Category Archives: Centers for Medicare and Medicaid Services

Public Option A Bad Policy

I’m back!

In case you missed me, I have been busy with personal matters and preparing for a trip out of town. Now that I am back, I have decided to pick up where I left off, and re-post an article from The Nation by Himmelstein and Woolhander on why private insurance or the public option is a bad policy choice. This article comes courtesy of Don McCanne, so thanks go to him.

Here is the entire article:

The Nation
October 7, 2019
The ‘Public Option’ on Health Care Is a Poison Pill
Some Democratic candidates are pushing it as a free-choice version of Medicare for All. That’s good rhetoric but bad policy.
By David U. Himmelstein and Steffie Woolhandler
Health care reform has been the most hotly contested issue in the Democratic presidential debates. Bernie Sanders and Elizabeth Warren have been pushing a single-payer Medicare for All plan, under which a public insurer would cover everyone. They would ban private insurance, except for items not covered by the public plan, such as cosmetic surgery or private rooms in hospitals. The other Democratic contenders favor a “public option” reform that would introduce a Medicare-like public insurer but would allow private insurers to operate as well. They tout this approach as a less traumatic route to universal coverage that would preserve a free choice of insurers for people happy with their plans. And some public option backers go further, claiming that the system would painlessly transition to single payer as the public plan outperforms the private insurers.
That’s comforting rhetoric. But the case for a public option rests on faulty economic logic and naive assumptions about how private insurance actually works. Private insurers have proved endlessly creative at gaming the system to avoid fair competition, and they have used their immense lobbying clout to undermine regulators’ efforts to rein in their abuses. That’s enabled them to siphon hundreds of billions of dollars out of the health care system each year for their own profits and overhead costs while forcing doctors and hospitals to waste billions more on billing-related paperwork.
Those dollars have to come from somewhere. If private insurers required their customers to pay the full costs of private plans, they wouldn’t be able to compete with a public plan like the traditional Medicare program, whose overhead costs are far lower. But this is not the case: In fact, taxpayers—including those not enrolled in a private plan—pick up the tab for much of private insurers’ profligacy. And the high cost of keeping private insurance alive would make it prohibitively expensive to cover the 30 million uninsured in the United States and to upgrade coverage for the tens of millions with inadequate plans.
Public option proposals come in three main varieties:
§  A simple buy-in. Some proposals, including those by Joe Biden and Pete Buttigieg, would offer a Medicare-like public plan for sale alongside private plans on the insurance exchanges now available under the Affordable Care Act. These buy-in reforms would minimize the need for new taxes, since most enrollees would be charged premiums. But tens of millions would remain uninsured or with coverage so skimpy, they still couldn’t afford care.
§  Pay or play. This variant (similar to the plan advanced by the Center for American Progress and endorsed by Beto O’Rourke) would offer employers a choice between purchasing private insurance or paying a steep payroll tax (about 8 percent). Anyone lacking employer-paid private coverage would be automatically enrolled in the public plan. The public option would be a good deal for employers who would otherwise have to pay more than 8 percent of their payroll for private coverage—for example, employers with older or mostly female workers (who tend to use more care and incur high premiums) or with lots of low-wage workers (for whom 8 percent of payroll is a relatively small sum). But many firms employing mostly young, male, or highly paid workers (e.g., finance and tech) would likely stay with a private insurer.
§  Medicare Advantage for All. The public option approach favored by Kamala Harris would mimic the current Medicare Advantage program. Medicare Advantage plans are commercial managed care products currently offered by private insurers to seniors. The Centers for Medicare and Medicaid Services (CMS), the federal agency that administers Medicare, collects the taxes that pay for the program and passes the funds ($233 billion in 2018) along to the insurance companies. Under this approach, the public option would operate alongside the private Medicare Advantage plans and compete with them, as the traditional fully public Medicare program currently does.
No working models of the buy-in or pay-or-play public option variants currently exist in the United States or elsewhere. But decades of experience with Medicare Advantage offer lessons about that program and how private insurers capture profits for themselves and push losses onto their public rival—strategies that allow them to win the competition while driving up everyone’s costs.
