Photo by Military Health via Flickr

Donald M. Berwick, head of the Centers for Medicare and Medicaid Services speaks at the Military Health System conference in January. Facing strong criticism of the proposed regulation for accountable care organizations (ACOs) the Obama administration announced new options Tuesday to lure hesitant doctors and hospitals.

ACOs are a new delivery model created under the health law that offers providers financial incentives to work together to provide high quality care to Medicare beneficiaries while keeping down costs. But hospital and doctor groups are complaining that the proposed regulation creates more financial risks than rewards and imposes onerous reporting requirements. On Monday the American Hospital Association estimated that starting an ACO could cost a hospital $11 million to $26 million in the first year. The proposed regulation put the cost at $1.8 million.

The Department of Health and Human Services announced Tuesday a new “Pioneer” ACO model, which officials promised “will provide a faster path for mature ACOs” and save Medicare as much as $430 million over three years. The idea is that existing integrated-care organizations such as Geisinger Health System, the Cleveland Clinic and Intermountain Healthcare will be able to launch ACOs as early as this summer. One incentive: the opportunity to pocket more of the expected savings in exchange for taking on greater financial risk. These ACOs also will be able to work with private insurers and eventually Medicaid, the state-federal program for the poor.

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March 5, 2011

Brookings Institute Logo from the Brookings Institute Website

On March 2, 2011, the Brookings Institution hosted an Oxford Style debate analyzing the constitutionality of the individual mandate, a major provision requiring individuals to purchase health insurance.  The debate was moderated by William Galston, a Senior Fellow and Ezra K. Zikha chair in Governance Studies at the Brookings Institution.  David B. Rivkin Jr. and Ilya Somin   presented the argument favoring the mandate’s unconstitutionality. Arguing in opposition to these two aforementioned gentlemen were Walter Dellinger   and Simon Lazarus  who eloquently argued the merit and constitutionality of the individual mandate. The debate rules stated that each gentleman had 10 minutes to present their argument, followed by a round of 5 minute rebuttals then concluding with final remarks.  At the very end, each answered questions from the media and public in attendance.

Here is the brief overview of the debate.  David B. Rivkin Jr. began the debate by stating that, the passage of this law would expand the federal government’s authority over individual Americans to an unprecedented degree. In his Washington Post article “Illegal Health Reform” he states “the Constitution assigns only limited, enumerated powers to Congress.” And that Congress no matter how important the issue may be, must accept their limitations and legislate within the confines of the Constitution.

Walter Dellinger, a Partner with O’Melveny & Myers , countered Rivkin’s assertions by referring to the 1824 decision by Chief Justice Marshall, in the case Gibbons v Ogden, where he ruled that federal law superseded state law, in matters regarding interstate and foreign commerce. Dellinger went on to explain Article 1 Section 8 of the Constitution , which states that Congress has power to “exercise exclusive Legislation in all cases whatsoever” over the federal district and other territories given to the federal government by the states.  He offered reassurances to skeptics who argue that allowing this law to stand would send Congress down a slippery slope in terms of new legislation adoption. Dillinger asserts that Congress legislates with a limiting principle and it is useless to engage in such hypothetical examples that are not plausible.

Ilya Somin, an associate professor at George Mason University School of Law, continued Rivkin’s argument that the individual mandate is unconstitutional.  Somin’s two main points were 1) individual mandate was unconstitutional under the Commerce Clause  2) the individual mandate is not protected under the Necessary and Proper Clause.  Mr. Somin explains how the individual mandate does not regulate commerce that is both commercial and interstate.  He explains that virtually all purchases of health insurance are intrastate because a combination of state and federal law makes it illegal to purchase insurance across state lines.  Somin examines the flaw in the argument that the individual mandate is protected under the Necessary and Proper Clause, which gives Congress the power to “make all Laws which shall be necessary and proper for carrying into Execution” other powers Congress is granted by the Constitution.  His rebuttal to this defense is even if the mandate is “necessary,” it is not “proper” under our constitutional system of limited federal authority.

