Medicare Bonus Program Under Fire

Two major developments on the Medicare Advantage (MA) finance front over the past week or so.

On one hand, the Centers for Medicare and Medicaid Services (CMS) actuary is estimating that the Patient Protection and Affordable Care Act (PPACA) MA plan premium reductions will save $68 billion through 2016. (The 10-year estimate of savings when the bill passed was about $150 billion.) Plan premium was about 14% higher than FFS costs nationally before the PPACA cuts. About half of the reduction to average FFS costs in the MA program will now be in force. CMS administrators point to continued strong MA plan enrollment and revenue to debunk arguments that the reductions were too much for the program to sustain without meaning huge benefit reductions.

At the same time, the non-partisan Government Accountability Office (GAO) is arguing that the quality pilot that CMS announced that temporarily waters down quality mandates through 2014 is wasteful and will cost Medicare $8.35 billion. GAO and some congressional Republicans are arguing that quality bonuses should only go to 4 and 5 Star plans as PPACA intended. GAO says that the cost of the demonstration is well above those of other such projects done by CMS. Further it says that the bonuses won’t improve quality until 2014 as data is retrospective and for the most part average and excellent plans will be paid roughly equally in the demonstration.

Republicans say that the administration is attempting to temporarily shield seniors from benefit cuts in an election year. As we have said before, whether politics entered into the equation or not, CMS also had less-sinister reasons for pursuing the demo. Only 20% to 25% of plans would have qualified if left as PPACA envisioned. CMS correctly saw that the glide path to 4 Star was too steep for most plans and a different approach was needed to incent all plans to move the quality bar. It has implemented a carrot-and-stick approach to doing so, by incenting 3 Star plans with bonuses and at the same time implementing measures to penalize low-scoring plans (e.g., inability to enroll through Plan Finder and terming consistently low-scoring plans). Convinced of the good policy rationale, Department of Health and Human Services Secretary Kathleen Sebelius told the Congressional hearing this week that she has no intention of cancelling the demonstration.

While it is too early to tell, the demonstration probably will have the intended effect of focusing all plans on quality. While some plans are still getting their act together in terms of pushing the quality bar higher, many are finally enacting reforms that should bear fruit in higher scores and the concomitant increase in revenue and membership.

For those laggard plans that have yet to focus on quality, Sebelius also deflated the hopes of some executives when she indicated that CMS has no plans to extend the temporary reprieve past 2014.

Final 2012 MA Rates

CMS’ final Call Letter for 2013 plan coverage calls for average increases of 3.07 percent for Part C and Part D. This is up from last year’s 0.4 percent average increase.  Overall, this is good news for plans in the MA program, especially given ongoing reductions in benchmarks due to PPACA.

Supreme Court Fallout

President Obama’s comments that the Supreme Court would not overturn PPACA drew harsh rebukes from many and forced the White House to backtrack.

PPACA Rebates would Have Been Sizable in 2010

The Commonwealth Fund released a study recently that determines that consumers would have received rebates of nearly $2 billion if PPACA’s minimum medical loss ratio (MLR) provision were in force for 2010.

Medicare Restructuring

While major changes to Medicare are unlikely to occur this election year, more and more proposals are coming out that recognize that Medicare’s current benefit design is not sustainable.

PPACA Supreme Court Review – The Last Day

The Supreme Court arguments on the Patient Protection and Affordable Care Act (PPACA) concluded Wednesday. With the first two days dedicated to arguments on whether the case can be heard and on the constitutionality of the individual mandate, Wednesday was devoted to the Medicaid expansion’s constitutionality and whether PPACA should be struck down in whole or just part if portions are deemed unconstitutional (known as severability).

PPACA Supreme Court Review – Day Two

The Second Day of Supreme Court review of the Patient Protection and Affordable Care Act (PPACA) lived up to the promise of being controversial. Each side laid out their case as to why they believe or don’t believe the individual mandate is constitutional.

PPACA Supreme Court Review – The First Day

On the first day (Monday, March 26) of the Supreme Court review of the Patient Protection and Accountable Care Act (PPACA), justices seemed inclined to move the case forward and hear the merits. As we wrote last week, one question was whether the fact that the individual insurance mandate (in the form of a federal “tax”) could be overturned before it even went into effect.

PPACA: Reflecting on Two Years

The Patient Protection and Accountable Care Act (PPACA or health reform) turns two today and we couldn’t help but reflect on the activities of the last 24 months. With the Supreme Court on the verge of beginning arguments on the law as a whole and the mandate and Medicaid expansion specifically, we wanted to share some thoughts on where we have been and what might be ahead.

PPACA: Supreme Court Review And A Flurry Of Regulations

The Supreme Court is set to begin hearing arguments next week on whether the Patient Protection and Affordable Care Act (PPACA) is constitutional or not. For our part, we feel the case could go either way, but many conservative constitutional scholars have opined that the Obama administration may have a good shot of convincing enough justices (especially swing Anthony Kennedy) that the individual mandate is essentially a tax and is within the domain of the federal government. So the case may or may not be decided on a 5-4 vote.

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