16 October 2012

Midwest Edition
Calendar
November 15-16
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Vouchers Could Spike Premiums
Michigan, Illinois Could See Biggest Increases
The type of proposal championed by Republicans to overhaul Medicare by giving beneciaries a xed amount of money to purchase insurance could lead to signicant increases in premium costs in some parts of the country, according to a new study. If the plan had been in place in 2010, six in 10 Medicare beneciaries—about 25 million people both in traditional Medicare and in private Medicare Advantage plans — would have faced higher premiums if they didn’t switch to a cheaper plan, according to researchers at the Kaiser Family Foundation. (KHN is an editorially independent program of the foundation.) The study modeled the impact of a generic version of premium support, under which beneciaries would receive a dened subsidy, or voucher, to buy health insurance in a competitive market instead of getting a guaranteed set of benets as Medicare has traditionally provided. That payment would be tied to the second lowest cost plan offered in an area or traditional Medicare, whichever is lower. This kind of a change is a central part of the House Republican budget written by Rep. Paul Ryan of Wisconsin, now the GOP’s vicepresidential candidate, and it has also been embraced by GOP presidential nominee Mitt Romney. Even a few Democrats have irted with such a plan as a way to leverage market efciency to rein in the spiraling cost of Medicare. The new study estimated how the plan would have worked in 2010 by looking at the cost of traditional Medicare and private Medicare Advantage plans around the country. The study’s authors emphasized that!their model was not an exact replica of any existing proposal for a variety of reasons, including that most plans, among them Ryan’s, wouldn’t phase in for a decade and even then would affect only new Medicare beneciaries. The study found that 59 percent of Medicare beneciaries would have paid higher premiums in 2010 unless they shifted into a cheaper plan. In California, Michigan, New Jersey, Nevada and New York, average extra premiums would exceed $100 a month, and in Florida they would exceed $200 a month, the study calculated. Medicare spends vastly different amounts per beneciary around the country, ranging from less than $500 a month per beneciary in some places to more than $900 a month per beneciary elsewhere. That’s often because people in some areas of the country are sicker and need more care; it’s also because providers in some places favor more interventions and more expensive ones. In those high-cost areas, beneciaries would see signicant monthly increases in premiums if

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December 13
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WEBINAR
E-Mail info@payersandproviders.com with the details of your event, or call (877) 248-2360, ext. 3. It will be published in the Calendar section, space permitting.

Thursday, October 25, 2012

Noon, CDT

MEDICAID EXPANSION: 2014 AND BEYOND
Please join Lucien Wulsin, Executive Director of the Insure the Uninsured Project, and Elizabeth Benson Forer, CEO of the Venice Family Clinic, to discuss the challenges of Medi-Cal expansion under the ACA.

http://www.healthwebsummit.com/pp102512.htm a HealthcareWebSummit Event co-sponsored by PAYERS & PROVIDERS

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Payers & Providers
Top Placement... Bottomless Potential

NEWS
Vouchers (Continued from Page One)
they remained in traditional Medicare. The study found people in Los Angeles would have paid $260 more and people in Miami would have paid $492 more, for instance. In other regions where Medicare costs were low—such as Alaska, Delaware, Hawaii, Wyoming and Washington, D.C.— people in traditional Medicare would not pay more, but people in many private Medicare Advantage plans would face higher premiums if they didn’t want to change to traditional Medicare. People in Portland, Ore., for instance, would have paid $211 more a month and people in Honolulu would have paid $254 a month to stay in their preferred private plan. About one in every four Medicare beneciaries are now enrolled in these private plans, some of which are preferred provider organizations while others are HMOs. Overall, premiums would increase 27% nationwide. Although many Midwest states would see lower premiums increases, the study projects a 43% rise for Michigan and a 41% boost for enrollees in Illinois. Although the ght over premium support often has been characterized as a battle between defenders of traditional Medicare and proponents of private health plans, the study found that it could have a substantial impact on people who enrolled in Medicare Advantage plans. Nationwide, 88% of those beneciaries would have paid more to stay in their plans, averaging $87 more per month, if it had been in place in 2010. Of course, getting many beneciaries to switch to less expensive plans is how the architects of premium support envision saving money. They say it will bring pressure on insurers, doctors and hospitals to offer lower prices. The study noted, however, that such shifts might mean signicant changes in the type and quality of care for beneciaries. In some regions, the low cost plans might be HMOs, which have tightly controlled networks of doctors and hospitals. If