Simon Lazrus, Public Policy Counsel of the National Senior Citizens Law Center , rounded out the discussion but posing a very sobering question.  What happens if we repeal the new health care law?  What do we do with the millions of uninsured?  Lazrus states that the individual mandate is constitutional and we must look at and analyze the consequences of repealing this law.

Overall, the debate proved very informative.  Both sides made strong points and did well in articulating their message to the audience.  Special thanks to the Brookings Institution for hosting this event.

Official New America Foundation Logo

On February 25, 2011, Len M. Nichols was part of a panel at The New America Foundation   along with Shannon Brownlee, Acting Director of the Health Policy Program and Christine Bechtel, Vice President of the National Partnership for Women and Families. The topic was on the Dartmouth Atlas paper Improving Patient Decision-Making in Health Care: A 2011 Dartmouth Atlas Report   Highlighting Minnesota. Watch the discussion

March 1, 2011

Len M. Nichols at the National Governors Association

The National Governors Association     held their Winter Meeting this past weekend in D.C. On Sunday, March 1, 2011, Len M. Nichols participated on the Health and Human Services Committee panel   where the focus of discussion was on the sustainability of Medicaid, I have summarized some points by Len M. Nichols, Doug Holtz-Eakin and the governors who voiced their concerns for their states. Doug Holtz-Eakin and Len M. Nichols agreed that Medicaid is unsustainable and that the system is broken, but mentioned different strategies making the health care system work.

Mr. Hotlz-Eakin mentioned how Medicaid is unsustainable and it must be reformed and states need to help fix the problem. Without solving the problem, Mr. Hotlz-Eakin talked about how the US economy will suffer. Currently, on a federal level, we borrow $58,000 per second. States have to take control and cannot rely on the federal government to fix this problem, especially since governors know their individual states (populations) better than the government.

Len M. Nichols also talked about the unsustainability of Medicaid (just as unsustainable as rest of the economy), but talked about how we cannot leave the most vulnerable population to suffer, it will not achieve fiscal sanity. He makes a notion that this is a task for the governors and they have to do their best to make it sustainable. He mentioned a few things to fix Medicaid: 1. Continue Federal Medical Assistance Percentages (FMAP) enhancements   2.Control system wide cost growth enrollment growth and 3. Increase federal liability for non institutionalized children and adults. Len M. Nichols discussed incentive realignment and suggested looking at successful delivery systems in states who have implemented new models and spreading those ideas across the US to help fix the broken system.

Once the panel was opened up to the governors, the governors voiced their concerns about what the two panelists had mentioned:

-Controlling system wide costs
-Block grants
-How to realign incentives (providers, patients, insurers)
-Addressing public health measures (clean air, water, prevention initiatives, etc.)
-Competition (on multiple levels)
-Increasing enrollment growth in Medicaid

Overall, everyone agreed this has to be a multipayer reform initiative , not just Medicaid. The participants at the meeting agreed that they have the tools along with the Affordable Care Act to make the necessary changes. Watch Len Nichols on C-Span.

For more information read Len M. Nichols’ National Governors Association Testimony and Sustainability of Medicaid: Action Steps for Governors to Achieve Meaningful Reform By Douglas Holtz-Eakin and Michael Ramlet.

February 2, 2011

NPR Official Logo

National Public Radio released a 3 part series titled, “Pressure on Primary Care”, which focuses on the changing landscape of delivering primary care.The problem: Americans aging and not enough physicians to treat them. It is predicted that by 2030, 70 million Americans will be older than 65, which means they will require more care. With health reform, another 32 million will be covered. Additionally, Health Affairs stated that 21% of the US population lives in a rural area and only 10% of physicians practice there.

