Blog

In the spirit of value-based care, Medicaid is tying payments to the effectiveness for some gene therapies, as reported by KFF Health News. Paying only when a treatment is successful is one way of reducing risk as a payer, especially if the treatment is expensive. The details of the program are confidential, so it is unclear whether the performance-based payments are meaningful. Additionally, the program stipulates "discounts and rebates," which could reduce the appeal of the arrangement.

Nevertheless, when these treatments can cost millions of dollars, a performance-based compensation scheme makes a lot of sense. A health insurer might be willing to pay a large number if the treatment successfully avoids larger ongoing costs over the long term. In return, the participating pharmaceutical companies might be able to enjoy a more streamlined process for patients to be approved, which could lead to more sales. This arrangement could be a win-win for Medicaid and for companies that offer effective treatments.

KFF Health News reported on how one large Medicare Advantage insurer settled with the federal government in a case about "upcoding" (exaggerating how sick patients are in order to gain more compensation). Interestingly, even though a whistleblower (an insider physician) brought forth one of cases against this insurer, the case took over eleven years to resolve, and the insurer still did not admit wrongdoing. The case alleges that over a time period of 2009 through 2018, the insurer received roughly a billion dollars of improper payments. Although other Medicare Advantage insurers have faced similar accusations, the article did not discuss why Medicare Advantage might be particularly susceptible to this type of fraud.

Cases against other insurers appear to be ongoing. Unfortunately, this type of fraud drives up the cost of health care.

The reduction in Medicaid funding signed into law last July will have significant impacts on the state and local levels. KFF Health News reported on how California, for example, could lose $30 billion each year in Medi-Cal funding, which could account for 15% of the state program's budget. On a local level, that means that millions of people will likely be losing health insurance ("estimated 10 million"). One researcher noted: "This is the moment where a lot of hard decisions have to be made about who gets care and who doesn't... The number of people who are going to lose coverage is large, and a lot of the systems that were in place to provide care to those individuals have either gone away or diminished."

The expansion of Medicaid coverage as part of the Affordable Care Act made sense in many ways. When states and counties come to rely on that funding, and that funding is abruptly reduced, it is no surprise that the change can be a devastating shock to the system.

The budget passed in July of last year cut Medicaid funding by about $1 trillion over ten years. Large numbers can be abstract, but KFF Health News reported on how the looming cuts (along with shortfalls in state budgets) are affecting behavioral health therapists. In North Carolina, for example, therapists treating autism expect a 10% rate cut, while in Nebraska, the anticipated rate cuts might be more than 30%. Funding for autistic patients can also limit the covered number of hours of treatment in a week. The article profiled some very real concerns from families. Interestingly, leadership of one organization of behavioral health therapists seemed to think that the rate cuts were appropriate. The CEO of that organization believes that the treatment plan should vary more widely, based on patient needs.

From a policy perspective, the right level of reimbursement can be difficult to figure out. Setting the rate too high can lead to inefficiencies and diminishing gains, and setting the rate too low can leave problems untreated (potentially incurring higher longer-term costs). What makes this decision especially difficult is that the professionals who are likely in the best position to assess the efficacy of treatments are the therapists themselves, creating a conflict of interest. Nevertheless, when patients who need treatment are unable to get treatment, supply is likely too low, meaning that the reimbursement rate is inadequate.

We hope last year ended well for you all, and that this year will be even better.

Happy New Year!