2012 July

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ACA to Trigger Growth Spurt in Health Spending

ACA to Trigger Growth Spurt in Health Spending By Emily P. Walker, Washington Correspondent, MedPage TodayPublished: June 12, 2012 WASHINGTON — Healthcare spending in the U.S. is expected to continue to grow slowly over the next year and a half, but then speed up in 2014 when a number of provisions of the Affordable Care Act (ACA) kick in, according to a report from economists and actuaries at the Centers for Medicare and Medicaid Services (CMS).

And, by 2021, healthcare costs will equal 19.6% of the nation’s gross domestic product (GDP), up from 17.9% in 2011, Sean P. Keehan, an economist in the CMS Office of the Actuary, told reporters at a Tuesday morning press conference.

Spending on healthcare goods and services is projected to grow 5.7% per year from 2011 to 2021, outpacing growth in the GDP by 0.9 percentage points, Keehan and colleagues and colleagues wrote online in Health Affairs.

National healthcare spending grew very little in 2011 — just 3.9%, which was the same rate seen in 2010 – to reach $2.7 trillion. The slow growth was mostly because of the lingering effects of the recession, the study authors said. During the recession, fewer people used medical services, such as doctors’ visits, and more people lost their jobs, and along with them, their health insurance.

Some of the numbers expected in 2014 when an estimated 22 million people join the ranks of the insured:

An 18% increase in Medicaid spending and a 7.9% increase in private health insurance
Overall growth in health spending, 7.4%
8.8% growth in prescription drug spending, in part from narrowing the Medicare Part D “doughnut hole”
8.5% growth in physician services

Notably, slower healthcare spending projections for 2013 assume that physicians will face a nearly 31% cut in Medicare reimbursements starting Jan. 1, 2013. That’s when a temporary “patch” that is currently holding pay rates steady will expire.

CMS based that projection on current law, but in reality, the 31% pay cut is very unlikely to happen because Congress always votes to postpone the cuts, which are mandated by the sustainable growth rate (SGR) formula.

Overall, the ACA is projected to add 1/10 of a percentage point to annual health spending from 2010 to 2021 beyond the rate had the law never passed, according to the study authors.

While 0.01% growth doesn’t sound like much, consider that it is 1/10 of a percentage point of 1/5 of the economy, or roughly $478 billion, said Keehan.

A blog post on the report from Health and Human Services Secretary Kathleen Sebelius pointed to the fact that the law didn’t raise healthcare costs in 2011; in fact, it decreased costs slightly.

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Massive growth in HIE spending expected by 2014

Massive growth in HIE spending expected by 2014 By Susan D. Hall – Contributing Writer, Fierce Health Payer A new survey from Black Book Rankings on the health information exchange market indicates more industry technology executives are exploring adoption at this point over actual implementation of the technology. Still, it predicts massive growth in HIE spending by 2014. The survey, of 4,000 healthcare and insurance organization executives, found that the majority of U.S. hospitals (80 percent) and physicians (97 percent) have yet to implement an HIE system, Healthcare IT News reports. Among other findings from the Black Book report: 28 percent of respondents are cautiously increasing HIE spending before the end of 2012, but eight of 10 providers expect organizational HIE budgets to significantly increase by 2014; 83 percent of hospitals and 17 percent of all providers either already have or plan to participate in an HIE solution; Ninety-five percent of all providers expect to be included in at least one HIE interface by July 2013; Ninety-eight percent of those providers with HIE strategies in place will focus entirely on community or regional exchanges for the foreseeable future, rather than national health record exchange initiatives. “The current driving forces of HIE adoption are clearly apparent: accountable care implementation, Meaningful Use implementations, the need for care coordination, outcome-based reimbursement challenges, available funding, and opportunities for regional stakeholder participation,” Black Book senior partner Doug Brown said in a statement. Overall, hospitals are holding the line on spending, though among those planning an increase in capital investments, health IT is at the front to the line, according to a recent survey by group purchasing organization Premier Inc. A recent Fitch Ratings survey revealed similar results, with those who plan increases in capital spending over the next five years citing health IT as an important way to help them control costs, improve quality and adjust to new reimbursement models. The firm grip on the purse strings comes as PricewaterhouseCoopers predicts U.S. consumer healthcare spending in the United States will grow at a historically low rate of 7.5 percent next year. PwC foresees the industry continuing efforts to contain costs, cost-conscious patients using fewer services and employers trying to hold down expenses.

