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A Tale of Two Medicares

CMS has announced it will raise rates for insurance companies offering privatized Medicare Advantage, rather than trimming back the billions of federal overpayments as required in the Affordable Care Act.  Wall Street and the insurance industry loved the news that taxpayers will continue to overpay Medicare Advantage plans:

“WellCare Health Plans Inc. jumped as much as 12 percent on Monday after the government proposed raising payments next year for private insurers that provide Medicare coverage.Shares in Humana rose 2.6 percent. Centene Corp. and Molina Healthcare Inc. also rose Monday following the CMS’s proposals, adding 4.2 percent and 6.2 percent respectively.”

The health insurance industry’s massive advertising and lobbying campaign to keep their government subsidies has become an annual ritual here in Washington – one that’s more predictable than the timing of the cherry blossoms. To head off any chance that CMS might reduce the massive federal overpayments, as required by the Affordable Care Act, the multi-billion dollar insurance industry floods the airways and hallways of Congress with threats to cut seniors’ MA benefits unless their overpayments are protected.  Clearly, that lobbying works. 

For the second year in a row, CMS has proposed a rate increase. This year’s 1.35%  rate hike, when combined with other industry requested changes, will lead to a 3.55% increase in revenue for America’s health insurance industry.  Last year, CMS initially proposed a .95% rate cut which was reversed after AHIP’s lobbying blitz turned it into a 1.25% increase.  In 2015, Medicare paid $8 billion more to provide coverage for seniors in Medicare Advantage than for traditional Medicare. That will now continue.

The Washington Post’s analysis last year, still fits today:

“Alas, since its origins in the early ’80s, MA has proven no more immune to perverse incentives and system-gaming than any of the government’s other health programs.

First, insurers cherry-picked healthier customers, who are less costly, and hence more profitable, to treat. Congress responded with new payment formulas to reward companies for accepting relatively sick customers. But this led to rampant “upcoding,” whereby MA plans find and report as many illnesses per enrollee as they can plausibly document.

Last fall, {2014} the Department of Health and Human Services released a comprehensive analysis showing that MA costs grew faster than they would have under fee-for-service between 2004 and 2013 — and that only upcoding, not patient demographics or other neutral factors, could explain this.”

Family physician and Senior Health Policy Fellow for Physicians for a National Health Program, Dr. Don McCanne says:

“Ensuring success of the MA plans is part of the plot to eventually privatize Medicare - converting it into a premium support system (vouchers) for a market of private plans that will displace the traditional Medicare program. The value of the voucher equivalents will erode with time, shifting ever more of the costs to the Medicare beneficiaries. It will be disastrous.

They (private MA plans) have been profitable only because they have continued to be successful in enrolling healthier, less costly patients while at the same time receiving overpayments from the government.”

So how did we get here?

Medicare Advantage was created by the Bush Administration to privatize Medicare. Prior to the ACA, the federal government paid MA plans up to 14 percent more than traditional Medicare for identical services, costing taxpayers about $1,000 extra per beneficiary.  MA plans attract younger and healthier customers by offering benefits not included under traditional Medicare, such as gym memberships.  That competitive and financial advantage has paid off, as MA enrollment continues to grow.  Seniors in private Medicare say they like their plans, as do people enrolled in traditional Medicare. 

The real irony in this debate is that while traditional Medicare has been repeatedly targeted in Congress for cuts, $8 billion in overpayments to the insurance industry remain protected. Congressional conservatives claim America can’t afford Medicare yet many of these same politicians defend sending billions of Medicare dollars straight to the insurance industry, in spite of growing concerns that insurers are gaming the system:

  • Independent analysis by the National Bureau of Economic Research shows private plans are “upcoding” or manipulating patient diagnoses in order to game payment systems and generating billions of dollars annually.  
  • Risk scores have risen 9 percent faster in Medicare Advantage, on average, than in traditional Medicare for comparable beneficiaries, MedPAC estimates.  This leads to excessive payments to Medicare Advantage plans. 
  • Last year, CMS took 35 enforcement actions against MA and Part D sponsors for a range of issues, including limited provider access and charges for higher than allowed out-of-pocket costs. Among the enforcement actions last year were 25 fines in the six figures. This year, CMS has fined $1 million to Aetna for Part D directories that erroneously listed 7,000 pharmacies as being in-network. 
  • GAO investigators found Medicare officials rarely enforce rules for private insurance plans intended to make sure beneficiaries will be able to see a doctor when they need care. In Connecticut, UnitedHealthcare, the nation’s largest health insurance company, dropped more than a thousand of health care providers and doctors leaving patients desperately scrambling for care. 
  • Brown University study shows that once medical care becomes costly for seniors in Medicare Advantage and the coverage no longer meets their needs for acute care, beneficiaries are leaving private MA plans to return to traditional Medicare. 

