• The Washington Post’s Wonkblog had a post, Are health insurers on the way out?, which highlighted a map of existing private sector accountable care models that exist across the country.  The post said that, “These ACO models are showing pretty promising results,” and cited data from a recent Health Affairs article. 
• The Council for Affordable Health Coverage’s piece, ACOs: a Triumph of Hope Over Experience, addresses many of the concerns some policy experts have raised about ACOs, including the potential for increase in hospital market concentration and the potential for cost shifting.  The Coalition points to the potential success of ACOs in the private market, writing “We are encouraged as well by the flourishing of private ACOs – wedded to a business care for better, cheaper care through risk sharing arrangements.  If these models prove successful, they will help guide the way for Medicare.”

Here are additional AHIP resources on ACOs:

• A recent article in Health Affairs found that “not all providers are equally prepared to enter into accountable care arrangements and that flexibility and the technical assistance and support of health plans will be key to the success of these arrangements.” 
• AHIP’s Innovation Report Series highlights the innovative programs and services health plans have implemented to coordinate care for patients with multiple chronic conditions, improve patient safety, and promote prevention and wellness.

• Medicare beneficiaries continue to choose Medicare Advantage coverage because these plans have lower out-of-pocket costs and offer innovative services, such as care coordination, that improve the quality and safety of patient care. 

• There is an increasing amount of evidence showing that seniors in Medicare Advantage receive higher quality care compared to seniors in the fee-for-service part of Medicare.  In fact, a study in the January edition of Health Affairs found that seniors with diabetes in a Medicare Advantage special-needs plan had “seven percent more primary care physician office visits; nine percent lower hospital admission rates; 19 percent fewer hospital days; and 28 percent fewer hospital readmissions compared to patients in FFS Medicare.”

• The Health Affairs study follows a series of studies by AHIP researchers comparing patterns of care among patients with Medicare Advantage coverage and in the FFS Medicare program. The most recent report, based on an analysis of hospital discharge datasets provided by the Agency for Healthcare Research and Quality (AHRQ) as well as state discharge data acquired directly from the states of Pennsylvania and Texas, estimated risk-adjusted readmission rates were about 27-29 percent lower in Medicare Advantage than Medicare FFS per enrollee, 16-18 percent lower per person with an admission, and14-17 percent lower as measured per hospitalization.

• AHIP recently hosted a briefing on Capitol Hill where several Medicare health plans highlighted the innovative ways they are improving the health and well-being of Medicare and Medicaid beneficiaries with complex health conditions.  Those presentations are available here: http://www.ahip.org/AHIPResearch/. 

 The ACA Includes $200 Billion in Cuts and New Taxes that Will Put at Risk Beneficiaries’ Medicare Advantage Coverage

• The ACA cuts more than $200 billion from the Medicare Advantage program which will likely result in seniors facing higher out-of-pocket costs, reduced benefits, and fewer health care choices.

• In their March 2011 baseline, the Congressional Budget Office projected that the Medicare Advantage cuts will have the following impact:

• CBO is projecting MA enrollment declines from 11.7 million enrollees in 2011 to 7.5 million in 2018 and 7.8 million in 2019.

• CBO is projecting MA enrollment as a percentage of total MA enrollment decreases from 24% today to 13% in 2019.

•  The new premium tax that included in the ACA will also impact beneficiaries in Medicare Advantage.   A new technical analysis by Oliver Wyman estimates the impact of the new tax on insurance market segments and public programs:

• Impact on Medicare Advantage beneficiaries: Increase costs $16 to $20 per member per month in 2014 and will increase to between $32 and $42 by 2023, with an average expected increase in the cost of Medicare Advantage coverage of $3,590 over ten years.

IMPACT ON PRIVATE INSURERS: ACOs are intended to reduce fragmentation and improve coordination between different providers, which could lead to lower health care use. But they could also produce higher prices as hospitals and physicians consolidate and become more powerful negotiators. This could worsen existing problems: Studies exploring why US health care spending far exceeds that of other countries have already found that substantially higher prices are more important in explaining higher spending than overuse of common services, such as doctor visits and hospitalizations.

ANTITRUST ISSUES: Because of the concern that newly formed ACOs could use their newfound market power to demand and receive higher payment rates from private insurers, the Department of Justice and the Federal Trade Commission had originally proposed a mandatory antitrust review for ACOs that met certain thresholds for provider concentration, for instance, if two or more providers participating in an ACO offer a common service to patients from the same Primary Service Area and have a combined market share of 50 percent or more. The objective was to allow ACOs that are large enough to become accountable for quality and cost, but not so large that they could demand high prices from private health plans because of their market dominance.

