Okay, so I am being a tad dramatic here, but Rush Limbaugh would be proud.  I want to get your attention so you read some facts about premium increases.

According to new HHS regulations, a health insurance premium increase of 10% or more should trigger a review at the state level, if not the federal level.  In addition, there needs to be more transparence about these rate increases so the public knows what is going on.  Keep in mind that during the health care reform debate the main target of the Administration was insurance companies, they were chastised and criticized for discrimination, abusive practices and outrageous premium increases.  The debate boiled down to making the public see insurance as the culprit for all that is wrong with our health care system from intervening between the patient and doctor, to denying coverage to high cost.

What better way to keep this myth alive and to divert attention from growing health care costs (because health reform does little or nothing to actually control costs) than to put premium increases in the spot light.

Let us consider the facts.  The average trend rate for healthcare costs is about 9% give or take a percentage.  This means health care costs are increasing at nine percent per year.   In addition, PPACA mandates, such as accepting individuals with pre-existing conditions, increase premiums from one and one half to two and a half percent on top of trend.  These additional amounts do not include cost shifting resulting from additional fees, taxes, etc. on healthcare providers and vendors.  This means that an eleven percent increase or more is largely out of the insurance company’s control.  Thus, it is a foregone conclusion that the majority of rate increases will be at 10 or above percent simply based on escalating healthcare costs, elimination of underwriting rules and benefit mandates.

Given these facts, why was ten percent picked by HHS as the point at which “unreasonable” kicks in?  Surely, the experts at HHS know what the health care trend is and that PPACA adds costs to health care.  They also know that the public is largely focused on premiums as the cost of health care because most people are insulated from the true cost.  In addition, they know that insurance companies are an easy target (much like the “wealthy”}.

The penalty for seeking unreasonable premium increase is exclusion from the health insurance exchanges starting in 2014, once again diverting attention away from the real issues surrounding our health care system and in the process perhaps limiting choices.

Let’s recap, what unfortunately are “normal” premium increases may be unreasonable, asking for an “unreasonable” premium increase may get you excluded from state health insurance exchanges, which may put you out of business.  The irony is that with all insurers now playing under the same federal rules, their only edge is to complete on lower premiums if they want business from the other guy.  HHS must think you are going to buy insurance from the most expensive insurance company. On the other hand, HHS may be trying to find a way to explain the fact that after health care reform will not control costs and that by 2014 premiums will have continued to escalate at substantial rates.

By golly, it is a bloody plot (just kidding…I hope).

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The Patient Protection Affordable Care Act of 2010 makes a big deal of the savings to be generated from eliminating fraud, waste and abuse in Medicare.  In fact. those hundreds of billions in savings over the next ten years are vital in making PPACA “affordable.”  Don’t hold your breath! 

Follow are excerpts from a Congressional Budget Office Report on the subject of Medicare fraud and abuse.  I have highlighted a few key points in red.  Take a look and see how these observations and recommendations apply to what you have heard about health care reform.  In addition, you may have heard about the low administrative costs associated with Medicare as compared with those of a private insurance company.  The fact is that Medicare does not review claims in any serious way and its administrative costs should be higher to better manage claim processing and review. 

 

 

The grand plan to control Medicare costs contained in PPACA is just that, a grand plan.  It is also interesting to note that contrary to logic and even the following report, PPACA further lowers the individual’s involvement in cost sharing and thus further reduces the concern any individual may have over fraud or excessive charges or utilization.

Oh yes, the following report was written in 1995.  The problems were well-known and suggestions made to deal with them fifteen years ago…what happened? Where was Congress the last fifteen years?

The budget resolution assumes that the Congress will take actions to reduce the growth of Medicare spending by $270 billion over the 1996-2002 period. As the Congress considers alternative approaches to meeting that target, it is repeatedly confronted with claims that fraud, waste, and abuse are major factors contributing to current levels of outlays and rates of growth in Medicare. Both the general public and many Members of Congress feel that reducing or eliminating illegal or inappropriate behavior on the part of some health care providers would in turn reduce or eliminate the need for making more difficult decisions about how to limit the rate of growth in federal health spending.

Evaluating proposals to reduce fraud, waste, and abuse in Medicare involves addressing three questions. First, what kinds of spending are embodied in the terms fraud, waste, and abuse? Second, what steps could be taken to reduce fraudulent or wasteful spending and improve the integrity of the Medicare program? Finally, how would the Congressional Budget Office (CBO) estimate the savings that might stem from such efforts?

