Obamacare pilot project lowers Medicare costs

By: Brett Norman
July 17, 2013 05:00 AM EDT
 

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An ambitious program under the health law to change how care is paid for lost nearly a third of its participants after the first year, but not before all were able to boost the quality of care provided to patients in an experiment that some experts say holds promise to bring down health care costs in the long run.

The Centers for Medicare & Medicaid Services announced Tuesday that all 32 health care organizations had hit performance benchmarks for improving care in the Pioneer Accountable Care Organization program, and 13 had done so while substantially lowering Medicare costs. In part, that was by reducing hospitalization and rehospitalizations, CMS reported.

By health care standards, the savings claimed were relatively modest — $87.6 million in 2012. And two participants reported increasing costs by $4 million. Overall, for the 669,000 Medicare enrollees in the program, costs rose by just 0.3 percent compared with 0.8 percent for typical Medicare patients.

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“These results show that successful Pioneer ACOs have reduced costs for Medicare and improved the quality of care for their patients,” CMS Administrator Marilyn Tavenner said in a statement. “The Affordable Care Act has given us a wide range of tools to realign payment incentives in Medicare and Medicaid, and these efforts are already paying off.”

Mark McClellan, former CMS administrator under President George W. Bush and a leading accountable care expert, said the first-year performance is in line with similar undertakings in the private sector. Quality improvements typically precede savings because they can be accomplished more quickly while the savings sometime lag.

“Improving diabetes care now, you see benefits 18 months, 24 months down the road,” said McClellan, now at The Brookings Institution.

“This is a difficult journey,” he said. “It’s a marathon not a sprint, and some organizations are in a better position to do it faster, and others slower.”

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The Pioneer ACO program is among the health care law’s most aggressive experiments in improving care and cutting costs. Networks of doctors coordinate care for patients and share in both the savings they generate and — eventually — the risk of losses.

The Medicare Shared Savings Program is a risk-free version of the accountable care effort, but the share of the savings for the health care organization is also substantially smaller. Seven of the Pioneer ACOs are transitioning to that option this year, and two are opting out of the health law’s ACO programs altogether, although they may adapt their ACO investments for contracts with private insurers, Blair Childs, senior vice president for Premier healthcare alliance, said.

Presbyterian Healthcare Services in New Mexico is one of two Pioneers to drop out of the ACO program completely. The integrated health system, which also has a large health plan, faced two major challenges, according to Todd Sandman, its vice president for strategy and customer engagement. Part of the problem centered on using retrospective data, and part was that New Mexico is a “low-cost, low-reimbursement, low-health care utilization state” — putting it at a disadvantage to perform better than other Medicare providers, Sandman said.

“Frankly, what was hard for us getting out is we really do believe this is the right direction for health care providers,” Sandman said, describing the relationship with CMS as “very collaborative.”

More than 200 health care organizations are participating in the shared-savings program in addition to the Pioneer ACOs, and private insurers are employing the concept as well.

It’s one of several ideas, including bundled payments and medical homes, that are all likely to be part of reorganizing the payment model toward paying for quality, not volume, of care, McClellan said.

CMS should strike “the right balance between incentives and encouragement for change and getting participation in the program,” McClellan said. But the agency shouldn’t back off of rigorous goals — it “should continue to think of [the Pioneer ACO] program as pushing the envelope.”

Some participants had threatened to leave the program this spring over what they said was an overly ambitious set of 33 quality measures. CMS did not make the adjustments they sought. Health systems also have complained that the agency has not been fast enough in providing Medicare claims data that would help them keep track of whether their patients were filling needed prescriptions, for instance, or following up on referrals to specialists.

Jason Millman contributed to this report.

© 2013 POLITICO LLC

THE SMOKER DILEMMA FOR HEALTH INSURANCE

By Michelle Andrews Special to The Washington Post

July 17, 2013

Since smokers’ health-care costs tend to be higher than those of nonsmokers, is it reasonable for smokers to pay higher premiums when they buy insurance through the new state marketplaces that are scheduled to open in October? A handful of states and the District of Columbia say the answer is no.

“We decided it’s not in the good interests of our people” to charge smokers more, says Mohammad Akhter, chairman of the D.C. Health Benefit Exchange Authority, which is developing the District’s online marketplace.

Under the 2010 Affordable Care Act, health insurers are allowed to charge smokers 50 percent higher premiums than nonsmokers for new policies sold to individuals and small employer groups.

States have the option to reduce or eliminate the variation in rates, however, and six states and the District have opted not to charge smokers more, according to the Department of Health and Human Services. A few others have limited the premium differential to less than 50 percent. Virginia will apply the full 50 percent surcharge.

Consumer advocates say charging smokers more for health insurance may be counterproductive.

“There’s no evidence that charging someone a higher premium will discourage them from smoking,” says Dick Woodruff, vice president of federal relations at the American Cancer Society Cancer Action Network.

It might, however, discourage someone from buying health insurance, experts say. The health law requires many plans to cover FDA-approved smoking cessation services such as counseling and medication as a preventive benefit without charging consumers anything out of pocket. If health insurance coverage seems too expensive, fewer smokers will be able to take advantage of tools to help them quit, Woodruff says.

Experts say that smokers disproportionately have lower incomes, so that a premium surcharge will hit them especially hard. Tax credits to help pay for health insurance are available to people with incomes up to 400 percent of the federal poverty level ($45,960 for an individual in 2013). But the tax credit can’t be used for the tobacco surcharge.

What might this mean financially for a smoker?

The annual premium for a 40-year-old nonsmoker with a $35,000 income would be $3,857 for a typical plan that will be available on state exchanges, according to the Kaiser Family Foundation’s exchange subsidy calculator. This person would be eligible for a $532 tax credit, reducing his payment to $3,325.

But if that individual smoked, his cost would increase substantially. He would get the same $532 tax credit, but the premium would be 50 percent higher, or $5,786, meaning he’d have to pay $5,254.

The toll from the surcharge, however, may be tempered, at least temporarily, for some smokers. Last week, the Obama administration announced that some technical problems would make it difficult to process some older smokers’ premiums, and it told insurers not to charge older smokers more than three times what younger smokers pay, at least for now.

So how will insurers know if someone smokes?

“It’s going to be an honor system, basically, with people acknowledging that they’re a smoker,” Woodruff says.

If an insurer finds out that someone hasn’t told the truth, it can charge the policyholder for any surcharge amounts that should have been paid that year. But the insurer can’t rescind the policy or deny the liar continued coverage, according to the final rule governing the issue.

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This column is produced through a collaboration between The Post and Kaiser Health News. KHN, an editorially independent news service, is a program of the Kaiser Family Foundation, a nonpartisan health-care-policy organization that is not affiliated with Kaiser Permanente.

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