GAO Examines Geographic Variation in Private Payer Spending on High-Cost Procedures

On January 28, 2015, the Government Accountability Office (GAO) released a report entitled “Private Health Insurance: Geographic Variation in Spending for Certain High-Cost Procedures Driven by Inpatient Prices.” In the report, the GAO examines: (1) how spending per episode of care for certain high-cost procedures varies across geographic areas for private payers, and (2) how the mix of service types, and the volume, intensity, and price of services contribute to variation in episode spending across geographic areas for private payers. Specifically, using a large private sector claims database, GAO examined 2009 and 2010 spending by metropolitan statistical areas (MSA) for episodes of care for three commonly performed inpatient procedures -- coronary stent placement, laparoscopic appendectomy, and total hip replacement. The GAO examined spending by service category: hospital inpatient, hospital outpatient, post-discharge, professional, and ancillary services. For inpatient and professional services, GAO examined the volume, intensity, and price of services.

According to the GAO, its investigation found that spending for an episode of care in the private sector varied across MSAs for the three procedures, even after GAO adjusted for geographic differences in the cost of doing business and differences in enrollee demographics and health status. MSAs in the highest-spending quintile had average adjusted episode spending that was 74% to 94% higher than MSAs in the lowest-spending quintile, depending on the procedure. The price of the initial hospital inpatient admission was the key driver of differences in episode spending in high- and low-spending MSAs. Professional services (office visits and other services provided by a physician or other health professional) were the second largest contributor to geographic differences, but accounted for only 7% or less of the difference in total episode spending between MSAs in the lowest- and highest-spending quintiles. The report does not include recommendations, and GAO notes that its findings may not be generalizable to all private insurers due to data limitations. 

President Signs Government Funding Bill with Health Spending/Policy Provisions

On December 16, 2014, President Obama signed a $1.1 trillion spending bill that funds most government agencies through the end of the fiscal year on September 30, 2015 (funding for the Department of Homeland Security is funded through February 27, 2015). With regard to HHS funding, the bill, among other things: holds CMS funding at FY 2014 levels; provides no new funding for Affordable Care Act implementation and blocks the use of CMS program management funds to support risk corridor payments; provides emergency funding to address the Ebola crisis; increases National Institutes of Health funding by $150 million over FY 2014 levels; provides funds to FDA to investigate counterfeit drugs within the United States and internationally; and reduces funding for the Independent Payment Advisory Board (IPAB) by $10 million.  The explanatory statement also includes a number of health policy provisions. For instance, the report: expresses concerns about a CMS proposal to eliminate critical access hospital status for certain rural facilities; requests CMS to report on the impact of competitive bidding on treatment patterns of enteral nutrition patients residing in LTC facilities; directs CMS to review billing rules regarding implantable pain pump drugs; requests that CMS develop proposals to encourage short-cycle dispensing of outpatient prescription drugs in LTC facilities; directs CMS to educate providers on how to reduce Medicare claims errors, develop procedures to reduce the Office of Medicare Hearings and Appeals (OMHA) appeals backlog, and improve the appeals and audit processes; requests that CMS reconsider changes to payment for surgical procedures included in the annual Medicare physician fee schedule rule; and directs HRSA to work with covered entities under the 340B drug program “to better understand the way these entities support direct patient benefits from 340B discounted sales.”

Congressional Health Policy Hearings

Recent Congressional health policy hearings have addressed the following issues:

Looking ahead to 2015, House Energy and Commerce Committee Chairman Fred Upton has indicated that his panel will hold a hearing on preparation for ICD-10 implementation

MedPAC Issues 2014 Medicare/Health Spending Data Book

The Medicare Payment Advisory Commission (MedPAC) has released its 2014 Data Book on Health Care Spending and the Medicare Program. The volume provides detailed information regarding national health care and Medicare spending and utilization, sector profit margins, Medicare and dual-eligible beneficiary demographics, Medicare quality, Medicare beneficiary and other payer liability, and related issues.

