A Tip of the ‘Cap,’ A Wag of the Finger: Ending the Annual Cap on Rehabilitation Services

July 22, 2014 by · Leave a Comment
Filed under: Medicare 

Tiscia Blog PictureBy Bryan Tiscia

Frank retired, and he’s spent a large part of his life making sure his family had what they need. Recently he noticed his right knee bothered him. He went to a physical therapist, who explained that his knee problem was caused by degeneration in his spine. The degeneration caused him to lean to the right, and Frank over compensated with his right hip and knee.  The physical therapist started a therapy plan that would start with his knee and work to his spine. After weeks of therapy on his knee, Frank’s physical therapist told him that he reached the limit on his Medicare cap for physical therapy. He was told that he could either appeal for an increase in funds, pay for it out of pocket, or be refused the physical therapy treatment he needed.

Frank is not a real person, but the situation described above illustrates a very real problem in the United States. In 1997, Congress passed the Balanced Budget Act, which included an annual cap on physical therapy, and a separate cap on occupational therapy. The therapy caps were designed to be temporary, but they still remain today. (To learn more about the act click here.) However, many have argued that the cap fails to reflect what patients actually need.

Many organizations believe that the cap is arbitrary, and have fought to repeal it. One such opponent of the cap is the American Physical Therapy Association, or APTA. APTA has argued in position papers that this cap was not based on data, quality-of-care concerns, or clinical judgment, but that its sole purpose for existence was to balance the federal budget. APTA argues that various patients are likely to be impacted by the cap, as they are forced to bear 100% of the cost of care once they exceed it. APTA believes the cap is “arbitrary” and prevents beneficiaries from receiving the care they need when they need it.

Congress recognized the flaws associated with the cap, and has acted several times to prevent the implementation of a hard therapy cap. In 2003, Congress authorized the Government Accountability Office to determine whether progress was being made towards correlating outpatient therapy payments to beneficiary needs. The GAO found that the Department of Health and Human Services should allow for exceptions to the cap.

In 2006, Congress passed legislation allowing for exceptions to be made when  a patient’s condition would require medically necessary and clinically appropriate physical therapy above the financial limitation. In 2013, Congress extended the allowance for exceptions, and created an automatic exception process when patients reach the $1,920 threshold, and a manual medical review process where a patient requires treatment over $3,700 threshold. While organizations like the APTA have applauded these exceptions, the problem related to receiving treatment when it’s needed as the cap approaches still remains.

The solution to the problems created by the cap may be on the horizon. Various members of Congress from around the country have introduced the Medicare Access to Rehabilitation Services Act (HR 713/S 367). The Act would permanently repeal the therapy cap. If the physical therapy cap was never pegged to patient needs, it should be repealed. The story above about Frank may have been fiction, but access to timely and appropriate care patients need and a repeal of the cap may soon be reality.

Bryan Tiscia earned his Juris Doctorate from Seton Hall University School of Law in May 2014. We are very pleased to welcome him to the blog today.

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Exiling the Poor from the Insurance Market

July 22, 2012 by · 1 Comment
Filed under: Hospitals, Medicaid, Medicare 

pasquale_frank_lg1John Roberts’ jurisprudential wizardry in NFIB has been compared with the artistic genius of pro wrestlers and rappers. Poor Americans in states newly empowered to resist the ACA’s Medicaid expansion may need even more ingenuity to get themselves insured. Both Kevin Outterson and my colleague John Jacobi have observed the perplexing predicament imposed on the poor in states that keep Medicaid 1.0, and resist Medicaid 2.0. From Jacobi’s post:

The reform provides insurance subsidies through tax credits. The credits are calculated on a sliding scale, according to household level, for people with income up to 400% of FPL [the federal poverty line] — subsidizing more generously someone earning 200% of FPL, for example, than someone earning 350% of FPL. But, under 26 USC 36B(c)(1), credits will not be distributed to those with incomes below 100% of the FPL. Why? Because Congress assumed states would take up the Medicaid expansion, obviating the need for exchange-based subsidies for the very poor. . . .Bottom line: states rejecting Medicaid 2.0 will not only forego about 93% federal funding for the program between 2014 and 2022, but they could also be depriving the poorest of the uninsured from any shot at coverage — potentially affecting millions nation-wide.

