Premium-supported Medicare proposal spawns many questions, no solid answers

Medicare currently makes payments based on specific services, but policy discussion is swirling about changing the program to a premium support system that operates on capitation payments, or payments per person. The Kaiser Family Foundation (KFF) offered some answers to common questions that are now swirling after Rep. Paul Ryan (R-Wis) released a Republican health reform proposal that includes partially privatizing Medicare (see Ryan proposes ‘A Better Way’ to repeal Obamacare, Health Reform WK-EDGE, June 29, 2016). The KFF warned that out-of-pocket costs for beneficiaries could either rise or fall under the proposed plan, depending on various factors.

How would it work?

The new system would involve a federal payment made for each beneficiary toward a health plan purchase, either a private plan (like under Medicare Advantage), or traditional Medicare. Beneficiaries would be able to choose their plans. The KFF emphasized that that various premium support proposals provided over the last few years have key differences in how policies would work, including benefit specificity, health insurer rules, and payment setting.

The price tag

A premium payment system’s particular design will determine the amount of premiums and out-of-pocket payments. Premiums for covered services would vary by geography and plan. The Congressional Budget Office (CBO) found that total cost to beneficiaries would decrease if the federal payments were tied to the average plan bid but would increase if tied to the second lowest plan bid. A general decrease, however, does not mean that every beneficiary’s payments will go down. Most beneficiaries who remain in traditional Medicare would pay more.

One of the primary aims of such a system is to reduce federal spending. If plan competition increases and results in decreased premiums, and beneficiaries are incentivized to choose the most cost-effective health plan, long-term federal spending on the program could decrease. Like beneficiary costs, federal government costs depend on plan structure.

Effects on beneficiaries and providers

The preservation of particular benefits is currently unknown, as some proposals differ. Currently, Medicare Advantage plans must offer at least the amount of benefits a beneficiary would receive under traditional Medicare, but premium support proposals have not clearly established this requirement. Some proposals offer subsidies for low-income beneficiaries, but these may be insufficient to allow such individuals to select the plan they want. They may also need to switch plans frequently to avoid premium hikes. KFF believes that a premium support plan may erode traditional Medicare enrollment so much that providers may have fewer incentives to enroll in accountable care organizations and other payment reform efforts, and subsidized providers like teaching hospitals may not receive the financial support to which they are accustomed.

Highlight on Massachusetts: Will the CVS painkiller settlement be the first of many?

CVS Pharmacy, Inc. must essentially admit that it contributed to the opioid epidemic by filling forged prescription painkillers during what some consider to be the height of the epidemic. CVS has agreed to pay $3.5 million to resolve allegations that 50 of its stores violated the Controlled Substances Act by filling forged prescriptions for prescription painkillers more than 500 times between 2011 and 2014, which is currently one of the largest settlements of its kind.  The pharmacy has also entered into a three-year compliance agreement with the Drug Enforcement Administration (DEA) requiring it to maintain and enhance the programs it has developed in recent years for detecting and preventing diversion of controlled substances.

The allegations came after the federal government conducted two DEA investigations into CVS’ activities after receiving calls reporting forged oxycodone prescriptions. The first investigation involved CVS pharmacies throughout Massachusetts and New Hampshire and identified 403 instances at 40 CVS stores where forged prescriptions were filled. The second investigation, which focused solely on the Boston area, found over 120 filled forged prescriptions at 10 CVS locations. A handful of people were involved in nearly all of the forgeries involving an estimated street value of over $1 million.

Although the company had some protections in place, the government spent time looking into whether CVS pharmacists continually ignored red flags such as computer system band on individuals receiving addictive painkillers. “When pharmacies ignore red flags that a prescription is fraudulent, they miss a critical opportunity to prevent prescription drugs from entering the stream of illegal opiates on the black market…Although CVS is currently undertaking corrective steps to curb the tide of diversion, this settlement pushes CVS to go further and holds the company accountable for its past conduct,” said United States Attorney Carmen M. Ortiz commented on the settlement.

DEA regulations indicate that pharmacists have a responsibility to ensure that he or she is filling only valid prescriptions that were written for a legitimate medical purpose by a practitioner who is managing the care of that individual. The responsibility requires that pharmacists identify and resolve any red flags which may indicate that a prescription could be forged or is otherwise invalid.

