Health Care Current: October 21, 2014

Fostering innovation through Medicaid managed care

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.

Fostering innovation through Medicaid managed care

I have had a long and varied career in health care, with a large focus on health care policy. One of my first interests in the policy landscape was in the potential for better health care delivered through health plans—in Medicaid this is known as managed care plans. My first “real” policy job was with the Commonwealth of Virginia, where I worked on a host of issues from a budget perspective.

At the time, Virginia had not implemented managed care statewide; in fact, most states were run under a mix of managed care and fee-for-service. But today managed care is a fundamental part of most state Medicaid programs and a major vehicle for expanding coverage.1

It was with interest that I recently read the Centers for Medicare & Medicaid Services (CMS) Innovation Center’s Request for Information (RFI) on Health Plan Innovation Initiatives (see the October 14, 2014 Health Care Current). My first thought was, “At last, the Innovation Center is getting around to health plans!”

When it was created through the Affordable Care Act (ACA), the Innovation Center set coming up with and testing ideas in the traditional, “un-managed,” fee-for-service program (not the care delivery done through managed care contracts with health plans) as its first priority. Many of the initiatives that were funded actually started with health plans, but the Innovation Center has been focused on testing them in fee-for-service instead. Health plans have long sponsored shared-savings programs with providers, have been part of the multiple payers participating in Patient-Centered Medical Home programs and have participated in collaborations to improve patient safety.

The RFI outlined several focus areas where the Innovation Center is seeking innovative ideas, including pharmacy and medication therapy management, value-based insurance design, remote access technologies, hospice care, long-term services and supports, behavioral health and provider incentive arrangements such as accountable care organizations. The second thought I had was, “How would I pick which topics to focus my recommendations if I were to respond?”

Many of these topics are – to me anyway – interrelated. Medication therapy management, for example, is critical for people using long-term services and supports. Accountable care organizations might be exactly the right types to leverage remote-access technologies. And behavioral health is probably linked to many of these issues in one way or another because behavioral and physical health are connected for many people, and this connection is especially visible in Medicaid.

There are many interesting programs that state Medicaid agencies and Medicaid managed care plans have tried over the years to improve quality. One Medicaid-based mHealth program sent out reminders to young, high-risk, pregnant moms using free cell phones and rewarded them with extra minutes if they met all recommendations for prenatal care. Another program run by a managed care plan in inner New York City took lessons learned from “hotspotting” work in Camden, New Jersey to identify high-risk patients and provide supportive services to wean them off their regular use of emergency rooms.

Some Medicaid managed care plans – particularly those in Massachusetts, Rhode Island, Wisconsin, New York and Minnesota – have among the highest quality scores in the country.2 Some credit is due to the Medicaid program directors and clinical leadership who provided the resources and incentives, a supportive community and a culture of raising the bar on performance expectations in those states. Some credit also goes to the plans’ medical and nurse leaders and CEOs, who in many cases rose to the challenge of providing excellent care to populations that may not always be easy to care for.

But in other states, payment rates are low—possibly too low to support the kinds of investments that managed care plans would like to make in analytics to identify high-risk populations and find opportunities to improve quality, new approaches to care management and new and innovative programs. It is conceivable that some of these plans might in the face of scarce resources come up with innovative ways to care for Medicaid enrollees. But, in my opinion, this could be hard. Medicaid programs keep managed care plans very busy with quality improvements, compliance and oversight activity (as they should).

CMS could consider ways to create opportunities for some of the plans in resource-constrained states that allow them to try new things. Of course funds from the Innovation Center shouldn’t be used to offset low payment rates in these states, but perhaps extra support in the form of technical assistance might be warranted. Pairing participants in Innovation Center projects across states so those who are not as far along could learn from those who have invested more into clinical care and analytics might also be an idea.

CMS is also focused on developing consistent quality measures in order to measure performance across states and managed care plans. Given the variety of approaches that states have taken to performance measurement, this could be challenging to implement.

If forced to choose one from all of the potential areas to explore, I might choose long-term services and supports. This is an area that even the most exemplary special needs plans are beginning to step into and represents one of the highest in Medicaid spending. Best practices in care management should be figured out. Programs like Evercare and PACE have shown some great results, but may not be scalable with their current structures; more programs that meet consumer demands for care that is better organized around their circumstances and those of their caregivers could be helpful.

