Happy Holidays!

December 23, 2011

Happy Holidays to all our readers. Thank you for your support in 2011.
We’ll be away for the next week, but we look forward to seeing you back here
for an exciting 2012 . . . there’s sure to be much to write about!

On Monday, December 19th, 2011 the Department of Health and Human Services (HHS) announced its list of 32 organizations that were selected to participate in the Pioneer Accountable Care Organization (ACO) Model, which begins January 1, 2012.

Launched by the CMS Innovation Center, the Pioneer ACO Model initiative will test the impact of different payment arrangements on helping organizations improve patient care and reduce Medicare costs. HHS estimates that this initiative could save up to $1.1 billion over five years.

Out of 80 applicants, 32 organizations were selected based on their experience offering coordinated patient-centered care, and for operating in an ACO-like manner.  An ACO is a group of health care providers and suppliers that work together to deliver high-quality care and reduce costs.

A complete list of the organizations selected can be found in “Pioneer Accountable Care Organizations Model: General Fact Sheet.

During its first two years, the Pioneer ACO Model will test a shared savings and shared losses payment arrangement. The shared savings would be determined by comparison with CMS established benchmarks. In the third year, ACOs that showed savings over the first two years could move to a population-based per-beneficiary, per-month payment model.

CMS will determine which beneficiaries are aligned with each ACO. Generally, each ACO must have 15,000 beneficiaries, but those located in a rural area are allowed to have only 5,000. In addition, beneficiaries must be enrolled in original, fee-for-service Part A and Part B Medicare. To make sure beneficiaries receive high-quality care, CMS has set strict quality measures that it will monitor.

The Pioneer ACO Model is just one of several ACO initiatives. For more information on those programs, visit www.cms.gov/aco.

Last week Sen. Ron Wyden (D-OR) and Rep. Paul Ryan (R- WI) released a 12-page white paper outlining their plan to overhaul Medicare in an effort to reduce long-term Federal health care spending while preserving the promise of comprehensive health care benefits to our nation’s retirees.  The plan would, in effect, convert Medicare from a defined benefit program to a defined contribution program.  Beneficiaries would receive a fixed amount of money – “premium support” – that would be put towards the cost of their insurance plan.  CMS would certify plans to be eligible for sale on a Medicare exchange, much the same way Medicare runs the Medicare Advantage and Part D programs today.  Original Medicare would be offered as one of the plans on the Medicare exchange.

The release of this plan is sure to reverberate around Washington.  The last time Rep. Ryan released a plan to overhaul Medicare, it was criticized to great effect by Democrats, who argued that the amount of premium support offered to beneficiaries would grow too slowly and become inadequate over time.  The last time Sen. Wyden introduced a bipartisan plan to overhaul a portion of the health care system, his Republican co-sponsor, Sen. Robert Bennett (R-UT), lost his re-election primary bid to a Tea Party-backed candidate.  Meanwhile, Governor Mitt Romney has recently released a plan similar to the Wyden-Ryan plan, ensuring a protracted, national debate during the 2012 election campaign season.

While plans like Wyden-Ryan are receiving bipartisan support for the time being, the devil, as they say, is in the details.  And for now Wyden-Ryan is short on details.  We at Extend Health have over seven years’ experience introducing defined contribution plans to Medicare-eligible retirees on behalf of over 150 employer sponsors.  To the Congress that might one day debate such a plan, we offer the following advice:

Will insurers be compelled to guarantee issuance of a health insurance policy?

This may seem like an obvious point, but it’s a deal breaker for every one of Extend Health’s clients:  seniors must be able to purchase any policy offered on an exchange without fear of being denied coverage.  Without guaranteed issue, the most vulnerable beneficiaries will have the hardest time finding coverage.  Wyden-Ryan specifically outlines this as a feature of their plan, and we would expect any final version of a plan to maintain this requirement.

What is the right level of funding?

Much of the debate will center on the amount of funding offered to beneficiaries as premium support.  Will the amount be enough to purchase a private plan such that the beneficiary is no worse off – or perhaps better off – than they were under original Medicare?  The answer to this question will be determined by the specifics of the policy:  what determines the rate of growth of the voucher; what amount of geographic adjustment will be factored in; what amount of health risk adjustment will be factored in; can cost-containment strategies introduced by policymakers or plan administrators assist in keeping plan costs down.  Policymakers will work with economists at the Congressional Budget Office who, in “scoring” a detailed plan, will officiate whether or not seniors are better off.

