Doctoral Thesis

Can Accountable Care Save the U.S. Medicare Trust Fund from Insolvency?

Comparing Projected 2013-2015 Per Capita Medicare Spending Rates to the Projected Per Capita change in the Growth Rate of the U.S. GDP.  

A Concept Paper Draft for Dr. H. Young Baek

Department Chairman, Finance

Nova Southeastern University

Huizenga School of Business

April 18, 2013

a

By Steven Gerst, MD, MPH, MBA, CHE

Nova Southeastern University Doctoral Program

Abstract:

At $2.9 Trillion projected to go to $4.64 Trillion in the next 7 years, the U.S. Healthcare system is the largest industry in the world. Consuming 36% of the Federal Budget, Social Security and Medicare are the two largest line items with which Congress and the President must content, annually. As of this year, Medicare will now be the largest budgetary line item. Insolvency of the Medicare Trust Fund is projected for 2024. This is the point at which Medicare can no longer pay 100% of benefits.

At the current rate of 17.6% of the U.S. GDP, domestic healthcare costs are projected to rise to 20%. This 20% expense must be added to the cost of most all goods and services produced in the U.S., leading to a significant trade imbalance and rampant deficit spending. In 2010, Congress passed the Patient Protection and Affordable Care Act creating Accountable Care attempting to drastically change the Medicare financing mechanism from “volume-based” reimbursement to “value-based” financing system to curb this trend.

This 3 year Accountable Care experiment is the largest change in the financing of the largest industry in the world. The goal is to slow the per capita growth rate of Medicare spending and stave off the imminent exhaustion of the Medicare Trust Fund which currently also threatens the solvency of the Social Security Trust Fund.

The Fund is currently borrowing nearly $200 billion annually from the General Tax Fund since more working adults are retiring from the work force and entitled to Medicare Benefits than are entering.  This Doctoral Dissertation Concept Paper is focused on determining whether or not this change will occur as predicted.  Changing the trend through Accountable Care is a fundamental assumption of the proposed 2014 Health and Human Services Budget and has been quantified in a just recently released study by the Kaiser Family Foundation.

With 259 Accountable Care Organizations operationally approved by the Centers for Medicare and Medicaid in the past year, $10 billion in funding, and a shared savings mechanism covering 4 million Medicare beneficiaries, this experiment is well underway. There are expectations of 750 total ACOs to be approved in the next 18 months covering an estimated 10 million of Medicare’s 53 million beneficiaries.

If the quantitative assumptions are correct, the rate of Medicare spending will drop by nearly 10% in the next 3 years. This Doctoral Dissertation is designed to prove or disprove this hypothesis through an examination of both public and private data. The results will be measured by the changes in the rate of growth of Medicare spending versus the per capita growth rate of the GDP over the next 18-24 months.

 

Table of Contents

 

Section 1: The Research Problem

  1. A.   Problem and Sub-Problem:

The Problem: Spiraling Healthcare Costs are projected to exhaust the U.S. Medicare Trust Fund.

The Sub-Problem: Can Accountable Care under the PPACA Legislation Change or Slow this Course?

 

1. Social Security and the Medicare Trust Funds

2. Medicare and Social Security Account for 36% of the Federal Budget

3. The Medicare Trust Fund

4. Medicare is the Single Largest Healthcare Payer in the Nation

5. Medicare, Medicaid and National Debt Interest will exceed the U.S. Tax Revenues

6. In 25 years, Medicare, Medicaid and Social Security Spending will also Outpace GDP growth

7. U.S. Healthcare Costs 2x as Much as other First World Countries

8. The Anticipated Effect of the PPACA Legislation (“ObamaCare”)

9. The Patient Protection and Affordable Care Act (2010) and Accountable Care Organization

 

  1. B.   Background and Justification
    1. Medicare
    2. Medicaid Expansion
    3. CO-OPs, Provider Sponsored Networks, Federally Qualified Health Centers
    4. Accountable Care Organizations
    5. The HITECH ACT of 2009
      1. Meaningful Use for Hospitals (HIMSS’ Stages 0-7)
      2. Health Insurance Exchanges (“HIE”) under “Meaningful Use” Reimbursements
      3. Point of Order Clinical Decision Support, Image Sharing and Meaningful Use Requirements
      4. HCAHPS and 30-day Readmissions
  2. Sustainable Growth rate (SGR) and ICD-10 Implementation
  3. National Bundled Payment Initiatives
  4. Patient Centered Medical Home Initiatives

 

  1. C.   Definition and Terms

 

  1. The Medicare Security Trust Fund
    1. Medicare Part A Funding
  2. Medicare Part A Coverage
  3. Medicare Part B
  4. Medicare Part C
  5. Medicare Part D
  6. Accountable Care Organizations (“ACOs”) as Defined Under Patient Protection and Affordable Care Act Types of ACOs
  7. ACOs by State
  8. D.   Limitations and Delimitations


 

  1. Medicaid ACOs and Other Sources of Data
  2. Chronic Conditions in the Medicare Population

 

  1. E.     Assumptions

 

1. Medicare Per-Capita Spending Growth Relative to Inflation and Per-Capita GDP Growth

2. General Tax Revenue as a Share of Total Medicare Spending

3. Accountable Care Assumptions

Section 2:  Research Approach

  1. A.   Literature to be Reviewed

 

1. The Brookings-Dartmouth ACO Financial Model

2. Track 1 and Track 2 ACO Models

3. 3 Years, 2 Tracks, 33 Measures in 4 Domains

4. Expenditure Benchmarks

5. Minimum Savings Rate (MSR)

6. Shared-Savings Threshold

7. Sharing Rate

8. Sharing-Rate Adjustments

9. Shared-Savings Cap

10. Shared-Savings Withhold

11. Minimum Loss Rate (MLR)

12. Loss Rate

13. Loss Cap

14. Comparison of Track 1 and Track 2

15. Understanding the Financial Savings Model for this Concept Paper

 

  1. B.   Conceptual Empirical Design

Section 3:  Suggested Reference Texts, Articles and Data Sources

  1. A.   Suggested References
  2. B.   Proposed Journal Articles

Section 4:  Appendices


 

 

List of Figures

 

Figure 1.  U.S. Healthcare System Projected Costs – From $2.9 Trillion to $4.4 Trillion by 2017

Figure 2. Proposed 2014 Federal Budget for Centers for Medicare and Medicaid (April 2013)

Figure 3. Projected 2014 Federal Medicare Budget, Up $20 Billion from 2013

Figure 4. Historical U.S. National Health Expenditures vs. the U.S. Consumer Price Index. Since the introduction of Medicare and Medicare in 1965 and 1966, National Health Expenditures (NHE) have been 2x-3x higher than the Consumer Price Index (CPI) for all U.S. goods and services.

Figure 5. Historical Composition of Federal Spending 1966, 1986, and 2006

Figure 6. Projected Medicare/Medicaid Federal Spending Compared to National Tax Revenues.  By 2015, the Tax Revenue Base of the U.S. will be exceeded. By 2040, Medicare Costs and the Interest on the National Debt alone, is projected to exceed the U.S. Tax Revenue Base.

Figure 7. At the Current Rate of Growth Projected Federal Entitlement Programs will exceed 10% of the GDP by 2020, 15% by 2030 and nearly 20% by 2080

Figure 8. Over the next 25 years, the GDP is expected to grow 71%, while Social Security costs will increase 127%, Medicaid by 224% and Medicare by 235%

Figure 9. Study by the Commonwealth Fund on Costs of Health Care by Country

Figure 10. The cost of the U.S. Healthcare system is exorbitant compared to other First World Countries. The U.S. represents 5% of the world’s population, but 50% of the world’s healthcare dollar.

Figure 11.  The Projected Difference Between Growth in Medicare Spending per Beneficiary and Growth in GDP per Capita

Figure 12. Over the past 10 years, the Average Annual Growth rate of Prescription Drugs has decreased substantially while the cost of hospitalization and physician services has increased, pulling up the Consumer Price Index since 2002

Figure 13. National Health Care Spending is currently 17.6% of GDP, projected to go to 20% in 2 years.

Figure 14. 2019 US Healthcare Market by product and group size without Healthcare Reform Law.

Figure 15. Projected 2019 U.S. Healthcare Market by product and group size with Healthcare Reform Law. Depicts movement of 23 million uninsured into Managed Medicaid Programs and Exchanges.

Figure 16. Bundled Payment Example

Figure 17. 259 CMS Approved Medicare Shared Savings Program Accountable Care Organizations

Figure 18. Entities that are Permitted to Form ACOs by CMS under the Medicare Shared Savings Program

Figure 19. ACOs Quality Performance Standards, Pay for Reporting and Pay for Performance

Figure 21. The Brookings Dartmouth ACO Model

Figure 20.  CMS Roadmap to Global Capitation Payment Structures under ACA Reform

Figure 22. The ACO Continuum

Figure 23. Social Security and Medicare Cost as a Percentage of GDP

Figure 24. Outlook for Social Security and Medicare HI Costs in Relation to Taxable Income

Figure 25. OASDI and HI Income and Cost as a Percentage of Taxable Payroll

Figure 26. Medicare Cost and Non-Interest Income by Source as a Percentage of GDP

Figure 27. Projected SMI General Revenue Funding plus OASDI and HI Tax Shortfalls

Figure 28. OASI, DI, and HI Trust Fund Ratios [Assets as a percentage of annual cost]

Figure 29. Total Annual Cost of Social Security

Figure 30. Ratio of Workers to Beneficiaries

Figure 31. Monthly Trend of Extended and Emergency Unemployment Claims Compared to the Number of   People on Disability (June 2008- April 2012)

Figure 32. Per Capita Medicare Costs vs. Employer Sponsored Insurance Cost

Figure 33. 2014 Proposed CMS Budget (April 2013)

Figure 34. 2014 Proposed Federal Healthcare Budget (April 2013)

Figure 35. Simulated Comparison of Relative Medicare, Medicaid and Private Health Insurance Prices

Figure 36. Comparison of Relative Medicare, Medicaid and Private Health Insurance Prices for MD Services


 

List of Tables

 

Table 1. Projected Dates of Exhaustion for the Social Security and Medicare Trust Funds

Table 2. Medicare EMR Payment Schedule

Table 3. Medicaid EMR Payment Schedule

Table 4. The differences in the Medicare EMR and Medicaid EMR programs are:

Table 5. HIMSS Electronic Medical Record Administrative Module 8 Stage Schedule

 

Table 6.  Detailed Stages of HIMSS Model EMR Adoption

 

Table 7. The 2014 statutory updates to the annual parameters for the defined standard Part D prescription drug benefit are finalized as proposed.

 

Table 8. CMS Approved Medicare Shared Savings Program ACOs by State

 

Table 9. CMS Chronic Condition Data Warehouse (CCW) Medicare 5% Sample* Medicare Beneficiary Counts for 2000 Through 2009

Table 10. CMS Chronic Condition Data Warehouse (CCW) Medicare 5% Sample* Medicare Beneficiary Counts† for Chronic Conditions for 2000 Through 2009

Table 11. CMS Chronic Condition Data Warehouse (CCW) Medicare 5% Sample* Total Number of Medicare Claims† by Claim Type 2006 Through 2009

Table 12. CMS Chronic Condition Data Warehouse (CCW) Medicare 5% Sample* Total Medicare Fee-for-Service Reimbursements† (in Millions) by Claim Type 2006 through 2009

Table 13. Income, By Source, of each of the Social Security Trust Funds

Table 14. Assets of the Social Security Trust Fund, 2012

Table 15. Expenditures of the Social Security Trust Fund, 2012

Table 16. Social Security (OASDI) Program Rates & Limits

Table 17. Medicare Part B and Part D Income Based Copayment and Surcharge Schedules, 2013

Table 18. Medicare Part B and Part D, Married Filing Separately, Income Based Copayment and Surcharges

 

 
SECTION 1: THE RESEARCH PROBLEM

A. Problem and Sub-Problem: Spiraling Healthcare Cost are Projected to Exhaust the U.S. Medicare Trust Fund. Can Accountable Care Change or Slow this Course?

U.S. Healthcare is the largest industry in the world.  It costs the U.S. $2.9 Trillion in annual economic value, absorbing 17.6% of the nation’s Gross Domestic Product. Forecasted to rise to $4.4 Trillion by 2012[1] (See Figure 1) and 20% of GDP in the next 8 years, these rising costs are threatening the fiscal solvency of the Medicare Trust Fund.  As a result of this cost spiral, U. S. goods and services are less competitively priced in world markets. This has led to uncontrollable Federal deficit spending and a significant trade imbalance.

In an effort to curb this crippling economic trend, Congress passed the Patient Protection and Affordable Care Act in 2010. This legislation is driving a massive experimental financing shift from the current “volume based” purchasing of healthcare services to a “value-driven, outcomes based” reimbursement mechanism. If this experiment does not substantially slow inflationary growth, an Independent Payment Advisory Board appointed by the President and confirmed by the Senate by 2019, will develop recommendations to achieve an “applicable percentage” specified reduction in Medicare spending with a possible “single payer” solution.

Figure 1. U.S. Healthcare System Projected Costs – From $2.9 Trillion to $4.4 Trillion by 2017

 

As a nation, we are in financial distress due to the historically uncontrolled rising cost of healthcare delivery in the U.S. and its consequent effect on non-competitive pricing of U.S. goods and services in international markets. In November 2012, the Trustees of the Social Security Trust Fund, to which the Medicare Security Trust Fund is financially tied, reported that for the first time since 1983, Social Security’s expenditures exceeded non-interest income in both 2010 and 2011.

