It was a field day last week for health wonks in Washington. The CMS issued two major rules—one final, one proposed—that will shape how nearly half the nation's healthcare tab gets spent over the next decade.
A few weeks ago, I wrote glowingly about burgeoning state Medicaid experiments aimed at delivering better care to the nation's poor and long-term disabled. Many of those programs are run by private managed-care organizations (MCOs), which now oversee spending for a majority of state Medicaid budgets.
Because these programs serve vulnerable populations, they need careful oversight. Last week, the CMS issued a final rule that prevents those programs from stinting on care or ripping off taxpayers.
The rule follows a series of government reports lambasting many states that fail to audit Medicaid contractors after they turn their programs over to the private sector. The rule sets a baseline that at least 85% of all per capita payments to MCOs must be spent on healthcare services. It also called for routine oversight reports from independent auditors.
It's the same ratio applied to other government-subsidized plans run by private insurers—Medicare Advantage and the individual plans sold on the exchanges. Some states may balk, but the feds pick up over 60% of the Medicaid tab and have a valid interest in ensuring taxpayer dollars are well spent.
While the industry trade group opposed those parts of the rule, it should wind up benefiting most firms because it will level the competitive landscape. Major insurers have jumped into the Medicaid managed-care market in a big way, either by growing their own plans or through acquisitions. That's no surprise given projections that Medicaid will grow to a nearly $1 trillion program in the next decade.
But as Modern Healthcare's Bob Herman reports this week, some of the larger insurers have been less than forthcoming on their medical-loss ratios, unlike the smaller players that specialize in Medicaid managed care. Competition for state contracts will be more robust when there is full transparency on price, utilization and the value of programs run by MCOs.
The rule didn't focus only on oversight. It encourages continued expansion of MCO programs that deliver long-term care and services for the frail elderly and long-term disabled in settings other than nursing homes, which gobble up over half of most state Medicaid budgets.
Done right, that can be a real money saver and raise quality of life by allowing people to remain in their own homes. Done wrong, it can limit a beneficiary's choice of providers. The rule wisely allowed patients to opt out of a managed-care contract and return to fee-for-service if their provider isn't in a network.
Meanwhile, the CMS also released its first draft of the new merit pay system for physicians, mandated by last year's Medicare Access & CHIP Reauthorization Act. MACRA replaced the sustainable growth-rate formula that each year mandated a physician pay cut that Congress ignored with its annual “doc fix.”
Initial reactions suggest doctors in independent practices will like the system because the proposed Merit-based Incentive Payment System (MIPS) will largely scrap overly prescriptive meaningful-use requirements for electronic health records and simplify quality reporting. It also rewards previously unreimbursed clinical activities such as care coordination, beneficiary engagement and patient safety.
But hospitals and other organizations involved in accountable care organizations, medical homes and bundled payments fear the advanced alternative payment models offered as an alternative to MIPS are defined too narrowly in the proposed rule. They warn they will discourage employed physicians—that's well over half the physician workforce today—from participating in value-based reimbursement programs.
Given the agency's goal of moving 50% of its Medicare fee-for-service payments to value-based reimbursement by 2018, creating a disincentive to participation couldn't have been the rule writers' intent. The CMS needs to get this right.
