Trump is Improving Medicare – Part IV

 

This is Part IV in a series of posts concerning improvements in Medicare being made by the Trump administration.

This new Trump policy is based on the idea of promoting choice, competition, and market prices.It seeks to do that in Medicare by:

  • Liberating telemedicine
  • Liberating Accountable Care Organizations (ACOs)
  • Ending payment incentives to hospital-based physicians
  • Promoting hospital price transparency
  • Deregulating paperwork
  • Increasing transparency in the market for prescription drugs

In Part I we discussed Liberating telemedicine. In Part II we discussed Liberating ACOs andEqualizing Physician Fees. In Part III we discussed Promoting Hospital Price Transparency and Price Transparency in the Drug Market.

Deregulating Paperwork

As a physician, I can testify to the increasing amounts of paperwork required of the American physician. It has reduced the amount of time physicians spend with their patients, increased the cost of doing business, and generally reduced the quality of care. Relief is certainly needed.

The Trump administration, through the Centers for Medicare and Medicaid (CMS) has launched a major initiative to do what most doctors believe is long overdue. Based on input from thousands of practitioners, the agency has made changes it estimates will eliminate 53 million hours of burden!

Reducing this burden will reduce costs by an estimated $5.2 billion over the first five years. This means more time for doctors to spend with their patients and lower costs of providing healthcare.

Concierge Doctors

You’ve probably heard of a new phenomenon in healthcare called concierge medicine. Some doctors now limit their practice to those who pre-pay for healthcare by an annual fee in order to guarantee less time waiting for appointments and easier access to healthcare. This form of practice has gained in popularity in recent years.

A similar type of medicine called Direct Primary Care is coming soon to Medicare.  Under this arrangement, Medicare would pay a fixed monthly fee to a physician or group instead of the traditional fee-for-service. In return, the physicians would provide virtually all primary care. Fees will be from $90 to $120 per month, depending on patient age and medical history.

As of March 2018, there were 790 direct primary care practices in the U.S. They generally provide 24/7 access to a physician and communicate by phone, email and Skype. Their benefits include:

  • Improved access to care
  • Improved quality of care
  • Reduced overall healthcare spending
  • High levels of patient satisfaction

 

Currently these practices generally do not accept Medicare. They are not allowed to contract with a Medicare patient unless they are in Medicare – and most are not. This requires a change by Congress to eliminate this Catch 22. Such a change would allow the elderly and the disabled to get the same tax break others receive when they buy healthcare from providers who aren’t governed by Medicare rules.

John C. Goodman, the author quoted throughout this series, says, “The Trump administration is clearly pushing the envelope – in many cases acting to fill a void left by Congress. These changes will result in a very different healthcare system. It will be one that is shaped more by individual choice and market forces than by rules and regulations.”

Republicans have been repeatedly accused by Democrats of having “no healthcare solutions.” Clearly, this is not true of the Trump administration.

Trump is Improving Medicare – Part III

 

This is Part III in a series of posts concerning improvements in Medicare being made by the Trump administration.

This new Trump policy is based on the idea of promoting choice, competition, and market prices.It seeks to do that in Medicare by:

  • Liberating telemedicine
  • Liberating Accountable Care Organizations (ACOs)
  • Ending payment incentives to hospital-based physicians
  • Promoting hospital price transparency
  • Deregulating paperwork
  • Increasing transparency in the market for prescription drugs

In Part I we discussed Liberating telemedicine. In Part II we discussed Liberating ACOs and Equalizing Physician Fees.

Promoting Hospital Price Transparency

When people pay for goods and services out of their own pocket, price transparency is never a problem. Who would think about buying a car without knowing the price?

Some areas of healthcare have transparency. Cosmetic surgery and Lasik surgery for the eye are good examples. In these specialties, where healthcare insurance doesn’t cover the expense, patients are always aware of the full price – and often shop for the best deal. Medical tourism is another example. If you go to another country for your total hip replacement, they’ll tell you the cost up front – and usually expect pre-payment.

But for the vast majority of healthcare patients, payments are made by a third party – either private or government health insurance. As a result, hospitals don’t compete for patients on price. They don’t even compete on quality, either. They mostly compete on amenities.

John C. Goodman, writing in Forbes, says the Trump administration is trying to change all that. Beginning January 1 of this year, every hospital in the U.S. is required to post its standard price for all procedures it performs. Thus far this effort has not made a difference because most hospitals are posting their charge master prices – which nobody pays. That’s like an auto dealer posting the MSRP on all its cars.

Responding to this situation, President Trump last month signed an executive order directing federal agencies to find ways of requiring hospitals to reveal their “actual charges”, including amounts that patients are expected to pay. Right now, people are paying widely different prices for the same service in the same town.