IN US HEALTH INSURANCE, GOOD GUYS FINISH LAST
A public option plan that facilitates enrollees’ genuine access to health care can’t compete with private insurers that avoid the expensively ill and obstruct access to care. Despite having overhead costs almost seven times that of traditional Medicare (13.7 versus 2 percent), Medicare Advantage plans have grown rapidly. They now cover more than one-third of Medicare beneficiaries, up from 13 percent in 2005. Greed has trumped efficiency, and the efforts of regulators to level the playing field have been overwhelmed by insurers’ profit-driven schemes to tilt it.
Private insurers employ a dizzying array of profit-enhancing schemes that would be out of bounds for a public plan. These schemes, which continually evolve in response to regulators’ efforts to counter them, boil down to four strategies that are legal, in addition to occasional outright fraud.
§  Obstructing expensive care. Plans try to attract profitable, low-needs enrollees by assuring convenient and affordable access to routine care for minor problems. Simultaneously, they erect barriers to expensive services that threaten profits—for example, prior authorization requirements, high co-payments, narrow networks, and drug formulary restrictions that penalize the unprofitably ill. While the fully public Medicare program contracts with any willing provider, many private insurers exclude (for example) cystic fibrosis specialists, and few Medicare Advantage plans cover care at cancer centers like Memorial Sloan Kettering. Moreover, private insurers’ drug formularies often put all of the drugs—even cheap generics—needed by those with diabetes, schizophrenia, or HIV in a high co-payment tier.
Insurers whose first reaction to a big bill is “claim denied” discourage many patients from pursuing their claims. And as discussed below, if hassling over claims drives some enrollees away, even better: The sickest will be the most hassled and therefore the most likely to switch to a competitor.
§  Cherry-picking and lemon-dropping, or selectively enrolling people who need little care and disenrolling the unprofitably ill. A relatively small number of very sick patients account for the vast majority of medical costs each year. A plan that dodges even a few of these high-needs patients wins, while a competing plan that welcomes all comers loses.
In the employer market, cherry-picking is easy: Private insurers offer attractive premiums to businesses with young, healthy workers and exorbitant rates to those with older, sicker employees. As a letter this summer to The New York Times put it, like casinos, health insurers are profitable because they know the odds of every bet they place—and the house always wins.
The CMS, in theory, requires Medicare Advantage plans to take all comers and prohibits them from forcing people out when they get sick. But regulators’ efforts to enforce these requirements have been overwhelmed by insurers’ chicanery. To avoid the sick, private insurers manipulate provider networks and drug formulary designs. Despite the ban on forcing enrollees out, patients needing high-cost services like dialysis or nursing home care have switched in droves from private plans to traditional, fully public Medicare. And as a last resort, Medicare Advantage plans will stop offering coverage in a county where they’ve accumulated too many unprofitable enrollees, akin to a casino ejecting players who are beating the house.
Finally, Medicare Advantage plans cherry-pick through targeted marketing schemes. In the past, this has meant sign-up dinners in restaurants difficult to access for people who use wheelchairs or offering free fitness center memberships, a perk that appeals mainly to the healthiest seniors. But higher-tech approaches are just around the corner. Will Oscar, the health insurer founded by Jared Kushner’s brother—with Google’s parent company as a significant investor—resist the temptation to use Google’s trove of personal data to target enrollment ads toward profitable enrollees like tennis enthusiasts and avoid purchasers of plus-size clothing or people who have searched online for fertility treatments?
§  Upcoding, or making enrollees look sicker on paper than they really are to inflate risk-adjusted premiums. To counter cherry-picking, the CMS pays Medicare Advantage plans higher premiums for enrollees with more (and more serious) diagnoses. For instance, a Medicare Advantage plan can collect hundreds of dollars more each month from the government by labeling an enrollee’s temporary sadness as “major depression” or calling trivial knee pain “degenerative arthritis.” By applying serious-sounding diagnoses to minor illnesses, Medicare Advantage plans artificially inflate the premiums they collect from taxpayers by billions of dollars while adding little or nothing to their expenditures for care.
