UPDATE 1-Coventry profit just misses analysts’ target

UPDATE 1-Coventry profit just misses analysts’ target

8:33am EDT

* Q1 EPS 62 cents vs 63-cent Street view

* Medicaid costs weigh

* Follows Aetna’s Q1 miss on Thursday

April 27 (Reuters) – Insurer Coventry Health Care Inc reported quarterly profit that was slightly lower than expected on Friday, hurt by high costs in its Medicaid plans for low-income Americans.

While overall enrollment in Coventry’s Medicaid plans nearly doubled, costs for a plan in the state of Kentucky were well above premiums.

“Unfortunately, concern over the higher costs in Kentucky will overshadow the otherwise solid results this quarter,” Goldman Sachs analyst Matthew Borsch said in a research note.

Shares of Coventry, a mid-sized health insurer, rose 2 cents to $32.70 in light pre-market trading.

Coventry’s report comes a day after larger rival Aetna Inc’s profit missed Wall Street’s target and said healthcare-claim costs may be about to rise, sending its shares tumbling.

The quarterly earnings of UnitedHealth Group Inc and WellPoint Inc, the two biggest health insurers, exceeded expectations, and both raised their outlooks for the year.

Coventry’s first-quarter net income rose to $170.7 million, or $1.20 per share, from $110.2 million, or 73 cents per share, a year earlier.

Results in the quarter got a big boost from a release of reserves related to its Medicare plans for seniors. Excluding the reserve release, earnings of 62 cents per share were a penny shy of the average estimate of analysts, according to Thomson Reuters I/B/E/S.

Revenue grew 21 percent to $3.69 billion, about $200 million ahead of estimates. Its membership jumped about 16 percent to 5.26 million, as Medicaid enrollment nearly doubled to 924,000.

Coventry saw greater-than-expected medical claims expenses in Kentucky for its Medicaid plan, which became effective late last year. The Kentucky contract represents about 5 percent of company revenue, according to Goldman’s Borsch.

The company backed its 2012 earnings forecast of a range of $3.10 to $3.30 per share. Analysts have been looking for $3.26.

Through Thursday, Coventry shares had risen more than 7 percent this year, less than the 12-percent climb for the Morgan Stanley Healthcare Payor index of health insurers.

Americans Support Medicare Reform, But Not on Their Dime: Poll

Respondents to Harris Interactive/HealthDay survey want drug companies, higher-income beneficiaries to pay more

April 26, 2012

By Karen Pallarito
HealthDay Reporter

THURSDAY, April 26 (HealthDay News) — Medicare, the federal health insurance program for older and disabled Americans, may be hurtling toward the critical list, but most people don’t want to pay for needed reforms from their own wallets, a new Harris Interactive/HealthDay poll finds.

Eighty-three percent of those polled believe changes are needed to keep Medicare affordable and sustainable, and 51 percent think that “a great deal of change” is necessary. But they’d rather not make any personal sacrifices, according to the poll.

“There’s a clear majority who think there is a problem that needs to be addressed, but (people also believe) if the changes are going to cost me money in terms of higher co-pays, higher deductibles or higher taxes, no thank you,” said Humphrey Taylor, chairman of The Harris Poll.

When people were presented with nine proposals for slowing the rate of Medicare spending, the poll revealed strong approval (72 percent) for cutting the price Medicare pays for prescription drugs to pharmaceutical companies, and modest support for trimming fees to hospitals (47 percent favor, 28 percent oppose) and doctors (41 percent to 35 percent).

Few favor higher taxes and out-of-pocket contributions, such as increased co-pays and deductibles. Fifty-three percent and 60 percent, respectively, oppose those options. But a majority said people with higher incomes should pay more for Medicare benefits than lower-income individuals (57 percent favor, 21 percent oppose).

Medicare, which serves 49 million older and disabled Americans, is under severe financial strain. More than 15 percent of the federal budget goes toward Medicare, and that’s projected to increase to 17.5 percent by 2020 — the third largest government expenditure after Social Security and defense, government statistics show.

Experts say rising prices, new technologies, beneficiaries’ increasing use of services and the aging of the population are fueling the growth in Medicare spending.

“You’ve got a situation now where health care is somewhere around 18 percent of GDP (gross domestic product), and it’s going to go to 20 percent in a few years,” said Nathan Goldstein, chief executive officer of Gorman Health Group, a Washington, D.C.-based consulting firm. “It’s like a dragon eating the economy from the inside.”

