Health Care Current: February 17, 2015

Alternate Medicaid expansion: Crossing the proverbial bridge

This weekly series explores breaking news and developments in the U.S. health care industry, examines key issues facing life sciences and health care companies and provides updates and insights on policy, regulatory and legislative changes.

Alternate Medicaid expansion: Crossing the proverbial bridge

We say it to ourselves all the time: “At some point, we’re going to need a new car”; “This tax year is going to be complicated”; or – my personal favorite – “My children’s activities this weekend will require me to be in two places at the same time.” The typical response: “We’ll cross that bridge when we get to it.”

Now, nearly a year after I last covered alternate Medicaid expansion plans (see the February 4, 2014 Health Care Current), many states are crossing their proverbial bridges.

Arkansas, the first state to receive approval from the Centers for Medicare and Medicaid Services (CMS) in September 2013, has enrolled 210,000 individuals on the state’s alternate expansion plan.1 Since January 2014, Arkansas has been using the ACA’s Medicaid expansion funds to purchase qualified health plans (QHPs) through the health insurance marketplace for newly eligible adults. The uninsured rate in the state has dropped a dramatic 10 percent.2,3 More recently, CMS allowed Arkansas to amend its Section 1115 Waiver to include new cost-sharing requirements for enrollees of the private option plan. Beneficiaries will now make monthly contributions into new health independence accounts.

Soon after Arkansas received its waiver approval, Iowa followed. Using the new expansion funds, Iowa created two programs: the Iowa Marketplace Choice Plan and the Iowa Wellness Plan. The Iowa Marketplace Choice Plan has been purchasing coverage in QHPs for newly eligible beneficiaries whose incomes fall between 100-138 percent of the federal poverty level (FPL), and the Iowa Wellness Plan has enrolled newly eligible individuals with incomes below 100 percent of the FPL into managed care plans in traditional Medicaid. Many of the newly eligible are also responsible for some cost sharing through monthly premiums.4 As of December 2014, Iowa had enrolled nearly 120,000 into the expansion programs (three-fourths of whom enrolled in the Iowa Wellness Program) setting the state well on its way to meeting its goal of 150,000 enrollees.5

In 2014, CMS approved Michigan’s waiver program. Healthy Michigan built in copayment and cost-sharing requirements for all newly eligible individuals and gives enrollees discounts for healthy behavior. The program began enrolling the new population into Medicaid beginning in April, 2014. Today, Healthy Michigan has enrolled more than 546,000 beneficiaries.6 Most recently, Indiana received approval of its Section 1115 Waiver to expand Medicaid through the Healthy Indiana Program 2.0 (see the February 3, 2015 Health Care Current).

Even though these states are beginning to cross the Medicaid expansion bridge, it is still unclear what the other side will look like. States will likely face many questions as their journey continues:

  • A common thread built into each of the alternate expansion programs is cost sharing. Whether it’s in the form of health savings account “look-alikes” or monthly premium contributions, states are testing whether newly eligible can handle increased responsibility for the cost of their care. Some might consider the cost sharing modest—in Arkansas it is between $5 and $25 per month depending on an individual’s income level. But patient advocates have expressed concern about the requirements. Are these policies keeping individuals from enrolling? Or are they making people more cost aware in a positive way?
  • Early results indicate these expansions have decreased uninsured rates across the country. A recent study found that community health centers have seen more patients overall, but a sample of “regular” expansion states have seen larger reductions in uninsured patients than non-expansion states (see the January 20, 2015 Health Care Current). Will the states that opted for the alternate expansion see the same results?
  • While uninsured rates may be down, other evidence indicates that some areas of the country are still seeing an increase in emergency department visits. Giving individuals health insurance coverage does not necessarily mean that they will always seek care in the most appropriate setting. It could also mean that health care consumers are still struggling to modify their health behavior. Do patients need more education, do they know how to use their new coverage, and do the networks on their new plans offer sufficient coverage?
  • The policy that raises Medicaid rates to Medicare levels for primary care physicians expired at the end of 2014, leaving states to decide whether to continue the match program. Twenty-three states have indicated they have no intention to continue the increased payment level after 2014. Those states have tended to be the ones where the difference between Medicaid and Medicare rates are the highest; thus, rates there will fall even more than the average, at more than 47 percent.7 What impact will the expiration of this policy have on access?
  • Policies adopted in one state may result in different outcomes in another state. What impact will state demographics, social determinants of health, politics and more have on the implementation of each of these programs?
  • Some policymakers and proponents of expansion predicted that it would reduce uncompensated care costs for hospitals. The U.S. Department of Health and Human Services (HHS) estimated that hospitals’ uncompensated care costs were $5.7 billion lower due to the coverage expansions in 2014. Nearly three-fourths of these savings came from the states that expanded Medicaid.8 Will costs continue to decrease?

