Verma draws the line on Medicaid limits, ACO risk contracts

CMS Administrator Seema Verma offered hospital executives on Monday good and bad news on Medicaid coverage limits and accountable care organizations' risk contracts.

The CMS will reject Kansas' request to impose lifetime limits on Medicaid coverage, following an outcry from clinicians and others in the state. Late last year, the state submitted a waiver to impose a 36-month enrollment cap on adult Medicaid beneficiaries.

"We're determined to make sure that Medicaid remains the safety net for those that need it most," Verma said at the American Hospital Association's annual meeting in Washington. "To that end, we have determined we will not approve Kansas' recent request to place a lifetime limit on Medicaid benefits."

Verma's announcement also likely spells doom for Arizona's similar pending request, which sought a five-year benefits limit. It also indicates that the Trump administration has a hard line on which conservative policies it will support.

Verma hinted last week that Kansas' waiver wouldn't be approved. "We understand people's circumstances change over time," Seema said. "They may get a job, and then something happens. Those are the things we want to keep in mind."

Several healthcare providers in Kansas this year urged the CMS to deny the state's proposed Medicaid benefits limit, claiming it would significantly increase hospitals' uncompensated-care costs, as many low-income beneficiaries cycle on and off Medicaid due to unpredictable hours and wages.

"This will increase the uninsured rate, which in turn could significantly increase the uncompensated care," the Kansas Association for the Medically Underserved said in a comment letter on the CMS' site. The group represents community clinics in the state.

The Kansas Hospital Association and American Academy of Family Physicians also urged the CMS to not approve the request.

Audience members at AHA's meeting on Monday applauded Verma's Medicaid announcement, but they had a more muted response to her stance on accountable care organizations taking on risk.

Verma said that the ACOs that have been willing to take on risk have saved money, while those that haven't appear to be increasing Medicare spending.

"The presence of these upside-only tracks may be encouraging consolidation in the marketplace, reducing competition and choice for our beneficiaries," she said. "While we understand that systems need time to adjust, our system cannot afford to continue with models that are not producing results."

There are 561 Medicare ACOs in the program this year and 82% of them remain in Track 1.

Last week, the National Association of ACOs released a survey in which many ACOS said they would quit if they were required to take on risk next year. ACOs that started in the Medicare Shared Savings Program's Track 1 in either 2012 and 2013 are supposed to move to a risk-based model by their third contract periods, which begin next year, according to Obama-era regulations.

But these ACOs say they need more time without risk because Medicare Shared Savings Program regulations have changed considerably since the early years and ACOs are just now operating successfully.

In addition, providers have been afraid to make the shift if commercial payers aren't willing to create similar pay models, according to Chas Roades, CEO of consultancy Gist Healthcare.

"It hasn't been worth killing the fee-for-service golden goose on the commercial side in order to capture shared savings in the Medicare book of business—and it's not feasible to ask doctors to practice medicine two different ways depending on who's paying," Roades said.

Verma's stance may mean there will be an exodus from Track 1, policy insiders said.

"This seems like a recipe for a much smaller ACO program that loses less money," said Jeff Goldsmith, an adviser at Navigant Consulting.

In a letter sent to the National Association of ACOs late last month, Verma suggested risk-reticent ACOs move to the newly created Track 1+.

Track 1+ has a lower shared loss rate of 30%, compared to Tracks 2 and 3, which can reach 60% and 75%, according to John Feore, a director at Avalere Health.

"Track 1+ may be a good option for some ACOs who are ready to assume some downside risk, but not as much as Tracks 2 or 3," Feore said.

Others had more of a mixed reaction to the suggestion. "For some ACOs the amount of risk in Track 1+ may still be too high," said Allison Brennan, vice president of policy at the National Association of ACOs. "There are concerns about moving to Track 1+ when the shared-savings rate is not any higher than Track 1."