The CMS Blog

Promoting Greater Value for Enrollees in Medicare Advantage and Drug Plans

By Jonathan Blum, Acting Principal Deputy Administrator and Director, Center for Medicare

Posted February 15, 2013

New limits on overhead and profits for health plans in Medicare Advantage and Medicare drug plans will increase value for the over 14 million seniors and persons with disabilities enrolled in Medicare Advantage and over 35 million Medicare beneficiaries in drug plans offered by private insurance companies.  This step is part of the Affordable Care Act’s efforts to ensure that consumers get the most health care for their dollars.  Last year, we issued a rule to make sure that insurance companies generally spend at least 80 percent of the premiums paid by consumers in private health plans on health care or activities that improve health care quality, instead of paying for administrative costs or overhead.  Today’s proposal for people with Medicare is similar to last year’s rule benefiting consumers in the private health insurance market.

Seniors and individuals with disabilities will get more value and be more likely to stay healthy as plans invest more in their health care.  Specifically, beginning in 2014, Medicare health and drug plans will be required to meet a minimum medical loss ratio; they must spend at least 85 percent of revenue on clinical services, prescription drugs, quality improvements, and/or direct benefits to beneficiaries in the form of reduced Medicare premiums.  The higher the medical loss ratio, the more a health plan is spending on health care services and quality improvement activities and less the health plan is spending on non-health related items.

The medical loss ratio policy will spur Medicare plans to become more efficient in their operations.  Medicare plans not already meeting the medical loss ratio can either reduce administrative costs, profits, or increase benefits to meet the minimum medical loss ratio.

The Affordable Care Act requires that if a Medicare plan’s medical loss ratio is below 85 percent, the plan must return the amount by which the plan’s medical loss ratio is below this minimum.

The proposal will also enhance transparence for prospective enrollees.  When comparing their options and making choices, people with Medicare and their caregivers will be able to consider information about a plan’s medical loss ratio, along with quality ratings, coverage, premiums and other factors that influence their health care decisions.

With careful use of taxpayers’ dollars on health care services and improvements, the Affordable Care Act will create greater value for seniors and persons with disabilities enrolled in Medicare plans by helping them stay healthy.  And with additional information about health plan spending and quality, people with Medicare are better equipped than ever before to make informed health care choices.

Bundled payments, DMEPOS, regulatory reform, and ESRD

By Jonathan Blum, Acting Principal Deputy Administrator and Director, Center for Medicare 

In the past few days, the Centers for Medicare and Medicaid (CMS) announced four critical initiatives that are designed to enhance health care delivery for millions of Medicare beneficiaries by improving care or lowering costs, or both.  Taken together the announcements illustrate the breadth and diversity of efforts underway to ensure a better, stronger, more patient-centered Medicare program.

Last week, we announced a new health care delivery system reform, made possible by the Affordable Care Act, to test how bundling of payments for episodes of care, for example a heart attack or stroke, instead of paying for each test or procedure or physician’s visit, can result in more coordinated, higher quality care for beneficiaries.  By bundling payments for services that beneficiaries receive during an episode of care, CMS hopes to encourage doctors, hospitals, and others  to work together to improve care and health outcomes, while also lowering Medicare costs.  Over 500 organizations, nationwide, have already signed-on to participate.

We also announced a major expansion of the Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) Competitive Bidding Program.  In its first year of operation, competitive bidding, where prices are based on suppliers’ bids, saved the Medicare program, and taxpayers, over $202 million, while maintaining access to quality products for Medicare beneficiaries in the nine areas of the country where the program launched.   It’s a great example of the Administration’s determination to put the brakes on runaway healthcare costs.  With this expansion in the program, Medicare beneficiaries in 91 major metropolitan areas will save an average of 45 percent on certain DMEPOS items beginning in July.  Between 2013 and 2022, we estimate that the expansion of the DMEPOS program will save Medicare $25.7 billion, while saving beneficiaries, who pay a percentage for medical equipment and supplies, $17.1 billion through lower prices.