Georgia hospitals are already worried about the “unexpected prospect of lower reimbursements without the expanded pool of patients” to be covered by the Medicaid expansion:

Last year, Georgia hospitals lost an estimated $1.5 billion caring for people without insurance. The promise of fewer uninsured is what led the national hospital industry to agree to the health law’s $155 billion in Medicare and Medicaid cuts over a 10 year period. The Medicaid curveball comes at a time when Georgia hospitals are already in the throes of a massive industry transformation to improve quality and efficiency driven by market forces as well as the new law. Hospitals face lower payments from insurers and pressures to consolidate. One in three Georgia hospitals lose money. All are busy preparing for new standards under the law that, if not met, could mean millions of dollars in penalties.

It’s hard to imagine how hospitals like Grady can continue to act as a safety net in that environment. The article notes that “Georgians already pay for the cost of care provided to people without insurance through higher hospital bills and inflated insurance premiums.” If that trend continues, all the states refusing Medicaid 2.0 may end up doing is shifting the cost of the Medicaid expansion population from national taxpayers to Georgians with insurance. The superwealthy Americans of Marin County and Manhattan ought to send Georgia Governor Nathan Deal a thank you note for keeping Georgians’ problems for Georgians themselves to solve.

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Medicare Payment, a System in Need of Fixing

January 8, 2012 by · Leave a Comment
Filed under: Medicare, Physicians 

band-aid_close-up[Ed. Note: We are pleased to welcome Andy Braver, Esq. back to Health Reform Watch. Andy is a health care attorney who recently completed an LL.M in Health Law at Seton Hall Law. Prior to entering the LL.M. program, Andy spent five years as a healthcare provider, running a state of the art medical diagnostic imaging center.  During that time, he dealt with many important health law issues faces by providers today, including Fraud and Abuse, Medicare and Medicaid licensing and reimbursement, state and private accreditation organizations, private payers, electronic health records, and HIPAA and other privacy issues, to name just a few.]

Medicare’s fee for service payment system has many problems that need fixing.  While recent studies have predicted that Accountable Care Organizations (ACOs) may very well achieve better care and lower costs, any savings generated as a result of these new groups of providers will be just a drop in the bucket solution to a vast problem.

Medicare was projected to spend over $500 billion on patient care in 2010.  Notwithstanding the fact that the White House Office of Management and Budget believes $36 billion of the Medicare and Medicare Advantage payments made in 2009 were improper.

The problem is, there is no distinction made for the provision of quality medical care.  Conversely, there is no check in the system to make sure that the care provided is inadequate.  If you provide the service, you get paid.

I realize that in many areas of medicine, it is difficult or even impossible to create a system to accurately and impartially judge the adequacy of care provided.  How in fact do you measure the ‘quality’ of healthcare?  Do you look at the structure of an entity, its organization and ability to provide what is generally regarded as good care?  Or do you look at the actual process or provision care, measuring relative malpractice claims among other objective factors?  Many believe that better outcomes suggest better care.  While I do not believe that outcome or evidence based medicine is the answer to every problem, it certainly can be a solution to some of these challenges.

There are differences in the Medicare program based on geography, and local coverage determinations and reimbursement rates, whether using the PPS or RVU systems (Part A & B), vary greatly across the country.  That part of the system makes sense by taking into account cost of living, cost of employment, property costs, and local tax rates.

In my mind, however, these processes fail because they do not further take into account advances in technology, or reward investment in the future.  For example, Medicare pays the same amount of money for an MRI exam regardless of the type of machine that was used to take the picture, and without a thought given to the type of storage system employed by the medical provider.  Imagine a facility with a two decade old system, state licensed and able to take pictures, with a machine equivalent to the first generation digital camera I owned 15 years ago, and printed pictures that are stored in a file room.  Then imagine a state of the art facility with an HD camera taking high resolution digital pictures, stored in an electronic file system, in a format that is able to be sent electronically to specialists all around the country (or world), and accessed by the patient quickly and securely on the internet.  Are those two pictures worth the same to Medicare?  There certainly is increased value to the patient in the ‘new’ system.  Better picture quality undoubtedly leads to better diagnostic capability (better medicine), and fewer picture redos over time; long-term storage and record portability is certainly going to lower future treatment costs if the issue is a chronic one.  HITECH and the new EHR incentive programs recognize the importance of electronic medical records, but it remains to be seen how those requirements will affect licensing and reimbursement rates.  Will there be a license ranking and a tiered payment system based on perceived quality or outcome?

