Lazzy Feet on a Blue Ocean Beach vacation

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The American Instistute of CPAs recently released results of a poll that  asked people about their retirement expectations. The survey of 1005 working American citizens came back with a depressing result: for the second year in a row, four out of ten say they don’t think they will ever be able to retire. Other results are just as depressing: 55% don’t know how much they need to have in savings to retire, and many who think they know are way off in their estimates. Read the full story on the AICPA web site for more.

The survey didn’t even ask about affording health care in retirement – but we know from other surveys that mostly as a result of the closing of the Medicare Part D donut hole over the next few years, that cost has actually gone down a bit. Long term, however, rising health care costs are still an issue for retirees and the underlying factor in yearly insurance premium increases. That’s why we’ve been writing about things like the CMS proposed rules for ACOs and the CMS Center for Medicare and Medicaid Innovation on this blog. Medicare is still the most cost-effective way to deliver health care to seniors – and we hope that CMS can use its influence to accelerate the development and dissemination of innovations that will help slow or reverse rising health care cost trends.

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Provisions in the health care law call for reductions to the 14% supplemental payments to Medicare Advantage plans that start in 2012, reducing payments by $145 billion over 10 years. This reduction was widely called “cuts to Medicare” by those opposed to reform – and subsequently caused many seniors to worry about reduced services, increased out-of-pocket costs, and being driven out of Medicare Advantage plans back to original Medicare. Recent moves by the HHS to provide incentives for improved quality to a broader range of plans may alleviate some of these worries.

In an effort to provide incentives for Medicare Advantage carriers to improve quality, the law was originally going to provide bonuses for plans that received four to five star quality ratings on the government’s grading system. This would have left something like 80% of Medicare Advantage enrollees in plans that were not eligible for bonuses, and, presumably, more susceptible to cuts in services and or cost increases.

HHS has just announced that it will also give bonuses to plans that receive three or three-and-a-half stars, but at a lower percentage. This change means that four out of five enrollees will now be in plans that are eligible to receive bonuses. This $6.7 billion infusion of funds should postpone any drastic reductions in service and higher costs.  The AP published a helpful and informative piece explaining the change, which you can read here.

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Employer Benefit News’ Kathleen Koster has a new piece out today on the future of the public insurance exchanges mandated by PPACA. She interviewed several industry experts including (full disclosure) our CEO Bryce Williams, on what they see happening with exchanges over the next few years as 2014 draws nearer. Will employers, large and small, migrate their insurance coverage to the exchanges?

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The Centers for Medicare & Medicaid Services (CMS) announced today (April 14, 2011) that they have selected 15 states to, “design new ways to meet the often complex and costly medical needs of the nation’s lowest-income and chronically ill citizens.” As discussed in an earlier post — CMS Center for Medicare and Medicaid Innovation — this is an example of the types of programs the CMS is trying to foster with the goal of reducing program costs while maintaining or improving the quality of care.

Funded by the Affordable Care Act, the states will receive up to $1 million to develop demonstration proposals showing how they would improve the quality, coordination and cost effectiveness of care provided to dual-eligible beneficiaries. CMS will work with the states on the models that show the most promise.

States selected: California, Colorado, Connecticut, Massachusetts, Michigan, Minnesota, New York, North Carolina, Oklahoma, Oregon, South Carolina, Tennessee, Vermont, Washington and Wisconsin.

Watch this

April 12, 2011

Bryce Williams

Extend Health CEO Bryce Williams has started his own personal blog. We who work with Bryce know him as a man passionately committed to making health care insurance affordable for everyone, and he spends a lot of time thinking about how Extend Health and the exchange model can be used to that end. We think you’ll enjoy reading his thoughts – and maybe even sharing your own responses to what he has to say. His blog is called Watch This because he plans to use it as a forum for ideas and developments in the industry that you’ll want to know about – and because it’s a phrase he says often when he’s about to say something that will shed a whole new light on a trend or a concept.

Another provision in the Affordable Care Act that may help to rein in medical costs is the Shared Savings Program. The Affordable Care Act requires that the Shared Saving Program be established by January 1, 2012. Under this program, Accountable Care Organizations (ACO) will be administered by the Centers for Medicare and Medicaid Services (CMS) to manage and coordinate care for Medicare fee-for-service beneficiaries. ACOs that meet quality-of-care and cost-reduction performance standards will be eligible to receive a share of the savings (hence the name of the program).

