Health Care Economists Debate Causes of High Prices in the U.S.

September 24, 2020

In a Sept. 9 webinar hosted by the Brookings Institution and Robert Wood Johnson Foundation, leading health care economists debated the value of government intervention in prices.

The event was held in honor of the late Princeton economist Uwe Reinhardt, who advocated for the U.S. to shift to an all-payer system along the lines of his native Germany, in which prices for health care services and products are subject to uniform schedules.

By Peter Johnson

In a Sept. 9 webinar hosted by the Brookings Institution and Robert Wood Johnson Foundation, leading health care economists debated the value of government intervention in prices.

The event was held in honor of the late Princeton economist Uwe Reinhardt, who advocated for the U.S. to shift to an all-payer system along the lines of his native Germany, in which prices for health care services and products are subject to uniform schedules.

In the panel discussion, debate centered on what causes high prices in the first place.

“Looking at price variation should make us curious about why is there price variation, as opposed to saying, ‘because there’s price variation, we need to regulate the prices,’” said Amitabh Chandra, a professor at the Harvard Kennedy School and Harvard Business School. Chandra argued that consumer choice must account for some of the variation in prices for the same procedure even within regional markets.

That position sparked criticism from the other panelists, who observed that the opacity of pricing and the market dynamics of health insurance mean that consumers are unlikely to have an accurate perception of the true cost of a procedure.

Melinda Buntin, chair of the Department of Health Policy at Vanderbilt University Medical Center, observed that the localized, consolidated structure of health care markets also means consumers have limited choices.

“Time after time in health care, we get into the situation where high prices are associated with greater supply of things,” said Buntin. “We also have a situation where we don’t have exactly monopolies, but hospitals are really multi-product firms. They don’t have a monopoly in every single one of their service lines; they try to leverage the monopoly they have overall, or their reputation, to negotiate with insurers. They clearly maximize their margins of their rents by providing more of some services and less of others.”

“I would also challenge the idea of choice here,” said Daria Pelech, a principal analyst at the Congressional Budget Office. Pelech observed that, because commercial insurance premiums are subsidized by the federal government through tax write-offs and premiums are pooled at the group level, the group membership of a plan subsidizes the expensive health care choices of individual members.

Datapoint: CareFirst, MedStar Sign Value-Based Care Deal

September 23, 2020

Baltimore-based CareFirst BlueCross BlueShield, one of the largest insurers in the mid-Atlantic, signed a “landmark” value-based care agreement with MedStar Health, a health system with more than 300 sites of care in the region. The two entities say their efforts, which will focus on more personalized care for patients, identifying high-risk populations and geographies and improving technology infrastructure, will save $400 million over the next seven years. CareFirst is currently the largest insurer in Maryland, with 2,128,811 members, and the second-largest insurer in Washington, D.C., with 308,313 members.

Baltimore-based CareFirst BlueCross BlueShield, one of the largest insurers in the mid-Atlantic, signed a “landmark” value-based care agreement with MedStar Health, a health system with more than 300 sites of care in the region. The two entities say their efforts, which will focus on more personalized care for patients, identifying high-risk populations and geographies and improving technology infrastructure, will save $400 million over the next seven years. CareFirst is currently the largest insurer in Maryland, with 2,128,811 members, and the second-largest insurer in Washington, D.C., with 308,313 members.

Source: AIS’s Directory of Health Plans

Pandemic, Market Stability Encourage Major Insurers to Expand ACA Footprints

September 23, 2020

Given that enrollment in the Affordable Care Act (ACA) exchanges has basically flatlined, one might not expect insurers to view the exchanges as a growth opportunity. But recent moves by some of the country’s largest payers suggest otherwise.

Centene Corp. said on Sept. 11 that it will widen its ACA marketplace footprint by selling plans in “nearly 400 new counties” next year. The company will increase its presence in 13 of the states where it already sells plans, plus enter two new states: Michigan and New Mexico.

