Tag Archives: Medicare

Overview of Part D Senior Savings Model and impact on out-of-pocket costs

The Centers for Medicare and Medicaid Services (CMS) recently announced the Part D Senior Savings Model, a new Medicare Part D initiative created to reduce beneficiary cost sharing for insulin products. It is designed to make insulin product cost sharing more affordable and predictable for Medicare beneficiaries. Plans opting to participate in this voluntary Model are required to provide insulin at a maximum $35 copay per 30-day supply in the first three phases of coverage under Medicare Part D.

The new Model also modifies how supplemental benefits, such as a $35 copay, are applied in the coverage gap. Under the current Part D benefit design, if a plan sponsor provides supplemental benefits on applicable drugs in the coverage gap, the manufacturer coverage gap discount of 70% applies only to the beneficiary cost sharing. This increases the plan’s liability in the coverage gap and may discourage a plan from offering supplemental gap benefits for applicable drugs. Through the Model, however, the 70% discount paid by the manufacturer will apply prior to any supplemental benefits.

In this paper, Milliman professionals explore the impact of the Model on patient out-of-pocket costs. Using Milliman’s Part D Claims Database, they apply the Model benefits to observed experience of non-low-income beneficiaries on insulins.

2020 cost-of-living adjustments for Medicare

The Centers for Medicare and Medicaid Services (CMS) of the U.S. Department of Health and Human Services (HHS) has announced cost-of-living adjustments (COLAs) for Medicare Parts A and B for 2020. In April this year, CMS announced the 2020 amounts for the Medicare Part D standard prescription drug benefit.

For more perspective, read this Milliman Client Action Bulletin.

What was the impact of the Next Generation ACO Model on Medicare spending in 2016?

In September 2016, the Center for Medicare and Medicaid Innovation (CMMI) selected NORC at the University of Chicago to conduct an independent evaluation of the Next Generation Accountable Care Organization (NGACO) Model program. On August 27, 2018, CMMI released NORC’s first report on the findings of its evaluation, which included NORC’s estimate of the impact of the NGACO program on Medicare Part A and Part B spending (gross impact) in 2016. NORC defined the net impact of the program by combining this gross impact with the results of the NGACO program’s shared savings and losses. These results were published by CMMI in October 2017 (i.e., shared savings and losses).

In this paper, Milliman consultants combine the aggregate gross impact of each of the NGACOs shown in the NORC report with the shared savings/(loss) results of each NGACO to calculate the net impact of each individual NGACO.

Modified HRRP benchmark may affect provider reimbursements

The 21st Century Cures Act was passed into law in 2016 with the express purpose of decreasing hospital readmissions. In connection with the legislation, the Centers for Medicare and Medicaid Services (CMS) announced changes to the Hospital Readmission Reduction Program (HRRP) in fiscal year (FY) 2018, finalizing those changes with the release of the FY 2019 Inpatient Prospective Payment System (IPPS) final rule. The program has been modified to incorporate measurements of the socioeconomic status of patients served by each hospital.

CMS has altered the HRRP benchmark that readmission rates are measured against. The new rule groups hospitals into “peer groups” that are defined in terms of the proportion of patients with dual eligibility for both Medicare and Medicaid. Rather than one benchmark applying across the board to all hospitals, different benchmarks will now apply for each peer group.

The changes to HRRP starting in FY 2019 could have significant monetary impacts to a provider’s reimbursement. Milliman’s James Lucas illustrates the effects in his article “Fiscal year 2019 HRRP impact to hospitals.”

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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