I’ll be interested to see what others choose and to see CMS’s agenda around testing innovations in health plans unfold.

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Kaiser Family Foundation, “Medicaid Managed Care: Key Data, Trends, and Issues,” February 2012
The Menges Group, “Analyses of NCQA Quality Ratings Among Medicaid Health Plans,” March 2014

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My Take

By Sarah Thomas, Research Director, Deloitte Center for Health Solutions, Deloitte Services LP



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Analysis: Medicaid expansion states to see lower cost increases than those who did not expand

The Kaiser Family Foundation analyzed state Medicaid programs for fiscal year (FY) 2014 to find that enrollment increased by 8.3 percent overall and spending grew by 10.2 percent across all states. Seven states that expanded Medicaid had greater than 20 percent growth in their Medicaid population, while four states (none of which expanded Medicaid) had decreases in their enrollment during FY2014. Other major findings include:

  • Expansion states saw an average of 12.2 percent enrollment growth in FY2014 as compared with states that did not expand their programs that had an average growth of 2.8 percent
  • Enrollment is expected to grow by 12.2 percent in FY2015: nearly 4 percentage points higher than the 8.3 percent in FY2014; expansion states are expected to see an 18.0 percent growth rate while non-expansion states are expected to grow at 5.2 percent
  • Spending is expected to increase in FY2015: state spending for expansion states is expected to grow at 4.4 percent, while state spending in non-expansion states could grow more quickly at 6.8 percent; this is due to the enhanced federal medical assistance percentage (FMAP) rate of 100 percent for newly eligible enrollees in expansion states until 2016

Enrollment has grown because of Medicaid expansions and higher uptake of existing Medicaid programs as people became generally more aware of Medicaid. States have increased referrals to Medicaid through the “no-wrong-door” provision (which encourages uninsured to apply for coverage, whether they are Medicaid eligible or eligible for subsidies through marketplaces), and people have greater awareness of Medicaid because of coverage expansion outreach and publicity.

Approximately 80 percent of enrollment growth was due to the Medicaid expansion (newly eligible individuals enrolling in the program), while the other 20 percent of enrollment growth was due to those already eligible for Medicaid that had not previously enrolled.

(Source: Kaiser Family Foundation, “Implementing the ACA: Medicaid Spending & Enrollment Growth for FY 2014 and FY 2015,” October 2014)


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Implementation & Adoption


CMS announces new ACO initiative targeted at rural and underserved areas

Last week CMS and the Innovation Center announced the availability of a new Accountable Care Organization (ACO) Investment Model initiative. The ACO Investment Model will provide $114 million to 75 organizations that are either new ACOs or ACOs that have been participating in the Medicare Shared Savings Program (MSSP) since 2012. For the new ACOs, the Innovation Center seeks to encourage greater uptake and use of coordinated care by organizations in rural areas and geographies that have seen little ACO activity.

These organizations will be offered an upfront and ongoing per beneficiary per month payment beginning on January 1, 2016 to help them invest in information technology systems and/or practice changes. ACOs that have been participating in MSSP will receive similar payments to help them accept higher levels of financial risk. The Innovation Center will accept applications from MSSP ACO organizations that began in 2012 and 2013 from October 15 through December 1; ACOs that began in 2014 or are starting in 2016 may apply during the summer of 2015. ACOs that have been participating in the MSSP must have accurately and completely reported quality measure results for the most recent performance year in order to qualify for the payments under the new initiative.

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ONC progress report: Approximately half of hospitals and physicians have adopted basic EHRs

The Office of the National Coordinator for Health Information Technology (ONC) released its annual report to Congress to provide updates on the national adoption of health information technology (IT). The ONC reported that hospitals and physicians made progress in their adoption of electronic health records (EHR) across the country:

  • 59 percent of hospitals adopted basic EHRs, a 47 percent increase from 2009
  • 48 percent of physicians adopted basic EHRs, a 26 percent increase from 2009
  • As of June 2014, 75 percent of eligible providers and 92 percent of eligible hospitals had received funding from the EHR Incentive Program

Despite an increase in adoption of EHRs and wide provider and hospital participation in the incentives program, key challenges remain. A primary challenge is interoperability, or allowing health information exchange among organizations, vendors and geographical boundaries. Another issue is that EHRs are not yet fully standardized. A third is that adoption is a low priority among some providers due to cost.