A study cited by the Council of Economic Advisers in its 2019 Annual Report, found that 73% of the 100 highest-spending hospital procedures were “shoppable” – meaning better prices could be found in the same town. Among outpatient procedures, 90 % of the 300 highest were also “shoppable.”

Drug Price Transparency

President Trump is committed to lowering the price we pay for prescription drugs. The Trump administration has finalized another regulation requiring pharmaceutical companies to make visible their list prices in all direct-to-consumer advertising. You haven’t seen this yet in television advertising because a federal judge has temporarily blocked it – until it is decided by an appeals court.

Ending Rebates and Gag Clauses for Drugs

There are two separate markets for prescription drugs – generic drugsand brand name drugs. About 85% of all prescriptions filled in the U.S. are for generic drugs and Americans pay some of the lowest prices in the world for most of these; lower even than Europe or Canada.

Brand name drugs is a different story. For these, the American consumer pays the highest prices in the world. They often don’t benefit from PBM discounts and often they pay more than they should.

Here’s an interesting fact – according to a University of Southern California study, almost one-fourth of these transactions result in patients paying more in health insurance co-pays than the cash price of the drug!In other words, if the pharmacist told them the truth, they would save money by paying for the drug without using their insurance.

What keeps them from revealing the truth? Gag clauses. These clauses prohibit pharmacists from telling patients about more affordable options. Under PBM contracts for these drugs, most of the discounts go to the PBM itself in the form of a rebate. In return, the PBM is induced to place an expensive drug on its formulary so that patients are induced to choose it over a less expensive drug.

In other words, the system is full of perverse incentives that raise the price and the profit for the benefit of the pharmaceutical companies and their middlemen in the market. The Medicare Part D legislation passed in 2003 gave a safe harbor from federal anti-kickback laws that would otherwise prohibit such arrangements.

President Trump is fighting back with two pieces of legislation to ban pharmacy gag clauses and classify PBM rebates as illegal kickbacks unless the benefits are passed on to the consumer. One study says this could reduce federal spending on government programs by $78 – 98 Billion over the next ten years. Costs to seniors in Part D could go down by 18 per cent.

(More on this subject in Part IV.)

 

Trump is Improving Medicare – Part II

 

In Part I of this series, I began a discussion of the many ways the Trump administration is improving Medicare. This new Trump policy is based on the idea of promoting choice, competition, and market prices.It seeks to do that in Medicare by:

  • Liberating telemedicine
  • Liberating Accountable Care Organizations (ACOs)
  • Ending payment incentives to hospital-based physicians
  • Promoting hospital price transparency
  • Deregulating paperwork
  • Increasing transparency in the market for prescription drugs

In Part I we discussed Liberating telemedicine. Today we’ll continue this discussion.

Liberating ACOs

Accountable Care Organizations were created by ObamaCare to encourage the private sector to find innovative ways to reduce costs and improve quality – generally through integrated, coordinated, managed care. It sounds good on paper but has largely failed in practice.

John C. Goodman, writing in The Wall Street Journal, says the original plan for ACOs was one of progression – evolving from shared savings to more savings for plans that take more risks to fixed payment for each patient in return for delivering all medical care. The Trump administration is making changes to facilitate this end goal. It is allowing Next Generation ACOs:

  • More freedom to communicate with patients
  • Rewarding patients for meeting compliance measures
  • Offering additional benefits patients must forgo if they go “out of network”
  • Broad freedom to utilize telemedicine
  • Full capitation in some cases

 

Equalizing Physician Fees

There has been a recent rush by hospitals to employee physicians. In 2010, 27.7% of primary care physicians were employed by hospitals. In 2016 the number jumped to 43.5%. Current numbers are unavailable but could be significantly higher.

The reason for this change is simple – physician fees for the same service are paid much higher by Medicare if performed in a hospital setting.

According to the Ambulatory Surgery Center Association, Medicare pays almost twice as much for hospital-based outpatient services as it pays for the same services in a free-standing facility. For example, Medicare pays hospitals $1,745 for outpatient cataract surgery but pays surgery centers only $976. There is no rational reason for this discrepancy.

The Trump administration says Medicare will be moving toward parity over the next two years for billing codes covering about 50% of outpatient services. According to CMS, current Medicare payment for a typical hospital-based clinic visit is approximately $116, with an average beneficiary copayment of $23. After two years, the payment rate for the clinic visit will fall to $46 and the beneficiary copay to $9, thus saving patients an average of $14 each visit.

As expected, the American Hospital Association is suing to block the rule change. Goodman points out this illustrates the influence of powerful special interests. Many of the reforms described here would have been done by Congress – except for these special interests. When Congress tries to reform healthcare institutions, these special interests stop the reforms in committee. But the Trump administration is pushing forward with these needed reforms, forcing the special interests to resort to the courts.

(More on the changes to Medicare next week in Part III.)