Ten Costliest DRGs to Medicare and Beneficiaries

Ten Costliest DRGs to Medicare and Beneficiaries

The Centers for Medicare and Medicaid Services (CMS) recently released payment data for the 100 most commonly billed discharges by Diagnosis Related Group (DRG) at more than 3,000 hospitals using the Inpatient Prospective Payment System (IPPS) in 2013. These payments represent over 7 million discharges, or 60 percent of the total IPPS discharges billed to Medicare that year. The following chart shows the top 10 costliest DRGs to the Medicare system as a whole, counting payments by both the government (and/or supplemental private insurance) and beneficiaries (including copayments and deductibles). These 10 DRGs were responsible for nearly 1.7 million discharges with total payments per discharge averaging nearly $23,000 for a total cost of more than $26 billion. As illustrated, much of the cost is driven by the number of discharges—particularly for major joint replacement (DRG 470) and septicemia (DRG 871)—rather than the cost of the services. Percutaneous cardiovascular procedure (DRG 247) was the only DRG in this top 10 that was not also in the top 10 for number of discharges or average total payments per discharge.

TRICARE: The Military’s Health Care System

The Department of Defense (DOD) provides health care for 9.5 million military service members, retirees, and family members through military treatment facilities (MTFs) and a self-funded, self-administered insurance program called TRICARE.[1] The mission of the military health care system is to maintain the health of military personnel, and their families, so that they are capable of carrying out their missions, and to ensure that military medical personnel are prepared to deliver all necessary health care services to any service member injured in battle.

All But One ACA Co-ops Lost Money in 2014

All But One ACA Co-ops Lost Money in 2014

The Affordable Care Act (ACA) allowed the creation of non-profit consumer operated and oriented plans (co-ops) which would be allowed to sell health insurance to a state’s residents either on or off the newly-created Exchanges. These co-ops were eligible for both start-up and solvency loans, and the Centers for Medicare and Medicaid Services (CMS) awarded $2.4 billion in loans to 23 new co-ops. One criteria for receiving such loans was a high probability of becoming financially viable. While most of the co-ops were expected to lose money in the first year (as most new businesses do), the Health and Human Services Office of the Inspector General found 19 of the 23 co-ops exceeded their projected losses; 10 co-ops lost more than $2,000 per enrollee. Projections show 11 co-ops are expected to still be losing money by the end of 2015. Maine’s co-op, the only one not to lose money in 2014, had the lowest priced plans (despite only drawing down 32 percent of the loans they were awarded and enrolling more than 2.5 times as many individuals as anticipated) and attracted 80 percent of the state’s marketplace consumers. The chart below shows the net loss per enrollee for each co-op by state, which averaged $2,712. The total loss was $539 million.

Forty Percent of ACA Subsidized Households Could Lose Eligibility Because of Tax Filing Confusion

According to preliminary data released by the Internal Revenue Service (IRS) in a letter to Congress on July 17, 2015, about 40 percent of households that received subsidies in 2014 are currently at risk of losing their subsidy eligibility because of complications with their 2014 tax returns. To date 1.8 million heads of households have not submitted the appropriate Affordable Care Act (ACA) related tax forms to reconcile the $5.5 billion in subsidies paid on behalf of these households.

Medicaid: After 50 Years, It’s Time for Reform

Over the last 50 years, Medicaid has transformed from a social welfare program for the neediest in society, to the largest public health insurance program in the country, covering more than 70 million individuals— over 20 percent of our nation’s population.  Given the growth and scope of the program, it is important to examine the program and ensure that it is accomplishing its mission while conforming to current budget realities. Unfortunately, that is not the case. Reforms must be implemented in order to restore the program’s mission and ensure its fiscal sustainability.

Are Electronic Medical Records Worth the Costs of Implementation?

Electronic medical records (EMRs), as a cornerstone of a more intelligent, adaptive, and efficient health care system, have the potential to improve the overall health of our society and begin to rein in the trillions of dollars spent on health care each year. However, implementation and utilization of such record systems brings its own significant costs and challenges which must be carefully considered and overcome in order to fully realize the potential benefits.

Reforming 340B

The 340B drug pricing program requires pharmaceutical manufacturers to provide outpatient medications at steeply discounted prices to certain types of hospitals and health clinics. Intended to provide critical cost savings for hospitals and other entities that provide charitable care for patients without health coverage, eligibility for the largest proportion of entities participating in the program is based on a funding formula that relies on the proportion of Medicare and Medicaid inpatients served by a given hospital. As 340B enters its third decade as part of the federal health funding structure, now is a good time to reevaluate and make sure it is working as intended. This short paper argues that a fundamental change in the formula would better reflect the program’s stated priority.

Medicaid Accounts for 16 Percent of All Health Care Spending in U.S.