In particular, long-term care, post-acute care and behavioral health providers were excluded from incentives program eligibility, making adoption too expensive for many. To address these barriers, the ONC plans to continue supporting EHR adoption, promoting and developing new technical standards to connect health IT systems, increasing the health IT workforce and facilitating interoperability.

Related: The American Medical Association and supporting groups urged the administration to remove EHR certification mandates and instead implement a more flexible and scalable standard of measuring increased interoperability and health IT adoption. The groups noted that hospitals and physicians are scrambling to meet EHR Meaningful Use deadlines, leaving them with little time to find interoperable systems.

(Source: The Office of the National Coordinator for Health Information Technology, U.S. Health & Human Services, “Report to Congress: Update on the Adoption of Health Information Technology and Related Efforts to Facilitate the Electronic Use and Exchange of Health Information,” October, 2014)

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CBO monthly projections show lower than estimated spending for Medicaid and marketplace subsidies

In early October the Congressional Budget Office (CBO) updated its Budget and Economic Outlook for 2014 through 2024, showing that the $486 billion budget deficit for FY2014, which ended on September 30, is smaller than the shortfall for FY2013 by $195 billion. CBO also found that outlays for key programs health coverage expansion programs were lower than CBO estimated in 2010 when the ACA was first passed. Specifically:

  • Spending on health insurance subsidies: In FY2014 the federal government paid $13 billion in subsidies to assist qualified individuals in paying for coverage under the new health insurance marketplaces. CBO had projected in March 2010 that spending on subsidies would amount to $19 billion in FY2014.
  • Medicaid spending: Unlike CBO’s original projections that ranged from $320 to $335 billion, the latest figures show the federal government spent $302 billion on Medicaid in FY2014. The CBO’s original estimates assumed that all states would expand Medicaid, but the U.S. Supreme Court struck down the expansion mandate.

The CBO said that despite lower than expected Medicaid outlays for FY2014, costs for the program increased by $7 billion over FY2013, a 34 percent increase. Spending for the Medicare program also increased by $4 billion (10 percent growth over FY2013).

(Source: Congressional Budget Office, “Monthly Budget Review for September 2014,” October 8, 2014)

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Poll: 1 in 4 privately insured people doubt they’ll be able to afford medical bills if unexpected illness occurs

The Associated Press-NORC Center for Public Affairs Research polled consumers enrolled in private insurance plans to find that one out of four do not believe they would be able to pay for medical care if they had an unexpected illness or injury. Only half of the respondents indicated that they strongly understand what their plan covers, which may explain why 18 percent did not get a physical or routine preventive care, despite lack of cost-sharing for preventive services (a requirement through the ACA). Of those with high-deductible plans, 24 percent did not get a physical or routine preventive care.

One out of five also skipped care when they were sick or injured due to cost concerns, and one third of those enrolled in high-deductible plans mentioned doing this. Many health care consumers have to make trade-offs in other areas of their life to pay for medical care: one-third reduced spending on entertainment, 18 percent used all of their savings (24 percent for high-deductible enrollees) and 19 percent cut back on their payments into retirement savings. Only 40 percent of individuals with high-deductible plans have health savings accounts to use pretax money to pay out-of-pocket costs.

(Source: Associated Press, “Poll: Many Insured Struggle with Medical Bills,” October 13, 2014)

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DOL FAQ clarifies rules on reference pricing and cost-sharing limits

On October 10 the U.S. Departments of Labor (DOL), Health and Human Services (HHS) and Treasury published a frequently-asked question (FAQ) guidance document to clarify key components of the ACA, including the application of cost-sharing limits when reference-based pricing is used by non-grandfathered large group plans. Reference-based pricing is a benefit design in which health plans negotiate a set price for services with providers, and if a consumer goes to a provider who does not accept that price consumers pay more out of pocket for the service.

