Should Hospice be put into Medicare Advantage?

The bipartisan Chronic Care Working Group of the Senate Finance Committee outlines this as an option they are considering (see p. 8 h/t to Brad Flansbaum). I have blogged about the oddity of hospice being carved out of Medicare Advantage plans before (here, here, and here). Several points:

  • There is no actuarial reason to carve hospice out.
  • Putting hospice into the Medicare Advantage benefit package will almost certainly lead to hospice aggregation and driving out small providers in some areas, because hospice is now any willing provider in Part A. If we put it into Med Advantage plans, they will contract and in some markets this will have big impacts. This might be good and might be bad depending on the market (competition v quality trade-off).
  • There is now a huge business opportunity produced by this carve out that is just now being leveraged. Any palliative care company that can (1) get more Medicare Advantage patients to elect hospice and (2) do so earlier will improve Med Advantage plan profitability. If a patient goes out of Med Advantage to hospice 30 days before death versus dying in a hospital, the Med Advantage plan losses ~$1,500 in premiums, but avoids $15,000+ in claims. They likely improve patient quality/experience as well, but these profits now could at least partly be going back into the system.

My guess is that hospice goes into the Medicare Advantage benefit package within the next few years, driven finally by the rise of palliative care on a more widespread basis.

Beyond this issue, the working paper is filled with what interests a bipartisan group of staffers + members of the Senate Finance Committee (they key committee) in the area of chronic care, so this is a great place to start when thinking about what you should be studying/writing a dissertation or grant on.

Medicare Advantage claims should be available for research

Today my first piece in The Hill makes the case that claims data from Medicare Advantage plans should be made readily available for research. I will be writing 2x/month in the Hill, trying to look at the “story under the story” in health policy/reform. Several of my Duke Sanford Colleagues are also writing in the Contributors section of The Hill on different topics.

Private Insurance in Medicare: Language and Details

One barrier to reasonable discussion of the important details for any private option in Medicare is language. Premium support, competitive bidding, vouchers are thrown around willy nilly. Sometimes the words are meant by speakers to be self-evidently bad, other times good–what does it all mean?

From chapter 7 of my book Balancing the Budget is a Progressive Priority on the future of private insurance options in Medicare comes this (bolding added here):

I distinguish three approaches to purchasing private health insurance with support from the government to defray the cost. They may seem similar, but are very different in reality. And within each of these three varieties noted below, there are innumerable policy distinctions that could be made. Within the broad category of premium support, the version below that I term competitive bidding is an idea worth trying, in both the elderly and non elderly population. The other two are probably not.

The first approach is the use of an Equal Value Voucher. An equal value voucher is when everyone gets the same amount of money to go and purchase health insurance. The main effect of such an approach is to fix the total cost to the federal government, and essentially to shift cost differences to individuals. This is not being actively proposed by anyone as a Medicare policy, but this is similar conceptually to block granting the Medicaid program to the states. The federal government would fix their cost, and shift the remainder to the states in the case of Medicaid, or to the patient if you had an equal value voucher proposal.

The second approach is an Administratively Set Voucher. This is where an amount is provided to people that enables them to purchase private health insurance, but the key detail—how much money is provided to purchase insurance—is set administratively as opposed to by market forces. The current Medicare Advantage program, and really all earlier variants of Medicare HMOs were administratively set vouchers. The amount of money provided was determined in relation to the average adjusted per capita cost (AAPCC) of Medicare in a given county; it was set at 95 percent of AAPCC for two decades in an attempt to reduce costs until the mid-2000s, when the amounts were greatly increased with a policy goal of increasing participation in private plans. However, the amounts were still administratively determined. A company that could provide care cheaper than the value of the voucher simply pockets the difference as profit.

Rep. Paul Ryan’s plan passed by the House in April, 2011 to transition over time away from the current Medicare program and toward a system of providing money for the elderly to purchase private health insurance is also an administratively set voucher program. In fact, his linking of the amount provided to the elderly in the future to purchase health insurance to overall inflation, which grows much less slowly than health care inflation, shows what can happen with an administratively set voucher program: the value and therefore purchasing power of the voucher would greatly erode over time.