DEFINING FRAUD, WASTE, AND ABUSE

The terms waste, fraud, and abuse are often raised in discussions of federal health spending without being clearly defined or distinguished from the spending for health services that Medicare is intended to cover. One way to think of those issues is to place all of the activities for which Medicare reimburses providers on a spectrum. At one end of the spectrum are activities that are unmistakably illegal. For example, a health care provider–or, more accurately, nonprovider–who deliberately bills Medicare for services that have not been rendered to a covered beneficiary is clearly engaging in a fraudulent activity. At the other end of the spectrum are the medically necessary, competently performed, and fairly priced health care services for which Medicare is intended to pay.

Although those poles are relatively easy to identify, there is ample room between them. Moreover, no clear line separates abusive activities from fraud. One definition that has been put forth distinguishes abusive activities as those that are not illegal but that violate the intent of the program. That definition, however, offers little guidance in practice. Consider, for example, whether the following examples should be described as abuse:

A technician mistakenly takes an X-ray of a patient’s left leg, then takes a second X-ray when he discovers his error. The hospital bills Medicare for both X-rays.

A physician admits a patient to a hospital to ensure that drugs are paid for that would not otherwise be covered under Medicare.

To offset lower fees paid by Medicare, a physician begins recommending follow-up office visits for certain conditions that previously did not warrant such visits.

A managed care plan markets itself in a way that attracts relatively healthy beneficiaries, thus increasing its profits by reducing the costs of care below those envisioned in the risk-contract reimbursement formula.

Depending on one’s perspective, those activities might or might not be characterized as abusive. A definitive characterization, however, would require an understanding of both Congressional intent–that is, knowing the objective of the legislation that permitted (or prohibited) a particular activity–as well as the intent of providers or beneficiaries and the circumstances surrounding their actions. Certainly, some Medicare spending reflects abusive activities; how much is considerably less clear.

Distinguishing between spending that is wasteful and spending that is appropriate is even harder. Among the factors making that determination problematic are the uncertainties of medical science and the lack of financial incentives to limit spending.

Medicare pays for services whose ultimate success is often unknown at the individual level. For example, even the most appropriate use and careful application of diagnostic tests will often rule out a particular illness rather than confirm its presence. In addition, treating a particular illness often allows several approaches, whose costs may vary substantially. Differences in approach may reflect lack of scientific consensus or simply differences in patterns of practice among providers. Studies show that the incidence of many medical procedures varies far more among regions of the country than can be explained by differences in the characteristics of the population of patients.

Advances in medical science may reduce, but will probably never eliminate, uncertainties in diagnosis and treatment. Although negative test results or failed treatments may seem wasteful after the fact, that vantage point is not necessarily the appropriate one from which to assess the value of the services. Similarly, one may expect medical approaches to particular illnesses to become more similar over time as the most successful methods become apparent. Efforts to reduce spending by forcing that convergence to happen more quickly may stifle innovation.

Perhaps more important than the potential waste from the technical aspects of medical care is the institutional environment in which Medicare beneficiaries and health care providers meet. In markets where consumers are well-informed and pay the full costs of purchasing goods and services themselves, economists would generally not view waste as a relevant issue because people can be presumed to purchase only goods and services that are of value to them. That presumption, however, is much less valid for Medicare. Beneficiaries have had little incentive to concern themselves with costs because they may pay little or nothing at the margin for additional services. Moreover, consumers of health care are often ill-equipped to assess the risks and benefits of alternative therapeutic approaches. The financial incentives faced by health care providers in the fee-for-service sector also encourage the provision of more rather than fewer services.

Medicare spending can be reduced by changing the financial incentives given to beneficiaries and providers. For example, increasing the exposure of beneficiaries to the costs of health care at the margin could make them more cost-conscious and potentially reduce spending.  As long as most Medicare beneficiaries have first-dollar coverage through the Medicaid program or through private medigap insurance, however, reducing health spending by this route is difficult. Certain types of managed care could also reduce the use of health care services–in this case by altering the incentives of providers. How much of the reduction would occur through cutting unnecessary services is less clear.

IMPROVING PROGRAM INTEGRITY

Since 1990, the General Accounting Office (GAO) has made a special effort to review and report on federal programs especially vulnerable to fraud, waste, abuse, and mismanagement. Both Medicare and Medicaid are included in that group of programs. A number of GAO reports have been released that describe specific problems or that suggest ways the Health Care Financing Administration (HCFA) might more effectively reduce the potential for fraud and abuse in its programs.

