The notion that hospital readmission rates are a “quality” measure reached the status of conventional wisdom by the late 2000s. In their 2007 and 2008 reports to Congress, the Medicare Payment Advisory Commission (MedPAC) recommended that Congress authorize a program that would punish hospitals for “excess readmissions” of Medicare fee-for-service (FFS) enrollees. In 2010, Congress accepted MedPAC’s recommendation and, in Section 3025 of the Affordable Care Act (ACA) (p. 328), ordered the Centers for Medicare and Medicaid Services (CMS) to start the Hospital Readmissions Reduction Program (HRRP). Section 3025 instructed CMS to target heart failure (HF) and other diseases MedPAC listed in their 2007 report.  State Medicaid programs and the insurance industry followed suit.
Today, twelve years after MedPAC recommended the HRRP and seven years after CMS implemented it, it is still not clear how hospitals are supposed to reduce the readmissions targeted by the HRRP, which are all unplanned readmissions that follow discharges within 30 days of patients diagnosed with HF and five other conditions. It is not even clear that hospitals have reduced return visits to hospitals within 30 days of discharge. The ten highly respected organizations that participated in CMS’s first “accountable care organization” (ACO) demonstration, the Physician Group Practice (PGP) Demonstration (which ran from 2005 to 2010), were unable to reduce readmissions (see Table 9.3 p. 147 of the final evaluation) The research consistently shows, however, that at some point in the 2000s many hospitals began to cut 30-day readmissions of Medicare FFS patients. But research also suggests that this decline in readmissions was achieved in part by diverting patients to emergency rooms and observation units, and that the rising rate of ER visits and observation stays may be putting sicker patients at risk  Responses like this to incentives imposed by regulators, employers, etc. are often called “unintended consequences” and “gaming.”
To determine whether hospitals
are gaming the HRRP, it would help to know, first of all, whether it’s possible
for hospitals to reduce readmissions, as the HRRP defines them, without gaming.
If there are few or no proven methods of reducing readmissions by improving
quality of care (as opposed to gaming), it is reasonable to assume the HRRP has
induced gaming. If, on the other hand, (a) proven interventions exist that reduce
readmissions as the HRRP defines them, and (b) those interventions cost less
than, or no more than, the savings hospitals would reap from the intervention
(in the form of avoided penalties or shared savings), then we should expect much
less gaming. (As long as risk-adjustment of readmission rates remains crude, we
cannot expect gaming to disappear completely even if both conditions are met.)
Leading lights of
the health insurance industry are crying that Medicare For All or any kind of
universal health reform would “crash the system” and “destroy
healthcare as we know it.”
They say that like
it’s a bad thing.
They say we should
trust them and their cost-cutting efforts to bring all Americans more
affordable health care.
We should not trust
them, because the system as it is currently structured economically is
incapable of reducing costs.
Why? Let’s do a
quick structural analysis. This is how health care actually works.
Health care, in the
neatly packaged phrase of Nick Soman, CEO of Decent.com, is a “system designed
to create reimbursable events.” For all that we talk of being
“patient-centered” and “accountable,” the fee-for-service, incident-oriented
system is simply not designed to march toward those lofty goals.
A friend of mine told me the other day, “We’ve seen our insured patient population go from 15% to 70% in the few years since Obamacare.” As a primary care physician in the Midwest, he’s worked for years in an inner-city clinic that serves a poor community, many of whom also suffer from mental illness. Before the Affordable Care Act (ACA), the clinic constantly struggled to stay afloat financially. Too often patients would be sent to an emergency room because the clinic couldn’t afford to provide some of the simplest medical tests, like an x-ray. Now, with most of his patients insured through the Medicaid expansion program, the clinic has beefed up its staffing and ancillary services, allowing them to provide better preventive care, and in turn, reduce costly ER visits.
From the time Medicaid was established in 1965 as the country’s first federally-funded health insurance plan for low-income individuals, state governments have only been required to cover the poorest of their citizens. Before the ACA, some 47 million Americans were uninsured because their incomes exceeded state-determined benchmarks for Medicaid eligibility and they earned far too little to buy insurance through the private marketplace.
The ACA reduced the number of uninsured Americans by mandating that states increase their income requirement for Medicaid to 138% of the federal poverty line (about $1,330 per month for a single individual), and promising that the federal government would cover the cost to do so. However, in a 2012 decision, the Supreme Court left it to the states to decide if they wanted to increase their Medicaid eligibility. If they agreed to adopt Medicaid expansion, the federal government offered to cover 100% of the increased cost in 2014 and 90% by 2021.
In the industrialized world and especially in United States, health care expenditures per capita has has significantly outgrown per capita income in the last few decades. The projected national expenditures growth at 6.2%/year from 2015 onwards with an estimated in 20% of entire national spending in 2022 on healthcare, has resulted in passionate deliberation on the enormous consequences in US political and policy circles. In US, the ongoing public healthcare reform discussions have gained traction especially with the recent efforts by the Senate to repeal national government intervention with Affordable Care Act (ACA).