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Health insurance mandate faces huge resistance in Oklahoma

Health insurance mandate faces huge resistance in Oklahoma By Sandhya Somashekhar, Published: July 29, Washington Post

OKLAHOMA CITY — The Supreme Court may have declared that the government can order Americans to get health insurance, but that doesn’t mean they’re going to sign up.

Nowhere is that more evident than Oklahoma, a conservative state with an independent streak and a disdain for the strong arm of government. The state cannot even get residents to comply with car insurance laws; roughly a quarter of the drivers here lack it, one of the highest rates in the country.

When it comes to health insurance, the effort to sign people up isn’t likely to get much help from the state. Antipathy toward President Obama’s signature health-care overhaul runs so deep that when the federal government awarded Oklahoma a large grant to plan for the new law, the governor turned away the money — all $54 million of it.

The idea that the federal government will persuade reluctant people here to get insurance elicited head-shaking chuckles at Cattlemen’s Steakhouse, an iconic old restaurant in the Stockyards City neighborhood, which is lined with street banners reading “Where the Wild West still lives.”

“That kind of frontier mentality maintains in Oklahoma, and it’s not a bad thing. It’s a good thing,” said Mark Cunningham, 64, an Army veteran having breakfast with a couple of friends in a dimly lighted booth recently. Considering the car insurance statistic, he said, “I suspect they’re going to run into the same kind of trouble on health insurance.”

Although Obama’s health-care overhaul cleared a major hurdle last month when it was upheld by the Supreme Court, the government continues to face challenges as it implements the largest social program in decades. Among the biggest is the resistance, both personal and political, that officials face as they try to achieve the law’s most ambitious goal — extending health coverage to 30 million uninsured Americans.

That includes people who will become newly eligible for Medicaid coverage and others who can buy insurance through new state exchanges. Beginning in 2014, most Americans will be required to get health coverage or face a fine come tax time. But it will not be a simple task to get so many people to purchase coverage, and the Congressional Budget Office estimates that, for a variety of reasons, fewer than half of the 30 million will actually gain coverage in that first year.

Hopeful advocates

Advocates believe that, when the word gets out, people will sign up because it will prove to be a good deal.

“People may have heard about ‘Obamacare’ this and ‘Obamacare’ that, and they may have even succumbed to some of the myths . . . but once people see the impact it can have on their lives, all of that is going to change tremendously,” said Ron Pollack, a health-care advocate.

Pollack sits on the board of directors of Enroll America, a nonprofit group that plans a major public relations campaign, including television and radio ads, to promote the insurance mandate and the health law in general. The group says it will focus special attention on states with large uninsured populations and those where lawmakers have actively opposed the law.

Obama officials, cognizant of the challenges, have already begun reaching out to human services organizations and government agencies that work with the poor to begin telling the uninsured about the benefits they may be able to get under the health law, such as Medicaid eligibility or subsidies to help them afford coverage.

But some in Oklahoma aren’t so sure the population here will be easy to persuade, especially if the state government continues to condemn “Obamacare.”

“If we’re not being cooperative and all the rhetoric is hostile, then that’s going to be a real barrier to providing information to people,” said David Blatt, director of the Oklahoma Policy Institute, a state policy think tank. “There’s a lot of important outreach that needs to happen before January 1, 2014, and it’s going to be extremely difficult to do that when you have state leaders standing there saying, ‘Over our dead bodies.’ ”

Resistance remains strong in other states as well, with some governors promising to opt out of parts of the law. Obama’s Republican challenger, Mitt Romney, has said he will act to repeal the law as his first priority if elected president. But it is unclear how far opponents can turn back the clock.