Competitive bidding occurs when the amount of a voucher provided to a patient with which to purchase private health insurance is determined by the actual cost of an insurance policy that covered a set of services (defined benefits) in a given health care market. This price would differ by market, and would be set through competitive bidding, in which insurance companies were each seeking as much business as possible. Setting the voucher amount at the price at which the lowest bid company was covering the specified benefit package would incentivize other insurance companies to aim to provide better care for less money and therefore gain market share. Insurers could compete on provider network, wellness programs, or internal efficiency. If insurers charged a higher premium than this competitive bid standard for a given area, the patient would have to be willing to pay the extra amount if they wanted to sign up for the higher priced plan, as the government would only pay the lowest bid amount in a given market. If properly constructed, cost could drop and quality could increase.

The ACA exchanges are the closest thing we have to competitive bidding at this point, although there are worries that the premium subsidies provided in the out years could erode under some circumstances. Competitive bidding is a good thing to try in the exchanges, and it also a reasonable thing to try in Medicare. The key is that the amount of premium subsidy provided to patients must be set by the cost of an actual reference health insurance policy that is readily available in a given market.

Senator Wyden and Rep. Ryan’s plan proposed in December, 2011 may fall in the competitive bidding realm, because of how the amount provided by government to Medicare beneficiaries would not be set administratively, but would be set via a bidding process between private insurance companies (note: the details are important and the plan is not in legislative language as of this writing). Further, this proposal would maintain traditional Medicare, though it would have to live under the limits of the competitive bidding framework as well, with patients receiving cash payments if plans (or traditional Medicare) were able to provide health care to their covered population for less than the competitively determined bid amount, and being expected to pay more if the premium was higher. [note: the 2012 House budget included an option to remain in traditional Medicare, unlike the 2011 budget]

Without some shared language, there is no hope of a reasonable policy debate.

Medicare Advantage and Hospice

I enjoyed Carl McDonald‘s presentation at the AcademyHealth National Health Policy Conference, on Monday in Washington D.C. He analyzes the health care industry for Citi and discussed earnings trajectories for publicly traded managed care organizations and insurance companies under various health reform scenarios.

One aspect of his talk reminded me of my grandfather’s advice, “be careful what you pray for, you might get it.”

McDonald was asked about about proposals to shift more Medicare beneficiaries (or even all of them) into a private insurance option and he noted that this would be great news for them. A questioner pushed back reminding him that since everyone dies and we know that health care costs rise near death, a total privatization would mean that private insurance would be responsible for paying for health care for the vast majority of the sickest, most expensive patients in the U.S., whereas today, fee for service Medicare is doing a great deal of that.

This interchange reminded me of an oddity of Medicare Advantage (the private health insurance Medicare option that nearly one-fourth of all seniors choose to be covered by).

I assume it is related to the politics/optics of a private insurance company being viewed as having an incentive to steer people into hospice in order to reduce health care outlays which could help their bottom line. Of course, under the current set up, such an incentive might be even stronger. This exclusion makes little sense in policy terms so far as I can tell, and private insurers cover hospice in commercial plans for younger persons. Were insurance companies not trusted to do this in private Medicare, or did they want no part of it? I don’t know.

The politics of end of life discussions are hot and not conducive to thoughtful, reasoned policy making. And we don’t seem to be able to have any sort of rational discussion about health care costs. Thinking all this through at the 30,000 foot level (on the plane back from the conference) I couldn’t stop thinking “why in the world would the private insurance companies want to be responsible for insuring all of the elderly”?


Key to Wyden/Ryan is the ACA

The Wyden/Ryan compromise Medicare reform was announced yesterday. Austin looked at the policy and politics; his series on premium support is required reading. Aaron also had several good posts up right away.

In policy terms, something like this proposal will likely be adopted one day in Medicare, for both political and policy reasons. I used to call for an end to private insurance options in Medicare. However, having no private insurance option in Medicare is a fantasy of the left, just as having no public option (traditional Medicare) is a fantasy of the right. Given that there will likely be some sort of private insurance option in Medicare along with a public one, I think that some version of premium support based on competitive bidding could be better than our current Medicare Advantage program. And we must do something. The Wyden/Ryan plan continues that part of the conversation.

It is true that Rep. Ryan moved to the center from his initial Medicare proposal, but that only means he moved away from his fantasy with respect to Medicare, as have I. However, I am unable to give a final grade to the Wyden/Ryan proposal without knowing what we will do to expand coverage (or not) for people under the age of 65, while seeking to slow costs and improve quality. If Wyden/Ryan were a part of a deal that also adopted a compromise to modify and implement the ACA, then maybe (but more details are needed).

