After three years of providing penalties and bonuses to hospitals treating Medicare patients through the Affordable Care Act’s (ACA) Hospital Value-Based Purchasing (HVBP) Program, the Government Accountability Office (GAO) has found that the amount of a hospital’s payment adjustment is well-aligned with the hospital’s net income—hospitals with a higher net income received the largest bonuses. This finding is not all that surprising (with one exception: hospitals in the lowest net income range in 2013 had the second-highest payment adjustment in 2015). While potentially a chicken-and-egg situation, hospitals with low or negative net income are not likely to have the available resources necessary to make needed improvements. When a hospital is penalized for its poor performance, the situation worsens. In all three years, average payment adjustments for safety net hospitals were negative. Interestingly, the most commonly cited challenge to improving quality was health information technology (IT), which every hospital is being required to utilize in the hopes that such technology will catalyze quality improvements. Additionally, the GAO found “no apparent shift... in hospitals’ performance on the quality measures included in the HVBP program”.
Many veterans of the United States military receive health care through the Veterans Health Administration (VHA), a division of the Department of Veterans Affairs (VA). The VHA provided care to more than 8.7 million veterans (40 percent of all living veterans) in 2014. It operates more than 1,700 VA facilities with nearly 304,000 employees, making it the country’s largest integrated health care system. VA health care is not an insurance plan but rather allows veterans to receive health care treatments and services, either at no cost to them or for a copayment (depending upon eligibility), so long as such services are received at a VA clinic or hospital. Most veterans who served at least two years in active duty and received a non-dishonorable discharge are eligible to receive health care through the VA. Veterans with 20 or more years of service who have retired from the military are eligible to receive TRICARE benefits, administered by the Department of Defense (DOD) rather than the VA—although some retirees use both systems.
The Kaiser Family Foundation recently released polling on Americans’ views of the pharmaceutical industry and the costs of prescription medications. Not particularly surprisingly, 55 percent of those polled expressed an unfavorable opinion of these companies and 72 percent said the cost of prescription drugs was unreasonable. Perhaps more surprising is that Kaiser reported 83 percent supported allowing the government to negotiate drug prices in Medicare, and 76 percent supported limiting the amount companies can charge for high-cost drugs.
Years ago, as a professor at the Syracuse University I decided to teach a course entitled “Economics in the Media” in the Newhouse School of Communications. The idea was spawned by the realization that I might do more social good by producing a single economically literate journalist than 20 economics majors a year. I promise you that this author did not take my class.
A little-used social security payment rule and its connection to Medicare Part B premium increases has become a concern for many policymakers. Part B premiums will increase by half for 25 percent of enrollees, while the other 75 percent of beneficiaries will be spared any premium increase at all due to a Hold Harmless provision. A July report on Social Security Cost of Living Adjustment (COLA) indicated there will be no 2016 increase in payments to offset the Medicare Part B premium increase, but a Hold Harmless provision will protect three-quarters of Medicare beneficiaries from these premium increases while shifting the entire burden to the other 25 percent of beneficiaries. This shift will cause monthly premiums to increase from $104.90 to $159.30 for 25 percent of beneficiaries. State Medicaid agencies will pick up a substantial share of the $500 million tab for dual eligibles in 2016, while high-income beneficiaries could see their premiums spike to over $500.
A recent proposal aimed at lowering out-of-pocket (OOP) health care costs would give tax credits to those individuals and families that spend 5 percent or more of their annual income on OOP costs. Individuals that reach this threshold could receive up to $2,500, while families could receive up to $5,000.
Improper drug use, and the negative health effects of such, has been of increasing concern over the past several years. In 2012, of the approximately 36 million young adults in the U.S. aged 18-25 in the U.S., more than one third reported binge alcohol use and one fifth reported illicit drug use in the past month. The total number of emergency room (ER) visits caused by problems or complications from using drugs (both legal and illegal, prescribed or otherwise) reached nearly 5.1 million in 2011, an increase of 88 percent from 2004. ER visits following use of pain relievers—responsible for 23 percent of all ER visits due to drug use in 2011—increased 126 percent, with oxycodone and hydrocodone accounting for 46 percent of that increase. ER visits for non-alcohol illicit drug use only increased 19 percent. ER visits for users of antidepressants increased 55 percent, while ER visits due to use of anti-anxiety medicines increased 126 percent. At the average charge for an ER visit in 2013 of $1,233, the cost of these visits would total nearly $6.3 billion.
The California Senate recently passed a bill intended to make many benefits of the Affordable Care Act (ACA) available to undocumented immigrants in the state. The bill is currently working its way through the state assembly, and will soon come to a vote in that body. The two-part proposal would allow undocumented immigrants to purchase health insurance through the state’s ACA exchange, CoveredCalifornia, and allow many others unable to afford insurance to participate in Medi-Cal, the state Medicaid program.
Between January 2011 and May 2015, less than $10 million in Medicare Part D improper payments had been recovered by the Centers for Medicare and Medicaid Services—less than 0.14 percent of improper payments made during this time period. Over the last decade, approximately 4 percent of all federal government payments each year were improper, but 9.5 percent of all Medicare and Medicaid payments last year were improper. Medicare and Medicaid have accounted for half of all improper payments by the federal government over the last 11 years, and since 2009, these two programs have been responsible for at least 55 percent of all improper payments each year. In 2014, Medicare Fee–for-Service (Parts A & B) accounted for 37 percent of all improper payments by the federal government; Medicare Advantage (Part C): 10 percent; Medicare Part D: 2 percent; and Medicaid: 14 percent.
A Medical Loss Ratio (MLR) is a calculation used to loosely gauge the efficiency and profitability of a health insurance plan. The measurement determines what portion of the money consumers pay in premiums is spent on providing health care services or improving the quality of care delivery. A higher MLR is thought to indicate a higher quality insurer because a larger portion of the company’s funds are spent on providing care. However, this is not necessarily the case if an insurer succeeds in keeping a healthier-than-expected risk pool.
Biopharmaceutical medications, commonly referred to as biologics, are a rapidly growing sector of specialty drugs. While the concept of using living cells for specialized medical treatment is not new—live vaccine treatments have been around for some time—recent innovations in genetic engineering have precipitated more complex and specifically tailored drugs that are grown, rather than manufactured, and advanced the landscape of modern medicine. However, these innovations require large investments in both research and production. Recent estimates indicate that research and development costs for biopharmaceuticals totaled $140 billion worldwide in 2014 alone. A biologic treatment course can cost between $10,000 and $50,000 over the course of a year, with some treatments exceeding $100,000, and both public and private insurance programs are struggling to maintain access in the face of high price tags and increasing demand for specialty drugs. In 2013, the IMS Institute for Healthcare Informatics estimated that 28 percent of prescription drug expenditures in the US were spent on biologic drugs, and the market share of biologics globally is projected to continue growing at an annual rate of 10.6 percent through 2019.
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.
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. 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.
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.
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.