This week, we issued a proposed rule which will help health care providers and hospitals to operate more efficiently by getting rid of regulations that are outdated, obsolete, or excessively burdensome.  Many of the rule’s provisions streamline requirements that health care providers must meet in order to participate in the Medicare and Medicaid programs, without jeopardizing patient safety, and they will save providers nearly $676 million annually.  Just as important, by eliminating burdensome requirements, health care providers can improve the quality of health care delivery for Medicare beneficiaries by spending more time focusing on patient care and less time filling out forms.

Finally this week, we announced the Comprehensive End-Stage Renal Disease (ESRD) Care Initiative.  It will help identify, test and evaluate new ways to improve care for Medicare beneficiaries living with ESRD.  We’ll be working with the health care provider community to care for a population that significant and complex health care needs.  Through better care coordination, beneficiaries can more easily navigate the multiple providers involved in their care, ultimately improving their health outcomes.

These four initiatives demonstrate that CMS is employing new and novel tools and programs, thinking outside the box and beyond the usual way of doing things, in order to improve health care delivery for people with Medicare and, in the process, strengthen the Medicare program for current and future beneficiaries.

Medicare Announces Substantial Savings For Medical Equipment Included In The Next Round Of Competitive Bidding Program

By Jonathan Blum, Acting Principal Deputy Administrator and Director, Center for Medicare

Last week, the Centers for Medicare & Medicaid Services (CMS) announced new, lower Medicare prices that will go into effect this July in a major expansion of the DME Competitive Bidding Program from nine areas to 91 areas. The CMS Office of the Actuary estimates that the program will save the Medicare Part B Trust Fund $25.7 billion and beneficiaries $17.1 billion between 2013 and 2022. Medicare beneficiaries in these 91 major metropolitan areas will save an average of 45 percent for certain DME items scheduled to begin on July 1, 2013.

To reduce costs and the fraud resulting from excessive prices, CMS introduced a competitive bidding program in nine areas of the country in 2011. Under the DME competitive bidding program, Medicare beneficiaries with Original Medicare who live in competitive bidding areas will pay less for certain items and services such as wheelchairs, oxygen, mail order diabetic supplies, and more. Competitive bidding for DME is proven to save money for taxpayers and Medicare beneficiaries while maintaining access to quality items and services.

Additionally, Medicare beneficiaries across the country will save an average of 72 percent on diabetic testing supplies under a national mail-order program starting at the same time.

Medicare thoroughly vets all suppliers before awarding them contracts in the program. Suppliers must be accredited and meet stringent quality standards to ensure good customer service and high quality items. We have also monitored the program areas extensively, and real-time monitoring data have shown successful implementation with very few beneficiary complaints and no negative impact on beneficiary health status based on measures such as hospitalizations, length of hospital stay, and number of emergency room visits compared to non-competitive bidding areas.  CMS will employ the same aggressive monitoring for the MSAs added in Round 2.

A full list of the new prices and included items is available at www.dmecompetitivebid.com.

106 NEW ACOS – GOOD NEWS FOR PEOPLE WITH MEDICARE

By Jonathan Blum, Acting Principal Deputy Administrator and Director, Center for Medicare

The Centers for Medicare & Medicaid Services (CMS) is pleased to announce the latest group of Accountable Care Organizations (ACOs) participating in the Medicare Shared Savings program.  This is the third group since the Medicare Shared Savings program was launched over a year ago.

ACOs are groups of doctors and other health care providers that have agreed to work together to treat individual patients across care settings.  They share—with Medicare—any savings generated from lowering health care costs while meeting standards for quality of care and providing patient-centered care.

If you have one of these new ACOs in your area, it means that physicians will work together as a team to better share information and coordinate your treatment. 

ACOs are just one of a host of Affordable Care Act provisions that improve Medicare—for example, when you go home from the hospital, you’ll get the care you need to reduce the risk of going back to the hospital.  All of these are designed to increase the value of health care services and they were all put in place by the Affordable Care Act. 