This is an increasingly popular method for health plans to control spending and steer beneficiaries toward high-quality providers that have agreed on price levels. The ACA set annual limits on cost-sharing ($6,600 for an individual in 2015), but HHS interpreted the rule not to apply to payments made out of pocket by an enrollee for services furnished by providers out of their network. While health plans can choose to apply these payments to the out-of-pocket maximum, it is not a requirement.

Clarification of the policy is in response to concerns that reference-based pricing or similar network designs may force consumers to spend more out of pocket than the maximum, a concern particularly acute if the reason for going out of network is because consumers did not have sufficient access to services. The FAQ addressed this concern and issued what the departments consider to be “reasonable methods” for ensuring that consumers have adequate access to quality providers if they are in a plan using reference-based pricing. Health plans using reference-based pricing should consider the following:

In May the DOL published an FAQ document that said that insurers in the large group market and self-insured plans may use reference pricing and still comply with limits on out-of-pocket liability that the ACA requires. More recently, researchers from the Federal Trade Commission (FTC) published a blog that analyzes some of the concerns that the FTC has with the greater use of reference-based pricing. See the September 30, 2014 Health Care Current for more information.

(Source: U.S. Department of Labor, “FAQs about Affordable Care Act Implementation (Part XXI),” October 10, 2014)

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On the Hill & In the Courts


CMS penalizes 2,610 hospitals for their readmission rates of patients with certain conditions

According to Kaiser Health News, from October 1, 2014 through September 2015, 2,610 hospitals will have reduced Medicare reimbursement rates, a penalty imposed by Medicare under the Hospital Readmissions Reduction Program. The program penalizes hospitals for failing to keep readmission rates low. This year, the third year of the program, 433 more hospitals were penalized than last year. Thirty nine hospitals will lose 3 percent of their Medicare payments through September 2015, which is the highest amount allowed under the program. The average penalty increased from 0.38 percent of payments last year to 0.63 percent this year.

Two new conditions were added to the categories of readmissions that hospitals can be penalized for this year. Hospitals are now measured on readmissions for knee and hip replacements (new to this year) as well as readmissions for lung ailments, heart failure, heart attacks and pneumonia (measured since 2012). Results for the five states with the most hospitals receiving readmission penalties:

Background: According to CMS, 17.9 percent of fee-for-service Medicare beneficiaries were readmitted within 30 days of discharge in 2013, a drop from the 18.5 percent rate in 2012 and 19 percent from 2007 through 2011. Readmissions cost Medicare $26 billion a year, $17 billion of which are estimated to be avoidable. High readmission rates are often viewed as indicators of poor quality care.

(Source: Rau, Jordan. Kaiser Health News, “Medicare fines 2,610 Hospitals in Third Round of Readmission Penalties,” October 2, 2014; U.S. Centers for Medicare & Medicaid Services, “Findings from Recent CMS Research on Medicare,” accessed October 16, 2014)

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Rhode Island, Massachusetts and Virginia awarded $29 million for marketplace development

Last week CMS announced that three states have received Level One Establishment Grants to fund various activities and initiatives for their health insurance marketplaces. Rhode Island, Massachusetts (both state-based marketplaces) and Virginia (federally facilitated marketplace) received a total of $29 million from CMS for consumer outreach activities. The states plan to use their funds on the following focus areas:

  • Rhode Island plans to spend $58.5 million on collaborating with more companies and organizations to achieve goals, enhancing outreach activities in person and over the phone, developing an education campaign, providing onsite technology support for customer service representatives and building additional technology and financial functionalities.
  • Massachusetts plans to use its $13.9 million on outreach and enrollment efforts through mail and phone campaigns, public awareness and application events and advertising and marketing statewide. Additional funds will be used to train internal and external stakeholders.
  • Virginia will spend $9.2 million to contract with the Virginia Community Healthcare Association, which includes 28 member federally qualified health centers and one rural clinic. The relationship will allow the Virginia Department of Medical Assistance Services to enhance outreach and education efforts to residents across the state and provide direct consumer assistance in enrolling and re-enrolling in a marketplace plan.

CMS has awarded Planning, Level One and Level Two grants over the last four years; all but one state received at least one type of award to help them develop their health insurance marketplaces. States that wish to receive a Level One or Level Two Establishment Grant have one last deadline, November 14, 2014, to request funding.

