Archives for May 24, 2023

Senate Scrutinizes MA Payment Denials, Including Use Of Algorithms

Impossible' Medicare Advantage denials decried during Senate hearing

Medicare Advantage plans’ use of third-party algorithms for coverage determinations is facing some scrutiny in the Senate.

Lawmakers in a Wednesday hearing argued something must be done to pare back burdensome prior authorization requirements allowing payers to delay or deny medical care that would be covered under traditional Medicare — including the use of artificial intelligence — as insurer profits continue to rise.

“Insurers are in effect denying Americans necessary care in order to fatten and pad their bottom lines, and that phenomenon is unacceptable,” said Sen. Richard Blumenthal, D-Conn., chair of the Permanent Subcommittee on Investigations, which held the hearing.

“I want to put these companies on notice. If you deny lifesaving coverage to seniors, we’re watching, we will expose you, we will demand better, we will pass legislation if necessary, but action will be forthcoming,” Blumenthal said.

The subcommittee on Wednesday sent bipartisan letters to some of the biggest MA payers, including UnitedHealth, Humana and CVS, which collectively cover more than 50% of MA beneficiaries. The letters asked for internal documents showing how decisions are made to grant or deny access to care, including the use of AI in coverage determinations, Blumenthal said.

Payment denials

Although the majority of requests for services are approved, it’s not uncommon for private MA plans to wrongly deny medically necessary care that would be covered under traditional Medicare, according to an HHS Office of Inspector General report from last April.

Federal investigators found 13% of prior authorization requests and 18% of payment denials were wrongly denied and should have been approved under Medicare coverage rules.

In addition, a 2018 government audit found MA plans ultimately approved 75% of appealed requests that were originally denied.

MA plans, which can offer more benefits than traditional Medicare, continue to grow in popularity. Currently, 30 million Americans, or roughly half of all Medicare enrollees, are in the privately run Medicare plans. And the number of plans has grown, with the average beneficiary choosing between 43 plans offered by nine different insurers as payers flood into the lucrative market.

“Fast growth has increased vulnerabilities and the need for robust program integrity measures,” testified Megan Tinker, HHS OIG chief of staff, during the hearing.

AI determinations

To cut costs, MA insurers are routinely using algorithms from third-party companies like NaviHealth for coverage determinations, sparking many of the inappropriate denials, according to a STAT investigation earlier this year.

Insurers’ use of the unregulated technology was a major focus of the hearing with senators arguing the need for more oversight.

“Insurers may refer to these algorithms as tools used for guidance, but the denials they generate are too systematic to ignore,” said Blumenthal. “Insurance companies insist those AI mechanisms are proprietary, but part of what needs to happen is to make them more transparent so patients and providers know along with the public how they are being used.”

Gloria Bent, an MA enrollee, shared her husband’s experience with melanoma and how NaviHealth, which is owned by payer giant UnitedHealth, frequently denied care prescribed by his clinician. That resulted in a stressful cycle of coverage denials and appeals and his premature departure from a skilled nursing facility.

“The reappearance of melanoma in 2022 pulled a rug out from under my husband and my family. Then came the added trauma which piled on steadily of having to fight to keep him receiving the care he needed,” Bent testified. “This should not be happening to families and patients. It’s cruel.”

Still, utilization management tools like prior authorization can be valuable for cost containment, testified Lisa Grabert, a visiting research professor at the Marquette College of Nursing. Insurers argue prior authorization is necessary to curb waste and unnecessary medical expense.

Earlier this year, the Biden administration finalized a rule reiterating that MA plans are required to comply with coverage rules in traditional Medicare. Where there isn’t a Medicare coverage determination, MA plans can establish their own internal coverage criteria. That criteria must follow widely accepted available clinical guidelines and be reviewed annually by a clinical committee, the final rule says.

In addition, if a utilization management policy like a prior authorization could lead to a partial or full denial of care, it needs to be reviewed by a clinician. CMS plans to enforce the rule through audits.

Large private health insurers, like UnitedHealthcare, have been paring back their prior authorization requirements in advance of the regulation.

Senator Roger Marshall, R-Kans., asked witnesses if it would be valuable to force plans to report more detailed information on prior authorization delays, denials and appeals by CPT code or individual service level, as the new CMS rule only requires MA payers to share aggregate data.

Witnesses said more data is always helpful for research, oversight and beneficiary shopping between plans.

“The information that is available right now, you have to dig very, very, very deep to get any information on whether a prior authorization may or may not be required, and certainly not at the service level,” testified Jeannie Fuglesten Biniek, associate director of Medicare policy for KFF. “It would be a step in a direction that would help.”