According to HRSA , 66.8 million live in a federally designated health professional shortage area. The care that Americans need may not be serious, but require the attention of a primary care professional. However, there is not enough primary care physicians to attend to these patients and need for medical care is growing. Medical students are more intrigued to specialize versus going into primary care-financial incentive. There is not enough exposure to primary care during medical school, this adds to the problem of not enough medical students going into primary care. Only about 16% out of 24,000  students went into primary care according to an article in the New England Journal of Medicine. A medical student survey displayed results that showed students were initially interested in primary care, but with the lack of exposure to it and a payment system that is focused on specialty care-it is a disincentive to pursue it.

It is likely when a patient visits a primary care physician, the doctor may not be the one who sees the patient, but the nurse practitioner or physician assistant. It is much more cost effective for a mid level professional to see a patient compared to a physician for primary care needs. The number of physician assistants is also continuing to grow, it is said to be the 2nd fastest growing health profession (after home health aides). The growing number of mid level professionals will help especially in rural areas

Health reform is pushing for primary care to be reinvented-changing the way primary care is delivered and paid for especially in rural areas. This leads into the concept of the patient centered medical home which many states have begun experimenting with.

This particular section focuses on Martin’s Point, a physician practice which has transformed into a medical home. The purpose of the medical home is to provide more comprehensive care and let mid levels handle some of the less specialized care that they can do without a physician. This would allow the mid level practitioners to practice to their full extent (training and education) and would result in serving patients more efficiently. At Martin’s Point, the overseeing physician has a nurse and medical assistant handle the schedule. Since the nurse and medical assistant understand the needs of the patient, they know how to set up the schedule and this has reduced patient’s waiting time. Michael McDonald, the supervising physician at Martin’s Point in Maine, says that this system works well for him because his mid level practitioners know their limits of their training and education and it makes their delivery of health care much more effective.

The physician at Martin’s Point also has instituted an electronic medical record system. He uses the data to group all the patients who have high blood pressure on a graph and provides the office with a “wall of knowledge” that tracks all the patients. According to the NPR report, the charts revealed that 98% of his hypertension patients have controlled their blood pressure (this is also based on their visit frequency, treatment, and follow-up data).

Another crucial point of changing health care and making individuals more responsible is patient education. At Martin’s Point, a nurse practitioner who specializes in diabetes education is available to patients with Diabetes (medication guidance, social issues, etc).

The final Martin’s Point issue that must be addressed is whether or not this model can save money. In order to reduce costs, improve quality, and become more efficient, it will require physicians to establish an environment that encourages team work and allow mid levels to perform to their potential (reducing costs by allowing physicians to work with the more critical patients while mid levels take care of the less serious patients).

Hopefully, the delivery of health care will slowly start to experience change, especially with medical home pilots, accountable care organizations, etc., being launched, however, it will definitely take time to change the mentality and attitudes of all those involved in the process of delivering health care.

Read Len’s Post on the Health Affairs Blog.

Written by Shuchita Madan

Len Nichols, along with Jon Kingsdale (Executive Director of Massachusetts Commonwealth Health Insurance Connector)  and Joel Ario (Insurance Commissioner for Pennsylvania Insurance Department)   presented to the members of the American Hospital Association’s  at the Annual Meeting on April 26, 2010.  The three participants gave their presentation on the importance of exchanges being established as a result of health care reform.  It provided the audience with a good variety of perspectives-a health economist, one who was successful in expanding coverage, and an insurance commissioner.

Dr. Kingsdale, who had a huge part in implementing Massachusetts’ Health Care Exchange  and offering universal coverage-the national health reform plan is based on MA’s design.  Being surrounded by such a knowledgeable group of people was inspiring to someone like me who is just learning different aspects of the health care industry.  Len’s PowerPoint is linked below and I will talk about some of his main points as well. Here are some highlights I listed from the presentations on exchanges from Joel Ario’s and Jon Kingsdale’s presentations.

