Category: Our Blog
Change will save millions by preventing fraudulent claims
Prior authorization will now be necessary before Medicare will cover medical equipment such as wheelchairs and prosthetics. Prior authorization has always been required, but now it will be earlier in the process.
Why?
Fraudulent billing for these types of equipment costs Medicare millions. They expect to save big: $10 million in the first year, $200 million within five years and $580 million within ten years. In 2014, “the error rate among durable medical equipment billing was 53.1%, which accounted for $5 billion in improper payments that year.” Not all of those were intentionally fraudulent, but this new rule intends to correct many of those cases.
What is prior authorization?
Before an insurance company will cover something- a prescription or procedure- they will need to talk to your doctor and determine if they will cover it. If not, they could cover a substitute, change the dosage, or provide an alternative.
In this case, before Medicare will cover a piece of medical equipment, they will need to talk to your doctor earlier in the process than they previously had.
What equipment is affected?
The Master List of equipment that requires prior authorization includes items with “a high rate of fraud or unnecessary utilization.” They are also items that have an average purchase cost over $1,000 or an average rental cost over $100.
After 10 years, items are removed from the list. They will also be removed if the prices fall before then. In addition to wheelchairs and prosthetics, equipment like oxygen supplies, orthotics, and braces are listed.
Are there any concerns with this plan?
Some groups are concerned that the new rule will increase wait times for equipment that patients need ASAP.
To read the Centers for Medicare and Medicaid Services’ press release on the change, click here.
For more information on the prior authorization process, see this article from Healthcare Finance.
Approving new applications could significantly lower the cost of drugs
The question is how to reduce drug prices. The solution could be found in the Food and Drug Administration.
In recent months, politicians and organizations have written to the FDA, calling for the Office of Generic Drugs to reduce their overloaded system holding thousands of applications for new medications. Each of these 3,000 applications, called ANDAs (Abbreviated New Drug Applications), is a submission for a new generic drug.
Why is this important?
Generic drugs can cost up to 80% less than brand drugs. Of all prescriptions filled in the U.S., 86% are for generic drugs. Introducing new generics into the marketplace could increase competition and bring down prices across the board.
Is this a new problem?
The FDA will always have a backlog of new applications, says RAPS.org. The Office of Generic Drugs has been receiving more applications than it can feasibly look over.
However, other groups have noticed the problem getting worse. The Healthcare Supply Chain Association (HSCA) wrote in a letter to the FDA that approval time for generic drugs increased almost a full year from 2012 to 2014. They also said the Administration has approved fewer generic drugs each year for the last three years.
More generic drug applications are being submitted likely because so many patents are expiring. Drug patents originally issued in the 1980’s and 1990’s are nearing their end, opening up the opportunity for generic versions to exist.
Has anything been done?
In the last few months, the issue has gained traction. Senator David Vitter (R-LA) wrote a letter to the Acting Commissioner of the FDA urging the Administration to reduce the backlog of generic drug applications.
Democratic Presidential candidate Hillary Clinton also wrote to the FDA, calling for expediting pending applications and clearing the backlog.
For more on the FDA’s generic drug applications, see this article from the Wall Street Journal.
Click here to learn more about the FDA’s drug approval process.
Express Scripts will offer a $1 alternative to the $750 dollar pill.
In September, we wrote about Daraprim, which originally cost $13.50 per pill, and skyrocketed to $750 overnight. Last week, Express Scripts announced that they would offer a cheaper alternative. Express Scripts is the largest pharmacy benefits manager in the country.
What is the new drug?
The company partnered with Imprimis Pharmaceuticals to create a slightly different pill- not a generic version, which would require approval by the FDA. Theirs has pyrimethamine, the main drug in Daraprim, and leucovorin, which is commonly prescribed with Daraprim to control its’ side effects. It will cost $99 for a bottle of 100 pills- less than $1 each.
What is the old drug?
Daraprim is a decades-old drug that is used to treat toxoplasmosis, a rare infection that typically affects those with decreased immune systems. Since the disease is so uncommon, there was never a push for a generic version of the medication that treats it. The drug Express Scripts offers is cheaper than Daraprim’s price, even before Turing Pharmaceuticals raised it from $13.50 to $750. After public outrage at the price hike, the CEO of Turing Pharmaceuticals, Martin Shrkeli, said that hospitals would be offered discounts of up to 50%.
Why?