Progress on the alternate expansion programs to date has also brought some larger questions. Will we see more unique expansion programs or have we reached a plateau? Several states have new legislatures and governors that might consider new approaches to expansion. But, many of those states are focused on adding employment requirements. Will CMS continue its hard line that states cannot use participation in a workplace program as eligibility criteria for Medicaid?

Expansion, whether traditional or alternate, will likely require an overhaul of operation strategies, technology functions and IT enhancements to support enrollment system changes. New IT processes and functions could help keep track of the changing enrollee population, especially as individuals’ incomes, and thus eligibility, changes.

Medicaid is the largest component of total state spending, and in 2014 accounted for more than 25 percent of total state spending, an increase over 2013.9 Many state leaders and lawmakers are beginning to weigh whether an alternate expansion program might be the best route for them, as well. As states that decided to expand their programs begin to see outcomes from these initiatives, others continue to watch.

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1 Arkansas Governor, “Transcript of Governor Asa Hutchinson’s Healthcare Speech,” January 22, 2015
2 Kaiser Family Foundation, “Medicaid Expansion in Arkansas,” February 15, 2015
3 Ibid
4 Kaiser Family Foundation, “Medicaid Expansion in Arkansas,” February 12, 2015
5 Quad City Times, “Iowa: Nearly 120,000 signed up for Medicaid expansion program,” December 24, 2014
6 Michigan Department of Community Health, “Healthy Michigan Plan Enrollment Statistics,” February 9, 2015
7 Stephen Zuckerman, Laura Skopec, and Kristen McCormack, Urban Institute, “Reversing the Medicaid Fee Bump: How Much Could Medicaid Physician Fees for Primary Care Fall in 2015?” December 2014
8 HHS, Office of the Assistant Secretary for Planning and Evaluation, “Impact of Insurance Expansion on Hospital Uncompensated Care Costs, in 2014” September 24, 2014
9 National Association of State Budget Officers, “Overview: Total State Spending Accelerates in Fiscal 2014 After Returning to Positive Growth in Fiscal 2013,” November 20, 2014

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My Take

By Jessica Blume, Vice Chairman, U.S. Public Sector Leader, Deloitte LLP


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GAO reviews ICD-10 readiness; House E&C subcommittee discusses implementation challenges

According to the Government Accountability Office (GAO), CMS has effectively worked to prepare Medicare, state Medicaid agencies, vendors and health care provider organizations for conversion to the 10th revision of the International Classification of Diseases (ICD-10) codes. On October 1, 2015 all claims submitted to payers – whether commercial health plans, Medicare or Medicaid – from U.S. providers must use ICD-10 codes to be reimbursed. CMS strategies have included:

  • Developing educational materials: CMS provided checklists and timelines to providers, clearinghouses, vendors and health plans. 
  • Conducting outreach: CMS held in-person trainings for small physician practices in several states. 
  • Monitoring stakeholder readiness: CMS collaborated with industry and other stakeholders through focus groups, survey reviews and in-person meetings.
  • Modifying Medicare systems and policies: CMS made its final changes to the Medicare fee-for-service (FFS) claims processing system.
  • Providing technical assistance: CMS worked with state Medicaid agencies to make sure they are prepared to perform critical activities by the October deadline.

GAO also reviewed recommendations and requests from stakeholders such as the American Medical Association (AMA), American Health Information Management Association (AHIMA), Medical Group Management Association (MGMA) and the Workgroup for Electronic Data Interchange (WEDI) to determine whether CMS was responding to feedback. For example, some stakeholders requested more extensive testing. In response, CMS scheduled end-to-end testing with 2,550 organizations to take place in January, April and July 2015. CMS also expanded in-person training sessions in additional states.

Related: Last week, the House Energy and Commerce health subcommittee held a hearing to review the state of preparedness among critical ICD-10 stakeholders. The testimony included individuals from 3M Health Information Systems, AHIMA, Athena Health and America’s Health Insurance Plans (AHIP). Most of the speakers were in favor of keeping the current ICD-10 implementation date. Some argue that the current system – ICD-9 – is outdated and needs to be updated with current clinical knowledge and terminology. Others recognize that last year’s delay resulted in significant costs and that an additional delay could cost more. On the other hand, a representative from the provider sector argued that the new classification system places additional administrative and financial burden on providers that are already overwhelmed with time and capital restraints.