Though most upcoding stays within the letter of the law and merely stretches medical terminology, the CMS’s (rare) audits of enrollees’ charts indicate that Medicare Advantage plans are collecting $10 billion annually from taxpayers for entirely fabricated diagnoses. And that’s only a small fraction of their overall take from upcoding. Private insurers keep most of this pilfered money for their profits and overhead, but they use a portion to fund added benefits (for example, eyeglasses or slightly lower co-payments for routine care) that attract new enrollees and help private plans to seemingly outcompete traditional Medicare.
§  Lobbying to get excessive payments and thwart regulators. Congress has mandated that the CMS overpay Medicare Advantage plans by 2 percent (and even more where medical costs are lower than average). On top of that, Seema Verma, Trump’s CMS administrator, has taken steps that will increase premiums significantly and award unjustified “quality bonuses,” ignoring advice from the Medicare Payment Advisory Commission that payments be trimmed because the government is already overpaying the private plans. And she has ordered changes to the CMS’s Medicare website to trumpet the benefits of Medicare Advantage enrollment.
In sum, a public option insurer that, like traditional Medicare, doesn’t try to dodge unprofitable enrollees would be saddled with more than its share of sick, expensive patients and would become a de facto high-cost, high-risk pool. The CMS’s decades-long efforts to level the playing field have been thwarted by insurers’ upcoding, belying their promises of fair competition. And insurance companies have used their political muscle to sustain and increase their competitive advantage over traditional Medicare. The result: The public plan (and the taxpayers) absorbs the losses while private insurers skim off profits, an imbalance so big that private plans can outcompete a public plan despite squandering vast sums on overhead costs, CEO salaries, and shareholder profits.
SINGLE PAYER WOULD SAVE, PUBLIC OPTION WON’T
This year alone, private insurers will take in $252 billion more than they pay out, equivalent to 12 percent of their premiums. A single-payer system with overhead costs comparable to Medicare’s (2 percent) could save about $220 billion of that money. A public option would save far less—possibly zero, if much of the new public coverage is channeled through Medicare Advantage plans, whose overhead, at 13.7 percent, is even higher than the average commercial insurer.
Moreover, a public option would save little or nothing on hospitals’ and doctors’ sky-high billing and administrative costs. In a single-payer system, hospitals and other health facilities could be funded via global, lump-sum budgets—similar to the way cities pay fire departments—eliminating the need to attribute costs to individual patients and collect payments from them and their insurers. That global budget payment strategy has cut administrative costs at hospitals in Canada and Scotland to half the US level. The persistence of multiple payers would preclude such administrative streamlining, even if all of the payers are charged the same rates. (Under Maryland’s mislabeled global budget system, the state’s hospitals charge uniform rates but continue to bill per patient; our research indicates that their administrative costs haven’t fallen at all, according to their official cost reports.)
Similarly, for physicians and other practitioners, the complexity involved in billing multiple payers, dealing with multiple drug formularies and referral networks, collecting co-payments and deductibles, and obtaining referrals and prior authorizations drives up office overhead costs and documentation burdens.
The excess overhead inherent to multipayer systems imposes a hidden surcharge on the fees that doctors and hospitals must charge all patients—not just those covered by private insurance. All told, a public option reform would sacrifice about $350 billion annually of single payer’s potential savings on providers’ overhead costs, over and above the $220 billion in savings it could sacrifice annually on insurers’ overhead.
Finally, a public option would undermine the rational health planning that is key to the long-term savings under single payer. Each dollar that a hospital invests in new buildings or equipment increases its operating costs by 20 to 25 cents in every subsequent year. At present, hospitals that garner profits (or “surpluses” for nonprofits) have the capital to expand money-making services and buy high-tech gadgets, whether they’re needed or not, while neglecting vital but unprofitable services. For instance, hospitals around the country have invested in proton-beam-radiation therapy centers that cost hundreds of millions of dollars apiece. (Oklahoma City alone now has two.) Yet there’s little evidence that those machines are any better for most uses than their far cheaper alternatives. Similarly, hospitals have rushed to open invasive cardiology and orthopedic surgery programs, often close to existing ones. These duplicative investments raise costs and probably compromise quality.