From our experience, providing employer sponsors with this style of actuarial analysis has been imperative to ensuring they make the right decision on a retiree health solution.  Extend Health actuaries have spent the last seven years refining analyses that demonstrate how retirees choosing plans on a private Medicare exchange can collectively find greater value for their employer’s dollar than the employer can through a group plan.  Without the analysis, plan sponsors are making important contribution decisions in the dark.  We encourage lawmakers to use such analyses when making the case to their constituents for defined contribution.

Will plan choices be easy to understand?  

Competition only produces value to the customer if the customer can easily understand the meaningful differences between products.  If you’ve ever had to choose between even two health insurance options, you know how difficult this can be. 

At Extend Health, we believe no retiree should decide on a plan without understanding the meaningful differences between insurance products in four areas:  costs (premium vs. out-of-pocket); plan benefits; provider network; and customer service.  In fact, we believe this is the whole point of operating an exchange in the first place.  We have spent the last seven years building out technologies that make comparing plans along these lines as simple as possible, both for a customer looking at plans online and for a benefit advisor assisting a customer over the phone.  Congress should ensure that by engaging with a Medicare exchange, beneficiaries will be able to easily comprehend the tradeoffs when choosing one plan over another. Without such a capability, the exchange won’t provide a transparent, competitive marketplace where consumers can maximize the value of their health care dollar.


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Paul Ryan (R-WI) and Ron Wyden (D-OR) released their proposal to overhaul Medicare this week. It is not at the bill stage yet, as the authors hope to cut down on the political rhetoric and start a serious national dialogue about the future of Medicare. Ryan and Wyden have not asked the Congressional Budget Office to review their proposal yet, so it is not known how much their plan would save compared to current Medicare.

Here is a brief overview of some of the plan’s key points:

People over 55 would see no change to their benefits. They would be free to opt into a private plan when the Medicare Exchange is established in 2022.

The “premium support” system would ensure affordable coverage by empowering seniors to choose either traditional Medicare or private plans. And there would be more help for low-income seniors who need it, and less for wealthier seniors who don’t need the assistance.

Medicare plans could be purchased on an insurance exchange established by congress.

Strong consumer protection would include:

  • All participating plans would have to offer benefits that are at least equal to traditional Medicare plans.
  • Risk-adjusted premium-support payments would guarantee affordable coverage for those with the greatest health needs.
  • Plans could neither refuse coverage for pre-existing conditions, nor charge rates that discriminate based on health status.
  • CMS would oversee all plans to ensure transparency and fairness.

Competition would drive program growth. Competitive bidding would force providers to reduce costs and improve quality. Competition between private and traditional Medicare plans would incentivize both to develop better delivery models and ways to care for patients.

Employees in small businesses with up to 100 workers could use their employer’s contributions to purchase their own health insurance, and the cost of free choice options would be fully tax deductible to the employer. In addition, allowing workers to keep the same insurance when they retire would ease their transition into Medicare.

Medicare spending would be capped to GDP plus one percentage point.

Read the full report:  http://budget.house.gov/UploadedFiles/WydenRyan.pdf


News Roundup:

Here’s a roundup of news articles written this week about the Ryan/ Wyden proposal, with reactions and opinions from across the political spectrum.

Bloomberg BusinessWeek: Bipartisan Medicare Plan May Spur More Compromise, Ryan Says

The Washington Post: Interview with Rep. Paul Ryan

Politico: Ryan-Wyden under ‘no illusion’ their plan will pass tomorrow – Looming shutdown? W.H. says to pass a short-term CR – Essential benefits, politically speaking

Boston.com: Clipboard: The “Ryden” Medicare proposal

Chicago Tribune: White House blasts new Medicare plan by GOP’s Ryan

Reuters: Republican Ryan backs new bipartisan Medicare Plan

Forbes: Ron Wyden and Paul Ryan’s Bipartisan Plan for Health Care and Medicare Reform

The Wall Street Journal: A.M. Vitals: Ryan, Wyden to Introduce Proposal for Changing Medicare

Time: Wyden-Ryan: A Move Toward Health Care Sanity

The Washington Post: What Wyden-Ryan hath wrought

The Wall Street Journal: The Wyden-Ryan Breakthrough

Kaiser Health News: Wyden And Ryan Join Forces On New Medicare Overhaul Plan

The Hill: Paul Ryan moves away from controversial Medicare reform plan

The New York Times: Lawmakers Offer Bipartisan Plan to Overhaul Medicare

Visit Extend Health — the nation’s largest private Medicare exchange.