GAO has cited several factors that make it difficult to ensure the integrity of the Medicare program. One of those is the continued emphasis on unmanaged fee-for-service care, which generates incentives for providers to bill for unnecessary care. Currently, only about 9 percent of Medicare beneficiaries are enrolled in health maintenance organizations (HMOs). GAO notes, however, that managed care plans offer the potential for a different kind of abuse, which is to provide inadequate services. In the fee-for-service sector, problems include:

Weak controls for detecting questionable billing practices. All Medicare bills are screened for consistency and completeness as part of the initial processing of claims. Even very high volumes of services to individual patients or by individual providers do not necessarily trigger further review before payment. Currently, less than 5 percent of Medicare claims are reviewed.

Inadequate checks on the legitimacy of those billing the program. Medicare lacks stringent requirements for issuing billing numbers to certain providers. In some cases, phantom companies with only a post office box number have qualified to bill the Medicare program. Also, surveys of providers are too infrequent to ensure their continued compliance with Medicare’s conditions of participation.

Little chance of being prosecuted or penalized. The weak controls on billing mentioned above make it unlikely that inappropriate claims will be detected, but when they are detected recovery is uncertain. Penalties are often light, large penalties are difficult to collect, and providers often continue to bill Medicare.
HCFA believes that investment in anti-fraud and abuse activities yields a high return, paying for itself many times over by reducing spending for Medicare benefits. The Congress has established other objectives as well, however, which conflict with the objective of deterring fraud and abuse. Two of those other objectives are to ensure reasonably prompt payment to providers and to keep down the costs of processing claims. Currently, the same conflicting objectives are set for Medicare’s contractors. As a result, efforts to detect fraud and abuse may be curtailed because they would increase the costs of processing claims.

It is unrealistic to think that fraud and abuse could be eliminated from Medicare, but their extent could be reduced. HCFA and other federal agencies already have a number of initiatives in place and others in the planning stages that are intended to enhance the integrity of the Medicare program. A number of initiatives are under way at HCFA:

HCFA is establishing a Medicare Transaction System for processing all Medicare claims. By 1999, that centralized system will replace the 10 different systems now used by Medicare contractors and will integrate claims from Part A and Part B. All claims for a given beneficiary or provider will be in the system, thereby simplifying claims processing and improving the agency’s ability to detect inappropriate billings.

HCFA is running a demonstration program in four states, intended to determine whether simplified and more comprehensive mailings of EOMB (explanation of Medicare benefits) statements to beneficiaries can be used as a cost-effective check on inappropriate billings. Currently, Medicare enrollees do not receive notices when benefits are paid on their behalf for services that do not require patient cost sharing (primarily home health and laboratory services).

Operation Restore Trust is a HCFA demonstration in five states targeted toward nursing facilities, home health agencies, and suppliers of durable medical equipment. The demonstration (which builds on an earlier demonstration limited to south Florida) is intended to identify and correct processes in the Medicare and Medicaid programs that make them unnecessarily vulnerable to fraud and abuse. One prominent feature of the demonstration is coordination among federal, state, and private health plans–an important factor because fraudulent practices are rarely targeted toward only one insurer.

HCFA is also examining ways to improve the provider enrollment process so that fraudulent or unqualified providers are unable to bill Medicare. Some improved procedures have already been put in place for suppliers of durable medical equipment through the National Supplier Clearinghouse, which contains nationwide information on those suppliers. Clearly, HCFA needs stronger requirements for granting Medicare participation, as well as periodic resurveys of participating providers to ensure that they remain in compliance. But HCFA is still reviewing possible corrective actions to take in those areas.

The Department of Health and Human Services (HHS) has drafted the Medicare and Medicaid Payment Integrity Act of 1995, which is intended to increase its capacity to combat fraud and abuse in Medicare and Medicaid. One provision would establish an HHS Fraud and Abuse Control Fund, which would finance further investigations of fraud and abuse from funds collected from previous settlements involving Medicare and Medicaid claims, after reimbursing the programs for their losses. A second provision would provide a dependable, long-term funding source from the Medicare trust funds to be used for initiatives to improve the integrity of the Medicare program. That funding would support specialized fraud and abuse units with multiyear contracts. Under current law, funding for activities to improve program integrity is subject to the annual appropriation process and to the statutory limits on discretionary appropriations. Because of the resulting instability in funding, HCFA has found it difficult to invest in developing strategies to control fraud and abuse, nor have Medicare contractors had much incentive to hire and train qualified auditors and investigators.

The Inspector General of the Department of Health and Human Services has been giving greater emphasis to investigating suspected instances of fraud in Medicare and Medicaid. The Inspector General estimates that each dollar spent on these investigations has generated about $7 in recoveries or fines on average for 1990 through 1994. In addition, the Attorney General has said that deterring health care fraud and abuse is the number two priority at the Department of Justice, right after deterring violent crime.

