iProtean—Medicare Advantage Plans Scaling Back Networks, Benefits

Most major health insurance carriers offer Medicare Advantage plans, and the plans have been a lucrative line of business until recently. Because of recent sequestration cuts and rate reductions in the Affordable Care Act (ACA), Medicare Advantage plans will see payment reductions of billions of dollars ($135 billion in cuts over the next 10 years from ACA alone). (See iProtean Newsletter, October 15, 2013)

 

In response, some insurers are cutting physicians from networks, reducing plan offerings, trimming extra benefits and increasing patient cost sharing. (“Docs protest as insurers trim Advantage networks in reaction to rate reductions,” Modern Healthcare A.M., October 28. 2013)

 

A Medicare Advantage plan is a type of Medicare health plan offered by a private insurer that contracts with Medicare to provide Medicare recipients with all of the Part A and Part B benefits. These plans include health maintenance organizations, preferred provider organizations and private fee-for-service plans. Plans must meet Medicare minimum benefit requirements. More than 25% of Medicare beneficiaries nationwide belong to Advantage plans.

 

Many physicians around the country are getting notices from Advantage plans that they are being cut from private insurers’ networks. For example, UnitedHealthcare is shrinking its Advantage networks to 85% to 90% of their current size, according to one of its executives. Physician groups have criticized UnitedHealthcare over what they consider to be “abrupt” terminations in networks made without cause or explanation.

 

Although these plans are increasing in popularity (approximately a 10% increase year over year since the passage of ACA), they have received strong criticism from policy makers and analysts for their high costs relative to the traditional Medicare program. Rate cuts to the plans were included in the ACA, but insurance industry lobbyists succeeded in converting the rate cuts for this year into rate increases. Analysts predict payments to these plans will decrease by about 3.5 percent in 2014.

 

In 2012, according to the Medicare Payment Advisory Commission, payments to Advantage plans amounted to 107% of what the government spends on traditional Medicare enrollees, totaling $9 billion in additional spending. (“Docs protest as insurers trim Advantage networks in reaction to rate reductions,” Modern Healthcare A.M., October 28. 2013)

 

 

iProtean subscribers, please review the advanced course Value-Based Purchasing and Accountable Care Organizations for more information on Medicare Advantage plans in the context of accountable care organizations. In this course, expert Nate Kaufman urges hospitals to consider setting up an accountable care organization with a private insurer and/or with a Medicare Advantage plan rather than a Shared Savings Accountable Care Organization. If you have or are in the process of setting up a Medicare Advantage accountable care organization, it may be useful to receive an update from the insurer about the projected impact of sequestration and ACA cuts to your Medicare Advantage plan partner in your ACO.

 

 

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iProtean—Medicaid Enrollment Robust But Many Left Out

Some states have reported a surge in Medicaid enrollments as part of the Affordable Care Act’s (ACA’s) push to expand insurance coverage, despite the reported IT problems in the federal and some state-operated exchanges.

 

The ACA expanded Medicaid coverage to all residents with household incomes up to 138 percent of the poverty level. However, the Supreme Court ruling in June 2012 made the expansion of Medicaid optional for states; as a result, 26 states are not planning to implement the expansion as of September 2013. The expansion of Medicaid eligibility was expected to add nine million beneficiaries to Medicaid in 2014, according to the nonpartisan Congressional Budget Office.

 

The remaining states appear to have had a modicum of success in enrolling these new Medicaid recipients. The Healthcare Financial Management Association (HFMA) cited progress in Arkansas’ Medicaid program. It noted that early success in Arkansas was ‘very encouraging’ to the state’s hospitals, and that hospital officials hope the ACA’s expanded coverage of previously uninsured patients will help offset some of the $379 billion in Medicare hospital cuts the law includes from 2012-2021. (“State Medicaid Enrollments Outpace Federal Efforts,” HFMA Weekly News, October 18, 2013)

 

Arkansas and several other states have had success primarily because they searched their other public assistance programs (e.g., Supplemental Nutrition Assistance Program) for applicants whose incomes would qualify them for the expanded Medicaid program.

 

Andrea Maresca, director of federal policy and strategy for the National Association of Medicaid Directors speculated that some states have avoided the challenges experienced by healthcare.gov because “this isn’t entirely new to the states.” HFMA cites “the longstanding experience of states with the process.” (“State Medicaid Enrollments Outpace Federal Efforts,” HFMA Weekly News, October 18, 2013)

 

Arkansas estimates the expansion will add 220,000 newly eligible residents to the program. The state’s Medicaid expansion uses private insurance sold in the new marketplace to cover much of the newly eligible population.

