MSAs – another perspective

In follow up to my posts on MSAs, I had the chance to interview Peter Foley of the American Insurance Association yesterday. Peter is quite knowledgeable about MSAs, the Medicare Secondary Payer Act, CMS’ perspectives, and how this affects payers. He’d be the first to say he is not an “expert”, but in my view he is certainly one of them.

Here is our conversation – and I hope I got it right.

What payers are affected by MSP Act?

All payers – group, Self-Insured (SI) and non group health plans, workers comp auto general liability etc. – including claims where no medicals have been or can be paid. (E.g a claim on an accountant’s E&O insurance)

Does any payer have to file an MSA w CMS?

No. It is not statutorily required and never has been, it has been recommended but not required.

Why do payers send MSAs to CMS?

The payer thinking is in some way they can use a submission as a defense against Medicare coming back to them and say the payer did not take Medicare’s interest into account when settling the claim. While it does not definitively protect the payer from future action but does show that at that point in time they made an effort to protect Medicare’s interest.

If a company stops sending in MSAs, they may be concerned that CMS would think there’s a problem and perhaps subject them to more scrutiny.

Is there a “safe harbor” in regards to MSAs?

There is no safe harbor.

After an MSA is established and set aside does the payer have any protection from future action from CMS?

No. One can’t prevent the federal government from asserting its perceived rights if it so chooses.

It appears the backlog has come down, but other sources indicate it has not. What do you see?

Medicare doesn’t make available what is submitted or processing times they simply capture how many MSAs they have approved for how much in what time frame. The only data available is what individual companies report on their own.

There is no available comprehensive data on turnaround time – MSA companies have repeatedly asked CMS to bring more transparency to the process; my interpretation of transparency is data on the number of submissions, timeframes, and financial data. The problem that CMS has is they only capture numbers of MSAs approved, the date they are approved, and value of those set asides. We and they don’t know when or if the settlements have been finalized or indeed if the claim was settled at all. CMS does not report submission and approval dates, just approval date – what has been made available is just that.

There is no consistent reporting from CMS on those data points, much of the information available required a specific request to CMS, or may have come from congressional testimony.

The information currently available is limited and sporadic and not generalizable to the entire MSA population.

MCM – There’s some hope that legislation currently pending in Congress will provide some relief. There are two bills, a House and Senate version, which appear to be pretty similar.

The bill will be scored (to assess its impact on the budget and deficit) while the Senate and House are out for election and will score favorably. The hope is it will be attached to a bill and considered in the lame duck session. The American Bar Association endorsed it yesterday joining a broad coalition that includes the plaintiff bar, self-insured employers, AIA, and the Property Casualty Insurance Ass’n. More on this from Jennifer Jordan here.

Key elements of the bill:

  • Requires federal govt to adhere to state WC laws
  • Codifies current procedures which otherwise could be changed at any time without prior notification.
  • Allows for parties to submit funds directly to CMS if mutually agreed upon
  • Also includes a separate appeals process on the MSA determination.

Peter – “We are asking for transparency and clarity, and insurers, plaintiffs bar, and self insured employers are all supporting this bill.”

Thanks to Peter for his time, and to AIA for allowing a pseudo-journalist to interview one of their staff for the record.

From my admittedly uneducated perspective, CMS’s position, stance, and requirements border on the ludicrous.

Insurers and self-insured entities will be required to send data on essentially ALL claims to CMS, where the data will likely sit for eons, hopefully untouched unless some hacker gets in and steals all the personal health information, SSNs, and other data, an event that is only possible because CMS requires payers to send it to CMS.

What does this mean to you?

While I applaud the thinking behind the Medicare Secondary Payer Act (taxpayers shouldn’t have to pay for services that an insurer or employer should be liable for), the powers that be at CMS have taken that thinking and turned it into an expensive, ridiculously burdensome, wholly-unnecessary, potentially dangerous and likely pointless exercise.

 

Medicare Set-Asides and Workers’ Comp

I’m gingerly stepping into a topic I’ve mostly avoided to date – MSAs.  I avoid it because it is mind-numbingly complex, seemingly illogical in application, and served by often-contentious vendors.

