On June 28, 2012 the Supreme Court announced its decision on the health care law, which upheld the constitutionality of the individual mandate and allowed states to opt-out of Medicaid expansion. The Congressional Budget Office (CBO) recently released an updated budget estimate to reflect changes in the insurance coverage provision of the ACA resulting from the Supreme Court’s decision.

While SCOTUS upheld the constitutionality of the ACA’s individual mandate that requires people to purchase insurance or pay a penalty tax, this is not the reason why the CBO revised its budget estimate. The update was necessary to reflect projections stemming from the SCOTUS decision that fewer people will be covered by Medicaid and CHIP (6 million), and more people will be enrolled in and exchanges (2 million) and uninsured (4 million) than their previous estimate. As a result of these changes, CBO estimates net costs will be $84 billion less than originally projected.


CBO Budget Estimates for(2012 – 2022) Net Costs (billions)
March  2012 $1,252
July 2012 – Post SCOTUS update $1,168
Savings $84


Changes In Insurance Coverage (millions)

March 2012 July 2012 Difference
Medicaid & CHIP












Numbers may not add up to totals because of rounding.

Read the entire CBO report.

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Extend Health held its very first tweet chat today. The topic was health care reform, and there were some really great questions – and a bit of humor tossed in too. John Barkett, Dir. of Policy Affairs at ExtendHealth fielded questions. John worked in congress on health care and his wealth of knowledge was evident in the answers he provided.

If you missed our tweet chat you can read a complete recap of the event. Hope to see you at the next one!

Visit Extend Health to use the ExtendExchange™ platform – the nation’s largest private Medicare insurance exchange.

Back in December of 2011 the U.S. Department of Health and Human Services chose 32 organizations to participate in the Pioneer Model test initiative that stated on January 1, 2012. On July 9th, HHS announced 89 new ACOs that will serve 1.2 million people with Medicare in 40 states and Washington, D.C. The program overall now includes 154 ACOs that are providing care to 2.4 million people.

ACOs consist of doctors, hospitals and other health care providers that work together to deliver high-quality health care and reduce costs. Participation in this shared savings program under the ACA is voluntary, and providers are incentivized by the opportunity to share in the savings they help create. ACOs must meet 33 quality measures to insure that the savings generated result from improving the coordination and quality of care.

Not all ACOs are large organizations. Nearly half are physician-driven with less than 10,000 beneficiaries. The program is estimated to save the federal government up to $940 million over four years.

Visit Extend Health to use the ExtendExchange™ platform – the nation’s largest private Medicare insurance exchange.

Here’s and excerpt from a new post just published on Bryce Williams’ blog “Watch This,” about today’s ruling by the Supreme Court on the ACA:

“With Chief Justice Roberts siding with the majority, the Supreme Court decided in a 5-4 vote to uphold the individual mandate as a tax. The case before the court on Medicaid expansion was upheld narrowly, with the Court ruling that the federal government may not cut off all of the Medicaid funding of states that opt out of Medicaid expansion . . .”

Read the full post on Watch This.

Visit Extend Health to use the ExtendExchange™ platform – the nation’s largest private Medicare insurance exchange.

Here’s an excerpt from a new post just published on Bryce Williams’ blog “Watch This,” on the need for transparency in health care pricing:

“Knowledge is power — the power to think, to act, to buy, or even to not do any of the above. Our nation’s health insurers and health care providers need to figure out how to put power back into the hands of consumers. Consumers today have too many constraints when it comes to accessing decision-critical information about the cost of health care. That’s a hard pill to swallow when there’s so much at stake.”

Read the full post on Watch This.

Visit Extend Health to use the ExtendExchange™ platform – the nation’s largest private Medicare insurance exchange.

Back in August of 2011 we wrote  about a new program from the U.S. Department of Health and Human Services (HHS) called the Bundled Payments for Care Improvement initiative that would allow multiple providers to bundle payment for services a patient receives for a single “episode of care,” such as heart bypass surgery or a hip replacement. The program was designed to incentivize health care providers (hospitals, doctors, clinicians, etc.) to work together to reduce costs and provide better care. As part of our ongoing interest in measures to reduce health care costs, we’re posting this summary of trends in bundled payments.

Bundling payments is not a new idea. The first large scale CMS pilot of bundled payments was Medicare’s Heart Bypass Center Demonstration that ran from 1991 to 1996. It saved Medicare over $42 million and saved patients nearly $8 million. It also improved the quality of care and lowered hospital mortality.