(Source: GAO, “CMS’s Efforts to Prepare for the New Version of the Disease and Procedure Codes,” January 2015)

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Implementation & Adoption

CMS Innovation Center to test new model for cancer care payment through Oncology Care Model

Starting in the spring of 2016, CMS will pay physicians through a new Oncology Care Model (OCM) program. The CMS innovation Center will oversee the OCM and will pay participating oncology practices using a two-part payment approach: Practices will receive a monthly care management payment of $160 per beneficiary for Medicare FFS beneficiaries. Practices that meet quality and cost-improvement measures over a six-month episode will receive a performance-based payment for that episode.

The goal of OCM is “to improve care coordination, appropriateness of care and access for beneficiaries undergoing chemotherapy.” Most of the 1.6 million individuals diagnosed with cancer each year are 65 years or older and are enrolled in Medicare, making the program a major payer for oncology services in the U.S. Through the Innovation Center, CMS has been testing new and innovative payment and service delivery models to reduce Medicare spending and improve care quality.

To participate, practices will be required to:

  • Develop a care plan using standards defined by the Institute of Medicine
  • Give patients access to clinicians 24 hours a day and seven days per week
  • Be data driven and focused on quality improvement
  • Have adopted a certified electronic health record and attested to Meaningful Use by the end of the third year of the program

Analysis: This announcement comes shortly after HHS announced goals to move Medicare from FFS to value-based care (see the February 3, 2015 Health Care Current). HHS set a goal to have 85 percent of FFS payments linked to quality and value by 2016.To do this, HHS will use three levers: Incentives, care delivery reform and health information and health IT. At the same time a group of health care systems, health plans, consumer groups and policy experts announced the formation of the Health Care Transformation Task Force. The Task Force aims to move 75 percent of its business to value-based care by 2020. Many specialty providers argue that value-based care may make sense for discrete and definable episodes and diseases (e.g., HbA1c for diabetics, knee replacements). However, similar to the limitations of evidence-based practice there are many issues that are uncommon or rare by themselves but collectively make up a large percentage of acute and chronic care episodes. Some stakeholders believe that defining value and applying measures for these cases will be difficult if not impossible in many cases. How should value-based care for recurrent cancer work? This is a very common, very individual condition and may not fit into the typical value-based care model.

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CO-OP plans vary widely in enrollment and pricing

The ACA-created Consumer Operated and Oriented Plans (CO-OPs) vary substantially in enrollment rates, pricing and financial condition, according to recent analysis from the Robert Wood Johnson Foundation. According to September 2014 data from SNL Financial, the 23 CO-OPs have enrolled 521,000 members:

  • Most consumers enrolled in individual coverage (391,000 members), and the remainder enrolled in a group plan
  • More than half the CO-OPs reported substantially fewer enrollees in 2014 than projected
  • Seven CO-OPs reported considerably more enrollees than projected

Pricing trends were also mixed. CO-OPs with more 2014 enrollees (at least 20,000 members) typically charged lower than average premiums. The cost to premium ratio, an indicator of margin with a higher ratio meaning a lower margin (also known as “combined ratio”) varied widely among the five CO-OPs with the largest enrollment. The CO-OP with the largest combined ratio of 114.5 percent had an underwriting loss of about $15 per $100 in premiums. The lowest combined ratio was 90.8 percent, giving that CO-OP an underwriting gain of about $9 per $100 premiums.

Many CO-OPs have adjusted their 2015 pricing as a result of their 2014 experiences. Those with high enrollment and low rates increased their rates, while CO-OPs with higher than average premium rates lowered their pricing.

Background: The ACA included the CO-OP program as a compromise in the debate over a public insurance option. In discussion but not included in the final legislation was a program that would have allowed individuals of all ages to enroll in a program similar to Medicare. CO-OPs are member-run, non-profit health plans that provide coverage to the individual and group markets. Earlier this year, the Iowa Insurance Commissioner announced that the CO-OP based in Iowa and Nebraska would be liquidated. Another CO-OP suspended additional enrollment to maintain financial stability.

(Source: Leonard Davis Institute of Health Economics, Robert Wood Johnson Foundation “The financial condition and performance of CO-OP Plans, February 2015)

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Study: Medicaid ACOs testing new payment models

With the rise of accountable care organizations (ACO) in Medicaid, the Center for Health Care Strategies announced a third phase to its Medicaid ACO Learning Collaborative (LC) project. The ACO LC project has worked with thirteen states in the last three years to create and launch Medicaid ACOs. Five states in the program have already launched Medicaid ACO programs. Two more states developed ACO programs that will be launched soon. The third phase of the project will help six more states design payment models and quality measurement criteria and develop data and analytics capacities to implement Medicaid ACOs. The Center for Health Care Strategies also expects to work on integrating ACO models into Medicaid managed care.

