Building on H.R. 2810, the “Medicare Patient Access and Quality Improvement Act of 2013” approved by the House Committee on Energy and Commerce, the new proposal to fix the SGR comes from the House Ways & Means and Senate Finance Committees with support from both Democrat and Republican members, hence the bipartisan and bicameral labels. It is currently in draft form and it is open for public comment until November 12, 2013. This is a short document, and you should read it before it’s transformed into a 1000 page cleverly titled Act. The idea behind the proposal is very simple, and it is widely used in other service industries, where patrons pay a base price for the service, and discretionary bonuses, gratuity, or tips, are available to service providers based on quality of service. There is a small difference though, since the proposal is supposed to be budget neutral (i.e. a zero sum game). Thus, a sufficient number of physicians will need to be penalized to balance the bonuses awarded to better performers.
Below is a simplified summary of the eight point proposal to repeal the SGR, and replace the straight fee for service payment system with quality adjusted risk-based contracting:
- The Medicare physician fee schedule will be (sort of) frozen for the next 10 years. After 2023, the fee schedule will be adjusted upwards by 2% annually if you take risk for your patients through an advanced alternative payment model (APM), or just 1% annually if you don’t.
- The heart of the proposal consists of bundling the multitude of incentives and penalties currently enacted by CMS, into one Value-Based Performance (VBP) Payment Program, beginning in 2017. It’s not that you won’t have to report quality measures or be a meaningful user, you will have to do those things and more, but there will be a single aggregate score to trigger incentives/penalties, calculated as follows:
- Quality Measures reporting – exactly what you think this is – Weight 30%
- Resource Use – similar to the CMS Value Based Modifier initiative, with an added requirement for claims self-reporting (subject to payment reduction) – Weight 30%
- Clinical Practice Improvement Activities – basically patient centered medical home (PCMH) or patient centered specialty practice (PCSP) certification – Weight 15%
- EHR Meaningful Use – it seems that all that is needed here is the use of a certified EHR – Weight 25%
- Practices that have very few Medicare patients are exempt and practices that have significant revenues in at-risk contracts (see below) are excluded from the VBP program. This is a budget-neutral item, meaning that high performer bonuses are directly proportional to the number of penalized poor performers. The pool available for bonuses starts at 8% of the total physician payments in 2017 and increases in subsequent years.
- Since the stated goal of this permanent SGR fix is to eliminate fee for service, an additional 5% bonus will be made available to those who have significant revenues tied to at-risk contracts. The thresholds begin at 50% and go up to 75% revenue. Both Medicare and commercial payer revenues can be counted for this purpose. It is interesting that the thresholds are for revenue, not patients, and it is also interesting that private payers can be counted, although it is not clear if the bonus is 5 percent of Medicare payments, or 5 percent of all payments. A seemingly simpler alternative to obtaining the 5% bonus is to have a “significant share” of revenue in a patient-centered medical home (PCMH) model that has been “certified as maintaining or improving quality without increasing costs”. This will require some explanation in the final bill because PCMH is usually not tied to revenue shares, and because I am not aware of anybody with the ability to certify that a certain PCMH model will increase quality, but not costs.
- For those practicing in a PCMH, or a comparable specialty model (e.g. PCSP), special care coordination codes will be created. The description here sounds very similar to the new Transitional Care Management CPT Codes following hospital discharge. Note that payment for these codes is also budget neutral within the physician fee schedule, so for each care coordination code paid out, someone or something else will be paid less.
- Along with ending fee for service, the proposal will also improve the fee for service schedule, by thoroughly evaluating and “identifying and revaluing misvalued services” to facilitate “smooth downward payment adjustments” The yearly downward target is 1% per year, and if not enough misvalued services are identified, the entire fee schedule will be revised downward by the missing amount. If more than 1% reduction is found, the funds will remain in the budget neutral pool to offset bonuses and other changes.
