HMOs Beat PPOs on Cost and Quality

HMO

California’s commercial HMOs outperform commercial PPOs on most clinical quality measures. They also consistently provide less costly care. The average yearly cost is $4,245 per HMO enrollee versus $4,455 per PPO enrollee, according to the California Regional Health Care Cost & Quality Atlas. The report comes from the Integrated Healthcare Assn., the California Health Care Foundation, and the California Health and Human Services Agency. Differences in benefit designs don’t explain the cost variation since the total cost of care includes enrollee cost-sharing (deductibles and coinsurance) as well as insurance payments to providers.

HMOs may be performing better because they rely on integrated care networks, which generally accept capitation (fixed per-member, per-month payments). So they are accountable for the patients’ health and are generally rewarded for it, according to the report. So why is HMO enrollment declining? PPOs are often less costly for employers since they reduce premiums with higher enrollee cost-sharing, such as deductibles and coinsurance. But employers should look at the whole picture since HMOs produce superior results when you consider quality and the total cost of care, according to the report.

Quality of Care
California’s commercial HMOs perform better than their national counterparts on every clinical quality measure except asthma medication management. At the same time, California’s commercial PPOs perform worse than the national average on five of the six measures.

When Kaiser Permanente is removed from the analysis, the difference in clinical quality between HMOs and PPOs is cut by about half. Also, the performance difference on risk-adjusted total cost of care narrows substantially, but HMOs still outperform PPOs.

Quality is highest in Northern California, solid in Southern California, and weakest in Central California. The study reveals these regional differences is quality:

  • Northern California outperforms Central and Southern California on clinical quality.
  • Central California falls below the statewide average on key clinical measures for cancer, diabetes, and asthma.
  • The lowest performing region is the Eastern region 13, which includes Central California counties Mono, Inyo, and Imperial.
  • The highest performing region is Contra Costa County region in Northern California.
  • Clinical quality scores vary significantly on some measures. For example, 33% of commercial enrollees with diabetes in Alameda County region six have poorly controlled blood sugar, compared to 75% in the Eastern region 13.
  • In Southern California, San Diego County region 19 is the highest performing region, outperforming Northern California regions: San Mateo County region eight and San Francisco County region four.

If all commercially insured Californians got the same quality of care as top-performing regions, nearly 200,000 more people would have been screened for colorectal cancer and 50,000 more women would have been screened for breast cancer in 2013. If care is provided to all Californians at the same cost as in San Diego, the cost of care would decrease 10% for commercially enrolled people. Many factors contribute to regional performance, including socioeconomic characteristics and the availability of medical services.

Medicare Advantage
The quality and cost of care varies widely for seniors enrolled in Medicare Advantage. For example, in North Bay counties, 91% of women have gotten appropriate breast cancer screening compared to 70% in the Eastern region 13. The average annual per-enrollee total cost of care for Medicare Advantage enrollees ranges from $11,500 in San Diego County to $14,500 a year in Los Angeles region.

Cost of Care
Geographic variation in cost of care is dramatic—a difference of $1,800 in the average annual per-enrollee total cost of care between the most costly and least costly regions. With one exception, all Northern California regions have higher annual per-enrollee costs than the statewide commercial average of $4,300 while all Southern California regions fall below the statewide average. Central California regions show mixed results on cost. HMOs have a lower average total cost of care than do PPOs in 12 of the 18 regions. More tightly managed care in HMOs may contribute to a lower cost of care. Yet, inpatient bed days and readmission rates are similar for HMOs and PPOs. Emergency department visit rates are actually higher for HMOs. The statewide average annual per-enrollee cost of care for commercially insured Californians is $4,300. Kern County is the least costly HMO region. It’s $1,800 per enrollee, per year less than in Santa Clara County, which is the costliest HMO region. The least costly PPO region is Los Angeles at $2,400 less than San Francisco County, which is the costliest PPO region.