In 2010, there was a $49 billion deficit of non-interest income relative to expenditures. In 2011, it was $45 billion. This deficit is projected to continue to average approximately $66 billion each year between 2012 and 2018.  After 2018, this deficit spending is expected to rise steeply as the economy slows post-recovery, and the number of Medicare beneficiaries continues to grow substantially faster than the number of covered workers paying tax revenues into the Medicare Trust Fund to support its expenditures.[2]

The U.S. Government is currently borrowing about $200 billion a year from the $2.73 trillion Social Security Trust Fund (OASDI) to pay for the Medicare Hospital Indemnity Fund (HI), Disability Income (DI) and Old Age and Survivors Retiree Old-Age and Survivors Insurance (OASI) benefits. The expenditures for these funds since expenditures now exceed the income[3]. The following table shows the dates for projected exhaustion and insolvency of these respective Trust funds.  Insolvency is defined as the Fund’s inability to pay 100% of the expected liabilities[4]. As depicted in Table 1, Social Security and Medicare Boards of Trustees reported in November 2012 that the Medicare Hospital Insurance Trust Fund is expected to be insolvent by 2024.

Table 1. Projected Dates of Exhaustion for the Social Security and Medicare Trust Funds
OASI DI OASDI HI
Year of peak trust fund ratioa 2011 2003 2011 2003
First year outgo exceeds income excluding interestb 2010 2005 2010 2008
First year outgo exceeds income including interestb 2023 2009 2021 2008
Year trust funds are exhausted 2035 2016 2033 2024

aDates pertain to the post-2000 period.   bDates indicate the first year that a condition is projected to occur and to persist annually thereafter through 2086.

  1. 1.       Social Security and The Medicare Trust Fund

The Social Security Trust Fund consists of U.S. government bonds that have been bought by the Social Security Administration for 30 years with tax money paid by “baby boomers” who have spent most of their working lives paying more into the system than it spent.  A surplus which developed over the 1990’s was lent to the Federal government to offset some of the huge deficits of the 2000s. Today, the retiring boomers are taking out more than younger workers are putting in. At the current rate of expenditure, the Trust fund is projected to be exhausted by 2033 (see Table 1 above)[5].

In 2011, 44.8 million people received OASI benefits, 10.6 million received DI benefits, and 48.7 million were covered under Medicare.[6] For 2014, the recently released proposed budget, projects increased Medicare enrollment, growing from 52 million seniors currently (2013) to 53.6 million in 2014.  The Centers for Medicare & Medicaid Services would receive $860 billion (a $60 billion increase over 2013, some of it actually coming from the Social Security Administration)[7].  Medicare represents 61% of this Budget.

Figure 2. Proposed 2014 Federal Budget for Centers for Medicare and Medicaid (April 2013)

 

Source:  Brino, A. (2013) HHS proposes $967B budget for 2014, Budget up $60M from last year would boost Medicare enrollment, fund HIXs, Healthcare IT News: Washington, D.C. (April 11).

For Medicare, the Hospital Insurance (HI) Trust Fund pays for inpatient hospital and related care. The Supplementary Medical Insurance (SMI) Trust Fund comprises two separate accounts: Part B, which pays for physician and outpatient services, and Part D, which covers the prescription drug benefit. Part C is Medicare Advantage in which the Centers for Medicare and Medicaid subcontract HMOs to enroll Medicare Members and apply tested Managed Care controls to spiraling Medicare costs. Medicare Advantage Health Plans are heavily regulated insurance companies and both the Federal and State levels.

  1. 2.       Medicare and Social Security Account for 36% of the Federal Budget

Together, Medicare and Social Security account for 36% of the Total Federal Budget. They are the two largest federal budgetary programs, with Medicare being the largest line item in the Federal Budget.  The Trust Funds to support these programs were established by Congress and signed by President Franklin D. Roosevelt on August 14, 1935, when the U.S. economy was in the depths of the Depression[8]. The funds are managed by the Treasury Department.  Treasury credits Social Security and Medicare taxes, premiums, and other income to the four separate funds[9].

One in seven Americans receives a Social Security and Medicare benefits. The program has grown dramatically over the decades. In 1940, just over 222,000 people received a total of $35 million in Social Security benefits. By 2009, that number had increased to almost 52 million recipients who collectively received $650 billion in benefits. More than 90% of all American workers are in jobs covered by Social Security[10].

Due to aging of the population, increasing longevity, and lower-birth-rate generations entering employment, both the Social Security Trust Fund and the Medicare Trust Fund are projected to experience per capita cost growth substantially in excess of GDP growth.[11] To cover these losses, the Government is currently redeeming Trust fund assets from the General Fund of the Treasury to provide the resources needed to offset the annual deficits.

The Trust Fund Ratio, which indicates the number of years of program cost that could be financed solely with current trust fund reserves, peaked in 2008, declined through 2011, and is expected to decline further in future years. “After 2020, Treasury will redeem trust fund assets in amounts that exceed interest earnings until exhaustion of trust fund reserves in 2033, three years earlier than projected last year. Thereafter, tax income would be sufficient to pay only about three-quarters (75%) of scheduled benefits through 2086.[12]

Beginning in 2021, net redemptions of Trust Fund assets with General Fund payments will be required until exhaustion of these assets in 2033. After OASDI Trust Fund exhaustion, continuing tax income would be sufficient to pay only 75 percent of scheduled benefits in 2033 and 73 percent starting in 2086[13].

When the programs are considered separately, the projected exhaustion dates are 2035 for the OASI Trust Fund and 2016 for the Disability Income (“DI”) Trust Fund.[14]  As one can see, in 2005, Trust expenditures for the Disability Fund exceeded income, exclusive of interest.

The same occurred for the Medicare Fund Hospital Insurance Fund (Part A) in 2008, the OASI Fund and the OASDI Funds in 2010.  With interest income, these last two funds will turn negative in 2023 and 2021 respectively, but both the Disability Fund and the Hospital Insurance Fund went into the red in 2009 and 2008, respectively, with projected exhaustion by 2016 and 2024.

  1. 3.       The Medicare Trust Fund

Medicare is the largest line item in the Federal Budget. When first introduced by the Johnson Administration in 1965 as one of the “Great Social Programs” of the 20th century, the administration claimed that their actuaries calculated the most Medicare could ever cost the Social Security System would be $12 billion per year. Total Medicare expenditures in from the Medicare Security Trust Fund in 2011 were $549.1 billion[15]. This year, Medicare is budgeted cost the Trust Fund over $600 billion for an estimated 52 million people.

The Centers for Medicare & Medicaid Services (CMS) runs the Medicare Program and monitors Medicaid programs offered by each state. It is a branch of the Federal Department of Health and Human Services (HHS).

Medicare is paid for through two Trust Fund accounts held by the U.S. Treasury: (1) the Hospital Insurance (HI) Trust Fund which pays for inpatient hospital care, skilled nursing facility care, home health care, and hospice care (Medicare Part A), and (2) the Supplementary Medical Insurance (SMI) Trust Fund which pays for premiums from people enrolled in Medicare Part B (Medical Insurance) and Medicare prescription drug coverage (Part D).[16]

For those health-care costs that original Medicare doesn’t cover (e.g., copayments, coinsurance and deductibles), private insurance companies sell supplemental policies called “Medigap” to help foot the bill. Most policies also cover necessary medical care needed during international travel, and must pay even if the policy holder becomes very ill or have a pre-existing condition.

The Medicare Security Trust Fund is paid for by payroll taxes by most employees, employers, and people who are self-employed. Other sources, like income taxes paid on Social Security benefits, interest earned on the Trust Fund Investments, and Medicare Part A premiums from people who aren’t eligible for premium-free Part A.  In 2013, Self-employed persons pay a total of 15.3%. This consists of 12.4% for OASDI and 2.9% for Medicare. Beginning in 2013, certain high-income taxpayers will be required to pay an additional Medicare tax.[17]

  1. 4.       Medicare is the Single Largest Healthcare Payer in the Nation

Medicare is the largest single payer in the U.S. Healthcare system and rising. At a projected $524 Billion for 2014, Medicare spending in total would increase about $20 billion from the 2013 expected expenditure[18].

Figure 3. Projected 2014 Federal Medicare Budget, Up $20 Billion from 2013.

 

 

Ever since the introduction of the Medicare program in 1965, the rate of health care inflation has been 2x-3x higher than the Consumer Price Index for all other goods and services (see Figure 4). With 10,000 new Medicare Eligible Beneficiaries entering the system daily, and an absence of significant consumer involvement in negotiating healthcare service prices for services, costs are projected to continue to rise.

Figure 4. Historical U.S. National Health Expenditures vs. the U.S. Consumer Price Index. Since the introduction of Medicare and Medicare in 1965 and 1966, National Health Expenditures (NHE) have been 2x-3x higher than the Consumer Price Index (CPI) for all U.S. goods and services.

 

Under the current trend, the Government Accountability Office estimates the 75-year funding gap will be a staggering $76.4 trillion. According to a 2011 Report form the Trustees of the Social Security Fund, the Medicare Security Trust Fund could be bankrupt as soon as 2016. In addition, Congress estimates Medicare fraud and abuse is costing the system nearly $100 billion a year[19].

Some analysts estimate that U.S. citizens receive health care that costs three times what citizens paid into it. That’s unsustainable in the long run, as the projected 75 year gap signifies. The only way out is to cut benefits or up the individual ante, neither of these options have much long term political support[20].

In 1966, Medicare was less than 1% of the Federal Budget and National Defense was 43%. As of 2006, they were almost equal (see Figure 5) at 19% for Medicare and 20% for National Defense. Social Security is 21% and all other spending is 32%. In 2013, Medicare Spending now exceeds National Defense spending.

Figure 5. Historical Composition of Federal Spending 1966, 1986, and 2006

 

Source: Figures 5 through 8 were presented By the Honorable David Walker, Comptroller General of the United States, December 5, 2007 at the National Conference on Healthcare Consumerism, Washington, DC

  1. 5.       Medicare, Medicaid and National Debt Interest will Exceed the U.S. Tax Revenues

Medicare and Medicaid spending is now projected to rise in 2015 through 2040 to the largest component of the GDP, in line with the Interest on the National Debt. Figure 6 (below) shows that together, Medicare, Medicaid and the Interest on the National Debt will exceed the entire revenue base of the United States in 25 years. Adding Social Security and all other spending will top tax revenue generation in the next few years.

While then 2014 Federal Budget projects increased Medicare enrollment, it simultaneous assumes a $5.6 billion reduction in Medicare payments for 2014. Meanwhile, Medicaid spending would increase by $37 billion, to $303 billion[21]. The assumption is that Medicare Part D negotiations with Pharmaceutical companies and savings expected to be produced by Accountable Care will allow for this reduction.

As will be discussed in the following Section B (Background) of this Concept Paper, these savings on Part D were recently announced by CMS, leading to an announced reduction in 2014 “out-of-pocket” costs for Medicare Beneficiaries. The proposed Budget, as a whole, assumes a projected $393 billion in Medicare and Medicaid spending over the next decade. $120 billion of that would come through letting Medicaid-Medicare dual eligible enrollees buy prescription drugs at Medicaid rates, which are lower than Medicare.

Figure 6. Projected Medicare/Medicaid Federal Spending Compared to National Tax Revenues.  By 2015, the Tax Revenue Base of the U.S. will be exceeded. By 2040, Medicare Costs and the Interest on the National Debt alone, is projected to exceed the U.S. Tax Revenue Base.

 

Source: presented By the Honorable David Walker, Comptroller General of the United States, December 5, 2007 at the National Conference on Healthcare Consumerism, Washington, DC

  1. 6.       In 25 years, Medicare, Medicaid and Social Security Spending will Outpace GDP Growth

As depicted in Figure 6 (below), at the current rate of growth, projected Federal entitlement programs (Medicare, Medicaid and Social Security) are currently expected to exceed 10% of the GDP by 2020; 15% by 2030, and nearly 20% by 2080.  At this rate, over the next 25 years, spending for these programs will significantly outpace the growth in the Gross Domestic Product (71%) (Figure 7). Medicare given the 10,000 new Medicare Eligible Members per day and greater longevity, Medicare costs will grow the fastest (235%).

According to the 2012 Trust Fund Report, “the long-run actuarial deficits of the Social Security and Medicare programs worsened in 2012, though in each case for different reasons. The actuarial deficit in Social Security increased largely because of the incorporation of updated economic data and assumptions. The actuarial deficit in the Medicare Hospital Insurance program increased primarily because the Trustees incorporated recommendations of the 2010 – 2011 Medicare Technical Panel that long-run health cost growth rate assumptions be somewhat increased.[22]

Figure 7. At the Current Rate of Growth Projected Federal Entitlement Programs will exceed 10% of the GDP by 2020, 15% by 2030 and nearly 20% by 2080.

 

Figure 8. Over the next 25 years, the GDP is expected to grow 71%, while Social Security costs will increase 127%, Medicaid by 224% and Medicare by 235%.

 

 

In addition, in 2011 a temporary reduction in the Social Security payroll tax rate reduced payroll tax revenues by $103 billion and by a projected $112 billion in 2012. This affected to projections significantly.  To correct this, the legislation establishing the payroll tax reduction also provided for transfers of revenues from the General Fund to the Trust Funds in order to “replicate to the extent possible” payments that would have occurred if the payroll tax reduction had not been enacted. Those general fund reimbursements comprise about 15 percent of the program’s non-interest income in 2011 and 2012[23].

  1. 7.       U.S. Healthcare Costs 2x as Much as other First World Countries

On average, Americans pay at least twice as much for their health care costs than other first world countries. But the U.S. cannot demonstrate twice the benefit as measured by morbidity, mortality, fetal death, longevity rates or other metrics for the money. The following is a slide from The Commonwealth Fund, an organization with a significant portion of its fundraising (nearly $100 million) resulting from the efforts of former President Bill Clinton. It demonstrates this phenomenon.