As we wrote here last year,

“Private Medicare Advantage plans continue to see growth as they promise gym-memberships, limited optometric coverage or zero premium plans.  However, as predicted by many healthcare experts and indicated in the Brown study, seniors find that once they actually need help with more costly care, MA plans aren’t providing the coverage they need. 

Ultimately, this means that younger and healthier seniors are being lured into private insurers’ plans only to have to switch to traditional Medicare once they need coverage for more serious health issues (and isn’t that why we have health insurance in the first place – to cover when we get sick, not when we’re healthy?).  Meanwhile, private insurance companies continue to reap the benefits of annual federal subsidies to provide this limited coverage for healthier seniors – which are tax dollars that could have been used in traditional Medicare to serve all beneficiaries.”

Modern Healthcare reports Medicare Advantage has been a boon for health insurers, which views taxpayer-funded insurance as a ripe business opportunity.  Meanwhile, the GOP Congress is preparing another round of cuts to traditional Medicare in their upcoming 2017 Budget plan

CMS Releases New Plan to Prevent Readmissions among Racially Diverse Medicare Beneficiaries


The Centers for Medicare & Medicaid Services (CMS) has long been working to reduce the number of hospital readmissions for Medicare patients. 

 

“Medicare—through Congressional direction and Administration initiatives—has started implementing incentives to reduce hospital readmissions. One example...is the Hospital Readmission Reduction Program (HRRP) which penalizes hospitals with relatively higher rates of Medicare readmissions.”  Kaiser Family Foundation, “Reducing Hospital U-Turns”

 

Research has shown that unplanned readmissions cost Medicare $17.4 billion in 2004 and that 20 percent of Medicare fee-for-service patients were readmitted within 30 days of discharge. According to CMS, racial and ethnic minority populations are more likely than their white counterparts to be readmitted within 30 days of discharge for chronic conditions, such as heart failure, heart attack, and pneumonia, among others. Why is that?  CMS says social, cultural, and language barriers contribute to these higher readmission rates.

 

CMS has released a new guide to preventing readmissions among communities of color in Medicare:

“This plan focuses on Medicare populations that experience disproportionately high burdens of disease, worse quality of care, and barriers to accessing care. For CMS, these populations include racial and ethnic minorities, sexual and gender minorities, persons with disabilities, as well as individuals living in rural areas. The CMS Equity Plan for Medicare was also developed with particular attention to disparities in chronic diseases such as diabetes, chronic kidney disease, and cardiovascular disease. Chronic conditions pose a significant human and financial burden, are prevalent in the Medicare population, and are likely to co-occur.”...CMS Equity Plan for Improving Quality in Medicare

Among the plan’s proposals are to:

·         Expand data Collection and Analysis

·         Evaluate Disparities and Integrate Solutions

·         Develop New Approaches to Reduce Disparities

·         Increase the Ability to Meet the Needs of Vulnerable Populations

·         Improve Communication and Language Access

·         Increase Physical Accessibility of Health Care Facilities

“CMS has an important opportunity and a critical role in preventing hospital readmissions while promoting health equity among diverse Medicare beneficiaries,” said Cara James, Director of CMS’s Office of Minority Health. “This Guide encourages action-oriented steps and solutions in achieving health equity, addresses reducing readmissions and focuses on our initiative of achieving better care, smarter spending, and healthier people throughout our health care system.”

The Truth about Social Security’s Math Really Does Matter – Even in Washington

We don’t usually share this is the kind of “inside baseball” Washington story here but today’s a little different...

For months, conservative think-tankers who undermine the value of Social Security, deny the existence of a national retirement crisis and the need to boost benefits have been banging their drum for benefit cuts especially hard.  Why?  Because a scarcely reported CBO report on Social Security replacement rates (now you see why we don’t usually share these kind of stories) claimed Americans received more in benefits than previously believed or reported by Social Security actuaries.

For those who make a living advocating for benefits cuts, like the American Enterprise Institute’s Andrew Biggs, the CBO report was a golden goose.  His columns in the Washington Post, Wall Street Journal, Forbes and more tweets than we can count proclaimed the retirement crisis is phony and not only are Americans receiving enough Social Security benefits, some receive more than they need.