Meanwhile, primary care and mental health services have languished, and rural hospitals and other cash-strapped facilities that provide much-needed care spiral toward closure. As in Canada and several European nations, a single-payer system could fund new hospital investments through government grants based on an explicit assessment of needs, instead of counting on private hospitals to use their profits wisely. That strategy has helped other nations direct investments to areas and services with the greatest need and to avoid funding wasteful or redundant facilities. Public option proposals would perpetuate current payment strategies that distort investment and raise long-term costs.
Because a public option would leave the current dysfunctional payment approach in place, it would sacrifice most of the savings available via single-payer reform. The bottom line is that a public option would either cost much more or deliver much less than single payer.
WHY NOT IMPORT GERMAN, SWISS, OR DUTCH HEALTH CARE?
Public option proponents often cite Germany, Switzerland, and the Netherlands as exemplars of how private insurers can coexist with thriving public health care systems. But they ignore the vast differences between those nations’ private insurers and ours.
The nonprofit German “sickness funds,” which cover 89 percent of the population (only wealthy Germans are allowed to purchase coverage from for-profit insurers), are jointly managed by employers and unions—a far cry from our employer-based coverage. The government mandates identical premium rates for all the sickness funds, takes money from those with low-risk enrollees and subsidizes others with older and sicker ones, and directly pays for most hospital construction. All sickness funds offer identical benefit packages, pay the same fees, and cover care from any doctor or hospital.
Although the details differ, a similarly stringent regulatory regime applies in Switzerland, whose system descended from Otto von Bismarck’s original German model, and as in Germany, the government funds most hospital construction. While for-profit insurers can sell supplemental coverage, only nonprofits are allowed to offer the mandated benefit package.
Since 2006, the Netherlands has been transitioning from the German-style universal coverage system to a more market-oriented approach championed by corporate leaders. However, the government pays directly for all long-term care, and a strong ethos of justice and equality has pressured both public and private actors to avoid any erosion of social solidarity. The Netherlands has long enjoyed ready access to care, and its system hasn’t descended (yet) into an American-style abyss. But under the new regime, hospital administrative costs have risen nearly to US levels, overall health costs have increased rapidly, doctors complain of unsustainable administrative burdens, and even in such a small nation, tens of thousands of people are uninsured. Insurers spend massively on marketing and advertising, and private insurers’ overhead costs average 13 percent of their premiums. Moreover, the United States and the Netherlands aren’t the only places where for-profit insurers’ overhead costs are high: They average 12.4 percent in Switzerland, 20.9 percent in Germany, and 26.2 percent in the United Kingdom.
Transforming the immensely powerful, profit-driven insurance companies of the United States into benign nonprofit insurers in the Swiss or German mold would be as heavy a lift as adopting Medicare for All. Nor can we count on the cultural restraints that have thus far softened the Dutch insurers’ rapacious tendencies and prevented a reversal of that country’s long-standing health care successes.
A final point: While allowing private insurers to compete with a public plan amounts to a poison pill, the same isn’t true for supplemental private plans that are allowed to cover only those items excluded from the public benefit package. While Canada bans the sale of private coverage that duplicates the public plan’s benefits, it has always allowed supplemental coverage, and that hasn’t sabotaged its system.
The efficiencies of a single-payer system would make universal coverage affordable and give everyone in the United States their free choice of doctors and hospitals. But that goal will remain out of reach if private insurers are allowed to continue gaming the system. Preserving the choice of insurer for some would perpetuate the affordability crisis that has bedeviled the US health care system for generations. Proponents of the public option portray it as a nondisruptive, free-choice version of single payer. That may be good campaign rhetoric, but it’s terrible policy.
David U. Himmelstein, MD and Steffie Woolhandler, MD, MPH are Distinguished Professors of Public Health at the City University of New York at Hunter College and are co-founders of Physicians for a National Health Program.