In 2014, national spending on health care products and services totaled $3.1 trillion, or $9,695 per person, and accounted for 17.4 percent of our gross domestic product (GDP).  Medicaid enrollment grew by 12.9 percent in 2014, while spending on the program grew by 12 percent (federal and state spending grew 17.7 percent and 3.4 percent, respectively) totaling $503.3 billion and accounting for 16.3 percent of national health expenditures (NHE).   Average spending per beneficiary in Medicaid was 1.4 times greater than spending on individuals with private health insurance.  The chart below provides insight into where that money is going: a large share of the nation’s spending on nursing and retirement care, home health care, and other residential and community-based services are paid for by Medicaid.

Paying to Keep At-Risk Patients Healthy

Health plans should be paid to keep patients healthy. That is, when some percentage of patients with a chronic progressive disease may be expected to progress to the next stage of that disease in the course of a year, health plans should be paid if they can keep the percentage of patients progressing significantly below the expected level. Depending on the level of success in preventing disease progression, and the payment required to achieve that level of success, preliminary estimates suggest that annual program savings could range from several hundred million to almost $3 billion from chronic kidney disease alone. This is just the tip of the iceberg, since there are many other chronic progressive conditions that would be amenable to this sort of incentive system. Most important, because the payment for reducing disease progression can be calibrated to be lower than the payment for more severe stages of the diseases, it can be guaranteed that program costs will not increase.  In other words, there is great potential benefit, but no downside risk to the taxpayer.

The Daily Dish

Health insurance mergers have hit the headlines recently. Aetna and Humana led off by announcing their merger, followed by the agreement by Cigna to be purchased by Anthem. To some, the most notable outcome of these mergers is that they yield two very large insurers, and leave the U.S. with three large health insurers with annual revenues in the $150 billion range. In this populist, “big is bad” era there are already calls for the Justice Department to step in and prevent the mergers. Let’s think this through step by step.

The Future of America’s Entitlements: What You Need to Know About the Medicare Trustees Report

The Medicare Trustees issued their annual report detailing the financial state of America’s entitlement programs. The report echoed past conclusions: Medicare and Social Security are still going bankrupt. At its current pace, Medicare will be bankrupt in 2030 and Social Security will go bankrupt in 2034 (a year later than last year’s projection). Despite what many will herald as good news for Medicare, a deeper look at the data proves just how broken our current entitlement programs are. 

Medicare Advantage Stars: Are the Grades Fair?

Medicare Advantage (MA) offers seniors a one-stop option for hospital care, outpatient physician visits, and prescription drug coverage. MA is popular; enrollment has increased every year since 2004 and reached 16 million individuals in 2014, which represents 30 percent of the Medicare population. Since 2008 MA plan performance has been rated on a 5-star scale to inform beneficiaries of the quality of plan options, and since 2012 plans with higher ratings receive bonuses that are in part returned to beneficiaries.

The Medicare and Medicaid Programs will Cost $2 Trillion in Just 8 Years

The Medicare and Medicaid Programs will Cost $2 Trillion in Just 8 Years

As the nation marks the 50th Anniversary of the creation of Medicare and Medicaid, it is important to both look back at how the programs have evolved, as well as forward at what’s to come. But be careful—the trajectory may alarm you. Between 2010 and 2023, total expenditures on Medicare and Medicaid will more than double to nearly $2 trillion annually, while enrollment during that same period is only expected to increase by 45 percent. Spending on Medicare did not surpass $500 billion until 2009, 44 years after the program began; but it will only take 13 years beyond that to increase by the same amount. In the 10 years between 2014 and 2023, average annual enrollment growth in both Medicare and Medicaid will be approximately 3 percent, while average annual growth in expenditures will be more than double the rate of enrollment for both programs—6.2 percent for Medicaid  and 7 percent for Medicare.

Medicare Spending Per Beneficiary Has Tripled Since 1970

The Medicare program was established 50 years ago and, as of 2013, provided health care coverage to 52.3 million beneficiaries at a cost of $583 billion. Serving 19.4 million beneficiaries in 1967, total Medicare expenditures were $4.7 billion. The growth in program expenditures is largely due to growth in the number of beneficiaries. However, growth in health care prices and the availability of more health care services has been a significant factor in the growth of real per-beneficiary spending, which has tripled since 1970. Between 1965 and 2010, average annual growth in health care prices outpaced general price inflation by approximately 2 percent. Average total spending per beneficiary was $12,210 in 2013, and will continue to rise. As the number of beneficiaries will also soon skyrocket—enrollment is expected to grow at an average annual rate of 3 percent over the next decade, this combination will dramatically increase Medicare expenditures, expected to surpass $1 trillion by 2022.

Medicaid: A Review of the Program after 50 Years

Medicaid, along with Medicare, was created in 1965 as a joint federal-state entitlement program to provide health care coverage to any low-income individual or individual with disabilities who meets the eligibility criteria in his or her state of residence. The Federal government sets minimum eligibility criteria and program requirements which can be expanded by the state, and funds anywhere from 50 percent to 74 percent of a state’s Medicaid expenses, based on the Federal Medical Assistance Percentage (FMAP) formula. Every state has participated in the program since 1982.

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