Kaiser Permanente Discloses Timeline, Financial Commitments For Its VBC Megadeal With Geisinger Health

Regulatory filing sheds new light on Kaiser-Geisinger megadealDisclosures included in Kaiser Permanente’s quarterly financial statements offer new details on the timeline for its major value-based care deal with Geisinger Health, as well as the upper and lower limits of its investment commitments toward the new entity and expanding Geisinger’s Pennsylvania market presence.

The statements, released late Monday, recap the definitive agreement announced by the integrated health systems in late April—Kaiser will create a separate non-profit called Risant Health, that would then acquire Geisinger and become its sole member.

Risant would, according to the statements, strategically aim to “expand and accelerate the adoption of value-based care in diverse, multi-payer, multi-provider and community-based health system environments.” Kaiser leadership has also said that Risant would accomplish those goals with “five or six” additional health system acquisitions.

Monday’s filing, however, shares that Kaiser doesn’t expect its deal to close until some time in 2024.

Additionally, the system’s financial commitments into Risant are slated to be made “over the five-year period following closing,” while committed investments and support by Risant into Geisinger will be made through Dec. 31, 2028, according to the filing.

As for the investments themselves, Kaiser leadership previously said it planned to shift $5 billion of the system’s funds into support for the new entity. Per the filing, that $5 billion toward “core Risant Health capabilities, technologies, tools and future investments” represents the upper limit of Kaiser’s potential support, with Kaiser also committing to a minimum investment of $400 million over five years “inclusive of funds generated by Risant Health.”

Risant would then be on the hook to make available to Geisinger a minimum of $2 billion (inclusive of funds generated internally by Geisinger and Risant) through the end of 2028 to “support necessary hospital, ambulatory facility, technology and other strategic and routine capital,” Kaiser wrote.

Further, Risant must assure funding “of no less than $100 million” through 2028 to support expansions of Geisinger’s health plan and care delivery services into bordering Pennsylvania communities (again inclusive of internally generated funds), according to the statements.

Finally, Kaiser wrote that the agreement requires Risant to keep a minimum of $115 million available annually (inclusive of internally generated funds, and adjusted for inflation and other factors) to fund Geisinger’s research and education efforts for at least 10 years after the deal’s close, the system wrote.

Kaiser and Geisinger’s deal is still subject to regulatory approvals, though antitrust agencies have so far been hesitant to challenge deals involving healthcare entities operating in different markets.

Monday’s disclosures came alongside a more fleshed-out report of Kaiser’s first-quarter financials. The integrated giant said it brought in $1.2 billion in net income and $233 in operating income, a welcome turnaround after it lost $4.5 billion across 2022.

The Oakland, California-based nonprofit reports over $95 billion in annual operating revenues and spanned 624 medical offices, 39 hospitals and 43 retail and employee clinics as of March 31. It counted a total of 12.7 million members as of March 31.

Danville, Pennsylvania-based Geisinger reported $6.9 billion in revenue, a $239 million operating loss and a $842 million net loss across 2022. Its 133 care locations, including 10 hospital campuses, are primarily focused in central and northeastern Pennsylvania. It counted roughly 612,050 members as of Dec. 31 and had cared for nearly 1.2 million people across 2022.

House Panel Advances Transparency And PBM Bills

House panel advances bill to promote PBM transparency

A House Energy and Commerce Committee health markup on Wednesday offered more evidence that price transparency and pharmacy benefit manager regulation are two issues that have enough bipartisan support to move ahead in this Congress.

Among the measures the panel advanced on a unanimous 27-0 vote:

  • Codifying and strengthening Trump-era rules for hospitals and insurers to make health care prices available and more transparent.
  • Imposing new transparency requirements on PBMs and banning “spread pricing” in Medicaid, where PBMs charge more than they pay for a drug and keep the difference.

Yes, but: The committee took a pass on major measures to provide for site neutral payment reforms in Medicare that address the way hospitals charge more for outpatient services that can be done in less-expensive settings.

  • In a sign the issue is not dead, Chair Cathy McMorris Rodgers (R-Wash.) offered and withdrew an amendment, saying there is “more work to do” on the measures.
  • “It’s not a secret that hospitals have concerns with these proposals,” she said, but argued that there should be other ways to support hospitals than overpaying for certain services.

The bottom line: Versions of transparency and PBM bills could end up in a broader legislative package later this year, given the need to reauthorize programs like community health centers.