The situation will only worsen in the coming years as more and more baby boomers become eligible for the program, swelling Medicare enrollment to more than 80 million people by 2030.

Because of these trends, the board of trustees that oversees Medicare’s financial operations predicts that the hospital insurance trust fund, known as Medicare Part A and a key component of the program, will be depleted by 2024.

To put the program back on stable footing, policymakers are considering a variety of cost-cutting and revenue-raising strategies.

One proposal being advanced by House of Representatives Budget Committee Chairman Paul Ryan (R-Wis.) and Sen. Ron Wyden (D-Ore.) would give seniors a voucher to shop for their own private health insurance. Under their so-called “premium support” plan, Medicare would no longer provide a “defined benefit.” Instead, beneficiaries would receive a “defined contribution” toward the cost of health insurance.

But support for such a plan depends on political affiliation, the poll found.

When described as “one proposal to change the Medicare program,” a small plurality (32 percent to 27 percent) of those polled said they favor a voucher plan. When described as a House Republican plan, Republican support increases to 47 percent from 35 percent while Democratic opposition rises to 48 percent from 31 percent.

At a press briefing on Friday to unveil recommendations for Medicare reform, the American College of Physicians (ACP) said it could not endorse such a “premium support” plan without pilot testing and strong protections for beneficiaries. However, the college said it does support policies to improve the delivery of care, reduce the government’s cost of prescription drugs and pay providers based on the value of services provided.

“Difficult choices must be made to ensure (Medicare’s) solvency, but not at the expense of patient health,” Robert Doherty, ACP’s senior vice president of governmental affairs and public policy, said during the briefing.

A majority of adults (54 percent to 18 percent) polled agree that doctors and hospitals should be paid based on quality and results, rather than the volume of care provided. Even in Washington, D.C., Taylor noted, “there is an acceptance . . . that the traditional fee-for-service way of paying for things is a kind of toxic incentive and needs to be changed.”

The poll also found that people like having a choice between traditional fee-for-service Medicare and Medicare Advantage plans. Only small percentages would like to see the program run exclusively by the federal government (12 percent) or by private health plans (13 percent).

The online survey of 2,229 adults aged 18 and older was conducted April 5 to 9. Figures for age, sex, race/ethnicity, education, geographic region and household income were weighted, where necessary, to make them representative of actual proportions in the population. Weighting was also used to adjust for respondents’ likelihood to be online.

Arrests over Capital Medicaid Protest

76 arrested in Capitol protest over Medicaid cuts

By Paul Courson, CNN
 
STORY HIGHLIGHTS
  • The demonstration is held in the Cannon House Office Building
  • Disability activists are worried about proposed cuts by House Republicans
  • Actor Noah Wyle is among those arrested

Washington (CNN) — Seventy-six people, including actor Noah Wyle, were arrested Monday at a demonstration protesting cuts in Medicaid proposed by the House Republican leadership, authorities said.

Hundreds of demonstrators filled the ornate rotunda of the Cannon House Office Building for the protests. The 76 were arrested on suspicion of unlawful conduct and demonstrating in a Capitol building, police said.

Wyle, formerly of “ER” and current star of “Falling Skies,” was among those handcuffed and taken away. Police said he and most of the others would face a misdemeanor fine and be released after processing.

The rally against the proposed cuts in Medicaid was organized by ADAPT, the Americans with Disabilities for Attendant Programs Today. A statement handed out during the event called for “accountability,” against the House’s proposed one-third cut to federal Medicaid spending.

“Today, I took part in an effort by ADAPT to bring attention to the Medicaid cuts that have been made by many states and are threatened to be made on a federal level,” Wyle said in a statement.

“To institutionalize a disabled American costs four times as much than to give assistance for independent living. This issue is about civil rights, not about medicine. People who have the ability to live in integrated, affordable and accessible housing should have the right to do so.”

The group wants House Budget Committee chairman Rep. Paul Ryan (R-Wisconsin) to require states to provide long-term alternatives to nursing homes and institutions that are often mandated by Medicaid rules.

Instead of home and community support when she’s older and unable to live on her own, protester Madeleine McMahan of Pennsylvania told CNN, “My generation? The Baby Boomers? we’re looking at nursing homes if we don’t do something about it.”

She spoke in handcuffs, waiting for police to escort her to an elevator for arrest processing.

Also in handcuffs and a wheelchair, Denise McMullin-Powell of Delaware said lawmakers proposing the Medicaid cuts are “completely ignoring that we even exist in the stupid budget that they have.”