Figure 9. Study by the Commonwealth Fund on Costs of Health Care by Country

 

On certain surgical services, the U. S. Healthcare System is typically eight (8x) to ten (10x) times more expensive than other 1st World countries while providing what may be considered at best an equal, if not lesser quality of care and access (See Figure 10, below). Despite U.S. Medicine’s high opinion of quality of care delivered, the World Health Organization has ranked the U.S. system 36th in the world behind such countries as France (Ranked #1) and Singapore (Ranked #6) on cost vs. access and quality metrics.

Figure 10. The cost of the U.S. Healthcare system is exorbitant compared to other First World Countries. The U.S. represents 5% of the world’s population, but 50% of the world’s healthcare dollar.

 

This additional cost of the system must be added to the cost of production of all U.S. goods and services for export leading to less competitive pricing and a significant U.S. trade imbalance.  Other than some medical devices and pharmaceuticals, most of the goods and services produced by the U.S. Healthcare system cannot be exported to other countries to offset our trade imbalance.  Therefore, it becomes an operating cost of production for U.S. goods and services.

While other first world countries are able to keep their healthcare cost of production to 3% -8% of GDP, the U.S. Healthcare System’s predominant 3rd party payor funding mechanism by insurance companies and Federal and State governments has created this ever increasing cost spiral.  The U.S. currently borrows Trillions of dollars from trading partners like China to try to remain solvent.  This is largely due to the overly burdensome cost of the U.S. Healthcare System.

Much of this crisis is due to the government entitlement programs of Medicare and Medicaid which, over the past nearly 50 years, have funded the development of a huge, overly-bloated cost structure in desperate need of massive overhaul, new technologies, efficiencies, consolidation and economies of scale.  As an operating cost of production to the U.S. economy, this is clearly an unsustainable model going forward.

To attempt to change this potentially devastating economic situation for the U.S., in the past 5 years, Congress has enacted the following three critical pieces of legislation:

(1) “Medicare Improvements for Patients and Providers Act (MIPPA)” of 2008;

(2) “Health Information Technology for Economic and Clinical Health (HITECH) Act” of 2009, and;

(3) “The Patient Protection and Affordable Act (PPACA)”of 2010, affectionately dubbed “ObamaCare.”

This combined legislation is designed to “bend the [inflationary] health care cost curve” depicted in Figure 7. If successful, it is projected to help save the Medicare Security Trust Fund from fiscal exhaustion. But can the implementation of this new legislation leading to “Accountable Care” actually change or slow this seemingly inevitable cost spiral.  And “if so, how?”  This doctoral thesis is designed to answer this problem and sub-problem.

  1. 8.       The Anticipated Effect of the PPACA Legislation (“ObamaCare”)

This legislation, including the “Individual Mandate,” aims to provide higher levels of care at rates that eventually close the gap with world market values. The “Individual Mandate” is designed to increase the pool of healthier, lower financial risk individuals from the pool of 50 million uninsured U.S. residents to offset some of the risk of the less healthy insured population.

The Supreme Court recently upheld this challenge in order to force employers with more than 50 employees to purchase healthcare insurance for all employees either through commercial insurers or through Health Insurance Exchanges (“HIX’s”). The new 2014 HHS Budget proposes $1.5 billion for HIX implementations[24]. These reforms strive to align incentives for care delivery and financing toward a more collaborative, coordinated, and preventive model that rewards high quality and appropriate stewardship of healthcare resources.

Continuing the trend depicted in Figures 5 through 7, since 2004, the average annual growth in total U.S. GDP averaged 3.8%, while the annual growth in total Medicare spending has averaged 7.4 % (nearly double), with a gap of 3.6 %.[25] Meanwhile, the growth in the U.S. population has only been about 1% per year.

Yet, within that 1% total growth rate, the Medicare beneficiary component has been growing at about 2.5% a year.[26] As the “Baby Boomers” turn age 65, 10,000 new Medicare eligible beneficiaries are now adding to the cost of the system daily. This has a tremendous impact on the U.S. Economy, since younger workers are responsible for earning wages to pay into the Social Security Trust Fund to pay for the cost of older retirees.

In this study just published by the Kaiser Family Foundation see Figure 11 (below), an analysis of these trends demonstrates that as a result of this combined legislation, passage of the Medicare Part D legislation and negotiations on with the pharmaceutical industry by the Obama Administration and the Centers for Medicare and Medicaid (“CMS”), the first significant reduction in this cost spiral occurred in 2010.

Based on the rates, there has been a dramatic change in the growth in Medicare Spending per Beneficiary vs. growth in the U.S. GDP per capita from 8.7% to -1.6%, a 10.3% decline (see Figure 11)[27].  This article attributes this dramatic change to the effect of the implementation of Medicare Part D to control Pharmaceutical Costs through negotiated rates by the Federal Government.

The combined Legislation is designed to target this increase by shifting control of the Medicare cost away from the hospitals and specialists and back to the primary care physicians.  This is being done by offering to share the savings primary care physicians can generate through the formation of Accountable Care Organizations (“ACOs”).

These Medicare Shared Savings Programs partner providers with the Federal Government.  As one can see from the Kaiser predictions Figure 11 (below), the effect of the first set of approved ACOs is projected to occur in 2013 at -3.5% per capita Medicare growth rate. This peaks in 2015 at -3.8% per capita Medicare growth rate when these first three year ACO contracts expire.  The objective is to compare this to the per capital growth rate of the GDP to account for a changing baseline of 10,000 new Medicare beneficiaries/day.

Figure 11.  The Projected Difference between Growth in Medicare Spending per capita and Growth in GDP per Capita

Year Difference
2008

4.9%

2009

8.7%

2010

-1.6%

2011

-1.1%

2012

-0.6%

2013

-3.5%

2014

-2.1%

2015

-3.8%

2016

-1.0%

2017

-1.6%

2018

-0.5%

2019

0.0%

2020

-0.3%

2021

1.4%

2022

1.1%

2023

1.3%

Source: White, C. (2013).“Medicare Spending Limits: Issues and Implications,” The Kaiser Family Foundation (March). As found at: https://snt143.mail.live.com/default.aspx?id=64855&rru=inbox#n=116480129&rru=inbox&fid=1&fav=1&mid=e5460902-9687-11e2-9878-001e0bcc060c&fv=1

As depicted in Figure 12 (below), the major change for this first wave of cost growth reductions has been due to a reduction in the per capita growth rate of the cost of Pharmaceuticals over the past 10 years compared to the cost of hospitalization and physician services and the Consumer Price Index.  However, while this reduction may be producing the first wave of decreases in cost growth vs. GDP, please note that in Figure 12, as the cost of hospitalization and physician services has risen, the U.S. CPI has experienced a corresponding rise as well.  This is because at one-fifth (20%) of the GDP, when these hospital and physician costs rise, so consequently does the Consumer Price Index, with little to offset this “pull” effect.

Figure 12. Over the past 10 years, the Average Annual Growth rate of Prescription Drugs has decreased substantially while the cost of hospitalization and physician services has increased, pulling up the Consumer Price Index since 2002.

 

  1. 9.       The Patient Protection and Affordable Care Act (2010) and Accountable Care Organizations

The Patient Protection and Affordable Care Act (2010) is designed to change the cost of healthcare delivery in the United States through a “Three Part Aim”:

  • Improve the healthcare experience for patients
  • Improve population health
  • Lower per capita costs

 

The Affordable Care Act provides significant latitude for providers to create innovative ways to achieve these objectives representing a much-needed departure from the insurer-driven status quo to a provider-driven model of quality improvement and lower costs by leveraging technology and communications to improve efficiencies.

The question of course is: “Will the PPACA work well enough to avoid fiscal exhaustion of the Medicare Security Trust Fund, increasing available funds for Social Security, and reducing the continued trade imbalance and rampant deficit spending?” This proposed doctoral research project will be designed to examine the financial and economic forces at work in the U. S. Healthcare system as the PPACA is implemented to determine if it will work, or if a ”single-payer” system (e.g., government run healthcare as in other first world countries and “socialized” medical systems) is the only alternative.

Provisions in the Act are such that a failure of this new Accountable Care financing mechanism to slow the spiraling inflationary trends of U.S. Healthcare by 2019 triggers the formation of a 15 member “Super Committee” known as the Independent Payment Advisory Board (IPAB).  The IPAB will consist of expert members appointed by the President and confirmed by the Senate[28]. According to the Act, if Medicare spending per capita beneficiary grows faster than a specified target, then IPAB is will develop recommendations to achieve a “applicable percentage” specified reduction in Medicare spending.  These recommendations take effect automatically unless blocked by Congress.

 

The IPAB panel is designed to be insulated from political pressure, like the process for closing excess military bases. It is viewed as a potential “backstop” if the projected savings from the PPACA payment reform do not materialize which may then lead to the bankruptcy of the Medicare Security Trust Funds and perhaps the Social Security Trust Fund.[29]

 

This research will be directed at identifying the key problems and sub-problems posed by this ever increasing and impending economic crisis. Once identified, each problem and its potential impact and suggested solution may be posed based on suggestions by financial experts in the literature.  Much of this will focus on the economic theories taught in the Finance Curriculum as well as current theories posed by Nobel Prize winning economics laureates and current healthcare financial experts.

Figure 13. National Health Care Spending is currently 17.6% of GDP, projected to go to 20% in 2 years.


B. Background

There are currently approximately 52 million Medicare Recipients in the United States costing the Federal Government about $600 billion, annually.  With 10,000 new “Baby Boomers” turning Medicare Eligible at age 65 every day, this financial burden is predicted to rise to 60 million Medicare Eligibles by 2019 (see Figure 14).

In addition, the Medicare is expected to be partially responsible for 63 million Medicaid recipients, including dual eligible and SCHIPs (children) recipients, as well as an addition 15 million people under Military Department of Deference (“DOD”) and the Federal Employee Health Benefit Programs (“FEHBP”). This totals nearly 138 million people (of a total estimated population of approximately 375 million in the nation (or 37%). An additional 57 million people will be uninsured seeking care from government sponsored “Safety Net” hospitals and providers totaling 195 million people (52%), or more than half the country.

Considering that when President Johnson first proposed the “Great Social Programs of 1965 (Medicare) and 1966 (Medicaid),” Congress was led to believe that these programs were unlikely to cost the Federal Government more than $12 Billion per year. We now surpass that by near 50 fold, and growing daily.

Figure 14. 2019 US Healthcare Market by product and group size without Healthcare Reform Law.

(Source: Holland & Knight, LLP)

 

Under the PPACA reform law, beginning in 2014, approximately 23 million people are expected to move into Managed Medicaid programs.  This is expected to result from a combination of approximately 18 million uninsured individuals being forced to access insurance government financing through Managed Medicaid plans, another 16 Million through Health Insurance Exchanges (being formed right now by major insurance companies throughout the United States) and 2 million people accessing financing through by moving from employer based small group plans directly into Managed Medicaid plans.

Another 16 million people are expected to move from “Small Group” and “Large Group” insurance plans to lower cost Health Insurance Exchanges and to new, lower cost, government funded Cooperative Insurance Companies (“CO-Ops”) beginning in 2013-2014. 24 States have each received between $60 million and $150 million or more to establish these Cooperative Insurance companies designed to compete directly with public and privately funded insurers by offering state level, lower cost, government subsidized health plans.

These expected financing movements are depicted in the diagram below (see Figure 15).

Figure 15. Projected 2019 U.S. Healthcare Market by product and group size with Healthcare Reform Law. Depicts movement of 23 million uninsured into Managed Medicaid Programs and Exchanges.

 

(Source: Holland & Knight, LLP).

 

  1. 1.       Medicare  

Medicare’s clinical and payment rules essentially dominate the healthcare landscape as most other commercial and some Medicaid programs tie their fee schedules to a percentage of Medicare, or mimic Medicare’s requirements. Due to the baby boomer explosion, this is also the fastest growing healthcare market segment in the country.

Approximately 23% of the existing Medicare market is managed by HMOs through a risk program called Medicare Advantage (MA) [Medicare Part C].  There are nearly 11 million Medicare Advantage enrollees in roughly 200 Medicare Advantage HMOs.  The annual growth rate in the Medicare Advantage market has been slowing due to benefit cuts and co-payment increases.

This leaves 77% of the Medicare in an unmanaged, Fee-For-Service Environment.  In an unmanaged system, Medicare pays doctors and hospitals and other providers based on volume of services at prices for services that are dictated by rate schedules adjusted for complexity and geographic location. Through the PPACA, the Federal Government hopes to “attribute” the majority of these unmanaged Medicare members into an Accountable Care Organization hoping to slow the growing cost to the Medicare Security Trust Fund.

  1. 2.       Medicaid Expansion

The Medicaid program provides health care services to approximately 62.9 million Americans. 20% of all U.S. citizens have enrolled in Medicaid for at least one month. It is jointly funded by individual states and the Federal Government through Social Security. At the Federal Level, Medicaid, like Medicare, is administered by CMS. The Federal Government pays on average 57% of Medicaid expenses. Medicaid payments currently provide financial assistance for nearly 60 percent of all nursing home residents and about 37 percent of all childbirths in the United States. [30]

While each state operates its own Medicaid system, each must conform to Federal Guidelines in order to receive matching funds and grants. The wealthiest states only receive a Federal match of 50% while poorer states receive a larger match. Payment rates vary by state, depending on per capita state income[31]. The matching rate is determined using a Federal matching formula (the “Federal Medical Assistance Percentages”). On average, state General Tax Funds with Federal matching comprises an average of 22% of each state’s budget[32]. In 2008, Federal Medicaid outlays were estimated to be $204 billion[33].

In 2010, the Patient Protection and Affordable Care Act expanded Medicaid eligibility starting in 2014. This will expand Medicaid to cover approximately 25 million new people with incomes up to 133% of the poverty line qualify for coverage, including adults without dependent children[34]. However, the United States Supreme Court ruled in National Federation of Independent Business v. Sebelius that states do not have to agree to this expansion in order to continue to receive Medicaid funding.