An ACO is a group of providers and suppliers of health care services (hospitals, physicians, etc.) that work together with the goal of delivering high-quality health care while reducing costs. The theory behind this program is that well-run ACOs will improve communication and coordination among physicians and other providers, which will lead to both cost reductions and better care for patients. Most Medicare beneficiaries have multiple chronic conditions and receive care from multiple physicians, hospitals or other health care providers. Poor coordination among these providers can lead to lack of care, unavailable or lost medical records, duplication of care and redundant test procedures, readmissions to hospitals and even medical mistakes, all of which can and do increase the cost of care for Medicare beneficiaries.

On March 31, HHS proposed rules designed to help doctors, hospitals and other health care providers improve the coordination of care for Medicare beneficiaries through Accountable Care Organizations. Among these rules:

  • To become an ACO the group must submit an application to the CMS that includes a plan for delivering high-quality care and reducing costs. The group must have at least 5,000 beneficiaries, and agree to participate in the Shared Savings Program for three years. A governing body that represents the ACO must be established, and each ACO must routinely assess, monitor and report on the care it delivers.
  • ACOs must meet quality performance standards established by the new rules, as well as the savings benchmark set for them by the CMS to receive shared savings. If they fail to meet these standards they will be held liable for a portion of the losses.
  • ACOs will be required to notify beneficiaries that they are participating in an ACO, and that their providers will be eligible for payments for improved care and lower costs. They must also inform beneficiaries that claims data may be shared with the ACO to make it easier to coordinate their care. Beneficiaries have the right to opt out of the data sharing arrangements.

The rules are subject to a 60 day public comment period, and CMS encourages the public, providers, suppliers and Medicare beneficiaries to submit their comments for consideration. HHS will be holding open-door forums and listening sessions to help the public understand what the CMS is proposing and how to comment (dates and times have not been posted yet, but you can check these web sites for updates: and We encourage readers, especially Medicare-eligible individuals, to become informed about the new rules and submit comments during the comment period.

As part of the Affordable Care Act, the Centers for Medicare and Medicaid Services (CMS) created the Center for Medicare and Medicaid Innovation (CMI). The CMI is charged with testing innovative payment and service delivery models with the goal of reducing program costs while maintaining or improving the quality of care for Medicare, Medicaid and CHIP beneficiaries. As clinicians, health systems and community leaders develop new models to bring about better health, better health care and lower costs, the CMI wants to partner with these groups to identify models for change and rapidly expand their adoption throughout the Medicare, Medicaid, and CHIP programs.

Currently the CMI is actively seeking suggestions for innovative models that it can evaluate based on potential improvements in quality of care and reductions in spending. The Center’s mandate allows it to select and test innovative payment and service models and provides $10 billion in funding to help pay for pilot programs that will work within Medicare, state Medicaid, and CHIP programs.

The CMI solicits ideas for new models via a web-based submission form. The most promising model proposals are evaluated against CMI criteria, and then are tested and evaluated by working with partnering organizations to see if they can achieve the three critical aims of better healthcare, better health and reduced cost. Clear, objective benchmarks are established and evaluation is terminated if they are not met. Successful models that meet cost and quality tests may be expanded to the entire Medicare, Medicaid, or CHIP programs.

At Extend Health, we’re following the national debate over health care reform very closely, as our readers might not be surprised to learn. We think the original bill got quite a few things right and that there’s room for lots of improvement; the devil is in the details, as they say. How will exchanges be structured? What will the standardized insurance plans look like? What will the effect of various subsidies, fines, and taxes be on individuals and on employers who sponsor health care? Is the individual mandate constitutional? These and a thousand other questions remain to be answered.

One of the more contentious arguments has raged around the issue of the cost of the bill, with some saying it will cost many times more than originally estimated and others saying that it will actually reduce national health care expenditure. Central to the actual outcome is whether reform as enacted will have any impact on the rapid rise of health care costs in the United States.

Two of PPACA’s central provisions make all insurance guaranteed issue – a huge step forward for uninsured individuals – and institute insurance reform via state-run Health Benefit Exchanges that will create competitive health care insurance marketplaces. Less well-known, however, are a number of provisions that are aimed at reducing and moderating the rise of health care costs.

We did a little research to understand more about what’s in the bill that may “bend the cost curve” on the provider side, and we’ve summarized it here. CMS (the Centers for Medicare and Medicaid Services) is the central administrative organization for the two most extensive efforts: the new Center for Medicare and Medicaid Innovation, and Accountable Care Organizations. In our next couple of posts we will talk about some of the innovations introduced as part of PPACA.