She said “it’s worth getting arrested, it’s worth dying for, but they’re gonna kill us first because of the cuts. If we can’t stay in our home, if we can’t get the things we need through Medicaid, we will die in the streets without that type of thing.”

Wyle said, “This effort is to end the longstanding bias of the Medicaid system toward institutions and away from community care. The real shame is to see so many productive, intelligent people expending their energy on the fight for basic services to ensure their survival.”

2 Medicaid Data Breaches, 1 Weak Link: Employees


Second data breach at a state Medicaid agency in less than a month shows need to limit employee access to confidential data, regardless of other security procedures.

By Ken Terry,  InformationWeek
April 24, 2012
URL: http://www.informationweek.com/news/healthcare/security-privacy/232900817

For the second time in less than a month, there has been a major data security breach at a state Medicaid agency. The South Carolina Department of Health and Human Services (SCDHHS) discovered on April 10that an employee of the state’s Medicaid program had transferred personal information of 228,435 Medicaid beneficiaries to his personal email account.

After the department detected the transfers, it contacted the state law enforcement agency. The employee was terminated, and the affected individuals were notified of the security breach. Christopher Lykes Jr. of Swansea, Ga., has been arrested and charged with the offense, according to South Carolinian website The State.com. AdTech Ad

Just a few weeks ago, hackers broke into a server at the Utah Department of Technology Services and stole Medicaid records of 780,000 people. Of those, about 280,000 had their Social Security numbers compromised. Less-sensitive personal information on an additional 500,000 individuals, including names, addresses, dates of birth, and diagnostic codes, also was stolen.

In the South Carolina case, the compromised records had patient names, phone numbers, addresses, birth dates, and Medicaid ID numbers, but no private medical records or financial information. In 22,604 cases, the records included Medicare numbers that contained Social Security numbers.

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To address the possibility of identity theft, SCDHHS is offering a free year of identity protection services to every affected individual. The service, provided by Experian, includes a free credit report, daily credit monitoring, and a $1 million identify theft insurance policy. In addition, the department has created a website and a toll-free number to answer the questions of affected beneficiaries.

Meanwhile, the SCDHHS announcement said, the department is impounding all files and computers where the compromised information might have been stored; has frozen access for much of its staff to software that allows the aggregation of personally identifiable information; and has hired an external IT security firm to conduct a risk assessment of its data and IT systems security.

The risk of this type of transfer of confidential information by employees is increasing because many organizations are using Web browsers as the primary platform for viewing information, Bill Morrow, a security expert and CEO of Quarri Technologies, told InformationWeek Healthcare.

“Standard Web browsers contain critical security gaps that create significant risks to organizations’ confidential data, and online resources like webmail and social networking sites can be open windows for data leakage,” he said. “A careless or malicious employee can easily steal company trade secrets, intellectual property, or leak sensitive customer information.”

Employees can access such information regardless of whether their organization uses an on-premises server or a remote server. But organizations, including healthcare providers, are increasingly using browsers to link together multiple sites and provide mobile access to systems, Morrow noted.

Moreover, many healthcare organizations are moving toward the use of cloud-based applications that are accessed over the Internet. In a recent Harris Interactive survey, nearly 60% of CIOs in healthcare systems that had an EHR and a health information exchange said they planned to invest in “cloud-based open systems.” Storage and retrieval of medical imaging data in the cloud also is becoming widespread.

The best way to prevent employees from using browsers to replicate confidential information, Morrow said, is to deploy what he calls “hardened browsers,” which are available from several vendors. Such a viewing platform allows organizations to limit the aggregation of data and to specify which data can be saved, printed or transferred, and how, he noted.

The key to using a hardened browser, he added, is to strike an appropriate balance between employees’ need to use data and a security policy that prevents unauthorized movement of confidential information.

Analysis – Supreme Court Ruling

Obamacare Collapse Would Put Employers In Charge

by The Associated Press

WASHINGTON April 24, 2012, 01:12 pm ET

WASHINGTON (AP) — If the Supreme Court strikes down President Barack Obama’s health care overhaul, don’t look to government for what comes next.

Employers and insurance companies will take charge. They’ll borrow some ideas from Obamacare, ditch others, and push even harder to cut costs.

Here’s what experts say to expect:

— Workers will bear more of their own medical costs as job coverage shifts to plans with higher deductibles, the amount you pay out of pocket each year before insurance kicks in. Traditional insurance will lose ground to high-deductible plans with tax-free accounts for routine expenses, to which employers can contribute.