Medical Marijuana Reduces Medicare Part D Drugs Costs

 BY  IN INSURANCE INSIDER NEWSLETTER

medical marijuana

Medical marijuana saves state and federal governments millions of dollars on Medicare. For example, prescriptions for painkillers have dipped drastically in states where medical marijuana is available, according to a Univ. of Georgia study published in the July issue of Health Affairs. Researchers combed through data on all prescriptions filled by Medicare Part D enrollees from 2010 to 2013 for a total of over 87 million physician-drug-year observations. In medical marijuana–approved states, the average doctor prescribed fewer doses of antidepressants as well as seizure and anti-nausea medication. Researchers narrowed the results to conditions for which marijuana may be an alternative treatment, selecting nine categories in which the Food and Drug Administration had already approved at least one medication: anxiety, depression, glaucoma, nausea, pain, psychosis, seizures, sleep disorders, and spasticity.

In 2013, Medicare saved $165.2 million in lower prescription drug use when 17 states and the District of Columbia implemented medical marijuana laws. The results suggest that if all states had implemented medical marijuana, Medicare would have saved about $468 million. “The results suggest people are really using marijuana as medicine and not just using it for recreational purposes,” said study author Ashley Bradford.

The next study will look at medical marijuana’s effects on Medicaid. Researchers expect the cost savings to be repeated, saying their findings suggests that more widespread state approval of medical marijuana could provide modest budgetary relief.

Bill Targets Pharma Tactics to Delay Generics

The Senate Judiciary Subcommittee held a hearing on S. 3056, the Creating and Restoring Equal Access to Equivalent Samples (CREATES) Act. The bill would allow generic-drug companies to bring actions in federal court to get the drug samples they need to develop generic versions of brand drugs. It would authorize judges to award damages. Proponents say that the bill would prevent brand drug manufacturers from abusing risk evaluation and mitigation strategies to block generic competition. It would encourage more development of generic and biosimilar drugs and reduce drug costs. “This legislation will help bring generics to market faster, which is key to reducing drug costs,” said Pharmaceutical Care Management Association (PCMA) president and CEO Mark Merritt.

The bipartisan legislation was introduced by Senators Charles Grassley (R-IA), Patrick Leahy (D-VT), Amy Klobuchar (D-MN), and Mike Lee (R-UT). The legislation is supported by a broad group of stakeholders, including the Generic Pharmaceutical Association, the Academy of Managed Care Pharmacy, Public Citizen, Consumers Union, and the Blue Cross Blue Shield Assn. PCMA also suggests these solutions to bring down drug prices:

  • Accelerate FDA approvals of drugs that face little or no competition.
  • Make copay coupons an illegal kickback for all insurance that receives any federal subsidy.
  • Modernize the Medicaid pharmacy to make it more like the commercial market and Medicare Part D.
  • Create new incentives for physicians to prescribe biosimilars.

Analysis Underscores the Need for ‘Any Willing Pharmacy’ Policy in Part D

National Community Pharmacists Association (NCPA) CEO B. Douglas Hoey, RPh, MBA issued the following statement in response to the detailed preferred pharmacy access analysis released by the Centers for Medicare & Medicaid Services (CMS) and conducted in response to concerns raised by NCPA, beneficiary advocates and others:

We appreciate Medicare officials acting on the concerns that NCPA members, beneficiaries, patient advocacy organizations and members of Congress have raised. We are still reviewing the full CMS analysis. Our initial reaction is that more work must be done in this area. The CMS analysis documents progress yet still identifies many plans that are ‘access outliers’ that impact a significant number of beneficiaries. Indeed, this total could be higher because CMS excluded from this analysis plans granted waivers to the retail pharmacy convenient access standard requirement. The marketing disclaimers, while appreciated, come well after the 2016 enrollment period concluded and six weeks into the plan year.

In addition, the format in which this data has been posted should be more accessible to the average Medicare beneficiary or their caregiver. Information of this importance should be incorporated into Medicare Plan Finder prominently – and before beneficiaries research their enrollment decisions.

Beneficiaries need swifter relief and protection. To that end, we encourage Medicare officials to implement an ‘any willing pharmacy’ policy and Congress to enact H.R. 793 / S. 1190. This would allow beneficiaries in medically under-served areas to access their prescription drugs at a community pharmacy that accepts the drug plan’s terms and conditions and can serve those patients. Medicare officials have already acknowledged that this is ‘the best way to encourage price competition and lower costs in the Part D program.

