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Aetna CEO: New Math for Medicare

October 22, 2014
5:02 pm

(We have made the point often in this space that, even with the private sector’s successes in containing healthcare costs and reducing Medicare per-capita spending to historic lows, the sheer magnitude of baby boomers reaching 65 and reaching Medicare eligibility necessitates significant changes to the program.  Moving away from a fee-for-service model that incentivizes volume rather than value is essential.  As Mark Bertolini, CEO of Aetna (a Healthcare Leadership Council member) points out in this Forbes op-ed column, innovative approaches to Medicare payment and healthcare delivery can achieve better patient health and improved system sustainability.)

By Mark T. Bertolini

The Medicare Part A trust fund will be exhausted by 2030. As 11,000 baby boomers become eligible for Medicare daily, Medicare spending is projected to exceed $1 trillion in 2020. We can’t change the numbers that define our population but, we can apply new math to them.

Focus first on helping the chronically ill

The sickest 5 percent of fee-for-service Medicare patients with chronic conditions drive more than 40 percent of the total cost of health care in the program. We should use the lessons learned in Medicare Advantage and other proven innovations. Encourage Medicare Part A and B enrollees with multiple chronic conditions to participate in new integrated care programs with top-notch physicians to ensure high-quality service. Pay managed care organizations rates that guarantee savings for taxpayers out of the gate.

Use the successes and learnings of this approach to phase out the Medicare fee-for-service payment model

The fee-for-service model has doctors getting paid by the number of procedures they do or tests they run, rather than on how well their patients do. We need to move to a system that pays for quality over quantity.

These two changes alone will mean lower cost coupled with better integrated, quality care for the members of our families that need that care the most.

While the Congressional Budget Office recently reported that estimated costs of Medicare and Medicaid have dropped, our country’s coffers are still being drained by a too-costly health care system. This was reconfirmed in July, when the Boards of Trustees of the Federal Hospital insurance and Federal Supplementary Medical Insurance Trust Funds projected that Medicare costs will grow from their current level of 3.5 percent of the gross domestic product (GDP) to at least 5.3 percent of the GDP in 2035.

Consider this: As baby boomers become Medicare eligible, the number of beneficiaries will grow from 50.7 million in 2012 to 81 million in 2030—a 60 percent increase in less than 20 years. Add to this that the tax base is shrinking: Baby boomers are retiring, leaving the country with a much smaller workforce paying a much higher Medicare tax burden. With average life expectancy projected to reach 81.5 years by 2030, on average those seniors will use Medicare benefits for three times as long as when Medicare was enacted in 1965. Chronic conditions among Medicare beneficiaries also are on the rise, making them a sicker and more expensive population than existed in 1965.

The current fee-for-service payment model unintentionally incentivizes the wrong kinds of behaviors—spending less time with patients, or having more tests and procedures. There is little reward for finding more efficient ways to make people better or for keeping them healthy in the first place.

Bringing innovative collaboration to traditional Medicare

Many programs that have been so effective for caring for Medicare Advantage’s sickest beneficiaries, including enhanced home-based care, care coordination and medication review, are not always covered under traditional Medicare. Our experience in Medicare Advantage shows the promise of these models. For several years, we have worked with health care providers to establish reimbursement models based on risk-sharing that encourages higher-quality performance. Aetna Aetna’s Medicare Advantage Provider Collaboration program, and its work to create accountable care organizations (ACOs), are examples of cooperative arrangements that are improving care quality and health outcomes while also reducing costs. In many instances, these programs have resulted in fewer inpatient hospital days, fewer hospital admissions and fewer readmissions for patients, which can reduce health care costs by as much as 30 percent.

Bringing innovative provider collaborations and managed care approaches to traditional Medicare is a winning proposition for everyone. Patients could get a full team of experts providing customized and focused attention, and be rewarded with incentives for adhering to treatment. Doctors could get greater support, information and resources to help their patients get and stay healthy. Managed care companies could serve a broader Medicare population, as long as they meet the required quality and outcomes results. Taxpayers could get a lower-cost, better-quality healthcare system.