— Increasingly, smokers will face financial penalties if they don’t at least seriously try to quit. Employees with a weight problem and high cholesterol are next. They’ll get tagged as health risks and nudged into diet programs.

— Some companies will keep the health care law’s most popular benefit so far, coverage for adult children until they turn 26. Others will cut it to save money.

— Workers and family members will be steered to hospitals and doctors that can prove that they deliver quality care. These medical providers would earn part of their fees for keeping patients as healthy as possible, similar to the “accountable care organizations” in the health care law.

— Some workers will pick their health plans from a private insurance exchange, another similarity to Obama’s law. They’ll get fixed payments from their employers to choose from four levels of coverage: platinum, gold, silver and bronze. Those who pick rich benefits would pay more.

“Employers had been the major force driving health care change in this country up until the passage of health reform,” said Tom Billet, a senior benefits consultant with Towers Watson, which advises major companies. “If Obamacare disappears … we go back to square one. We still have a major problem in this country with very expensive health care.”

Business can’t and won’t take care of America’s 50 million uninsured.

Republican proposals for replacing the health care law aren’t likely to solve that problem either, because of the party’s opposition to raising taxes. The GOP alternative during House debate of Obama’s law would have covered 3 million uninsured people, compared with more than 30 million under the president’s plan.

After the collapse of then-President Bill Clinton’s health care plan in the 1990s, policymakers shied away from big health care legislation for years. Many expect a similar reluctance to set in if the Supreme Court invalidates Obama’s Affordable Care Act.

Starting in 2014, the law requires most Americans to obtain health insurance, either through an employer or a government program or by buying their own policies. In return, insurance companies would be prohibited from turning away the sick. Government would subsidize premiums for millions now uninsured.

The law’s opponents argue that Congress overstepped its constitutional authority by requiring citizens to obtain coverage. The administration says the mandate is permissible because it serves to regulate interstate commerce. A decision is expected in late June.

The federal insurance mandate is modeled on one that Massachusetts enacted in 2006 under then-Gov. Mitt Romney. That appears to have worked well, but it’s unlikely states would forge ahead if the federal law is invalidated because health care has become so politically polarized. Romney, the likely Republican presidential nominee, says he’d repeal Obamacare if elected.

That would leave it to employers, who provide coverage for about three out of five Americans under age 65.

“With or without health care reform, employers are committed to offering health care benefits and want to manage costs,” said Tracy Watts, a senior health care consultant with Mercer, which advises many large employers. “The health care reform law itself has driven employers, as well as the provider community, to advance some bolder strategies for cost containment.”

First, employers would push harder to control their own costs by shifting more financial responsibility to workers.

Data from Mercer’s employer survey suggests that a typical large employer can save nearly $1,800 per worker by replacing traditional preferred provider plans with a high-deductible policy combined with a health care account. “That is very compelling,” said Watts.

It won’t stop there. Many employers are convinced they have to go beyond haggling over money, and also pay attention to the health of their workers.

“As important as it is to manage the cost of medical services and products, and eliminate wasteful utilization, there has been a strong recognition that ultimately healthier populations cost less,” said Dr. Ian Chuang, medical director at the Lockton Companies, advisers to many medium-size employers. His firm touts programs that encourage employees to shed pounds, get active or quit smoking.

Employer health plans were already allowed to use economic incentives to promote wellness, and the overhaul law loosened some limits.

A Towers Watson survey found that 35 percent of large employers are currently using penalties or rewards to discourage smoking, for example, and another 17 percent plan to do so next year. The average penalty ranges from $10 to $80 a month, but one large retailer hits smokers who pick its most generous health plans with a surcharge of $178 a month, more than $2,100 a year.

Overall, one of the most intriguing employer experiments involves setting up private health insurance exchanges, markets such as the health care law envisions in each state. Major consulting firms such as Mercer and Aon Hewitt are developing exchanges for employers.

As under the health care law, the idea is that competition among insurers and cost-conscious decisions by employees will help keep spending in check. Aon Hewitt’s exchange would open next January, with as many as 19 companies participating, and some 600,000 employees and dependents.

“The concept of an exchange does not belong to Obamacare,” said Ken Sperling, managing the project for Aon Hewitt. “We’re borrowing a concept that was central to the health care law and bringing it into the private sector. Whether the law survives or not, the concept is still valid.”