Page 2

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In Brief
Hospital Employees Cost More To Treat Than Other Workers
A study by an Ann Arbor, Mich.based research firm concluded that healthcare spending is much higher on hospital employees than the general population. The study examined healthcare data for 740,000 hospital workers nationwide during 2010, and compared them to data for workers in other professions. According to the study by Truven Health Analytics, formerly a part of Thomson Reuters, healthcare spending is 9% higher on hospital employees than the general population. They are at higher risk for chronic conditions such as depression and diabetes, and are 5% more likely to be hospitalized than the population at large. Moreover, the average community hospital expends 4% of its operating revenue on healthcare benefits. Those benefits also consume about 68% of all operating profit for those institutions. “Hospitals and health systems have a compelling opportunity to improve the health of their workforce,” said Michael Taylor, M.D., vice president and national business medical leader for Truven Health Analytics and co-author of the study. “In doing so, they will strengthen their business performance and set the standard for the broader community.”

beneciaries switched from traditional Medicare to HMOs,! they might not be able to keep seeing their regular doctors or go to their preferred hospital. In other areas, beneciaries –perhaps people in private plans that coordinate care – might not like shifting into less costly traditional Medicare. "Beneciaries' preferences and plan choices are not purely driven by premiums, and some beneciaries may not view the lowcost plan, whether a private plan or traditional Medicare, as optimal for meeting their individual needs and circumstances," wrote the authors, led by analyst Gretchen Jacobson. Other studies have found that only a small portion of Medicare beneciaries switch their Part D prescription drug or Medicare Advantage plans each year, even when doing so could save them money. "There are tradeoffs involved in making changes and we know from Part D and Medicare Advantage that people don’t really change very often," said Tricia Neuman, who oversees the foundation’s Medicare analyses. In addition, the new study noted that some low-cost plans might not be able to handle an inux of new beneciaries. A particularly glaring example is in Los Angeles County, where fewer than 10,000 beneciaries are enrolled in one of the two lowest-cost plans, while more than 900,000 beneciaries are enrolled in traditional Medicare or other plans. The study did not estimate how much money the plan would have saved Medicare. In a statement, the Romney campaign said: "As the authors stress, this is not a study of the Romney-Ryan plan. Our plan would always provide future beneciaries guaranteed coverage options with no increase in out-ofpocket costs from today's Medicare." The
Continued on Next Page

MEET YOUR FELLOW READERS
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Meridian Enters DualEligible Market

Continued on Page 3

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Payers & Providers
Longer ALOS!*

NEWS
Vouchers (Continued from Page One)
Obama campaign trumpeted the study, saying it "demonstrates how hollow" is Romney’s claim that the elderly would retain the option of enrolling in traditional Medicare under their plan. Joe Antos, a healthcare expert at the American Enterprise Institute, said that the study is "the best technical study so far of this sort," although he expected a premium support market would be much more competitive than the current Medicare Advantage market is, since the latter is guaranteed a certain payment by the federal government. "The competition would be even more

Page 3

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In Brief
Chicago-based Meridian Health Plan is entering the dual-eligible market in Illinois, covering individuals enrolled in both the Medicare and Medicaid programs. Meridian will offer coverage for dual-eligibles in Knox, McHenry, Mercer and Warren Counties. “The State of Illinois is committed to making people healthier. We are honored to be an integral part of reaching this goal,” said Vijay Kotte , President of Medicare Operations for Meridian Health Plan. “Given the tremendous growth in the Medicare eld, this is an exciting opportunity for Meridian. I'm thrilled to be able to contribute to this growth.” Meridian covers about 300,000 Medicaid enrollees in Illinois.

intense," he said, especially since most Medicare beneciaries would not be able to afford anything more expensive than the benchmark plan, and thus insurers would compete to meet those prices.! "You just can't have high costs if people can’t pay it," he said. – JORDAN RAU, Kaiser Health News Kaiser Health News!is an editorially independent program of the Henry J. Kaiser Family Foundation, a nonprot, nonpartisan health policy research and communication organization not afliated with Kaiser Permanente.

ACO Savings May Be Overstated
Study Rebuts Hopes For Reform of Care Delivery
One aspect of the Affordable Care Act created to curb costs is the Shared Savings Program. Providers who form an accountable care organization serving Medicare patients and meet quality standards will receive nancial incentives. Those who meet the marks will share in any savings Medicare receives due to reduced costs from things like hospital readmissions and better managing chronic conditions. But a new study recently published in Health Affairs found that these cost savings might not be as viable as initially thought. The authors simulated the effects of the savings program by examining Medicare costs for people ages 65-75 with Type 2 diabetes. To receive a portion of the shared savings, providers must realize savings of at least 2% before they see a return. The study’s authors found that a 10% performance improvement would reduce adverse events such as strokes, heart attacks and vascular complications by about 4%. These changes, however would likely only reduce costs by 1.22% on average. That’s below the threshold for providers to share in the savings. If the cost of tests and extra visits to improve performance are factored into the equation, the net effect for providers is reduced – and some may even see increases in costs. Costs would be seen in other areas as well. CMS estimates start-up costs for an ACO to be about $1.7 million. And many of the interventions for diabetics require medication, which will need to be paid through Medicare Part D. According to the study’s authors, the Centers for Medicare & Medicaid Services expects that during the rst three years of the Shared Savings program, ACOs will receive an average savings of $800 million – or $2.5 million annually per organization taking part in the ACO. – TAMMY WORTH