As of 2013, several states have declared that they will not expand eligibility[35]. This expansion will stimulate the growth of FQHCs and Community Health Centers which are the backbone provider services for this population.  Many types of payment schemes and entities that are similar to ACOs will emanate from the Medicaid expansion. Since some people are eligible for both Medicaid and Medicare based on income level known as Medicare “Dual Eligibles”. In 2001, about 6.5 million Americans were enrolled in both Medicare and Medicaid. ACO’s may apply to both.

A proliferation of new health plans and provider organizations focused on serving Medicaid populations will be formed over the next several years.  Many states, including Florida, have already approved Provider Sponsored Networks (PSNs) to manage their Medicaid patients.  Other types of government sponsored programs are also providing incentives for providers to manage these patients.

Driven by the Medicare ACO legal and electronic infrastructure being set up now as a result of the PPACA,  a rapid expansion of MSOs, IPAs, Physician Hospital Organizations (PHOs), to mimic ACOs, will experience dramatic transformation over next 5 years as these new government programs are implemented.

  1. 3.       CO-OPs, Provider Sponsored Networks, Federally Qualified Health Centers

As of December 31, 2012, the Centers for Medicare and Medicaid Services (CMS) has funded the start-up of approximately 24 Consumer Oriented and Operated Plans (CO-OPs). New Provider Sponsored Networks (PSNs) and FQHC’s Community Health Centers are also being funded to better manage Medicaid patients and coordinate care. This is in addition to individual state Medicaid Expansion projects.  These are new, non-profit insurance companies established to sell individual coverage through the Health Insurance Exchanges.

Approximately 32 million uninsured individuals are expected to receive mandated health insurance through these Exchanges.  Potential half of all newly insured individuals are expected to be insured by CO-OPs in the states in which they will operate.  These CO-OPs are designed to underprice for profit insurers.

  1. 4.       Accountable Care Organizations

Since the Supreme Court upheld the Individual Mandate and the ACO portion of the PPACA, it is estimated that 10% (4.9 million) of Medicare Eligible Beneficiaries will be enrolled in Medicare ACOs at year end 2013. Considering that it has taken nearly 15 years and billions of dollars in HMO marketing and retention costs to get 23% of the eligible population enrolled in Medicare Advantage plans, this is an astounding change in the financing of the U.S. health care system in less than 2 years.

This dramatic change is largely due to the fact that CMS is simply assigning (“attributing”) non-Medicare Advantage plan Medicare eligible beneficiaries to ACOs through applications by independent primary care physicians groups and hospital-based providers.  Medicare patients are assigned to be part of their ACOs based on “plurality of services” by CMS.  If this continues, virtually the entire 60 million eligible Medicare Beneficiaries population could be accessing care through a Medicare Advantage Plan, an ACO or a Medicaid ACO/Managed Care plan for “Dual Eligibles” in the next few years.

Approximately 36 million seniors are now eligible to be placed into new, non-HMO, provider sponsored Accountable Care entities that will attempt to manage this populations care.  In the first 13 months of this program, 259 Medicare Shared Savings Program ACOs have been approved and contracted by CMS.  By 2014,  former Secretary of Health and Human Services, Governor Michael Leavitt recently stated that he expects near 750 ACOs to  be operational as individual legal entities providing care to nearly 10 million people.  He is currently working on a new report outlining these assumptions.

This legislation is causing the financial re-organization of more than half the total payments of health care services in the U.S., including Medicare, Medicaid, and Commercial lines of business.  Several new types of entities are being introduced that will require major investments and implementations by hospitals and providers in new services and/or substantial modifications of existing products and services to meet these changing financial structure.

  1. 5.       The HITECH ACT of 2009

While the largest impact on the growth in Healthcare Expenditures as a percentage of GDP will come from Accountable Care Organizations (ACOs) and hospitals and providers, this movement is being facilitated by the “Meaningful Use” requirements of the corresponding HITECH Act of 2009 (the “Health Information Technology for Economic and Clinical Health Act”).

This legislation provides $22 Billion of the $787 Billion of the American Recovery and Reinvestment Act of 2009 for its implementation. $19.2 Billion of these funds are intended to increase the use of Electronic Medical Records (EMR) by providers.

The Federal Government firmly believes in the benefits of using electronic health records in order to reduce cost in the U. S. Healthcare system and improve quality of care.  It falls under Title XIII in Division A, pages 112 through 165 and Title IV in Division B, pages 353 through 398, cover the HITECH Act portion of this Economic Recovery Act. The requirements and financial incentives to hospitals and providers to leverage new electronic medical record technologies are the key to meeting the goals of the “Triple Aim.”

Under this Federal EMR Incentive program, Medicare providers who attest to the “Meaningful Use” of an Electronic Medical Record system under the HITECH Act are offered $44,000 in total reimbursement over 5 years consecutive years upon annual attestation of the meaningful use of the system (Table 2).

Medicaid providers who have at least 30% of their practice dedicated to Medicaid patients are entitled to $63,750 over 6 years (Table 3). This does not have to be in consecutive years. The difference between the two is that while Medicare providers must attest at the end of each year to the Meaningful Use of the EMR, eligible Medicaid providers can receive the initial $21,250 payment within the first (six weeks) of the initial installation with $8,500 per year thereafter until the $63,750 is attained over 6 years.


 

Table 2. Medicare EMR Payment Schedule

Year of Adoption HITECH Incentive Payout over time
2011 $18,000
2012 $12,000 $18,000
2013 $8,000 $12,000 $15,000
2014 $4,000 $8,000 $12,000 $15,000
2015 $2,000 $4,000 $8,000 $8,000
2016 $2,000 $4,000 $8,000
Total $44,000 $44,000 $39,000 $35,000

 

Medicare Eligible professionals include:

  • Doctor of medicine or osteopathy
  • Doctor of dental surgery or dental medicine
  • Doctor of podiatry
  • Doctor of optometry
  • Chiropractor

 

Through March of 2013, over $12.7 billion in Medicare and Medicaid electronic health record payments have already been made to total of 180,200 physicians under this program since its inception. This includes 106,000 Medicare and over 70,000 Medicaid physicians.


 

Table 3- Medicaid EMR Payment Schedule

 

Medicaid Eligible Providers must meet one of the following criteria:

  • Have a minimum 30% Medicaid patient volume*
  • Have a minimum 20% Medicaid patient volume, and is a pediatrician*
  • Practice predominantly in a Federally Qualified Health Center or Rural Health Center and have a minimum 30% patient volume attributable to needy individuals

* Children’s Health Insurance Program (CHIP) patients do not count toward the Medicaid patient volume criteria.

 

Medicaid Eligible professionals include:

  • Physicians (primarily doctors of medicine and doctors of osteopathy)
  • Nurse practitioner
  • Certified nurse-midwife
  • Dentist
  • Physician assistant who furnishes services in a Federally Qualified Health Center or Rural Health Clinic that is led by a physician assistant.

 


 

Table 4. The differences in the Medicare EMR and Medicaid EMR programs are:

Medicare EHR Incentive Program Medicaid EHR Incentive Program
Run by CMS Run by the State Medicaid Agency
Maximum incentive amount is $44,000 Maximum incentive amount is $63,750
Payments over 5 consecutive years Payments over 6 years, does not have to be consecutive
Payment adjustments will begin in 2015 for providers who are eligible but decide not to participate No Medicaid payment adjustments
Providers must demonstrate meaningful use every year to receive incentive payments. In the first year providers can receive an incentive payment for adopting, implementing, or upgrading EHR technology. Providers must demonstrate meaningful use in the remaining years to receive incentive payments.

 

These payments are based on individual provider Tax ID numbers.  Alternatively, a State may submit to CMS for review and approval through the SMHP a separate option so long as it meets the following requirements:

  1. It is submitted consistent with all rules governing the SMHP at § 495.332 of the final rule.
  2. Has an auditable data source.
  3. Has received input from the relevant stakeholder group.
  4. It does not result, in the aggregate, in fewer providers becoming eligible than the methodologies outlined above.

 

For this alternative approach, the Eligible Provider, Eligible Hospital, or Critical Access Hospital must use its CEHRT to create a summary care record for transitions of care and referrals, but instead of using a transport standard specified in ONC’s certification criterion at 45 CFR 170.314(b)(2) (included as part of its CEHRT) to electronically transmit the summary care record, Eligible Provider, Eligible Hospital, or Critical Access Hospital may use a NwHIN Exchange participant to facilitate the electronic transmission to the recipient. The NwHIN Exchange is now known as “eHealth Exchange.”

Medicare physicians and 20% of all Medicaid physicians have signed up from the program.

If the hospital aggregates these physicians under the EMR Incentive Program and submits the attestations, it can assume 5% of these payments as its fee. For employed providers, the hospital can assume the entire incentive compensation.

 

  1. a.       Meaningful Use for Hospitals (HIMSS’ Stages 0-7)

Hospital-based eligible professionals are not eligible for incentive payments. An eligible professional is considered hospital-based if 90% or more of his or her services are performed in a hospital inpatient (Place of Service Code 21) or emergency room (Place of Service Code 23) setting.  Instead, hospitals can be granted up to $2 million each when they implement an EMR system.

This $2 million is nowhere close to the hundreds of millions of dollars most hospital systems are spending on acquiring licenses and installing EMR systems.  For example, Catholic Health Partners, a 29 hospital system based in Ohio, recently licensed the Epic EMR System for $550 million.  Johns Hopkins paid Epic a reported $600 million and Duke paid Epic $750 million for their system.

While Epic alone has sold nearly 800 similar hospital system licenses, Cerner Corporation is even larger and according to their annual report, has over 2,600 hospitals worldwide using their system. Florida Hospital/Adventist Health pays Cerner over $100 million per year for access to their system for 43 hospitals.

The Health Information Management Society has developed an 8 Stage EMR scale to track EMR progress at hospitals and health system toward creating a paperless patient record environment. Hospital executives utilize this to compare progress regarding similar facilities (by bed size, patient days, etc.) as well as compare their score to their state’s average score. A Florida Hospital facility was the first to convert from Stage 0 to Stage 7 in 9 months.  They just completed a second hospital conversion. HCO able to contribute

Table 5. HIMSS’ Electronic Medical Record Administrative Module 8 Stage Schedule

 

Stages

Cumulative Capabilities

Stage 7

Medical record fully electronic; HCO able to contribute CCD as a byproduct of EMR; Data warehousing in use.

Stage 6

Physician documentation (structured templates), full CDSS (variance & compliance), full R-PACS

Stage 5

Closed loop medication administration

Stage 4

CPOE, CDSS (clinical protocols)

Stage 3

Clinical documentation (flow sheets), CDSS (error checking), PACS available outside Radiology

Stage 2

Clinical Data Repository, Controlled Medical Vocabulary, Clinical Data Support System, may have Document Imaging

Stage 1

Ancillaries – Lab, Rad, Pharmacy – All Installed

Stage 0

Ancillaries – Lab, Rad, Pharmacy – Not Installed Three Ancillaries Not Installed

Source: www.himssanalytics.org.

 

Electronic Medical Record Adoption

 

HIMSS’ believes that this EMR Adoption Model Structure ensures objectivity and forms a national standard for all hospitals to achieve while moving toward interoperability, data sharing, care coordination and improved quality of care for patients. This will ultimately lead to reduce system wise costs.

 

 

In this HIMSS Model:

 

1. All application capabilities within each stage must be operational before that stage can be achieved.

 

2. All lower stages must have been achieved before a higher level is considered as achieved.

 

3. A hospital can achieve Stages 3-6 if it has met all of the application requirements for a single patient care service (e.g. single nursing floor, cardiology service).

 

4. Using the rules above, additional points are given for the implementation of applications in stages higher than the one fully achieved by the healthcare organization. In this fashion, other implementation paths than those prescribed by the stages can be taken into consideration for correlation with quality and financial research. A more detailed description of each stage requirements is below (Table 6).

 

Table 6.  Detailed Stages of HIMSS Model EMR Adoption

 

Stages

Cumulative Capabilities

Stage 7

The hospital has a paperless EMR environment. Clinical information can be readily shared via Continuity of Care (CCD) electronic transactions with all entities within health information exchange networks (i.e., other hospitals, ambulatory clinics, sub-acute environments, employers, payers and patients). This stage allows the health care organization to support the true sharing and use of health and wellness information by consumers and providers alike. Also at this stage, HCOs use data warehousing and mining technologies to capture and analyze care data, and improve care protocols via decision support.

Stage 6

• Full physician documentation/charting (structured templates) are implemented for at least one patient care service area.

• A full complement of radiology PACS systems is implemented (i.e. all images, both digital and film-based, are available to physicians via an intranet or other secure network.)

Stage 5

The closed loop medication administration environment is fully implemented in at least one patient care service area. The eMAR and bar coding or other auto-identification technology, such as radio frequency identification (RFID), are implemented and integrated with CPOE and pharmacy to maximize point-of-care patient safety processes for medication administration.

Stage 4

• Computerized practitioner/physician order entry (CPOE) for use by any clinician added to nursing and CDR environment.

 

• Second-level of clinical decision support related to evidence-based medicine protocols implemented.

• If one patient service area has implemented CPOE and completed previous stages, this stage has been achieved.

Stage 3

• Clinical documentation installed (e.g. vital signs, flow sheets, nursing notes, care plan charting, and/or the electronic medication administration record (eMAR) system are scored with extra points and are implemented and integrated with the CDR for at least one service in the hospital.)

 

• First level of clinician decision support is implemented to conduct error checking with order entry (i.e. drug/drug, drug/food, drug/lab, conflict checking normally found in the pharmacy).

• Some level of medical image access from picture archive and communication systems (PACS) is available for access by physicians via the organization’s intranet or other secure networks.