Express Scripts was motivated to help patients and the doctors treating them. After hearing from many infectious disease doctors, the Chief Medical Officer at Express Scripts, Dr. Steve Miller, began looking for a solution.
Now, “the use of this compounded medication could theoretically reduce a hospital’s cost of treating a patient with Daraprim from as much as $40,000 to less than $60,” Ron Shinkman wrote on Fierce Health Finance.
See more about Express Scripts, Imprimis and their drug on CNBC.com.
Will Express Scripts’ decision impact healthcare and pharmaceutical prices? Read more here.
Most plans will see a small increase
The new 2016 Prescription Drug Plans will cost more than they did this year.
There are a few signs of rising costs, from U.S. News and World Report:
- The average monthly premium will increase about 13 percent, from $36.68 to $41.46.
- The amount that taxpayers pay for catastrophic coverage will increase about $4.5 billion. The beneficiary pays 5% of the cost under catastrophic coverage, which supports beneficiaries with high drug costs.
- The maximum deductible for 2016 plans will be $360, $40 more than last year. This year, 67% of prescription drug plans will have a deductible, and 53% of those will charge $360.
Switching to a different plan will help beneficiaries save money, but The Kaiser Family Foundation says that overall, this could be the biggest increase since 2009.
In Virginia, the average monthly premium for 2016 Prescription Drug Plans will increase 19%, according to the Kaiser Family Foundation.
Aims to improve quality and cost of care
Medicare will implement new system for hospitals performing hip and knee replacements, which are the most common surgeries among Medicare beneficiaries. If hospitals don’t meet the standards, they will have to pay back a part of the cost to Medicare. If they do perform well, they will get a monetary reward.
What is the new program?
The Comprehensive Care for Joint Replacement model (or the CCJR model) aims at better quality care. It will begin April 1, 2016.
67 geographic areas are included in the program. The Staunton-Waynesboro area is the only one in Virginia.
How does it work?
Hospitals will be evaluated for an “episode of care,” which lasts 90 days after the surgery. The cost of the episode of care, including the procedure and any related care, is in question for the hospital.
If the hospital’s care doesn’t meet the cost and quality standards, they will owe Medicare for a portion of the cost for the episode of care. If they succeed, Medicare will give the hospital a financial reward.
The program is meant to create incentives not only for hospitals, but skilled nursing facilities, nursing homes, and other health providers to providing comprehensive, coordinated care.
Why start this program?
The Centers for Medicare and Medicaid Services say on their website that these surgeries are the most common among beneficiaries, but the care varies from hospital to hospital. They want to not only coordinate the quality of care and its costs, but improve care nationwide. The inconsistencies in the health of patients after these surgeries reflects the state of the entire health care system.
Prices vary for current and new beneficiaries
The White House announced the 2016 Medicare Part B premiums this week. They are significantly less than expected- you can see the original predictions in a previous newsletter. Here’s what you need to know:
Premiums: The Part B premium will increase for new beneficiaries and some current beneficiaries.
- Current Beneficiaries: Most current beneficiaries will pay $104.90 per month, the same as this year.
- New Beneficiaries: New beneficiaries will pay an increased premium of $121.80 per month.
- High-income Beneficiaries: Beneficiaries making certain amounts will have a higher premium Those making over $85,000 a year will pay $170.50. The prices increase incrementally, up to a premium of $389.80 for those making over $214,000 per year.
- Current Beneficiaries: Current beneficiaries will pay $166.
- New Beneficiaries: New beneficiaries will pay $166.
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See this article by U.S. News & World Report for more details on the 2016 Part B premium prices.
Read The White House’s post about the 2016 Medicare Part B Premiums on their website.
In addition to other Social Security changes in the budget, Congress targeted methods that permitted beneficiaries to increase their own Social Security benefits while collecting their spouse’s checks. Waiting to collect benefits yields a larger payout- after full retirement age (currently 66), benefits increase 8 percent per year until age 70.
Losing this option could be costly for seniors- some couples can make up to $60,000 filing this way. But for the government, the cost is even greater: if everyone took advantage of these loopholes, the cost to the Social Security Administration would be over $9 billion.
These are the two main strategies outlawed by the budget rules:
File-and-suspend: This loophole allowed a person to file for benefits and suspend those benefits right away. Their benefits would grow by a small percentage while they collected their spouse’s benefits.
Restricted application: Filing a restricted application at age 66 (or full retirement age) would let a person collect their spouse’s benefits while their own benefits grow untouched.