 

Most enrollment has been through a combination of approaches; for example, in Arkansas, people sought enrollment through the state website, phone calls and in-person applications. Some state residents were found eligible by the state and confirmed their interest through a state letter writing campaign. Non-respondents will be auto-enrolled.

 

In some states, web-based enrollment has been working; for example, Washington state reported that 88 percent of the nearly 25,000 applicants who completed enrollments on its insurance website from October 1 through October 14 were added to the state’s Medicaid program.

 

What About the Other States?

 

A new report from Kaiser examines the impact of the decision by states to not expand Medicaid coverage as anticipated under the ACA. “In states that do not expand Medicaid, over five million poor uninsured adults have incomes above Medicaid eligibility levels but below poverty and may fall into a ‘coverage gap’ of earning too much to qualify for Medicaid but not enough to qualify for Marketplace premium tax credits. Most of these people have very limited coverage options and are likely to remain uninsured. (“The Coverage Gap: Uninsured Poor Adults in States that Do Not Expand Medicaid,” The Kaiser Commission on Medicaid and the Uninsured, Issue Brief, October 2013)

 

Because the ACA envisioned individuals with incomes up to 138% of poverty receiving Medicaid, the law does not provide premium tax credits for the lowest incomes. But most of these ‘coverage gap’ adults do not have access to employer-based coverage through a job and can’t afford coverage on their own.

 

The range of Medicaid eligibility among the 26 states varies widely; only four states not expanding Medicaid (Alaska, Maine, Tennessee, and Wisconsin) cover parents up to at least poverty, and eligibility limits in some states are less than 20% of the poverty level (16% in Alabama, 19% in Texas). Of the states not moving forward with the expansion, only Wisconsin provides Medicaid coverage to adults without dependent children. The median across all 26 states is 47 percent of the federal poverty level. (“The Coverage Gap: Uninsured Poor Adults in States that Do Not Expand Medicaid,” The Kaiser Commission on Medicaid and the Uninsured, Issue Brief, October 2013)

 

The safety net of clinics and hospitals that has traditionally served the uninsured population will continue to be stretched in these 26 states. States may decide to implement the expansion at a later date—there is no deadline for implementing the Medicaid expansion. “. . . more than five million poor adults in states not expanding Medicaid coverage will be ineligible for assistance, while millions more who earn more than they do will receive tax credits to help them pay for coverage in the new insurance Marketplaces,” the authors of the Kaiser report noted.

 

Additional sources for this posting: “Kaiser Says 5 Million Uninsured Adults May Fall into ACA ‘Coverage Gap’ in States That Choose Not to Expand Medicaid,” AHLA, October 18, 2013.

 

To read the Kaiser Issue Brief, please click here.

 

 

 

iProtean subscribers, please look for your new course, Making Difficult Decisions About Services & Programs, Part One in your library. This advanced Finance course features Marian Jennings, Nathan Kaufman and Lisa Goldstein.

 

 

For a complete list of iProtean courses, click here.

For more information about iProtean, click here.

iProtean—Providers Pushing Back on Insurers

Although the drama in Washington, D.C. has dominated the health industry news (because of the focus on the Affordable Care Act), there has been life (and news) as normal. Of particular interest to us over the last week has been legal action, or the threat of legal action, by providers against insurers over rate cuts or exclusion from health exchange plans.

 

Narrow Network Plans Predominate in Marketplaces/Exchanges

The Healthcare Financial Management Association (HFMA) reported on a lawsuit by Seattle Children’s Hospital against the state’s insurance regulator for approving few marketplace plans that include it as a preferred provider. “. . . the move reflects widespread hospital concern about the negative financial impacts for them and their patients from the growing use of such narrow provider networks, which can leave enrollees who seek care at non-network providers to bear a significantly higher share of the cost of their care.” (“Hospital Lawsuit Underlines Provider Concerns with Marketplace Plans,” HFMA Weekly News, October 19, 2013)

 

Limited-provider networks seem to be the norm under the marketplaces/exchanges. In the 34 federally run exchanges, nearly 2,000 plans are available; about 800 are HMOs and about 700 are PPOs. The expansion of available HMOs is unprecedented; for example, until now, HMO plans have comprised less than 5 percent of individual insurance plans sold through online insurance. But research indicated that low premium plans would be more popular among exchange enrollees; hence the proliferation of HMOs on the exchange.

