More About Edwin Park

Edwin Park

Park is Vice President for Health Policy at the Center on Budget and Policy Priorities, where he focuses on Medicaid, the Children’s Health Insurance Program, and issues related to federal health reform.

Full bio and recent public appearances | Research archive at CBPP.org


Reducing Medicare Advantage Overpayments

February 19, 2015 at 12:22 pm

Ahead of Friday’s announcement of Medicare’s preliminary payment rates and policies for Medicare Advantage insurers in 2016, insurers have launched an advertising campaign claiming that potential payment changes would undermine the program.  For numerous reasons, it’s hard to take these doom-and-gloom predictions seriously.

For starters, Medicare Advantage continues to thrive — enrollment has reached an all-time high and is expected to keep growing in 2016, according to the Congressional Budget Office (CBO) and Office of Management and Budget (OMB) — despite health reform’s ongoing, much-needed effort to curb overpayments to insurers.

In addition, Medicare Advantage payments still average about 105 percent of the cost of covering comparable beneficiaries in traditional Medicare, according to preliminary estimates by analysts from the Medicare Payment Advisory Commission (MedPAC), Congress’ official advisory body on Medicare payment policies.

MedPAC estimates that roughly 60 percent of that differential reflects the phenomenon known as “upcoding” — the first time MedPAC analysts have quantified how much upcoding inflates Medicare Advantage payments.  Medicare Advantage includes a risk adjustment system that raises or lowers payments to plans based on their enrollees’ relative health, measured by a “risk score” based on patient diagnoses; upcoding occurs when the risk scores that plans submit rise over time — making enrollees appear increasingly unhealthy — without actual changes in enrollees’ health.  This results in higher-than-warranted payments to Medicare Advantage plans.

Upcoding is a long-standing problem in Medicare Advantage, as CBO and the Government Accountability Office (GAO) have documented.  According to MedPAC, risk scores were 8 percent higher in Medicare Advantage, on average, than in traditional Medicare for comparable beneficiaries.  And MedPAC analysts noted that the amount of upcoding seems to be getting larger.

Policymakers could better address upcoding by raising Medicare’s annually required “coding intensity” adjustment.  Health reform requires the Centers for Medicare and Medicaid Services (CMS) to adjust Medicare Advantage’s risk adjustment system by at least a minimum amount each year to compensate for upcoding.  The President’s 2016 budget would raise that minimum annual adjustment very modestly starting in 2017, saving $36.2 billion over ten years, OMB estimates.

Moreover, while CMS has only applied the minimum required adjustment in recent years, it has the discretion to institute a larger adjustment than required, for example as part of the 2016 preliminary rate announcement.  MedPAC estimates that this year’s adjustment would have to have been more than 50 percent larger to fully offset the effects of upcoding.  (GAO similarly found that the annual adjustment likely needs to be substantially larger than the minimum level.)

Policymakers could also reduce upcoding by excluding in-home health assessments from Medicare Advantage risk score calculations unless the assessment diagnoses are later confirmed in treatment settings.  Medicare Advantage plans increasingly provide in-home health assessments of their enrollees; for example, a nurse may come to a patient’s home to do a physical exam.  CMS has found that insurers primarily use these assessments to “collect” diagnoses in order to increase enrollees’ risk scores for purposes of risk adjustment, rather than to improve follow-up care or identify illnesses requiring treatment.

CMS proposed last year to exclude any diagnoses identified during an in-home assessment that subsequent clinical encounters fail to confirm.  CMS, however, dropped the proposal in the face of industry opposition, opting to collect additional data about the impact of these assessments and revisit the issue later.  CMS could include this prior proposal in its 2016 preliminary rate announcement in order to limit the use of these assessments to promote upcoding.

Attack on “Risk Corridor” Program Falls Apart

November 13, 2014 at 12:32 pm

Congressional Republicans this fall may seek to repeal or block health reform’s temporary “risk corridor” program, designed to help cover any higher-than-expected costs for insurers that offer plans in the new marketplaces while sharing in the savings if costs are lower than expected.  They’ll likely make misleading claims about the risk corridors like those from Senator Marco Rubio and other Senate Republicans in a recent letter to House Speaker John Boehner.  These attacks simply don’t hold up under scrutiny.  Contrary to the Rubio letter:

  • The Administration has full authority to make risk corridor payments. The Rubio letter, citing a Government Accountability Office (GAO) legal opinion, claims that the Administration would violate the Constitution if it makes any risk corridor payments to insurers because it lacks the authority to do so.  But as we recently noted, the GAO opinion actually says the opposite.  Agreeing with the Administration, the GAO finds that the Centers for Medicare and Medicaid Services (CMS), which administers the risk corridors, has the authority to use contributions from insurers with lower-than-expected costs to finance payments to insurers with higher-than-expected costs.  In fact, GAO finds that CMS has the authority to use its regular operating funds to finance risk corridor payments as well.
  • The risk corridor program will be budget neutral. The Rubio letter says that the risk corridor program will put taxpayers at risk if insurers systematically face higher-than-expected costs, which could cause risk corridor payments to exceed contributions.  But the Administration has already issued regulations and guidance ensuring that the program will be budget neutral to the federal government over its three-year existence.

The Rubio letter also fails to mention that repealing or blocking the risk corridor program would result in higher premiums for marketplace plans.  That’s because the program helps keep premiums affordable by reducing uncertainty for insurers.  

