Tag Archives: Medicare

Critical Point podcast: Alternative Payment Models 101

In the latest Critical Point podcast, healthcare consultant Pamela Pelizzari discusses alternative payment methods, bundled payment, accountable care organizations (ACOs), and more. She explains in more detail what is meant by the term alternative payment model and why people should be interested. Pamela also explains how ACOs fit in and how alternative payments fit with Medicare and Medicaid.

To listen to this episode of Critical Point, click here.

Healthcare under the Delegated Risk Model in California: Lower cost, high quality

Health insurance is increasingly difficult to afford. As reported in the 2018 Milliman Medical Index (MMI), the typical American family of four covered by an average employer-sponsored preferred provider organization (PPO) plan will have annual healthcare expenditures totaling approximately $28,166. Californians are not exempt from this trend, also paying increasingly high costs for their healthcare. According to the 2013 Berkeley Forum report, employer-sponsored health insurance premium rates were projected to nearly double from 2011 to 2022, ultimately reaching $31,728 for family coverage in 2022. Those premium increases will be borne by both employers and employees. According to the MMI, on average premiums are funded approximately two-thirds by employers and one-third by employees through payroll deduction.

Some good news for Californians is that they would likely be paying a lot more without managed care plans that use the delegated model. In brief, the term “delegated model” describes a health insurance plan where financial risk for healthcare services is transferred from an insurance company to healthcare providers (e.g., physicians or hospitals). Most commonly this involves the insurance company paying a fixed, per capita dollar amount (a capitation rate) to a group of physicians, and the physicians assume financial responsibility to provide all professional services for each health plan member. They may also have full or partial risk for hospital services provided to those same members. In California, capitation can only be used in health maintenance organization (HMO) plans. Other common types of plans, PPO-style plans and other fee-for-service (FFS) plans, cannot use capitation.

Measuring the impact of the delegated model on healthcare expenditures is tricky for at least two reasons. First, the average person who enrolls in an HMO plan might have a different health status from the average PPO/FFS plan enrollee. For example, they might be younger, or just healthier than average. Second, per capita healthcare costs vary by geographic area, for a variety of reasons. HMOs tend to be concentrated in urban areas, while PPO/FFS plans are prevalent in all areas of the state.

IHA Atlas data quantifies savings
Fortunately, data published by the Integrated Healthcare Association (IHA) allows us to compare per capita healthcare expenditures for HMO versus PPO/FFS plans, adjusted for differences in the mix of members by health status and by geographic area. Results indicate that for commercial health insurance plans (i.e., non-Medicare, non-Medicaid), total healthcare expenditures per capita are lower under HMO plans than under PPO/FFS plans, as shown in the graph below. They were 5% lower in 2013 and 7% lower in 2015.*

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Diagnosed opioid use disorder by payer

Over 25 million American adults report suffering from chronic pain on a daily basis, and a range of adverse health outcomes accompanies their pain. Beginning in the early 2000s, opioid analgesics were increasingly seen as a solution to the problem of under-treatment that had been a concern in the 1990s. From 1991 to 2011, the number of opioid prescriptions filled at U.S. retail pharmacies nearly tripled, increasing from 76 million to 219 million per year, though those numbers have started to decrease since the peak in 2011.

Despite the recent decrease in prescriptions of opioids, the human toll of the opioid crisis has continued to intensify. Illegally acquired heroin and synthetic opioids such as fentanyl have become the leading cause of overdose deaths. Opioid overdose deaths are now the single largest factor slowing the growth in U.S. life expectancy, and if current trends continue, opioid overdose deaths could outnumber suicides by 2019.

In this article, Milliman’s Stoddard Davenport and Katie Matthews help explain the scale of the opioid epidemic within the insurance industry.

Based on a sample of over 42 million people with commercial insurance, nearly 1.3 million Medicare beneficiaries, and a Kaiser Family Foundation analysis of Medicaid beneficiaries in 49 states, we estimate that over 1.5 million insured Americans were diagnosed with an opioid use disorder in 2015 (the most recent year available). Figures 3 and 4 summarize these findings by payer. These results (and others presented throughout this report) have been age- and area-adjusted to be representative of the U.S. insured population as of 2015 using U.S. Census Bureau data.12

Figure 3: Diagnosed opioid use disorder by payer, 2015 (or most recent year)

Commercial
(2015)
622,000
Medicare
(2015)
239,000
Medicaid
(2013)
642,000

We found that about 41.4% of those with diagnosed opioid use disorder were commercially insured, 15.9% were Medicare beneficiaries, and 42.7% were Medicaid beneficiaries. Overall, the diagnosed prevalence rate of opioid use disorder was 3.28 per 1,000 for the commercially insured, 5.39 per 1,000 for those with Medicare, and 8.90 per 1,000 for those with Medicaid. Across all insurance payers, we found that the prevalence of opioid use disorder was 4.91 per 1,000.