In this never ending debate the role of government interventions has been vehemently opposed by conservative stakeholders who strongly favor the neoclassical economic tradition of allowing “invisible hands” of the free market without minimal (or any) government regulations to achieve the desired economic efficiency (Pareto optimality).
A central tenet of this argument is that perfect competition will weed out inefficiency by permitting only competent producers to survive in the market as well as benefit consumer to gain more “value for their money” through lower prices and wider choices.
Restrained by limited societal resources, in US to make our health market ‘efficient’ we need to aim for enhancing production of health services provision at optimal per unit cost that can match consumers maximum utility (satisfaction) given income/budget restraints.
Keeping asides the discussion on whether a competitive market solution for healthcare is even desirable as adversely impact the policy objective of ‘equity”, however from a pure ‘efficiency’ perspective it is worthwhile to focus on the core issue whether conditions in healthcare market align with the prototypical, traditional competitive model for efficient allocation of resources.
Back at their desks after the holidays, health care payers, providers and policymakers across the country are staring down their list of 2019 priorities, wondering which they can actually accomplish. Innovation to improve care quality and reduce costs will top many lists, and progress on this front depends, in no small part, on conditions for such innovation in the health care marketplace. Here are three phenomena unfolding there that I’ll be following closely this year to understand what innovators are up against, and how they’re responding.
The legal battle over the Affordable Care Act (ACA). Over 20 million previously uninsured Americans acquired health insurance between 2010 and 2017, many due to the ACA’s premium subsidies, ban on pre-existing condition restrictions, and Medicaid expansion. At the most fundamental level, this coverage expansion has vastly improved one of the most important conditions for a healthy population—access to health care. But it also supports innovation toward better, more affordable care.Coverage expansion means providers get reimbursed for more of the care they deliver to patients who are unable to pay, which strengthens their financial position. It also enables some patients to maintain more continuous health insurance coverage, hence see a doctor more regularly over time. This, in turn, facilitates providers’ development of more effective approaches to management of long-term, chronic disease, which causes untold suffering and costs the U.S. hundreds of billions in direct medical costs. Continue reading…
A Trump administration regulation issued just hours before the partial federal shutdown offers quiet hope for civility in government.
What happened, on its face, was simple: an update of the rules governing a particular Medicare program. In today’s dyspeptic political climate, however, what didn’t happen along the way was truly remarkable – and may even offer some lessons for surviving the roller-coaster year ahead.
A regulatory process directly connected to Obamacare and billions in federal spending played out with ideological rhetoric completely absent. And while there were fervid objections to the draft rule from those affected, the final version reflected something that used to be commonplace: compromise.
Think of it as Survivor being replaced by Mr. Smith Goes to Washington. Or, perhaps, a small opening in the wall of partisan conflict.
More on that in a moment. First, let’s briefly examine the specifics.
The 2019 ACA plan year is notable for the increase in insurer participation in the marketplace. Expansion and entry have been substantial, and the percent of counties with one insurer has declined from more than 50 percent to approximately 35 percent. While urban areas in rural states have received much of the new participation, entire rural states have gained, along with more metropolitan urban areas.
Economic theory and common sense lead most to believe that increased competition is unquestionably good for consumers. Yet in the paradoxical world of the subsidized ACA marketplace, things are not so simple. In some markets, increased competition may result in a reduction in the purchasing power of subsidized consumers by narrowing the gap between the benchmark premium and plans that are cheaper than the benchmark. Even though the overall level of premiums may decline, potential losses to subsidized consumers in some markets will outweigh gains to the unsubsidized, suggesting that at the county level, the losers stand to lose more than the winners will win.
One way to illustrate this is to hypothetically subject 2018 marketplace enrollees to 2019 premiums in counties where new carriers have entered the market. Assuming that enrollees stay in the same metal plan in both 2018 and 2019, and that they continue to buy the cheapest plan in their metal, we can calculate how much their spending would change by income group.
Under these assumptions, in about one quarter of the counties with federally facilitated marketplaces (FFM) that received a new carrier in 2019, both subsidized and unsubsidized enrollees would be better off in 2019, meaning that they could spend less money and stay in the same metal level. In about thirty percent of these counties, all enrollees are worse off. In almost all of the rest, about forty percent, there are winners and losers, but in the aggregate, the subsidized lose more than the unsubsidized win. Overall, in about 70 percent of FFM counties with a new carrier, subsidized enrollees will lose purchasing power, while in about 66 percent of these counties, unsubsidized customers will see premium reductions. In population terms, about two-thirds of subsidized enrollees in counties with a new carrier will find plans to be less affordable, while a little more than half of unsubsidized enrollees will see lower premiums.
Egged on by the Medicare Payment Advisory Commission (MedPAC), Congress has imposed multiple pay-for-performance (P4P) schemes on the fee-for-service Medicare program. MedPAC recommended most of these schemes between 2003 and 2008, and Congress subsequently imposed them on Medicare, primarily via the Affordable Care Act (ACA) of 2010 and the Medicare Access and CHIP Reauthorization Act (MACRA) of 2015.