 

 

Stage 2

• Major ancillary clinical systems feed data to clinical data repository (CDR) that provides physician access for retrieving and reviewing results.

 

• CDR contains a controlled medical vocabulary (CMV) and the clinical decision support system and rules engine for rudimentary conflict checking.

Optional for extra points – Information from document imaging systems may be linked to the CDR.

 

Stage 1

• Laboratory, pharmacy and radiology installed.

 

 

Stage 0

• Some clinical automation may exist.

 

• Laboratory and/or pharmacy and/or radiology not installed.

 

Go to www.himssanalytics.org for the country’s most recent EMR Adoption Model scores.

  1. b.      Health Insurance Exchanges (“HIE”) under “Meaningful Use” Reimbursements

Once an electronic medical record system is in place and being “Used Meaningfully,” patient care can then be coordinated in order to improve the quality of care delivered to each patient across physicians, hospitals and health systems not only locally, but regionally, statewide and nationally through the implementation of addition to the Health Information Exchanges (now termed “HIE’s).  These also fall under the HITECH Act’s Meaningful Use requirements.

These “interoperable” electronic interfaces are designed to gather the patient data and records from each electronic medical record system for every patient and allow coordination of care between and amongst treating providers.  Each state has been offered Federal funds to purchase and build these systems. Florida, for example, accepted $19 million in Federal funding which was awarded to Harris Corporation to build a statewide HIE.

Some states have chosen to accept these funds and meet federal Guidelines for these Exchanges.  Others have chosen to deny the funds and build on contract with Health IT companies to establish and meet their own standards.  Individual Health systems, such as Memorial Healthcare System in Fort Lauderdale has also purchased and built their own system known as the Atlantic Coast HIE for which they has connected most of their Epic based EMR system hospitals (7) and physicians to this exchange and as of this past month, have now connected this to the State’s Harris Corporation System.

In a Provider Service Network Project for the State of Florida for Medicaid Managed Care and Expansion submitted this past week for the public record, it has been proposed that the Jackson Health System/ University of Miami and Broward Health Systems from Dade and Broward Counties also be connected to the Atlantic Coast system through their Cerner, Allscripts, Sage and Meditech/Epic systems as well.

This is a very significant change in the way health systems will now collaborate to improve patient care and reduce overall cost by working together to break down existing competitive barriers and coordinate a patient’s care over several regional health systems and a multitude of providers involved in a patients care. This will specifically help to reduce duplicate testing, unnecessary and costly medical imaging, and avoiding drug-drug interactions from multiple physicians as well as “doctor shopping” for prescription drugs which may also be sold on the street leading to avoidable emergency room visits and hospital admissions.

To promote the use of Electronic Health Information Exchanges, the Federal Government also makes funding available through other CMS HITECH Act Funds Allocation programs including:

  • $2 billion to the Office of the National Coordinator for infrastructure necessary to allow for, and promote, the electronic exchange and use of health information for each individual in the United States; updating the Department of Health & Human Services’ technologies to allow for the electronic flow of information; integrating health IT education into the training of healthcare professionals; and, promoting interoperable clinical data repositories.
  • $1 billion to be made available for renovation and repair of health centers and for the acquisition of health IT systems.
  • $550 million for – among other things – the purchase of equipment and services including, but not limited to, health IT within Indian Health Service facilities.
  • $400 million for comparative effectiveness research on how use of electronic data impacts healthcare treatments and strategies.
  • $300 million to support regional and sub-national efforts towards health information exchange.
  • $40 million to be used by the Social Security Administration to use EHRs to submit disability claims.
  1. c.       Point of Order Clinical Decision Support, Image Sharing and Meaningful Use Requirements

Under the authority of the HITECH Act of 2009, Meaningful Use Stage 2 now requires that 60% of all pharmacy orders, 30% of all laboratory orders, and 30% of all radiology orders be placed through the CPOE of the EMR to maintain compliance. Stage 3, as proposed, is expected to require higher targets.

This gives hospitals, ACOs, PSNs, MSOs, IPAs and insurers the opportunity to implement several new technologies to support physician decision making at the Point-of-Order through the EMR and HIE as well as check for potential drug-drug interactions discussed above. This can be of significant clinical and financial benefit if the patient is seeking care from multiple providers.

With 60% of pharmacy orders required to be ordered through the CPOE, by linking a centralized clinical data warehouse into an RxHub, drugs prescribed by different providers within the coverage areas, the State and ultimately can be coordinated. Potential drug-drug interactions can, therefore, be discovered by participating physician at the Point-of-Order to avoid poor clinical outcomes and reduce cost.

This electronic process, which can be coordinated through the HIE, can dramatically reduce unexpected consequences and medically unnecessary admissions, morbidities and mortalities within the population.  It also may reduce potential “Doctor Hopping” for drugs, as well as potential fraud and abuse within the system.

By linking laboratory data from the various sources within a service area connecting each hospital’s clinical laboratory databases with the larger clinical labs such as Quest and Labcorp, potentially dangerous and expensive conditions within the population can be discovered more easily and addressed immediately.

For example, (1) sharing of data on hemoglobin A1c levels for diabetics in the population, and (2) cholesterol, triglycerides and HDL/LDL ratios can be assessed. Preventive actions can be taken by the HIE connected provider to prevent or avoid costly and unnecessary myocardial infarctions and other consequences.  This will enable the providers to better manage the population than ever before.

In addition, new clinical decision support and image sharing technologies are now available which can be integrated into the EMR to identify medically unnecessary  overuse of advanced imaging technologies such as CT, MRI and nuclear medicine studies as well as repetitive studies. Studies show that nearly 30% of these high cost diagnostic studies are medically unnecessary based on the established American College of Radiology (“ACR”) and American College of Cardiology (“ACC”) Criteria. These systems provide evidenced-based guidance to ordering physicians through the EMR as promoted under the Meaningful Use guidelines.

With the addition of image sharing through the EMR, HIE and a Clinical Data Warehouse at the regional, state and Federal Levels, additional savings can be generated by leveraging these technologies and avoiding duplicate studies.  In many instances, the new EMR technologies can provide ordering physicians with these images directly to their PDA’s and Tablets, as well as their office-based computer systems.

Ultimately, image sharing technologies and Point-of-Order clinical decision support systems (already available) can automate pre-authorizations electronically through these new rule-based systems. Together, they can streamline the utilization management process by electronically approving or denying order sets at point-of-order, and/or with a Medical Director’s assistance, by providing the ordering physician electronic evidenced-based guidance on the best test for that patient based on the patient’s EMR record.  This can dramatically reduce the cost of telephonic utilization review which a recent study in Health Affairs estimated cost each provider approximately $68,300 per year to navigate.

  1. d.      HCAHPS and 30-day Readmissions

Finally, the new HCAHPS rules also required under the HITECH Act’s Meaningful Use requirements can now be electronically incorporated into the inpatient setting to significantly improve patient quality of care.  At the same time, implementation of these systems avoids costly government penalties for poor HCAHPS scores and 30-day hospital readmissions.

These new systems are now available for various hospital-based EMR systems. They provide patient education about their condition at the bedside through either the hospital entertainment system (TV) or the new touch-screen tabular platforms which are being released in 2013.

Since these systems are directly integrated into the EMR, the system provides educational content specific to that patient’s condition and/or procedure and recovery phase during the hospital stay.  Through a series of easy to answer questions regarding the quality of the patient experience, patient feedback is instantaneously sent via an electronic scoring system to the hospital administration and floor nurse supervisors.

Questions about bed and bathroom cleanliness, noise levels, attentiveness (similar to the post discharge HCAHPS surveys) can be interspersed with questions regarding the patient understanding of their specific condition. These new educational videos are available from the hospital through over 1,000 cashed and age-specific animated videos controlled by the hospital. Questions directly related to the patients discharge plan to avoid 30 day readmissions can be added and the patient’s understanding electronically graded.

This HCAHPS system enables the floor nurse, discharge staff and hospital administration to immediately record the patient’s understanding of their post-discharge instructions.  For those patients who do not seem to have a clear understanding of their post discharge protocols, a nurse advocate and/or social services employee of the hospital can be sent to the patient to go through the discharge plan carefully until the patient (and their family or outpatient caretaker) thoroughly understands what they need to do to avoid a high cost readmission (for which the hospital may not be reimbursed).

  1. 6.       Sustainable Growth rate (SGR) and ICD-10 Implementation

The Federal Budget deficit far exceeded $1 trillion each year from 2009 through 2012.  As a share of gross domestic product (GDP), deficits of this size have not occurred since World War II.  Medicare alone now comprises nearly $600 billion of this $1 trillion, far exceeding the cost of National Defense. Such large deficits will hobble economic growth and increase the likelihood of another fiscal crisis.[36]

 

In 1997, Congress anticipated this uncontrolled growth in deficit spending on Medicare and enacted the Sustainable Growth Rate (SGR) as part of the Balanced Budget Act (BBA) under President Clinton. The SGR is designed to automatically limit the growth in Medicare spending on physician services by comparing cumulative actual expenditures on physician services with a cumulative target (Congressional Research Service 2011). The target accounts for overall economic growth, increases in the number of beneficiaries, and any expansions of benefits[37].

 

While the SGR is designed to automatically control expenditures by reducing physician fees, with the rapid growth in spending on physician services and slow growth in the economy in the early 2000s, cumulative actual expenditures have exceeded the target every year since 2002.  The latest figure for 2012 was an expected 27% cut. Yet, physician led opposition by the American Medical Association and other powerful lobbying organizations have caused Congress to override these cuts before they could be implemented every year since 2002.

 

While politicians point to the fact that Medicare physician fees, even with the overrides, have not really grown since the SGR was established, Congress and the Centers for Medicare and Medicaid (CMS) have instead implemented a Mandatory change in Medicare Billing and coding from ICD-9 to ICD-10 which, while promoted as “Budget Neutral,” commercial studies indicate an approximate 4% -7% reduction in costs after its implementation on October 1, 2014.

 

While ICD-10 has been utilized as the standard hospital and physician coding system in Europe and other first world nations for nearly two decades, political pressure by the AMA and American Hospital Association had blocked its implementation.

 

This transition will have a significant impact on Medicare costs over time. With ICD-9 (International Classification of Diseases, version #9) has a total of nearly 16,000 codes and health care providers traditionally use to code and bill Medicare and commercial payors for their services, ICD-10 adds two decimal places for increased specificity. This results in approximately 157,000 total billing codes. The greater specificity allows CMS “unbundle” many codes, allowing for lower reimbursement for many diagnoses that have lower “intensity of service.”

 

Once the EMRs and HIEs are in place, the Federal Government will then be able to capture almost all patient billing data under Medicare, analyze where the greatest costs and “waste” is occurring in the system, and then slowly “ratchet down” provider payments by code much more effectively than through the SGR. This is all administered under the new Office of National Coordination of Health Information Technology. Since many commercial insurers tie their contractual reimbursement rates to the “Medicare Fee Schedule,” this change will also have a significant impact on HMO profitability for the non-Medicare population.

 

  1. 7.       National Bundled Payment Initiatives

 

Two other key Federal Initiatives beginning implemented under the Triple Aims of the Legislation are (1) Bundled Payments, and (2) Patient Centered Medical Home.  Both are designed to significantly reduce the overall per unit costs under Medicare. The Government has allocated significant funding for those provider groups who can develop a fee schedule around “bundled payments.” In this initiative, providers are being challenged to develop a “team approach” billing system such that the majority of provider fees associated with a specific patient condition be all bundled together such that each provider “police’s” the other.

 

Figure 16 (below), illustrates how this can work.  In this diagram, the surgical and operating room fees for this orthopedic case are bundled together with those of the Primary Care (PCP), Radiologist, Cardiologist and other providers.  In today’s current billing environment, all of these are separate bills submitted to Medicare. Physicians and hospitals maximize their income by submitting the maximum charges allowed for each.

 

For example, the Primary Care Physician may know from the patient’s history and physical exam that the patient has a “slipped disk” causing “sciatica” which can be referred to the orthopedic surgeon without further testing.  However, to maximize income and protect against malpractice, that Primary Care physician may instead order a series of tests and imaging studies where the PCP, Radiologist, Hospital/Imaging Center and other providers may all bill Medicare separately.  If these images are not immediately available via the EMR or HIE, the Orthopedic Surgeon may order more hi cost images prior to surgery for additional protection under malpractice.

 

With EMRs, HIEs, Image Sharing and other new technologies available (and often mandated) under the HITECH Act, much of this cost can be avoided.  When payments are all bundled together, the Orthopedic surgeon shares in the profits generated with the PCP, Radiologist, Cardiologist, and Operating Room facility if the same service can be provided more cost effectively under one bundled payment.

 

Figure 16. Bundled Payment Example

[Courtesy of David Nace, MD, Medical Director, McKesson Corporation ass presented at the American Association of Health Insurance Plans, San Francisco, 2011

 

CMS recently announced approximately 450 groups have been accepted to participate in its bundled payment program, one of many flavors of Accountable Care. The bundled payment model aims at improving outcomes and reducing costs for a select group of procedures and related services. This program further fosters the development of the Accountable Care financing model. It offers promotes the shift from fee-for-service “volume-based” financing service model to a value-based model which reimburses based on outcomes, not productivity.

 

In a recent article in Health Data Management, a senior consultant at the Hospital Advisory Board Company stated that this Bundled Payment Initiative by CMS is  “the largest voluntary Medicare Accountable Care Model.” It has nearly twice as many provider organizations compared to those participating in the shared savings program.” This consultant called 2013, “The Year of Accountable Care.” He notes that in addition to HHS and the Center for Medicare and Medicaid’s efforts, a large number of commercial health plans are forging partnerships with providers with the same goals.[38]

 

  1. 8.       Patient Centered Medical Home Initiatives

 

Finally, under the Affordable Care Act, there has been a tremendous push to leverage technology to provide more care outside of the expensive hospital setting and move care into more technologically advance home care options. So called “Smart Homes” are being built and piloted across the country with one of the most notable under development as a joint venture between Florida Hospital, Disney (EPCOT) and Medtronic Corporation initiated by Celebration Hospital in the Kissimmee area of Florida.