  • PBM measures have particular momentum, given that the Senate HELP Committee also advanced measures aimed at providing drug savings.

Progressives Reintroduce ‘Medicare For All’ Bill

Progressive Lawmakers Revive Medicare for All Bill

Key progressives in the House and Senate have revived the fight in Congress over “Medicare for All,” a single-payer health system based on the Medicare program.

Sen. Bernie Sanders, I-Vermont, and Reps. Pramila Jayapal, D-Washington, and Debbie Dingell, D-Michigan, reintroduced the Medicare for All Act, with 14 Senate Democrats and 110 House Democrats on board with the measure.

The legislation would roll out the Medicare for All model over four years, expanding health coverage to each American. Under the bill, that coverage would come with no premiums, deductibles or copayments and would cover a wide array of services from primary care to vision care to mental health.

Sanders said in a news release that the COVID-19 pandemic threw into stark relief how critical it is to ensure that everyone has access to affordable healthcare.

“As we speak, there are millions of people who would like to go to a doctor but cannot afford to do so,” Sanders said. “That is an outrage. In America, your health and your longevity should not be dependent on your bank account or your stock portfolio.”

The legislators noted that the Congressional Budget Office previously projected that Medicare for All would save the healthcare system $650 billion per year.

“Sadly, the number of people struggling to afford care continues to skyrocket as millions of people lose their current health insurance as pandemic-era programs end,” Jayapal said. “Breaking a bone or getting sick shouldn’t be a reason that people in the richest country in the world go broke.”

Medicare for All faces strong opposition from all corners of the industry. In a statement, the Partnership for America’s Health Care Future, which represents payers and providers, urged legislators to take a more “common sense approach” to ensuring coverage is accessible to everyone.

“Every American deserves access to affordable, high-quality health coverage and care—however one-size-fits-all proposals like Medicare for All that result in government-controlled health care won’t help us get there,” said Executive Director Lauren Crawford Shaver. “With more and more states seeing failed public option approaches, it is more important than ever that Americans have access to quality and affordable health care—not a system that would force them to pay more and wait longer for worse care. ”

A More Aggressive FTC Is Starting to Target Drug Mergers and Industry Middlemen

FTC sues Amgen-Horizon, raising questions about PBM role in drug costsUnder the leadership of an aggressive opponent of anti-competitive business practices, the Federal Trade Commission is moving against drug companies and industry middlemen as part of the Biden administration’s push for lower drug prices at the pharmacy counter.

On May 16, the FTC sued to block the merger of drugmakers Amgen and Horizon Therapeutics, saying the tangled web of drug industry deal-making would enable Amgen to leverage the monopoly power of two top Horizon drugs that have no rivals.

In its lawsuit, the FTC said that if it allowed Amgen’s $27.8 billion purchase to go through, Amgen could pressure the companies that manage access to prescription drugs — pharmacy benefit managers, or PBMs — to boost the two extremely expensive Horizon products in a way that would inhibit any competition.

The suit, the first time since 2009 that the FTC has tried to block a drug company merger, reflects Chair Lina Khan’s strong interest in antitrust action. In announcing the suit, the agency said that by fighting monopoly powers it aimed to tame prices and improve patients’ access to cheaper products.

The FTC’s action is a “shot across the bow for the pharmaceutical industry,” said Robin Feldman, a professor and drug industry expert at the University of California College of the Law-San Francisco. David Balto, a former FTC official and attorney who fought the 2019 Bristol-Myers Squibb-Celgene and 2020 AbbVie-Allergan mergers, said FTC’s action was long overdue.

The Horizon-Amgen merger would “cost consumers in higher prices, less choice, and innovation,” he said. “The merger would have given Amgen even more tools to exploit consumers and harm competition.”

The FTC also announced an expansion of a yearlong investigation of the PBMs, saying it was looking at two giant drug-purchasing companies, Ascent Health Services and Zinc Health Services. Critics claim the PBMs set up these companies to conceal profits.

When Amgen announced its purchase of Horizon in December — the biggest biopharma transaction in 2022 — it showed particular interest in Horizon’s drugs for thyroid eye disease (Tepezza) and severe gout (Krystexxa), for which the company was charging up to $350,000 and $650,000, respectively, for a year of treatment. The complaint said the merger would disadvantage biotech rivals that have similar products in advanced clinical testing.