By Leslie Small

Given that enrollment in the Affordable Care Act (ACA) exchanges has basically flatlined, one might not expect insurers to view the exchanges as a growth opportunity. But recent moves by some of the country’s largest payers suggest otherwise.

Centene Corp. said on Sept. 11 that it will widen its ACA marketplace footprint by selling plans in “nearly 400 new counties” next year. The company will increase its presence in 13 of the states where it already sells plans, plus enter two new states: Michigan and New Mexico.

On Sept. 10, Cigna Corp. announced that it will be increasing its ACA exchange presence by “nearly 80 counties” next year, expanding its customer reach in that market by more than 50%. All told, Cigna will offer marketplace plans in 220 counties spanning 10 states.

In addition, UnitedHealth Group has so far announced it will expand to three new states in 2021: Maryland, Tennessee and Virginia. And startup insurer Oscar said on July 30 that it will increase its ACA marketplace presence for the fourth consecutive year in 2021, entering four new states.

As for what may be driving those moves, Katherine Hempstead, a senior policy adviser at the Robert Wood Johnson Foundation, observes that “there’s been this kind of secular trend away from employer-sponsored insurance vs. various other government or quasi-government products — Medicaid, Medicare Advantage and the marketplace — and I think that carriers are seeing synergies between all those government markets and want to be in all of them.”

The COVID-19 pandemic and its economic repercussions comprise another, more recent, catalyst for insurers’ ACA exchange expansions, according to S&P Global Ratings analyst Deep Banerjee.

“This market has not been growing in terms of the number of people signing up each year — it’s not drastically declining either, but you wouldn’t look at this market and say all of a sudden it’s a growth market,” Banerjee says. “But because of unemployment, because of [commercial group enrollment] shrinking, this could become a growth option in the future.”

While the economy is expected to eventually rebound, it makes sense for firms that stand to lose group-market members in the short term to follow those enrollees by investing in other market segments, Hempstead adds.

Datapoint: Health Net, Canopy Launch New Bay Area Plan

September 22, 2020

Health Net last week said it will launch a new insurance product, targeting large employer groups in the San Francisco Bay Area, in January 2021. The plan, CanopyCare, is a partnership with Canopy Health, an accountable care network of more than 5,000 Bay Area physicians that focuses on high-touch member care and cost transparency. Health Net is a California-based division of Centene Corp., acquired in 2015. Centene is currently the fourth-largest insurer in California, with 3,132,104 members.

Health Net last week said it will launch a new insurance product, targeting large employer groups in the San Francisco Bay Area, in January 2021. The plan, CanopyCare, is a partnership with Canopy Health, an accountable care network of more than 5,000 Bay Area physicians that focuses on high-touch member care and cost transparency. Health Net is a California-based division of Centene Corp., acquired in 2015. Centene is currently the fourth-largest insurer in California, with 3,132,104 members.

Source: AIS’s Directory of Health Plans

CMS Finally Phases Out RAPS Data With Early Release of 2022 Advance Notice

September 22, 2020

In a surprise move aimed at giving some clarity to Medicare Advantage and Part D plans already thinking about their 2022 plan bids, CMS on Sept. 14 released Part 1 of the 2022 Advance Notice. But the items in the notice were largely expected — including the final phaseout of legacy Risk Adjustment Processing System (RAPS) data in determining risk scores — and key information is still forthcoming.

The second part of the notice, which contains planned changes to the MA capitation rate methodology and other risk adjustment methodologies and usually posts in early February, may come out in the fall in order to accommodate an early final rate notice release of mid-January 2021, CMS said in the Sept. 14 document. CMS is statutorily required to post the final rate notice for the coming calendar year by early April.

By Lauren Flynn Kelly

In a surprise move aimed at giving some clarity to Medicare Advantage and Part D plans already thinking about their 2022 plan bids, CMS on Sept. 14 released Part 1 of the 2022 Advance Notice. But the items in the notice were largely expected — including the final phaseout of legacy Risk Adjustment Processing System (RAPS) data in determining risk scores — and key information is still forthcoming.

