to improve population health, and engaging patients in decisions about their care.
Lower cost health care equipment and supplies. In 100 metropolitan areas, a stronger Medicare Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) competitive bidding program is setting new, lower payment rates for medical equipment and supplies.  Because of this program, CMS estimates that Medicare beneficiaries will save an average of 45 percent on certain equipment and supplies in the 91 MSAs launching this year.  Overall, the initiative is expected to save the Medicare program an estimated $25.7 billion, and beneficiaries an estimated $17.1 billion, over the next 10 years.
Fighting fraud. The Affordable Care Act’s landmark steps to improve and enhance the Administration’s ongoing efforts to prevent and detect fraud and crack down on individuals who attempt to defraud Medicare, Medicaid, and CHIP has resulted in a record level of recoveries—$4.2 billion in fiscal year 2012—and a record return on investment— $7.90 for every dollar invested.  Total recoveries over the past four years were $14.9 billion compared to $6.7 billion over the prior four years. Efforts include tough new rules and sentences for criminals; enhanced screening and enrollment requirements; increased coordination of fraud-fighting efforts; sharing data across federal agencies to fight fraud; and new tools to target high-risk providers and suppliers.

States Can Cut Medicaid Pay, Feds Tell Court

By David Pittman, Washington Correspondent, MedPage Today
Published: February 27, 2013

States may cut payments to Medicaid providers as long as they have been found not to harm access to care, the Obama administration has told an appellate court.
The statement came in a brief filed Friday in the ongoing court battle between the California Medicaid program -- known as Medi-Cal -- and providers in the state.
In October 2011, the Centers for Medicare and Medicaid Services (CMS) approved California's plan to lower Medi-Cal payments by 10%. Outraged providers sued to prevent the cuts from occurring.
A federal district court issued an injunction on the payment cuts in January 2012, but a three-judge panel of the Ninth Circuit Court of Appeals, in San Francisco, lifted the injunction and okayed the cuts in a Dec. 13 ruling.
The plaintiffs, which include the California Medical Association and a number of other provider groups, requested last month that the entire Ninth Circuit review the case, prompting a refiling of briefs from both sides.
The California Department of Health Care Services plan involved cutting payments for a number of -- but not all -- Medi-Cal providers, including physicians, outpatient clinics, dentists, laboratories, optometrists, pharmacies, free-standing nursing and sub-acute care facilities, and other skilled nursing facilities.
"There is no merit to plaintiff's contention that CMS was required to disapprove the plan amendments because they were motivated by 'purely budgetary reasons," according to Friday's Justice Department urging the court to uphold the cuts. "It is entirely appropriate for a state to review its Medicaid plan to determine whether it can continue to satisfy its statutory obligations at lower payment rates."
The California health department developed a plan to monitor 23 measures of access on a continual basis and to take prompt action if any problems are indicated, the court document argued. The cash-strapped state also determined payment reductions for some services would create access problems and did not seek to drop payment for those.
CMS required Medi-Cal to provide metrics on provider participation and per-capita service utilization to "adequately demonstrate beneficiary access to care." The federal agency said previous court cases gave it the authority to interpret on a case-by-case basis states' requests for payment rate increases or decreases.
Friday's brief also lauded CMS's decision to make beneficiary access to services -- rather than provider costs -- the focus of the agency's support of lower payments.
"This interpretation accommodates the practical realities of the market for healthcare services and the data that will be relevant and available in any given instance," the Justice Department said.
State Medicaid plans are bound by federal law to provide payments "sufficient to enlist providers so that care and services are available under the plan at least to the extent that such care and services are available to the general population in the geographic area."
The California Medical Association (CMA) disagreed and said the decision to cut provider payments by 10% would limit access to millions of Medi-Cal patients.
"Our hope is that state officials and Governor [Jerry] Brown (D) can look at the situation and decide not to move forward with these cuts," CMA President Paul Phinney, MD, said in a statement after the December ruling. "It was a tough budget decision that was made when a dire fiscal situation was faced by the state."
Brown's 2013-2014 budget proposal for the state includes a 10% Medi-Cal reimbursement cut retroactive to Jan. 1, after the December court ruling.
It's too early to tell what implication the case will have on other states' decision to expand their Medicaid programs under the Affordable Care Act.
States that have publicly declined the option to open up their programs to those effectively earning up to 138% of the federal poverty level have cited cost as the factor.
Despite the fact that CMS will pay for the medical care of those newly enrolled, states would have to shoulder the administrative costs and the likely uptick in enrollment from state residents who are currently eligible but not already enrolled. Georgia, for example, found it would cost the state $4.5 billion to pay for the extra 650,000 people that will be added to its Medicaid rolls in the first decade alone.
Republican governors in Florida, Michigan, Ohio, Nevada, North Dakota, New Mexico, Arizona, and most recently New Jersey have opted for the expansion. Meanwhile, some other states with Republican governors, including Texas, Georgia, and Louisiana, have said they won't expand.

David Pittman is MedPage Today’s Washington Correspondent, following the intersection of policy and healthcare. He covers Congress, FDA, and other health agencies in Washington, as well as major healthcare events. David holds bachelors’ degrees in journalism and chemistry from the University of Georgia and previously worked at the Amarillo Globe-News in Texas, Chemical & Engineering News and most recently FDAnews.