Many experts say the tax penalty for not having insurance — which starts at $95 and gradually increases to $695 or 2.5 percent of a person’s income — is too low to be sufficient motivation on its own.

In Massachusetts, a similar health insurance mandate enacted during Romney’s term as governor succeeded partly because it was uncontroversial, and because government agencies, nonprofit groups and health-care providers promoted it widely, even at Boston Red Sox games. Less than 5 percent of the state’s population is now uninsured.

But that was Massachusetts, a liberal-leaning state where residents are accustomed to more government regulation. No one is quite sure how it will work elsewhere.

Stubborn mind-sets

“There’s a sense in Oklahoma, and I’m not sure if this is peculiar to this state, but we don’t like people telling us what to do,” said Chuck Mai, a spokesman for AAA Oklahoma. “We know what we should do. We should buckle our safety belt every time we drive. We should drive sober. And we should have insurance on our vehicle. But having our law telling you to do those things sometimes has an adverse effect.”

Although auto insurance is required for all drivers under state law, an estimated 20 to 30 percent in Oklahoma go without it, Mai said. (In Massachusetts, about 5 percent of drivers are uninsured, the lowest rate in the country, according to the Insurance Research Institute, which last calculated the numbers in 2009.)

Lawyers and industry groups believe the low car insurance rates in Oklahoma are partly because of the sizable population of illegal immigrants. But a number of people sign up for insurance long enough to register their cars, and then, driven by poverty or a devil-may-care attitude, immediately stop paying their insurance bills.

Offenders face a $230 fine and suspension of their driver’s licenses. Police recently gained access to a database of uninsured drivers’ license plates, but the state legislature rejected a bill that would have allowed police to pull over drivers solely for insurance violations. Even the state’s insurance commissioner opposed it.

“I think that gives [the police] too much power,” said the commissioner, John D. Doak, who nevertheless considers uninsured motorists a top challenge. “I’m not a fan of the camera systems. They’ve got that in China. I want to protect people’s individual rights and liberties.”

Doak believes it will be similarly difficult to get people to sign up for health insurance.

About one in five Oklahomans lacks health insurance, also one of the highest rates in the country, despite strides made in recent years to get eligible children signed up for Medicaid. Gov. Mary Fallin (R) has been sharply critical of the new health-care law and is contemplating opting out of its expansion of Medicaid. Conservative lawmakers in the legislature are already devising ways to skirt its provisions.

Resentment and fear

Even some providers who treat the poor are skeptical. Betty Denwalt, a registered nurse at the Baptist Mission Center’s free medical clinic for the uninsured in Oklahoma City, believes people will choose not to buy insurance because they can’t afford it, or because they dislike being directed to do so by a federal government that seems disconnected from their problems.

On a recent morning at the center, patients waited in avocado-green chairs to pick up medicine or see a doctor. John, 37, who would not give his last name, said he could not afford health insurance for himself, his wife and his five children on his $38,000 salary as an apartment manager. He said he resents the idea that the government could compel him to do something he may not be able to afford.

“I don’t think the government should have the right to force people to do anything unless it’s following a criminal law or something,” he said.

At the Mid-Del Community Clinic across town, Mark Nelson, 46, expressed a similar sentiment. Once a successful roofing contractor, Nelson eschewed health insurance for much of his life despite suffering from a genetic kidney disease. He figured he would “sell a couple houses” if he ever needed a transplant.

His fortunes, however, took a turn just as his kidneys began to fail. He is now earning $7.50 an hour as a dishwasher at IHOP and gets most of his care at the clinic, though he eventually will need more intensive care. Yet he is still of two minds about health insurance, which he said he wishes he had, but also considers a racket.

“I’m anti-government,” he said. “Insurance is a concept based on fear.”