MedPAC’s five-year P4P binge began with the endorsement of the general concept of P4P at all levels – hospital, clinic, and individual physician – in a series of reports to Congress in 2003, 2004, and 2005. This was followed by endorsements of vaguely described iterations of P4P, notably the “accountable care organization” in 2006 , punishment of hospitals for “excess” readmissions in 2007 , the “medical home” in 2008 and the “bundled payment” in 2008. None of these proposals were backed up by anything resembling evidence.
Congress endorsed all these schemes without asking for evidence or further details. Congress dealt with the vagueness of, and lack of evidence supporting, MedPAC’s proposals simply by ordering CMS to figure out how to make them work. CMS staff added a few more details to these proposals in the regulations they drafted, but the details were petty and arbitrarily adopted (how many primary doctors had to be in an ACO, how many patients had to sit on the advisory committee of a “patient-centered medical home,” how many days had to expire between a discharge and an admission to constitute a “readmission,” etc.).
New rule, new culture
This process – invention of nebulous P4P schemes by MedPAC, unquestioning endorsement by Congress, and clumsy implementation by CMS – is not working. Every one of the proposals listed above has failed to cut costs (with the possible exception of bundled payments for hip and knee replacements) and may be doing more harm than good to patients. These proposals are failing for an obvious reason – MedPAC and Congress subscribe to the belief that health policies do not need to be tested for effectiveness and safety before they are implemented. In their view, mere opinion suffices.
This has to stop. In this two-part essay I argue for a new rule: MedPAC shall not propose, and Congress shall not authorize, any program that has not been shown by rigorously conducted experiments to be effective at lowering cost without harming patients, improving quality, or both. This will require a culture change at MedPAC. Since its formation in 1997, MedPAC has taken the attitude that it does not have to provide any evidence for its proposals, and it does not have think through its proposals in enough detail to be tested. Over the last two decades MedPAC has demonstrated repeatedly that it believes merely opining about a poorly described solution is sufficient to discharge its obligation to Congress, taxpayers, and Medicare enrollees. Continue reading…
Although signed into law in 2010, the Affordable Care Act has been in constant flux, with key aspects changing due to time-dependent provisions, Supreme Court decisions and shifts in U.S. policy. The effects of changes to the ACA on health insurance enrollment and premiums often depend on state regulatory decisions and other state-specific factors. The elimination of the individual mandate penalty is a prime example of this when applied to New York state, which has unusual rules in its individual insurance market.
In 2019, consumers will no longer face financial penalties stemming from the ACA’s individual mandate, which requires most people to secure health insurance. Without pressure from the individual mandate to enroll, younger and healthier people might drop coverage, leading to premium increases. New York’s health insurance regulations and expansive safety-net programs could make the state’s insurance market particularly susceptible to premium increases after the penalty’s elimination.
New York uses what is known as “full community rating” in its individual health insurance market, which means that all adult enrollees, regardless of age or whether they use tobacco, are charged the same premium. In most states, the youngest adults in the market pay one-third of what older adults do, and tobacco users are charged 1.5 times as much as non-users. New York’s flat premium structure raises costs for younger enrollees and nonsmokers, making them more likely drop coverage when the penalty goes away.
1) What is the likelihood the ACA will be repealed?
This straightforward question has a very simple answer: It depends on the results of the upcoming November 6 U.S. congressional elections.
If the Republicans retain control of both the House and the Senate, the probability that the ACA will be repealed is very high: The Republicans would be emboldened by such a victory and would most probably attempt in 2019 to repeal the health care law—again. It is worth remembering that in July of last year, the repeal of the ACA (a version of which had passed the House in May) was defeated in the Senate by the narrowest of margins, because three Republican Senators, Susan Collins, Lisa Murkowski, and the late and much regretted John McCain, voted against the repeal. This is very unlikely to happen again, although one would also have to consider the margins by which the Republican would have gained control both Chambers after these November midterms. In July of 2017, the Republicans held a 52-48 advantage in the Senate. Given ever-increasing polarization, such a margin, plus Republican control of the House, would likely spell the end of the ACA in 2019.
If the Democrats gain control of either the House of Representatives or the U.S. Senate, then the ACA will remain the law of the land. The only issue in the horizon will be the lawsuit filed in February of this year by a coalition of 20 states, led by Texas and Wisconsin. This lawsuit claims that Obamacare is no longer constitutional after the Republicans eliminated in December of 2017 the tax penalty associated with the ACA’s individual mandate. The 20 Republican attorney generals argue that without the tax penalty, Congress has no constitutional authority to legislate the individual mandate. Even if this case reaches the Supreme Court, one has to remember that the Court affirmed twice the constitutionality of the ACA, in June of 2012 and then 2015, with Chief Justice John Roberts voting with the majority on both occasions.
2) What do recent congressional changes to the ACA mean for those who buy insurance on health care exchanges?