The Washington Extension

December 16, 2011

Medicare News

Senator Ron Wyden (D-OR) and House Budget Chairman Paul Ryan (R-WI) introduced a plan to reform Medicare beginning in 2022, including premium support, a Medicare Exchange, and a cap on annual Medicare spending. The members tout their plan as increasing choice for seniors, spurring innovation, and lowering health care costs through competition among private plans and traditional Medicare. The plan also expands health care options for small businesses by allowing employees to use employer contributions to purchase their own health care. The reforms draw from ideas that Mr. Ryan and Mr. Wyden have previously backed. Though key details are omitted from the plan, critics of premium support have questioned its ability to lower costs, provide adequate premium support amounts, and protect low-income beneficiaries. Political reactions are divided largely along party lines, with Democrats asserting that the plan will undermine Medicare and Republicans cautiously supporting it as worthy of consideration.

ACA Update

The early retiree health insurance fund—established by the ACA to help employers maintain coverage for non-Medicare eligible retirees until 2014 when exchanges are running—will accept its last claim on December 31, 2011. The $5 billion fund has already exhausted $4.5 billion. According to Democrats, the rapid exhaustion is due to the program’s popularity with employers, though Republicans assert the premature shut-down proves the inaccuracy of cost estimates when the ACA was passed.

Minnesota has posted multiple exchange prototypes for employers and individuals to test drive, including websites from Ceridian, Curam Software, MAXIMUM/Connecture, Getinsured.com, and Deloitte. The functionality of the websites range from Deloitte, with actual plan search capability, to MAXIMUM’s, which appears to have only demonstration videos posted. Minnesota is asking for public feedback on the modules to influence its vendor selection process and development of an online interface.

On the Hill

Congress must act before the end of the year to avert a nearly 30% Medicare pay cut to physicians, and may pair short-term relief from the cuts with extension of the payroll tax holiday and unemployment benefits, also set to expire at year-end. The extension could be as short as two months, but will still require Congress to come up with $40 billion to pay for the bill. A House-passed bill earlier in the week offset the extensions in part by reducing the Medicare subsidy that certain higher-income beneficiaries receive, thereby increasing premiums and reducing government spending.

Both Senate committees with jurisdiction over health care—Finance and Health, Education, Labor and Pensions—held hearings on widespread prescription drug shortages reported across the country. Witnesses at the hearings cited quality control issues, manufacturing delays, supply disruptions and price changes as problematic in ensuring a constant supply of drugs.

HHS is expected to release information about essential health benefits that plans offered through health insurance exchanges will be required to cover. Look for the release here or here. The Institute of Medicine, at the HHS Secretary’s request, released a report earlier in the year recommending criteria and methods for determining and updating essential benefit requirements.

Reports/Other News

Seniors age 50+ and near retirement are more concerned about their ability to afford health care expenses (24%) than current retirees (17%), according to an Allstate-National Journal Heartland Monitor poll. Three-quarters of near-retirees believe they will have to work after retirement and over half say they will retire later than their parents.

The Government Accountability Office released a report on “job lock” due to employer-sponsored health insurance, finding that workers with health insurance from their employer are less likely to change jobs, leave the labor market, become self-employed, or retire when eligible, compared to workers with alternative sources of coverage. Experts surveyed generally agreed that broader access to health insurance in the ACA may help mitigate job lock, but opinions differed about the extent.

The Washington Extension will return in 2012. Happy Holidays!

Visit Extend Health — the nation’s largest private Medicare exchange.

Learn how Whirlpool Inc., leveraged a Medicare exchange to take control of retiree health care costs while providing retirees with health care benefits of equal or better value.

During this webcast you will learn:

  1. How Whirlpool was able to provide a cost effective, retiree friendly solution by moving to defined contribution and providing its retirees access to a Medicare exchange.
  2. How Whirlpool reduced OPEB liabilities and simplified administration.
  3. Details of Whirlpool’s decision making process, communication protocol and successful results.

Webinar Details 
January 11th, 2012
10:00 am PST/1:00 pm EST
Registration link : https://extendhealth.webex.com/extendhealth/onstage/g.php?t=a&d=668549631

On Tuesday (11/29) the Department of Health and Human Services (HHS) announced that it, “awarded nearly $220 million in Affordable Insurance Exchange grants to 13 states to help them create Exchanges, giving these states more flexibility and resources to implement the Affordable Care Act.“

Following this announcement, Steve Larsen, deputy administrator of the Centers for Medicare and Medicaid Services, briefed legislators on the new HHS rules at the National Conference of State Legilatures forum in Tampa. The HHS also released an FAQ to help legislators understand the new provisions, which include the following:

  • Grants can be used to build a state Exchange that is operational after 2014
  • Exchanges will not be charged for accessing Federal data needed in 2014
  • State insurance rules and operations will continue even if the Federal government is facilitating an Exchange in the state.
  • Greater flexibility will be allowed in determining eligibility

In addition, the FAQ also covers issues relating to costs, quality requirements, program integrity and much more. If you are interested in learning more about the new provisions, you can read the HHS press release or the FAQ.