“DEA registrants like CVS have a corresponding responsibility to dispense controlled substances in accordance with the Controlled Substance Act.  When pharmacies fail to adhere to these responsibilities, it allows for the diversion of prescription pain medication, which contributes to the widespread abuse of opiates, is the gateway to heroin addiction, and is devastating our communities,” said DEA Special Agent in Charge Michael J. Ferguson.

What this investigation makes clear is that authorities aren’t just looking at the forgers themselves. Pharmacies will need to ensure that they are complying with the DEA regulations and that they are keeping a lookout for any red flags. As is the case with CVS, pharmacists who look the other way will be forced to face stiff penalties for their failures to keep their eyes open.

Kusserow on Compliance: OIG reports 2016 mid-year work plan update: Items completed, revised, & removed

The HHS Office of Inspector General (OIG) released a mid-year update on its 2016 Work Plan that summarizes new and ongoing reviews and activities it plans to pursue with respect to HHS programs and operations during the current fiscal year and beyond. This report includes those items that have been completed, postponed, or canceled. The following list those items related to Medicare and Medicaid. It is worth reviewing to determine whether the outcomes noted have any effect on the current compliance office work plan. Details can be found in the Work Plan.

Items in the 2016 Work Plan Completed

  • Medicare Did Not Pay Select Inpatient Claims for Bone Marrow and Stem Cell Transplant Procedures in Accordance with Medicare Requirements
  • Hospices Inappropriately Billed Medicare Over $250 Million for General Inpatient Care
  • CMS Has Not Performed Required Closeouts of Contracts Worth Billions
  • National Background Check Program for Long-Term-Care Employees: Interim Report
  • Enhanced Enrollment Screening Process for Medicare Providers: Early Implementation Results.
  • Part B Payments for 340B Purchased Drugs

Revised Work Plan Items

  • Consumer Operated and Oriented Plan Loan Program—CO-OP Conversion of Start-up Loans and CMS Monitoring Activities
  • CMS Oversight of Eligibility Determinations at State-Based Marketplaces
  • Medical Loss Ratio

Work Plan Items Removed

  • Analysis of Generic Price Increases Compared to Price Index

Richard P. Kusserow served as DHHS Inspector General for 11 years. He currently is CEO of Strategic Management Services, LLC (SM), a firm that has assisted more than 3,000 organizations and entities with compliance related matters. The SM sister company, CRC, provides a wide range of compliance tools including sanction-screening.

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Copyright © 2016 Strategic Management Services, LLC. Published with permission.

 

Over 500 hospitals reach DSH payment settlement with CMS

Resolving 11 pieces of litigation stretching back to 2010, over 500 hospitals on July 14, 2016, entered into confidential settlement agreements with CMS regarding Medicare disproportionate share hospital (DSH) payments. Details of the settlements were not available at press time, although they involve disputed DSH payments for cost reporting periods from 1991 through 2007, depending on the hospital. Neither CMS nor the attorneys at Akin Gump, lead counsel for the hospitals involved in the settlements, would comment on the settlements.

Background

Medicare makes DSH payments as a percentage add-on to the standard payment amount per discharge under the prospective payment system for the operating costs of inpatient hospital services. The fact situations for the hospitals involved in the settlement were similar – the hospitals challenged CMS’ payment determinations on the grounds that errors and omissions in the calculation of the DSH payment formula wrongfully reduced the resulting DSH payments. The hospitals also challenged a subsequent ruling by CMS – CMS-1498-R – that the Provider Reimbursement Review Board and the other Medicare administrative appeals tribunals lack jurisdiction over provider appeals of specific DSH payment adjustment issues.

Treatment of Part C days

The hospital parties in four cases also filed a motion to stay further proceedings pending a final, non-appealable merits decision in either Allina Health Services, et al. v. Burwell, 1:14-cv-01415-GK (D.D.C.) (see Court has jurisdiction to hear health system’s challenge to DSH calculation, Health Law Daily, November 2, 2015) or Allina Health System, et al. v. Burwell, 1:16-cv-00150-GK (D.D.C.). The substantive issue in dispute in those cases concerns the treatment of Medicare Part C days in the Medicare DSH payment calculation for periods after October 1, 2004.

Original complaints and stipulations

Listed below are the complaints for the 11 cases that were settled, along with the number of hospitals involved in each complaint and the cost years involved on the original complaints, followed by a link to the July 14, 2016 stipulation.