Medicare budget’s wild ride

In 2010 the Center for Budget Policies and Priorities published their Medicare spending forecast. Now, three years later, the CBPP is forecasting a $511 billion reduction.

The half a trillion dollar reduction in spending is said to be due to a dramatic slowdown in health care costs. For three years straight health care costs have been in line with the rest of the economy. In previous years, healthcare was  outpacing most of the fastest growing industries.

“In recent years, health care spending has grown more slowly both nationally and for federal programs than historical rates would have indicated,” the CBO wrote in its latest forecast. The CBO also noted that, last year, “federal spending for Medicare and Medicaid was about 5 percent below the amount that CBO projected in March 2010.”

Due to the new trend, “CBO made a series of downward technical adjustments to its projections of spending for Medicare and Medicaid.”

Have Medicare costs truly been reeled in, or is this simply a reflection of the down economy? Read more about this story in this great piece on by Annie Lowrey of the New York Times.

ObamaCare reductions to Medicare rocks health insurers with $11 billion in cuts

Last Friday the Centers for Medicare and Medicaid Services (CMS) published its proposed payment reductions for 2014 Medicare Advantage insurance plans. The proposed cuts, estimated at $11 billion by an insurance industry trade group, sent health insurer shares plummeting on Tuesday.

Humana Inc, the nations second largest health insurer, said that the cuts proposed by CMS would negatively affect its growth in 2014. Its shares fell as much as 10 percent on the news. Insurers UnitedHealth Group Inc, Cigna Corp and Aetna Inc were down, as well.

Medicare Advantage is the private insurance option available to Medicare beneficiaries. It’s reimbursed by the government and subject to a long list of regulations enacted by the Affordable Care Act of 2010 (aka, “ObamaCare”), including Medical Loss Ratios and lower payment rates.

“These changes will disrupt coverage for Medicare Advantage beneficiaries at a time when evidence clearly demonstrates that Medicare Advantage provides higher-quality care than the fee-for-service part of Medicare,” Karen Ignagni, president of America’s Health Insurance Plans, said in a statement.

Medical Loss Ratios set the level of profits that insurers can earn on Medicare Advantage and Medicare prescription plans. In essence, starting in 2014, 85 percent of all revenues must be spent on direct beneficiary benefits.

Medicare Advantage insurers receive a set fee per beneficiary from the government to pay doctors. In Original Medicare, doctors and hospitals are reimbursed by the government based on each service they provide. About 27 percent of all Medicare recipient (14 million people) have Medicare Advantage plans in 2013.

Humana, which has about 2 million customers in Medicare Advantage, said in a regulatory filing that the government’s proposed 2014 payment rates were too low.

CMS’ proposed base payments rates for Medicare Advantage suggest a 4 to 6 percent decline in rates. On the news, Humana said it based its 2014 earnings outlook on the expectation that the base Medicare Advantage payment rate would be flat to slightly down.

Reductions in Medicare Advantage payment rates are part of President Obama’s healthcare reform plans. Medicare Advantage rates have fallen an estimated 10 percent since the Affordable Care Act was passed in 2010. An additional 8 percent savings are expected for 2014.

CRT Capital Group analyst Sheryl Skolnick said she would expect UnitedHealth to exit many Medicare Advantage markets and experience a significant or severe contraction in that business if the proposed rules become final. As with past rule changes, heavy lobbying over the next few weeks by insurers is sure to affect the final rule.

Medicare’s transition into ‘value-based purchasing’ managed care

U.S. Healthcare reform is creating a  fundamental shift away from the fee-for-service model to more coordinated care, leading to better outcomes and lowered spending. Starting this year, the financial viability of hospitals will depend on how well care is coordinated for Medicare beneficiaries.

A relatively little-known piece of the Affordable Care Act called the “Hospital Value-based Purchasing Program,” overseen by the Centers for Medicare and Medicaid Services, forces hospitals to improve their quality or make due with lower payments. The ACA program ties hospital performance, both clinical and patient satisfaction, directly to reimbursement rates. It’s a change that will have a significant impact — both good and bad — for all hospitals that treat Medicare patients.

Given the sway that Medicare has as a healthcare payer, the new regulations have critical  importance and may instigate changes by private insurance and other third-party payers. HMOs will likely adopt similar metrics for payment to their healthcare providers.

Under the new CMS program, Medicare reduced its payments to all hospitals by 1 percent. The cut is believed to bring an estimated savings of $964 million. Additionally, CMS will begin scoring hospitals.  Hospitals will be scored on how well they compare with others in the industry as well as how much they improve over time.

Hospital payments will be based on 12 clinical measures, including the effectiveness of treatment on heart disease, hospital-borne infections, pneumonia, diabetes and others. Seventy percent of the scores will be based on the clinical standards, while 30 percent will be determined by patient satisfaction surveys, which will include emergency room wait times and physician responsiveness, among others.