Figure 4: National estimates of opioid use disorder diagnosis by payer, 2015 (or most recent year)

Payer Diagnosed prevalence per 1,000 Total diagnosed nationally No. (%)
Commercial (2015) 3.28 622,000 (41.4)
Medicare (2015) 5.39 239,000 (15.9)
Medicaid (2013) 8.90 642,000 (42.7)
Total 4.91 1,503,000 (100.0)

The authors also highlight the rate of opioid use disorder by age and sex.

Rates of opioid use disorder varied widely by age and sex, with men generally experiencing higher rates of opioid use disorder through age 65, and women experiencing higher rates from 66 and older. Rates were quite low through childhood, followed by a marked increase in the late teen years, peaking in the mid-20s at a rate of 5.47 per 1,000 for women (at age 24) and 10.00 per 1,000 for men (at age 25). Rates showed a sharp drop-off in the late 20s, followed by a rise to another peak in the mid-30s of about 3.76 per 1,000 for women (at age 35) and 6.37 per 1,000 for men (at age 36). From the late 30s through age 64, the gap between men and women closed and both experienced prevalence rates hovering between 3.50 to 4.00 per 1,000 through retirement age. Opioid use disorder rates for Medicare beneficiaries were generally higher for women than for men, and tapered off with advancing age. Comparable data for Medicaid were not available.

Medicare Shared Savings Program 2016 Track 3 financial results

Under the Medicare Access and CHIP Reauthorization Act of 2015, healthcare providers that participate in a Medicare Shared Savings Program (MSSP) as Track 3 accountable care organizations may qualify for the advanced Alternative Payment Model 5% bonus. Track 3 was first offered in 2016. This paper by Milliman consultants discusses first-year MSSP Track 3 performance and possible drivers of success.

Questions and answers: Are you managing retiree health needs cost-effectively?

Because retirees are often the highest users of healthcare, simple changes in plan design or delivery can go a long way in reducing costs for employers. For example, we had a client that was looking to deliver benefits to its Medicare retirees more efficiently. By moving the entire population to a Medicare Advantage plan, our client not only reduced its retiree medical costs by 10% in the first year due to a reduced premium, but it also was able to provide a richer benefit design.

In reviewing your own retiree medical benefit design strategy, here are a few questions you should ask.

Is my plan coordinating with Medicare in the most efficient way?
If you have an active medical plan that also covers Medicare-eligible retirees, carefully review the coordination of benefits method. When Medicare is primary, the plan commonly coordinates under one of these approaches: carve-out, maintenance of benefits, or coordination of benefits. Because costs to the plan and retiree vary under each of these approaches it is a good idea to examine each one; there may be a way to save money for the plan or the retiree.

Am I taking full advantage of prescription drug subsidies?
Given the high use of prescription drugs in the retiree population, this area may be your best opportunity to reduce costs. Are you taking full advantage of the prescription drug subsidies from the Centers for Medicare and Medicaid Services (CMS)? Consider delivering Medicare prescription drug coverage through an employer group waiver plan or with retiree drug subsidy coverage.

Am I leveraging the experts in administration?
Some companies have moved Medicare-eligible retirees to a Medicare Advantage Prescription Drug Plan (MAPDP), which offers additional benefits beyond Part A and Part B coverage. The federal government pays private insurance companies to offer these plans. Because MAPDPs are fully insured, the insurer would take over the entire administration of the Medicare plan and is well-versed in managing this population, resulting in possible savings and increased efficiencies in plan administration.

Does a pre-Medicare plan make sense?
If the size of your pre-Medicare retiree population is large enough, the most cost-effective solution could be to offer a pre-Medicare retiree-only plan. Retiree populations are different and a pre-Medicare retiree-only plan can be designed with those needs in mind, in a way that efficiently maximizes benefits. For example, retirees are generally on fixed incomes, so a plan designed with set deductibles, copayments, and out-of-pocket maximums is more desirable.

Am I using all the utilization management tools available?
Utilization management programs can be helpful in reducing the cost of covering pre-Medicare retirees. For example, chronic diseases are likely more prevalent in your pre-Medicare retirees than your actives. Helping retirees manage these conditions can benefit not just your covered population but also your bottom line.

Do any of the plan changes that I am making have unintended consequences for my retiree population?
Seemingly small changes can have significant financial impacts for your organization when you look closely at how it affects your retirees—even though retirees likely make up a smaller portion of your total population. For example, for plans that receive the retiree drug subsidy, changes that increase cost sharing or contributions for prescription drugs for retirees may cause the plan to lose eligibility for the subsidy. Instead of cost-shifting, it may make more sense to focus on managing plan costs. You will have the added advantage of possibly lowering retiree medical accounting liabilities—e.g., Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Subtopic 715-60 liability—by potentially reducing projected plan costs, long-term trend, and delaying the impact of the 40% excise tax on high-cost health plans.

When it comes to retiree medical coverage, it is important to ask the right questions. Given the increasing cost of healthcare and retirees’ high utilization, you may be able to make changes that positively affect your retirees and lower the cost of covering them.