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State wants permanent insurance reform

State wants permanent insurance reform By Dina Overland, Fierce Health Payer Insurers operating in California would have to provide some reform law provisions–without an individual mandate–under two bills making their way through the state legislature, regardless of the U.S. Supreme Court’s ruling on the law’s constitutionality. The main elements of the reform law, including requiring insurers cover people with pre-existing conditions and limiting how insurers set premium rates to age, geography and family size, would become permanent in California if S.B. 961 becomes law, reported Kaiser Health News/Capital Public Radio. The legislation, which has an identical version in the state Assembly, also prohibits insurers from conditioning individuals’ coverage and costs on health status, medical condition, claims experience or genetic information. “I feel tremendous responsibility to ensure that California continues to lead the nation, implementing federal reform, and that we serve as a model for the rest of this country,” Sen. Ed Hernandez (D-Calif.), who authored the bill, told CPR. “While I remain optimistic that the U.S. Supreme Court will uphold the Affordable Care Act, we still need the authority here in California to enforce these protections,” he added in a separate statement. The California insurance industry, however, wants the bills to include an individual mandate. “Disconnecting the requirement to join the insurance pool from the duty to sell insurance at the same price, doesn’t work,” Patrick Johnston, CEO of the California Association of Health Plans, told CPR. And Sen. Sam Blakeslee (R-Calif.) said that providing expensive care to individuals with pre-existing conditions could raise costs for others or drive some people out of the insurance pool, KPBS reported. “If the U.S. Supreme Court strikes down the universal mandate as being unconstitutional federally, then we would almost have to come back and institute such a universal mandate here in California much like Massachusetts, or the entirety of this would fail and potentially catastrophically,” he said.

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Medicaid financial burdens continue regardless of reform

By Alicia Caramenico July 18 2012

Even if the economy rebounds, Medicaid will continue to strain state budgets regardless of whether they expand their programs under the Patient Protection and Affordable Care Act, according to areport from the State Budget Crisis Task Force released yesterday.

The report examined California, Illinois, New Jersey, New York, Texas and Virginia and found a common thread of ongoing financial burdens from Medicaid. Thanks to the Supreme Court ruling, states will see a moderate increase in Medicaid costs, widening the gap between spending and revenue, according to the report.

The Centers for Medicare & Medicaid Services projects total Medicaid costs to grow at an average annual rate of 8.1 percent between 2012 and 2020 with implementation of health reform provisions and at a rate of 6.6 percent without them, noted the task force, led in part by a former Federal Reserve chairman.

States that choose to forgo Medicaid expansion still will to be confined by the ACA’s maintenance of effort provisions until 2014 for adults and 2019 for children, furthering driving up costs, according to the report.

And even if the federal government approves Medicaid cost-cutting efforts, the feds will collect half the savings, meaning states must realize $2 in federally approved cost savings to save $1 to their budgets, the report states.

In contrast, a report last week from the Center on Budget and Policy Priorities concluded reform willreduce state and local government costs for uncompensated care. “Expanding Medicaid is thus a very favorable financial deal for states,” it said.

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Federal Health Spending as Share Of GDP to Double by 2037, CBO Reports

Federal Health Spending as Share Of GDP to Double by 2037, CBO Reports Wednesday, June 6, 2012 from Health Care Daily Report™ By Steve Teske

Spending on federal health care programs will grow from more than 5 percent of gross domestic product today to nearly 10 percent in 2037, according to a report issued June 5 by the Congressional Budget Office.

National health care spending also will continue to rise, CBO said in the report, The 2012 Long-Term Budget Outlook. National health care spending has risen from 9.8 percent of GDP in 1985 to 16.8 percent of GDP in 2010, and under CBO’s extended baseline scenario, which generally reflects current law, national spending for health care would increase to almost one-quarter of GDP by 2037, the report said.

“The aging of the baby-boom generation portends a significant and sustained increase in the share of the population receiving benefits from Social Security and Medicare, as well as long-term care services financed by Medicaid.”

–CBO budget outlook

Key factors contributing to the growth in health care spending, the report said, have been:

• the emergence and increasing use of new medical technologies;

• rising personal income; and

• the expanding scope of health insurance coverage.

Of the total projected growth in spending on the major mandatory health care programs and Social Security between 2012 and 2037, aging accounts for 75 percent and excess cost growth accounts for 25 percent, CBO said.