In fairness to Rep. Ryan, he has a replace plan for the under 65 set, the Patients’ Choice Act, introduced before any House committee passed any version of the ACA in 2009, and which he recently re-embraced. I have blogged quite a lot about this bill and as always, the details are important. I see a great more policy overlap between the PCA and the ACA than Rep. Ryan’s rhetoric suggests. However, the big picture is more telling on replace than are the details of any one proposal: no House committee has marked up any sort of comprehensive replace bill  since the Republicans took control of that body. Nothing. It is very easy to say what you are against, but hard to get 218 votes in the House, 60 in the Senate and 1 in the White House.

Both political parties claim to be interested in a long range sustainable budget. To achieve this will require a health reform plan. The Democratic party passed one, and the ACA was what could pass. It can and needs to be reformed and changed; we will never be done with health reform, and the ACA gives us a place to start. The Republicans need a deal on health reform in the long-run-achieve-a-sustainable-budget-sense more so than do the Democrats; there is no example of the Republican party using political capital to drive any sort of comprehensive health reform, ever. Without a health reform plan, there will never be another balanced budget, or anything close.

Wyden/Ryan is only a placeholder unless there is to be a fuller discussion about health care reform. Senator Wyden said the key to his relationship with Rep. Ryan was not discussing the ACA. That conversation has to be had, in the Supreme Court and beyond.


Medicare is complicted, ctd.

It has been fascinating to show people the CHRT‘s chart of how people would get health insurance under the ACA, and to listen to what they see (complicated; simple; clear; confusing; Medicare much simpler; no it is more complicated; it is simple in one sense, complicated in another, etc.).

Austin’s take was that the chart is misleading because it says “if age 65 plus or otherwise eligible for Medicare, then you have Medicare” while it then provides a flow chart for everyone else. Essentially, the box “to Medicare” could have an asterisk that says “flip to the back for the Medicare flow chart.” Recently, I helped an age-eligible Medicare beneficiary decide what to do inside the “Medicare” box of the chart.

  • She had been covered by a combination Medicare supplement/prescription drug plan for the past 6 years, provided by the company from which her spouse retired 19 years ago; this company decided to drop all employee health insurance benefits beginning Jan. 1, 2012.
  • That means that she can sign up for a Medigap plan and a Part D prescription plan with no penalty for late sign up so long as she does so during the Medicare open enrollment period (Oct 15-Dec 7, 2011).
  • She could also sign up for one of 19 Medicare Advantage plans available in her zip code (private option that combines Parts A, B, D and Medigap).
  • After talking with her I concluded several things: physician choice was very important to her, to an extent that I consider to be the extreme, so this tilted me away from Medicare Advantage plans, some of which had either/or choices in terms of one health system on another where she lives and she currently sees docs in both systems.
  • Picking the Medigap plan to cover what Part A and Part B do not cover was fairly straightforward, and plan F was the one for her given historical use patterns. There was one that provided the most physician choice available to her. Interestingly, it also had the lowest premiums so it was an easy call. This turns the more choice/higher premium assumption on its head. I think this is due to the fact that it is by far the dominant insurance carrier in this state. update: In theory all Medigap plans cover all docs that accept Medicare, but there was a therapeutic example in this person’s medical history related to the application of a non-pharmaceutical therapy in which a plan stipulated they would supply the needed factor, and some physicians will not do it this way.
  • Prescription drug plans were trickier. This person takes 14 prescriptions, several of which are very expensive; she refuses to do mail order; she insists on using one pharmacy that is very small. These preferences (esp mail order) trimmed the list quickly and left 4 options.
  • I used an online tool and entered the pharmaceuticals taken and got a clear out of pocket and premium estimate. I also checked with her pharmacy to ask a few questions.
  • I picked the best one and it was offered by a company she had told me at the beginning of the process that she would “never do business with them because they were in business with the government.” I showed here that the second best plan would cost her about $1,100 more in out of pocket costs in a year and she changed her mind.
  • Bottom line: it was easy finding a Medigap plan and coverage is about the same as what she had. The prescription plan she had before was tons better (for her) than any Part D plan available; I see why the company wants out of providing that to spouses of retirees (also, the initial company has now been sold 4 times and the helpful person on the telephone said it was easier (and of course cheaper) to get out of the retiree health insurance business than to try and unify all the plans).
  • I spent 5-6 hours investigating this and around 2 hours over three conversations to convince the Medicare beneficiary that my suggestions represented the best route.

This is what Austin had in mind when he said Medicare is complicated.