ACA Medicare Incentive Payments INTRODUCTION: United States expenditure on the healthcare system is much more than any other developed country in the world. Despite spending trillions of dollars there are more than 29 million Americans who lack the health insurance. US healthcare system works as a market place where multiple stakeholders including government agencies, public and private insurers and other investors work in liaison to provide healthcare to US citizens. This creates an essence of a business model where healthcare is considered in terms of profits and loss as oppose to service for the destitute.
The US healthcare spending has been on the rise since the past many decades attributed to the changing landscape in medical technology and research advancements. However, the role of an insurance marketplace in the system is of importance. It lets create business models and consulting and marketing corporations leading to a lot of healthcare dollar utilization. The notion of a national health care system in US started in the early 20th century and was finalized by the enactment of the Social Security Act in 1965. This resulted in the formation of Medicaid and Medicare for the poor and the elderly.
Since its enactment, Medicare is facing challenges to manage the constant rise in its expenditure. Over the past many years, Medicare has introduced various proposals and models in its payment procedure to counteract the balance between the healthcare access and its cost. This brief review is focused on some of the Medicare payment methodologies and its development through the history since its enactment. The traditional fee-for-service and the usual, customary and reasonable methods by the hospitals and physicians to the diagnostic related groups and resource based relative value cale. The establishment of accountable care organizations and advanced primary care practice and payment methods like bundle and global payments are briefly explained. The Patient Protection and Affordable Care Act (ACA) which was passed in 2010 has also provided with multiple provisions in the development of new methodologies. ACA resulted in the formation of Center for Medicare and Medicaid Innovation (CMMI) under the Center for Medicare and Medicaid Services ut forth some innovative models with an idea of tying the Medicare payments with a value based model.
The aim is to formulate some potential prospects of reducing the healthcare cost while increasing the efficiency of the system and improving the overall care of the Medicare beneficiaries. The review also provides some alternative methods to the current Medicare system in comparison to other countries around the world. HISTORICAL BACKGROUND-UNDERSTANDING THE PROBLEM: In the early days, the doctors/ physicians were paid out-ofpocket by the more affluent of the society and that too was based on the barter system. The services consist of home-visits and local made remedies or mere herbs and extracts. The great recession and World War II paved the way for the modern medical healthcare in US. In 1965 under the Social Security Amendments, congress passed the bill for a national healthcare plan and Medicare was established for the elderly and Medicaid for the poor people. 2 In the beginning when Medicare was formed hospitals and physicians were paid on their own cost and the fees they charge by themselves. This led to an increase in the cost and charges of all the services. This system had no control over the cost and expenditure. The physicians were in charge of the health care.
Quality of the service and patient care outcome were not accountable. Hospitals and physicians charge what they seem appropriate which led to an increase in the overall healthcare cost. There was a steep incline in the annual Medicare spending from $475 to $1579 per beneficiary in just 10 years from 1975 to 1985. 3 In 1983, the Healthcare Financing Administration (under the social security amendments public law 98-21) change the payment system for Medicare beneficiaries from a cost based to a retrospectively remitted prospective payment method.
This mode was adopted for the inpatient services provided by the hospitals. Similarly, the physician’s payment for the Medicare beneficiaries was changed from the customary, prevailing, and reasonable charged-based system to resource based Medicare fee schedule (under Omnibus Budget Reconciliation Act-OBRA 1989- public law 101-239). The prospective payment method was developed in response to an increase in hospital expenditures and its impact Medicare fund. 4 It consists of a fixed amount that represent an average standardized payment provided for a specific diagnosis of the patient.
The same type of illnesses requiring similar treatment resources were grouped in a particular set referred to as the diagnosis-related groups (DRG’s). Medicare paid a fixed amount irrespective of the hospitals spending. This prospective payment methodology led hospitals to reduce their cost because the excess expenditure was to be bear by the hospitals, however they would retain the excess reimbursed amount by Medicare. The same mode of payment was then preferred for post-acute care including home health and skilled nursing facility.
This change in the methodology of payment led the hospitals to cut their expenditure decreasing the length of the hospital stay for their patients. 5 The physician’s payment by the usual, customary and reasonable charges continue to increase until it was replaced by the Medicare Fee Schedule in 1992. This national resource based relative value scale (RBRVS) was formed as an estimate for the services provided by the physicians adjusted by the geographic variances.
This methodology is now a standard among the healthcare providers and insurance companies to set the leverage and rates. 6 The Medicare Prescription Drug, Improvement, and Modernization Act aka Medicare Modernization Act (MMA) in 2003 made the prescription drugs available for the Medicare beneficiaries. https://www. cms. gov/About-CMS/Agency-information/History/ The benefit coverage was offered through private insurances and is not mandatory. The insurance companies bargain with the pharmaceutical companies for the price packages.