 

In this pilot, implantable biometric chips are surgically implanted in patients with pacemakers and implanted defibrillators. The patient’s heart rate EKG and other information is sent via radio frequency (RFID) to biometric sensors in the walls of the house which then transmit the vital cardiac data to the health system, attending physician/cardiologist and primary care physician.

 

Any significant change or destabilization of cardiac rhythm may initiate a call to 911 or the paramedics to bring that patient to the hospital Emergency Room for immediate care or cardio-version.  Eventually this same kind of monitoring can be done for other standard in home monitoring devices such as urinalysis, stool samples for blood and other tests which may become standard in our homes of the future.

 

Medicare demonstration projects on Patient Centered Medical Home (PCMH) have documented savings of $20‐40 million for the Medicare Trust Fund[39]. The PCMH model is based on the assumption and corresponding data suggesting patient have predictable patterns in the typical access and use of healthcare services. PCMH has certain key element designed to improve the efficiency and quality of care for these patients around these predictable patterns which incorporates electronic and telephonic care coordination, improved access to care, risk stratification, provider partnerships and the use of unique reimbursement strategies and financial incentives to improve quality and reduce costs.

 

One 2009 study published in the Annals of Family Medicine entitled, “Model Medical Homes: Benchmarks and Case Studies in Patient‐Centered Care indicated an estimated 5.6% decrease in health care costs. This would save the Medicare Trust Fund roughly $67 billion dollars each year[40]. Under this model, these estimated savings would result from shifting the providers’ focus from reactive, episodic care to a more comprehensive, proactive holistic approach to the care of the patient’s condition(s).

 

This PCMH Approach revolves around use of the Electronic Medical Record to proactively collect, store, data mine, analyze and exchange member‐specific electronic health data amongst care givers.  Most of the cost savings generated by the PCMH model for the Medicare Trust Fund is due to leveraging technology to prevent medically unnecessary hospitalizations (e.g., the “HI Fund”).

Richard Gilfillan, MD is the current Executive Director of the new Centers for Medicare and Medicaid Innovations (“CMMI”) which administers the Medicare Shared Savings program for CMS. Dr. Gilfillan was the Executive Director of the Geisinger Health Plan in Pennsylvania before joining CMMI. At Geisinger, the PCMH plan he implemented reduced “medically unnecessary” hospital admissions by 20%. It saved 7% in total medical costs through the provision of 24 hour access to electronic health records (EHRs) by primary care, specialists and the patient in an effort to better, and more efficiently coordinate patient care. Geisinger also provides practice-based monthly payments per physician and stipends per 1000 Medicare members to help finance additional PCMH staff.[41]

Open scheduling, extended hours, “e-visits” and HIPPA secure e-mail communications were found to decrease the patient’s need to visit the Emergency Room for care, which often ended up in a medically unnecessary admission. These Care Management (CM systems) need to have the ability to collaborate with the provider and member, provide strong, reliable reporting, identify and act on clinical “alerts.” Other electronic tools can also be implemented such as” Patient Registries,” “Provider Facing Portals,” “Care Coordination” and “Care Management” (CM) systems.

The PCMH initiative is a component of the Patient Protection and Affordable care Act, along with the ACOs. While the PCMH model can be implemented in a stand-alone fashion, it will most commonly be seen as part of many ACO implementations since the cost savings PCMH implementations can generate for the ACO is significant and savings reverts to the Primary Care provider.  Therefore, Primary Care physicians and their staffs have strong financial incentives to implement and participate in the PCMH movement, ultimately generating savings for the Medicare Trust Fund.

PCMH and ACOs will bring a change in focus for the organizations.  In addition to managing services and payments, these organizations will manage health based on stringent performance metrics, capitation management, episodes of care and new bundled payment initiatives.

Predictive Modeling, Care Coordination, Data Excahnge and Analytics become vital to managing these organizations and determining the amount of “Shared Savings” due as well as the payments/revenue distribution to each provider. There are also other new entities and start up functions required under Meaningful Use Stage 2 and Stage 3 of the HITECH Act.  These include “Point-of-Order” Clinical Decision Support systems (CDS)  for radiology and cardiology advanced imaging studies (CT, MRI, PET , Nuclear scans), as well as mandated CPOE ordering of laboratory, pharmacy and radiology orders through the EMR.

All together, these new technologies will serve to improve the quality of care and reduce the rate of growth of the Medicare Trust Fund per capita in comparison to the GDP per capita growth rate. Most of the savings will come from reduced hospital admission rates from the Medicare population, reduced Emergency Room visits per thousand population, and ultimately, with new “spot market” models for purchasing surgical services under bundled payment initiatives, they will lower overall hospital surgical facility charges and inpatient OR costs in favor of lower cost outpatient costs. These are the biggest cost to the Medicare Trust Fund and are clearly measurable on a per capita basis to demonstrate the financial effects of these changes.

  1. C.   Definition and Terms

 

  1. 1.       The Medicare Security Trust Fund

The Medicare program was established by Congress in 1965 under the Title XVIII of Social Security Act. Medicare is considered a social welfare “entitlement program.” For people age 65 and older, regardless of income or medical history, Medicare offers all enrollees a defined benefit. Inpatient Hospital care is covered under Part A through the “HI Fund” and outpatient medical services are covered under Part B.

Enrollees have a choice between an open-network, government administered “single payer” health care option known as “traditional Medicare” and a subcontracted HMO administered network plan known as “Medicare Advantage” also known as  “Medicare Part C”.  Part D covers the pharmaceutical benefit.

Currently 76% of Medicare Enrollees access funding through the “unmanaged” traditional Medicare program. 24% access care through a Medicare Advantage Plan[42]. Medicare Part D provides funding for outpatient prescription drugs exclusively through the Part C Medicare Advantage Plans known as “MAPD” plans or through CMS contracted private Part D plans (“PD plans”). There are also numerous Supplemental “MediGap Plans” (e.g., Part E through Part I) that are contracted by CMS to offer supplemental coverage that cover co-pays, deductibles and other “gaps” in financing coverage.  Enrollees can buy from CMS approved, state licensed insurers and brokers.

Medicare also provides benefits for people under age 65 with permanent disabilities who receive Social Security Disability Insurance (“SSDI”) payments, and for those who have End-Stage Renal Disease (ESRD). There are also benefits for speech, physical, chiropractic therapy, hospice benefits to aid the elderly on a temporary basis and people with amyotrophic lateral sclerosis (also known as “ALS”, or “Lou Gehrig’s Disease”).

Medicare currently provides health insurance to 52 million Americans.  This consists of 43 million people age 65 and older and 8 million younger people with disabilities. U.S. Citizens pay into the Medicare Trust Fund throughout their working lives and generally become eligible for Medicare when they reach age 65. Medicare comprises approximately 12% of the Federal Budget and nearly 20% of total national health spending[43].

On average, Medicare covers about half (48%) of health care costs for enrollees. In the Traditional Medicare program, long-term care, dental, hearing, and vision care, and supplemental insurance costs must be borne by the Medicare recipient through out-of-pocket co-payments and deductibles.[44] In a Part C, “Medicare Advantage Plan,”  many of these services may be provided as “covered benefits.”

Part B and Part D are funded by premiums paid by Medicare enrollees and General Tax Fund revenue.


 

  1. a.       Medicare Part A Funding

Medicare Part A is funded primarily through a 2.9% payroll tax and self-employment taxes paid by the working population and their employers as established by the Federal Insurance Contributions Act (FICA) and the Self-Employment Contributions Act of 1954. Workers and employers each pay 1.45%. The self-employed pay the entire 2.9%, but may deduct half of the tax from the income in calculating income tax[45].

The amount paid in by each employee can generally be found on an employees’ weekly payroll check stub as a Federal Payroll deduction. At year end is appears on the W-2 form from their employer. These taxes are “ear-marked” by the U.S. Treasury for the Medicare Hospital Indemnity Trust Fund  (“HI Fund”) to pay for Part A Medicare hospital benefits. Beginning in 2013, the 2.9% hospital insurance tax will continue to apply to the first $200,000 of income for individuals, or $250,000 for couples filing jointly, and will rise to 3.8% on income in excess of those amounts.[46]

For those employees who have at least 40 quarters of Medicare-covered employment, there is no premium to cover hospitalization, when needed, after the employee becomes eligible for Medicare benefits. This currently covers about 99% of Medicare beneficiaries.

About 1% of enrollees over age 65 certain persons with disabilities who have fewer than 30 quarters of coverage must obtain Part A coverage by paying a monthly premium based on a formula established by the government. For example, the Medicare premium for 2013 is $441 for individuals with fewer than 30 quarters of Medicare Covered employment during their working years. Those with 30 and 39 “quarters of coverage” may buy into Part A at a reduced monthly premium rate of approximately $250.

On average, CMS allocates approximately $800 or more montly per Medicare recipient for Medicare benefits based on the County in which the recipient resides. This amount is based on the “Adjusted Average Per Capital Medicare Cost” per region known as the “AAPCC rate.” For example, Dade County and Broward County have two of the highest AAPCC rates in the nation due to the large number of Medicare Eligible Retirees. 17.5% of Florida’s Population is Medicare Eligible. This is the highest percentage in the nation.

Due to the high percentage of retirees, Dade County’s (Miami) AAPCC rate is nearly twice as high as the rates in other states such as parts of New York.  The AAPCC is made up of 122 different rate cells; 120 of them are factored for age, sex, Medicaid eligibility, institutional status, and whether a person has both part A and part B of Medicare. Actuarial projections of per capita Medicare spending for enrollees in fee-for-service Medicare calculated, usually at the County level.  They are first calculated for Part A services and then for Part B services for the aged, disabled, and people with ESRD.

This AAPCC rate is also the basis for HMO under Medicare Advantage (Part C). It is calculated at the equivalent of 95% of the average costs to deliver medical care in the Fee-For-Service sector under Part A and Part B with adjustments factors to reflect differences in Medicare per capita fee-for-service spending related to age, sex, institutional status, Medicaid status, and employment status.

  1. b.      Medicare Part A Coverage

Part A covers semiprivate room, food, and tests for a hospital inpatient stay up to a maximum length of stay of 90 days. Medicare pays the entire amount for the first 60 days. For days 61–90, a co-payment of $289 per day (the 2012 rate) is required to be paid by the beneficiary to the hospital. After 90 days, the Medicare member is also allocated “lifetime reserve days” which require a copayment $578 per day (the 2012 rate), with a lifetime maximum of 60 days throughout their lifetime.[47]

Part A also covers brief stays per ailment in a skilled nursing facility up to 100 days if certain criteria are met. These criteria include:

  1. There must have been a preceding inpatient hospital stay of at least 3 days (3 midnights), not counting the discharge date.
  2. The nursing home stay must be directly related to the primary diagnosis billed for the preceding hospital stay.
  3. The stay is unrelated to simply “rehabilitation.”
  4. The care being rendered must require skilled nursing care rather than unskilled, custodial or long-term care activities, including activities of daily living (ADL) such as personal hygiene, cooking, cleaning, etc.

Medicare fully pays for the first 20 days and requires a copayment of $144.50 per day (2012 rates) for the remaining 80 days. The 100-day clock is reset and the person qualifies for a new 100-day benefit period if the beneficiary only uses some portion of their Part A benefit and then goes at least 60 days without receiving facility-based skilled services[48].

For terminally ill patients with less than 6 months to live, as determined by the patient’s physician, Hospice Care benefits may also be covered 100% under Medicare Part A. The patient must sign a statement that Hospice Care has been chosen over other Medicare-covered benefits, (e.g. assisted living or hospital care) and Medicare coverage then includes pharmaceutical products for symptom control and pain relief as well as other services such as grief counseling[49].


 

  1. 2.       Medicare Part B

Medicare Part B covers outpatient care, physician visits, Durable Medical Equipment (Canes, Walkers, Prosthetic Devices) and other “medically necessary” devices and services. It also includes nursing services, laboratory, diagnostic and imaging tests, vaccinations, transfusions, renal dialysis, limited ambulance transportation, immunosuppressive drugs for organ transplant recipients, chemotherapy, and other outpatient medical treatments which are administered in a doctor’s office[50].

Part B coverage begins once a patient meets his or her deductible ($140 in 2012). Unlike Part A which pays 100% benefit, the patient typically pays a 20% co-payment for these services and Medicare pays the rest (80%). Also, unlike Part A, Medicare Part B is optional.  If the beneficiary or his/her spouse is still working and has group health coverage through that employer, the beneficiary may choose to defer Part B coverage. However, there is a lifetime penalty (of 10% per year) imposed for not enrolling in Part B, if a Medicare Eligible Beneficiary is not actively working and receiving group health coverage from that employer[51].

In a “Traditional” Medicare Benefit Plan (e.g., CMS Administered), all or a portion of the Medicare Part B premium due is withheld from a Medicare Eligible Member’s Social Security check each month, depending on the beneficiary’s taxable income. For individuals with incomes less than or equal to $85,000 per year, or couples filing joint returns with incomes less than or equal to $170,000, the Medicare Part B premium is $104.90 (2013). Depending on the income bracket, anyone over this amount must pay monthly premiums ranging from $146.90 to $335.70.  In addition, there may be a Part D premium (see Appendix A)[52].

For those enrollees who choose to purchase Part B and Part D through a Part C Medicare Advantage Plan, these premiums can be paid to the MA plan directly for either a stand-alone Prescription Drug Plan or a combined MAPD plan premium. The MA plan can also choose to waive this premium to entice beneficiaries to enroll.

