Sunday, October 13, 2019

Government Watchdog Faults Trump Administration’s Approval of Medicaid Work Requirements
From Kip Sullivan: Early in October CMS announced that its main ACO program, the Medicare Shared Savings Program, saved $739 million in 2018 after accounting for bonuses paid out to some ACOs and collecting penalties from a few others. CMS released a similar press release a year ago announcing smaller savings in 2017 (after announcing losses between 2012-2016).

What CMS has never bothered to announce is (a) the savings constitute a tiny fraction of Medicare spending on the Medicare beneficiaries assigned to ACOs (without their knowledge) and (b) these savings are much smaller than the overhead costs of the ACOs (I'm not even counting CMS's overhead in running that complex program).

According to an article in Medpage, the savings in 2018 equaled a mere $73 per beneficiary. to the Medicare Trustee's report, per beneficiary spending in 2018 was $13,665 (Table V.D1p 185).

When we do the math, we discover the $73 per beneficiary savings in 2018 was half a percentage point of total Medicare spending on the 10 million beneficiaries assigned to ACOs in 2018.

According to MedPAC's staff, the average ACO has overhead of 2 percent of Medicare spending. (I suspect that's low.) Obviously, 2 percent is four times half a percent. ACOs, in short, are raising total spending.

The complete disinterest in administrative costs is par for the course for CMS and other managed care advocates. All the managed care schemes ever proposed -- from HMOs in the 1970s to "medical homes" in the 2000s to the Hospital Readmissions Reduction Program in the 2010s -- were proposed without any evidence on the administrative costs of these schemes. Managed care buffs suffer from terminal free-lunch syndrome.

Interestingly, Kaiser Health News yesterday summarized a Wall St J story about a GAO report saying Trump's wizards at HHS forgot to include administrative costs in their estimate of how much Medicaid would save if states added work requirements to their Medicaid programs. I have pasted in the blurb below. Notice the final bolded sentence.

Beats me why the GAO hasn't done this for all the managed care fads.

1 comment:

Craig said...


Kip asks: How the hell do Medicare Advantage companies save money for Medicare with overhead like that?

The answer is, in this situation it's not about overhead costs.

Try wrapping your mind around this: Reports state Medicare Advantage private insurance policies (MA) cost less than Fee For Service (FFS) Original Medicare, yet other reports state that MA plans resulted in $21 billion overpayments in 2010. How can that be? Is your head spinning yet?

I might be wrong, but my understanding is Medicare Advantage (MA) insurance doesn't actually save money for Medicare. But compared to what Medicare FFS would pay if it was the payer, as it's currently structured, it is actually less. Confused? Me too. Here's what I figured out:

Medicare pays MA plans a capitated (set fee per patient) amount for each person enrolled (plans receive more $ for high risk patients). They also can receive additional money that the Centers for Medicaid and Medicare Services (CMS) offers based on various factors. MA must pay for all Medicare covered claims from that money. Medicare Parts A and B, is completely removed as a payer of any individual claims. (In comparison, Supplement insurance plans are second payer after Medicare A and B pays first). MA plans make gigantic profits (more than from their other health insurance policies) because what they get paid per person, in aggregate, is far more than what they pay out. Simple math. How much Medicare (CMS) decides to pay the MA insurance companies provides huge profits.

MA insurance companies control their costs (paying out claims) by negotiating fees, decreasing utilization by requiring referrals to specialists, attracting healthier seniors, limiting networks, and denying care. MA insurance companies make enormous profits from the payment structure created by CMS. MAs often offer additional services from CMS "rebate money" (dental, homecare, hearing aids, etc) that Original Medicare and Supplements don't. They can keep monthly premiums to consumers low or zero incentivizes consumers to buy their products.. (Restrictions, deductibles, copymts, co-insurance vary by policy).

So...currently, MA plans are paid using CMS developed formulas. These formulas are derived from benchmarks calculated by CMS from FFS Medicare costs and other variables. The MA private insurance companies are able to make huge profits using the CMS formulas. They are overpaid. CMS hasn't been interested in changing the rules. FFS, if used exclusively as it is currently, would still cost more than MA because MA has developed ways to save costs. Profit. Profit. Profit. Waste. Waste. Waste.

Medicare Advantage (MA) programs aren't providing an actual cost savings for Medicare. But, they are playing within the rules created by the government. And, that needs to change.

We need a single-payer, universal coverage national health plan!!! We absolutely need administrative waste out of the equation. In addition, the Plan must be created and developed to efficiently address coverage, costs, and payment structures.

Do you have a different understanding of this situation?

Taking deep breaths,

Barbara Qualley

How Medicare Advantage Plans Are Paid: The Devils–and the Insights–Are in the Details