Amgen could promote the Horizon drugs through “cross-market bundling,” the FTC said. That means requiring PBMs to promote some of Amgen’s less popular drugs — the Horizon products, in this case — in exchange for Amgen offering the PBMs large rebates for its blockbusters. Amgen has nine drugs that each earned more than $1 billion last year, according to the complaint, the most popular being Enbrel, which treats rheumatoid arthritis and other diseases.

The three biggest PBMs negotiate prices and access to 80% of prescription drugs in the U.S., giving them enormous bargaining power. Their ability to influence which drugs Americans can get, and at what price, enables the PBMs to obtain billions in rebates from drug manufacturers.

“The prospect that Amgen could leverage its portfolio of blockbuster drugs to gain advantages over potential rivals is not hypothetical,” the FTC complaint states. “Amgen has deployed this very strategy to extract favorable terms from payers to protect sales of Amgen’s struggling drugs.”

The complaint noted that biotech Regeneron last year sued Amgen, alleging that the latter’s rebating strategy harmed Regeneron’s ability to sell its competing cholesterol drug, Praluent. Amgen’s Repatha generated $1.3 billion in global revenue in 2022.

It “may be effectively impossible” for smaller rivals to “match the value of bundled rebates that Amgen would be able to offer” as it leverages placement of the Horizon drugs on health plan formularies, the complaint states.

Business analysts were skeptical that the FTC action would succeed. Until now the commission and the Department of Justice have shied away from challenging pharmaceutical mergers, a precedent that will be hard to overcome.

Research on the impact of mergers has shown that they often benefit shareholders by increasing stock prices, but hurt innovation in drug development by trimming research projects and staffing.

Waves of consolidation shrank the field of leading pharma companies from 60 to 10 from 1995 to 2015. Most of the mergers in recent years have involved “big fish buying up lots of little fish,” such as biotech companies with promising drugs, Feldman said.

The giant Amgen-Horizon merger is an obvious exception, and therefore a good opportunity for the FTC to demonstrate a “theory of harm” around drug industry bundling maneuvers with PBMs, said Aaron Glick, a mergers analyst with Cowen & Co.

But that doesn’t mean the FTC will win.

Amgen may or may not engage in anti-competitive practices, but “a separate question is, how does this lawsuit fit under current antitrust laws and precedent?” Glick said. “The way the law is set up today, it seems unlikely it will hold up in court.”

The FTC’s argument about Amgen’s behavior with Horizon products is hypothetical. The pending Regeneron suit against Amgen, as well as other, successful lawsuits, suggests that rules are in place to suppress this kind of anti-competitive behavior when it occurs, Glick said.

The judge presiding over the case in U.S. District Court in Illinois is John Kness, who was appointed by then-President Donald Trump and is a former member of the Federalist Society, whose membership tends to be skeptical of antitrust efforts. The case is likely to be settled by Dec. 12, the deadline for the merger to go through under current terms.

Amgen sought to undercut the government’s case by agreeing not to bundle Horizon products in future negotiations with pharmacy benefit managers. That promise, while hard to enforce, might get a sympathetic hearing in court, Glick said.

Still, even a loss would enable the FTC to shed light on a problem in the industry and what it sees as a deficiency in antitrust laws that it wants Congress to correct, he said.

The day after suing to stop the merger, the FTC announced it was pushing further into an investigation of pharmacy benefit managers that it began last June. The agency demanded information from Ascent and Zinc, the two so-called rebate aggregators — drug purchasing organizations set up by PBMs Express Scripts and CVS Caremark.

At a May 10 hearing, Eli Lilly & Co. CEO Dave Ricks said that most of the $8 billion in rebate checks his company paid last year went to rebate aggregators, rather than to the PBMs directly. A “big chunk” of the $8 billion went overseas, he said. Ascent is based in Switzerland, while Emisar Pharma Services, an aggregator established by PBM OptumRx, is headquartered in Ireland. Zinc Health Services is registered in the U.S.

Critics say the aggregators enable PBMs to obscure the size and destination of rebates and other fees they charge as intermediaries in the drug business.

The PBMs say their efforts reduce prices at the pharmaceutical counter. Testimony in Congress and in FTC hearings over the past year indicate that, at least in some instances, they actually increase them.

Private Insurers Estimated To Pay $1.1B in Rebates in 2023

Insurers set to pay $1.1B in premium rebates this year: KFF

Private insurers are expected to pay about $1.1 billion in medical loss ratio rebates in 2023, a new analysis found.

The report, published Wednesday by the Kaiser Family Foundation (KFF), relied on preliminary data reported by insurers to state regulators. Some insurers haven’t reported their rebate estimates for this year yet, but final data will be released later in the year.