NCCI’s Barry Lipton et al just released an excellent synopsis of the MSA situation (opens .pdf) and summary of where things are today. The report focuses on the feds’ review process, wherein they examine payers’ proposed MSAs.  Based on an analysis of data submitted by Gould and Lamb and NCCI’s Medical Call database, a few of the Research Brief’s highlights include:

  • most MSAs are for Medicare-eligible claimants, with 45% over 60
  • MSAs make up 40% of the average total proposed settlement
  • Drugs make up fully half of the MSA amount
  • CMS’ processing time for MSAs has declined of late to a median of 41 days
  • The gap between submitted and approved MSAs has shruck dramatically.
  • 29% of settlements are for amounts over $200,000, while 45% of the MSA amounts are less than $25,000.
  • Most MSA settlements are paid as a lump sum.
  • More than 90% of MSAs completed in December 2012 were approved as submitted.  That came after CMS changed approval vendors in July 2012.

The report is stuffed full of great information and, for those of us who are relatively ignorant of MSAs yet encounter them on occasion, well worth a read.

What does this mean for you?

If you don’t have the time right now, put it in your research file so you’ll have it when you need it.  And you will need it.

More states will expand Medicaid

Even those dominated by Republicans.

To understand why, here’s a quote from a conservative GOP legislator from Michigan:

State Rep. Al Pscholka: “When people say Medicaid expansion, I think to a lot of us that meant bigger government, and it meant expanding a program that doesn’t work very well…When I understood how it worked, and what we had done in Michigan in the late ’90s, that was actually pretty smart, we’ve privatized a lot of that already, which I think a lot of folks didn’t understand.”

But it’s more than that.

Hospitals and health care systems will be in dire shape without expansion.  Already the feds are reducing the amount of funds they are transferring to hospitals that provide a lot of uncompensated care and Medicaid services. The federal DISH (disproportionate share) allotments are established, HHS has a formula in place for rolling out those changes but that formula doesn’t account for states that don’t decide to use expansion. States that don’t expand Medicaid will see a reduction in these payments, and no increase in Medicaid, leaving the hospitals in a financial bind.

Without Medicaid expansion, hospitals and health systems will find it increasingly costly to care for the uninsured  - and they will pass that cost along to privately insured patients and workers’ comp payers.  This already happens, and is one of the arguments in favor of universal coverage.

More significantly, the poor uninsured with chronic conditions (diabetes, asthma, hypertension, depression) will become increasingly expensive to care for.   The lack of primary care will mean when they do get care, it will be much more expensive than if they’d been able to effectively manage their health and thus avoid hospitalization.

Unhealthy people find it harder to get and keep a job, don’t do well in school, and thus are less able to contribute meaningfully to society than those of us with insurance.

That’s not to say that Medicaid shouldn’t be modified; for example, some sort of nominal copay or coinsurance so services aren’t just a freebie makes sense to me. That’s happening in some states.

Finally, there’s a bit of history here; when Medicaid was originally introduced, many states opted out.  Within a few years, each one had signed up.

What does this mean for you>

History will repeat itself, and that’s good news indeed.

Thanks to Kaiser Health News for the heads’ up.

Medicaid coverage expansion – status update

The fine folks at the Kaiser Foundation held a webinar on Medicaid expansion today; here are a few of the highlights I picked up…

WA and MN showing significant increases in enrollment

AR IL WV are enrolling via SNAP – facilitates enrollment

Estimate total enrollment COULD go up as much as 21 million but that’s including everyone who is currently eligible and those in all states that could participate by 2022.

As of now, there are 26 states moving forward w Medicaid, with  Ohio just joining this week. (here’s the map showing state status) Among the states that may consider expansion in the future; NH may do this in November in a special legislative session, PA may be moving in this direction as well.  Interestingly, the map looks just like it did in 1965 when states originally could decide to adopt Medicaid or not. About half adopted Medicaid that first year, and most of the rest did within a few years.

In the states that are not expanding Medicaid, the median eligibility level for parents is 47% of poverty level, or $9400 a day for family of three. In almost all non-expansionary states, there is no coverage for individuals.

Nationally 4.8 million individuals are in the coverage gap due to states not deciding to expand, 22% of these are in Texas, 16% in FL. The vast majority are NOT eligible for those states’ current Medicaid program.

Currently enrollment via state exchanges seems to be heavily Medicaid focused.