By 2017, the new value-based purchasing model will increase its penalty or bonuses by 2 percent. For most hospitals this is a significant number to the bottom line.  Hospitals are not the only providers to be hit by CMS.  Come 2015, the same concept will be applied to large physicians groups (100+ professionals), and by 2017 to all doctors.

CMS rolls back Medicare Part D deductibles for 2014

Photo: Washington Times
Photo: Washington Times

For the first time in the ten year history of the Medicare Part D program, the Centers for Medicare and Medicaid Services (CMS) announced on Friday in a new Call Letter that it will reduce the annual deductible.  The 2014 Call Letter sites greater protections, value, and care for Medicare beneficiaries.

The Call Letter takes important steps to improve payment accuracy for Medicare Advantage (Part C) and in Medicare prescription drug (Part D) plans for 2014, without shifting costs to beneficiaries. Since the Affordable Care Act was passed in 2010, Medicare Advantage premiums have fallen by 10 percent and enrollment is expected to increase by an estimated 28 percent through this year. In addition, costs of the defined standard Part D plan will be lower in 2014 than they are in 2013. The standard Part D deductible will be $310, down from $325 in 2013, and cost-sharing amounts will also be lower.

The 2014 statutory updates to the annual parameters for the defined standard Part D prescription drug benefit are:

Part D Benefit Parameters



Defined Standard Benefit



Initial Coverage Limit (Total drug costs after deductible before hitting coverage gap)



Out-of-Pocket Threshold  (Total amount beneficiary pays before hitting catastrophic phase)



Minimum Cost-sharing for Generic/Preferred Multi-Source Drugs in the Catastrophic Phase



Minimum Cost-sharing for Other Drugs in the Catastrophic Phase



Retiree Drug Subsidy (RDS)
Cost Threshold (Amount RDS sponsor must spend before claiming the RDS subsidy)



Cost Limit (Amount after which RDS sponsor claims no RDS subsidy)




Proposed guidance by the Call Letter increases value and protections for beneficiaries:

Lower Out-of-Pocket Drug Spending: Due to decreases in the cost of the Medicare prescription drug program, CMS is announcing for the first time since the inception of the program that the 2014 defined standard Part D prescription drug benefit will have lower co-payments and a lower deductible than in 2013. These costs are decreasing at the same time that coverage for Medicare beneficiaries in the Part D prescription drug coverage gap, or “donut hole” will continue to increase in 2014. As a result of the Affordable Care Act, in 2014, enrollees with liability in the donut hole will receive coverage and discounts of 52.5 percent on covered brand name drugs and 28 percent on covered generic drugs.

Greater Protection for Beneficiaries: CMS proposes to require Part D plan pharmacies to obtain enrollee consent prior to each delivery, unless the enrollee personally requests the refill. This proposal is in response to complaints from beneficiaries who have received and been charged for unnecessary and unwanted prescriptions because of “auto-ship” services. CMS intends to again use its authority, provided by the health care law, to protect Medicare Advantage enrollees from significant increases in costs or cuts in benefits, and, for the 2014 contract year, proposes reducing the amount of any permissible increase to $30 per member per month (down from $36 per member per month in previous years).

Improved Coordination of Care: CMS urges plans to broaden their target enrollee populations for medication therapy management (MTM). In accordance with the Affordable Care Act, CMS is interested in expanding shared decision-making within the Medicare Advantage program.

Meanwhile, a Washington Post story published on Saturday suggests that Price controls for Medicare Part D death sentence for patients:

There is a movement afoot in the government to curtail Medicare Part D — perhaps even discontinue it. Some believe that the feds should control the entire management of all prescription drugs, thus decreasing incentives for innovation for new drug research and creation.

According to Adam Frederic Dorin, M.D., MBA, “Some who believe that ‘bigger’ government control is ‘better’ have sided with the pro-Obamacare crowd. They are encouraging the Secretary of Health and Human Services to dismantle Medicare Part D, thus exercising unlawful discretionary powers, without Congressional permission or oversight.”


Could Medicare-for-all become reality, or is it another pipe dream?

Rep. John Conyers Jr. (D-Mich.) and other House members have reintroduced a federal bill that would expand Medicare to a universal, single-payer program, the Detroit Free Press reported. Is Medicare-for-all a reality or simply a dream by a few on the left?

The “expanded and improved Medicare” program would pay hospitals and providers a monthly lump-sum under a global budget to cover all operating expenses, according to the bill. It also would require for-profit hospitals to convert to nonprofit entities, a move that could spark a constitutional battle.

The bill, which has been introduced each Congress since 2003, has little chance of winning approval.  Even so, a group of 18,000 physicians are praising the “Medicare-for-all” legislation as a solution to ever-growing healthcare costs.