Omnibus Government Spending Signed to Fund HHS, Other Departments

President Obama has signed into law the Consolidated Appropriations Act of 2014, which provides $1.012 trillion in discretionary funding for the operations of the federal government through September 30, 2014. In addition to setting overall funding levels for HHS agencies, the law specifies funding for numerous HHS policies and initiatives, such as additional funding for program integrity effort involving the 340B drug pricing program and research on the impact of health information technology on patient safety, and reduced funding for the IPAB and certain other ACA activities. The agreement also includes directives for HHS to improve fraud and abuse efforts, including using the latest technology to ensure only valid beneficiaries and valid providers receive benefits (although on the other hand, the agreement raises concerns that the Recovery Audit Contractor program includes incentives “to take overly aggressive actions”). In addition, the agreement highlights more Congressional interest in more narrow HHS policies, such as objections to the criteria CMS uses to package drug costs under the hospital outpatient prospective payment system, and concerns that rural patients maintain access to needed health services if CMS proceeds with a proposal to remove critical access hospital status from certain facilities.

CBO Offers Deficit Reduction Options

On November 13, 2013, the Congressional Budget Office (CBO) issued a report entitled “Options for Reducing the Deficit: 2014 to 2023,” which includes more than 100 policy options that would decrease federal spending or increase federal revenues over the next decade. The following is a listing of the CBO’s health policy options, many of which have been considered previously, including the estimated 10-year savings potential:

• Impose Caps on Federal Spending for Medicaid ($105 billion to $606 billion)
• Add a “Public Plan” to the Health Insurance Exchanges ($37 billion)
• Eliminate Exchange Subsidies for People with Income Over 300 Percent of the Federal Poverty Guidelines ($173 billion)
• Limit Medical Malpractice Torts ($57 billion)
• Introduce Minimum Out-of-Pocket Requirements under TRICARE ($31 billion)
• Convert Medicare to a Premium Support System ($22 billion to $275 billion)
• Change the Cost-Sharing Rules for Medicare and Restrict Medigap Insurance ($52 billion to $114 billion)
• Raise the Age of Eligibility for Medicare to 67 ($23 billion)
• Increase Premiums for Parts B and D of Medicare ($20 billion to $ 287 billion)
• Bundle Medicare’s Payments to Health Care Providers ($17 billion to $47 billion)
• Require Manufacturers to Pay a Minimum Rebate on Drugs Covered Under Part D of Medicare for Low-Income Beneficiaries ($123 billion)
• Modify TRICARE Enrollment Fees and Cost Sharing for Working-Age Military Retirees ($20 billion to $71 billion)
• Reduce or Constrain Funding for the National Institutes of Health ($13 billion to $28 billion)
• End Enrollment in VA Medical Care for Veterans in Priority Groups 7 and 8 ($48 billion)
• Reduce Tax Preferences for Employment-Based Health Insurance ($266 billion to $613 billion)
• Increase the Excise Tax on Cigarettes by 50 Cents per Pack ($37 billion).

CMS Actuary Determines No IPAB Cuts Needed in 2015

The ACA’s controversial Independent Payment Advisory Board (IPAB) is charged with submitting detailed proposals to Congress and the President to reduce Medicare per-capita spending if projected spending growth exceeds a specified target based initially on inflation and then growth in the economy. IPAB’s proposals will go into effect automatically unless Congress enacts alternative legislation to achieve the required savings (with certain exceptions). The ACA authorizes the IPAB’s first recommendations to be submitted by January 2014 for implementation in 2015 if the Medicare per capita target growth rate is exceeded. The CMS Office of the Actuary has just determined, however, that the Medicare spending target will not be triggered for 2015, and as a result IPAB savings proposals will not be needed for that year. Specifically, in an April 30, 2013 memo, the Actuary explained that because the projected 5-year Medicare per capita growth rate (1.15%) for the period of 2011 to 2015 does not exceed the Medicare per capita target growth rate (3.03%), there is no applicable savings target for 2015. Note that to date, no members have been appointed to the IPAB, and there have been repeated legislative attempts to repeal the IPAB provision (although the Obama Administration’s proposed FY 2014 budget would strengthen the IPAB by reducing the target rate of Medicare cost growth that triggers IPAB recommendations).

