Posts tagged ‘Medicare’

Lower Mortality Rates in Elderly Readmitted to Hospital Where Surgery was Performed Rather than Alternate Hospital

From January 2009-November 2011, 93,062 Medicare patients were re-hospitalized for complications due to major surgeries common in elderly patients. One in four of these Medicare beneficiaries were readmitted to a different hospital than the one where surgery was performed. The rate of mortality was 41% higher for these patients than those readmitted to the hospital where surgery was originally performed. Clinical integrating may improve outcomes for older US patients undergoing complex surgery.

Continue Reading March 18, 2015 at 11:31 AM Leave a comment

Medicare Value-Based Purchasing Program to Give Incentive Payment Boost to 37% More Hospitals in 2015 Than 2014

in 2015, 463 more hospitals will be seeing a Medicare value-based purchasing program payment boost than 2014.

Continue Reading March 18, 2015 at 9:17 AM Leave a comment

How will Medicare Advantage Developments Affect Your Products?

Reductions in federal payments to Medicare Advantage plans have caused split views on enrollment number predictions. Regardless of enrollment outcomes, drug and device manufacturers have certain things they need to keep in mind if they want to be successful.

Continue Reading July 16, 2013 at 12:00 PM 1 comment

Perceptions into the Recent Hospital Billing Data Release

The release of hospital transparency data shows large differences in pricing for common procedures among local hospitals. How will hospitals respond to this data? Read on to consider our thoughts:

Continue Reading May 21, 2013 at 4:43 PM Leave a comment

Impact of Healthcare Reform on Lifecycle Management of Healthcare Products – Paying for Reform

 Between now and 2019, healthcare reform will cost taxpayers approximately $938 billion.  This is based on the latest estimates from the Congressional Budget Office.  The major funding sources for healthcare reform are displayed below.

 Some of these funding sources, although not the largest sources, will have an impact on healthcare manufacturers.  The funding sources of most concern to healthcare manufacturers include:

  •  Raising Medicaid basic rebates for branded pharmaceuticals from 15.1% to 23.1%.  As an aside, the 8% increase in rebates will be completely transferred to the Centers for Medicare and Medicaid Services (CMS).  This exacerbates the budget impact of healthcare reform at the state level.
  • Medicaid rebates on managed Medicaid volumes – The rebates available to Medicaid fee-for-service plans will be extended to managed Medicaid plans.  This will reduce the cost under the pharmacy benefit.
  • Reduction in Medicare reimbursement – Restructure payments to Medicare Advantage plans by setting payments to different percentages of Medicare fee-for-service (FFS) rates, with higher payments for areas with low FFS rates and lower payments (95% of FFS) for areas with high FFS rates.

    The healthcare reform act establishes an independent Payment Advisory Board comprised of 15 members.  The Board will submit legislative proposals containing recommendations to reduce the per capita rate of growth in Medicare spending if spending exceeds a target growth rate.  

    Beginning April 2013, require the Chief Actuary of CMS to project whether Medicare per capita spending exceeds the average of CPI-U and CPI-M, based on a five year period ending that year. If so, beginning January 15, 2014, the Board will submit recommendations to achieve reductions in Medicare spending. Beginning January 2018, the target is modified such that the board submits recommendations if Medicare per capita spending exceeds GDP per capita plus one percent.

    PPACCA will reduce Medicare payments that would otherwise be made to hospitals by specified percentages to account for excess (preventable) hospital readmissions.

  • Eliminate CPI reset for new formulations – Under current law, price increases of existing formulations cannot exceed the consumer price index without a penalty.  However, launching new formulations allowed drug companies to reset the base price for comparison.  However, PPACCA eliminates that loophole.  Launching a new formulation does not reset base for comparing price increases to CPI.
  • 50% discount in Part D gap for branded drugs – Beginning on January 1, 2011, drug manufacturers will cover 50% of the negotiated rate for brand pharmaceuticals when a Medicare Part D beneficiary is within the donut hole.  Medicare beneficiaries will pay the discounted price at the pharmacy and manufacturers will reimburse the retail pharmacies for the difference.
  • Excise tax on “Cadillac” plans – Insurers would pay an excise tax of 40% of annual premium cost when annual premiums are greater than $10,200 for individuals or $27,500 for families.  It is likely that some or all of the cost of the excise tax would trickle down to consumers.

Funding healthcare reform will affect healthcare manufacturers and how they market their products.  For example, the increase in rebates, elimination of the CPI pricing reset, 50% discount in Part D gap for branded drugs, reduction in Medicare reimbursement and the excise tax on “Cadillac” plans will increase downward pricing pressures.  Increasing rebates, eliminating the CPI price reset and the 50% discount in Part D gap for branded drugs will directly reduce the net revenue that drug manufacturers realize. 