Health Care Incentives Improvement Institute (HCI3) recently released a report titled Bundled Payment Across the U.S. Today. They found that the most common reasons for choosing a procedure or condition to bundle are based on cost, how easy it is to define and implement the bundle, and how it aligns with existing initiatives. In the future, bundles may also be influenced by those adopted by Medicare.

Procedural inpatient conditions like hip and knee replacement make good bundle candidates because they are easy to define and standardize. Chronic conditions like diabetes are more difficult to bundle than procedural conditions, but offer the greatest opportunity to generate savings by bundling. Among bundles created by providers and payers in the HCI3 study, there were few for outpatient procedures and none for acute medical conditions.

Bundles are defined by the services include, the time period covered, and patients included.  After defining the bundle, payers and providers negotiate its price. Defining a bundle is complex and can take a great deal of time and effort for providers and payers to analyze and come to an agreement on the final definition. Bundle rates can be defined as risk-adjusted or flat-fee; risk-adjusted rates vary with the severity of the patient’s condition, while flat-fee rates stay the same for every patient.

There are two types of payment bundles, retrospective and prospective, and four broad models for bundling payments. Payers and providers work together to determine the episodes of care and services they want to bundle together based on what works best for them.

1. Retrospective Payment Bundles – Payers & providers set a target price for an episode of care. Participants are paid using the Original Medicare fee-for-service system, and then add an administrative budget reconciliation process at the conclusion of each episode. While some feel this method does not represent true bundled payment, it is used because the technical and administrative infrastructure is already in place for providers and payers. Setting up a “true” bundled payment system would require an expensive investment in changing billing practices. The types of episodes that work for retrospective payment bundles are:

  • Model 1 – Inpatient stay in a general acute care hospital
  • Model 2 – Inpatient stay plus post-acute care
  • Model 3 – Post-discharge services only

2. Prospective Payment Bundles – Payers make a single, prospectively determined bundled payment to the hospital for services furnished. Prospective payment bundles are only available for:

  • Model 4 – Inpatient stay only

Payers send spending reports to providers on a monthly or quarterly basis so providers can keep track of the amount spent on the bundle.  Payments must be reconciled at the end of an episode to make sure claims are associated correctly with the bundle. While quality measures were being used in various ways, only one of the participants in the HCI3 study was using them to adjust payment amounts, because it is difficult to find acceptable quality measures that can be directly tracked to spending.

Risk and savings are used to incentivize providers to increase the success of bundled payments systems. There are three types of savings/risk arrangements.

  1. Shared savings – incentivizes the provider to reduce spending below the negotiated bundled rate by letting them share in the savings.
  2. Shared risk – incentivizes the provider to reduce spending by putting them at risk for costs above the negotiated bundled rate and letting them share in the savings.
  3. Full risk – puts the provider at full risk for all costs above the negotiated bundle rate, but allows them to keep all of the savings.

Bundled payments are gaining in popularity, but the volume remains low because of the high number of exclusions negotiated between payers and suppliers, and issues with lack of continuous enrollment. It may be too early to draw any definite conclusions, but there are early indications that bundled payments have delivered some cost savings. Decreased readmissions, complications and mortality have been reported too. Many are using their early experiences with bundled payments to help them prepare for the future and develop new payment and risk-sharing strategies.

Read the HCI3 report

Bundled Payments for Care Improvement, CMS Innovation


Affordable Care Act initiative to lower costs, help doctors and hospitals coordinate care


Visit Extend Health to use the ExtendExchange™ platform – the nation’s largest private Medicare exchange.

According to a recent Kaiser Family Foundation report, this summer individuals and employers are expecting to receive $1.3 billion in health insurance rebates from insurance companies who did not meet requirements of the Medical Loss Ratio (MLR) provision of the Affordable Care Act (ACA).  Under the health care law, insurers are required to pay rebates to consumers and employers if they do not comply with the MRL regulations.

The MLR requires insurance companies to spend a specified percentage of their income on health care claims and quality improvements. The remaining income can then go to covering administrative expenses, marketing and profits. If too much goes toward the latter, the insurer must pay rebates. These rebates act as an incentive to improve quality and seek lower premium increases.

There are two MLR thresholds.

