week 4 provider payment/ public insurance

how much a health care entity stands to gain financially if health care spending is low (or suffer if high)

financial risk from health spending

what is the default regarding financial risk from health spending?

other risk sharers?

default= insurance or employer will bear the risk if health spending is high

may share risk with

1. patients= cost sharing

2. providers

describe the alternative payment methods for providers graph

x axis?

y axis?

trend diagnolly?

x axis= degree of aggregation (how many health services are grouped together as one)

y axis= bundling across providers (no/yes)

goes from low powered to high powered

what does a low degree of aggregation mean? high?

low= not a lot of health services grouped together

high= a lot of services grouped together as one payment

= more incentive to consider pt health as whole

what is "bundling across providers"

no= docs considered separately

yes= payments go to one hospital at the same time and then they split it (conflict)

what does bundling providers do

creates incentives for better coordination amongst providers= more efficient tx by directing pts to appropriate docs

fee for service payment model

what is it?

cons?

-predominant form-> each service is paid for

-low aggregation, no bundling

-TOO MUCH healthcare is provided (bc paid for each service). can abuse for provider financial gain

which payment model encourages providers to give too much care

fee for service (FFS)

pay for performance (P4P)

fee for service model plus a bonus payment for good performance (quality/costs)

per diem model

paid per day u take care of a patient (ex: hospital, nursing home)

DRG/ per episode payments

covers all services provided for a period of a pt's illness (ex: joint replacement= hospital gets one payment from surgery to recovery)

capitation model vs global budget/salary

highly aggregated models

capitation= one payment to cover all services for a pt for one entire year

global budget= payment to cover all services required by ALL the patient seen in an entire year (ex: hospital in canada)

which provider payment model is the most aggregated

global budget/ salary

they get one payment to cover EVERYTHING for a year

-> need to budget out services. cant just provide everything

which models are NOT bundled across providers (from least to most aggregated)

FFS

P4P

Per diem

DRG/ per episode

Capitation

Global budget/salary

affordable care act payment innovations are managed by?

what are the 3 types?

medicare innovation center (CMMI)

providers can CHOOSE to participate

1. ACO 1 sided medicare shared savings program

2. ACO 2 sided

3. bundled payments

ACO 1 sided vs 2 sided Medicare Shared Savings Program

providers can CHOOSE to participate

1 sided= basically P4P but bundled across providers

- bonus is a percentage of total health savings ACO provider achieves for payer

- the saved money is then split btwn provider and payer

2 sided= provider shares in savings AND losses

- if they spend more than expected then they will get penalized

medicare bundled payments

episode of care based payments but spread across providers

- payment is prospective (provider keeps 100% of savings, not just one share)

which insurance plan is the MOST high powered

Kaiser HMO premium

Kaiser HMO premium

- on west coast, owns many health systems

- premium is a capitation payment to doc that covers ALL care a pt might need (hospital, drugs, everything) .

- premium is given straight to providers that Kaiser owns.

- docs keep 100% of savings to set low premium and get more pts

- premium is like a provider payment to all providers Kaiser owns

if a pt comes in with back pain which model is LEAST likely to get expensive labs and scans done

a. FFS

b. DRG

c. Kaiser HMO premium

c. Kaiser

org will suffer financially if they do wasteful care

______% of payments to providers were high powered (bundled, high degree of aggregation)

28.5%

which insurance has the MOST % of payments to providers that were high powered

a. commercial

b. medicare advantage

c. medicaid

d. traditional medicare

b. medicare advantage (43%)

the % of payments that are 2 sided risk (compared to 1 sided) is _________ (increasing or decreasing)

increasing

what are the 2 models hospitals are paid

1. diagnosis related groups (DRGs)

2. Medicare pay for Performance

- value based purchasing

- readmissions reduction

- hospital acquired conditions reduction

Medicare Pay for Performance includes which 3 quotas for hospitals

- value based purchasing

- readmissions reduction

- hospital acquired conditions reduction

6% of Medicare revenue is at risk based on performance of this

what is a DRG?

diagnosis related groups= billing method in medicare where each pt admission is assigned 1 DRG and payment includes ALL of the services they get from admission to discharge

(incentive to give cheap drugs)

how do DRGs affect provider prescribing

doc gets payment for ALL of the services in one visit

creates incentive for doc to use LESS expensive meds. good but also uses cheap abx

1. abx resistance

2. lower incentive to develop new abx bc hospitals wont buy

how many MS DRGs groups are there now

745 (used to be 538)

MS-DRG algorithm

is there an operating procedure?

yes-> major or minor? comorbidities?

if no (less money payed)-> principal dx-> neoplasm, sx, etc

Medicare P4P: value based purchasing

score given to hospitals

how is it divided up?