Across the country, 106 new Medicare Shared Savings Program ACOs began operation in January.  They’re located in 47 states and territories—from the most remote community in Montana to as far away as Puerto Rico. 

Roughly half of all Medicare Shared Savings ACOs are physician-led organizations that serve fewer than 10,000 beneficiaries.  Approximately 20 percent of ACOs include community health centers, rural health centers and critical access hospitals that serve low-income, and rural communities.  Fifteen of the new ACOs qualified to be “Advance Payment ACOs,” an innovative model designed especially for entities such as small doctors’ practices or hospitals and doctors that work in remote rural areas.

That’s good news for people with Medicare. 

Great health care is not simply a matter of showing up at your doctor’s office and getting a problem fixed.  It means physicians coordinating and improving the overall standard of care for their patients, which means important gains in patient safety, care quality, and value.

In other words, great health care requires a team that will work together at every stage of your care, which can lead to better health at lower cost.  That’s the aim of the ACOs.  Affordable Care Act reforms such as ACOs have helped to set Medicare on a more sustainable path today and into the future, as well as serve as a model for what improvements are possible for our nation’s health care system.

And that’s good news for all Americans.

Tying Medicare Payment to Quality

By Patrick Conway, MD, MSc  

CMS Chief Medical Officer and Director of the Center for Clinical Standards and Quality

In mid-December, the Centers for Medicare & Medicaid Services (CMS) posted one of the most important steps we’ve taken yet for Medicare reform. 

Go to http://www.cms.gov/Medicare/Quality-Initiatives-Patient-Assessment-Instruments/hospital-value-based-purchasing/index.html and you’ll find a chart labeled “FY 2013 HVBP Payment Adjustment Factors” with provider numbers and percentages.  This chart is the latest sign of how serious Medicare is when it comes to making sure its beneficiaries get the best quality care. 

The Hospital Value-Based Purchasing Program is one of a host of Affordable Care Act programs that put patients at the center of the Medicare system.  We’ve known for a long time that when Medicare paid providers based on how much work they did and not on how well they did for patients, too often patients got services and tests that didn’t improve their health.  Providers already must publicly report the steps they take to provide quality care to Medicare beneficiaries; Hospital Value-Based Purchasing gives these efforts additional teeth. 

Beginning in 2013, Medicare will start paying hospitals a little more or a little less in each payment depending on how well they meet Medicare’s quality standards.  The value-based payment adjustment factors tell them how much their base Medicare payments will change.

Hospitals are graded on improvement as well as performance on a variety of quality measures.  These standards are consistent with clinical practice for the provision of high quality care.  Did emergency room staff follow the right protocols with a heart-attack patient?  Did a patient get antibiotics before surgery?  Did your nurses and doctors listen to you?

Hospital Value-Based Purchasing is a carefully crafted program.  It’s built on the same recommendations that private purchasers of health care and the Institute of Medicine have recommended and tested for a decade or more.  It does not add to the deficit.  One percent of the base Medicare payment for each Medicare patient discharged from an eligible hospital funds the FY 2013 program.  CMS consulted with a wide range of stakeholders—from hospitals to patient advocates—every step of the way. 

CMS reviewed nine months of data from July 1, 2011, to March 30, 2012 measure both performance and improvement in the first year of the program.  We published our initial calculations in April, gave hospitals updated calculations in October, and posted these final adjustment factors only after the hospitals had a chance to review them.  And, only 15 hospitals out of almost 3,000 asked us to review our calculations. 

If you go to the chart, you’ll see the base payment adjustments that Medicare will be making for every single discharge from an eligible hospital, depending on the quality of care the hospital provided.  This demonstrates Medicare’s commitment to ensuring that its beneficiaries get the best quality care. 

In the next few years, as payment incentives gradually increase and more quality measures are added to the program, we will continue working with hospitals to make sure Medicare beneficiaries’ quality of care improves.  The Hospital Value-Based Purchasing program is off to a strong start.  Posting the value-based payment adjustment factors may seem like a routine step, but it actually heralds a new era in which Medicare actively promotes the best care for beneficiaries and makes their health priority #1.