Congressional Health Policy Hearings & Markups

The Senate Finance Committee held a hearing on the President’s proposed HHS budget for FY 2013. The House Ways and Means Committee is holding a hearing on the HHS budget proposal on February 28; the budget also will be the focus of a House Energy and Commerce Committee hearing on March 1, 2012. Also looking ahead, the following health policy hearings and markups have been scheduled: 

National Health Care Spending Slowing, CMS Finds

According to new CMS national health spending statistics, U.S. health care spending grew 3.9% in 2010 -- the lowest rate of increase in 51 years. The relatively low rate of growth is attributed to lower utilization of health care services. Notably, retail prescription drug spending grew only 1.2%, the slowest rate of growth for prescription drug spending recorded in the national health expenditure survey. Medicare spending grew 5.0% in 2010, while Medicaid spending increased 7.2%.

Energy & Commerce Hearings on ACA Policy Issues

The House Energy and Commerce Health Subcommittee has held a hearing entitled “CLASS Cancelled: An Unsustainable Program and Its Consequences for the Nation’s Deficit.” The panel also has scheduled a November 2, 2011 hearing entitled “Do New Health Law Mandates Threaten Conscience Rights and Access to Care?”

GAO Highlights Lack of Meaningful Health Care Pricing Information for Consumers

The GAO has issued a report entitled, Health Care Price Transparency: Meaningful Price Information is Difficult for Consumers to Obtain Prior to Receiving Care.” According to the GAO, consumer difficulties in obtaining meaningful medical pricing information stem from both health care factors (such as the difficulty of predicting health care services in advance, billing from multiple providers, and various insurance benefit structures) and legal factors that may prevent the disclosure of negotiated rates between insurers and providers that could be used to estimate consumers' complete health care costs. While a number of public and private price transparency initiatives are underway, the types of information available to consumers vary. The GAO recommends that HHS determine the feasibility of making estimates of complete costs of health care services available to consumers as part of its transparency initiatives.

Agreement Reached on FY 2011 Spending Bill

On April 8, 2011, President Obama and Congressional leaders announced an agreement on the outline of a spending bill to fund the government through the rest of FY 2011 (until September 30, 2011). The final FY 2011 continuing resolution cuts an additional $38.5 billion in federal spending over the remainder of the year, including new cuts in Department of Health and Human Services funding. Notably, the continuing resolution includes a number of provisions addressing the Affordable Care Act, including: reduced funding for the ACA Consumer Operated and Oriented Plan (which supports nonprofit, member-run health insurance issuers that offer qualified health plans in the individual and small group markets); elimination of the “Free Choice Voucher” insurance subsidy program; mandates a number of reports on the cost of implementing the ACA, administrative waivers of ACA annual insurance limits, and the impact of certain ACA market reforms on premiums for employer-sponsored health insurance; and requires an audit of ACA comparative effectiveness funding. Congress is expected to vote on the FY 2011 continuing resolution later this week. In the meantime, Congress passed and the President signed a separate stop-gap bill to fund the government through April 15, 2011 to allow time for action on the FY 2011 bill to be completed.  As noted above, although the FY 2011 spending plan is not yet finalized, the House of Representatives already is moving ahead with consideration of its FY 2012 budget framework.

Another Short-Term FY 2011 Spending Bill Enacted

The President has signed another short-term government spending bill (H.J.Res. 48), funding government operations through April 8, 2011 as Congress attempts to craft a spending bill for the remainder for FY 2011. The latest bill would cut federal spending by $6 billion, including reductions in funding for HHS state health access grants and certain “no-year” pandemic influenza funding (both reductions were included in the President’s budget request). 