Many would-be ACOs opposed this mandatory review for various reasons, including that it would be bad public policy to change the nature of antitrust enforcement from law enforcement to administration of a regulatory regime. In the final rule, CMS no longer requires a letter from a reviewing antitrust agency, but CMS still recommends that prospective ACOs seek a voluntary review by such an agency. As suggested in comments submitted to CMS, a different antitrust enforcement approach would focus on an ACO’s actions, not its size and configuration–such as by monitoring per capita costs Medicare ACOs charge for non-Medicare patients.

• Support state flexibility (as a two-year transitional approach) and assure that state benchmark plans are affordable.  We support state flexibility as a two-year transitional approach and strongly recommend that HHS encourage states to use this flexibility to create the most affordable package.  AHIP also recommends that HHS examine the potential cost of the benchmark approach—with a focus on affordability for small businesses and families—and assure that the EHB package promotes value and high-quality care.

• Advance the goals of an evidence-based and more effective health care system by establishing a process for a rigorous, evidence-based review of any new proposed mandates—as well as existing mandates—based on their efficacy, clinical effectiveness, and cost.  As part of this analysis, HHS should examine the cost and medical evidence of mandates and develop a framework for excluding some state mandates from inclusion in the EHB package.

• Support benefit design flexibility to assure that patients have access to safe, clinically effective, and affordable health care services.  As recognized in the Bulletin, allowing plans flexibility to design benefits within the 10 statutory EHB categories “would provide greater choice to consumers, promoting plan innovation through coverage and design options, while ensuring that plans providing EHB offer a certain level of benefits.”

• HHS should issue timely guidance to states on the process for selecting the benchmark plan, and issue guidance on related standards on cost-sharing and actuarial value as soon as practicable.  We also recommend that HHS establish a deadline—no later than June 30, 2012—for states to select an EHB benchmark.  If states do not select the benchmark plan by the deadline, HHS should specify the fallback plan as the largest small-group plan in the state by the deadline.

So what does this have to do with rising health care costs?  The researchers wrote in the study:

“This evolution in care patterns may be playing a role in the rising trajectory of health care spending in the U.S., as referrals to specialists may lead to increased use of higher-cost services…”

“how to pay for the spectacular rise in the cost of cancer care, especially drugs and diagnostic tests.”

Goozner interviewed a number of experts including physicians about the impact of the rise in the cost of cancer treatment.  Goozner has one doctor saying “In the real world of private practice where most care is delivered, it would be a mistake to say rising costs haven’t affected care.”

But the impact will not be felt just by people with private insurance.  Goozner adds:

“The growing cost of cancer care will impose its greatest burden on the nation’s Medicare system, since 55 percent of all cancers are diagnosed in individuals 65 or older. A recent study by the National Cancer Institute projected the cost of treating the 29 most common cancers in men and women will rise 27 percent by 2020, even though incidence of the disease is going down due to successful public health campaigns like the war on smoking.”

Of particular interest he writes about the MLR provision and whether it will really “bend” the cost curve.  Munro writes:

Medical Loss Ratios (or basically what the insurance companies pay out for actual healthcare services) will be mandated – but is this really going to dent our NHE?  Here’s an Insurance Industry (AHIP) chart from 2009 (pre-Obamacare) that shows the breakout of spending relative to payers and other healthcare expenses (inpatient, outpatient, Physician Services and drugs) :

He’s not wrong — we’ve been saying for a while that the MLR is not a substitute for real cost containment.

Hancock based his article on a soon to be released study by a Georgetown University researcher.  The researcher’s study “will show that urology practices across the country drastically increase expensive IMRT referrals after they acquire a machine.”  The researcher adds about the practice in Maryland “the doctors at [the Maryland practice] ‘are some of the less egregious.’  Some urology practices in other states send close to 70 percent of their prostate-cancer patients to their own IMRT machines, she said.”

The two studies “support the conclusion that MA plans outperform FFS based on several different measures of health care quality.”