Now, anyone who actually works with beneficiaries knows his claim doesn’t reflect the real-world.  Today apparently, the CBO agrees.  They’ve issued a statement that their December numbers were wrong...significantly so.  

“After questions were raised by outside analysts, we identified some errors in one part of our report, CBO’s 2015 Long-Term Projections for Social Security: Additional Information, which was released on December 16, 2015.

The errors occurred in CBO’s calculations of replacement rates—the ratio of Social Security recipients’ benefits to their past earnings. The estimates reported in December inadvertently included years with earnings below those intended amounts.

The corrected version shows substantially lower mean initial replacement rates for retired and disabled workers. For example, the corrected rate for retired workers born in the 1940s is 43 percent; the value CBO reported in December was 60 percent.”

Los Angeles Times columnist, Michael Hiltzik, has been covering this story including some conversations with 

AEI’s Biggs: 

“Via Twitter, he has now retracted the Forbes piece. He says retractions of the others are coming. [Update: Biggs says by emailthat he has sent a retraction to the Wall Street Journal. His Washington Post piece, however, didn't cite the original CBO figures directly.]

 Biggs told me by email that the CBO's recalculation "doesn't radically alter the way I view the adequacy of Social Security benefits or retirement saving." That's because he had argued for a different formula that he says still shows replacement rates close to the CBO's original figures.”

In other words, the facts won’t alter conservatives’ quest to cut benefits and if the formula being used doesn’t get the results they want, the CBO should just change the formula to fit the anti-Social Security crowd’s political frame. 

Welcome to Washington. 

Voters Say “No Thanks” to Christie’s Plans to Gut Social Security & Medicare


National Committee President/CEO, Max Richtman's reacts to Chris Christie's suspension of his Presidential campaign: 

“New Jersey Governor Chris Christie’s political strategy to portray himself as a tough-talking-truth-teller by promising to destroy America’s retirement safety net if elected President came to a predictable conclusion today.  I say it’s predictable because Americans have worked hard to earn their Social Security and Medicare and this campaign shows they simply don’t support Christie’s slash and burn strategy.  Voters, of all political persuasions, agree Social Security and Medicare must be strengthened not cut.  That’s a powerful lesson for the remaining candidates after today’s Christie campaign suspension announcement.

National Committee members and supporters will continue our engagement with Presidential candidates in town halls and forums nationwide with one clear message -- our nation must honor its commitment to America’s workers who’ve contributed to Social Security and Medicare their entire working lives.  Not only do we oppose plans to privatize, means-test and slash benefits, working and retired Americans want candidates who have ideas on how to boost benefits for millions of seniors, survivors, people with disabilities and their families who are struggling just to get by.”...Max Richtman, NCPSSM President/CEO


President Proposes Allowing Medicare to Negotiate for Lower Rx Drug Prices

“It’s long past time for Congress to acknowledge the hard truth that the sky-rocketing cost of prescription drugs is hurting average Americans and our federal budget. Medicare spends billions providing Part D drug coverage each year while beneficiaries including seniors, the disabled and their families also face rising out-of-pocket costs and higher premiums. All the while, drug makers continue to reap the profits of their price gouging. In his budget, President Obama has again proposed lifting the ban preventing Medicare from negotiating prices with the drug companies. Big Pharma has lobbied hard to keep the ban in place but seniors expect, this time, Congress will do the right thing and finally allow Medicare to negotiate for fair prices.”...Max Richtman, NCPSSM President/CEO

Among the other budget provisions beneficial to seniors include:

  • closing the Part D donut hole two years earlier
  • additional funding for in-home services
  • reforms for overpayments going to private insurers in Medicare Advantage
  • a 7.44% increase in administrative funding for the Social Security Administration

However, the President’s budget was not all good news.  Once again, the budget proposes shifting even more healthcare costs to seniors by extending Medicare means-testing to the middle class and increasing out-of-pocket costs such as the home health care copayment and the Part B deductible. 

“The average Medicare beneficiary already spends nearly $4,800 per year in out-of-pocket health care costs with half of all people on Medicare having incomes of less than $24,150. People in Medicare simply can’t afford increased cost-sharing year-after-year.  What’s especially worrisome are efforts to portray expanding means-testing in Medicare as impacting only ‘high-income seniors.’  While that may be good political rhetoric the truth is, if passed, further means testing will actually target middle-class individuals”...Max Richtman, NCPSSM President/CEO 




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