  • Large group plans – 85% must be spent on claims and quality improvements
  • Individuals & small business – 80% must be spent on claims and quality improvements

The rebates for 2012 are estimated to be $1.3 billion and are due this August. Here is a break down by market:

  • Individual market – $426 million, 215 insurance plans, 3.4 million people, average rebate $127
  • Small group market – $377 million, 146 insurance plans, 4.9 million people, average rebate $76
  • Large group market – $541 million, 125 insurance plans, 7.5 million people, average rebate $14

The rebates won’t make health insurance more affordable, but that’s not their purpose. The goal is to make insurers better align their premiums with their medical claims costs, forcing them to be more efficient and preventing them from charging too much.


Insurer Rebates under the Medical Loss Ratio: 2012 Estimates

Checks In The Mail: Millions Expected To Receive Insurance Rebates Totaling $1.3 Billion

Healthcare rebates scheduled for August

Visit Extend Health to use the ExtendExchange™ platform – the nation’s largest private Medicare exchange.

Coventry Health Care just recognized Extend Health for efficiency and customer satisfaction, including zero customer complaints in 2011. Here’s a brief snip from the press release.

“Extend Health Inc., a leading provider of health benefits management services, including the nation’s largest private Medicare exchange, received two first place awards from Bethesda, Maryland-based Coventry Health Care, Inc. (NYSE:CVH) for exceptional customer service performance by a partner in 2011.

  • Zero customer complaints reported to the Centers for Medicare and Medicaid Services (CMS) by seniors signing up for Coventry private Medicare supplement plans through Extend Health;
  • The lowest 90-day plan cancellation rate — called rapid disenrollment — which, at just 0.5 percent, was far less than the typical rate.”

Click here to read the complete news release.

Visit Extend Health to use the ExtendExchange™ platform – the nation’s largest private Medicare exchange.

Based on provisions in the Affordable Care Act, over the last two years CMS has stepped up its efforts to root out and prevent Medicare fraud with measures that include stronger penalties, enhanced provider screening and enrollment requirements, improved fraud prevention coordination and new high tech tools. This post takes a look at the success of those efforts so far.

Anti-fraud efforts by the Health Care Fraud Prevention and Abuse Control (HCFAC) recovered over $4 billion during 2011, and nearly $11 billion over the past three years. In February of 2012 the Medicare Fraud Strike Force busted a $375 million health care fraud scheme, arresting a Dallas area doctor, office manager, and five owners of home health agencies for their alleged participation.

Other accomplishments include:

  • Charged 323 defendants who allegedly billed Medicare for over $1 billion
  • Charged 1,430 defendants with health care fraud and convicted 743
  • Recovered approximately $2.4 billion under the False Claims Act (FCA) in 2011

Seniors on Patrol Against Fraud

CMS is bringing seniors into the effort to control fraud too. In November of 2011 CMS awarded $9 million to the Senior Medicare Patrol (SMP) program to help it continue the fight against Medicare fraud. The SMP program has 5,000 volunteers across the nation. The funds will help seniors learn how to prevent, detect, and report health care fraud.

According to CMS, “the SMP volunteers work in their communities to educate Medicare beneficiaries, family members, and caregivers about the importance of reviewing their Medicare notices, and Medicaid claims if dually-eligible, to identify errors and potentially fraudulent activity.”

Since the program began in 1997, more than 25 million people have participated in community outreach education events, and over 4 million Medicare beneficiaries have received education in one-on-one counseling sessions.

High-Tech Tools

In 2011 CMS added high-tech tools to help it “crack down on waste, fraud and abuse.” In June of 2011 CMS announced that it would begin using predictive modeling technology, similar to technology used by credit card companies, to identify potentially fraudulent Medicare claims and prevent them from being paid. The new tools will help CMS move from its former “pay & chase” approach to one that focuses on preventing fraud and abuse before it takes place.

Visit Extend Health to use the ExtendExchange™ platform – the nation’s largest private Medicare exchange.

The 2012 Medicare Trustees Report released today echoes last year’s report estimating the Hospital Insurance Trust Fund (Medicare Part A) will stay solvent until 2024. The Medicare Board of Trustees issues this report annually and it has been projecting the year the program would become insolvent almost every year since the reports began back in 1970. A recently published chart  lists the projections from previous reports.

The 2012 report also says that premiums and revenue for Supplementary Medical Insurance program (Medicare Part B and Part D) are expected to cover costs.

The CMS press release and link to the report are available here.

Visit Extend Health to use the ExtendExchange™ platform – the nation’s largest private Medicare exchange.