Mrs. Verma Goes to Washington


Seema Verma, the Trump appointee who runs Medicare, has had an active week. The problem facing much-beloved Medicare is one that faces every other government-funded healthcare extravaganza: it’s always projected to be running out of money. Medicare makes up 15% of the total federal budget. That’s almost $600 billion dollars out of a total federal outlay of $4 Trillion dollars. The only problem here is that revenues are around $3.6 trillion. We are spending money we don’t have, and thus there there is constant pressure to reduce federal outlays.

This is a feat that appears to be legislatively impossible.  The country barely is able to defund bridges to nowhere let alone try to reduce health care spending because, as everyone knows, any reduction in health care spending will spawn a death toll that would shame the black plague. The prior administration’s health policy wonk certified approach was to change the equation in health care from paying for volume to paying for value. This, we were assured, would allow us to get better healthcare for cheaper! And so we got MACRA, The Medicare Access and CHIP Reauthorization Act, that introduced penalties for doctors unable to provide ‘good’ care. Never mind that in some years good care means you treat everyone with a statin, and in others it means treat no one with a statin. When in Rome, live like the Romans. In 2018 parlance, that roughly translates to “check every box you can and everything will be all right.”

In the face of legislative paralysis, administrators have a tremendous amount of power in picking winners and losers in the healthcare landscape. The prior administration, fueled by New Yorker articles that spoke of academic medical centers filled with virtuous cardiologists doing preoperative evaluations for free, set up a system that made winners of large health systems.  Reimbursement for office work was slashed, and rewards were put in play for documenting value-based care that were best accessed by performance improvement departments. A wave of consolidation followed. Hospitals merged, and office practices found safe harbor by becoming hospital practices overnight.  Medicare noticed. They were paying more for the same services if beneficiaries ended up at hospital owned clinics. As a result, the Medicare Payment Advisory Commission (MEDPAC) would recommend equalizing payments between free-standing office practices and hospital-based outpatient practices. And every year CMS administrators failed to act. The politics of moving against hospitals was apparently untenable for many.

That was until Seema Verma came on the scene. On November 2 via tweet, the announcement finally came:

The cheering that followed the announcement came from independent physicians under constant pressure from reimbursement rich hospitals. It was good news following a lump of coal delivered to physicians by the same Seema Verma days earlier by collapsing three commonly used office billing codes for evaluation and management into one code.

This particular move was cast primarily as a move to reduce the documentation burden for physicians and address physician burnout.  The reality is that the surviving independent physicians that hadn’t opted out of Medicare survived in part by using their electronic medical record to generate templated notes that were audit-proof level 4 billing machines. It’s a cat and mouse game that has been going on since the inception of Medicare.

A closer look reveals these moves to be far less bold than advertised. Collapsing Evaluation and Management (E&M) billing codes and site-neutral payments are small potatoes. The E&M code changes don’t take effect until 2021, and the reduction in payment for even those mostly billing level 4 codes is $19-$37 per patient. That’s not an insignificant amount, but it’s also not an amount that is back-breaking. The same holds true for site-neutral payments and their effects on hospitals. The policy doesn’t cover procedures done in the outpatient setting — only E&M payments — and the average cut applied to the hospital setting amounts to about $30 per patient as well. Medicare stands to save ~ $380 million dollars in this move. This only sounds like a lot of money if you didn’t know that total Medicare spending in 2016 was $672 billion.

Nonetheless, this is some major action by a Trump appointee that comes on the heels of a number of other policy pronouncements related to drug pricing that could easily have been made by a Clinton appointee. It took Seema Verma to take on doctors and hospitals in a way her predecessors did or could not. E&M documentation changes have not been made since 1997, and MedPac’s recommendation on site neutral payments have been steadfastly ignored year after year.  One would think the health policy world would applaud these moves, but after four days Seema Verma’s site-neutral tweet has ten retweets. Meanwhile, Atul Gawande tweeting 5 years too late that Epic sucks goes viral.

It reveals major foundational issues with health policy that the self-proclaimed objective/neutral/empiricists are really a group of brittle partisans that are either too biased or too scared to applaud Verma’s moves. This performance stands in stark contrast to the grave pronouncements of what would happen to the nation’s health after the devastating election of 2016. While these policies do little for those seeking to overturn the current system, as symbolic gestures, they send a hopeful message that the balance of power in the healthcare landscape may be shifting.

Anish Koka is a Cardiologist in private practice in Philadelphia.  Follow him on twitter @anish_koka.

13 replies »

  1. A good read, well-written and very informative.

    “Medicare makes up 15% of the total federal budget. That’s almost $600 billion dollars out of a total federal outlay of $4 Trillion dollars.”

  2. Thanks for the news, I had not seen it.
    ” language in its agreements with health insurers that had restricted the insurers from creating plans that steered patients to competitors offering lower prices, ”
    In my experience the Blue i dealt with fought me in setting up such a plan…but that was a while ago.

  3. North Carolina state treasurer Dale Folwell is in charge of the state employee active and retiree health care plans. He is shaking things up.

    “Folwell said BCBSNC and UNC Health Care refuse to give the state billing data to determine what the health plan is paying for, and whether charges are legitimate. Blue Cross says the state plan is bundled with other clients and revealing the information would expose trade secrets.”
    and ” Folwell announced the State Health Plan would transition from a commercial-based program to a reference-based government pricing model which indexes provider payments to Medicare rates.” excerpts from Carolina Journal November 16, 2018
    This may blaze a path for large private employers to demand the Blues (and other insurers) do the same thing. Sea change?