“Such a plan would save over $400 billion a year currently wasted on private-insurance-related bureaucracy, paperwork and marketing–money that should be used to care for patients,” internist and Physicians for a National Health Program President Andrew Coates said.

The nonprofit research and educational doctor organization also pointed to surveys showing a solid majority of physicians, as well two-thirds of the general public, favor a Medicare-for-all approach.

The proposal to expand and improve Medicare follows a warning from the Medicare Payment Advisory Commission (MedPAC). Medicare could face a national crisis unless lawmakers overhaul the formula used to pay doctors, MedPAC Chief Glenn Hackbarth said.

Just last week, the House introduced bipartisan legislation that called for a permanent fix to yearly automatic Medicare cuts and would permanently repeal the SGR.

Medicare Fraud Down for Second Year

Department of Health and Human Services (HHS) Secretary Kathleen Sebelius released a new report showing that the government’s health care fraud prevention and enforcement efforts recovered nearly $4.2 billion in 2012. According to the report on The Health Care Fraud Prevention and Enforcement Act Team’s (HEAT) performance,  for the second year in a row, the government’s new plan to attack Medicare Fraud reaped results.

The Feds recovered $4.2 billion of taxpayers’ money last year from legal proceedings, settlements and penalties. In 2011, joint efforts to reduce Medicare fraud resulted in a $4.1 billion dollar recovery.

In May 2012, Medicare Strike Force teams charged 107 people, including licensed health care professionals in seven cities, who were allegedly involved in schemes involving over $452 million in false billing.

In 2011, the same teams charged 115 people, including health care professionals, companies and executives for suspected participation in Medicare fraud schemes that involved over $240 million in false billing.  In another case, 91 suspects were charged for their alleged involvement in a Medicare fraud scheme that involved $290 million + in false billings.

According to the HHS’s press release :

“A key component of HEAT is the Medicare Strike Force – interagency teams of analysts, investigators, and prosecutors who can target emerging or migrating fraud schemes, including fraud by criminals masquerading as healthcare providers or suppliers.”

The Department of HHS attributes success to HEAT and several additional steps President Obama’s Administration took to combat Medicare Fraud – including provisions in ObamaCare.  Thanks to ObamaCare, Medicare fraudsters will receive 20 to 50 percent longer sentences for crimes involving more than $1-million dollars in lost taxpayer money. It also makes it more difficult for Medicare fraudsters to transfer their scams to another state or between Medicare and Medicaid.

Will ObamaCare End the Relationship Between You and Your Doctor?

President Obama looked the citizens of the USA in the eye and swore that we would be able to keep our doctor and our healthcare plan once the new Affordable Care Act (aka, “ObamaCare”) is fully enacted. With every passing day, changes in our healthcare system are giving rise to changes that will break that promise.

From an article published today by Dr. Sreedhar Potarazu

There is a growing concern among consumers that they may not be able to see the doctor of their choice, or even keep the doctor they currently have, as a result of what’s happening with ObamaCare.

There are several recent trends, which are concerning and may be a sign the role of the doctor, especially in primary care, is changing as we know it.

Dr. Potarazu lists a few examples of why we should all be concerned, including:

  1. Physicians assistants taking on more responsibility.
  2. A shortage of primary care doctors.
  3. Doctors are becoming employees.
  4. The rise of the virtual doctor.
  5. Doctors being replaced by computers.

California is said to have a unique solution to the extreme shortage of primary care physicians in the Golden State.  They simply changed the definition of what constitutes a primary care physician to include nurse practitioners, pharmacists and other healthcare professionals.

The doctor shortage caused by ObamaCare seems to be an unintended consequence, but who will pay for it in the end? Seniors will, that’s who.

“The most sacred part of health care is the doctor-patient relationship, and there is every indication that the sanctity of this relationship is being eroded’, says Dr. Potarazu.  “The reality is that the current supply of physicians cannot meet the demands of the new construct of the Affordable Care Act, and there needs to be immediate attention to how we will address this imminent manpower issue.”

Going forward, people without a health insurance contract, like a Medicare Advantage plan, will find it to be increasingly difficult to get an appointment with their doctor.

Read the full story…

Will House Republicans Successfully Repeal the Medicare “Doc Fix” Law?

Feb 13 (Reuters) – Republicans in the U.S. House of Representatives will seek a permanent solution to scheduled steep cuts in physician payments from the federal Medicare health insurance plan for retirees and disabled people, a House committee chairman said on Wednesday.

Rep. Fred Upton, chairman of the House Energy and Commerce Committee, told doctors he hopes to send so-called “Doc Fix” legislation to the House floor this summer that would repeal payment reductions enacted in 1997 as part of a law to balance the federal budget.