I certainly hope that payments are tiered when advanced technology is used, but not according to self-assessment rankings and quality benchmarks.  I would argue that medicine is the one area where any kind of ranking and result (or outcome) based assessment is virtually impossible.   People are not cars, and JD Power cannot provide meaningful answers when it comes to medicine; there is no way to objectively determine a specific course of treatment for a particular patient is better at one hospital versus another.  No two patients are the same, though it is entirely possible they might both drive the same car.  Determining quality in healthcare is exceedingly difficult.  Patient bases are different, whether because of socio-economic reasons, or geography.  So do you then look to the education of the physician to determine quality?  We don’t do the same for lawyers?  Or do we?  Do you look at healthcare structure (how an entity is organized, its equipment, etc…) to determine quality?  Or process (the # of lawsuits against it, for example)?  Better outcomes alone do not mean better healthcare, and none of these items taken alone should affect licensing of healthcare providers.  In the end, this highlights the fact that designing a system that is fair and without major flaws may never be possible with so much money in the system and with so many parties having opposed interests. But that doesn’t mean we shouldn’t try to fix the expensive and broken (the status quo is unsustainable), it just means that attainable reform could very well mean significantly less unfairness and less major flaws. Because ultimately, in this context, the perfect may be the enemy of the good.

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Why Reduce Health Care Costs?

drugcostsOne rare point of elite consensus is that the US needs to reduce health care costs. Frightening graphs expose America as a spendthrift outlier. Before he decamped to Citigroup, the President’s OMB director warned about how important it was to “bend the cost curve.” The President’s opponents are even more passionate about austerity.

Journalists and academics support that political consensus. Andrew Sullivan calls health spending a “giant suck from the rest of the working economy.” Gregg Bloche estimates that “the 30% of health care spending that’s wasted on worthless care” is “about the price of the $700 billion mortgage bailout, squandered every year.” He calls rising health spending an “existential challenge,” menacing other “national priorities.” Perhaps inspired by Children of the Corn, George Mason economist Robin Hanson compares modern medicine to a voracious brat:

King Solomon famously threatened to cut a disputed baby in half, to expose the fake mother who would permit such a thing. The debate over medicine today is like that baby, but with disputants who won’t fall for Solomon’s trick. The left says markets won’t ensure everyone gets enough of the precious medical baby. The right says governments produce a much inferior baby. I say: cut the baby in half, dollar-wise, and throw half away! Our “precious” medical baby is in fact a vast monster filling our great temple, whose feeding starves our people and future. Half a monster is plenty.

But when you scratch the surface of these sentiments, you have to wonder: is the overall level of health care spending really the most important threat facing the country? Is it one of the most important threats? There are many ways to raise revenue to pay for rising health costs. Aspects of the Affordable Care Act, like ACOs and pilot projects, are designed to help root out unnecessary care.

I am happy to join the crusade against waste. But why focus on total health spending as particularly egregious or worrisome? Let’s explore some of the usual rationales.

Terrible Tax Expenditures and Suspect Subsidies?

Employment-based insurance gets favorable tax treatment, and much Medicare and Medicaid spending is drawn from general revenues. So, the story goes, medicine’s big spenders don’t have enough “skin in the game.” Once health and wealth are traded off at the personal level (as the Harvard Business School’s Clayton Christensen advocates), people will be much less likely to demand so much care. Government can attend to other national priorities, or individuals will enjoy higher incomes and will be free to spend more.

I respect these arguments to a point, but I worry they partake of the “nirvana fallacy.” If I could be certain that leviathan would repurpose all those wasted health care dollars on infrastructure, or green energy, or smart defense, or healthier agriculture, I’d be ready to end tax-advantaged health insurance in an instant. But I find it hard to imagine Washington going in any of these directions presently.

Giving tax dollars back to taxpayers also sounds great, until one processes exactly how unequal our income distribution is. In 2004, “the top 0.1% — that’s one-tenth of one percent — had more combined pre-tax income than the poorest 120 million people.” To the extent health-related taxes are cut, very wealthy households may see millions per year in income gains; the median household might enjoy thousands of dollars per year. Sure, middle income families will find important uses for those funds (other than bidding up the price of housing and education). But at what price? What if the insurance systems start collapsing without subsidies, and more physicians (who are already expressing a desire to work less) start seeking out pure cash practices? A few interactions with the the very wealthy may be far more lucrative than dozens of ordinary appointments.