In the past, we have shied away from making significant changes to Medicare, since the issues seemed to be so far down the road. That is no longer the case. Our Medicare spending has a tremendous impact on our economy now, and that will only increase over the next decade. Our population is aging too quickly and our nation’s Medicare costs are growing too rapidly for us to be timid. We need to take dramatic action now, and revolutionize how we approach the problem. The numbers can work if we are ready to adopt a new model. We can achieve a result that includes both healthier seniors and a lower tax burden.

The Burwell Direction

September 08, 2014
3:22 pm

If her first public address as Health and Human Services Secretary is any indication, Sylvia Burwell has her department headed in a positive and much-needed direction.

Speaking to an audience at George Washington University, Secretary Burwell made it clear that she has no interest in maintaining the partisan strife that has characterized the handling of healthcare issues in recent years.  In describing her governing philosophy, she said “What’s central to all of this is not politics.  It’s progress:  setting aside the back and forth and continuing to move forward.”

Secretary Burwell also emphasized the need for transparency in HHS actions and decisionmaking, bipartisanship and listening to stakeholders.

The last of those points is going to be particularly important given the challenges facing HHS in the coming months.  All parties hope that the next open enrollment period for the Affordable Care Act will go more smoothly than the initial sign-up efforts.  Making that happen will, by necessity, involve listening to the expert, hands-on perspectives of healthcare insurers and providers.  The Healthcare Leadership Council has, in fact, developed and provided a number of recommendations, generated from the insights of its member companies, on how to improve upon the previous open enrollment period.

Also, there is rulemaking scheduled this fall related to the Medicare Part D prescription drug program.  I like to think that the regulatory controversy over Part D earlier this year – when the Centers for Medicare and Medicaid Services ceased action on aspects of a proposed rule because of strong response from hundreds of healthcare and patient organizations over the prospects of fewer Part D plan choices and higher drug costs – could have been avoided with more communication between federal authorities and those groups working to preserve a strong, affordable Medicare prescription drug benefit.

With such important issues on the horizon, we strongly applaud the direction Secretary Burwell has set for her department and welcome the opportunity to work with her in achieving shared goals for American healthcare.

The Medicaid Standoff and the Need for Flexibility

July 02, 2014
11:55 am

The White House’s Council of Economic Advisors released a report this week that is clearly intended to intensify the pressure on the 24 states that have, thus far, refused to expand their Medicaid programs, as provided for under the Affordable Care Act.  As we recall, the U.S. Supreme Court ruled that the federal government cannot compel states to go along with the Medicaid eligibility expansion and many, predominantly with Republican governors and/or legislatures, have elected to pass.

In its report, the White House’s economic advisors make the point that almost 5.7 million more Americans will have health coverage in 2016 if these currently non-compliant states embrace expansion.

We’ve made clear in this space the Healthcare Leadership Council’s view that Medicaid is not the best option for reducing America’s uninsured rolls.  Medicaid’s reimbursement rates for doctors and hospitals, significantly lower than private insurance and even Medicare, underscore the point that coverage does not necessarily equal access.  Nonetheless, less-than-ideal coverage is better than no coverage for the millions of Americans who need healthcare but can’t afford to pay the providers who are delivering that care.

But, while it’s easy to blame states for not getting on board, the Administration needs to recognize its own responsibilities in this area.

It is fortuitous timing that the White House report was released in the same week that the state of Indiana submitted its proposal to the Department of Health and Human Services for an expansion of its Healthy Indiana program as an alternative to enlarging traditional Medicaid.  As Indiana governor Mike Pence wrote in an op-ed, Healthy Indiana 2.0 is a better fit for the sensibilities of his state in that in that enrollees can take greater control of their own healthcare decisions through contributions to private accounts that are not unlike health savings accounts.

As he put it, “As national leaders in healthcare innovation, Hoosiers understand empowering people to take greater ownership of their healthcare choices is better than government-driven healthcare.”  Pence backed up his rhetoric with metrics showing that Healthy Indiana participants use preventive health services at a high rate while making less use of expensive emergency room care.

The Indiana case, as well as the movement toward innovative Medicaid plans in Iowa, Arkansas and other states, emphasizes the argument that flexibility is critical in bringing Medicaid expansion to all 50 states.  It’s simply a political reality that many states with conservative-leaning leaders do not like ‘Obamacare,’ don’t necessarily trust the federal government to keep its promises in regard to financial support for Medicaid expansion and are not going to change their current programs.

