Medicare Advantage Star Bonuses

On November 10, 2010, the Centers for Medicare and Medicaid Services (CMS) released a Fact Sheet on the “stars” quality bonus payments for Medicare Advantage (MA) plans. Beginning in 2012, quality bonuses are paid to MA plans that earn 3 or more stars*. Five-star plans will receive a higher quality bonus payment than 4-star plans … 4-star higher than 3.5-star plans … 3.5-star higher than 3-star plans. Plans with less than 3 stars get no bonus and are eventually labeled as “low performers” on the web-based Medicare Plan Finder tool.

The regulations are different than methodology prescribed in the Patient Protection and Affordable Care Act and the Health Care Education and Reconciliation Act of 2010 (ACA). CMS will test an alternative method for bonus payments to understand whether providing scaled bonuses will lead to more rapid and larger year-to-year quality improvements compared to the ACA bonus structure. Essentially, there are two major changes:

1. Four rating levels (3-star, 3.5-star, 4-star, and 5-star plans) instead of two under ACA law (only 4-star and 5-star plans).
2. Increases bonus payments (e.g. 1.5% to 5% for 5-star plans in 2012).

I have two thoughts on the changes to the stars bonus system presented by CMS.

First, I applaud the increase in percentage of bonuses applied to the payment benchmarks. CMS has raised the bonus level for 5-star plans to the maximum allowed by previous federal regulation that applies to state payments to health plans (42 CFR 438.6(c)(5)(iii)). As suggested by Rosenthal, et al. (2006) in their work on provider performance payments, small bonus payments not be enough to effect results in incentive-based contracts (Rosenthal, 2006).

Second, I scratch my head at the inclusion on 3-star health plans bonus payments. While ACA provides NO BONUS for 3-star plans, the new star system gives them 3% starting in 2012. CMS defines 3-stars as “average performance.” This means that even average plans are rewarded. Using 14 months performance history, among the 560 MA plans 84.6% would receive at least a 3% bonus on the benchmark in qualifying counties. This reminds me of giving medals to all of the kids that participate in a competition.

Is CMS rewarding mediocrity? Will this create a sense of entitlement among MA plans? Will it strengthen CMS’ ability to distinguish between high and low performers? Thoughts?

* The quality assessment categories are:

• Staying Healthy: Screenings, Tests and Vaccines
• Managing Chronic (Long-Lasting) Conditions
• Ratings of Health Plan Responsiveness and Care
• Health Plan Member Complaints and Appeals
• Health Plan Telephone Customer Service

Medicaid and non-emergency use of emergency departments

The Deficit Reduction Act gave state Medicaid programs the option of instituting higher copayments for non-emergency use of emergency departments. Some states accepted the option and imposed copays from $3 to $50 to Medicaid recipients for non-emergency ED use. An interesting article in Health Affairs from September/October 2010 found that these copayments did not reduce their non-emergency use of the ED.

According to the study, this effect is contrary to the findings of other studies that show that copays may reduce use for other services and pharmaceuticals. Also, other studies show that commercially insured populations are sensitive to small changes in copays in the use of ED services.

So what makes the emergency department utilization different for Medicaid enrollees? Assuming that the study was designed correctly (and there were some limitations to the study), what is going on? The authors suggest some explanations in their discussion.

1. Medicaid recipients face significant barriers to primary care due to a lack of PCPs that are willing to accept Medicaid insurance payments. Thus, the ED may be a location of last resort.
2. The 1986 Emergency Medical Treatment and Active Labor Act (EMTALA) requires that the service be provided before the ED collects the copay. So, maybe the copay is not actually made to the hospital. (Does this add to the bad debt?) 
3. The Medicaid recipients may not have been aware of the requirement to pay a copay for nonemergency services in the ED. Therefore, the change in the law did not factor into their decision to seek non-emergency care in the ED.

Nonetheless, the contradictory findings underscore how little we understand about the causes of Medicaid recipients’ use of the ED for non-emergency services.

ACA’s Medical Loss Ratio provisions

Today’s press release by the Health and Humans Services states that the Affordable Care Act’s Medical Loss Ratio floor provisions will “increase value for consumers.” In effect, the law requires health insurers to provide rebates to their policyholders if their MLR is less than 85 percent in the large group market or less than 80 percent in the small group market and individual market. There are two points that I’d like to make on these interim final regulations. The interim final regulations can be found here.

First, the regulations recognize important Quality Improvement functions that managed care purports to offer to consumers. The interim regulations define Quality Improvement as activities “grounded in evidence-based medicine, widely accepted best clinical practice, or criteria issued by recognized medical associations, accreditation bodies, government agencies, or other nationally recognized health care quality organizations.”