Short-Term Spending Bill Signed Into Law

President Obama has signed into law a short-term spending bill (H.J.Res. 44) that keeps the government funded through March 18, 2011 while Congressional leaders try to reach agreement on a spending package for the rest of fiscal year 2011 (through September 30, 2011). The latest stop-gap bill includes $4 billion in spending cuts, including reductions in certain HHS program management funding and earmarked projects at the  Health Resources and Services Administration and Centers for Disease Control and Prevention. The appropriations bill for the remainder of FY 2011 is expected to include much deeper cuts to discretionary spending, as evidenced by a spending package approved by the House in February (H.R. 1) that would reduce spending by an additional $61 billion over the rest of the fiscal year compared to President Obama's budget request (note that different sources count the savings differently). The Senate is expected to begin debate on alternative spending packages this week.

Congressional Hearings on the ACA, Health Care Fraud

The House Energy and Commerce Committee held a hearing entitled "The Consequences of Obamacare: Impact on Medicaid and State Health Care Reform." In addition, the House Energy and Commerce Health Subcommittee held hearings on the FY 2012 HHS budget and implementation of the ACA. On March 2, three Congressional panels held hearings on health care fraud: the Senate Finance Committee examined "Preventing Health Care Fraud: New Tools and Approaches to Combat Old Challenges"; the House Ways & Means Oversight Subcommittee focused on "Improving Efforts to Combat Health Care Fraud"; and the Energy & Commerce Committee held a hearing on “Waste, Fraud and Abuse: A Continuing Threat to Medicare and Medicaid". The fraud hearings covered current and planned regulatory and enforcement initiatives, legislative proposals, and areas of continued program vulnerability. Note that yet another Medicare/Medicaid fraud hearing, this one to be held by the Senate Homeland Security and Governmental Affairs Committee, is scheduled for March 9.  Also on the Congressional schedule is a March 9 Energy and Commerce Subcommittee on Health hearing on “Setting Fiscal Priorities in Health Care Funding” and a March 10 House Education and the Workforce Health Subcommittee hearing on "The Pressures of Rising Costs on Employer Provided Health Care."

Lawmakers, President Call for Spending Reductions

On January 25, 2011, the House of Representatives voted 256-165 to approve H.Res. 38, which directs Congress to cut FY 2011 non-security discretionary spending to no more than fiscal year 2008 levels. While H.Res. 38 does not specify planned spending cuts, the Republican Study Committee has offered a plan for achieving such reductions, including cutting funding to carry out the ACA and eliminating $16.1 billion temporary increase in federal Medicaid matching funds enacted by Congress last year. Likewise, in his State of the Union address, President Obama proposed freezing annual domestic spending for the next five years, which would reduce the deficit by more than $400 billion over the next decade. Additional details on the President’s spending plan will be included in his FY 2012 budget proposal, which is scheduled to be released in February. 

Congressional Hearings

The new 112th Congress has already held a number of hearings on health policy issues and other policy areas that also can impact the health industry. For instance, with regard to health reform, the House Ways and Means Committee held a hearing on the Health Care Law’s Impact on Jobs, Employers, and the Economy.” In addition, the Senate Health, Education, Labor and Pensions Committee examined the ACA’s insurance market reforms, and the House Budget Committee focused on the ACA’s fiscal impact. In other areas, a Senate Judiciary Committee hearing focused on “Protecting American Taxpayers: Significant Accomplishments and Ongoing Challenges in the Fight Against Fraud." Separately, the House Judiciary Committee held hearings on "Medical Liability Reform - Cutting Costs, Spurring Investment, Creating Jobs," and on H.R.10, the "Regulations from the Executive in Need of Scrutiny (REINS) Act," which would require Congress to vote on every new major rule (economic effect of at least $100 million) before it could be enforced. Coming up, on February 2, the Senate Judiciary Committee has scheduled a hearing on the Constitutionality of the ACA, and the Senate Energy and Natural Resources Committee will review S. 99, the American Medical Isotopes Production Act of 2011.

