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The Voice of Jean LeMasurier
The National Coalition on Health Care (a nonprofit organization representing 80 organizations who support comprehensive health system change) and the Partnership for the Future of Medicare (a bipartisan organization supporting the long-term security of Medicare) have a new lobbying message – don’t kill the golden goose. Recognizing the upcoming budget battles this year and next, these organizations presented their lobbying strategy which will feature Medicare Advantage plans as the model for a sustainable Medicare program. John Rother from the National Coalition, Lanhee Chen from Stanford University, and Ken Thorpe from Emory University highlighted the innovations in Medicare Advantage plans that should serve as the model for reforming Medicare fee-for-service. These innovative programs focus on beneficiaries with multiple chronic conditions that drive Medicare costs and include care coordination, disease management, team-based care, transitional care, medication management, prevention, health coaching, and evidence based lifestyle programs. They argued that Medicare Advantage plans are already facing a 6.7 percent payment reduction in 2014 and that any further cuts will lead to threats to these innovative initiatives that should be encouraged and not penalized. They discussed research studies showing that MA plans had higher quality scores in 9 of 11 HEDIS measures compared to FFS, 13 – 20 percent lower readmission rates, lower hospital costs including a spillover effect to the overall health system in areas with high MA enrollment, and lower mortality rates.
The Congressional Budget Office (CBO) issued a report on two premium support options for reforming Medicare entitled “A Premium Support System for Medicare: Analysis of Illustrative Options”. The two options include a second-lowest-bid option and an average-bid option. The report assumes that they would go into effect in 2018. Medicare Advantage plans would participate in the bid submission process along with FFS, but Part D would continue a separate bidding process as under current law. Dual eligible beneficiaries would not participate in the premium support system.
Since the passage of the Medicare Modernization Act, Gorman Health Group has been discussing the value that Medicare Advantage (MA) and Prescription Drug Plans (PDP) offer to both public sector and private sector employers for their Medicare eligible retirees. The value proposition includes FASB/GASB benefits as well as more affordable coverage. A number of employers have moved their retirees to these plans over the last seven years. Some employers contract directly with a MA plan or PDP plan while other employers offer their retirees a choice of plans through a private exchange such as Extend Health. This has been a gradual movement. However, during the last year, the shift has been very dramatic. CMS enrollment data for August 2013 show that employer group enrollment in PDPs was 4.4 million which is more than double the 2 million employer group enrollment in August 2012. Employer group enrollment in MA plans increased to 2.6 million in August 2013 compared to 2.4 million enrollment in August 2012.
ACA premiums have been a key topic of discussion this month as more state marketplaces and companies released proposed and final rates for QHPs or “qualified health plans” that will be available on October 1. As discussed in an earlier blog, ASPE released an analysis of rates in July from 10 mostly state based marketplaces that showed premiums will be 10 – 18 percent lower than CBO estimates. Subsequent releases show that premiums will increase in some markets, for example Ohio and Florida, as plans move to more comprehensive “essential health benefit packages”. Rates for plans in the federally facilitated marketplaces will not be released until September.
The Alliance for Health Reform held a briefing entitled “Health Insurance Marketplaces: Different Strokes for Different States”. I think the title was an apt description of all the variation that is going on in states that are implementing their own Marketplaces. In many ways, it looks like a natural experiment. Sarah Dash of the Georgetown University Health Policy Institute (CHIR) highlighted some of the different approaches states are taking which are discussed in more detail in a recent report by Urban and CHIR. For example, 4 states are choosing to selectively contract with a limited number of plans, 6 states are serving as a market organizer by limiting the number or type of plans and 8 states are allowing all plans who meet standards to participate. Three states and DC required insurer participation. Maryland for example is requiring that insurers above a certain size in both the individual and small group market must participate in their Marketplace. Five states are setting “waiting periods” for insurers who decide not to participate during the first year. Six states aligned coverage inside and outside their Marketplaces to minimize adverse selection. 8 states and DC are requiring additional coverage levels beyond silver and gold. Six states required insurers to offer standardized plan designs ranging from 3 plans in Oregon to 17 in California and 7 states and DC required plans to be meaningfully different.
The Alliance for Health Reform held a meeting on “Streamlining Cost Sharing in Medicare: The Impact on Beneficiaries” on July 22, 2013 which focused on a number of proposals to modernize Medicare benefits. The Medicare benefit package has not been updated since 1965 and it needs streamlining and improving. Medicare Advantage has already updated many cost sharing features, for example charging co-payments rather than coinsurance for many services and charging a single predictable premium that covers Medicare cost sharing for Parts A, B, and D and supplemental coverage. Medicare Advantage plans also have an out of pocket maximum that protects beneficiaries from catastrophic costs. My colleague Bill McBain recently discussed “Medicare Essential” which was developed by the Commonwealth Fund and would combine Medicare Parts A, B and D into a single premium plan run by the government unlike Medicare Advantage which is offered by private plans. The Bipartisan Policy Center (BPC) has developed its own proposal to modernize Medicare Fee For Service benefits beginning in 2016. The BPC proposal would build on some of the reforms already offered by MA plans and recommended by CBO and MedPAC including a unified Part A and B deductible and an out of pocket spending cap. The BPC proposal includes a catastrophic cap of $5,300, a single $500 deductible and a simplified copayment structure. To provide incentives for primary care, the BPC proposal would not apply the deductible to physician office visits. The BPC proposal would also provide new federal subsidies for beneficiaries between 100 – 150 percent of the FPL. The BPC plan would prohibit all supplemental plans including Medigap, employer coverage, FEHBP and Tricare for Life from providing first dollar coverage.
Most Americans get their health insurance from employer sponsored coverage. But this coverage has been eroding over the last twenty years. The Clinton health reform discussions realized that it was impractical and fiscally impossible to remove employer contributions from the financing of American health care coverage. And in subsequent health reform efforts, there have been a number of programs to shore up employer coverage including the Retiree Drug Subsidy and the Early Retiree Reinsurance programs which subsidized employers who continued to offer retiree medical and drug coverage. These subsidies didn’t stop the troubled auto industry from shifting retirees from defined benefit plans to defined contribution plans and sending their retirees to an early version of a private exchange where they could choose among a number of insurance products. Now with the Affordable Care Act (ACA) health insurance Marketplaces coming on line this October, we are seeing a number of troubled public sector employers seeing an opportunity to unload their retiree health burden. Detroit and Chicago have announced plans to end employer coverage and send their under age 65 retirees to the new Marketplaces to buy health coverage. The savings are substantial, e.g. Detroit could reduce its health care expenditures from $185 million to under $40 million. The new Marketplaces not only provide an opportunity for retirees to easily find replacement coverage, but also avoid a penalty under the individual mandate since they would no longer have employer coverage that qualified as minimal essential coverage. These cities would not face a penalty under the ACA’s employer mandate since the penalty applies to employee coverage and not retiree coverage. Other troubled municipalities and state and local governments are expected to follow suit since they would not only realize huge annual savings but also have an opportunity to offload GASB liabilities and improve bond ratings.