WHITE PAPER Medicare Lines of Business
As Medicare enters its second half-century, there are varying opinions regarding its relative success. On one hand, Medicare costs have grown at a slightly slower rate than private health insurance spending on a per enrollee basis; 5.5 percent per year for Medicare versus a 6.3 percent per year rate in the private insurance sector. On the other hand, Medicare recently forecasted that reserves will be exhausted by 2028; that is two years sooner than last year s forecast. Regardless of your position on the matter, Medicare is a big business that has shaped the U.S. healthcare system for decades. In 2015, Medicare benefit payments totaled $632 billion 23 percent was for hospital inpatient services, 12 percent for the Part D drug benefit and 11 percent for physician services. Twentyseven percent of benefit spending went toward Medicare Advantage health plans. The Centers for Medicare and Medicaid Services (CMS), originally developed to provide stable coverage to the elderly and then expanded for the disabled through Medicaid, works to evolve Medicare and Medicare Advantage programs to better address current issues. For example, CMS has added a voluntary prescription drug benefit and has expanded coverage for preventive care. It also offers beneficiaries the option to obtain benefits from private health insurers. And with the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA), Medicare is leading the charge to tie reimbursements to quality, outcomes and performance measures. However, Medicare lines of business are facing challenges. As the largest insurance program in the U.S., CMS and Medicare is expected to support the 10,000 baby boomers that turn 65 and become eligible every day, placing an immense strain on resources and finances. Challenges Payers Face with Medicare Lines of Businesses VALUE-BASED REIMBURSEMENTS MACRA is aimed directly at incenting Medicare providers to adhere to specific quality measures starting on January 1, 2017 with payments starting in 2019. Even with the recent relaxation of requirements for providers, those that do not meet the most basic set of measurements will face financial penalties and those who perform well can earn financial incentives. CMS is also working to tie 50 percent of its payments to quality or value models by the end of 2018. This means that payers with Medicare lines of business must change their business models and be ready to collect new sets of data and pay providers based on significantly different criteria. While some payers have taken the initiative to get in front of value-based reimbursement, many others are still working out the details and are behind on implementation. The same holds true for the providers. MEDICARE ADVANTAGE SHADOW BILLING For Medicare Advantage, CMS requires hospitals to submit claims for inpatient services provided to Medicare beneficiaries who are enrolled in an Medicare Advantage plan, and shadow claims (or no pay claims) to their Medicare Administrative Contractor. These 2 Medicare Lines of Business
claims are submitted to request supplemental Indirect Medicare Education, Graduate Medical Education, and Nursing Allied Health Education payments and to properly report Medicare beneficiary days. In addition, Medicare Advantage inpatient stays have specific coverage periods. Coupled with the increasing volume of claims due to everincreasing baby-boomer enrollees and the need for shadow claims, claims processing can be complex, requiring highly trained systems that ensure accuracy and efficiency. EVER-CHANGING REGULATIONS When CMS changes Medicare and Medicare Advantage benefits, the impact affects the Medicare population as well as private insurers and the U.S. healthcare system in general. CMS can change their quality standards or payment rules at a whim, and they often do. Integrating CMS changes to Medicare and Medicare benefit plans and staying compliant is an ongoing challenge for health plans. For example, according to Modern Healthcare, 2015 changes included a fix to the sustainable growth-rate pay formula for physicians; a mandatory bundled-payment program that affects 67 markets across the country; tweaks to the CMS value-based payment program; clarifications of waivers that aim to give states more flexibility in molding their Medicaid programs; and a down-to-the-wire budget deal that delayed taxes on Cadillac plans, medical devices and health insurance. 