The 16-year-old “sustainable growth rate” (SGR) provision calls for reductions in doctor pay as a way to control spending by Medicare. Congress has prevented the SGR from taking effect through temporary measures, but that has run up the fiscal and political costs of finding a permanent solution.

U.S. Doctors have voiced frustration about uncertainty caused by the persistent threat of steep reductions in Medicare reimbursement for their services. Some have even threatened to stop serving Medicare patients.

Upton said he believes the nonpartisan Congressional Budget Office has opened “a window of opportunity” for change. The budget office recently lowered its cost estimate for a long-term SGR fix to $138 billion, from $245 billion last August, due to lower Medicare spending on physician services.

“It’s obviously a very large amount but a smaller mountain to climb,” the Michigan Republican said in a speech to the American Medical Association (AMA).

“Our goal is to get it done this year, to actually have it on the House floor before the end of the summer — July or the first week of August.”

Upton said he would seek support from Democrats in the Republican-controlled House to achieve a bipartisan bill that could muster support in the Democratic-run Senate.

He offered no specifics on how his bill would pay for the cost of repealing the SGR.

In the latest episode of the cat-and-mouse game, physicians escaped a 27 percent reduction in Medicare payments scheduled for Jan. 1, 2013, when Congress enacted a one-year $25 billion Doc Fix as part of its fiscal cliff legislation. The measure holds physician payments unchanged.

Upton and other leading Republicans on his panel have released a legislative blueprint that calls for freezing doctor payment rates for 10 years and basing future increases on their willingness to embrace methods to improve the quality and efficiency of care.

A bill introduced this month by House Democrat Allyson Schwartz and Republican Joe Heck would allow four years of payment increases while new payment and delivery models are vigorously tested.

An AMA proposal calls for a similar transition period, during which physicians would be rewarded for participating in new methods of care delivery.

Obama names Marilyn Tavenner as new CMS Chief.

President Obama nominated Marilyn Tavenner to run one of the biggest agencies in the federal government today, the Centers for Medicare and Medicaid Services (CMS). If it were anyone else it might be a big deal, however, Ms. Tavenner has been running the department for more than two years as the acting Deputy.

If recent history is any indication, the nomination won’t matter.

Not that being the head of CMS isn’t a big deal. It is. The agency has a massive budget that dwarfs the DOD, oversees Medicare, Medicaid, and the Children’s Health Insurance Program. Plus, the agency is the tip of the sword on Obama’s health care reform law, the Affordable Care Act.

Tavenner’s nomination is of little consequence because she already has the job. She’s been running the agency since December 2011 after Donald Berwick, M.D., quit the post. It’s not likely a Senate confirmation hearing will be held to confirm Tavnner. After all, the Senate hasn’t bothered to vote on a CMS nominee since Mark McClellan left the agency all the way back in October 2006.  For more information on why this important agency hasn’t had a confirmed leader for over six years and why that matters, read this article from Politico.

Marilyn Tavenner served as Principal Deputy Administrator of CMS since February 2010 and as Acting Administrator of CMS from February to July 2010. Previously, Ms. Tavenner served as the Commonwealth of Virginia’s Secretary of Health and Human Resources in the administration of former Governor Tim Kaine. Ms. Tavenner also spent nearly 35 years working with health care providers including almost 20 years in nursing, three years as a hospital CEO and 10 years in various senior executive level positions for Hospital Corporation of America (HCA). She has served as a board member of the American Hospital Association and as president of the Virginia Hospital Association. Ms. Tavenner holds a B.S. in nursing and an M.A. in health administration, both from the Virginia Commonwealth University.

Medicare Spending Slowing Ahead of Projections

The Congressional Budget Office (CBO) lowered its spending projections for Medicare earlier this month. The watchdog agency noted that Medicare’s expenses have been “significantly lower” than estimated for three straight years. The CBO revised its 10-year spending projections for the program down by $137 billion in its latest long-term economic forecast. That’s a two percent drop.

The report noted that spending on Medicare Parts A and B (hospital and doctor insurance) increased by an average of 2.9 percent per year since 2009. This is a significant downward trend compared to the 8.4 percent annual growth seen between 2002 and 2009.

“In recent years, healthcare spending has grown much more slowly both nationally and for federal programs than historical rates would have indicated,” the CBO wrote. The CBO previously attributed the slowdown to the recovering economy and “structural factors” in the healthcare system, however, supporters of the new ObamaCare law insist its reforms are the reason for the slower cost growth.

The latest CBO report also forecasts a 5.5 percent decrease in Medicaid spending between 2013 and 2022 compared with estimates made in August, 2012. The CBO explained that Medicaid spending per person is expected to go down as a result of the Affordable Care Act’s extension of eligibility to healthier adults. The CBO also predicts that Medicaid will see fewer enrollments than previously estimated.