Hospital uncompensated care payments will be reduced for DISH payments; the feds are reducing the amount of funds they are transferring to hospitals that provide a lot of uncompensated care and Medicaid services. The federal DISH allotments are established, HHS has formula in place for rolling out those changes but that formula doesn’t account for states that don’t decide to use expansion. Thus states that don’t expand Medicaid will see a reduction in these payments, and no increase in Medicaid, leaving the hospitals in a financial bind.  

What does this mean for you?

I’d expect more states to accept Medicaid expansion over the next few years.

What’s happening with health care premiums and costs?

Employer health insurance premiums increased 4 percent for families, 5 percent for singles this year. While that’s a modest increase, over the last decade, family premiums are up 80 percent.

And, premiums have been held down of late in large part due to rapidly increasing cost-sharing; the average deductible for employers with 3-199 employees hit $1715 this year as the percentage of employers with deductibles over $1000 jumped from 49% in 2012 to 58% this year.

Large insurers’ actual trend rates continue to come in lower than projections, with the latest stats indicate Aetna, CIGNA, and Wellpoint all reporting mid-single digit rises.

Combining Medicare and commercial health care costs as reported by health care providers shows an increase of 3 percent in June over the preceding 12 months.  Medicare’s trend was a lowly 1.27 percent…Medicare is increasing hospital reimbursement by less than 1 percent, a move that will certainly help keep the program’s costs increasing very slowly.

But those price controls are far from the only reason Medicare’s cost trends are at historical lows.

What’s behind the relatively good news on cost increases?  While commercial insurers see the recession as a contributor to past success in keeping trend rates down, the recession doesn’t appear to have had much to do with Medicare’s relatively low cost increases from 2000 to 2010. According to the Congressional Budget Office, the modest trend rate:

“appears to have been caused in substantial part by factors that were not related to the recession’s effect on beneficiaries’ demand for services…other factors–namely, a combination of changes in providers’ behavior and changes in beneficiaries’ demand for care that we did not measure–were responsible for a substantial portion of the slowdown in Medicare spending growth.”

In fact, CBO is projecting Medicare’s total costs by 2020 will be some $169 billion lower than earlier projections.

So, what does this all mean.

Well, mostly good news for folks not in the health care sector.  The decline in projected costs will have a substantial – and very positive – effect on the Federal deficit and long-term debt.

Employers and individuals won’t see costs hit the troposphere just yet – I guess that’s good news, although they certainly aren’t going to drop out of the stratosphere…

For the health care provider sector (broadly defined), what have been wrenching changes to date are about to get even more dramatic.  I’d expect some payers will see increased efforts to cost-shift as providers seek to increase revenues where they can while they struggle to strip cost and inefficiencies out of their operations.

 

 

 

Quick catch-up on the events of the week

Hard as it is to believe, the world kept turning while MCM was on vacation, with nary a wobble to mark our hiatus.

Here’s a quick summary of things that happened while we were away…

Medicare physician reimbursement

Congress may – at long last – kill the oft-derided and pretty-much-useless Medicare physician payment update methodology knows as the Sustainable Growth Rate.  Useless because Congress overrides it on an annual basis, as SGR requires cuts in reimbursement to keep Medicare’s doc costs under control.  A bill advancing in the GOP-controlled House of Representatives seeks to replace SGR with an annual increase of 0.5%, ending in 2018 with a to-be-developed methodology based on quality and performance.

In the work comp world, almost all provider fee schedules are based – to one degree or another – on Medicare’s RBRVS. This change will directly impact reimbursement in a few states, and indirectly in all as the unforeseen consequences of price management become apparent. (An excellent source for information on state fee schedules is available from WCRI.)

The latest edition of Health Affairs has a great piece about CalPERS’ use of reference pricing to influence their members’ choice of hospitals…

in response to a fivefold variation in prices it paid on behalf of members who underwent knee and hip replacement surgery. Under this benefit design, an insurer places limits on the amount it will pay for a procedure, with employees paying the difference if they select a higher-price hospital. Based on first-year results from forty-one hospitals identified as value-based purchas- ing design facilities, surgical volumes for CalPERS members increased by 21.2 percent at low-price facilities and decreased by 34.3 percent at high-price hospitals. [emphasis added]

Gotta love the effective use of the power of information.