In addition to the obvious case/disease management initiatives, these activities include:

• “Any HIT expenditure that is attributable to improving health care, preventing hospital readmissions, improving patient safety and reducing errors, or promoting health activities and wellness to an individual or an identified segment of the population, is classified as a quality improvement activity”
• “Fraud recovery expenses … up to the amount of fraudulent claims recovered.”

The second point I want to make is regarding the regulation comments that state, “if the activity is designed primarily to control or contain costs, then expenditures for it may not be included as a quality improvement activity.” On the face, this seems to increase the “value to the consumer.”

The assumption with this comment is that more medical care is good, and that less healthcare (especially when spent on administrative activities) is bad. This is a fallacy debunked by the work done at the Dartmouth Atlas. As summarized by Dr. Skinner, “a high-intensity practice pattern is associated with lower quality of care and worse outcomes than a more conservative practice pattern.”

So, it can be said that managed care activities that control inappropriate utilization of medical care that may decrease quality healthcare outcomes. Numerous studies over the years support this notion. Here is a table of some common inappropriate treatments.

Service	% Inappropriate	Study
Childhood tube insertions	23%	Kleinman et al., 1994
Antibiotics for the common cold	60%	Mainous et al., 1996
CABG surgeries	14%	Winslow et al., 1988
Carotid endarterectomies	32%	Chassin et al., 1987
Upper GI endoscopies	17%	Chassin et al., 1987

Let me know your thoughts on the matter.

Truvada and Medicaid Policy

An important HIV prevention study released on November 23, 2010 showed that when gay men without HIV infection take an antiretroviral medication every day, the pill (Truvada) was more than 90% effective at preventing contraction of HIV. According to the National Institutes of Health infectious disease chief, Anthony Fauci, M.D., this pre-exposure prophylaxis is an important finding for HIV/AIDS research and “has the potential to make a significant impact in the fight against HIV/AIDS.”

This is the best news in HIV/AIDS research since a major clinical study in Thailand demonstrated for the first time that an experimental vaccine could prevent HIV infection among some people.  In October 2009, the study showed that the vaccine treatment group saw HIV infection rates reduced by more than 30% compared with those in the placebo group.

Not to dampen the spirit of this wonderful moment, but it is sobering to consider the financial impact what may someday become standard prevention practice for vulnerable populations. In an article published in the New York Times on November 23, 2010, “Daily Pill Greatly Lowers AIDS Risk, Study Finds,” Donald G. McNeil, Jr. writes that in the United States, Truvada “costs $12,000 to $14,000 a year.” However, the article acknowledges that insurance payers, such as Medicare, do not have established policies for paying for Truvada as a pre-exposure prophylaxis for vulnerable populations. What will be the immediate impact on payers?

As a specific example, Florida Medicaid pays risk-adjusted premiums to managed care companies that participate in the Medicaid Reform pilot counties. As of August 2010, the premium paid to health plans is for members diagnosed with HIV is $1,294.05 ($15,528.60) in the Jacksonville area and $1,899.30 ($22,791.60 annualized) in the Ft. Lauderdale area. Whereas the premium paid to managed care for a disabled male eligible for Medicaid is only $630.52 and $815.52 in the Jacksonville and Ft. Lauderdale areas, respectively.

What if Medicaid managed care companies encouraged doctors to prescribe Truvada as a pre-exposure prophylaxis to Medicaid eligible member that do not have an HIV diagnosis? Would the Medicaid managed care companies receive the increase payment?

According to the Medicaid rules, the answer is maybe. According to the Agency for Health Care Administration (AHCA), the identification of HIV-positive eligible payments in Medicaid Reform pilot areas are made through an algorithm based on specific diagnosis, procedure, and pharmaceutical codes. Developed by Julia Hidalgo, Ph.D., this algorithm examines claims data and if there are two or more Truvada claims in different months within the last 36 months, then the member is technically classified as HIV-positive. However, According to the Medicaid managed care reporting guide, AHCA reserves the right to audit the health plans for “documentation of completed lab testing as interpreted by a licensed physician” and “the health plan must provide the Agency with such enrollee‘s test results upon request.”

By reclassifying these members as HIV-payment eligible, Medicaid managed care would gain an additional annual revenue between $8,000 and $13,000 in Jacksonville and Ft. Lauderdale area, respectively. Assuming no other major medical claims, this could mean up to an additional $10,000 in annual net gain per member in Ft. Lauderdale for managed care plans (up to $3,500 in Jacksonville). AHCA could have an incentive to conduct these costly audits, as health plans may see opportunities for profit. It will be interesting to see if AHCA publishes their policy on pre-exposure prophylaxis for HIV.

 Thoughts?