This Part B Premium covers about 25% of the true cost of physician and outpatient services.  The rest is paid from the General Tax Revenue of the U.S. Government, rather than the Medicare Trust Fund. Therefore, in determining success of the Accountable Care Organizations regarding slowing the rate of expected actuarial exhaustion of the Medicare Trust Fund, the focus of this Dissertation will be on Part A, Hospitalization costs under the Medicare Hospital Insurance Fund. Medicare Part A by far the largest component of Medicare. It is the most easily tracked to determine per capita changes as an indicator of changes in total Medicare expenditures and growth rate and data is more readily accessible from the CMS database.


 

  1. 3.       Medicare Part C

Medicare Part C was established under the Balanced Budget Act of 1997. It allows private HMOs to contract directly with CMS to administer Medicare Benefits to eligible enrollees. Part C was originally called Medicare+Choice, and then later changed to “Medicare Advantage.” After 15 years in existence, approximately 24% of all Medicare Recipients (11.3 million people) now access their Medicare Benefits through Medicare Advantage health plans.

To qualify for a contract with CMS to be a Medicare Advantage plans, the insurer must offer coverage that meets or exceeds the benefits of “traditional” Fee-For-Service Medicare.  MA plans are allowed to contract with providers at a lower rate than the standard Medicare Fee-For-Service Fee Schedule amount in order to produce profits and/or provide expanded benefits to the Medicare Advantage HMO beneficiaries.

For example, MA plans may offer coverage for services not provided under traditional Medicare Parts A & B such as Dental and Vision coverage. They may also limit out-of-pocket maximum co-payments for Part B to make these plans more attractive.

To cover the additional cost of providing medical management, marketing, sales benefit design and plan administration which traditional Medicare does not perform, Congress agreed to pay Medicare Advantage plans an additional 14% over and above the traditional Medicare Fee Schedule.  CMS also has developed a 5-Star rating system of Medicare Advantage organizations based on survey data including  the Consumer Assessment of Healthcare Providers and Systems (CAHPS), the Healthcare Effectiveness Data and Information Set (HEDIS) data, and the Health Outcomes Survey (HOS)[53].

These ratings are available for the general public to review. It is particularly important when selecting a plan during the open enrollment period (October 15 – December 7 in 2012). Enrollees are required to stay with their selection for a year until the next Open Enrollment Period.  Only plans that receive 5-Star ratings are allowed to accept new Medicare Advantage patients at any time.  In addition, if a plan is in “Administrative Supervision” due to financial distress, patients may also be able to switch into a new plan.

  1. 4.       Medicare Part D

In order to provide a pharmaceutical benefit to Medicare members eligible for Part A or Part B, Medicare Part D was created under the Medicare Modernization Act of 2003 and went into effect on January 1, 2006. The eligible member may enroll through a Medicare Advantage plan with prescription drug coverage (an “MA-PD” plan) or through a CMS approved “stand-alone” Prescription Drug Plan (“PDP”).

Each plan can vary in the drug coverage (or classes of drugs) they wish to cover, with the exception that certain drugs are specifically excluded from coverage.  For those enrollees who are considered Dual-Eligibles (both Medicare and Medicaid eligible due to certain disabilities and or income level), some of these drugs,  like benzodiazepines, and other restricted controlled substances which may not be covered under Medicare Part D,  may be paid for by Medicaid depending on the state or the Managed Care plan.

In March 2013, Chapin White’s paper for the Kaiser Family Foundation projected that the first wave of reductions in the per capita growth rate of Medicare vs. the growth in the per capita GDP would come from the contribution to savings from the Medicare Part D program. In April 2013, HHS announced the first reductions in the premium contributions required for Medicare Part D participation based on these savings.

As detailed in the table below, the deductible and out-of-pocket limits for the defined standard prescription drug plan (Part D), will be lower in 2014 than in 2013. Beneficiary costs will be further reduced as coverage for Medicare enrollees who have reached the prescription drug coverage gap, or “donut hole” co-payment continues to expand in 2014. In the Press Release of April 1, CMS specifically stated, “as a result of the Affordable Care Act, in 2014, enrollees in the donut hole will receive coverage and discounts of 52.5% on covered brand name drugs and coverage of 28% on covered generic drugs. To date, 6.3 million beneficiaries have received savings of $6.1 billion on prescription drugs[54]”.

Table 7. The 2014 statutory updates to the annual parameters for the defined standard Part D prescription drug benefit are finalized as proposed.

Part D Benefit Parameters

2013

2014

Defined Standard Benefit
Deductible

$325

$310

Initial Coverage Limit

$2,970

$2,850

Out-of-Pocket Threshold

$4,750

$4,550

Minimum Cost-sharing for Generic/Preferred Multi-Source Drugs in the Catastrophic Phase

$2.65

$2.55

Minimum Cost-sharing for Other Drugs in the Catastrophic Phase

$6.60

$6.35

Retiree Drug Subsidy (RDS)
Cost Threshold (Amount RDS sponsor must spend before claiming the RDS subsidy)

$325

$310

Cost Limit (Amount after which RDS sponsor claims no RDS subsidy)

$6,600

$6,350

Source: http://www.cms.hhs.gov/MedicareAdvtgSpecRateStats/

This is a good indicator that the Affordable Care Act is beginning to have a positive impact on the per capita growth rate of the Medicare program.

  1. 5.       Accountable Care Organizations (“ACOs”) as Defined Under Patient Protection and Affordable Care Act Types of ACOs

Generally, an Accountable Care Organization (“ACO”) can be defined as a set of healthcare providers, driven by primary care physicians, to collaboratively accept collective “accountability” for the cost and quality of care delivered to a patient population. If successful, ACOs will create innovative ways to measurably improve quality, cost, and patient outcomes, while creating a more “value-driven” healthcare system.

The dominant model for ACOs is currently based around single provider group, although an increasing number of ACOs are joining insurers to share risk using insurance company based claims and medical management/analytic systems. These combined ventures are now occurring frequently with large Medicare Advantage insurers such as Aetna, CIGNA, United Healthcare, Humana, WellPoint and Universal American. The insurers are providing ACO with: (1) competencies that enable care coordination, and (2) promoting and sponsoring risk-based arrangements with small and large provider organizations. According to a recent Leavitt Partners report (from the former Secretary of Health and Human Services and former Governor of Utah), most ACOs can be categorized using the following designations:

  1. a.       Insurer ACO: A regional or national insurer who takes the lead in organizing providers in such a way that the insurer bears the burden of assuring Accountable Care.

 

  1. b.      Insurer-Provider ACO: The insurer and the provider are equal partners in providing Accountable Care. Both entities provide services that are above and beyond industry expectations.

 

  1. c.       Single Provider ACO: Usually an integrated delivery system that receives payment for a population and takes on the responsibility of providing Accountable Care. The payer’s involvement is generally limited to the provision of a risk-based payment.

 

  1. d.      Multiple-Provider ACO: Two or more providers (usually a hospital and a physician-organization) have partnered (i.e. do not own each other) to provide accountable care for a population. The insurer involvement, like the single provider ACO, is limited to the provision of a risk-based payment.

Figure 17 (below) indicates the types of entities permitted to form ACOs under the “Medicare Shares Saving Program.”  Medicare Advantage health plans are not permitted to form ACOs.  Under Medicare rules, ACOs must be provider sponsored. Under commercially insured programs, there are no restrictions and joint ventures between commercial insurers, hospital systems and independent provider groups and associations are becoming abundant.

In the past year, 259 Medicare approved ACOs have legally formed in at least 45 states covering nearly 4 million Medicare Members (or nearly 10% of the U.S. Medicare population).  New ACOs being are announced almost daily.  Secretary Leavitt recently reported that on November 1, 2012, there were 330 operational ACOs[55].  He expects nearly 750 ACOs in the market by the middle of 2014.

With the 106 newly approved MSSP ACOs as of January 2013 total Leavitt Partners has identified over 436 ACOs operating currently, meaning that there are at least 177 commercial ACOs formed by hospitals and fully integrated delivery systems.  In many cases, these ACOs are formed as joint ventures with Insurance carriers. At a recent speech in Dallas Texas for the National Association of CO-OPs, Secretary Michael Leavitt said he expected that by mid-2014 end, these 750 ACOs will cover close to 10 million members.

 

Figure 17. 259 CMS Approved Medicare Shared Savings Program Accountable Care Organizations

 

(Source: Leavitt Partners, June 2012)

Many of these insurance partners generally offer Medicare Advantage Plans as well.  The largest so far is Universal American (Texas and Florida) which now owns 31 Medicare Shared Savings ACOs covering nearly 250,000 Medicare lives. In their model, the insurer provides administrative services for 51% ownership control and 50% of the Medicare Shared Savings split with the ACO provider owners.

Aetna has invested heavily in sponsoring commercial ACOs with large hospital systems and now boast 20 ACO partnerships. These include joint ventures with such prestigious institutions as Banner Health Systems (32 hospitals in the Phoenix Area and a HIMSS Stage 7 Cerner EMR system client), Sharp Health Systems (San Diego [also Cerner]), Aurora Health Systems (Wisconsin), Inova Health Systems (Northern Virginia, and an Epic Client), Cleveland Clinic (Ohio, an Epic Client), Emory Medical Center (Atlanta, Georgia, a Cerner client) and Carilion Health Systems (South Western Virginia with 8 Epic hospitals).

Similarly, United Healthcare has been buying up IPA groups with ACOs such as Monarch Healthcare which is also the only Medicare Approved Shared Savings ACO which is also Brookings Dartmouth ACO Commercial Pilot.  The other Brookings Dartmouth commercial pilots are Carilion Clinic (with Aetna), Tuscon Medical Center (with United Healthcare), Norton Health Systems (Louisville, Kentucky, with Humana) and Healthcare Partners (California, Nevada and Florida, with WellPoint).

Figure 18. Entities that are Permitted to Form ACOs by CMS under the Medicare Shared Savings Program

In addition, WellPoint/Anthem (the insurer owner of 16 Blue Cross/Blue Shield Health Plans) has also been buying ACO groups includings the 1,000 physician Greater Newport Physician Group in Orange County, CA in reaction to United Healthcare’s purchase of Monarch Healthcare and Aetna’s relationship with Carilion.

Meanwhile, the valuations for these ACO groups are significantly exceeding those of HMOs.  For example, DaVita’s recent acquisition of Healthcare Partners with 595,000 covered lives and 3 ACOs (California, Nevada and Florida was at approximately $7,500 per live ($4,570 per life if at 1 million covered lives). In contrast, Aetna recently paid about $1,300 per HMO life for Coventry Healthcare in a $5.9 billion acquisition. In comparison, Aetna paid $192 per HMO life for Prudential Insurance Companies HMO in 1999.

  1. 6.       ACOs by State

With this most recent set of awards of Medicare Shared Savings ACO programs on January 13, 2013, the awards seem to follow closely with the Medicare population demographics.  For example, Florida has the highest percentage of Medicare recipients in the country at 17.1%.  Perhaps coincidentally, perhaps not, Florida also has the largest number of approved MSSPs with 31.  California is the next highest with 24; New York has 17 and Massachusetts and Texas are tied with 15 each, following population demographics.

Table 8. CMS Approved Medicare Shared Savings Program ACOs by State

State

Number of ACOs

Rank

Florida

31

1

California

24

2

New York

17

3

Massachusetts

15

4

Texas

15

4

Georgia

11

5

Michigan

10

6

New Jersey

10

6

Arizona

8

7

Illinois

8

7

Indiana

8

7

Connecticut

7

8

Tennessee

7

8

Wisconsin

7

8

Maryland

6

9

North Carolina

6

9

Ohio

6

9

Iowa

5

10

Kentucky

5

10

Minnesota

5

10

Minnesota

5

10

 

As per the Figure 18, a wide variety of the nation’s 5,000 hospitals and the nearly 900,000 physicians and other primary care providers are eligible to develop Accountable Care Organizations. This is the largest change in the mechanism of healthcare funding since the formation of Medicare and Medicaid in 1965 and 1966.  ACO’s refocus health care financing toward a more outcomes oriented system of global and partial capitation by episodes of care and bundled payments to improve care to a defined population.

This is a dramatic shift from “volume-based” reimbursement under the traditional fee-for service model to “value based” reimbursement based on patient outcomes. By accepting risk for the health outcomes of a defined population and being reimbursed based on the achievement of common quality benchmarks, ACOs seek to both improve health outcomes and decrease the growth of health care expenditures.

Even Walgreens, the retail pharmacy, now has three Medicare Approved ACOs, in three different states. These include Advocare Walgreens Well Network in New Jersey, Diagnostic Clinic Walgreens Well Network in Florida, and Scott & White Walgreens Well Network in Texas. Scott & White is merging with Baylor Healthcare. Since Walgreens qualifies as a primary care provider with their Take Care Primary Care clinics and the over 400 industrial worksite clinics they own, these ACOs represent a further expansion for the retail drug chain into primary care. This is Walgreens’ move to diagnose, treat and manage chronic care conditions for better drug adherence. This could cut and estimated $300 billion a year in wasteful spending, as well as increase healthcare access for disadvantaged populations. CVS and Walmart will likely follow.

Performance Metrics

All of these ACOs will have to meet stringent pay-for-performance quality metrics on 32 of the 33 quality metrics to achieve full Medicare Reimbursement and shared savings under this pilot program. The focus is on the highest “at-risk” populations: diabetes, hypertension, ischemic vascular disease, heart failure, coronary artery disease. For performance year 1, the quality performance standard is defined as “complete and accurate reporting” for all 33 quality measures (i.e., “pay for reporting”). In subsequent years, the quality performance standard will be phased in such that an ACO will be assessed based on both “pay for reporting” and “pay for performance.  CMS will set the standards each year which need to be achieved.