 

“The narrow network design gave insurers a tool to keep prices down in marketplaces where many of their traditional underwriting practices were barred, according to health policy experts.” (“Hospital Lawsuit Underlines Provider Concerns with Marketplace Plans,” HFMA Weekly News, October 19, 2013)

 

Excluding more expensive hospitals such as children’s hospitals and academic medical centers from these marketplaces/exchanges could affect the ability of parents or patients to secure or afford specialty care such as acute cancer care or level IV neonatal intensive care.

 

Medicare Advantage Plans Seek to Pass On Sequestration Cuts

When sequestration went into effect for Medicare, the rate cuts affected both providers and insurers. Now, most Medicare Advantage plans are “unilaterally” passing along the 2 percent rate cuts to providers, and hospitals, physician groups and post-acute care providers are threatening to sue. Legal action could begin by the end of the year. (“Providers threaten lawsuits: Advantage plans pass along 2% sequester rate cuts,” Modern Healthcare.com, October 14, 2013)

 

A 2 percent sequester cut to Medicare Advantage plans represents a large chunk of money; last year the federal government spent approximately $135 billion on this program. Providers say they would feel the cut more keenly. But insurers claim that passing along the cut makes sense where “contractually allowed,” and that providers reimbursed on current-year Medicare allowable rate fee schedules are subject to the same reduction required under sequestration. (“Providers threaten lawsuits: Advantage plans pass along 2% sequester rate cuts,” Modern Healthcare.com, October 14, 2013)

 

Several provider associations have asked CMS to confirm that the sequestration cuts should not be passed on to providers. In May of this year, CMS issued a guidance memo that noted that Medicare Advantage plans should review their individual contracts to determine how sequestration would affect payments. Providers say this statement in the CMS memo demonstrates that the sequestration cuts were intended for insurers, not providers, and that plans could not automatically pass along the cuts.

 

Medicare Advantage insurers say they have to pass along the cuts because they’re increasingly squeezed by reduced payments because of sequestration and Medicare spending reductions included in the Affordable Care Act. But hospitals can make the same claim; they face significant reductions from Medicare and private sector payers.

 

Here are a few facts about Medicare Advantage plans (from “Providers threaten lawsuits: Advantage plans pass along 2% sequester rate cuts,” Modern Healthcare.com, October 14, 2013):

 

  • About 14.4 million people, or 28 percent of Medicare beneficiaries, are currently enrolled in Medicare Advantage plans, and participation has more than doubled since 2006, according to the Kaiser Family Foundation and CMS data.
  • The government pays the plans on a per-beneficiary, per-month basis. It spent 24 percent of the $562 billion Medicare budget last year, or about $135 billion, on Medicare Advantage. Because payments to providers vary by plan, it’s unclear how much of that figure trickles down to hospitals.
  • A March report from the Government Accountability Office found overpayments to Medicare Advantage plans of up to $5.1 billion in years 2010 to 2012, heightening political pressure to reduce payments to the plans.
  • The plans had been facing a 2.3 percent cut for 2014—until the CMS reversed course in April and gave them a 3.3 percent rate hike. Nevertheless, the ACA still mandates a $156 billion payment reduction to Medicare Advantage plans over 10 years.

 

This issue has hit most providers in most states, but it appears to be most significant in states where Medicare Advantage plans have the greatest penetration, such as Florida (34% of beneficiaries) and Arizona (37%).

 

 

iProtean subscribers, please look for your new course, Making Difficult Decisions About Services & Programs, Part One in your library. This advanced Finance course features Marian Jennings, Nathan Kaufman and Lisa Goldstein.

 

 

For a complete list of iProtean courses, click here.

For more information about iProtean, click here.

 

 

iProtean—How the Government Shutdown Affects Health Services

This week’s newsletter comes a few days earlier than usual because we want our subscribers to have a full picture of the impact of the government shutdown on public health. Thanks to the American Health Lawyers Association, we can present a summary.

 

The shutdown began on October 1, resulting from the Senate’s vote to reject a House of Representatives plan that would have kept the government funded for several more months but delayed implementation of key portions of the Affordable Care Act (ACA) for one year.

 

Many federal employees across all healthcare sectors have been furloughed. The Department of Health & Human Services implemented its contingency staffing plan that furloughs more than half of its employees. Some agency programs continue operations but only if they either do not rely on annual appropriations or they involve the safety of human life or the protection of property.