There is more information coming out – seemingly every day – on rates filed for the health insurance Exchanges.  Another piece in Health Affairs explores why there’s wide variation in rates in some states – and very little variation in others.  One clue – “In contrast to the 34 states where the federal government is operating the exchange as a clearinghouse that will accept all insurers who meet minimum standards, Covered California negotiated rates with each insurer with the implicit threat that the Exchange would exclude any insurer who did not come up with an acceptable rate. ” California’s rates showed the least amount of variation…

Obesity has been classified as a disease by the AMA, a change that may well impact work comp claims, claims management, costs, and therefore system costs. CWCI research found:

“average benefit payments on indemnity claims with the obesity co-morbidity were $116,437, or 81.4 percent more than those without; and that these claims averaged nearly 35 weeks of lost time, or 80% more than the average of 19 weeks for claims without the obesity co-morbidity.”

There’s a lot more brewing out there with deals-aplenty, but I’ve got to catch up on emails and calls and stuff that didn’t get done last week, so they’ll have to wait till tomorrow.

Medicare-based fee schedules and work comp

Medicare bases the physician fee schedule, known as RBRVS, on estimates of how much time it takes docs to do specific things, plus their operating expenses adjusted for regional cost factors.  That’s a gross oversimplification but close enough. (more on the details of the price-setting process is here.)

Turns out the time estimates are (generally) way overstated, resulting in higher compensation for docs, higher costs for taxpayers, and a whole raft of downstream unintended effects – including higher costs for work comp payers.

The AMA’s Resource Based Relative Value System Update (RUC) Committee actually does the estimating.  According to a great piece in the Washington Post, “the AMA’s estimates of the time involved in many procedures are exaggerated, sometimes by as much as 100 percent [emphasis added]…If the time estimates are to be believed, some doctors would have to be averaging more than 24 hours a day to perform all of the procedures that they are reporting. This volume of work does not mean these doctors are doing anything wrong. They are just getting paid at the rates set by the government, under the guidance of the AMA.”

Who sits on the committee was essentially a secret until a couple years ago, when the Replace the RUC Committee published the names of Committee members, along with their potential conflicts of interest.  Pretty scary reading.

The AMA RUC committee’s estimates come from surveys of physicians, who are explicitly told the surveys are used to set payment levels.  Shockingly, their estimates are seven times more likely to raise the estimate of time required than to lower it, making medicine the only industry that has gotten less efficient over the past decades.

I’d be remiss if I didn’t acknowledge that experts including Brown University’s Dr Roy Poses have been on the RUC story for years; Here’s one of his gentler statements:

The RUC seems to embody a corporatist approach to fixing prices for medical services to create perverse incentives for physicians to do more procedures, and do less conversing with and examining patients, examining the best clinical research evidence about their problems, and rigorously thinking about how best to help them.  More procedures at higher prices helps physicians who do procedures.  It may help even more the corporations that provide the devices and drugs whose use is necessitated by such procedures, and the hospitals who can charge a lot of money as sites for performance of procedures.

Impact on workers’ comp

Of the 33+ states with fee schedules for physicians and other providers, all save one – California – use RBRVS as the basis, and California is adopting RBRVS.  The RUC’s time estimates have resulted in estimates that are often twice the actual time it takes to perform a procedure.  Significantly, the Post article cited orthopedics as one area where time estimates are particularly generous.

It is important to note that CMS sets the dollars per time unit, so the ultimate cost is partially based on that as well as the AMA’s time estimate.  But there’s no getting around the AMA’s RUC is inflating the time, and thereby inflating their members’ income, and employers’ and taxpayers’ work comp costs.

Kudos to the WaPo for their terrific investigative reporting, and to Roy Poses for being on top of this for years.  

What does this mean for you?

A deeper understanding as to why our health care system is – by far – the most expensive in the known universe.

Immigrants and health care – who’s paying, who’s getting

Immigrants Contributed An Estimated $115.2 Billion More To The Medicare Trust Fund Than They Took Out In 2002–09 - that’s the headline from a piece in Health Affairs this month.

“immigrants may be disproportionately subsidizing the Medicare Trust Fund, which supports payments to hospitals and institutions…In 2009 immigrants made 14.7 percent of Trust Fund contributions but accounted for only 7.9 percent of its expenditures—a net surplus of $13.8 billion. In contrast, US-born people generated a $30.9 billion deficit…

Most of the surplus from immigrants was contributed by noncitizens [emphasis added] and was a result of the high proportion of working-age taxpayers in this group. Policies that restrict immigration may deplete Medicare’s financial resources.”