Consider the math: billing a $20,000 retainer from each of 50 millionaires annually may be a lot more attractive to physicians than trying to wrangle up 500 patients paying $2000 each—or, worse, getting the money from their insurers. There are about 10 million millionaires in the US; that’s a lot of buying power. One $10,000 score by a cosmetic dentist from such a client could be worth 400 visits from Medicaid patients seeking diagnostic procedures. Providers are voting with their feet, and a Medicaid card is already on its way to becoming a “useless piece of plastic” for many patients. Given those trends, simply reducing health care “purchasing power” generally risks some very troubling outcomes for the very people the health care cost cutters claim to protect. No one should welcome a health care plutonomy, where the richest 5% consume 35% of services, regardless of how sick they are.

Is Anyone Underpaid in Health Care?

Health commentators rightly draw attention to big insurer CEO paydays. Top layers of management at hospitals and pharma firms are also getting scrutiny. Wonks are up in arms about specialist pay. Read more

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Gregg Bloche’s The Hippocratic Myth

April 14, 2011 by · 2 Comments
Filed under: Medicare 

the_hippocratic_myth1-206x300Georgetown law professor Gregg Bloche’s new book, The Hippocratic Myth, looks to be a major contribution to health policy debates. I haven’t had time to read it yet, but many reviews and radio shows give the impression of a rigorous work leavened with engaging narratives of individual patients and providers.

Bloche’s approach to rationing will rekindle many of the health care debates of 2010. A former advisor to the Obama health policy team, Bloche concludes the following:

Medicine’s therapeutic potential has surpassed our ability to pay for it, but our elected officials are afraid to tell us. The historic health reforms enacted last year will protect 30 million Americans from the Darwinian cruelty of lack of access to care. But contrary to much wishful thinking in Washington, these reforms do little to stave off looming medical cost catastrophe. Our future fiscal and social stability will turn on our ability to gain control of spending without imperiling patients’ trust in their caregivers.

Bloche also observes the importance of the medical profession in upcoming bioethical debates:

Medical judgment incorporates hidden political and moral beliefs, and doctors have become key political and legal decision-makers—on such matters as child custody, criminal punishment, access to performance-enhancing drugs, and the politics of obesity, abortion, and homosexuality.

Doctors and the rest of us will need to address the morality of innovations we never thought possible. Drugs that block—or boost—biological mechanisms of stress resistance, brain-scanning methods that read minds, and medicines that interfere with formation of traumatic memories are among the technologies that will soon be with us.

During his interview with NPR’s Leonard Lopate, Bloche mentioned an aspect of insurer practice that renders suspect many consumer-directed ideals of medical care. Many insurers’ care protocols are kept secret, as proprietary information. Bloche found the practice deeply troubling, and I agree. Insurers’ criteria for providing care are important aspects of the service they are providing. They should not be hidden from patients or doctors. In more encouraging news, Bloche notes that he has not lost an appeal of a medical coverage decision to an insurer.

Enforceable Contracts for Cheaper and More Limited Care

Bloche seems committed to permitting consumers to make enforceable contracts for lower levels of care. Tyler Cowen recently evoked that possibility of ala carte insurance in his evaluation of the recent Ryancare proposal:

Let’s say it’s 2027 and I’ve just turned 65. I fill out a Medicare application on-line and opt for a plan with superior heart coverage (my father died of a heart attack), not too much knee coverage and physical therapy (my job doesn’t require heavy lifting), no cancer heroics (my mother turned them down and I wish to follow her example), and lots of long-term disability. Is that so terrible an approach? Is it obviously worse than having the Medicare Advisory Board make all of those choices for me?

Cowen worries that “Perhaps an individual will choose ‘no coverage for lung cancer,’ but the government cannot precommit to the outcome of no coverage.” But Bloche makes a point in an NPR interview that suggests that a physician’s decision to withhold care in that instance would not violate the Hippocratic Oath:

The rationale there is that the doctor who stints on care three years later when you get really sick is acting in accordance with your preferences as you expressed them in the employee benefits office three years before. And therefore, the doctor is not violating the Hippocratic Oath. The doctor is merely complying with your preferences when you rolled the dice in the employee benefits office.