The excise tax on “Cadillac” plans will increase the cost of coverage for beneficiaries.  This could lead to a reduction in consumers’ availability of resources available for co-pays and deductibles.  This, in turn, could lead to a reduction in utilization of drugs and medical devices and diagnostic imaging procedure and, therefore, lead to downward pricing pressure.

The reduction in Medicare reimbursement will reduce the incentive for physicians to prescribe or order products and provide services.  Physicians also might reduce their volume of Medicare patients.  This could lead to downward pricing pressure for healthcare products and services as well as a potential reduction in utilization.

The reduction in financial resources could encourage Medicare plans to increase the use of specialty pharmacies rather than allowing buy-and-bill for high-cost therapies.

September 7, 2010 at 2:00 AM 1 comment

Medicare Reductions — Real or Imaginary?

The Obama administration is expected to release a report today that indicates that healthcare reform will reduce Medicare spending by $575 billion over the next 10 years, starting with an $8 billion savings in 2011.  This could add 12 years of solvency to the program’s trust fund.

As with any partisan government report, we need to evaluate the accuracy of the numbers and the underlying assumptions.  Does it present a realistic and complete assessment?  Will the savings be used to solidify the Medicare trust fund, reduce premiums for our nation’s seniors or for another purpose?  The report indicates that Medicare spending cuts will help to lower seniors’ monthly premiums by nearly $200 annually by 2018.  For the moment, let’s assume and hope that the estimate is accurate and will be used to solidify the trust fund and reduce premiums for seniors.  These are all good outcomes and well worth pursuing.

One approach to generating the above savings is to implement price controls.  Medicare spending will keep increasing, only not as fast. Under the law, spending will rise by 5.3% a year on average over the next decade, compared to 6.8% without the cuts.  

The biggest portion of the Medicare cuts is from reductions in projected payment increases to hospitals and other providers over the next 10 years. The second biggest portion is reductions in payments to Medicare Advantage plans.  Cuts to Medicare Advantage plans start right away. The report says Medicare Advantage cuts account for $5.3 billion through 2011, more than 60% of the total estimated two-year savings of $7.8 billion.  An analysis by the Kaiser Family Foundation earlier in 2010 suggests that reductions in payments to Medicare Advantage would amount to $130 billion by 2019.  The reason for these reductions, per some analysts, is that the Medicare Advantage plans are overpaid when compared to the cost of care in traditional Medicare.  

As we’ve written before, price controls produce unintended effects.  How will hospitals and physicians react to a reduction in spending?  Will they sacrifice the quality of care?  Will they provide fewer services?  Will seniors realize $200 reductions in premiums but a greater reduction in services and quality?  Is that constructive? 

The insurance industry says the cuts will mean steep premium increases for millions of seniors in the plans. That could trigger an exodus, with seniors returning to traditional Medicare.  Is this the effect the government intended?

Unintended effects also is one of the reasons that a national health plan, so seductively attractive in many ways, was not implemented.  Monopolistic, or near monopolistic control, can yield arbitrary strategies and tactics that are not beneficial to Medicare beneficiaries and providers.

More effective than using the stick (ie, payment reductions) to force providers to become more efficient is to first provide incentives to drive quality and efficiency.  For example, a program to reduce hospital readmissions due to preventable infections and other problems is estimated to save $8 billion over 10 years. And projects involving the patient-centered medical home (ie, a new, team-based approach to providing medical care for seniors) is estimated to save $5 billion over the same period, by keeping patients with chronic health problems healthier and avoiding hospitalization.

The incentives in place in our healthcare delivery system often discourage cost-effective, high quality care.  Instead, these programs encourage more cost-effective care by removing wasteful care from the system.  These programs encourage higher-quality care.   

Revising incentives, gaining consensus and support and implementing new programs takes time and investment.  While better in the long run, the issues facing Medicare and the healthcare system overall are pressing.  Therefore, the carrot (ie, programs that drive higher-quality, lower cost care) cannot be the only approach that is used.  The stick also must be used to gain short-term improvements.  Unintended effects will need to be managed. 

My suggestion is that the proportion of stick to carrot needs to be constructive.  The current approach relies heavily on price controls (ie, the stick) and experiments to a limited degree with quality-improvement programs that drive lower cost.  The ratio needs to be changed to a more even balance between the two approaches.  That will yield longer-term benefits and reduce the impact of unintended effects.

August 2, 2010 at 11:31 AM Leave a comment

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