Top Challenges for People with Medicare

The Medicare Rights Center released its annual report based on thousands of calls to its national helpline. Two trends stood out among the questions from helpline callers:

  1. Navigating Medicare Part B Enrollment: Many people are confused by Medicare enrollment rules, and specifically whether to take or decline Part B, which covers doctors’ and other services. Some have other coverage through an employer or the new state or federal Marketplace and want to know how insurance may change because they are eligible for Medicare. While callers may be aware of the risk of late enrollment penalties, they may not realize that their former insurance may refuse to pay for care once they are Medicare-eligible.
  2. Navigating Part D Prescription Drug Appeals: In addition to not knowing why their prescription drug was denied, callers are confused by the Part D appeals process. They are often unsure about whether their appeal has been filed, what level of appeal they are in, and what their doctors have done on their behalf.

Drawing from Medicare Rights’ 25 years of experience serving people with Medicare and their families, the report includes a comprehensive set of policy recommendations on how to improve access to affordable health coverage. Among the recommendations are to provide better education to newly eligible beneficiaries about Part B enrollment and prescription-drug appeals and streamline enrollment periods for employers.

2016 Medicare Parts A & B Premiums and Deductibles Announced

The Centers for Medicare & Medicaid Services (CMS) announced the 2016 premiums and deductibles for the Medicare inpatient hospital (Part A) and physician and outpatient hospital services (Part B) programs. There will be no Social Security cost-of-living increase for 2016. As a result, most people with Medicare Part B will be held harmless from any increase in premiums in 2016 and will pay the same monthly premium as last year, which is $104.90. CMS Acting Administrator Andy Slavitt said, “Our goal is to keep Medicare Part B premiums affordable. Thanks to the leadership of Congress and President Obama, the premiums for 52 million Americans enrolled in Medicare Part B will be flat or substantially less than they otherwise would have been.”

Beneficiaries who are not subject to the hold-harmless provision will pay $121.80. The following Medicare Part B beneficiaries are not subject to the hold-harmless provision:

  • Those who are those not collecting Social Security benefits.
  • Those who will enroll in Part B for the first time in 2016.
  • Dual eligible beneficiaries who have their premiums paid by Medicaid.
  • Beneficiaries who pay an additional income-related premium.

These groups account for about 30% of the 52 million Americans expected to be enrolled in Medicare Part B in 2016. Because of slow growth in medical costs and inflation, Medicare Part B premiums were unchanged for the 2013, 2014, and 2015 calendar years.

Since 2007, beneficiaries with higher incomes have paid higher Part B monthly premiums. These income-related monthly adjustment amounts affect fewer than 5% of people with Medicare. Under the Part B section of the Bipartisan Budget Act of 2015, high income beneficiaries will pay an additional amount. The IRMAA, additional amounts, and total Part B premiums for high income beneficiaries for 2016 are shown in the following table:

Beneficiaries who file an individual tax return with income: Beneficiaries who file a joint tax return with income: Income-related monthly adjustment amount Total monthly premium amount
Less than or equal to $85,000 Less than or equal to $170,000 $0 $121.80
Greater than $85,000 and less than or equal to $107,000 Greater than $170,000 and less than or equal to $214,000 48.70 170.50
Greater than $107,000 and less than or equal to $160,000 Greater than $214,000 and less than or equal to $320,000 121.80 243.60
Greater than $160,000 and less than or equal to $214,000 Greater than $320,000 and less than or equal to $428,000 194.90 316.70
Greater than $214,000 Greater than $428,000 268 389.80

Premiums for beneficiaries who are married and lived with their spouse at any time during the taxable year, but file a separate return, are as follows:

Beneficiaries who are married and lived with their spouse at any time during the year, but file a separate tax return from their spouse: Income-related monthly adjustment amount Total monthly premium amount
Less than or equal to $85,000 $0 $121.80
Greater than $85,000 and less than or equal to $129,000 194.90 316.70
Greater than $129,000 268 389.80

