The Center's work on 'Medicare' Issues

Despite Anti-Fraud Rhetoric, Republican Budgets Omit Funding to Combat Fraud and Abuse

March 25, 2015 at 5:00 am

The budgets that the House and Senate will consider this week leave out the funding that the 2011 Budget Control Act (BCA) specifically allows for “program integrity” activities to fight fraud and abuse in Medicare, Medicaid, and disability programs, despite the fact that these activities have a proven track record of saving money.  This action stands in contrast to Republican claims that their budgets will make government spending more “efficient and effective.”

Both the House and Senate budgets fail to include the $1.166 billion in funding the BCA sanctions in 2016 for reducing overpayments and fraud in the Social Security Disability Insurance and Supplemental Security Income (SSI) programs, and the $395 million for combatting Medicare and Medicaid fraud.  Congress provided the allowed amounts for fiscal year 2015 — $1.123 billion to combat fraud and overpayments in the disability programs and $361 million to address Medicare and Medicaid fraud — but under the new House and Senate budgets, this funding would end.

These program integrity activities have been found to save substantial sums, reduce program costs, and thereby lower budget deficits.  For example, a key use of program integrity funding for Social Security and SSI is to conduct “continuing disability reviews” to weed out beneficiaries who have recovered from their impairments.  The Social Security actuaries have found that these reviews save about $10 for every $1 they cost.

Similarly, program integrity activities to detect and stop erroneous payments and outright fraud in Medicare and Medicaid (including payments to doctors and hospitals that improperly bill or overbill the programs) saved about $8 for each dollar spent on such efforts in 2012-2014.

The funds in question are the amounts the BCA specifically allows for designated program integrity activities with a proven track record of saving money.  Because these activities yield savings significantly exceeding their cost, the BCA allows specified amounts for these program integrity efforts that don’t count against the BCA’s austere appropriations caps.

Many Republican lawmakers have been vocal in criticizing various programs for people who have disabilities or low-income families by charging that the programs are marked by fraud and abuse.  This can make good political and campaign rhetoric.  Now comes the question:  will they put their money where their mouths are?

Even if the budget resolutions do not include these funds, the Appropriations Committees may still be able to provide them when they write the annual appropriations bills.  That would be the right thing to do.

House Bill to Extend Children’s Health Funding Would Ease Pressure on States

March 24, 2015 at 2:27 pm

The House is likely to vote this week on a bipartisan compromise to permanently fix Medicare’s flawed physician payment formula (SGR) and extend federal funding and current policy for the Children’s Health Insurance Program (CHIP) for two years.  The continued momentum for extending CHIP funding quickly and cleanly is important not only for the millions of children who rely on the program for health coverage, but also for states and their budgets.

Six state legislative sessions have already ended, and Kentucky will become the seventh when it adjourns today.  So while lawmakers have yet to make new federal funding for CHIP available starting in October, states are passing budgets for the next fiscal year — which in most states begin on July 1 — nowRepublican and Democratic governors alike have called for CHIP funding certainty and quick extension.

Each week that passes without congressional action on CHIP places states in a tougher position.  For example, a recent survey of state CHIP directors found that if uncertainty about the program’s funding persists, states will have to pursue contingency plans that reflect the risk that no new federal CHIP funding will be available, such as how to move kids out of CHIP coverage and how to inform families that coverage could end.

To be sure, it would be better if the House bill extended federal CHIP funding for four years in order to ensure longer-term stability for the program and the children it serves (and robust efforts are expected to secure that in the Senate once the House bill is passed).  Nevertheless, the House bill does right by states and kids in other critical aspects.  Most importantly, the House bill maintains program improvements that Congress made in 2009 and 2010, while leaving out proposals floated by House and Senate committee chairs last month that would likely cost many children their coverage while shifting costs to states.

House Bill Makes Permanent Medicare Premium Assistance for Low-Income Beneficiaries

March 24, 2015 at 11:24 am

The compromise legislation that House Republican and Democratic leaders unveiled today to permanently fix Medicare’s flawed physician payment formula and extend funding and current policy for the Children’s Health Insurance Program (CHIP) through 2017 has another important feature — it would also make permanent the Qualifying Individuals (QI) program, which helps low-income Medicare beneficiaries pay their premiums and is otherwise slated to expire at the end of March.

QI is one of the Medicare Savings Programs (MSPs) through which Medicaid helps low-income Medicare beneficiaries pay their Medicare premiums and/or other cost-sharing charges.  QI covers the annual Medicare Part B premiums for beneficiaries with incomes between 120 percent and 135 percent of the poverty line (roughly $14,100-$19,100 for singles and $15,900-$21,500 for couples).  The program helps more than half a million near-poor seniors and people with disabilities pay their premiums.

Policymakers periodically need to extend QI — unlike the other MSPs, which are permanent features of Medicaid — and it’s once again scheduled to expire.  In finally making QI permanent, the House legislation would ensure that QI beneficiaries can continue to receive benefits, which are worth about $1,260 in 2015, over the long run.  Moreover, because people enrolled in QI are automatically enrolled in the Medicare drug benefit’s Low-Income Subsidy, which helps low-income beneficiaries with their premiums and cost-sharing for their drug coverage, they’d be assured of continuing to receive that assistance as well.

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.

Projected Health Spending Has Fallen Since 2010, Even With Health Reform’s Coverage Expansions

January 28, 2015 at 11:20 am

The Congressional Budget Office (CBO) now projects that federal health spending — including the costs of health reform’s coverage expansions — will be about $600 billion less over 2011-2020 than CBO projected in January 2010 without health reform (see figure).

In other words, projected health spending over the decade has fallen by $600 billion since 2010, despite $1 trillion in additional spending for premium tax credits and expanded Medicaid to help cover 27 million more Americans.

The decline in projected spending, which continues a pattern of downward revisions to CBO’s projections in recent years, stems from several factors.  One is health reform’s cuts in payments to Medicare providers and health plans.  Another is the recession, which has reduced the demand for health care services by slowing income growth.

But CBO and other experts have also concluded that a substantial part of the health care cost slowdown reflects structural changes in the health care system.  Professional associations, hospitals, and doctors are taking steps to curb costly and ineffective procedures and treatments.

CBO’s new report says, “Although views differ on how much of the slowdown is attributable to the recession and its aftermath and how much to other factors, the slower growth has been sufficiently broad and persistent to persuade [CBO and the Joint Committee on Taxation] to significantly lower their projections of federal health care spending.”

Health reform itself has most likely contributed to the slowdown as well.  As Kaiser Family Foundation President Drew Altman has written, “Even though its direct effects on system-wide costs may be limited so far, I believe Obamacare is having a significant indirect effect, although cause and effect and the magnitude are hard to prove. . . .  [It] is entirely likely that Obamacare has played and will continue to play a role in the slowdown in health-care cost growth and accelerating market change.”

To be sure, federal health spending — even if cost growth remains moderate — will keep rising as more baby boomers become eligible for Medicare and Medicaid.  Making the U.S. health care system more efficient thus remains a major budget challenge.  But CBO’s latest projections show that we’ve already made substantial progress.