Changes in the Structure of Benefits and Administration

Many of the elements of Medicare that lead to excessive spending are embedded in the legislation establishing the program–particularly, the emphasis on unmanaged fee-for-service care and the cumbersome procedures required to revise certification requirements and payment rates. Legislation modifying those elements of the program could result in quantifiable savings.

For example, the General Accounting Office suggests that Medicare be allowed to price services and procedures more competitively. According to GAO, that recommendation could encompass streamlining processes required to revise excessive payment rates, allowing competitive bidding for services, and negotiating prices. CBO has prepared estimates for many specific proposals of this type, such as limiting payments to physicians in hospitals whose costs far exceed the national median, bundling payment for post-acute care services into payments to hospitals, requiring competitive bidding for certain durable medical equipment and diagnostic tests, establishing payment limits for outpatient department services not covered under current cost limits, and revising cost limits for home health services and skilled nursing facilities.

Another GAO recommendation is to require health care providers to demonstrate their suitability as a Medicare vendor before giving them unrestricted billing rights. Under that rubric GAO mentions establishing preferred provider networks, developing more rigorous criteria for authorization to bill the program, and using private entities to provide accreditation or certification. CBO has already prepared an estimate for a proposal to establish a preferred provider option for both Parts A and B of Medicare.

Those examples are but a few of the ways in which this Committee might achieve real savings by improving the management of the Medicare program. The Congressional Budget Office will continue to work closely with your staff to provide estimates of those or similar provisions that the Committee may wish to consider.

CONCLUSION

Fraud and abuse clearly exist in Medicare, just as in all other public and private health plans, but estimates of potential losses from fraud and abuse are inherently speculative. If HCFA and private insurers had good information about the extent of the problem, they would know how to eliminate it. Moreover, fraud and abuse are not easily trimmed from the edges of the program but are marbled throughout the system. In Medicare, as elsewhere in the federal budget, there is no line item labeled “fraud, waste, and abuse.”

The General Accounting Office and others have made many suggestions for reducing what they see as wasteful spending by pricing Medicare services and procedures more competitively and choosing health care providers more selectively.  Some of those proposals could significantly slow the growth of spending in Medicare. In contrast, several considerations limit the savings to be expected from new payment safeguard initiatives. No savings should be expected without an assurance that the funding intended for specific initiatives to promote program integrity will be used for those purposes and that funding will be maintained in future years. Even with such assurances, and with some evidence of the savings achieved by similar initiatives in the past, the amount of savings to be expected is uncertain because diminishing returns are sure to set in as additional resources are devoted to those activities. Finally, CBO must evaluate any legislative proposal using the scorekeeping rules established by law and longstanding practice. If the Congress finds that spending more on efforts to further program integrity would represent good Medicare policy, however, it can and should ensure the necessary funding.

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Following is the text of a recent press release from HHS.  The goal of this effort is worthy and necessary.  Better coordinating health care for those with chronic conditions or any patient for that matter leads not only to better health care, but also to fewer adverse interactions and wasted dollars for duplicative care and tests.

However, take a close look at the list below.  Does giving money to several different agencies and groups all looking at different aspects of the same problem sound like a coordinated strategy?  Look at each of these programs; do some efforts sound duplicative? Other projects are doing research on what appears to have an obvious answer or at least one that has been previously considered by someone. Why are we spending $40 million to learn how to measure the value of coordinated care while concurrently spending $18 to learn how to optimize care?

In fact, I know only what I read below about this effort.  However, I do know that a strategic, coordinated effort would be more focused, and would approach each of the related issues is a more progressive manner building on the findings of each element from the bottom up. In this final analysis, is this the best way to address a valid problem by throwing tens of millions of dollars in different directions in a shotgun approach?

Here is another point and reflective of the current mindset of the role of government:

“The Affordable Care Act, with its emphasis on prevention, provides HHS with exciting new opportunities to keep chronic conditions from occurring in the first place and to improve the quality of life for patients who have them.”

Is it the job of HHS to keep chronic conditions from occurring or is that the job of the individual and his or her doctor?  It is these types of programs, while working toward better health care, that cause many Americans to question the intervention of the federal government into private matters.  During the health care debate,  proponents, including the President, repeatedly said that no one should come between you and your doctor (but they were referring to insurance companies). 

 HHS issues new strategic framework on multiple chronic conditions

The U.S. Department of Health and Human Services today issued its new Strategic Framework on Multiple Chronic Conditions ― an innovative private-public sector collaboration to coordinate responses to a growing challenge.