 

Medicare and Medicaid program reimbursement will proceed but a government shutdown for any period of time beyond three or four weeks could impede certain critical administrative functions such as Medicare claims processing, and therefore impact providers’ pocketbooks. Likewise, while substantial ACA implementation will continue, long-term furloughs could affect certain components of the law (such as the exchanges) because they depend on governmental employees to help run the IT component, among other aspects of the program. Thus, the magnitude of the shutdown’s impact will depend on how long it lasts.

 

The following services remain open:

 

  • Funding for Medicaid and the Children’s Health Insurance Program will continue uninterrupted because funding has already been set aside for these programs;
  • Funding for Medicare will continue uninterrupted but only in the short term. If the political impasse stretches beyond several weeks, the program could be disrupted by the reduction in HHS staff;
  • CMS will continue to implement the ACA, “including coordination between Medicaid and the Marketplace, as well as insurance rate reviews, and assessment of a portion of insurance premiums that are used on medical services;”
  • State and federal health insurance exchange programs will continue as planned; however, because IT underpins the exchanges, it isn’t clear how well the exchanges will function on the internet (CMS has not publicly stated whether the IT contracts are already issued and funded);
  • The National Institutes of Health (NIH) will continue to provide patient care for current NIH Clinical Center patients (the NIH Clinical Center is the agency’s research hospital);
  • The U.S. Food and Drug Administration (FDA) is operating only for “vital activities” such as high-risk recalls and other “critical public health issues;”
  • The Substance Abuse and Mental Health Services Administration will continue programs such as the Suicide Prevention Lifeline using the balance of available grants; and
  • Other programs supported through mandatory funding such as the Centers for Disease Control and Prevention (CDC) Global HIV/AIDS Program will continue.

 

However, several programs important to public health will be disrupted if a congressional compromise cannot soon be reached. For example:

  • Outside of matters related to “imminent threats of the safety of human life or protection of property,” CMS, FDA, NIH and other federal agencies will not publish regulations or other guidance during the shutdown;
  • CMS will not fund task forces that work to prevent healthcare fraud and abuse, and will scale back on Medicare provider audits;
  • The CDC seasonal influenza program, which tracks flu outbreaks and certain infectious diseases will stop;
  • No action will be taken on any grants related to medical research, improvement of the healthcare system and monitoring substance abuse programs;
  • No new patients will be admitted to the NIH Clinical Center. NIH-funded researchers may continue to work for as long as their money holds out but additional funds will not be released during the shutdown; and
  • FDA will not be able to support much of its food-safety activities such as routine inspections and public notification programs. FDA’s laboratory research and some compliance and enforcement activities have been suspended.

 

This summary was prepared by Nili S. Yolin (Mintz Levin Cohn Ferris Glovsky & Popeo PC, New York, NY). iProtean thanks AHLA’s Regulation, Accreditation, and Payment Practice Group leadership and AHLA for this alert. Sources include the Office of Legal Counsel, Department of Justice and DHHS Contingency Staffing Plan.   

 

iProtean subscribers, we will be reporting on the speakers’ presentations from our symposium in upcoming issues of this newsletter. Also, please look for your new course, Making Difficult Decisions About Services & Programs, Part One in your library. This advanced Finance course features Marian Jennings, Nathan Kaufman and Lisa Goldstein.

 

 

For a complete list of iProtean courses, click here.

For more information about iProtean, click here  

iProtean—Audits Delayed for Two-Midnight Rule

The Centers for Medicare & Medicaid (CMS) announced this week it will delay Recovery Audit Contractor (RAC) audits of the “two-midnight” rule for 90 days. The 2014 Inpatient Prospective Payment System (IPPS) Final Rule released in August finalized the “two-midnight” rule, under which hospital inpatient admissions that span at least two midnights qualify as appropriate under Medicare Part A, and hospital inpatient admissions that span less than two midnights (i.e., less than one Medicare utilization day) are presumed to be inappropriate for payment under Part A.  (See iProtean Newsletter for August 13 “CMS Payments to Hospitals Will Increase $1.2 Billion in FY 2014”)

 

When auditing medical necessity, the RACs would presume that the occurrence of two midnights after formal inpatient hospital admission indicates an appropriate inpatient status for a medically necessary claim. If the occurrence of two midnights after formal inpatient hospital admission does not occur, government recovery auditors do not apply the same presumption, and claims for such admissions receive a higher level of scrutiny.