When one considers that birth rates among citizens are declining, and thus there will be fewer young working folks to support us aged people, the current anti-immigrant/nativist stance starts to look a little problematic.

Fact is, Medicare and Social Security depend on contributions from working age people; if we drastically restrict immigration and deport all undocumented aliens those two programs will be in dire financial straits much sooner than anticipated.

Conversely, a more “open” policy would go a long way toward reducing the strain on Medicare and SS.

Just saying.

PPACA/Obamacare and Medicare fraud

Among the hundreds of pages of the PPACA are passages addressing provider fraud, a far-too-common and far-too-costly issue that has long plagued the program.

The good news is, things seem to be getting better.

CMS just reported they recovered a record $14.9 billion in 2011 and 2012 from anti-fraud prosecutions and judgments.  The number of providers kicked out of Medicare more than doubled in the two years after PPACA was passed. And the most recent large action saw 89 individuals charged with $223 million in false billing.

One occurred in Miami (shocking, I know), where a local TV celeb was busted for allegedly falsely billing Medicare some $20 million for home health care services for diabetics…(you gotta see this picture of the alleged perp…)

There are a bunch of reasons for the increased success;

  • PPACA allocated an additional $350 million over ten years to anti-fraud efforts;
  • the FBI has dedicated more resources to the effort,
  • CMS investigations staff and resources have been increased and given more authority and a more prominent position in the Department;
  • computer programs designed to identify potential fraud have been developed and improved, and
  • rewards for tips may be drastically increased – up to a maximum of $9.9 million.

That’s all good – but every time I see a TV ad for that hoverround chair I think there’s still  some rather significant “opportunities” to reduce taxpayers’ burden.

If those companies can afford to stuff my cable box full of adverts, they are making too much profit.

Coventry’s last earnings report

I’ll admit it, I’ve been slacking…It’s now five days since Coventry released their last-ever earnings report, and I’m only now posting on it.  Mea culpa; too darn much work. Here are a few quick takeaways followed by my perspective on the company and their results this quarter. 

(and so much for my title for the Q4 earnings report as the “last ever…”)

  • Very solid earnings – up 61% from the prior year quarter.  Pretty impressive.
  • Revenues were flat after some Medicare Advantage bookkeeping stuff
  • Commercial membership – and revenues – are down again.
  • Medical loss ratios (MLR) for Commercial risk and Medicaid are looking very good, improving substantially over the previous quarter; Part D is not.
  • Workers’ comp revenue is down substantially.

Let’s start with work comp (sorry David Young).  2012 was a tough year – revenue  decreased $26 million or 3.3 percent from the prior year. And Q1 was no improvement; revenues declined almost $8 million from the previous quarter; $16 million from the same quarter in 2012.

The main driver was likely pharmacy; the full impact of the loss of ESIS’ PBM business to Progressive was felt; the numbers may also reflect the USPS’ decision to change from Coventry’s FirstScript PBM to PMSI. Because ALL pharmacy revenue counts as “top line”, losing a PBM customer has a disproportionate impact on financials – just as winning one does (First Script won the Selective Insurance business recently).

I’ve said before – and will repeat again - Aetna is NOT going to dump the WC business.  If anything, they’ll likely invest in the sector.  There’s a bunch of reasons private equity is all over workers’ comp services these days: there’s lots of upside from automation; margins are very healthy; regulatory risk is minimal; and it is a good counterbalance to the group/public sector health plan business.

Overall, decent growth in Medicare Advantage and Part D revenues.  Medicaid growth was negative, driven by exiting one market and increasing membership in two others.  Overall, Coventry’s public-sector business continues to be the largest of the company’s three business segments – while commercial membership and revenues continue to sag.

This is why Aetna is buying Coventry – public sector expertise, market share, and membership.  Mother Aetna has the commercial sector pretty much figured out (as much as anyone does in these pre-ACA-implementation days); they need help in the public-sector health plan markets.

Unless the world ends, this will REALLY be their last earnings report.

What does this mean for you?

Size matters in the post-ACA days – a lot.  Expect more mergers and acquisitions, and some big ones too.