No Socialists Here

Dear Insurance company execs, pharmaceutical company execs, employee benefits consultants and executives, Wall Street investors, and all other stakeholders in the current dysfunctional, broken, complex, complicated, and bloated mess called the US health care system.

You have heard many politicians, and journalists, not to mention your own peers, or even you yourselves label the push for Medicare for All as “Socialism.”

We even have the Administrator of CMS, Seema Verma, calling it, and the public option plan,  “radical and dangerous for the country” recently when she spoke to the Better Medicare Alliance’s Medicare Advantage Summit in Washington, D.C.

Her solution, and probably yours as well, is to keep selling Medicare Advantage plans, which only makes the current system worse.

So, to help you get over your fear and loathing of Socialism, and to prove to you that the only reason why the US is the only Western, industrial nation to not provide its citizens with universal health care is because you are making money off of other people’s health, or lack thereof.

You are doing so, because you are greedy. There I said it. Now I hope you will pay attention to the following graphic:

Do you see any socialist countries? Do you see any radical and dangerous regimes that are hostile to the interests of the US? Well, maybe Slovenia. After all, they did send us Melania and her illegal family.

But back to the case at hand. I defy any of you hotshots in the health care space to prove to me that all of these Capitalist, free-market countries are flaming Reds, or even a bit Pinko.

You can’t, because it is not true. You and those who call Medicare for All, Single Payer, or even the so-called “public option” radical, just don’t want the government to interfere with your looting the pockets of the American people for your financial gain.

And that is why we are the only country with an “X”, instead of a check mark below our name.

16,000 Unnecessary Deaths Tied to Failure to Expand Medicaid

The Los Angeles Times reported Monday that a new study found that Medicaid expansion brought appreciable improvements in health to enrollees, but also that full expansion nationwide would have averted 15,600 deaths among the vulnerable Medicaid-eligible population.

This is in contrast to the view of opponents of Medicaid expansion who have said that lack of evidence that enrollment in Medicaid improves health and saves lives, and therefore they believed that expansion was a waste of money.

In the 22 mostly red states that refused expansion, the cause of the 15,600 deaths of their state’s residents was attributed to failure to expand.

“This highlights an ongoing cost to non-adoption that should be relevant to both state policymakers and their constituents,” the authors of the study said.

Fourteen states are still holding out, States such as Wyoming and South Dakota, the article states, have a warped sense of “freedom.” States such as Maine and Louisiana, who have had a change in governors from Republican to Democrat, have recently adopted expansion.

medicaid

Fourteen states still resist Medicaid expansion, at great cost to their residents (Kaiser Family Foundation)

The article takes a dim view of the entire rationale for refusing to expand Medicaid, and cites a few noted Conservative voices against the entire idea of expansion and Medicaid itself.

Conservatives have worked hard to depict Medicaid as ineffective, the article reports. They’ve done so, it continues,  by overinterpreting limited studies such as a 2013 study of a Medicaid expansion in Oregon.

Critics focused on the researchers’ finding of “no significant improvements in measured physical health outcomes in the first 2 years” of expansion, but they overlooked the findings that the expansion did “increase use of healthcare services, raise rates of diabetes detection and management, lower rates of depression, and reduce financial strain.”

Conservative health policy Avik Roy has crowed, the article states, that the result “calls into question the $450 billion a year we spend on Medicaid, and the fact that Obamacare throws 11 million more Americans into this broken program.”

Another right-wing critic of Medicaid expansion, and not to mention, also of Medicare for All, and now more recently, the public option for Medicare, is CMS Administrator Seema Verma, a Trump flunky.

(Credit: Getty Images )  Picture worth a thousand words was never more true. What a piece of work!