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Around the Country


Idaho adds 52 new plans to marketplace for 2015 open enrollment

Earlier this month Your Health Idaho, the state’s health insurance marketplace, announced that residents will have more health insurance plan options to choose from this year. Of the 198 health and dental plans being offered, 52 are new additions since last year. Seven carriers that offered plans during the year will continue to offer plans, while two new carriers, Mountain Health Co-Op and Willamette Dental, joined the marketplace this year.

Due to the increased competition, Idaho residents purchasing health plans or seeking to renew plans may see premiums rise or drop, depending on the plan they select. For silver plans, people living in some counties will see a 12 percent drop in premium cost, but people in other counties will see rates increase by as much as 9 percent.

(Source: Your Health Idaho, “Idahoans Will Have More Choice When Shopping for Health Insurance in 2015)

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More than 10,000 California residents to lose marketplace coverage due to lack of eligibility confirmation

Last week California announced that 10,474 marketplace enrollees would be receiving pre-termination notices from Covered California. Their health plans will send these individuals a final cancellation confirmation. Covered California enrolled more than 1.2 million individuals during the last open enrollment period, but over the last several months, officials had been unable to verify the eligibility of approximately 148,000 individuals.

September 30 was the deadline for those individuals to submit documentation proving that they have legal status and are eligible for the coverage. More than 130,000 of those individuals submitted the proper documentation, and information for approximately 7,000 individuals is still under review. Other states have had to cancel coverage for their residents. In September the federal government sent letters to individuals in other states notifying them that their policies would be canceled if they did not send in documentation to confirm their legal status. Florida, Texas and Georgia had a significant number of individuals who faced this deadline.

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Integrating genomic information into clinical decision making

Earlier this year, the National Institutes of Health (NIH) predicted that U.S. physicians will order 10,000 clinical genome or exome sequencing procedures for their patients in 2014, and expects that number to continue growing into 2015 and beyond. The technologies that were used for the Human Genome Project are now being translated into practical tools that clinicians can use to diagnose and ideally treat diseases in patients.

A big part of this movement is fueled by advances in technology that have driven down the costs of sequencing procedures. However, integrating this genetic information into the practice of medicine and clinical decision making in a timely and meaningful way is a significant challenge. Today, only a small fraction of the data is accessible to researchers and clinicians.

The Electronic Medical Records and Genomics (eMERGE) Network is a national consortium organized by the National Human Genome Research Institute (NHGRI) at the NIH to develop, disseminate and apply approaches to research. What is unique about the eMERGE network is that it combines DNA biorepositories with electronic medical record (EMR) systems to enable large-scale, high-throughput genetic research with the goal of returning genomic testing results to patients in a clinical care setting.

EMRs could be promising resources for research data. Each member site of the eMERGE network has EMR data linked to genetic samples obtained in the course of existing cohort studies, biorepositories or from residual tissue or blood samples. The eMERGE model provides efficient access to genetic samples from different study populations, which cuts down on both costs and time.

The Implementing Genomics in Practice (iGNITE) network is a project NHGRI designed to take the findings of research programs like eMERGE and apply them in “real-world” clinical settings that may have less infrastructure for research. Demonstration projects out of the iGNITE network will aim to incorporate genomic information into the EMR and provide clinical decision support for implementation of appropriate interventions or clinical advice.

The demonstration sites will work together to develop new methods and projects and disseminate their findings to providers and the public. Dissemination of these methods and developing best practices for implementation is critical so the program might add to the growing knowledge base of using genomic information in patient care.

Analysis: Despite major advancements in genomics, attaining meaningful information from the immense amount of data available within a person’s genetic makeup that can be obtained from a tiny tissue sample remains a challenge. As the cost of sequencing falls, the opportunity for harnessing this information expands, as do questions:

  • How can researchers access sufficient data to draw meaningful conclusions?
  • Is the health care workforce prepared to meet rising demand?
  • Can the data become clinically relevant?
  • Will privacy concerns inhibit broader use?

Developers of clinical decision-support tools, physicians, policymakers and consumers will likely continue to confront these questions as genomic science advances.

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Breaking Boundaries


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