25% based on health outcomes (skill)

25% efficiency (cost control; we want low costs)

25% pt/caregiver experience of care

20% pt safety/ careless health care (ex: pt hip fracture rate, etc)

5% based on process measures (how often did pts get the right steps)

COPES-> cost, outcome, process, experience, safety

3 main physician reimbursements

1. FFS/RBRVS

2. MIPs safer P4P)

3. AAPs (ACO, bundled)

RBRVS (FFS) is the standard physician payment and incorporates which 3 weights?

1. Work= time, skill

2. Practice= avg practice expense (ex: office vs hospital)

3. Malpractice= malpractice insurance costs (ex: OBGYN have higher costs)

Conversion factor= geographic/etc

relative value units= weights placed on each element

what units and factors are used in RBRVS/FFS to pay physicians

relative value units= weights placed on each element (work, practice, malpractice)

=== creates weight

conversion factor= geographic and other factors. grows according to sustainable growth rate (payment per unit)

=== multiply this $$ by RVU

the _________ in RBRVS grows according to the sustainable growth rate

conversion factor

what is MACRA? what did it repeal?

-new Med part B payment method focusing on VALUE of care (higher powered)

- law that repeals sustainable growth rate formula

________ replaces the SGR with a more predictable payment that incentivizes value FOR ____

MACRA; med part B

2 payment tracks for MACRA

what are they based on?

which is safer?

higher payments?

1. MIPS= merit based incentive payments

- types of P4P based on quality, resource use, clinical improvement, advancing care info (similar to hospital)

2. AAPMs= advanced alternative payments

- joining accountable care organizations

- bundled payment models

MIPS (9% bonus) is safer but can get higher earnings under AAPMs (100%)

when can you enroll in a private medicare health plan?

options?

annually every january

PDP= standalone RX drug plan

- 14 available

MA-PD= medicare advantage/ "part C"

- has A, B, and D

top 5 firms that cover 3/4 of medicare part D enrollees

UnitedHealth

Centene

Humana

CVS health

Cigna

-> centene, cvs, and cigna actually have more PDPs than MA-PD!!

t/f: Kaiser only offers MA-PD, no PDP

true

medicare part D benefit design

standard benefit vs alternative

almost ALL plans use an alternative plan (equal or greater in value)

MUSTTT be actuarially equivalent

actuarially equivalent

worth the same amount in avg spending for an avg enrollee (no ability for company to save money)

medicare part d alternative benefits must be actuarially equivalent to the standard benefit

medicare part d low income subsidy plans

subsidize premiums and cost sharing for low income enrollees by govt

1/4 of part d enrollees are LIS

which has a larger monthly premium

a. Part D stand alone

b. medicare advantage

why?

a. part D stand alone

6 times larger!!!

80% of enrollees in MA-DP plans dont even pay premiums. sponsors often subsidize. companies get rebates and lower premium to get more ppl

downsides to MA-DPs

restrictions on provider network

more prior auths

what is the standard part D benefit design (historically)

different "phases" of coverage with diff allocations of payment responsibilities

1. deductible

2. initial coverage phase

3. donut hole (gap)

4. catastrophic coverage (pt pays, no cap)

used to be NO CAP on OOPs

what is the standard part D benefit design (NOWWW)

1. deductible= pt pays all costs to certain amount

2. initial coverage= pt pays 25% of costs

3. cap of $2000 on out of pocket costs

after that, med part D pays for everything

t/f: only alternative benefit plans use tiered benefit designs

true

but note medicare restricts some of these tiers so that needed drugs are fs covered (ex: cancer)

tiered benefit design in COMMERICIAL insurance plans

1. generic drugs

2. preferred brand drugs

3. nonpreferred brand drugs

4. preferred specialty

5. nonpreferred specialty drugs

cost-sharing rises w tiers (pt pays more)

what is the tiered benefit design in medicare part d & compare it to commercial

2 tiers of generics: preferred and non preferred (1 in commercial)

2 tiers of preferred not preferred brands

1 tier of specialty (2 in commercial)

compare the use of copays vs co-ins in MADP vs PDP for

preferred brands

non preferred

specialty

for preferred brands and NON preferred

1. copays are more common in MA-PD ($$$)

2. co insurance more common in PDP plans (%%%)

- worse for pt

for SPECIALTY

- both use co-insurance

- expensive drugs, pt becomes more responsible for drug costs

- coinsurance is LOWER for most PDP plans (25%) and higher for MA-PD (30%)!!!!

if a pt takes a lot of specialty drugs, would an MA-PD or a PDP plan be better

PDP

PDP has a lower coinsurance (25%) than MA-DP (30%) for specialty drugs

BUTTT usually pys hit $2k max anyways so it doesnt matter

which plan has a higher deductible? premium?