The seven states that are early adopters of Medicaid ACOs have emphasized integrating non-medical social services into care to address the needs of their Medicaid populations. One way to do this is to require ACOs to partner with organizations like local governments service agencies and community-based groups. All of the Medicaid ACOs require coordinating with these local partners. Some loosely define the entities and other states require “meaningful” partnerships with certain organizations such as crisis management programs. Some of the states are using payment methods like shared savings and enhanced capitated payments based on social service coordination to give ACOs the financial incentive to manage care effectively. In addition, some states are planning to expand their data analytics and share information on social services use.

(Source: Roopa Mahadevan and Rob Houston, Center for Health Care Strategies, “Supporting Social Service Delivery through Medicaid Accountable Care Organizations: Early State Efforts,” February 2015)

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Study: Drug utilization decreases under consumer-directed health plans

Consumer-directed health plans (CDHP) may reduce medication adherence for chronic conditions, according to research published by the National Bureau of Economic Research earlier this month. Researchers examined pharmaceutical utilization patterns of employees from large firms:

  1. Firm 1: Shifted all health plans to CDHPs in 2005, but drug purchases were subject to the deductible 
  2. Firm 2: Shifted all health plans to CDHPs in 2005, but exempted drugs from the deductible
  3. Comparison group: 19 firms served as a comparison sample; Employees in these firms were only offered traditional health plans

Employees of the first firm transitioned to lower cost drugs, adjusted when they purchased drugs to periods when out-of-pocket expenditures were probably paid by health reimbursement accounts and reduced overall utilization. Employees of the second firm reduced utilization but did not shift to lower cost drugs. The authors conclude that it is possible both firms saw decreased utilization because of a gatekeeper effect—employees were spending more on cost sharing for physician visits so they reduced their spending on drugs.

Background: CDHPs are characterized by high deductibles (at least $1,000 or more) and health savings accounts. They are designed to reduce health care costs by making consumers more aware of the cost of care and, ideally, encouraging them to shop for care that provides the most value. In recent years, CDHPs have become increasingly popular; the percent of employees covered by CDHPs increased from 4 percent in 2006 to 20 percent in 2013.

(Source: Huckfeldt, Peter J., Haviland, Amelia, Mehrotra, Ateev, Wagner, Zachary, Sood, Neeraj, The National Bureau of Economic Research, “Patient responses to incentives in consumer-directed health plans: Evidence from pharmaceuticals”, February 2015)

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Medicare Advantage and Part D rule finalized for 2016

Earlier this month, CMS finalized changes to the Medicare Advantage (MA) and Part D programs, putting into effect many changes that were outlined in a proposed rule from January 2014. Most of the provisions will go into effect in the 2016 contract year. Key changes include:

Related: Earlier this month, CMS approved Medicare coverage of lung cancer screening with low-dose computed tomography. This type of screening will be available to current and former heavy smokers under Medicare. Commercial health plans already cover this screening because it is recommended by the U.S. Preventive Services Task Force, so the policy aligns Medicare policy with private insurers’ policies. Individuals age 55 to 77 who have smoked at least a pack a day for 30 years, current smokers and former smokers that quit less than 15 years ago will be covered for this screening.

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On the Hill & In the Courts

FDA releases guidance on MDDS devices and mobile medical apps

The U.S. Food and Drug Administration (FDA) announced last week that it “does not intend to enforce compliance with the regulatory controls that apply to medical device data systems (MDDS) devices, medical image storage devices or medial image communications devices.” MDDS products transfer, store, convert formats of and/or display data from medical devices; they do not control or change how medical devices are used or their purpose. In 2011, the FDA changed the classification of MDDS devices from high risk (Class III) to low risk (Class I). Low risk devices in Class I are not subject to controls under the FDA under the Federal Food, Drug, and Cosmetic Act. In down-classifying MDDS devices, the FDA said “that these devices pose a low risk to the public.”

On the same day, the FDA released guidance on mobile medical apps—applications for mobile devices that are considered medical devices and whose failure could pose patient safety risks. The FDA indicated it intends to regulate and provide oversight of these devices. The agency stated that oversight of mobile medical apps “is focused on their functionality” and that it does not intend to “regulate the sale or general/conventional consumer use of smartphones or tablets.”