Medicare trustee report hangs on uncertain assumptions

 

Mon, Apr 23 2012

By David Morgan

WASHINGTON (Reuters) – Medicare, the U.S. healthcare program for the elderly, should be able to stave off insolvency for the next 12 years, depending on a number of financial and political assumptions that may prove unrealistic, officials and other experts said on Monday.

The annual report of the Medicare trustees predicted that the program’s key hospital trust fund will become exhausted in 2024, prompting Medicare to begin paying out only 87 percent of scheduled hospital benefits to tens of millions of future retirees and disabled beneficiaries.

With the fate of Medicare a hot-button election year issue for the program’s 49 million beneficiaries, the report is likely to become fodder for Democrats and Republicans as they battle for control of the White House and Congress.

The 2024 forecast is unchanged from a year ago and shows that the deterioration of $549 billion-a-year program’s finances has not accelerated since 2010.

But the outlook is based on assumptions that may be unlikely, including a scheduled 31 percent pay cut for doctors in 2013, which Congress is almost certain to override.

The forecast also assumes that a deficit-reduction agreement to slash Medicare spending by 2 percent a year can be sustained over the coming decade and that the U.S. Supreme Court will not overturn President Barack Obama’s healthcare reform law in June.

The trustees also said Medicare is on an unsustainable path over the long term that could cause expenditures to more than double as a percentage of the U.S. economy, from 3.7 percent now to 10.4 percent in 2086, under a worst-case scenario.

Officials said that even the most optimistic sections of the report underscore the need for reform.

“The sooner the policymakers address these challenges, the less disruptive the unavoidable adjustments will be … and the greater the likelihood that the solutions we adopt will be balanced and equitable,” said trustee Robert Reischauer.

Administration officials seized on the report as evidence that Obama’s Patient Protection and Affordable Care Act has strengthened Medicare by encouraging efficiencies, combating fraud and waste and eliminating unnecessary costs.

MEDICARE AND MEDIOCRE COVERAGE

“Medicare’s in a much stronger position than it was a few years ago, thanks to the Affordable Care Act,” said Health and Human Services Secretary Kathleen Sebelius, who told reporters that an estimated $200 billion in Medicare savings from reforms had pushed the expected insolvency date back from 2016.

“This is an approach that will put Medicare on a stable trajectory without eliminating the guaranteed benefits that beneficiaries have counted on for decades or shifting tremendous new costs onto seniors,” she said.

But analysts said Medicare could be forced to begin paying only partial hospital benefits earlier if assumptions about physician pay, deficit reduction and the fate of reforms fail to pan out.

“Medicare is in trouble,” said Joseph Antos, an analyst at the conservative American Enterprise Institute. “Are we really holding the line? Absolutely not.”

Earlier on Monday, a new report from the nonpartisan Government Accountability Office raised new questions about Medicare’s ability to improve care delivery, reduce costs and combat waste.

The GAO said Medicare is spending $8.3 billion on a test project that is supposed to improve the quality of private health coverage but has mainly rewarded mediocre insurance plans.

The watchdog agency urged the administration to cancel the Medicare Advantage quality bonus payment initiative, a three-year project described as the largest-scale test to improve Medicare services to date.

The administration defended the program as a necessary effort to determine how best to improve quality and reduce costs in Medicare Advantage, which provides about one-quarter of Medicare beneficiaries with coverage from private insurers.

The demonstration project, designed to promote quality by awarding performance bonuses to private insurers that offer coverage through Medicare, was undertaken to test whether annual quality improvements could be achieved more quickly than under Obama’s healthcare overhaul.

“We think this is a really important step,” Sebelius said. “At the end of 2014, it will have accomplished just what the goal was, which is to give some financial incentives to those plans that are improving quality results.”

Medicare Advantage was adopted under George W. Bush as a way to bring market efficiency to the sprawling government program. Some of the largest providers of Medicare Advantage plans are UnitedHealth Group and Humana Inc.

But Medicare Advantage has proved to be more expensive than traditional Medicare.

Sebelius said that even with the costs of the quality test program, the administration has been able to reduce the cost of Medicare Advantage from 114 percent of the fee-for-service program to 107 percent over the past two years.

(Editing by Maureen Bavdek and M.D. Golan)

Medicare bonuses criticized

Nonpartisan gov’t auditors rebuke Medicare bonuses

By RICARDO ALONSO-ZALDIVAR

 

Businessweek

The nonpartisan Government Accountability Office said it’s not clear that the $8.3 billion Medicare Advantage bonus program will improve quality because most of the money is going to plans just rated average. The auditors did find, however, that the bonuses would temporarily ease the pain of unpopular cuts to insurance plans under President Barack Obama’s health care overhaul law.