- The proposal will also ensure that physicians practice medicine correctly. Mechanisms will be put in place to make sure doctors consult appropriate clinical decision tools before ordering “advanced imaging and electrocardiogram services” (no idea why electrocardiogram of all things is specified here). The “tools” will report back to the Secretary of Health and Human Services that such consultation occurred prior to ordering. “Payment would not be made for the advanced imaging or electrocardiogram service if consultation with appropriate use criteria did not occur.” Physicians found to order too many of these services will be required to obtain prior authorization in the future. If things go well, other services will also become subject to appropriate use surveillance.
- To support all these activities, qualified entities that are receiving Medicare and Medicaid data for public reporting, will be authorized to sell analyses and reports to physicians, as well as commercial insurance companies and employers too.
- Transparency will be facilitated by publishing physician payment and various performance metrics measured through the program, so the public can search for physicians by name and get all the data they need to select providers.
Bottom Line
Although right now this is just a proposal, it is very likely that sometime around January 15, 2014, this, or something very similar to it, will become the law of the land. For small independent private practice, the increase in bureaucratic burden will be significant and the reach of insurers into your everyday work will become palpable. Noncompliance with the new regulations means that your topline will remain flat for the next 10 years, minus any penalties, rejected claims and downward adjustments, which may or may not be significant depending on your specialty. Initially, this may only affect the Medicare portion of your practice, but it will not remain that way for long.If you want to continue practicing medicine and remain independent, you have three basic choices: 1) Join a larger entity, such as an accountable care organization, and accept risk for most of your patients in a managed care environment; 2) Adapt to the new paradigm by getting yourself a certified EHR, obtaining PCMH recognition, and learning how to practice under increased supervision; and 3) Stop accepting insurance and switch to a direct pay model. Since the program is slated to begin in 2017, you have 3 years to make an informed decision.
If you are a staunch conservative who believes that free markets should solve health care, or that poor people should work harder and have more skin in the game, or that governments should stick to building armies, you don’t need to read this post, unless of course you enjoy being aggravated by clueless liberals.If you are one of the talking heads posing as a progressive, while repeating the empty slogans of Obamacare (e.g. no one can be denied care any longer, children under the age of 26 can stay on parents’ plans, not perfect but a good a first step, etc.), you should probably not read this either, because you are far beyond the point where independent thinking is an option. If you are none of the above, and have a few minutes between updates on the completely irrelevant status of the Obamacare website, you may want to read on.
Obamacare Strengthens Medicaid
Medicaid is the public health insurance plan for the poor. Medicaid’s continued existence is an affront to human decency. Unlike Medicare, Medicaid is administered by the States. Subject to certain minimums, the States get to decide what medical services are covered, which medications are on formulary, how much money hospitals and doctors are paid, and who is eligible for Medicaid in the State. Some States have the gall to run lottery systems for choosing the lucky poor that are covered by Medicaid, while others have first-come-first-served brief enrollment windows. States are at liberty to decide that they will not cover certain conditions and certain medications, or other therapies, not because these are medically unsound, but just because they can. People on Medicaid have a Medicaid insurance card to let every hospital and every doctor know that they are poor, and that services will be reimbursed with peanuts, if at all. Obviously, many physicians do not accept Medicaid.Having poor people segregated in a defective insurance plan, separate and hardly equal, should be no more acceptable than any other form of segregation. Medicaid needs to be dismantled and all beneficiaries along with all the funds, including States responsibilities, should be funneled into Medicare, the Federally administered insurance plan, for those who cannot, or will not, purchase private insurance. Instead, Obamacare pours billions of dollars into keeping Medicaid alive on one hand, and privatizing its operations on the other (e.g. managed care, health exchange vouchers, etc.), with a net result of transferring a few more Medicaid cents from health care delivery to private corporations.