Medicare Part A covers inpatient hospital, skilled nursing facilities, and some home health care services. About 99% of Medicare beneficiaries do not pay a Part A premium since they have at least 40 quarters of Medicare-covered employment. The Medicare Part A annual deductible that beneficiaries pay when admitted to the hospital will be $1,288 in 2016, a small increase from $1,260 in 2015. The Part A deductible covers beneficiaries’ share of costs for the first 60 days of Medicare-covered inpatient hospital care in a benefit period. The daily coinsurance amounts will be $322 for the 61st through 90th day of hospitalization in a benefit period and $644 for lifetime reserve days. For beneficiaries in skilled nursing facilities, the daily coinsurance for days 21 through 100 in a benefit period will be $161 in 2016 ($157.50 in 2015).

Enrollees age 65 and over who have fewer than 40 quarters of coverage and certain people with disabilities pay a monthly premium in order to get coverage under Part A. People with 30-39 quarters of coverage may buy into Part A at a reduced monthly premium rate, which will be $226 in 2016, a $2 increase from 2015. Those with less than 30 quarters of coverage pay the full premium, which will be $411 a month, a $4 increase from 2015.

Deductibles and Coinsurance for 2016

Part A Deductible and Coinsurance Amounts for Calendar Years 2015 and 2016
Type of Cost Sharing
2015 2016
Inpatient hospital deductible $1,260 $1,288
Daily coinsurance for 61st-90th Day 315 322
Daily coinsurance for lifetime reserve days 630 644
SNF coinsurance 157.50 161

Medicare Advantage and Part D Market to Remain Stable in 2016

The market for Medicare Advantage and Medicare prescription drug plans will remain stable in 2016, according to the Medicare Rights Center. Next year, consumers will continue to see a stable Part D plan market with average premiums at $32.50 per month. The coverage of generic drugs increases to 42% of the cost of the drug in the doughnut hole. Coverage of brand name drugs will remain at 55%. Millions of older adults and people with disabilities will see affordable premiums and similar access to plans as they have in years past. As the Affordable Care Act (ACA) strengthens Medicare Advantage and prescription drug plans, beneficiaries are protected from significant increases in plan costs, benefits remain stable, and access to higher-quality plans is strong.

Enrollment in Medicare Advantage is at an all-time high. Next year the average premium will be $32.60, down from $32.91 in 2015. Additionally, 99% of people with Medicare will have access to a plan in 2016. There are now more four to five star plans than ever based on Medicare’s Star Quality Rating.

AARP Report Reiterates Need for Fair Generic Drug Reimbursements

National Community Pharmacists Association (NCPA) CEO B. Douglas Hoey, RPh, MBA issued the following statement in response to a new report by AARP on rising generic drug costs in 2013:

“This new report…underscores the need for action by Congress to support patient access to essential medications. Moreover, a 2015 survey of 700 community pharmacists concluded that this situation has only become worse since 2013…

Patient access to these medications is threatened by more than their rising cost. Independent community pharmacies are absorbing unsustainable losses of $100 or more on these prescriptions because insurance middlemen known as pharmacy benefit managers (PBMs) may wait months to raise reimbursement rates to pharmacies to cover the higher costs.

This buy high, sell low situation threatens the viability of independent community pharmacies, which provide care in many underserved rural and inner city areas without other convenient pharmacy options. Already some pharmacies can no longer stock certain medications for patients because the reimbursement rates are so far below the cost of acquiring and dispensing them. Because of the lack of transparency, PBMs may be profiteering during…by charging health plans much higher rates than they reimburse the pharmacies.

We encourage lawmakers to cosponsor H.R. 244. This bipartisan legislation would ensure that federal health plan intermediaries, such as PBMs, update reimbursement rates for rising generic drug costs to keep pace with market conditions. It would codify and expand upon a requirement that Medicare has adopted for the 2016 plan year.”