The law will go into effect May 1, 2016. After this date, these strategies will not be available. If you will be 66 before May 1, 2016, you have time to take advantage of these strategies before they are longer an option. The law will mostly affect new retirees, who will not have the strategy available to them.
Budget will end options that allowed married couples to maximize benefits
To read more about File-and-Suspend, see this Forbes article.
Prices will still raise slightly
Last week, we wrote about the likelihood of Medicare Part B premiums increasing because the Cost-of-Living did not increase.
Because of action by Congress, Medicare Part B premiums will not increase by 50% as expected. By slightly raising the annual deductible for all beneficiaries, and using money from the Treasury to cover Medicare Part B, the price hike will be avoided.
What will I pay?
- All Medicare beneficiaries will pay more for the annual deductible, which will increase from $147 to $167. The price originally predicted was $233.
- For most beneficiaries, their monthly Medicare Part B premium is $104.90. 30% of beneficiaries will see an increase to $120. Before the budget agreement, the premium would have been $159. Your premium will increase if:
- All beneficiaries will pay $3 more per month for their premium until 2021, to pay back the Treasury’s loan.
- A new felony charge: Conspiracy to commit Social Security fraud, which carries a maximum fine of $250,000 and up to 5 years in prison.
- A requirement that, if the prices of generic drugs rise faster than inflation, companies that produce them must provide Medicaid with bigger discounts.
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Part B premiums may increase for some beneficiaries
What is a COLA?
A Cost-of-Living-Adjustment is an increase in Social Security payments based on an increase in the cost of living. It is determined using the Consumer Price Index, which measures rates of inflation.
Since 1975, Cost-of-Living-Adjustments have been calculated annually, and result in an increase in Social Security payments. For the third time, the COLA will not increase. Each time has been during the Obama administration.
Why won’t there be an increase?
This year, there won’t be an increase because the cost of living didn’t increase. It actually decreased, according to the Consumer Price Index, because of falling gas prices.
Economists say that even though the price of medical care has increased, “consumer prices for a range of goods from food to housing have not risen enough overall to produce an increase in benefits, and have dropped from a year ago,” the Washington Post reported.
What does it mean?
Social Security’s benefit will remain the same for the next year.
If you saw our newsletter on the Medicare Part B premium increase, you know that the increase was dependent on a COLA adjustment. Now that we know there won’t be COLA adjustment, we know that Part B premiums won’t increase for 70% of Medicare beneficiaries. We also know that they could increase substantially for the other 30%, including those new to Medicare in 2016, those whose Part B is not paid through Social Security, and those with single incomes over $85,000 or joint incomes over $170,000. This issue of our newsletter has more detailed information about the premium increases.
The White House commented that they were concerned about the “unintended policy consequence resulting from the formula of calculating cost of living adjustments,” and has reached out to Congress in search of a solution.
Members of Congress have submitted bills aimed at halting the Part B premium increase, and dozens of groups representing seniors have been lobbying for their passage.
What can I do?
If you don’t want the Medicare Part B premium increase, call your congressman.
Cost-of-Living-Adjustments over the past decade. This chart was made with information from SSA.gov.
For more on the details of this year’s COLA, see this informative article from the Washington Post.
Here are the highest and lowest-rated plans for the upcoming year
The criteria for ratings is slightly different for each plan, as shown on MedicareInteractive.org.
Medicare Advantage Plans:
- Staying Healthy: Screenings, Tests and Vaccines
- Managing Chronic Conditions
- Plan Responsiveness and Care
- Member Complaints, Problems and Leaving the Plan
- Customer Service
Prescription Drug Plans:
- Customer Service
- Member Complaints, Problems and Leaving the Plan
- Member Experience with Plan
- Drug Pricing and Patient Safety
Plans are rewarded for high scores and penalized for recurring low ratings. If a plan has 4 or more stars, Medicare pays them an extra 5% per member in their monthly payments. If a plan is rated with 5 stars, the plan can enroll new customers year round- a coveted bonus.
If plans have less than 3 stars for three years, the Medicare Prescription Drug Plan Finder will flag them with a caution sign, and won’t allow beneficiaries to enroll on the Medicare website.
These are the highest-performing Medicare Advantage- Prescription Drug (MA-PD) Plans for 2016:
These are the highest and lowest-rated local Prescription Drug Plans for 2016. The highest-rated are in green, and the lowest-rated are in red.
For more information on Star Ratings, see this page from Medicare.gov.