Visit Extend Health — the nation’s largest private Medicare exchange.

Washington Extension

December 2, 2011

Medicare News

Enrollment in Medicare Advantage plans grew 6 percent from 2010-2011, according to a new report by the Government Accountability Office, despite federal payments that were frozen from 2010 to 2011. Average plan premiums declined 14 percent over the same period, from $28 per month to $24, and plan benefit packages remained stable. Medicare Advantage plan payment cuts scheduled to be implemented in coming years are expected to reduce plan enrollment and lead to less generous benefit packages.

CMS Principal Deputy Administrator and former Virginia Secretary of HHS Marilyn Tavenner has been tapped by the White House to lead CMS after current Administrator Don Berwick steps down on December 2nd. Berwick was never confirmed by the Senate, instead serving under a recess appointment that expires on December 31st, 2011. Health groups, including hospitals, physicians and nursing homes, expressed support for Tavenner’s confirmation to the post. House Majority Leader Eric Cantor has also thrown his support behind the President’s nominee, though Tavenner must still be confirmed by the Senate.

ACA Update

CGI Federal Inc. was awarded a contract worth up to $93.7 million to build the ACA’s federal health insurance exchange. CGI will work with the Center for Consumer Information and Insurance Oversight in HHS to implement a health insurance exchange that will serve consumers in states without access to a state-based health insurance exchange.

Another round of federal funding for health insurance exchange establishment totaling nearly $220 million was awarded to 13 states, seven of which are currently involved in the lawsuit challenging the constitutionality of the ACA. Twelve of the grants are Level 1 grants, which don’t require states to commit to establishing an exchange, and 28 states have received so far (most recently AL, AZ, DE, HI, ID, IA, ME, MI, NE, NM, TN and VT). Rhode Island received the first Level II grant, which requires an exchange commitment, to further develop its IT infrastructure.

The National Association of Insurance Commissioners passed a resolution (pdf) calling on HHS to “consider” bills that exempt insurance agents’ commissions from federal standards that cap insurers’ administrative costs. Though significant disagreement exists within the NAIC, the vote reflects concern about preserving consumer access to insurance agents and brokers as new minimum Medical Loss Ratio standards are implemented.

Employers may be able to dump their sickest employees onto health insurance exchanges, while preserving employer-based health insurance for healthier employees, a new report finds. Self-insured employers could design their health plan with limited provider networks, or high deductibles or copayments, to encourage higher-cost employees to leave the plan and purchase insurance through exchanges. An influx of sicker individuals into health insurance exchanges could negatively affect the risk pool. Experts disagree whether the financial advantage of this approach would trump the inevitably bad public relations for employers.

On the Hill

Due to the “super committee’s” failure to propose a deficit reduction plan, mandatory budget cuts are slated to be implemented in 2013 for defense and nondefense spending through automatic changes to budget authority, known as sequestration. This would result in reductions of 2 percent each year in most Medicare spending, or savings (pdf) of approximately $123 billion over 10 years, according to the Congressional Budget Office. Lawmakers from both parties on Capitol Hill have proposed amending the automatic budget cuts, but President Obama has threatened to veto any efforts to undermine sequestration.

With the collapse of the “super committee”, Congress has just until the end of 2011 to pass legislation preventing a nearly 30 percent cut to physician payments under Medicare, and extend various other Medicare payment policies that are subject to near-annual “fixes” to prevent implementation of current law. Staving off Medicare physician payments for just one year will cost approximately $22 billion.

Responding to a request from Senator Tom Coburn (R-OK), the Congressional Research Service refutes the claim of some Republican Presidential nominees that the ACA could be undone by Presidential executive order. CRS finds that a President “would not appear” to be able to issue an executive order preventing an agency from promulgating a rule that is statutorily required by the ACA because it would directly conflict with an explicit congressional mandate. Executive orders directing an agency to take a particular action on a mandatory program for which the agency has discretion may be permissible.

Visit Extend Health — the nation’s largest private Medicare exchange.