Obamacare Voucherizes Health Insurance
The Obamacare health insurance exchange is a marketplace where individuals and small businesses can shop for insurance plans that meet new minimum standards. The plans are sold by private insurance companies, and a formal exchange is needed because Obamacare will pay the private insurance companies a portion of the premiums. The Federal subsidy, or voucher, amount is calculated based on means testing. Those who are poor (but not poor enough for Medicaid) will receive a larger voucher than those who are better off financially. This is in effect a progressively defined contribution. Let’s illustrate this with an example. Say the Jones family, which is not completely destitute, received a $2,000 premium discount. Mrs. Jones goes and uses her brand new insurance to have a mammogram which according to the law carries no cost sharing. Say they find something that should be biopsied. This procedure is subject to the Jones family deductible. If the Joneses have the cash to pay for everything until the out-of-pocket maximum is met, Mrs. Jones will get the treatments she needs. If they don’t have the money, the story will have a different ending. So the benefits are not predefined, but the contribution is. This is the definition of a voucher.Obviously, if this is good enough for the federal marketplace, it should be good enough for the employer sponsored group market as well. Private exchanges, where employees get a fixed voucher contribution, are already operational and will most likely flourish in the future. I haven’t heard of any pay increases for workers sent to private exchanges to “shop” for a plan that best fits their “needs”. Eventually, as the contributions fail to keep up with costs of care, all health insurance will become just catastrophic insurance. And as middle class wages keep going down the drain, catastrophic insurance premiums will inch up, because those who cannot afford routine care will be experiencing lots of catastrophes. If you want to talk about death spirals, this is a perfect time to do so.
Obamacare Creates a Tiered Medical System
Much has been said about the transparency of the health insurance marketplace, where for the first time people can get clear information about health plan choices and make apples to apples comparisons. Well, it’s not really the first time, but it helps that plans are labeled by actuarial value, and it helps that there are navigators helping folks make sense of a very complex transaction. However, while you can get information on the costs of insurance, there is no information about the product itself. Health insurance is basically a financial arrangement for paying for health care. Health care is the actual product being bought. Unless we believe that health care is a commodity, then in order to evaluate the product, we need to know who is delivering care. I’m not sure if shoppers on the marketplace are aware of the fact that the financing instruments they are purchasing on the exchange will only work with increasingly narrower networks of health care providers.This is similar to buying a new television set, hooking it up and finding out that it can only receive and display channels 501 through 550. You may get lucky and these are the channels you watched anyway, or maybe these are very good channels, but then again you may not be so lucky. Now, there is nothing inherently wrong with selling TV sets that have limited channels, if people want to buy them, but there is plenty wrong with purposely hiding this particular information from buyers. And there is plenty wrong with a government advertising free and discounted TVs that have bigger screens and better picture than your dinky old TV, without telling you that you may not be able to watch premium channels on many of them.
Of course, if this little marketing maneuver works on the federal exchange, it will quickly spread to the private group exchanges, and soon we will have clinics and hospitals for the well-heeled and larger institutions for the shoeless. It’s anybody’s guess where the better doctors will be found. No, not really. Narrow networks are designed by insurance companies to put pressure on physicians and hospital to lower their charges, either for the sheer privilege of being in-network, or for the additional promise of filling out all seats, with plenty stand-by customers, just in case. This is strictly about money, and has nothing to do with excellence or quality. Exclusive networks of high quality delivery systems are usually more expensive (see Kaiser plans in California).
So basically Obamacare is taking another step towards privatization of health care financing, and the inequitable distribution of resources inherent to private markets. Some conservatives became concerned that if Obamacare does not work as expected, the progressives will have a field day instituting single payer in its place. I wouldn’t worry too much, because Obamacare is great for those who extract profits from health care, and they won’t let it fail. Besides, progressives have lost their way long ago, and single payer is not in the cards for the foreseeable future. If it were, the Obamacare bureaucracy nightmare would have been replaced by folding Medicaid into Medicare, and the insurance marketplace would consist of Medicare, and its defined benefits, as the only game in town for all.
So if your beliefs are on the conservative side, you should support Obamacare. You may have to wait a few years, but it’s going where you think it should go, where the Heritage Foundation wanted it to go. If you happen to be a liberal, and feel compelled to support an embattled President, just because he is better than the alternative, remember DOMA, GLBA and PRWORA. Were you cheering for Bill back then too?
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