1 In 2016, there were additional changes, including a final ruling to change the Medicare Shared Savings Program and a change to the requirements that long-term care facilities must meet to participate in the Medicare and Medicaid programs. Another significant change came with the advent of MACRA s final rule in 2016. The Sustainable Growth Rate was completely replaced, much to the delight of providers. While some changes may have a minimal impact on Medicare lines of business, other changes can have a major impact on processes, systems, and training. Payers are consistently challenged to keep up with and execute to these changes on-going. DUAL-ELIGIBLE CLAIMS Over 10 million people in the U.S., including low-income seniors and younger people with significant disabilities, are covered by both Medicare and Medicaid. Medicare beneficiaries who receive Medicaid tend to have greater medical needs than Medicare beneficiaries alone. In fact, nearly 75 percent of these individuals have three or more chronic conditions, which require regular appointments, tests and medications. These members are known as Duals, and represent some of the most at-risk and needy individuals in society. Processing dual-eligible claims for Medicare and Medicaid are costly and complex, as the claims and reimbursements must be correctly allocated. In fact, many payers process these claims manually because their claims processing systems lack critical features, such as flexible workflow and the ability to handle multiple patient identification numbers. Moreover, Medicare and Medicaid programs with similar benefits are often not coordinated. According to the Healthcare Business Management Association, for example, Medicare can be the primary payor for acute care and post-acute care services, including inpatient and outpatient hospital services, physician s services, and skilled nursing 3 Medicare Lines of Business
facilities, home healthcare, and prescription drugs. 2 Medicaid is generally the primary payor for Long-Term Services and Supports, including nursing homes, hospice care, and home healthcare. Medicaid sometimes also covers healthcare services that are never covered by Medicare, such as dental and vision. And to add more complication, coverages can vary state to state due to the differences in each state s Medicaid program. Sorting out the proper reimbursements quickly and efficiently can present layers of complexity, requiring a flexible and efficient system that payers can rely on. PAYERS AND ACCOUNTABLE CARE ORGANIZATIONS As Accountable Care Organization (ACOs) started to form after the passage of the Affordable Care Act, payers took notice and began investing in them to improve outcomes and the quality of care, as well as to decrease spending. However, payer involvement in ACOs has had its challenges. For example, payers discovered that they need to be closely involved in advancing patient engagement when working with ACOs versus working with other reimbursement models. This is because success in an ACO model is determined by quality and outcome metrics. Providers and payers have learned that patient engagement helps reduce medical costs and improve the quality of care. As a result, payers have started to embrace wellness incentive programs, phone call reminders, text messaging, mail programs, member portals and the like to incent patient engagement. This is a new recognition on the part of payers that direct interaction with members can directly impact quality, outcomes and ultimately costs. To effectively catch up on engagement effectiveness, many payers find that they must invest in new technologies to stay in touch with their members. Payers and providers must coordinate and effectively share data within the ACO to deliver better outcomes. This idea of payer-provider collaboration is now recognized as a critical path to positively impact the overall health of both individuals and populations. To learn more about the challenges payers face to make ACOs successful are outlined in Key Steps for Payer Success in Accountable Care Organizations. 3 WIN-WIN CONTRACTS In all lines of business, maintaining good relationships with providers will be more important than in the past. Traditionally, payers and providers have been in conflict over payments, claims and accountability. Contract negotiations have been arduous and complicated. However, today it is important to not only negotiate win-win contracts that provide incentives for good quality outcomes, but to establish common goals and objectives that include data sharing, reporting transparency and regular communication. With this approach, everyone benefits. As members get healthier, claims decrease and providers benefit from performance-based incentives. PREPARING FOR THE FUTURE We can expect even more changes and challenges over the next few years and Medicare lines of businesses must be ready to transform to prepare for an unknown future. Ensuring maximum efficiency and accuracy, and having the agility and flexibility to take on whatever changes lay in store, will determine who is successful going forward. For more information, visit: healthedge.com or call: 781.285.1300 4 Medicare Lines of Business
1. 2016 will bring flurry of new rules and regulations affecting healthcare, Modern Healthcare, retrieved 1 June 2017 from www.modernhealthcare.com/article/20160102/ MAGAZINE/301029961 2. Healthcare Business Management Association, retrieved 1 June 2017 from www.hbma.org 3. Key Steps for Payer Success in Accountable Care Organizations, Health Payer Intelligence, retrieved 1 June 2017 from http://healthpayerintelligence.com/features/key-steps-for-payersuccess-in-accountable-care-organizations 5 Medicare Lines of Business HealthEdge Software, Inc., 30 Corporate Drive Burlington, MA 01803 T 781.285.1300 F 781.419.6183 E info@healthedge.com W healthedge.com