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One year later states continue to debate Medicaid expansion

More than one year after the ACA expanded coverage in Medicaid, state legislatures and governors are still debating expansion of their Medicaid programs. Last week, several states acted on this issue:

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Around the Country

Premium subsidies saving consumers money in public marketplaces; Enrollment reached nearly 7.75 million by week 12

Nearly 6.5 million individuals qualify for an average of $268 in premiums subsidies, formally known as monthly advance premium tax credits (APTC), in the federally facilitated marketplace (FFM) according to analysis by HHS. About 87 percent of people who enrolled (either for the first time or re-enrolled) during the second open enrollment period qualified for financial assistance. Nearly eight in 10 consumers are eligible for a plan with a premium of $100 or lower (after applying the APTC). However, only 53 percent of qualified individuals selected or were re-enrolled in such a plan. The average APTC reduces the average premium by approximately 72 percent.

Related: The 2014-2015 open enrollment period ended on February 15. Based on the report from week twelve, nearly 7.75 million consumers selected a plan or were automatically re-enrolled in plans on the FFM as of February 6.

(Source: Misra, Arpit, Tsai, Thomas, Office of the Assistant Secretary for Planning and Evaluation, “Health Insurance Marketplace 2015: Average premiums after advance premium tax credits through January 30 in 37 states using the platform” February 9, 2015; HHS “Open Enrollment Week 12: January 31, 2015 – February 6, 2015”, February 11, 2015)

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Updating and innovating medical education for future physicians

Health care system transformation is not limited to delivery and insurance changes; it is also taking place in the most formative stages of professional development: medical education. Although science and medicine have dramatically increased what is known about disease and the human body, medical education has changed very little over the last 100 years. Young physicians-to-be are still taught a model that was largely established in 1910.

The standard model for medical school curriculum has been two years of basic science followed by two years of clinical practice. Last year, the AMA launched the Accelerating Change in Medical Education initiative. The initiative provided 11 medical schools with $1 million, five-year grants to revise medical education curriculum. The schools are taking different approaches to revising the curriculum, but are all focusing on common themes (e.g., patient safety, quality improvement and team-based care) and emphasizing a competency-based assessment that allows students to finish in less than four years. The revised curriculum also aims to integrate students into the health care system as soon as possible, rather than waiting until the third-year clerkship when students normally begin their clinical rotations.

The curriculum revisions around the country include:

  • Creating a virtual health care system and a teaching electronic medical record to train students on clinical decision making and ensuring competencies in system-, team- and population-based health care skills
  • Preparing students to serve as patient navigators so they can work within all aspects of the complex health system, including hospitals, homes, skilled nursing facilities and community/social agencies
  • Providing innovative educational strategies that include e-learning, simulation, problem-based learning, clinical skills training and targeted clinical experiences
  • Establishing a dual MD-MS degree program in primary care and population health to educate a new type of physician 
  • Placing students on inter-professional teams so they learn how to continuously improve the safety, quality and value of the care they provide

In 2015, the AMA’s Accelerating Change in Medical Education initiative seeks to train more physicians who are better prepared for the future health care system. The AMA wants to include colleges with pre-med curriculum and medical schools, graduate medical education and continuing medical education. The initiative will also continue to leverage new education models and technology to advance the vision of the medical school of the future.

Analysis: The topic of evolving medical education is one that many health care experts agree is critical to the health care system transformation happening in the U.S. In addition to the AMA’s program, a growing number of emerging partnerships between health systems and universities are seeking to identify innovative approaches to training future physicians. For example, the University of Illinois at Urbana-Champaign and Carle Health System are exploring the development of a new engineering-focused college of medicine that will combine biosciences research with the College of Engineering. The program will be the country’s first medical school designed to fuse engineering, computing, health sciences and medicine. Another example that Hackensack University Health Network’s joint venture with Seton Hall University (SHU). The intent of this partnership is to form a new school of medicine to address the physician shortage in New Jersey and the nation by creating a leading academic institution that will provide key educational, research and career opportunities for bright students. SHU plans to integrate its nursing and allied health programs with the new school of medicine to reflect the importance of inter-professional learning and teamwork—how health care will be delivered in the future.

The need for new skills and approaches to delivering care is not limited to medical schools and students. According to Deloitte’s 2014 Survey of U.S. Physicians, 77 percent of practicing physicians responded that gaining a perspective of medicine that is continuous and prevention-focused is important. Most physicians (81 percent) report that using health IT to improve communication and care management will be important for successfully practicing medicine in the future. These focus areas are all part of the innovative curriculum changes being introduced at medical schools around the country through the AMA initiative and other partnerships between health systems and universities.

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Breaking Boundaries

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