Joel Ario’s Presentation:

Insurance Reforms focused on Access and Consumer Protections:

Access: The purpose is to end discrimination (guaranteed issue and rating reform), make people recognize their personal responsibility (individual mandate), provide affordability and streamlined access (sliding scale of subsidies up to 400% FPL) and streamlined access (exchanges for individuals and small businesses)

Consumer Protection:Protects consumers from rescission, lifetime caps, transparency around benefit options and “unreasonable” rate increases, many more reforms in conjunction with exchanges in 2014, essential benefits package with 4 standard options, uniform enrollment form(easy to compare plans, like HealthConnector) and multiple forms of transparency and accountability on cost and quality

Some basics on Exchanges:

• They are state run-unless states do not meet standards, federal will help
• Health and Human Services (HHS) and National Association of Insurance Commissioners will establish standards (NAIC)
• By January 1, 2013, states must be certified by HHS
• Exchanges up and running by January 1, 2014
• For individuals and small groups-up to the states to put these two together or operate separately (Massachusetts has combined the groups)
• Start up grants-self sustaining by 2015

HHS will set up regulations for states to follow and I will post those once they are available.

Jon Kingsdale’s Presentation:

An update on what has worked for the state of MA:

• 2.7% uninsured after 3 years, down from 10%
• Of those recently insured, 35% private pay
• 98% compliance with taxpayer filings, individual mandate
• 59-75% voter approval rating
• Net new state costs, about $ 350 million

Dr. Kingsdale listed the key elements of reform and the shared responsibility that is required for success

Residents: Individual mandate

Government:  Provides premium assistance, expanding the eligibility of Medicaid

Employers: Need to make a “fair” contribution and set up section 125 plan

Policy Objective: “Make health insurance work for the sick as well as the healthy”

Primary functions of Exchanges:

1. Determine eligibility and subsidy flows

2. Sell to other target market segments

3. Specify plan designs & cost-sharing

4. Select, contract & market health plans-very critical part, what plans offer

5. Public education & Outreach

These are just a few of the things that I wanted to share from the presentation on exchanges.  Quote from Dr. Kingsdale:

“Everyone now recognizes that near-universal coverage is unsustainable without cost containment, Access is easy, cost is not.”

Len M. Nichols’ Response:

“cost growth reduction with coverage expansion is more likely to succeed”

Changing the way businesses operate-instead of:

risk selection–>help everyone find value

Fee For Service (FFS) pay for volume–>pay for value

So what are Exchanges “Supposed” to do is what Len explains here:

• Organize least organized insurance markets-small groups and individuals achieve some economies of scale , risk pool-large groups
• Promote competition with rules
• track enrollment and facilitate financial flows
• Promote transparency for consumers
• Promote and demand accountability among the insurers
• Assist with enrollees finding value in products and the delivery itself

Finally, Len M. Nichols outlined who will be in the Exchanges:

-Everyone who is without employer coverage

-Small businesses with <100 employees

-Those who work for firms that offer coverage, but-actuarial value is too low or out of pocket premium larger than 8% of income

-If one is not grandfathered in

-States/exchanges can meld/keep Small Group Coverage   and Non-Group Coverage markets the same

These are a few things that I wanted to mention, but Len M. Nichols entire PowerPoint is available for you to read.

Len M Nichols presentation at the American Hospital Association Annual Conference

Written by Shuchia Madan

Companies such as Boeing  and Caterpillar Inc.  claim they will report a decrease in their earnings as a result of health reform because they no longer can receive a tax break for retirees’ drug benefits. When companies show that they have a charge of $ 1 billion on their books in the first quarter as a result of the new health reform law, this does not clearly state what is going on.

An editorial in the New York Times  describes what the health care bill will change for companies and their accounting practices.  The amount that is being shown now, is a lump sum of what companies will be paying for retirees over many years, basically, they will not receive the $1 billion charge in the first quarter(AT&T), it will take effect in the next 30-40 years.

How Medicare works with companies: for every $100 that was spent on retiree drug benefits by an employer, Medicare paid a subsidy of $28 (tax-free) and the company was able to deduct the $100 expense instead of $72. With the new law, there is still the subsidy of 28% (tax free), but companies can now only expense the $72 they actually paid.  Which is why the old way was called “double dipping.”  They were being subsidized for accepting the subsidy!