CMS Releases New National Health Spending Data

CMS reports that national health care spending grew at 4.0% in 2009, to a total of $2.5 trillion. While this is the slowest rate of growth in decades (attributable to the recession), health care spending growth continued to exceed overall economic growth, which declined 1.7%. While private health insurance spending increased only 1.3% in 2009, Medicaid enrollment growth triggered a 9.0% increase in Medicaid spending (as a result of Recovery Act funding, federal Medicaid spending increased 22% while state Medicaid spending fell 9.8%). Medicare spending rose by 7.9% in 2009 to $502.3 billion. With regard to types of care: hospital spending increased 5.1% to $759.1 billion; physician/clinical services spending rose 4.0% to $505.9 billion; retail prescription drug spending grew 5.3% to $249.9 billion; spending for freestanding nursing care facilities/continuing care retirement communities increased 3.1% to $137.0 billion; home health care services grew 10.0% to $68.3 billion; and spending for durable medical equipment decreased 0.8% to $34.9 billion.

Upcoming Hearing on Health Care Pricing Transparency (May 6)

On May 6, 2010, the House Energy and Commerce Health Subcommittee has scheduled a hearing on health care pricing transparency legislation, focusing on H.R. 4700, the "Transparency In All Health Care Pricing Act of 2010"; H.R. 2249, the "Health Care Price Transparency Promotion Act Of 2009"; and H.R. 4803, the "Patient's Right To Know Act." The broadest of these bills, H.R. 4700, would require all hospitals, physicians, nurses, pharmacies, pharmaceutical manufacturers, dentists, insurers, and other such entities to publicly disclose, on a continuing basis, all prices for health care related items, products, services, or procedures. The disclosure, which would be available at the point of purchase, in print, and on the internet, would be required to include all wholesale, retail, subsidized, discounted, or other such prices the entity accepts as payment in full. The HHS Secretary would be authorized to impose civil fines or other civil penalties “as determined appropriate by the Secretary” for failure to comply with this requirement.

Obama Administration Releases Health Reform Plan in Preparation for Bipartisan Summit

Today the Obama Administration released an 11-page summary of its health reform proposal in preparation for a bipartisan health reform summit scheduled for February 25, 2010. Among other things, the proposal includes a relatively-detailed discussion how the Administration would promote access to affordable insurance, address health care fraud and abuse proposals, and bridge the differences between the House and Senate reform proposals in other key areas. Items of note include the following:

  • Access to Health Insurance – The Administration proposes expanding access to affordable insurance through a series of insurance market reforms, including an insurance purchasing pool; federal premium subsidies; a requirement that individuals buy insurance or pay a penalty (with exceptions); a requirement that employers defray costs employees receiving federal subsidies (with exceptions); expansion of Medicaid; and a new Health Insurance Rate Authority to provide federal assistance and oversight to states in conducting reviews of unreasonable rate increases and other insurance industry practices. There is no mention of establishing a public health insurance plan to compete with private insurers.
  • Waste, Fraud and Abuse – The Presidential proposal includes a variety of program integrity provisions, which include: a comprehensive sanctions database; registration and background checks of billing agencies and individuals; expanded access to the Healthcare Integrity and Protection Data Bank; liability of Medicare administrative contractors for claims submitted by excluded providers; strengthened standards for facilities that seek reimbursement as community mental health centers; limiting debt discharge in bankruptcies of fraudulent health care providers or suppliers; expanded use of technology for real-time data review; sanctions for illegal distribution of a Medicare or Medicaid beneficiary identification or billing privileges; a study of universal product numbers/claims forms for selected items and services under the Medicare program; a state Medicaid prescription drug profiling requirement; extrapolation of Medicare Advantage risk adjustment errors to contract payment for a given year; modification of certain Medicare medical review limitations; establishment of a CMS-IRS data match to identify fraudulent providers; and prevention of delays in access to generic drugs.
  • Cost-Containment Provisions – While the summary document does not include a detailed discussion of Medicare provider rate changes, it does include a limited number of cost containment/fiscal sustainability provisions, including: an adjustment in Medicare Advantage payments to reflect “unjustified coding patterns”; an excise tax on the most expensive health plans ($27,500 for a family plan) beginning in 2018 for all plans; and new Medicare Hospital Insurance taxes on high-income taxpayers.
  • Industry Fees -- The President proposes a $33 billion fee on brand name pharmaceutical manufacturers over 10 years (up $10 billion from Senate plan), beginning in 2011; a $67 billion assessment on health insurers over 10 years beginning in 2014 (with certain exceptions); and an excise tax (rather than fee) on medical device manufacturers, raising $20 billion over 10 years, starting in 2013.
  • Quality of Care – Although not discussed in the summary document, a separate description on the White House web site states the President’s plan would provide “incentives for doctors, and hospitals that improve quality while providing for better coordination that helps to reduce harmful medical errors and healthcare-acquired infections.” The plan also includes “innovative payment reforms so providers are rewarded for the quality of care they provide, rather than just additional tests or treatments.” Likewise, it would reward greater coordination of care between primary care providers and specialists.
  • Part D Coverage Gap – The President’s proposal fills the Medicare Part D prescription drug "doughnut hole" by providing a $250 rebate to Medicare beneficiaries who reach the coverage gap in 2010, and then phasing down the coinsurance requirement so it is the standard 25 percent by 2020 throughout the coverage gap.
  • Medicaid Matching Funds – The President would eliminate the Senate’s proposed enhanced Medicaid matching provision for Nebraska and instead provide additional federal financing for all states to support the expansion of Medicaid.
  • CLASS Act – The White House endorses the Community Living Assistance Services and Supports (CLASS) Program, a voluntary, privately-funded long-term services insurance program, but makes a series of changes designed to “improve the CLASS program’s financial stability and ensure its long-run solvency.”

