Health Policy Briefs: April 24, 2012
Compiled by Benita Dodd
Dulling the pain of Medicare cuts: The Government Accountability Office published a report Monday titled, “Quality Bonus Payment Demonstration Undermined by High Estimated Costs and Design Shortcomings.” It appears the administration has been doling out cash from an $8.3 billion fund to temporarily cushion the blow from Medicare Advantage cuts, according to a Washington Examiner editorial, which calls the demonstration program, “a blatant attempt to stave off seniors’ disapproval with Obamacare’s effects in an election year.”
While most seniors still use the program’s fee-for-service system, with the government billed directly by doctors and hospitals for all health received, more than 12 million, or a quarter of all Medicare recipients, participate in Medicare Advantage, in which private insurers compete to provide services for seniors. Medicare Advantage participants pay premiums to a health insurer of their choice. The insurers also receive a subsidy from the government for each patient. The $8.3 billion demonstration project ostensibly was designed to test how best to structure bonus incentives for insurers who provided better care.
“Instead, it is patching up politically damaging Medicare cuts. It will alleviate 71 percent of the Medicare Advantage cuts in 2012, and then the percentage plummets in the two years after the election to 32 percent and then 16 percent. The GAO concludes that ‘[t]he design of the demonstration precludes a credible evaluation of its effectiveness in achieving CMS’s stated research goal,'” the Examiner adds.
Medicare outlook: The annual Medicare Trustees report released Monday estimates the Medicare trust fund will run out of money in 2024. That’s the same as it was last year, but fully five years earlier than estimates from two years ago. (In 2011, Medicare covered 48.7 million people: 40.4 million aged 65 and older, and 8.3 million disabled.) The report notes the financial outlook for Medicare is uncertain because “some provisions of current law that are designed to reduce costs may not be sustained.” One example it cites is the sustainable growth rate (SGR) formula for physician fee schedule payment levels. The report assumes a 30 percent cut in payment rates to physicians at the start of 2013. “However, it is a virtual certainty that lawmakers, cognizant of the disruptive consequences of such a sudden, sharp reduction in payments, will override this reduction just as they have every year since 2003.”
The report also cites the Obama administration’s federal health care law as “another, and even larger, source of policy-related uncertainty.” The law contains roughly 165 provisions affecting the Medicare program by reducing costs, increasing revenues, improving certain benefits, combating fraud and abuse, and initiating a major program of research and development to identify alternative provider payment mechanisms, health care delivery systems, and other changes intended to improve the quality of health care and reduce its costs to Medicare.
FDA’s hindsight: The U.S. Food and Drug Administration now spends as much effort and resources on surveilling a drug after it is approved as it does in the pre-approval process, an FDA official says.Critics say the FDA lags in tracking the safety of drugs already on the market, when industry funds that supported pre-approval reviews tend to dry up.
“We think we’ve really balanced this,” Dr. Janet Woodcock, director of the agency’s Center for Drug Evaluation and Research, told reporters attending the Association of Healthcare Journalists meeting in Atlanta. In a report released on Saturday, the FDA says it has required companies to do 385 post-market studies since 2008, and to change the label based on new safety information 65 times. Source: Reuters
The need for Medicaid reform: With almost 60 million people enrolled, states’ expenditures on Medicaid have increased from 0.2 percent of total state tax revenues in 1966 to an estimated 21 percent in 2005. In 1975, just 10 percent of the U.S. population was enrolled in Medicaid, but by 2008, 19 percent of the U.S. population was enrolled in Medicaid. President Obama’s Affordable Care Act will add at least 18 million people to Medicaid rolls. Without reform, some states will see Medicaid spending increase by as much as 50 percent in 10 years. Source: Independence Institute
Cost-effectiveness and health care: “Cost-effectiveness” is a buzzword among think tanks, including the Georgia Public Policy Foundation, as we push constantly for limited government and protecting taxpayers. But Kathryn Nix of the Heritage Foundation warns of its ramifications for health care policy: The Patient Protection and Affordable Care Act has established the Patient-Centered Outcomes Research Institute (PCORI) – an institution that would conduct comparative effectiveness research. This research would compare treatment options and establish which choices are relatively cost-effective. “While this sounds admirable in theory, consumers should be wary of the mandate provided to the PCORI,” Heritage warns. “Specifically, cost-effectiveness recommendations can quickly turn into medical care rationing as a body that is charged with limiting spending becomes autocratic. The experience of Britain’s health care system is instructive in this regard.”
Insurers moving to control referrals? Two related but distinct trends are emerging, and quietly: insurers buying physician groups and insurers buying hospitals, Becker’s Hospital Review reports. Four of the five largest health insurers have increased physician holdings in the past year, according to a Kaiser Health News report. Recently, UnitedHealth Group has been buying medical groups and launching physician management companies. The Kaiser report said the strategy has stirred little controversy largely because few people know about it.
UnitedHealth isn’t the first: CIGNA Medical Group launched its CareToday clinics in 2006, providing “an alternative to traditional [physicians’] offices” in Arizona. In December, Louisville-based Humana purchased Concentra, an urgent-care system based in Addison, Texas. In June, Indianapolis-based WellPoint acquired CareMore Health Group, a health plan operator based in Cerritos, Calif., that owns 26 clinics.
The consolidation of primary care physicians is expected to create a clash between the insurance industry and hospital industry as both fight to control primary care, which the report calls “the epicenter of care management.” Primary care physicians are already in high-demand, and by acquiring them in certain markets, insurers could potentially wrest control of entire health systems by influencing referrals, whether intentional or not.
Quote of Note: “If Congress can do whatever in their discretion can be done by money, and will promote the general welfare, the government is no longer a limited one possessing enumerated powers, but an indefinite one subject to particular exceptions.” – James Madison, “Letter to Edmund Pendleton,” 1792