As the
debates amongst Democratic presidential candidates over single-payer health
care reaches new heights, the Trump administration recently responded with
its latest executive order targeting health care, laying out the
administration’s vision for the future of the Medicare program.
Historically,
improving the health system has been a bipartisan goal albeit with different
visions of how to best do so. Most policy makers agree that Americans need to
get the right care, at the right time, in the right place, from the right
provider—and that the current system is financially unsustainable. Democrats
have traditionally focused on coverage expansion and reducing consumer costs,
the former best exemplified by the 2010 passage of the Patient Protection and
Affordable Care Act (ACA). In contrast, Republicans have focused on consumer
choice, increased competition, and total cost reduction, best manifested by the
managed competition model for Medicare Part D in the 2003 Medicare
Modernization Act (MMA). In reality, all of these facets are needed for
meaningful health reform.
Recent
administration efforts have tracked traditional market-oriented principles,
with previous White House policy positions and executive orders focused on choice and competition. In this post, we review the latest
executive order addressing the Medicare program, how agencies could assist with
its implementation, and the political challenges it brings.
Medicare Advantage:
Market-Driven Medicare
Medicare
Advantage (MA), the market-driven alternative to the traditional
fee-for-services Medicare program, plays a central role in the executive order.
With participation doubling over the past decade, more than one in three beneficiaries, or 22 million Americans,
participate in MA. Plan design has proliferated to provide customized benefit
design for beneficiaries including health maintenance organization, local and regional
preferred provider organizations, and special needs plans targeting
dual-eligible and institutionalized beneficiaries.
The
executive order proposes further flexibility in benefits and plan design:
Medicare Medical Savings Accounts (MSA), supplemental benefits, and telehealth
services. Medicare MSA plans function similar to health savings accounts
(HSAs), in which a consumer selects a high-deductible MA plan and uses funds
that they place in the MSA to pay for medical expenses until their deductible
is met. Politically popular with many conservatives, MSAs have had little
uptake since their introduction. MSA plans—like HSAs—depend upon both price
transparency and high consumer health literacy, both of which are not features
of current health care markets. While efforts by the Centers for Medicare and
Medicaid Services (CMS) to implement price transparency are laudable, it is
reasonable to expect a sustained industry court challenge. Historically, health
systems resisted price transparency efforts, citing both the difficulties in
communicating meaningful prices in the setting of poor consumer health insurance literacy and price opacity
as core to the business model of third-party payment.
As
proposed, expansion of telehealth services could prove beneficial. Market
evidence for cost control and quality benefits from telehealth is mixed: There
is evidence for high utility in screening and other clinical preventive
services, while other work demonstrates increased access to care, suggesting that telehealth meets
otherwise unmet, pent-up demand by increasing access. Regardless, previous CMS efforts to broaden use of telehealth services could
be expanded in multiple ways, most notably by integrating availability of
telehealth services into star ratings and network adequacy
requirements—beneficiaries should be able to choose not only when but how they
receive medical services.
Medicare Advantage And
Traditional Medicare: Wrestling For Dominance
A
longstanding complaint from health plans is the differential treatment of
private plans as compared to fee-for-service Medicare. The executive order
proposes leveling this playing field with multiple opportunities for positive
change in not only program administration but also in rulemaking and
legislative activity. Administratively, the “Welcome to Medicare” booklet—sent
to all new beneficiaries—initially only briefly addresses MA plans, leaving a detailed description until page 55. The enrollment
process defaults beneficiaries into fee-for-service, requiring beneficiaries to
both elect Part B (most do) and then elect an MA plan.
To
capitalize on the budgetary and care coordination benefits of MA for both
beneficiaries and government, CMS could modify the enrollment process to
promote auto-enrollment into high-performing MA plans. This would likely
require additional legislative authority and could prompt objections by
progressive Democrats. However, it would help shift the balance from an
open-ended financial commitment—fee-for-service Medicare—to a risk-adjusted
capitated-plan product—MA—thus facilitating long-term budgetary control over
the Medicare program. Beneficiaries would benefit as MA promotes coordination
of otherwise siloed Part A, Part B, and Part D benefits.
Further
changes in payment rates are also proposed, which is likely to bring vigorous,
or even rancorous debate. With research describing a wide universe of scenarios
comparing MA to fee-for-service rates—including regional variation, equivalent rates, and lower rates for hospital payment—CMS should definitively
answer this question by undertaking and publishing a study comparing MA rates
to fee-for-service rates. Increasing Medicare fee-for-service rates to
commercial rates as specified in the executive order would likely be
financially unsustainable, stressing the already strained financial footing of
the Medicare program—the latest Medicare Trustees Report estimating depletion of the Hospital
Insurance Trust in 2026. Increasing fee-for-service rates to
commercial rates would also provide additional government subsidization of an
industry with marginal labor productivity growth and near-zero multifactor productivity growth, an undesirable
public policy outcome in an industry with highly concentrated markets.