The Administration also has released a variety of background and summary documents on the White House Health Care Meeting website.

Older Entries

February 11, 2010 — President Obama Releases FY 2011 Budget Request

February 11, 2010 — CMS Projects Rising Health Spending Growth in 2009

January 27, 2010 — Upcoming Congressional Hearings on President Obama's Budget Request.

January 12, 2010 — National Health Spending Growth Slows But Still Outpaces GDP Growth

December 21, 2009 — FY 2010 HHS Appropriations Bill Signed into Law

December 14, 2009 — National Health Spending to Increase Under Senate Health Reform Plan, Says CMS Actuary

November 16, 2009 — House Health Reform Bill Would Not Control Health Costs, According to CMS Office of the Actuary

November 11, 2009 — Congressional Hearings (Nov. 2009)

October 15, 2009 — October Congressional Hearings

July 28, 2009 — House Approves HHS Appropriations Bill

July 3, 2009 — Updated CBO Analysis of Senate HELP Health Reform Bill

June 26, 2009 — CBO Scores Finance Committee Health Reform Bill at Under $1 Trillion

June 19, 2009 — House Leaders Unveil Draft Health Reform Bill

June 18, 2009 — CBO Warns of Health Reform's Impact on Federal Budget

June 16, 2009 — CBO Estimates $1 Trillion Price Tag for Senate HELP Health Reform Bill Without Key Features

June 13, 2009 — White House proposes $313 billion in additional Medicare/Medicaid cuts

May 8, 2009 — Additional Details Released on Obama Budget Proposal

April 7, 2009 — Budget Resolutions Advance with Health Reform Funding

April 7, 2009 — Other Congressional Hearings

April 6, 2009 — HHS Report on Need for Health Reform

March 20, 2009 — HHS Appropriations

March 6, 2009 — HHS Appropriations

March 6, 2009 — Congressional Hearings

March 6, 2009 — Health Care Expenditures

March 6, 2009 — Part B Drug Prices

February 19, 2009 — Senate Health Reform Hearings Scheduled

January 27, 2009 — Role of HHS in Promoting Medical Technologies

December 19, 2008 — Congressional Budget Office Reports on Health Care Budget Options, Insurance Reform

October 30, 2008 — Medicaid Spending Increasing Rapidly

October 30, 2008 — Congressional Hearings