Health Care

Congress Quietly Acts to Improve Medicare

Congress might not be too popular these days, but quietly a week and a half ago, they passed a small but important bill that could pave the way for Medicare delivery system reforms. Just before leaving town, the House and the Senate each passed the Improving Medicare Post-Acute Care Transformation, or IMPACT Act of 2014 (H.R. 4994), by unanimous consent.

The National Law Review framed it appropriately:

The bill would enact data standardization across various post-acute care settings which could feed into various site-neutral and bundled payment initiatives. These initiatives could take a number of forms including independent legislation that targets the post-acute care sector, inclusion in broader payment reform efforts like the Medicare physician payment formula (SGR), and/or in efforts out of the Centers for Medicare and Medicaid Services (CMS) via demonstration authority. As we have noted in the past, post-acute care remains one of the top areas where health policy experts anticipate promising Congressional action this and next year. For example, post-acute care has been a priority for Senate Finance Committee Chairman Ron Wyden and is an area ripe for significant delivery and payment reforms.

The bill itself has little impact on the budget, increasing spending by $222 million to satisfy the new data requirements, offset by penalties for Skilled Nursing Facilities (SNFs) that don't satisfy the reporting requirements and reductions in caps on payments to beneficiaries in hospice care. The bill overall would save money but rather than use the net savings to reduce the debt, it adds $195 million to the "Medicare Improvement Fund," which hasn't actually funded Medicare improvements but serves as a sort of piggy bank to pay for doc fixes and other health policies.

MY VIEW: Judd Gregg

Judd Gregg, a former Republican senator from New Hampshire, served as chairman of the Senate Budget Committee from 2005 to 2007 and ranking member from 2007 to 2011. He recently wrote an op-ed featured in The Hill. It is reposted here.

At Dartmouth College in New Hampshire, there was recently a gathering of major healthcare public policy experts, senior staff of congressional health committees, and people concerned about both the health of Medicare and the health of the nation’s fiscal situation.

It was a small group with a specific goal: To come up with some doable proposals that are bipartisan in nature and can be used both to improve the delivery of Medicare to seniors and to reduce its unsustainable cost path, which is a large driver of the nation’s debt.

It was called “The Dartmouth Summit.”

New Bipartisan Bill to Lower Prescription Drug Costs

A new bipartisan bill seeks to drive down prescription drug costs for consumers and the federal government.

The Fair Access for Safe and Timely Generics Act or FAST Generics Act (H.R. 5657) was introduced late last week by Rep. Steve Stivers (R-OH) and Rep. Peter Welch (D-VT). It's goal is to close a loophole in drug safety rules (Risk Evaluation and Mitigation Strategies, or REMS) that allows name-brand drug manufactures to withhold access to some drug samples from generic manufactures, who generally use these samples to help produce safe and cheaper generic versions of drugs.

This bill comes on the heels of a report by Matrix Global Advisors that estimated:

[the] delay [in] generic market entry for these products totals $5.4 billion in lost savings to the U.S. health care system annually. The federal government bears a third of this burden, or $1.8 billion… Among government health care programs, Medicare, which accounts for nearly 26 percent of total U.S. prescription drug spending, experiences lost savings of $1.4 billion annually. The economic cost to Medicaid (both federal and state) totals $400 million.

A version of this policy proposal was also contained in a 2012 bill (S. 2516) by Senator Tom Harkin (D-IA), which CBO estimated at the time would reduce deficits by $753 million over ten years.

Mixed News for ACOs in CMS' Latest Update

The Centers for Medicare and Medicaid Services released some mixed news on Tuesday for health care reformers -- the results of two different Medicare Accountable Care Organization (ACO) programs in 2013. Twenty-three Pioneer ACOs and 220 ACOs in the Medicare Shared Savings Program (MSSP) generated somewhat modest savings of $372 million for Medicare while qualifying for shared savings payments of $445 million. Both programs performed better on quality benchmarks and patient experience compared to fee-for-service (FFS) Medicare. ACOs are one model that many reformers hope will provide a path forward for better coordinated, higher quality, and more affordable care delivery.

The Pioneer ACOs involve organizations and providers that are more experienced in coordinating care, so they are already on the second year of the program and have more ambitious savings targets. The Pioneers may share in savings if they exceed those targets but also face risk if they fail to meet them, unlike most MSSP ACOs. Overall, Pioneer ACOs saved $96 million, $41 million for the Medicare trust funds, and qualified for $68 million of shared savings payments. Eleven of the 23 ACOs qualified for those payments, while 3 had losses.

More Interesting Charts from CBO Director Elmendorf's Presentation

Earlier in the week, we highlighted a portion of CBO Director Doug Elmendorf's presentation at Cornell University highlighting the increased resources going to health care, Social Security, and interest spending to the detriment of the rest of the budget. In addition, the slideshow contained other helpful charts showing how the federal budget could change over the next decade, the choices policymakers face to alter the trajectory of debt, and a further look at the impacts of the Affordable Care Act. Here are some of the more interesting charts from that presentation.