Highlights of the findings:

• Medicare Advantage performed better than Medicare fee-for-service on most measures reflecting patients’ receipt of appropriate care.
• MA displayed rapid improvement on more recently introduced measures, suggesting a learning effect.
• MA also performed better than FFS when assessed using discharge data on hospital utilization.
• MA plans may be doing a better job of preventing unnecessary inpatient care by increasing use of outpatient services and office visits.
• MA plans may be avoiding unnecessary readmissions through superior discharge planning and coordination of care following an inpatient episode of care.

The National Journal reported on AHIP’s joint study with XL Health in the latest issue of HealthAffairs.

Click to read the complete study.

For more information on Medicare Advantage, click here.

• According to National Health Expenditure data released by the U.S. Department of Health and Human Services, from 2000-2010 the growth in premiums tracked almost directly with the growth in benefits – a trend that has been consistent for decades.

• According to the S&P Healthcare Economic Composite Index, between January 2003 and August 2010 medical costs for commercial health insurance programs grew 74 percent.

• Milliman recently released a video examining health care costs, and the video noted: “…the common driver of increasing cost is the underlying cost of care—the cost of seeing the doctor, going to the hospital, buying prescription drugs…”

The focus needs to be on all of the factors that are driving premium increases: soaring prices for medical services, changes in the covered population that has resulted in an older and sicker risk pool, and new benefit and coverage mandates that add to the cost of insurance.

According to the latest National Health Expenditure data, medical prices accounted for nearly 3/4 of the increase in personal health care spending.

Prices for medical services continue to rise.

• Data released today by the S&P Healthcare Economic Composite found that “healthcare costs covered by commercial insurance increased by 8.03% over the year ending September 2011, also increasing for the fifth consecutive month.”
• The annual Milliman Medical Index (MMI) found that “between 2010 and 2011, the MMI increased by $1,319 or 7.3%.”  Moreover, the report noted that “even though hospital spending is only 48% of total healthcare spending, increases in facility spending (inpatient and outpatient combined) account for over 60% of this year’s total increase in cost of healthcare.”
• PricewaterhouseCoopers (PwC) Health Research Institute’s “Behind the Numbers: Medical Cost Trends for 2012”, which examines the medical cost trends for employers in 2012, found that “medical cost trend is expected to increase from 8% in 2011 to 8.5% in 2012.”
• Medco’s Drug Trend Report, an annual look at prescription drug price and utilization trends, found that “overall drug inflation climbed 5.4%”,  “record inflation of branded drugs at 9.4% exceeded generic inflation by a wide margin”, and “specialty drug trend was 17.4% in 2010, fueled by unit cost growth of 11.5%.”
• According to National Health Expenditure Data released by CMS, the growth in health insurance premiums has tracked directly with the growth in benefits.

Changes in the covered population have resulted in a risk pool that is older and has higher health care costs.

• During the economic slowdown there has been a trend of younger and healthier people choosing to drop their current coverage and fewer choosing to take up coverage offered by their employer.
• High unemployment has resulted in employers hiring fewer younger workers.  Combined with a reduction in the number of early retirees, many employers are facing a workforce that is older and has higher health care costs.

New federal benefit and coverage mandates add to the cost of coverage.

• Expansion of dependent coverage has increased the number of people covered under many health insurance policies.
• New benefit mandates – such as no cost-sharing for preventive care and restrictions on annual and lifetime limits – has resulted in increased coverage and thus higher premiums.
• According to a recent Aon Hewitt survey, the impact of new benefit mandates “is likely to be highly variable, with disparate impacts being seen across different lines of business and different health plans.”

Many experts believe that the provisions in the law that are intended to reduce costs are insufficient and that the underlying medical costs that drive premium increases will continue to grow. Unfortunately, the law also imposes new taxes and benefit mandates that will increase the cost of health care coverage, including:

• New premium tax that will raise the cost of coverage for small employers, individual market customers and beneficiaries in public programs.  Jonathan Gruber has noted “…there are new premium taxes that will raise premium rates.”
• Essential benefits requirements that will force many consumers and small businesses to “buy up” and purchase more coverage than they may want or can afford.
• Age rating restrictions that will cause premiums to skyrocket for younger workers.

Health plans are doing their part to improve the quality and safety of patient care and help put our health care system on a sustainable path.

• AHIP Statement at HELP Committee Hearing on Delivery System Reform
• Information on AHIP’s Summit on Shared Accountability
• AHIP Article in Health Affairs Examines Private-Sector Accountable Care Models
• AHIP’s Coverage Blog: Five Important Ways Health Plans Are Helping Improve Patient Safety and Quality of Care