When then Rep. Tom Price of Georgia was named HHS Secretary, we had predicted that he would end certain experiments in the Medicare fee-for-service (FFS) world. Price is a doctor and close to both doctors and certain hospitals that have railed against the changes during the Obama era. This week, CMS announced what we anticipated:
- Cancellation of the mandatory bundled payment model launch for heart attacks and bypass surgeries in 2018 as well as a related incentive payment program for cardiac rehabilitation. This model was slated to be launched in 100 metro markets.
- Cancellation of the hip and femur fracture treatment bundled payment model launch in 2018 (an add-on to the existing joint replacement program).
- Scaling back of the mandatory participation in the existing joint replacement bundled payment (knee and hip) model to just 34 metro market from 67 (in 33 metro markets participation will be voluntary).
- Allowing rural and low volume hospitals to opt out of the existing joint replacement model altogether on a one-time basis in all 67 counties.
The concept behind bundled payments is a good one. The Medicare FFS world is fractured (forgive the pun!) and focused on transaction payments. Each provider receives his or her own payment and there is no incentive to reduce costs and improve quality outcomes. The bundled payment initiatives were meant to force cooperation between a myriad of providers throughout the continuum of care (hospitals, physicians, home care agencies, skilled nursing facilities, and so on). It was meant to focus a light on quality and coordination rather than simply on each individual payment.
These and other pilots (e.g., hospital and physician quality payments and the accountable care organizations (ACOs)) are by no means perfect. But then again, that is the purpose of an experiment or pilot. Things must change in the archaic Medicare FFS system, which still serves about two-thirds of all beneficiaries and will continue to dominate for years to come even with robust growth in Medicare Advantage.
Price took issue with the mandatory nature of many of these programs. But it is hard to see how strictly voluntary programs will be truly transformative. Usually, the most sophisticated of providers and hospitals enter such programs, leaving others stuck in the outdated past with no reason to change. In this type of experiment, how do you judge success?
The changes were a victory for opponents in the hospital and doctor world, but by no means for patients or the healthcare quality transformation of America.
Why Funding Cost-Sharing Subsidies is Important
President Donald Trump and the Centers for Medicare and Medicaid Services (CMS) this week gave health plans an extra three weeks (through September 5) to file rate requests for 2018. Ironically, the extension was needed because of the President’s refusal to commit to funding the Cost-Sharing Subsidies (CSRs) that offset lower-income persons’ cost-sharing and overall out-of-pocket costs. Many insurers have pulled out of the Exchanges for 2018 and others are remain undecided. If they choose to stay, high premium increases will be likely as they hedge their bets on whether the subsidies will be sent to them by CMS next year.
While the payments have been deemed unlawful by a federal district court and could stop at any time, the administration has decided to pay the CSRs again for August. But their ongoing fate remains unknown and subject to Trump’s whims. Here is why Trump should commit to continuing such payments at least for 2017 and 2018:
- The payments have been made since the plan was introduced in 2014. Changing course now is unfair to plans and consumers.
- Whether or not Trump likes the system in place now, a deliberate undermining of the program should not be countenanced. People are relying on coverage.
- As noted above, more plans will exit the Exchanges and premiums will shoot through the roof further if subsidies end. Premiums could increase by an average of 20 percent alone if CSRs are cut off. Plan participation in many counties in rural states is already razor-thin.
- A new study shows that the vast majority of costs would be paid by the federal government anyway. The federal government pays about $9 billion in CSR subsidies each year on behalf of people who enroll in the target Silver plans. The mandate will continue to exist to create the CSR Silver plans for low-income individuals even if the CSR subsidies end. Plans that remain will need to continue to offer such plans. While state insurance regulators have varying directives on how premium increases should be handled, if CSR payments are suspended, the fact is that the vast majority of the increase will accrue to the Silver plans, generally, and the CSR Silver plans in particular. That is where the enrollment is. Because the feds subsidize premiums (and these payments are not in dispute) to cap lower-income persons’ contributions, the feds cover almost all of the premium increases.
- In fact, the Congressional Budget Office (CBO) announced this week that premiums would increase, on average, the 20 percent stated above due solely to the CSR cutoff. It also said the deficit would actually increase by about $200 billion over a decade. It could also lead to the bizarre behavior of having sicker individuals move up to Gold plans with better benefits as premiums might be near or lower what the Silver plans cost, especially if premium increases are targeted at Silver level plans as suspected.
The President should change course and rise above the current political chaos on the issue. He should commit to funding the CSRs through 2018 and ask Democrats and Republicans to forge a bipartisan compromise. Health and Human Services Secretary Tom Price hinted that the administration may be open to this. Teams in both the House and Senate are working on various pieces of legislation that might fit the bill. A series of must-pass measures, including raising the debt limit and keeping the government open, could also play a role in settling the CSR issue. Democrats might very well demand the funding in order to stop a government shutdown. Republicans may need such votes given that more conservative members could bolt on these issues.