“The aging of the baby-boom generation portends a significant and sustained increase in the share of the population receiving benefits from Social Security and Medicare, as well as long-term care services financed by Medicaid,” the report said.

High Growth Rates Cannot Continue Indefinitely.

CBO said health care spending on a per capita basis has grown annually 1.6 percentage points faster than the nation’s GDP over the past 25 years.

But the report said the high rates of health care spending growth “cannot continue indefinitely, because if they did, total spending on health care would eventually account for all of the country’s economic output–an impossible outcome.”

“Instead, over time, people will try to limit their spending for health care in order to maintain their consumption of other goods and services,” the report said. “Private insurers and employers will adjust the insurance coverage they offer, the benefits they provide, and the amounts and nature of their payments to health care providers.”

In addition, state governments–which pay a large share of Medicaid’s costs and have considerable influence on those costs–will need to reduce spending growth in order to balance their budgets, CBO stated.

Medicare Growth in Spending Will Slow.

Even in the absence of changes in federal law, growth in spending on Medicare, Medicaid, and health care financed through the private sector will slow gradually, the report said.

Medicare spending is likely to slow less than that of Medicaid, reflecting changes in medical practices common to all patients; regulatory changes allowed under the law; and the increasing pressure of premiums and cost-sharing amounts, such as copayments and deductibles, on enrollees’ finances, CBO said.

The report said many features of Medicare cannot be altered without changes in federal law, but a slowdown in spending growth outside of Medicare will affect the program as well.

“In particular, Medicare will experience some reduction in cost growth to the extent that actions by individuals, businesses, and states result in lower-cost ‘patterns of practice’ by physicians, slower development and diffusion of new medical technologies, and cost-limiting changes to the structure of the overall health care system,” the report said.

The CBO analysis is at http://www.cbo.gov/sites/default/files/cbofiles/attachments/06-05-Long-Term_Budget_Outlook.pdf.

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Utah saves millions in Medicaid costs

May 29, 2012 | By Ron Shinkman, FierceHealthFinance

Utah’s Medicaid Inspector General has saved $10 million in its first year of operation, and could wind up recouping another $20 million in potential overpayments to hospitals, The Salt Lake City Tribune reported.

The Utah OIG was able to claw back $5.6 million in claim overpayments, and realized another $4 million in savings by scrutinizing the off-label use of psychotropic medications by providers, according to the article.

Although those savings are below the $20 million a year set by lawmakers when they created the office, OIG Lee Wyckoff said he’s in negotiations with hospitals to recover as much as $20.5 million in Medicaid overpayments to hospitals dating back to 2008.

Meanwhile, state lawmakers hope to reform the Medicaid program further, pushing for block grants from the federal government unfettered by Medicaid regulation, according to the Daily Herald. Utah is one of the most conservative states in the United States and has been systematically pushing for less regulation.

“We get a Republican president, we’ll get that last piece we need,” Dan Liljenquist, a state Senator now running for the U.S. Senate, told the Daily Herald. “It has to be fixed or we are going to be in trouble.”

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Weak anti-fraud programs lead to $43B Medicare, $21.9B Medicaid overpayments

By Karen M. Cheung, Fierce HealthCare, 6-8-12

Medicare and Medicaid are still vulnerable to fraud, largely due to poor oversight data, the Office of Inspector General and the Government Accountability Office testified yesterday.

In 2011, the Centers for Medicare & Medicaid Services estimated that it issued nearly $43 billion in Medicare overpayments and $21.9 billion Medicaid overpayments, as some of the most expensive and highest-risk programs on GAO’s watch list, according to a GAO summary yesterday.

GAO noted that the two programs have different challenges. For example, Medicaid runs 51 distinct state-based programs.

The two agencies, however, stressed that CMS must oversee their efforts to control costs.

“[T]hese programs are not effectively accomplishing their missions,” Ann Maxwell, regional inspector general, said yesterday. “[B]oth programs had low findings of actual overpayments and, as a result, yielded negative returns on investment. These programs also delivered very few referrals of potential fraud to OIG and our law enforcement partners. In many ways, these programs resemble a funnel through which significant federal and state resources are being poured in and limited results are trickling out.”