On the other hand, granting flexibility to make better use of private health plans and to incorporate patient engagement and responsibility can help resolve a situation in which we’re essentially two separate nations when it comes to Medicaid.  HHS approving the Indiana proposal would be an excellent step in this necessary direction.

Good for the Exchanges, Good for Medicare

October 09, 2013
9:37 am

Let’s set aside for the moment the glitches taking place with the Affordable Care Act health exchange websites.  It provides grist for late-night comedians, but we can presume the software problems will be fixed.  Besides, there are more important aspects of the exchange that warrant attention and discussion.

There was an analysis by Bloomberg Government published yesterday that shouldn’t escape notice.  Bloomberg found that competition between health insurance plans within the state-based insurance exchanges is driving down costs, by as much as one-third.  Bloomberg found what it called an “unmistakable pattern” – the more insurers operating in a given market, the lower the price of coverage for consumers.

Now, let’s stipulate that it’s early in the process and we don’t yet know how rates will be affected over time, particularly if the Administration is not successful in bringing young, healthy, currently uninsured Americans into the health coverage marketplace.  Nonetheless, the linkage between competition and a downward push on prices is significant.

This evidence should be considered in discussions about Medicare’s future.  It’s ironic that some of the same politicians who are praising the success of the ACA exchanges in making insurance affordable don’t want to improve Medicare by opening it up to more competition between private plans.

That’s an unsustainable argument.  The Medicare Trustees report confirms each year that the program will face insolvency unless there are changes made to the status quo.  Congress and future Administrations can continue to squeeze down on what Medicare pays for healthcare goods and services – thus having a negative impact on both healthcare access and quality – or it can look at the Bloomberg study, among others, and see the benefits that can be gained from competition and consumer choice.

You can’t praise the apparent success of the exchanges, but then take a ‘preserve Medicare as we know it’ position.  That falls short as both good logic and good policy.

Medicare Part D: Why Satisfaction Matters

September 18, 2013
10:18 am

Yesterday, the Healthcare Leadership Council, through its Medicare Today initiative, released its annual survey of seniors nationwide regarding their perceptions of and experiences with the Medicare Part D prescription drug program.  As has been the case since we began these surveys, the program is extraordinarily popular with seniors.  This year’s survey showed that 90 percent of respondents are satisfied with their Part D coverage.  They find their plans easy to use.  They’re saving money.  And, for many, their Part D plan is the difference between adhering to their doctor’s prescriptions and having to skip their medications.

That’s the what.  In this space, I want to discuss the why.  Why does it matter that the Medicare Part D program is so popular?  As some in Congress press to fundamentally change Part D by decimating its current pricing structure — either through mandatory drug company rebates to the government or shifting pricing authority from Part D plans to the Secretary of Health and Human Services — it’s worth noting three reasons why policymakers should take careful note of this program’s high approval ratings.

1)    The program is popular largely because it provides quality pharmaceutical coverage at an affordable price.  The Centers for Medicare and Medicaid Services announced this summer that average premiums in 2014 will be about $31 per month.  That’s the fourth straight year premiums have stayed level.  Obviously, competition between Part D plans is proving effective in keeping coverage affordable, a critical factor for seniors on fixed incomes.

2)    The Part D program has defied expectations since its inception.  Skepticism was abundant immediately after its enactment.  Plans wouldn’t participate.  Then, there would be too many plans participating and seniors would get confused.  The program would be a boondoggle for taxpayers.  Well, the results are in, and each state has an ample selection of plans.  Our survey shows seniors are negotiating the program without difficulty.  And overall program spending is 45 percent below original Congressional Budget Office projections.

3)    At a time in which citizens’ faith in government is at a disturbing low, a program that is overwhelmingly popular and that is spending at a rate far below expectations — certainly a rarity in Washington — is worth protecting, not remaking.

We’ll be sharing these survey results with members of Congress.  It’s our hope that lawmakers who are eyeing changes to Part D will realize that the program clearly isn’t broken and doesn’t need fixing.