The second part of the notice, which contains planned changes to the MA capitation rate methodology and other risk adjustment methodologies and usually posts in early February, may come out in the fall in order to accommodate an early final rate notice release of mid-January 2021, CMS said in the Sept. 14 document. CMS is statutorily required to post the final rate notice for the coming calendar year by early April.

However, CMS this year is considering moving up the entire timeline given the uncertainty associated with the COVID-19 pandemic.

The 21st Century Cures Act required that CMS phase in changes to risk adjustment payments over a three-year period, starting in 2019 with full implementation by 2022. As such, CMS plans to fully phase in the 2020 CMS-Hierarchical Condition Categories (HCC) risk adjustment model, which means the expected discontinuation of RAPS data. To determine MA organizations’ risk-adjusted payments for 2021, CMS used a blended calculation composed of 75% of risk scores based on the HCC model from 2020 and 25% of risk scores based on the 2017 model.

For 2022, CMS would cease using a blend of encounter and RAPS data and move to basing 100% of the risk score on diagnoses from MA encounter data and fee-for-service claims, according to the notice.

“There were no surprises in Part 1, which has only small impact on the net payment update for MA plans in 2022,” observed securities analyst Michael Newshel in a research note from Evercore ISI. Part 2 “will have more important details to put together the full build-up of proposed payment change.”

SVB Leerink viewed the early update as positive, “chiefly given CMS’ projection of the net effect on payments to MAO,” wrote securities analyst Stephen Tanal. “Although the transition to the newer risk model and 100% encounter data was expected, we do not believe that its impact was widely understood.”

Datapoint: Lilly Seeks Emergency FDA Approval for Olumiant

September 21, 2020

Eli Lilly’s rheumatoid arthritis drug Olumiant, in combination with Gilead’s Remdesivir, was found to reduce recovery time for hospitalized COVID-19 patients. The drugmaker is now seeking an emergency use authorization from the FDA for the anti-inflammatory. Olumiant currently holds preferred status under the pharmacy benefit for just 11% of covered lives, with utilization management restrictions. The drug is not covered for 25% of all insured lives.

Eli Lilly’s rheumatoid arthritis drug Olumiant, in combination with Gilead’s Remdesivir, was found to reduce recovery time for hospitalized COVID-19 patients. The drugmaker is now seeking an emergency use authorization from the FDA for the anti-inflammatory. Olumiant currently holds preferred status under the pharmacy benefit for just 11% of covered lives, with utilization management restrictions. The drug is not covered for 25% of all insured lives.

SOURCE: MMIT Analytics, as of 9/16/20

Surgeon General, Humana CEO Say Pandemic Highlights Health Care Priorities

September 21, 2020

If there’s any upside to the COVID-19 pandemic, it’s that it has laid bare what both the country and health care organizations need to prioritize moving forward, suggested two keynote speakers during the America’s Health Insurance Plans (AHIP) National Conference on Medicare, Medicaid & Dual Eligibles, which was held online from Sept. 14-17.

“I really do hope that we don’t just look at this as a fire to be put out, but we look at it as a real opportunity to address some underlying kindling that was there,” VADM Jerome Adams, M.D., the U.S. Surgeon General, said during a Sept. 14 panel. A major part of that “kindling,” he said, are the stark disparities in social and economic conditions experienced by different racial and ethnic groups across the country.

By Leslie Small

If there’s any upside to the COVID-19 pandemic, it’s that it has laid bare what both the country and health care organizations need to prioritize moving forward, suggested two keynote speakers during the America’s Health Insurance Plans (AHIP) National Conference on Medicare, Medicaid & Dual Eligibles, which was held online from Sept. 14-17.