Of course, that is in the private insurance context, not Medicare, and I don’t know if that distinction would make a difference for Bloche. But it does help me see how the book attracted a blurb from a Heritage Foundation analyst. Contemporary conservative health policy experts are committed to giving individuals the chance to buy low-cost plans, and so far the Obama Administration has been quite accommodating in granting waivers for them. My sense is that Bloche is committed to a minimum essential benefits approach that would allow consumers to opt out of “cancer heroics” (perhaps defined as biotechnology drugs costing over $7 million over one’s lifetime?), but not to waive “lung cancer” coverage generally.

Bloche argues in the book that:

[M]edicine’s capabilities and costs will inexorably grow. Increasingly, doctors will need to say no to care that’s technologically possible and that could prolong life, but that does so in competition with other national priorities. We must empower them to do so even when the consequences seem tragic. But we must give them this power without asking them to break faith at the bedside. To this end, the current regime of covert rationing, under cover of ‘medical necessity,’ should be supplanted by visible resource allocation rules–rules set for doctors and patients by social institutions. (58-9)

Transparency of this sort will compel us to come to terms the truth that insurers must say no to beneficial care to stay within the limits we impose when we seek low prices for products for products and services, elect politicians who promise low taxes, and choose cheaper health care plans for ourselves.

Though I hate to disagree with such an eloquent statement by so eminent a scholar, I am slightly troubled by that language. I think money saved from the health sector is more likely to go to new adventures in the Middle East or dot-com, housing, and commodities bubbles than it is to be allocated to “other national priorities.” Health care is only one of many sectors where US-style casino capitalism has seriously distorted capital allocation.

I also believe that the invocation of “we” here glosses over the moral role of redistribution in an extremely unequal economy. A privately insured person who really wants a procedure can spend himself down to bankruptcy, then apply for Medicaid. At that point, the government must make a decision. Given that “the government collected less in taxes in 2010 than it has in over three generations, and tax rates are at historic lows” for the very wealthy, I don’t think it is entirely fair to say “we” can’t afford certain care. Rather, those at the top of the income and wealth scale are increasingly supporting politicians who will not tax the wealthy. The current scarcity of care for the least well off is not a natural feature of the world; rather, it is epiphenomenal of repeated decisions not to impose certain tax burdens today even though they would have seemed perfectly fair 50 years ago. Since a “Wall Street transactions tax of only 0.50% on short-term speculation could raise up to $170 billion annually,” I fail to see an imperative to reduce incomes in the health sector until problems in much less socially productive sectors are addressed.

On the other hand, if our government “of the top 1%, by the top 1%, for the top 1%” continues, major cuts to the health sector are inevitable. If they must come, we need more trusted and fair voices like Bloche’s at the table. As Daniel Alpert has observed, “the U.S. has engineered a winner-take-all economy and indebted both the majority of its people and its government to keep a ‘don’t tax, but spend anyway’ consumerist fantasy alive.” Bloche helps us face the difficult task of unwinding the consequences of all those bad economic decisions.

Bloche is also admirably restrained in his sense of how much current law can do to rationalize health care spending. As he notes in a book excerpt:

30 percent of health spending [is] wasted on worthless care—about the price of the $700 billion mortgage bailout, squandered each year. . . [One study estimated that only] about 10 to 20 percent of medical procedures rest on “gold-standard” evidence — randomized clinical trials. . . . Risky and pricey therapies routinely make their way into common use without such studies. . . .

Change is looming. The 2010 health reform law created a “Patient- Centered Outcomes Research Institute,” funded by levies on Medicare and private insurers, to sponsor such research. But the funding level, less than a tenth of a percent of what Americans spend on health care each year, will do little to increase the fraction of medical decisions that rest on science. And the Institute’s governing body — composed mostly of representatives from the hospital, insurance, and drug and device industries, as well as physicians — seems almost designed to enable stakeholders to block studies that threaten their interests. Moreover, multiple provisions in the law (sought by providers and drug and device makers) hobble Medicare’s ability to base coverage decisions on research the Institute sponsors.

The mix of hope and realism in the paragraphs above reflects the judicious sensibility of the many Bloche articles I have had the good fortune to learn from. I look forward to reading his book.

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