Ahead of presidential and congressional elections in which seniors are a key group of swing voters, the administration has been working hard to portray itself as a good steward of Medicare, by cracking down on waste and fraud, improving benefits, and keeping costs under control. The GAO report could become a blemish on its record.

The administration defended the program, saying without bonuses many plans would not have an incentive to improve.

But Sen. Orrin Hatch, R-Utah, said the GAO report suggests that the administration abused its authority, pumping money to the plans to avoid more criticism over the cuts.

Medicare Advantage is a popular private insurance alternative to the traditional health care program. More than 3,000 private plans serve nearly 12 million beneficiaries, about one-fourth of Medicare recipients. They offer lower out-of-pocket costs, usually in exchange for some limitations on choice.

The health care law trimmed Medicare Advantage to compensate for prior years of overpayments that had allowed the plans to offer attractive benefits — and pocket healthy profits.

Republicans fiercely attacked those cuts during their successful campaign to take control of the House in the 2010 midterm elections. Seniors responded by backing GOP candidates.

After the election, the administration announced what it called a “demonstration program” to test whether a generous bonus program would lead to faster, broader improvements in quality. (The health care overhaul law had already provided a smaller bonus program only for top-rated plans.)

GAO, the investigative agency of Congress, did not address GOP allegations that the bonuses are politically motivated. But, its report found the program highly unusual. It “dwarfs” all other Medicare pilots undertaken in nearly 20 years, the GAO said.

Most of the bonus money is going to plans that receive three to three-and-half stars out of a possible five stars on Medicare’s quality rating scale, the report said.

Available through 2014, the bonuses will soften much of the initial impact of the Medicare Advantage cuts, acting like a temporary reprieve.

This year, for example, the bonus program offset about 70 percent of the cuts in the health care law. Indeed, Medicare Advantage enrollment is up by 10 percent and premiums have gone down on average.

But GAO questioned whether the bonus program will achieve its goal of finding better incentives to promote quality. “The design of the demonstration precludes a credible evaluation of its effectiveness in achieving (the administration’s) stated research goal.”

The administration says it disagrees with the GAO findings and believes the bonuses will improve the quality of care.

“Absent this demonstration, we believe that many plans would not have an immediate incentive to improve the quality of care delivered to (Medicare Advantage) enrollees,” the Health and Human Services department said in its formal response to GAO.

Hatch, the ranking Republican on the Senate panel that oversees Medicare, is questioning whether the administration had the legal authority to create the program.

“The Obama administration seems to be using a technicality to sidestep Congress and write itself a blank check to spend more money for political purposes leading into this year’s elections,” said Hatch.

“The White House does not have the authority to green-light spending on whatever program it wants,” he added. “This report is just the beginning — I will be demanding answers.”

HHS spokeswoman Erin Shields said the bonuses will help Medicare improve quality. “The temporary demonstration will build on the improvements due to star quality ratings to learn how to best incentivize quality while we bring payments down,” she said.

The Associated Press first reported on concerns about the bonus program last spring. Administration officials said at the time it had nothing to do with politics.

But another nonpartisan agency that advises lawmakers on Medicare also criticized the bonus plan as the administration was pursuing it.

The Medicare Payment Advisory Commission said it amounts to “a mechanism to increase payments” and its design “sends the wrong message about what is important to the program and how improved quality can best be achieved.”

The bonuses are the costliest demonstration program in Medicare history. They’ll be paid from the Medicare trust fund.

——

 

G.A.O. Calls Test Project by Medicare Costly Waste

April 22, 2012

 

From the New York Times

By

WASHINGTON — Medicare is wasting more than $8 billion on an experimental program that rewards providers of mediocre health care and is unlikely to produce useful results, federal investigators say in a new report.

The report, to be issued Monday by the Government Accountability Office, a nonpartisan investigative arm of Congress, urges the Obama administration to cancel the program, which pays bonuses to health insurance companies caring for millions of Medicare beneficiaries.

Administration officials, however, defended the project and said they would not cancel it because it could improve the quality of care for older Americans.

In the 2010 health care law, Congress cut Medicare payments to managed care plans, known as Medicare Advantage, and authorized bonus payments to those that provide high-quality care. Investigators found that most of the money paid under the demonstration program went to “average-performing plans” rated lower than the benchmarks set by Congress.

The report said the project would cost $8.3 billion over 10 years, with 80 percent of the cost occurring in the first three years.