Medicare beneficiaries can choose from a variety of health insurance plans for their Medicare benefits called ‘Medicare plus Choice’ which turned in to ‘Medicare Advantage’ with the provision of MMA and prescription drugs coverage. However, the beneficiary may be hindered by the so called ‘Donut Hole’ where the enrollee is responsible for the cost of drugs after an initial dollar coverage. http://www. medicarepathways. com/2012/10/ahistory-of-medicare-advantage-and-part-d/ .
Also, the drug prices in US are much higher than any other country as the pharmaceutical companies are protected by the patent laws and rights by Food and Drug Administration (FDA) and restricted by the bargaining power of the payers. This results in an increased dollar amount to the consumer. http:// jamanetwork. com/journals/jama/article-abstract/2545691 The Patient Protection and Affordable Care Act aka ACA of 2010 stands as one of the momentous milestone in the US healthcare system.
It proposed to resolve many issues being faced by the healthcare delivery and the way the complex payment methodology is involved. The ACA target various aspects of the health reforms addressing the healthcare delivery, its organization and the reimbursement methodologies. It provides multi-variable approach to build various new models to identify more efficient and productive system. The reimbursement system is linked to the patient’s outcome, the healthcare delivery and more importantly developing nation-wide resources for providing quality healthcare.
Similarly, Medicare under ACA has substituted its predominantly fee-for-service structure to value based model of care providing an enticement to reduce the overall cost and expenditure for its beneficiaries. 7 NEWER PAYMENT METHODOLOGIES- AN ANALYSIS: The ACA resulted in the establishment of Center for Medicare and Medicaid Innovation (CMMI). This agency was form to test new models for the healthcare delivery with the aims to provide quality healthcare while reducing or stabilizing the cost and expenditure.
These newer models can then be implemented at the national level. 8 Some of these programs include: • Accountable Care Organizations (ACO’s) • Multi-Payer Advanced Primary Care Practice (MAPCP) • Bundled Payments • Global Payments Initiative (GPI) Accountable Care Organizations (ACO’s): These are organizations formed by collaboration of physicians, hospitals and various healthcare providers under a single administrative management. The aim of these organizations is to promote a more coordinated and patient centered healthcare provision for the Medicare beneficiaries.
Centers for Medicare and Medicaid Services (CMS) established these organizations to ensure quality care for patients and at the same time decreasing the overall compensation amount by preventing the medical errors and duplication of services provided. CMMI motivated the ACO’s to share the savings if they deliver the standardized care in less amount. 9 Multi-Payer Advanced Primary Care Practice (MAPCP): The Centers for Medicare and Medicaid Services (CMS) in 2011 initiated the Multi-Payer Advanced Primary Care Practice (MAPCP) with the aim to decrease the expenditure and improve the availability and the effectiveness of the healthcare.
It started with the eight states and was meant to be for three years. The program paid for the coordinated management, education and services for the chronically ill patients. 10 The primary mode of payment is based on monthly per-member, per-month fees paid to primary care sites for providing medical home services and is linked to the pay-for-performances incentive, shared savings or other forms. The Center for Medicare and Medicaid (CMS) has extended the MAPCP program through to 2016. 11 Preferred Provider Organizations (PPO):
The passing of Medicare Prescription Drug, Improvement, and Modernization Act in 2003 paved the model for the formation of Preferred Provider Organizations (PPO) as a provision of managed care for the Medicare beneficiaries. The PPO model provides a contract between the insurer and the healthcare provider, same as in HMO but with more flexibility. HMO incentivizes its consumers by using strict restrictions to use the ‘network providers’ whereas, PPO offers less payment when the consumer uses its network providers but a higher price for the ‘out of network providers.
The enrollee can access a range of providers including out of network without approvals. The quality metrics and the financial incentives are measured for the managed care outcome. https://www. cms. gov/ResearchStatistics-Data-and-Systems/Research/ HealthCare FinancingReview/downloads/06Springpg95. pdf Bundled Payments: The Centers for Medicare and Medicaid Services (CMS) developed the Bundled Payments or commonly ‘episode-base payments’ for Care Improvement (BPCI) initiative, which provides a single payment amount for a specified course of inpatient and/or post-hospital care.
This mode of payment shifts from the traditional fees being paid for each service provided on the patient and bundle the range of services together for a specific health condition for an individual. This was to encourage the effectiveness of the services and to improve the coordinated care delivery by the provider while decreasing the services which are not needed. There are four payment models under the initiative which include acute care, hospitals, physicians and post-acute care providers. 12