Five Things to Know About the CMS Part D Data Release

by Allyson Funk of the Pharmaceutical Research and Manufacturers of America

Following the release of Center for Medicaid and Medicare services data on Medicare Part D, here are five things you need to know:

  1. Part D’s competitive, market-based structure is unique among government programs. Part D is different than other parts of Medicare and other government programs because it relies on competition among private plans that submit bids to offer prescription drug benefits to enrollees. Competition and rebates have been significant in keeping Part D costs $349 billion lower than initial ten-year projections and keeping costs and premiums low for beneficiaries.
  2. The release does not reflect actual government spending on the Part D program in 2013.According to the Congressional Budget Office (CBO), actual Part D mandatory outlays were $62 billion in 2013, which was only about 10.6% of total Medicare spending that year.
  3. Significant rebates are negotiated in Part D making the actual cost of drugs lower than reported in the data. The data does not reflect the significant rebates and discounts Part D plans negotiate with pharmaceutical companies. The Medicare Trustees report reveals that many brand-name prescription drugs carry substantial rebates, often as much as 20% to 30%. On average, across all program spending, rebate levels have increased in each year of the program. In fact, actual rebates are above projected levels for each year of the program. The drug that CMS lists as number one of the 10 most expensive drugs in 2013 is actually one of the most highly rebated drugs, with rebates reportedly in excess of 60%.
  4. The list is already outdated and ignores generic competition. CMS’ list of top-10 drugs, by cost, does not reflect the fact that competition and incentives to control costs have led to high generic utilization in Part D. More than half of the medicines on the list are off-patent or are expected to lose patent protection by 2016. Innovator companies invest in pioneering research to bring new treatments to patients, and over time those medicines become available as lower-cost generic copies. Since Part D’s inception, generic utilization among seniors has increased from about 54% in 2005 to 84% in 2013.
  5. Use of medicines reduces other medical spending. In 2012, CBO announced a change to its cost-estimating methodology to reflect the fact that increases in prescription drug use could reduce spending for medical services. Enrollment in Part D has improved access to medications recommended to treat congestive heart failure for beneficiaries with limited or no prior drug coverage. An increase in drug adherence for Part D enrollees with congestive heart failure led to over $2.3 billion in annual savings to Medicare, driven by reductions in Parts A and B expenditures. Over the next 10 years, further improvement in adherence among Part D enrollees with CHF could yield an additional $22.4 billion in federal savings.

Senate Bill Would Expand Access to Pharmacies

The National Community Pharmacists Association (NCPA) strongly endorses The Ensuring Seniors Access to Local Pharmacies Act, S. 1190. The legislation would expand the number of pharmacies that can offer discounted copays for Medicare Part D prescription drugs. It was introduced by Senators Shelly Moore Capito (R-W.Va.), Joe Manchin (D-W.Va.), Tom Cotton (R-Ark.) and Sherrod Brown (D-Ohio).

Medicare beneficiaries in medically under-served areas would be able to access lower copays at any pharmacy that agrees to accept a drug plan’s preferred pharmacy terms and conditions. S. 1190 is a companion bill to H.R. 793, The Ensuring Seniors Access to Local Pharmacies Act, which has been introduced by Reps. Morgan Griffin (R-Va.) and Peter Welch (D-Vt.). NCPA CEO Douglas Hoey, RPh, MBA said, “Medicare beneficiaries should not be confronted with the Hobson’s choice of continuing to patronize their pharmacy at a higher cost or making a long trip to another pharmacy.”

The bill has been endorsed by the Alliance for Retired Americans, the Center for Medicare Advocacy, Families USA, Justice in Aging, the Medicare Rights Center, the National Consumers League, the National Rural Health Association, and the U.S. Pain Foundation. “Today many Medicare beneficiaries are effectively told by drug plan middlemen which pharmacy to use based on exclusionary arrangements among the pharmacy benefit manager (PBM) middlemen and, in most instances, large publicly traded chain pharmacies,” Hoey added. According to a recent Medicare study, in urban areas 54% of preferred pharmacy drug plans failed to meet the government’s threshold for reasonable access to pharmacies. In rural America the closest preferred pharmacy can be 20 miles away or more.

Last Updated 10/28/2020

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