-madp

-pdp

higher deductibles and premiums in PDP plans

what is the max pt cost sharing in medicaid

$4 for preferred drugs

$8 for non-preferred drugs

some states its $0

THE LOWESTTT COSTS COMPARED TO PART D AND COMMERCIAL

3 strategies used by states to control drug costs

1. managed care organizations

2. pharmacy benefit managers

3. utilization management

what are "managed care organizations" in medicaid pharmacy benefits

- 3/4 of medicaid beneficiaries are in private managed care plans

- a private insurance company that contracts with state Medicaid programs to provide comprehensive healthcare services (including pharmacy benefits) to Medicaid enrollees.

The state pays the MCO a fixed monthly payment per enrollee (capitation).

The MCO then manages the delivery of care, including prescriptions, doctor visits, and sometimes behavioral health or long-term care.

t/f: pharmacy benefit managers are only used if MCOs manage medicaid

false. used whether states manage RX benefits or let MCOs do it

what is utilization management in medicaid pharmacy benefits (3)

coverage decisions prior to dispensing based on clinical/cost

1. preferred drug list; tools applied to non-preferred (NOT like a formulary)

2. prior auths

3. step therapy

formulary vs preferred drug list

formulary= only certain drugs can be used

preferred drug list= in medicaid; tools are applied to the non preferred

MEDICAID IS FORCED TO COVER ALL DRUGS APPROVED BY FDA

medicaid payments for a drug have 3 components:

1. dispensing fee to pharmacist ($9-12 per script)

2. amount paid to pharmacy for drug (NADAC or wholesaler price)

3. rebate received from manufacturer

what is medicaid prescription drug rebate program

for BOTH traditional medicaid and medicaid MCOs

-All drug manufacturers who want their drugs covered under Medicaid must sign a rebate agreement with CMS.

If they don't, their drugs are not covered by Medicaid.

- statutory rebates are required by law

- the true price of a drug to medicaid is NET price= list price minus rebate (secret)

in exchange for rebates, what does medicaid do?

medicaid must maintain open formulary

- must cover every single drug on market

- expensive when new high cost drug are approved

(but remember it has prefered drug list, prior auth, step therapy)

what are the base rebates in medicaid

for each drug, manufacturers MUST give rebates

13-23% lower than avg rebates in employer ins

what are the inflation based rebates given to medicaid

if a drugs price goes up faster than general inflation, the manufacturer rebates difference to medicaid

-> medicaid is protected against ALLL price increases in drugs year over year

-> in other countries, prices are fixed. basically same in medicaid bc they get that back in rebates. this is in medicare now too

which holds a larger proportion of rebates given back to medicaid

a. base rebates

b. inflation based rebates

b. inflation based rebates (54%)

base rebates= 46%

these are the 2 big rebates tho. less are smaller

some states pool together to negotitate rebates. why do manufacturers pay these large rebates?

to get drug on preferred drug list or reduce utilization management

t/f: medicaid MCOs can also negotiate additional rebates for their enrollees

true

what allows for lower prices in medicaid?

large rebates and price restraints

do medicaid or medicare get bigger rebates on drugs

medicaid

even tho medicare spends way more money on drugs. they still get less rebates

t/f: while medicaid gross spending on drugs has increased, net spending has remained the same since rebates have increased to match

FALSE

both gross spending and net spending have risen. they do get a lot of rebates tho so its not a major increase in net spending. it actually shrank one year but now its rising

what explains the increase in medicaid net spending over the years

growth in use and prices of high cost specialty drugs

- expensive list price and also smaller rebates. they are more unique so they might be the only option to treat a condition. pt is willing to pay= monopoly

net drug prices are higher in ________, due to higher rebates in _______

medicare part d; medicaid

pt cost sharing is higher in _______

a. medicare

b. medicaid

a. medicare part d