More than a quarter of all Americans ― and two out of three older Americans ― have multiple chronic conditions, and treatment for these individuals accounts for 66 percent of the country’s health care budget. These numbers are expected to rise as the number of older Americans increases.

The health care system is largely designed to treat one disease or condition at a time, but many Americans have more than one ― and often several ― chronic conditions. For example, just 9.3 percent of adults with diabetes have only diabetes, according to the Medical Expenditure Panel Survey from the Agency for Healthcare Research and Quality (AHRQ). And as the number of chronic conditions one has increases, so, too, do the risks of complications, including adverse drug events, unnecessary hospitalizations and confusion caused by conflicting medical advice.

The new strategic framework ― coordinated by HHS and involving input from agencies within the department and multiple private sector stakeholders ― expects to reduce the risks of complications and improve the overall health status of individuals with multiple chronic conditions by  fostering change within the system; providing more information and better tools to help health professionals  ― as well as patients ― learn how to better coordinate and manage care; and by facilitating research to improve oversight and care.

“Individuals with multiple chronic conditions deserve a system that works for them,” said Assistant Secretary for Health Howard K. Koh, MD, MPH. “This new framework provides an important roadmap to help us improve the health status of every American with chronic health conditions.”

The management of multiple chronic conditions has major cost implications for both the country and individuals. Increased spending on chronic diseases is a key factor driving the overall growth in spending in the Medicare program. And individuals with multiple chronic conditions also face increased out-of-pocket costs for their care, including higher costs for prescriptions and support services.

“Given the number of Medicare and Medicaid beneficiaries with multiple chronic conditions, focusing on the integration and coordination of care for this population is critical to achieve better care and health for beneficiaries, and lower costs through greater efficiency and quality,” said Centers for Medicare and Medicaid Administrator Donald Berwick, MD.

The Affordable Care Act, with its emphasis on prevention, provides HHS with exciting new opportunities to keep chronic conditions from occurring in the first place and to improve the quality of life for patients who have them. 

“We need to learn rapidly how to provide high quality, safe care to individuals with multiple chronic conditions.  AHRQ’s investments assess alternative strategies for prevention and management of chronic illness, including behavioral conditions, in persons with varying combinations of chronic illnesses,” said AHRQ Director Carolyn M. Clancy, MD.

HHS has taken action in recent months to improve the health of individuals with multiple chronic conditions. Some examples include:

• Administration on Aging (AoA)/ Centers for Medicare and Medicaid Administrator (CMS)

AoA and CMS jointly announced $67 million in grants to support outreach activities that encourage prevention and wellness, options counseling and assistance programs, and care transition programs to improve health outcomes in older Americans. 

• Agency for Healthcare Research and Quality (AHRQ)

AHRQ awarded more than $18 million dollars (American Recovery and Reinvestment Act) in two categories of grant awards to understand how to optimize care of patients with multiple chronic conditions.

• Assistant Secretary for Planning and Evaluation (ASPE)

As part of an existing $40 million ASPE contract, the National Quality Forum is undertaking a project to develop and endorse a performance measurement framework for patients with multiple chronic conditions.

• Centers for Disease Control and Prevention (CDC)

CDC is supporting a new project ― Living Well with Chronic Disease: Public Health Action to Reduce Disability and Improve Functioning and Quality of Life ― in which the Institute of Medicine will convene a committee of independent experts to examine the burden of multiple chronic conditions and the implications for population-based public health action. 

• Centers for Medicare and Medicaid Services (CMS)

CMS has provided recent guidance to State Medicaid directors on a new optional benefit available Jan. 1, 2011, through the Affordable Care Act, to provide health homes for enrollees with at least two chronic conditions, or for those with one chronic condition who are at risk for another.

• Food and Drug Administration/ Assistant Secretary for Planning and Evaluation (FDA/ASPE)

FDA and ASPE launched a study to examine the extent to which individuals with multiple chronic conditions are being included or excluded from clinical trials for new therapeutic products. 

• Indian Health Service (IHS)

IHS has expanded its Improving Patient Care Program to nearly 100 sites across the tribal and urban Indian health system to assist in improving the quality of health care for patients with MCC.

NIH has committed $42.8 million for a study to determine whether efforts to attain a lower blood pressure range in an older adult population will reduce other chronic conditions.

• Substance Abuse and Mental Health Services Administration (SAMHSA)

SAMHSA awarded $34 million in new funding to support the Primary and Behavioral Health Care Integration Program, which seeks to promote the integration of care with people with co-occurring conditions. 

For more information about the new HHS Strategy on Multiple Chronic Conditions, go to: http://www.hhs.gov/ash/initiatives/mcc/

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