Under the Affordable Care Act, insurers are limited in how much of premium income they can keep for administration, marketing and profits. Insurers in the individual and small group markets must use 80% of premium income on healthcare claims and quality improvement efforts, while those in large markets must use at least 85%. The rest they can use for administration, marketing and profits. Medical Loss Ratio rebates are based on 3-year averages, so 2023’s rebates are based on 2020, 2021 and 2022 insurer financial data.

“Insurers that fail to meet the applicable [medical loss ratio] threshold are required to pay back excess profits or margins in the form of rebates to their enrollees,” KFF said.

Individual market insurers are estimated to owe about $500 million to enrollees. This includes enrollees in ACA marketplace plans. Small group market insurers are anticipated to owe about $330 million. Large group market insurers are expected to owe about $250 million.

This year’s total rebates are similar to last year’s, which were at $1 billion. Rebates in 2022 were given to 2.4 million people with individual coverage and 3.8 million people with employer coverage. The average rebate was $205 per person for those in the individual market, $169 per person for those in the small group market and $110 per person for those in the large group market. Employees only receive a portion of this rebate, however, because it is shared with the employer.

While the $1.1 billion in rebates this year is higher than last year, it’s still significantly lower than 2020 and 2021, the analysis showed. A record $2.5 billion were paid in rebates in 2020 and $2 billion were paid in 2021.

The rebates in 2023 are reflective of challenges felt during the Covid-19 pandemic, which led to lower medical loss ratios from people skipping care.

“Hospitals and providers canceled elective care early in the pandemic and during spikes in COVID-19 cases in order to free up hospital capacity, preserve supplies, and mitigate the spread of the virus,” KFF stated. “Many consumers also chose to forego routine care in 2020 due to social distancing requirements or similar concerns. As insurers had already set their 2020 premiums ahead of the pandemic, many turned out to be over-priced relative to the amount of care their enrollees were using. Some insurers offered premium holidays and many temporarily waived certain out-of-pocket costs, which had a downward effect on their rebates.”

Superior Court Upholds CMA Legislation Mandating Reimbursement For COVID-19 Testing And Vaccination

Man receiving vaccination

In a ruling issued this week, the Los Angeles Superior Court upheld the constitutionality of a state law requiring health plans to fairly reimburse health care providers for the costs of COVID-19 testing during the COVID-19 state of emergency.

Senate Bill 510, which the California Medical Association (CMA) sponsored, mandates that health plans and health insurers reimburse health care providers, regardless of network status, for COVID-19 testing and vaccination services. The law requires that health plans and insurers cover testing and vaccination without any cost-sharing or prior authorization requirements. SB 510 extended those provisions retroactively to March 4, 2020, the date Governor Gavin Newsom declared a state of emergency for the pandemic.

In his ruling, Judge Mitchell L. Beckloff dismissed the arguments made by the California Association of Health Plans (CAHP) challenging the constitutionality of SB 510’s requirement that CAHP’s health plan members pay health care providers for COVID-19 testing rendered during the period from the March 4, 2020, state of emergency declaration through December 31, 2021. Recognizing that health plans do not operate as a matter of right, but rather must comply with state law, the court found it improper for those health plans to force health care providers to shoulder the responsibility for the cost of COVID-19 diagnostic testing through unfair contracting practices.

Judge Beckloff found that SB 510 was passed “to combat COVID-19 and its community spread by ensuring access to and encouragement for…screening and testing [and to] protect access to COVID-19 diagnostic and screening testing by ensuring the overall financial stability of the healthcare system.” His order further states that the health plans’ attempt to impose unreasonable contract terms on health care providers could frustrate this purpose by “diminish[ing] access to quality care.”

“CMA was proud to sponsor SB 510 when it was introduced by then-Senator Richard Pan, M.D., and we’re thrilled to see it’s been rightly upheld in court,” said CMA President Donaldo Hernandez, M.D. “SB 510 is a vital, life-saving bill that ensured all Californians were able to access COVID-19 testing throughout the duration of the pandemic and will require coverage for testing and vaccination during future public health emergencies.”

Prior to the passage of SB 510, CMA asked the California Department of Managed Care and the California Department of Insurance to investigate concerns that certain payors were illegally impeding patients’ access to COVID-19 testing and profiting at the expense of treating physicians.

CMA sponsored SB 510 to ensure that those barriers to testing were removed, physicians were reimbursed fairly by health plans, and patients did not have to incur out-of-pocket expenses for testing.

Last Updated 05/24/2023

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