The leak in payments is attributed to significant shortcomings of data. For example, due to poor data, Medicaid Integrity Contractors misidentified potential overpayments and the Medi-Medi Program identified fewer overpayments and fewer cases of potential healthcare fraud, according to Maxwell.

“It is critical that CMS and the states continue working on reducing improper payments. While both have made efforts to reduce improper payments, further action is needed,” GAO said.

For Medicare, CMS implemented several improved enrollment safeguards, including screening enrollment applications for categories of providers by risk level. CMS and GAO also are working on prepayment edits based on coverage and payment policies, to identify abnormally rapid increases in medical equipment billing, for example. Although CMS has begun using recovery auditing in its prescription drug program, it hasn’t for its managed care plans, GAO noted.

For Medicaid, CMS has started collaborating with states to identify targets for federal postpayment audits, which should help to avoid duplication of federal and state audit efforts. CMS hasn’t established a robust process for states to evaluate vulnerabilities identified by the states’ new recovery audit contractors to identify and recoup overpayments, GAO said.

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Hospitals to see more bad debt without health reform

Hospitals to see more bad debt without health reform June 8, 2012 | By Alicia Caramenico, FierceHealthFinance

While the industry awaits the U.S. Supreme Court’s ruling later this month, a new report from Moody’s Investors Service warns that a full or partial repeal of the health reform law will hurt for-profit hospitals.

If the Supreme Court strikes down the entire Patient Protection and Affordable Care Act, for-profit hospitals would face more financial pressure as individuals remain without health insurance, as well as market uncertainty over government cost control activity, Moody’s said Wednesday in a statement. If only the individual mandate is ruled unconstitutional, for-profit hospitals still will face increased exposure to bad-debt and reduced reimbursements.

But if the Supreme Court upholds the ACA, the expected influx of newly insured patients would lower bad-debt charges at for-profit hospitals, according to the report.

The new report echoes Moody’s bleak outlook in April, which concluded that fully or partially repealing the ACA would limit for-profit hospital operators’ revenue growth and profit margins and constrain cash flow. It warned that HCA, Community Health Systems and Tenet Healthcare Corp. would be most vulnerable, FierceHealthFinance previously reported.

Fitch Ratings also said that the health coverage expansion under the ACA will positively affect for-profit hospitals, according to its most recent quarterly report. The ratings agency also noted that a boost in outpatient volumes in the first quarter of 2012 helped increase adjusted admissions and profitability across the for-profit hospital sector.

To learn more: - check out the Moody’s statement - download the report (registration required) - here’s the Fitch Ratings report announcement

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Medicaid financial burdens continue regardless of reform

Medicaid financial burdens continue regardless of reform July 18, 2012 | By Alicia Caramenico

Even if the economy rebounds, Medicaid will continue to strain state budgets regardless of whether they expand their programs under the Patient Protection and Affordable Care Act, according to a report from the State Budget Crisis Task Force released yesterday.

The report examined California, Illinois, New Jersey, New York, Texas and Virginia and found a common thread of ongoing financial burdens from Medicaid. Thanks to the Supreme Court ruling, states will see a moderate increase in Medicaid costs, widening the gap between spending and revenue, according to the report.

The Centers for Medicare & Medicaid Services projects total Medicaid costs to grow at an average annual rate of 8.1 percent between 2012 and 2020 with implementation of health reform provisions and at a rate of 6.6 percent without them, noted the task force, led in part by a former Federal Reserve chairman.

States that choose to forgo Medicaid expansion still will to be confined by the ACA’s maintenance of effort provisions until 2014 for adults and 2019 for children, furthering driving up costs, according to the report.

And even if the federal government approves Medicaid cost-cutting efforts, the feds will collect half the savings, meaning states must realize $2 in federally approved cost savings to save $1 to their budgets, the report states.

In contrast, a report last week from the Center on Budget and Policy Priorities concluded reform will reduce state and local government costs for uncompensated care. “Expanding Medicaid is thus a very favorable financial deal for states,” it said.

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