Putting Debt on a Sustainable Path Requires Significant Changes

With debt set to continue to rise as a percent of GDP, simply maintaining the status quo will require significant changes. Keeping debt stable at its current elevated level of 74 percent of GDP for the next 25 years would require $2 trillion of savings over ten years, twice as much as the savings in the President's budget. Getting debt close to its historical average of 40 percent of GDP in 25 years will require $4 trillion in ten-year savings.

Individual Income Tax Revenue is the Only Growing Revenue Stream

CBO's ten-year projections show only a modest rise in revenue as a share of GDP over the next decade, from 17.5 percent to 18.2 percent, and in fact from 2015 to 2024 revenue will remain roughly flat.

Medicare Growth Continues to Be Slow

Prior to the release of CBO's August baseline, we surmised that one of the revisions to the budget would come from Medicare, whose growth in 2014 had come in much lower than CBO expected. As it turns out, CBO did revise Medicare spending in 2014 down by $9 billion, with growth expected to be a very low 2.4 percent for the year.

The Health Spending Outlook Has Improved But Pick-Up in Growth Still Expected

In a highly anticipated release, the Centers for Medicare and Medicaid Services (CMS) this week released updated data and projections on National Health Expenditures (NHE) and its components. This release updates the last set of projections put out in January and extends the time period by a year to 2023. Overall, the latest projections show another year of slow health care spending growth in 2013, but a pick-up in growth starting this year.

NHE growth is projected to have been just 3.6 percent in 2013, similar to what it has been since 2009 and only slightly above the 3.4 percent economic growth rate for that year. Growth is then expected to pick up -- as it has in past projections -- to 5.6 percent in 2014 as a result of the coverage expansions in the Affordable Care Act kicking in. It will then decelerate to 4.9 percent in 2015 due to reductions in Medicare Advantage payments, the expiration of a temporary hike in Medicaid primary care physician payments, and stabilization in Medicaid enrollment. For the rest of the projection period, growth will hover around 6 percent. Over the 2013-2023 period, NHE growth is projected to average 5.7 percent, 1.1 percentage points higher than the 4.6 percent projected economic growth rate, but still roughly a percentage point slower than the recent historical average.

The newest projections represent an improvement over CMS's previous ones, as NHE spending has been revised down by a total of $860 billion over the comparable 2012-2022 window.

BPC Kicks Off Series on Delivery System Reform

The Bipartisan Policy Center's Health Project has kicked off a series of white papers on overcoming the obstacles to delivery system reform with an overview of the opportunities and challenges for reform, over a year after producing a comprehensive health care reform proposal. The white papers will be done in consultation with a diverse set of health care policy experts and stakeholders.

With the "doc fix" set to expire in April 2015, threatening to cut Medicare physician payments by about one-fifth, an opportunity exists for lawmakers to put in place a fiscally responsible replacement system. So far, the "fiscally responsible" part has been elusive, but there appears to be bipartisan consensus on at least what the framework of the replacement would be. These plans generally would establish a value-based payment system where physicians would be penalized or rewarded from year to year based on quality metrics. The plans would provide bonuses to encourage physicians to transition to alternate payment models. This first paper notes this agreement creates opportunities not only at the legislative level to create a better payment system, but also for the Centers for Medicare and Medicaid Services, who would likely be tasked with fully fleshing out the payment reforms.

The paper identifies three general alternative payment models that could be considered for physicians and the health care system more broadly: bundled payments, patient-centered medical homes, and accountable care organizations (ACOs).

2014 Medicare Spending Growth Picking Up But Still Low

CBO's July Monthly Budget Review brings us ten months into the fiscal year, and it's time to update our tracking of the slow growth of Medicare so far in 2014. Through June, Medicare growth totaled 1.2 percent over the first nine months of FY 2014, or 3.6 percent when removing the effect of a number of temporary* or phased-in policies, mostly from the Affordable Care Act (what we refer to as the "underlying" growth rate).

Drivers of the Debt: Aging in the Medium Term, Health Costs Over the Long Term

The recent CBO Long-Term Budget Outlook confirmed that our long-term debt problems remain far from solved, with debt projected to exceed the size of the economy within 25 years. Federal spending, especially the mandatory portion of the budget, will continue to outpace revenue collected, running up debt and interest payments on that debt. Spending on Social Security and health care programs will grow by almost half from 9.8 percent of GDP today to 14.3 percent of GDP by 2039. Two factors are reponsible for major portions of the increase in mandatory spending: an aging population and "excess cost growth," when health care costs are growing faster than the rest of the economy.

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