  4. “The problem facing much-beloved Medicare is one that faces every other government-funded healthcare extravaganza: it’s always projected to be running out of money.”

    As opposed to patients/insured running out of money to pay for care?

    “Medicare makes up 15% of the total federal budget. That’s almost $600 billion dollars…”

    $100 billion spent on sports in 2017. The 100 highest-paid athletes earned a collective $3.11 billion over the last 12 months (2017 Forbes). Just a couple of sobering comparisons.

    Think what we could save if it was Medicare for all and care providers had to charge at Medicare rates. How come the money never comes from providers?

  5. Very well-written and a great read. Yes, more care options mean increased access with lower costs. #StrengtheningMedicare

  6. It should have been clear long ago when the National Academy of Science (aka National Academy of Medicine) contracted with the Rand Institute to study the benefits of a computer based medical record. It was funded by EPIC, General Electric and CERNER. We have lost the ability to establish trust, cooperation and reciprocity with each patient-person as a result of our competing, preoccupation with the cognitive dissonance occurring from an inscrutable set of data files and order sets.

  7. It appears to me abundantly clear that the legislatively empowered (MACRA/HITECH) central planners have tremendously damaged the noble profession of Medicine with their authority to foist untested/unpiloted interventions upon the system. If Verma etal can roll even some of that back we will be collectively better off. But many rent seekers have figured out how to benefit…a nd they will fight to keep every clever dollar in their fists.

  8. I’ll offer some encouraging news on Medicare spending. In its most recent Monthly Budget Review, the CBO reported net Medicare spending for the past three fiscal years as follows: 2016, $592 billion; 2017, $595 billion; and 2018, $585 billion despite growth of about 2% per year in the number of beneficiaries. These numbers are net of Part B beneficiary premiums, IRMAA surcharges and state payments on behalf of dual-eligible beneficiaries which the government accounts for as offsetting receipts.

    Second, I attended a panel discussion on dealing with dementia last weekend where one of the speakers was an elder care attorney who has been practicing for the last 25 years. She noted that far more people are opting to execute a living will, durable power of attorney for healthcare and even POLST documents than did so early in her career. Moreover, virtually everyone executing a living will is requesting no heroics at the end of life whereas the default protocol in the absence of such guidance is to do everything possible to keep the patient alive. I don’t know how much variance around the country there is in this but at least here in central NJ it’s good news for reducing the growth rate of future healthcare costs.

    Third, I think it would be helpful if the FTC paid more attention to hospital consolidation which is mainly driven by the push to increase market power in order to extract higher reimbursement rates from commercial payers. There are few cost efficiencies to be gained from such consolidation and any savings are generally not passed on to payers or patients anyway.

    Everyone knows or at least should know that academic medical centers have inherently higher costs than community hospitals because of their education and research mission and that they provide the most sophisticated care. Community hospitals have inherently higher costs than ambulatory surgical centers because the hospitals must operate around the clock and the ASC’s don’t. If we can drive more care out of hospitals without compromising patient safety, we can lower costs or at least mitigate their growth rate.

    Medicare’s historical reimbursement approach was designed to reimburse providers, especially hospitals, for their costs plus a profit margin which amounts to a cost plus payment formula. At the least, that significantly reduces the need for providers to become more efficient. I think site neutral payments, especially for relatively routine care, are a good idea. Why should we pay academic medical centers so much more for relatively simple and routine care when most patients don’t need to go there for such care in the first place?

  9. Just a few moments ago, I received the weekly e-mail edition from the CDC of its MMWR (morbidity and mortality weekly report). Its always interesting because of the broad variety of its reports. Included this week, the CDC described an analysis of how its Advisory Committee on Immunization Practices evaluates evidence. A list of members from the ACIP “Evidence Based Recommendations Work Group” appeared on the MMWR report: 26 members of which 4 were former members, 3 from Canada, 1 from Germany, 3 from the World Health Organization, and 6 were directly employed by the CDC. Among the Best Practices described, there was no reference to its voting processes. Remember now, the ACIP is the group that ultimately decides which immunization will be reimbursed by health insurance OR distributed by the Federally funded VFC program (for children with Medicaid and community, health department immunization clinics). The “…Work Group” is a apparently just a separate decision process.

    So, of the 26 members, only 10 presumably had some experience with vaccination issues within Primary Healthcare for USA citizens. Don’t hold your breath on that one! We need to realize that this is just a small niche within the future of centralized, coercive, and bureaucratic “healthcare reform.” Finally, Medicare is a funding nightmare because President Johnson cashed all the Medicare trust funds with an Administrative IOU to fund the Viet Nam War. The actuarial reports from the Medicare Trustees is an attempt to analyze their financial status as if the assets actually existed. They don’t.

  10. The current administration, fueled by visions of markets curing everything, is really good at making announcements. Lets wait and see what really happens. This is the same administration that announced everyone was going to have health care, it would be cheaper, it would be great and it would be easy. I guess it is kind of nice that you are not cynical or skeptical and believe everything the current administration tells, but I will wait.


  11. Outstanding piece explaining the “inside baseball” of CMS bureaucrats and hospitals gaming and counter gaming.

    It even explains my primary care doc staring at the EHR screen and pushing this or that screening etc.:
    “, The Medicare Access and CHIP Reauthorization Act, that introduced penalties for doctors unable to provide ‘good’ care. Never mind that in some years good care means you treat everyone with a statin, and in others it means treat no one with a statin. When in Rome, live like the Romans. In 2018 parlance, that roughly translates to “check every box you can and everything will be all right.”