Some companies have already made changes and switched their retirees to Medicare with company subsidies that still save the company money compared to their own retiree insurance costs, so one’s net expenses have decreased.   According to the article “Obamacare has upsides for big employers: Change to save millions by offloading retiree coverage”,  by 2020 Medicare will pay for 75% of prescription drugs versus 50% Medicare currently pays.  The health care bill fixes the donut hole in Medicare prescription coverage and by establishing insurance exchanges-companies will experience immense savings on their health care expenses for employees. In the future, this could possibly eliminate companies providing insurance for their retirees, reducing overhead costs all together. The savings that companies will experience can be huge, for example, Catepillarreports that they “moved 9,500 non-union retirees 65 and older from a traditional insurance plan to a mixture of Medicare and a company subsidy,” saving $60 million and reducing liabilities by a significant amount.

The health care bill provides $5 billion in subsidies for employers with employees under 65 retirees . Companies are more willing to have their retiree employees in Medicare as the donut hole issue is resolved (in addition to the exchange).  With the establishment of exchanges, this will help companies-they can drop their expensive plans they provide for employees. The exchanges aim to reduce prices and barriers-allowing those under 65 and retired to obtain coverage that is more affordable.   Len Nichols is quoted in the article, saying “There is no question that companies large and small will be better off with health reform than they would be without it.”

Read the full article, “Obamacare has upsides for big employers: Change to save millions by offloading retiree coverage” written by  John Pletz.  Read the op-ed article in The New York Times.

Written by Shuchita Madan

Donald Berwick CMS Administrator Official Image

President Obama has chosen Dr. Donald Berwick  as a nominee to direct the Center for Medicare and Medicaid.  This is especially important as Congress is in the process of implementing health reform.  Dr. Berwick will be influential and have a monumental impact on the future of the two programs.  Dr. Berwick is a professor of pediatrics at Harvard Medical School and has been working with the Institute for Health Care Improvement which stresses the importance of patient care and assuring that plans are implemented.

Dr. Berwick believes that the US has a prestigious health care system, but we struggle because of our inefficiencies (in delivery) and lack of information sharing (privacy issues).  Len M. Nichols strongly supports Berwick opinion about Quality of Care improvement, that the US can achieve much more by becoming more efficient in the way care is delivered.  Len M. Nichols foresees Dr. Berwick working towards- improving the quality of care by altering doctors’ incentives-getting paid for value instead of volume.  Since Dr. Berwick is a doctor himself, I think he would have a firm handle on how to incentivize fellow health care professionals in the field.  Medicare and Medicaid represent a large portion of our health care system, so if he can make a difference starting here, rest of the system will catch on.

Let us hope this nomination does not become another proxy political battle, we would not want to turn away someone that was ranked as the third most influential person in health care by Modern Healthcare Trade Magazine, just because his nomination comes on the heels of a great victory for President Obama.  Some worry that his advocacy for cost comparative effectiveness would ration care, however, a doctor’s priority is his/hers patient’s health and I do not believe a doctor committed to building a patient-centered health system like Dr. Berwick would do anything that was not in the patient’s best interest. To have someone with such vast experience and not have him serve the Centers for Medicare & Medicaid (CMS) would be a grievous lost opportunity for the health care system.

Written by Shuchita Madan

On March 16, 2010, Len M. Nichols testified(Len M. Nichols Testimony for Massachusetts Officials March 2010) on the first day of a set of hearings organized by the Massachusetts Division of Health Care Finance and Policy to focus on what Massachusetts — and the nation — can do about health care cost growth. The attendees included Governor Deval Patrick , Attorney General Martha Coakley, Senate President Therese Murray, Secretary JudyAnn Bigby, DHCFP Commissioner David Morales, and many more officials and leaders in Massachusetts politics and health care. Len M. Nichols highlighted the economic consequences  for families, employers, providers, and governments, if health care expenditures continue rising like they have for so long without reforms.