Federal investigators are trying to determine whether Medicare officials had the legal authority to make the changes.

Senator Orrin G. Hatch of Utah, the senior Republican on the Finance Committee, and Representative Dave Camp, Republican of Michigan and chairman of the Ways and Means Committee, said the report suggested that Medicare officials had abused their authority.

In a statement, Mr. Hatch and Mr. Camp said they were concerned that the government might be “using taxpayer dollars for political purposes, to mask the impact on beneficiaries of cuts in the Medicare Advantage program.” Administration officials denied that.

A separate federal panel, the independent Medicare Payment Advisory Commission, also criticized the project, saying it increases “spending at a time when Medicare already faces serious problems with cost control and long-term financing.”

The panel denounced Medicare’s “overly broad use of demonstration authority” and said “limited Medicare dollars should go to truly high-performing plans.” It said “the extension of quality bonuses to the vast majority of plans is likely to result in far greater program costs than the reward system enacted” by Congress, and that by spreading the rewards so broadly, “the demonstration lessens the incentive to achieve the highest level of performance.”

The G.A.O. said the project “dwarfs all other Medicare demonstrations” in its impact on the budget, but is so poorly designed that researchers could not tell whether the bonus payments led to improved care. As a result, it said, it is unlikely to “produce meaningful results.” Insurers can use the bonuses to offer extra benefits, like vision and dental care, or to lower premiums.

More than 12 million people are in Medicare Advantage plans. About one-third of them are in plans that would receive bonuses under the 2010 law. By contrast, under the demonstration program, 90 percent are in plans eligible for bonuses, the report said.

The administration said that by offering bigger bonuses to more health plans, it hoped to encourage larger, more rapid improvements in care. “All Medicare Advantage plans will be part of the demonstration,” a federal health official told James C. Cosgrove, the accountability office’s director of health care studies.

The Medicare commission said “demonstration authority is intended for smaller-scale projects” that test innovations in the way health care is financed and delivered.

The health care law cut payments to private Medicare Advantage plans after many studies found that they were being overpaid. President Obama said the private plans were getting “unwarranted subsidies” that “pad their profits but don’t improve the care of seniors.”

The commission said payments to private plans, including the bonuses, were still about 7 percent higher than what the government would pay for similar beneficiaries in the traditional Medicare program.

 

Right winning war on exchanges

from Politico
By: J. Lester Feder and Jason Millman
April 18, 2012 11:33 PM EDT

The Cato Institute’s Michael Cannon’s been racking up frequent-flier miles.

He’s dropped in on more than a dozen states to make the case to lawmakers that they should not lift one legislative finger to implement President Barack Obama’s health reform.

“It has been a fun ride,” he said.

Conservatives like John Graham of the Pacific Research Institute have also been touring states with the platform provided by the American Legislative Exchange Council to help kill off state-based exchanges, a key piece of health reform that will help millions of people purchase insurance coverage — often with federal subsidies — starting in 2014.

“Our approach has to be absolute noncollaboration, civil disobedience — well, not civil disobedience but resistance … by whatever means,” said Graham.

Two years into the law’s implementation, conservative emissaries have contributed to impressive stats. Almost all red states are holding off on exchange legislation at least until the Supreme Court decides on the Affordable Care Act, and in most of those states, exchange-building legislation has crawled to a stop.

Both funded partly by the Koch brothers, Cato and ALEC form the cavalry that state-based conservative organizations call in to convert Republican lawmakers who have been considering establishing exchanges. While they’re no fans of the federal law, many Republicans in state government thought it was better to set up their own exchange than to let the Department of Health and Human Services do it for them if the law survives past 2012.

Some still think that — and disagree with some of the assumptions and interpretations the fly-in conservatives are making. But Cannon and Graham are undeterred.

“Every time when I go into these states, there are usually a bunch of Republican politicians who have bought this line that creating a state exchange will protect them from Obamacare,” said Cannon. “It’s fun going in there and telling them, ‘No actually, if you want to protect your state, tell the federal government: … It’s your stupid law; you implement it.’”

In his view, state autonomy under health reform is a mirage. States won’t actually have much control because the federal rules governing the exchanges are so far-reaching. The sole difference between a state-run and federal-run exchange, he said, is that a state will have to “to pay for the privilege of having their autonomy taken from them” if they pass their own bill.