Verma has argued that the expansion hasn’t been a success despite its enrollment figures and has been a leader in undermining the program by allowing states to impose premiums, work requirements and punitive disenrollments on patients. (Her efforts have been blocked by a federal judge, for now.)

This is why advocates for Medicare for All are so passionate and determined, in the face of even the slightest opposition to improving the health and lives of millions of Americans for small changes to our nation’s health care system.

Failure to expand Medicaid, failure to enact universal health care, even if it is a public option, is challenged from the right for morally indefensible and reprehensible reasons.

The cry of “freedom” from conservatives is a smoke-screen to hid their true purpose. To dismantle all social programs and funnel that money to the wealthy and corporations, as they have already done with the Trump tax giveaway.

Now they are trying to cut three million Americans off of food stamps.

All these schemes have one purpose in mind, to kill off their most ardent supporters in Southern and Midwestern states that continue to vote for these sociopaths. To them, freedom means, freedom for a company to profit off of your misfortune, whether that misfortune is due to poor diet, poor personal habits such as smoking and drug abuse, and poor health outcomes due to poverty and economic distress.

Naturally, any attempt to improve the health and lives of the poor, black or white, or Latino, etc., is viewed as “Socialism” and is deemed bad for the country, as Ms. Verma did this week to the Better Medicare Alliance’s Medicare Advantage Summit in Washington, D.C.

No, it’s not bad for the country. It’s bad for the profits of the insurance companies, the pharmaceutical companies, the benefit managers industry, the health care consultants, and Wall Street investors.

Wanting to cut of food stamps, fail to expand even Medicaid, tightening rules for who is eligible for these programs, is not only bad for the health of average Americans, it is bad for the economic vitality of the nation in an era of global competition.

The men and women at Trump rallies are angry, but they are angry at the wrong people. The clown on the stage is the person they really should be angry at, and his entire swamp of “the best people.”

Lower Prescription Drug Prices Lure Americans To Mexico To Buy Meds : Shots – Health News : NPR

Good morning all.

Thanks go out to Josef Woodman who tweeted the following today from NPR about prescription drugs and going across the Mexican border to buy them at lower cost.

This is in addition to the article I recently posted, Run for the Border (Not a Taco Bell Commercial).

So wall, or no wall, Americans are going to look for cheaper prescription drugs, either in Mexico or Canada, or elsewhere, until we allow the government to negotiate prices for medications under an improved and expanded Medicare for All.

But thanks to a former Louisiana congressman who left Congress to become the President and CEO of PhRMA, a pharmaceutical company lobbying group, Congress passed a bill that prevents Medicare from negotiating lower drug prices and bans the importation of identical, cheaper, drugs from Canada and elsewhere.

But it does not have to be this way. We can lower drug prices, but by allowing the government to negotiate them, and not giving the pharmaceutical industry huge giveaways.

Here is NPR’s article:

Faced with high U.S. prices for prescription drugs, some Americans cross the border to buy insulin pens and other meds. At least 1 insurer reimburses flights to the border to make such purchases easy.

Source: Lower Prescription Drug Prices Lure Americans To Mexico To Buy Meds : Shots – Health News : NPR

Mid-Week Catch-Up

Borrowing a page from another blogger, here are some items that I have seen this week that I did not immediately post to the blog. The first three are courtesy of Medical Travel.com.

From AHA.org, comes an article about the Zika epidemic I wrote about a while ago. About 14% of babies age one or older who were born in U.S. territories to pregnant women infected with Zika virus since 2016 have at least one health problem possibly caused by exposure to the virus, the Centers for Disease Control and Prevention reported today. About 6% had Zika-associated birth defects, 9% nervous system problems and 1% both.

From Health Affairs.org, comes a report about the fundamental flaw of health care and the recurring-payment-for-outcomes solution.

Bloomberg.org reported that US hospitals are shutting at a 30-a-year pace with no end in sight.

Lastly, Health Affairs blog posted an article about an issue I covered some years ago, the Medicare Shared Savings Program (MSSP).