“I really do hope that we don’t just look at this as a fire to be put out, but we look at it as a real opportunity to address some underlying kindling that was there,” VADM Jerome Adams, M.D., the U.S. Surgeon General, said during a Sept. 14 panel. A major part of that “kindling,” he said, are the stark disparities in social and economic conditions experienced by different racial and ethnic groups across the country.

The factors contributing to those disparities are numerous, Adams suggested, but they all relate to the social determinants of health. For instance, Adams pointed out “only one in five African Americans and one in six Hispanic Americans has a job that allows them to work from home” to reduce their exposure to the novel coronavirus.

The health insurance industry, like the country at large, now has an opportunity to fix some of the problems that caused the pandemic to do so much damage, Adams argued. “As insurers, have the courage to crack some eggs and to think about how we restructure these systems, and use COVID-19 as the wind in your sails to do that,” he advised the AHIP conference’s virtual audience.

Humana President and CEO Bruce Broussard, meanwhile, said during a Sept. 14 question-and-answer panel that the pandemic has sharpened his focus on the core principles that guide his company.

“It reinforces the deep need for purpose and values inside your organization, because when you’re in a situation like COVID, if you don’t have that, then you run your business by policies and procedures, and so on, and you can’t rewrite policies and procedures in a time of change,” Broussard said.

Having a concentration in Medicare Advantage also helped shape Humana’s response to the crisis, since such plans are already reimbursed in a way that rewards taking a whole-person approach to health care, according to Broussard.

People on the Move

September 18, 2020

Most Medicare Part D Plans Incentivize Use of Generics, Study Finds

September 18, 2020

For medications with both brand-name and generic versions, an overwhelming majority of Medicare Part D plans encouraged the use of generics over their brand-name equivalents in 2019, according to a study published in Health Affairs. By analyzing Part D formulary coverage and tier placement of matched brand-name drugs and generics, the researchers found that 84% of Part D plan-product combinations covered the generic only in 2019, while 15% covered both brand-name and generic versions. In 2019, of the 1,361 drug products analyzed, there were 98% of products for which generics were placed on a lower cost-sharing tier than their brand-name counterparts in at least one plan in 2019.

by Jinghong Chen

For medications with both brand-name and generic versions, an overwhelming majority of Medicare Part D plans encouraged the use of generics over their brand-name equivalents in 2019, according to a study published in Health Affairs. By analyzing Part D formulary coverage and tier placement of matched brand-name drugs and generics, the researchers found that 84% of Part D plan-product combinations covered the generic only in 2019, while 15% covered both brand-name and generic versions. In 2019, of the 1,361 drug products analyzed, there were 98% of products for which generics were placed on a lower cost-sharing tier than their brand-name counterparts in at least one plan in 2019.

NOTE: The study was funded by a grant from Arnold Ventures.

SOURCE: “Medicare Part D Plans Rarely Cover Brand-Name Drugs When Generics Are Available,” Health Affairs 39, NO. 8 (2020): 1326–1333. Visit https://bit.ly/3k37XC5.

Datapoint: Horizon BCBSNJ Launches New Medicare Advantage Brand

September 17, 2020

Horizon Blue Cross Blue Shield of New Jersey and two Jersey-based health systems, Hackensack Meridian Health and RWJBarnabus Health (pending regulatory approval), are launching a new physician-led Medicare Advantage org in the state, Braven Health. The insurer will offer MA products in eight New Jersey counties for the 2021 plan year. Horizon BCBS is currently the fourth-largest MA insurer in New Jersey, with 23,245 members, or 5.0% of the state’s market.

Horizon Blue Cross Blue Shield of New Jersey and two Jersey-based health systems, Hackensack Meridian Health and RWJBarnabus Health (pending regulatory approval), are launching a new physician-led Medicare Advantage org in the state, Braven Health. The insurer will offer MA products in eight New Jersey counties for the 2021 plan year. Horizon BCBS is currently the fourth-largest MA insurer in New Jersey, with 23,245 members, or 5.0% of the state’s market.

Source: AIS’s Directory of Health Plans