Second, he argues that if states don’t act, employers will be better positioned to legally challenge penalties they would have to pay if their employees end up getting subsidized coverage in the exchanges. Cannon contends that the legislation as drafted only allows the subsidies to be given through a state exchange — not a federal one. Most legal experts think this is a drafting error that the Obama administration can fix through regulation, but Cannon believes the courts will strike down any workaround.

One state where his message resonated was New Hampshire, which he visited at the invitation of the Josiah Bartlett Center for Public Policy, a free-market think tank.

The New Hampshire Legislature not only allowed a Republican-sponsored exchange bill to die this winter, but the House went a step further and passed a bill prohibiting the state from enacting an exchange shortly after his visit.

And according to Maine Democratic state Rep. Sharon Treat, Cannon’s New Hampshire visit had a chilling effect across the state line. She had been in talks with some of her Republican colleagues about an exchange bill. That stopped.

“Now, they’re advancing the idea of don’t do anything, because we don’t want to help President Obama,” the Maine Democrat said.

This is exactly what the national conservative organizations had hoped for.

“It took a lot of people like Cannon and me and certain legislators to give some backbone” to lawmakers uncertain about drawing a hard line against exchanges, said Graham.

Graham said that national health experts are a vital resource for grass-roots groups, most of whom do not have health care experts on staff. He, for instance, recently visited the Idaho Freedom Foundation.

“They have to outsource,” he said of the local organizations. “Grass-roots liberty groups, tea party groups call us and say, ‘What are the reasons to oppose an exchange again?’”

These efforts get a boost from another Koch-aligned group, Americans for Prosperity, which is trying to fight off exchanges in eight states. These efforts are mostly kept in-house, without help from outside groups.

“We work with the policy shop in D.C. a lot to make sure we’re on top of the 644 pages” of final exchanges rules, said Teresa Oelke, director of AFP’s Arkansas chapter. “I think that is the largest point against the exchanges. We’re signing up for a program that we’ll have to pay for by January 2015, but the federal government has control of every single decision.”

The approach of these national organizations has reflected sophisticated lobbying know-how, suggested Alabama Republican state Rep. Greg Wren, who is co-chairman of the National Conference of State Legislatures Federal Health Reform Implementation task force. Though an ALEC member, Wren is one of the main Republican voices arguing that lawmakers who opt for doing nothing and open the door to a federal exchange are putting their state sovereignty at risk.

“They’ve targeted … leadership, committee chairs, and oftentimes, people in those positions can stop or speed-bump any kind of legislation,” Wren said.

Cheryl Smith also thinks the work by Cato and ALEC to derail exchanges looks reckless. She’s a former Heritage Foundation staffer who now directs the exchange practice of the consulting firm Leavitt Partners, which advises several red states trying to figure out how to handle the reform law.

Many legal experts doubt Cannon’s analysis of the health law, she said, and it’s risky for state lawmakers to leave their state’s future up to uncertain interpretation.

“He may be right, but if you’re a state policymaker, do you really want to bet the farm on that?” she said.

Less Than 1% of Dual Eligibles Considered “High-Cost” Beneficiaries

From Becker’s Hospital Blog
 
Written by Bob Herman | April 19, 2012

 

There are roughly 9 million people who are beneficiaries of both Medicare and Medicaid — also known as dual eligibles — and although it is a costly population, less than 1 percent of dual eligibles are considered to be in “high-cost” categories, according to a recent study in Health Affairs.

The authors looked at the 2007 Medicare Current Beneficiary Survey and the 2007 Medicaid Statistical Information System Summary File for their base of data, and they only focused on public spending of dual eligibles.

The combined average per capita spending on dual eligibles was $29,868 in 2007 — more than four times the per capita spending for non-dual-eligible Medicare beneficiaries. However, these results are averages, and the authors found that not all dual eligibles are “high-cost.”

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In 2007, they found roughly 40 percent of dual eligibles had combined Medicaid and Medicare annual spending that was less than the average $7,226 per capita Medicare costs on non-dual-eligible Medicare beneficiaries.

The study’s authors also found that only a relatively small portion of dual eligibles was responsible for the majority of the population’s total spending, as is the case for healthcare in general. Roughly 80,000 dual eligibles, or less than 1 percent of all dual eligible beneficiaries, were in the highest 10 percent of the spending distribution in both Medicaid and Medicare.

“It is these high-cost dual eligibles who would particularly benefit from initiatives aimed at coordinating care and aligning incentives between the two programs,” according to the report. “That said, high-cost Medicare-Medicaid dual eligibles accounted for only about 4.6 percent of total spending on the population in 2007.”