Neurosurgeon Makes Documentary About U.S. Healthcare System
A Michigan neurosurgeon has produced a documentary discussing what ails the U.S. healthcare system. Vivek Palavai, M.D., conducted interviews, worked the camera and performed much of the research for “Bitter Pill,” which is being shown in select venues in the Midwest. The documentary examines why the American healthcare system spends far more on care than in the European countries, but whose citizens do not live as long. The trailer for the documentary said the lm is examining healthcare spending from all points of view, including hospitals, health plans, the pharmaceutical industry, and from patients themselves. Palavali, who was trained at the University of Chicago and practices in Flint, Mich., made the documentary while operating his practice full-time. “As much as I enjoy making lms, I have no plans to give up my day job," Palavali said.

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Payers & Providers

OPINION

Page 4

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The GOP Wants The AHRQ To Fly Away
Party Puts Safety Agency In Same Category As Big Bird
The ap greeting Mitt Romney’s cheerful capital on a compromise that saves higheradmission that as president he’d defund Big prole funding victims. Bird’s nesting place on public television could Naturally, if the Republicans add control of turn out to be good news for a federal agency the Senate or the presidency, the AHRQ outlook promoting safe medical care that faces a worsens. similar extinction threat. But we won’t know Romney made it crystal clear on national till after the election whether the little-known television that the reasoning used in the House agency beneted from Big Bird’s protective subcommittee vote is an approach he embraces, presence. not just a political gesture: “I love Big Bird,” The stage was set for Romney’s Big Bird Romney told presidential debate moderator Jim boast by a bill Republicans pushed through a Lehrer, but then quickly noted he was not House Appropriations subcommittee in July willing to “borrow from China” to subsidize that slashed or eliminated budgets for a host of public TV. programs, including public television’s parent, Romney’s spending test is a legitimate effort the Corporation for Public Broadcasting. That to focus attention on what we, the American same bill completely abolished the Agency for public, want our government to pay for as we Health Care Research and Quality seek to balance the federal budget. (AHRQ). But that effort should be driven by By Health policy wonks lamented thoughtful consideration, not political Michael calculation. If the National Institutes of that terminating the agency “would badly undermine important research on Millenson Health’s $30.6 billion scal 2013 health care quality, disparities in care budget request is such an important and patient safety,” as a member of AHRQ’s investment that it goes untouched in the House national advisory council put it. But hardly subcommittee budget, is there a rationale other anyone else noticed. than political pique over “Obamacare” for The end of AHRQ didn’t even rate a eliminating AHRQ’s $0.4 billion budget entirely? separate mention in the committee’s lengthy (The actual request was $408.8 million, for press release. It was just a budget-balancing those counting pennies.) action and “not a reection on anything.” Now that Romney’s Big Bird budget has That’s where Big Bird waddles into the become a social media sensation, perhaps that’s picture. a conversation we can nally have. Because the The health policy community has tried Americans harmed by unsafe care or to tell itself that the AHRQ elimination vote overtreatment or undertreatment include was meaningless political theater, since there Republicans, Democrats and those utterly was no realistic chance the bill would be indifferent to politics. So how do you get to approved in anything close to its original form Sesame Street? Clearly, AHRQ needs a more kidbefore the election. In the event, Congress friendly approach to t in with its new nally did settle for a measure extending neighbors. I suggest ABCD – Adventures in existing government funding for another six Better Care Delivery. months. But that whistling past the graveyard And those nasty House Republicans? Well, ignores the bright ashing warning signal that when it comes to Big Bird, Oscar the Grouch is Romney has reafrmed. no match. Put bluntly, the GOP is expected to retain control of the House of Representatives. If the party is willing to kill Big Bird, despite Michael Millenson is president of Health the public image problem that presents, why Quality Advisors LLC in Highland Park, Ill. and would there be the slightest concern about a member of the Payers & Providers editorial axing AHRQ, an agency that even supporters board. A version of this op-ed originally acknowledge is a “rounding error” in the appeared on the Forbes.com website. Department of Health and Human Services budget? In fact, cuts to programs like public TV and the Jobs Corps may even hurt AHRQ, Op-ed submissions of up to 600 words are since a Democratic Senate (if it remains that welcomed. Please e-mail proposals to way) would be more likely to spend political editor@payersandproviders.com

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