Have a good rest of the week after remembering the fallen of 9/11. FYI, I was in Houston at the time, just having started a new job with Aon there, and heard about the first plane crashing into the north tower while driving to work and listening to the radio. As we were all new, and had little to do, I took a brief siesta and when I went into the hallway, was told to go upstairs to the break room. There was a TV on, and as I entered the room, the south tower went down. This NYC born kid was not sure what was going to happen next, surrounded as I was by all these Texans. I remembered the people and companies I knew there in both towers, especially my cousin who was there for the 1993 attack.

 

Again, With the Models?

Today’s post from Don McCanne revives an old issue readers of this blog are familiar with — the introduction of new models or the revising of old models for value-based care such as Accountable Care Organizations (ACOs) and the Medicare Shared Savings Program.

CMS Administrator Seema Verma attempts to defend these models and gives an overview of a new proposal called “Pathways to Success.” Don’t you just love these cute names they give to future failures? Instead of scraping them altogether and going to single payer, they keep re-inventing a broken wheel.

At any rate, I am posting Verma’s article from Health Affairs blog, along with Kip Sullivan’s response, and lastly, Don McCanne’s brief comments on both. Enjoy!


Health Affairs Blog
August 9, 2018
Pathways To Success: A New Start For Medicare’s Accountable Care Organizations
By Seema Verma
For many years we have heard health care policymakers from both political parties opine about the need to move to a health care system that pays for the value of care delivered to patients, rather than the mere volume of services.
From the moment I became Administrator of the Centers for Medicare & Medicaid Services (CMS), I have been committed to using every tool at my disposal to move our health care system towards value-based care.
One set of value-based payment models that CMS has been closely reviewing are initiatives involving Accountable Care Organizations (ACOs).
In this post I will unpack key features of Medicare’s ACO initiatives and provide an overview of CMS’s new proposal for the Medicare Shared Savings Program, called “Pathways to Success.”
Upside-Only Versus Two-Sided ACOs
The majority of Medicare’s ACOs – 460 of the 561 or 82% of Shared Savings Program ACOs in 2018 – are in the upside-only “Track 1” of the Shared Savings Program, meaning that they share in savings but do not share in losses.  Currently, ACOs are allowed to remain in the one-sided track for up to six years.
The results show that ACOs that take on greater levels of risk show better results for cost and quality over time. (See Kip’s comments.)
The current combination of six years of upside-only risk, which involves bonus payments if spending is low but no risk of losses if spending goes up, along with the provision of waivers may be encouraging consolidation.  Such consolidation reduces choices for patients without controlling costs.  This is unacceptable.
The proposed changes included in Pathways to Success would shorten the maximum amount of time permitted in upside-only risk to allow a maximum of two years, or one year for ACOs identified as having previously participated in the Shared Savings Program under upside-only risk.
Streamlining the program, extending the length of agreements, and accelerating the transition to two-sided risk would result in reduced administrative burden and greater savings for patients and taxpayers.
Looking Forward
ACOs can be an important component of the move to a value-based system, but after six years of experience, the program must evolve to deliver value.  The time has come to put real “accountability” in Accountable Care Organizations.
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The Health Care Blog
August 21, 2018
Seema Verma Hyperventilates About Tiny Differences Between ACOs Exposed to One-and Two-Sided Risk
By Kip Sullivan, JD
There is no meaningful difference between the performance of Medicare ACOs that accept only upside risk (the chance to make money) and ACOs that accept both up- and downside risk (the risk of losing money). But CMS’s administrator, Seema Verma, thinks otherwise. According to her, one-sided ACOs are raising Medicare’s costs while two-sided ACOs are saving “significant” amounts of money. She is so sure of this that she is altering the rules of the Medicare Shared Savings Program (MSSP). Currently only 18 percent of MSSP ACOs accept two-sided risk. That will change next year. According to a proposed rule CMS published on August 9, ACOs will have at most two years to participate in the MSSP exposed to upside risk only, and after that they must accept two-sided risk.