As part of its announcement, CMS stated it will not, for a period of 90 days, permit government recovery auditors to review the medical necessity of inpatient admissions of one midnight or less between October 1, 2013 and December 31, 2013. (National Law Review, September 29, 2013)

 

CMS will instruct Recovery Auditors as well as Medicare Administrative Contractors (MACs) to not review claims spanning more than two midnights after admission for appropriateness of patient status during the October – December timeframe. In addition, MACs and Recovery Auditors will not review any claims related to Critical Access Hospitals.

 

Also during this period, CMS will not permit Recovery Auditors to review inpatient admissions of one midnight or less that occur on or after October 1. CMS reminds hospitals that while medical review will not be focused on claims spanning two midnights or more after formal inpatient admission, physicians should make inpatient admission decisions in accordance with the two-midnight provisions in the final rule. If at any time there is evidence of systematic gaming, abuse or delays in the provision of care in an attempt to surpass the two-midnight presumption could warrant medical review. (“Auditors will delay scrutiny of ‘two-midnight’ rule: CMS,” ModernHealthcare.com, September 26, 2013)

 

Both the American Hospital Association and the Federation of American Hospitals responded with little enthusiasm. AHA noted that the rule should be delayed indefinitely, and FAH said CMS “used flawed and arbitrary assumptions to justify its $200 million payment cut to hospitals, purportedly to achieve budget neutrality for the two-midnight rule.” (CMS officials had estimated the two-midnights policy would increase hospital payments by allowing more patients to become eligible for inpatient rates who otherwise would have spent three or more nights in the hospital under outpatient observation.) (“Auditors will delay scrutiny of ‘two-midnight’ rule: CMS,” ModernHealthcare.com, September 26, 2013)

 

Background

Earlier in August, CMS published an IPPS final rule providing clarity on how payments will be provided for inpatient status.  It has been brought to light that “many Medicare beneficiaries had been spending time under ‘observation stay’ status as opposed to ‘inpatient’ status, which prevented them from reaching the three-day threshold required to have skilled nursing services covered.” (CMS Clarifies Payments with “Two Midnight Rule” for Hospital Admissions, CMS Compliance Group, August 28, 2013; iProtean Newsletter, “Inaccuracies, Skewed Incentives in RAC Program,” September 17, 2013)

 

The provisions in the IPPS final rule related to payments for inpatient status will be applicable to hospital discharges that occur on or after October 1, 2013.

 

The CMS Fact Sheet regarding the two midnight rule states:

“. . .The final rule specifies that the timeframe used in determining the expectation of a stay surpassing two midnights begins when the beneficiary starts receiving services in the hospital. This includes outpatient observation services or services in an emergency department, operating room or other treatment area. While the final rule emphasizes that the time a beneficiary spends as an outpatient before the formal inpatient admission order is not inpatient time, the physician—and the Medicare review contractor—may consider this period when determining if it is reasonable and generally appropriate to expect the patient to stay in the hospital at least two midnights as part of an admission decision.  Documentation in the medical record must support a reasonable expectation of the need for the beneficiary to require a medically necessary stay lasting at least two midnights.  If the inpatient admission lasts fewer than two midnights due to an unforeseen circumstance this also must be clearly documented in the medical record.

 

“This clarification will help determine when hospital inpatient status should be extended to a patient. The expectation with this final rule is that Medicare beneficiaries who are able to receive inpatient Medicare Part A coverage status should increase. This will hopefully translate over to subsequent care provided in post-acute care facilities since the required status of a beneficiary is 72 hours to qualify for skilled nursing care coverage, and more beneficiaries may be granted inpatient status with this new rule.”(CMS Clarifies Payments with “Two Midnight Rule” for Hospital Admissions, CMS Compliance Group, August 28, 2013)

 

 

 

 

iProtean subscribers, our annual symposium takes place this week. We will be reporting on the speakers’ presentations over the next several weeks in this newsletter. Also, please look for your new course, Making Difficult Decisions About Services & Programs, Part One in your library. This advanced Finance course features Marian Jennings, Nathan Kaufman and Lisa Goldstein.

 

 

For a complete list of iProtean courses, click here.

 

iProtean Symposium & Workshop

Mark the Date!! October 2 – 4, 2013 at The Lodge at Torrey Pines, La Jolla, CA. Faculty: Michael Irwin (Citigroup), Todd Sagin, M.D., J.D. (Sagin Healthcare Consulting), Dan Grauman (DGA Partners), Pam Knecht (ACCORD LIMITED), Brian Wong, M.D. (The Bedside Project), Doug Mancino, Esq. (Hutton & Williams, LLC)  For more information, click here.

 

For more information about iProtean, click here.