Health reform’s major reforms to the poorly functioning individual insurance market (like prohibiting insurers from charging higher premiums to people in poorer health or excluding them entirely) and the launch of its new marketplaces have temporarily raised insurers’ uncertainty in pricing their premiums during the marketplaces’ first few years.  If Congress blocked the risk corridors, insurers would have to build a bigger “risk premium” into their premiums for 2016, making coverage less affordable.  (Insurers have already finalized their 2015 rates.)  And some insurers might decide not to participate in the marketplaces in 2016.

If Congress enacts legislation denying the Administration the authority to make risk corridor payments, that would be virtually certain to drive up the cost of health insurance provided through the marketplaces.

GAO: Administration Can Make Health Reform’s “Risk Corridor” Payments

October 10, 2014 at 1:16 pm

Health reform’s opponents are renewing efforts to kill its temporary “risk corridor” program, through which the federal government will help cover any higher-than-expected costs for insurers that offer plans in the new marketplaces while sharing in the savings if costs prove lower than expected.  But the Government Accountability Office (GAO) legal opinion on which they’re basing this latest attack says the opposite of what they claim.

Citing the GAO opinion, opponents claim that the Administration lacks the legal authority to provide risk corridor payments and that legislation is needed to prevent it from making unlawful payments.  But GAO actually concludes that the Centers for Medicare and Medicaid Services (CMS), which administers the risk corridors, has the authority to use contributions from insurers with lower-than-expected costs to finance payments to insurers with higher-than-expected costs.

GAO finds that CMS has the authority to use its regular operating funds to finance risk corridor payments as well.  But the Administration has made clear that the risk corridor program, which will exist for three years (2014-2016), will be budget neutral over that period — that is, payments won’t exceed contributions.

CMS would only lack authority to make risk corridor payments, GAO finds, if Congress specifically blocked it as part of legislation funding the government for the rest of fiscal year 2015 (when the payments associated with health coverage in 2014 are scheduled to be made).  The GAO opinion thus offers no basis for repealing the risk corridor program or stopping it from taking effect.

Moreover, repealing or blocking the program would result in higher premiums for marketplace plans.  That’s because the program helps keep premiums affordable by reducing uncertainty for insurers.  Health reform’s major reforms to the poorly functioning individual insurance market (like prohibiting insurers from charging higher premiums to people in poorer health or excluding them entirely) and the launch of its new marketplaces have temporarily raised insurers’ uncertainty in pricing their premiums during the marketplaces’ first few years.

If Congress blocked the risk corridors now, insurers would build a bigger “risk premium” into their premiums for 2016, making coverage less affordable.  (Insurers have already finalized their 2015 rates in many states.)  And some insurers might decide not to participate in the marketplaces in 2016.

Once insurers have had several years of actual claims experience with their marketplace plans, they’ll be able to price their premiums with more confidence and accuracy.  At that point, the risk corridors will no longer be needed and will expire as scheduled.

Damaging House Bill Would Undo Health Reform Protections and Raise Small Business Premiums

September 9, 2014 at 2:02 pm

The House this week is scheduled to consider a bill sponsored by Rep. William Cassidy (R-LA) that would allow insurance companies, through 2018, to continue to offer to any small employer the health insurance plans in the small group market that the insurers were selling in 2013.

In short, the bill is another attempt to undermine health reform and try to ensure it doesn’t succeed, as we explain in a new analysis:

Under the bill, such plans would not have to comply with the Affordable Care Act’s (ACA) market reforms and consumer protections that otherwise apply to all health insurance plans offered in the small group market, starting in 2014.

The bill would go well beyond the existing Administration transition policy that permits states to allow insurers to continue — through 2016 — to offer non-ACA-compliant plans in the individual and/or small group market to individuals and employers who were previously enrolled in such plans. . . [T]he Cassidy bill would likely have serious adverse effects both on premiums in the small group market — causing them to rise substantially for many small firms — and on health reform’s consumer protections, such as the reform that prevents insurance companies from charging higher premiums to firms with older, less healthy workforces.

Click here to read the full paper.

CBO Findings Refute the Medicare Part D Myth

August 6, 2014 at 2:37 pm

The Medicare drug benefit’s lower-than-expected costs do not reflect efficiencies produced by competition among private insurers, as we’ve repeatedly explained.  The main factors were the slowdown in per-capita drug spending throughout the U.S. health care system and lower-than-expected Medicare Part D enrollment — and the Congressional Budget Office (CBO) concurred with our analysis in a recent report, finding:

  • National drug spending growth fell unexpectedly because many drugs went off-patent, the use of lower-cost generic drugs increased substantially, and fewer new drugs, which tend to be more costly, came to market.  National drug spending in 2012 was therefore much lower than what the Centers for Medicare and Medicaid Services’ actuaries projected in 2003 when the Medicare drug benefit was enacted.  CBO states that “spending per beneficiary in Part D has been lower than CBO projected in part because of those developments affecting nationwide drug spending.”
  • Part D enrollment was also lower than CBO projected — by 12 percent, in 2012.  CBO originally assumed that participation in the drug benefit would be similar to enrollment rates in Medicare Part B.  But CBO now believes that Part D participation is lower than in Part B likely because Medicare beneficiaries must actively enroll in the drug benefit — which can reduce participation — while eligible individuals are automatically enrolled in Part B and must actively opt-out.
  • CBO thus concludes: “Taken together, the unexpected slowdown in national drug spending per person and smaller-than-expected enrollment in Part D can account for nearly all of the difference between CBO’s original estimate and actual Part D spending” (italics added).

That’s all consistent with our analysis as well as that of the Kaiser Family Foundation, which found that there “is compelling evidence that factors other than competition offer the best explanations for the lower-than-expected spending trend” in Part D.