That same day, Verma published an essay on the Health Affairs blog in which she revealed, presumably unwittingly, how little evidence she has to support her decision. The data Verma published in that essay revealed that one-sided ACOs are raising Medicare’s costs by six-one-hundredths of a percent while two-sided ACOs are cutting Medicare’s costs by seven-tenths of a percent. Because these figures do not consider the expenses ACOs incur, and because the algorithms CMS uses to assign patients to ACOs and to calculate ACO expenditure targets and actual performance are so complex, this microscopic difference is meaningless.
As pathetic as these figures are, they fail to take into account ACO start-up and operating costs. CMS doesn’t know or care what those costs are. The only relevant information we have are some undocumented statements by the staff of the Medicare Payment Advisory Commission (MedPAC) to the effect that ACO overhead is about 2 percent of their benchmarks (their predicted spending). I suspect 2 percent is low, but let’s take it at face value and do the math. If, as Verna’s data indicates, two-sided ACOs save Medicare seven-tenths of a percent net (that is, considering both CMS’s shared-savings payments to some ACOs and penalties other ACOs that lose money pay to CMS), but these ACOs spend 2 percent doing whatever it is ACOs do, that means the average two-sided ACO is losing one percent.
The good news is that Verma may have hastened the demise of a program that isn’t working. Whether Congress ultimately pulls the plug on the ACO project will depend on whether ACO advocates will concede at some point that the ACO fad was based on faith, not evidence, and has failed to work. I predict they will refuse to admit failure and will instead peddle another equally ineffective solution, for example, overpaying ACOs (as the Medicare Advantage insurers and their predecessors have been for the last half-century). I base my prediction on the behavior of ACO advocates. The history of the ACO movement indicates ACO proponents don’t make decisions based on evidence.
Facing the Evidence
Evidence that the ACO project is failing is piling up. All three of CMS’s two-sided ACO programs – the PGP demo, the Pioneer demo, and the Next Generation program – saved only a few tenths of a percent, while CMS’s mostly two-sided program, the MSSP, raised costs by a smidgeon. All four programs have raised costs if we take into account the ACOs’ start-up and operating costs and CMS’s cost of administering these complex programs. Evidence indicting the other major “value-based payment” fads – medical homes, bundled payments, and pay-for-performance schemes – is also piling up. The simultaneous failure of all these fads to cut costs spells trouble ahead for the Affordable Care Act (because it relies on “value-based payment reforms” for cost containment), MACRA (because it also relies on “value-based payment” theology), and our entire health care system (because the big insurance companies and the major hospital-clinic chains are spending more money on “value-based payment” fads than those fads are saving, and because these 1,000-pound gorillas are using the establishment’s endorsement of ACOs, medical homes etc. as an excuse to become 2,000-pound gorillas).
The root cause of our nation’s chronic inability to adopt effective cost-containment policies is the chronic inability of the American health policy establishment to make decisions based on evidence, not groupthink. Seema Verma’s decision to bet the farm on two-sided-risk ACOs is the latest example of this problem.
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Comment by Don McCanne
We can thank Seema Verma for showing us that all of the talk about value-based payment – paying for value instead of volume through the establishment of accountable care organizations – was never really about value. Her insistence in shoving providers into downside risk reveals that it was always about reducing federal spending on Medicare. But that hasn’t changed her deceptive rhetoric about value and accountability.
Thank goodness we have astute analysts such as Kip Sullivan. The excerpts from his critique of Verma’s views as expressed in her Health Affairs Blog article should tempt you to read his entire critique at The Health Care Blog (link above).
The nonsense about ACOs has to go so we can get down to fixing the real problems with our health care financing system – the inequities, lack of universality, and lack of affordability for far too many individual patients. So let’s turn up the volume on a well designed, single payer, improved Medicare for all.

Rural hospitals in dire need of regulatory relief | Healthcare Dive

“Reducing some of the costly regulatory challenges we face would help staunch the bloodletting,” said Leslie Marsh, CEO of Lexington Regional Health Center.

Source: Rural hospitals in dire need of regulatory relief | Healthcare Dive