Targeting
network adequacy requirements, the executive order proposes further adjustment
for the presence of certificate of need laws. It is unclear how this could be
implemented, as constructing an accurate and precise measure to adjust for this
higher barrier for provider market entry would be challenging and require
further economic study. Further adjustments of network adequacy requirements
for telehealth services would allow MA plans to better serve rural and
underserved markets. This change would require CMS—and the medical community as
a whole—to better delineate which services can be safely and effectively
delivered remotely, in addition to creating guidelines for when a physical exam
is required. While a small part of the executive order, this could promote
significant changes in both documentation and medical practice, with the
potential to reinvigorate the practice of clinical medicine.
Coverage: Reconciling
FDA And CMS Regulatory Standards
The
executive order also attempts to address an age-old complaint of the life
sciences industry: the difference between Food and Drug Administration (FDA)
regulatory standards for market entry and those used by CMS coverage and
payment. Currently the Medicare program covers 80 percent of FDA-approved drugs or devices,
albeit frequently with more restrictions. The executive order proposes to
eliminate both time and steps between FDA approval and CMS coverage decisions
while also promoting parallel review. It is unclear how this could be
accomplished without significant statutory change or how this would help
beneficiaries.
The
FDA reviews drugs
prior to market entry, ensuring that they are effective and
that the benefits outweigh the known risks. CMS coverage is
dependent upon what is “reasonable and necessary,” a standard
well-defined in statute, focusing on items and services that assist
with the diagnosis or treatment of illness, prevention, or improvement in a
beneficiary’s functional status. As the vast majority of coverage decisions historically have not been
controversial, few coverage decisions are reserved for the CMS
central office and are made at the national level as national coverage
decisions. The national coverage decisions process was further clarified in a 2013 Federal Register notice, with the
most recent annual report to Congress noting that the agency took an average of six months from initial request to the
publication of a proposed decision memorandum.
Options
for streamlining these traditionally sequential processes are limited, and it
is unclear how beneficiaries would benefit from merging these regulatory
standards. Colloquially, the FDA determines what is “safe and effective,” while
CMS determines what is useful for a highly morbid population that is elderly,
disabled, or has end-stage renal disease. In contrast to the difficulties
inherent in regulatory or statutory change, industry has multiple options to
change its development process to better meet similar yet different CMS and FDA
regulatory standards, including integrating comparative effectiveness and
cost-effectiveness early in their drug and device development programs.
Health Plan
Administration: Unsexy And Important
For
much of health plan administration, the devil is in the details. Aiming to
reduce disparities between physician and hospital clinic payment for equivalent
services, CMS attempted to implement site neutrality in 2018, precipitating a legal challenge
by the American Hospital Association and a ruling that CMS exceeded its statutory authority in implementing site
neutrality. But the battle is not yet over: The stage is set for
Congress to partner with CMS to create legislative language in support of site
neutrality.
Other
facets of the executive order target information sharing, a longstanding
challenge in health plan administration. The order directs the Department of
Health and Human Services to share information regarding practice patterns with
providers and to provide beneficiaries with cost and quality data. The former
would provide additional and potentially useful information to both practitioners
and practice administrators about cost and quality based upon existing quality
metrics, albeit additional work regarding disease and episode-based outpatient
groups would be required to make the information clinically and
administratively meaningful. Research shows that consumer interest in “report cards” is growing and that
consumers can choose high-value care when cost and quality data are presented
together, suggesting that health plans—including CMS—have an
opportunity to help steer consumers to use cost and quality information to make
better decisions.
Finally,
while sensible, aspects of the executive order targeting supervision
requirements for non-physician providers would require modification of state
laws regarding scope of practice. Equalization of payment rates for
non-physicians (currently at 85 percent of physician rates) would increase
costs, and likely require both rulemaking and legislative change.
Thoughts For Policy
Makers
With
the Medicare program solidly into middle age, the political debate around
single payer has prompted a mid-life crisis. The recent executive order on
Medicare represents a traditional market-oriented response deploying many tools
requiring varying implementation methods, both regulatory and legislative. Some
features, such as the streamlining of FDA and CMS review processes, are likely
unattainable or even counterproductive. Other actions, such as the inclusion of
telehealth in MA network adequacy requirements, represent a better future for
both beneficiaries and practitioners.
Further
research will be required around the variations in fee-for-service and MA
payment rates, while equalizing fee-for-service and commercial rates would
likely increase program costs and would be contrary to the country’s interests.
Modification of the enrollment process could help tip the balance between
fee-for-service and MA, and would require Congress to give CMS additional
regulatory authority. Other changes regarding supervision of and payment to
mid-level practitioners would require modification of state-based scope of
practice laws, CMS rulemaking, and potentially congressional action.
The
Medicare executive order represents a vision for a market-based Medicare
program. With more than half a century of price setting in Medicare
fee-for-service, we have failed to control health care expenditure growth. Now
is the time to try something different.
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