Figure 19. ACOs Quality Performance Standards, Pay for Reporting and Pay for Performance

 

In addition, the Commonwealth Fund is strongly suggesting that ACOs focus on six (6) core competencies: a (1) patient -centered foundation;  (2) home healthcare; (3) high value network, (4) payor partnerships; (5) population heath, and (6) ACO leadership skills.[56]

In order to foster the development of this infrastructure and core ACO competencies, CMS is focused on having ACOs develop six (6) key competencies in information technology: (1) cross–continuum medical management; (2) member engagement; (3) clinical information exchange; (4) quality performance reporting; (5) predictive modeling and analytics; and, (6) administrative risk and financial management systems[57].  The data produced by these systems are integral to measuring and benchmarking the success of these ACOs.  If successful, they will be a good indicator of the changes to come in Medicare per capita growth rate.

While the Commonwealth Fund recently reported that of the 73% of reporting hospitals claim they share information across clinical settings, only 35% claim the ability to track the success of the information exchange and only 19% reported the ability to utilize predictive modeling and analytic tools available to identify and track outcomes for high risk, high cost patients[58].  This is likely to improve as Health Information Exchanges become more prevalent and these data become more available for research purpose for this Doctoral Dissertation.

  1. D.   Limitations and Delimitations

As just stated in Section 1(C), even the most mature Pioneer Accountable Care Organizations are only about a year old (they began January 1, 2012). Some are currently struggling with their CMS membership ACO attribution data.  While all but one of these Pioneer ACOs selected (Detroit Medical Center) were already fully functional integrated delivery systems with all of the technology and infrastructure CMS. Many of these  ACOs are now producing the performance metrics due to CMS in April 2013 for the first reporting round.

For the Literature Review Portion of this Doctoral Dissertation, there is an extraordinary amount of qualitative data articles already available with new articles and literature published daily.  However, in order to provide a truly meaningful Doctoral Dissertation, either a case study approach or a review of publically available data from CMS is planned by this researcher. The limitation to this approach is that since ACOs are only 1 year old so far, outcomes and results are not yet available from CMS and may not be completely available for another year.

The other challenge is defining the boundaries and structure of a study given available time and resources to produce meaningful Doctoral level research of broad, publishable significance to the ACO Community and the body of literature currently available. Therefore, the delimitations within this study need to be carefully structured.  Assistance with this by Committee Members and Nova Faculty will be greatly appreciated.

Since the purpose of the ACO is to marshal the shift from a “volume-based” metric to “value-based” outcomes measure, both clinical and financial data need to be merged, correlated and regressed to prove whether or not these experimental pilot ACO projects will work to “bend the cost curve” and slow the growth in the Medicare per capita expense rate versus the per capita growth in GDP.

From this researchers efforts to date, certain hospital systems such as the Aurora Health System in Wisconsin claim to have demonstrated quantitative results by “bending the cost curve.” By implementing an ACO on their own employees in 2011, Aurora claims to have saved $7.50 per member per month (pmpm). They anticipate of further savings of close to $75 pmpm this year.[59] As previously stated, Aurora has recently partnered with Aetna in order to access Aetna’s managed care infrastructure, analytics and “Healthagen” platform in order to provide ACO services for the commercial employer market. CIGNA has done similar joint ventures in the California Market with Brown & Toland and other well-known IPAs groups.

United Healthcare has purchased at least 4 IPA groups, including the 200,000 member Monarch Healthcare for both Medicare and Commercial ACO products. In Walgreen’s this ACO arrangements, the company is providing the sophisticated ACO infrastructure for and analytics the physician groups.  At the moment, all the data produced by these joint ventures would likely be considered proprietary, so accessing some of these commercial databases for the purposes of this Doctoral Thesis may prove challenging. However, the Walgreens’ Vice President of Clinical Outcomes for the project is a close friend and actuary.

 

  1. 1.       Medicaid ACOs and Other Sources of Data

Medicaid ACOs or similar entities are also forming. The success of these other models will likely be influenced by the success of Medicare ACOs. Eventually, data for meaningful quantitative research will be accessible, either publicly or through personal contacts.  This field is vast and data sources to produce empirical research should be available following IRB guidelines. Some of these suggested sources are listed in Section 2 and Section 3 of this Concept Paper.

There are also some sources of data which are starting to become available from CMS including per capita cost data. CMS’s new Chronic Conditions Dashboard presents statistical views of information on the prevalence, utilization and Medicare spending for Medicare beneficiaries with chronic conditions. The Dashboard displays information on a subset of the predefined chronic conditions available in the Chronic Condition Warehouse (CCW) at the national, state, and hospital referral region (HRR) levels for 2011[60].

The information in this Dashboard is limited to Medicare Fee-For-Service (FFS) beneficiaries residing in the 50 U.S. states and the District of Columbia, who were continuously enrolled in Medicare FFS, parts A and B, from 2000- 2011. According to CMS, Medicare beneficiaries who were enrolled in a Medicare Advantage (MA) plan were excluded, as were beneficiaries who first became eligible for Medicare after January of the calendar year. Beneficiaries who died during the year were included up to their date of death, if they met the other inclusion criteria.

The 15 chronic conditions below, included in the Dashboard, is consistent with the list of conditions included in CMS’s program statistics examining chronic conditions among Medicare beneficiaries. These data can be found at:http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/Chronic-Conditions/index.html. Also, this set of conditions corresponds with the conditions suggested by the HHS Strategic Framework on Multiple Chronic Conditions at: http://www.hhs.gov/ash/initiatives/mcc/.

  1. Alzheimer’s disease, related disorders, or senile dementia
  2. Arthritis (including rheumatoid and osteoarthritis)
  3. Asthma
  4. Atrial fibrillation
  5. Cancer (breast, colorectal, lung, and prostate)
  6. Chronic kidney disease
  7. COPD
  8. Depression
  9. Diabetes (excluding diabetic conditions related to pregnancy)
  10. Heart failure
  11. Hyperlipidemia (High cholesterol)
  12. Hypertension (High blood pressure)
  13. Ischemic heart disease
  14. Osteoporosis
  15. Stroke/Transient ischemic attack

Medicare population demographics differ in significant ways from those of the general population. Compared to the rest of Americans, Medicare enrollees are disproportionately white and female (due to women’s greater longevity)[61]. In analyzing a Medicare member’s typical financial situation, the average member lives under rather precarious economic conditions considering the costs of hospitalization:

  • In 2006, the average household income of Medicare enrollees was $22,600 compared to a U.S. median income of $48,201[62]. In 2008, 16% of Medicare enrollees were living in poverty, compared to 13% of the general population[63]. Hospitalizations usually cost at least $1,200 per day for self-pay.
  • The typical senior household has $66,900 in savings.  However, according to a 2012 the Kaiser Family Foundation study, the average Medicare eligible male needs $124,000 to cover health care during retirement. The average female needs $152,000[64].
  • On average, Medicare covers 75% of the cost of covered services and 48% of average costs for all medical services. The typical Medicare enrollee generates more than $3,000 per year in out-of-pocket expense.  10% of enrollees have over $8,300. Women have slightly higher costs at $3,236 compared to $3,103 for men, and older enrollees have substantially higher costs[65].  Before Medicare was instituted in 1965, only about half the elderly population could afford health insurance or the cost of medical care.  Medicare and Social Security have dramatically reduced the potential poverty level of the elderly.                                                                                                                                   Figure 18.
  1. 2.       Chronic Conditions in the Medicare Population

According to the Kaiser Family Foundation studies, Medicare enrollees also have substantially greater health care needs compared to the general population[66]. For example:

  • Roughly 87% of Medicare Enrollees have at least one chronic condition.
  • Nearly half of Medicare Enrollees have three or more chronic conditions, compared to 21% and 7% of the general population, respectively.
  • 47% of Medicare Enrollees have some kind of limitation on activities of daily living (“ADLs”).
  • 30% of Medicare Enrollees visit the Emergency Room in a given year, 21% have an inpatient stay.
  • Roughly two-thirds of seniors require some form of long-term care over their lifetimes, and 18% are enrolled in a nursing home for at least a year.

On an empirical level, these data show how important it is to utilize the in CMS Chronic Condition Data Warehouse in constructing the quantitative analysis for this Dissertation. The research using this database as well as the studies produced by the Kaiser Family Foundation should provide significant data to support the or refute their projected difference between growth in Medicare Spending per Beneficiary and growth in GDP per Capita presented in Figure 11 as the basic quantitative hypothesis for this Dissertation.

These data may provide a reasonably good forecast of the trends in the cost of U.S. Healthcare under the Affordable Care Act. However, some key delimitations must be considered when studying Accountable Care for this Dissertation including:

  1. a.      Accountability & Risk. Traditionally, healthcare has not been accountable to payers or consumers for quality outcomes. In Measuring accountability. This researcher will attempt to tie quality metric performance to financial risk and results (“value driven outcomes”). As part of being accountable, provider organizations will need act more like insurance companies in the assumption and measurement of financial risk and rewards, rather than simply billing for services.

 

  1. b.      Quality & Performance Measures. To facilitate accountability, performance metrics will be set by CMS and may change over the next 2-3 year period of the ACO experiment to drive outcomes value. Providers will have to meeting minimum standards of care to earn the financial rewards.

 

The key measures which reflect the ACO’s “Triple Aim” will need to be measured.  These include:

 

(1) Improving population health,

(2) Improving the patient experience, and

(3) Lowering per capita Medicare costs to be compared to per capita GDP growth

 

The ACO provider organizations which this researcher will interview and examine their results must be able to measure, track, and report on new clinical, financial, and performance standards.

  1. c.       Coordinated Care; Clinical Integration. To address the cost and quality measures of this Triple Aim, these ACO provider organizations will need to coordinate care seamlessly across all care settings such as in the Patient Centered Medical Home Model to drive cost savings to the Medicare Trust Fund while improving the quality of care for the Medicare recipient. To do this, they need to be clinically integrated, bringing data together from both an inpatient and outpatient setting. Clinical integration depends on having the right IT infrastructure and connectivity tools, and receiving data in an actionable format to further enhance quality and savings.

 

  1. d.      Managing Patient Populations. To take responsibility for a patient population, the ACO provider organizations will also need to have a complete understanding of the historical care and services those patients used in the past and will need in the future.  The past medical history can be derived from an examination through the Electronic Medical Record.

 

For this researcher, this means examining patient data in a delimited, de-identified manner. Therefore, the target ACOs for the study will need analytic and predictive modeling capabilities to understand the health status. Offering clinical decision support tools to determine the most cost effective approach to the future medical needs of a designated population to better coordinate care and enhance outcomes will also be helpful.

 

  1. e.       Handling New Reimbursement Models. These target ACO provider organizations will also need to accept and track a range of various payment mechanisms, including fee-for-service, episodes-of-care, bundled payments, as well as full and partial population-based prepayment options, similar to monthly per-member-per-month capitation. This analysis by this researcher may, therefore, involve some sophisticated financing analytic tools and processes with delimitations on some of these metrics.

In the era of accountable care and healthcare reform, advanced technology solutions, including data analytics, predictive modeling, business intelligence, and connectivity tools, will play a pivotal role in supporting the rapid transformation that is needed to meet new clinical, financial, and performance requirements. The growing need to account for ACO performance is driving greater demand for business intelligence at the level this research will need to be conducted.

Whether looking at the health of a single patient or an entire population, care management will require access to clinical information. If CMS and Health and Human Services are to foster the development of a more efficient, cost-effective model, integrated clinical and financial information will need to be examined for a complete 360-view of the healthcare data.  This Dissertation will incorporate reasonable elements of these changes as data become available and contributory to proof of the hypothesis regarding the predicted change in the per capita growth rate of Medicare spending versus the per capita change in the nations GDP.

 

 

 

 

  1. E.   Assumptions

 

The most important assumption of this Doctoral Thesis is that a shift in the financing mechanism of the nation’s $3 Trillion health care system from a “volume driven” incentive to a “value driven” incentive will slow the cost spiral as measured by the change in the per capital growth rate of Medicare spending versus the per capita growth rate of the Gross Domestic Product. This needs to be numerically proven over the next 18-24 months.

Much of the historical trend data for this baseline study is available. The Congressional Budget Office and the Centers for Medicare and Medicaid (“CMS”) are responsible for tracking and reporting this annually.  The Trustees of the Social Security Trust Fund must also report these statistics annually to Congress with actuarial projections regarding the solvency of the Medicare Hospital Insurance Trust Fund. The new Center for Medicare and Medicaid Innovation is now responsible for administering the Accountable Care Organizations. Over 200 new government agencies are being established under the Patient Protection and Affordable Care Act of 2010 to monitor and implement the success of these new programs.

Therefore, enough credible sources of government data should be available to document and perform this research to the level worthy of a Doctoral Dissertation and publication.  Another assumption is that this researcher will be able to limit the data required to prove or disprove the hypothesis focusing on the financials of the Medicare Hospital Trust Fund as proof for or against the hypothesis. The change in per capita cost on CMS’ 15 Chronic Care diagnoses will function as a leading indicator of the overall cost changes under Accountable Care. These indicators provide indicators for both Medicare and the Accountable Care experiment.

As previously discussed, the Medicare Trust Fund faces the financial challenge of increasing enrollment from the over 65 year old population (with 10,000 new Medicare beneficiaries a day) with a simultaneous decreasing ratio of employed workers to enrollees to fund the Medicare Trust. In the short term, total Medicare spending is assumed to be increasing from $600 billion in 2013 to $932 billion in 2020. In the long term, Medicare enrollment is projected to increase from 52 million today to 79 million by 2030. Meanwhile, the ratio of workers to enrollees is expected to decrease from 3.7 to 2.4[67]. This assumption demonstrates the gravity of the problem and sub-problems to be addressed in this research and Dissertation.

When Peter Orzag was Director of the Congressional Budget Office, he warned the Senate Finance Committee that the future growth in Medicare spending per capital beneficiary will be the most important determinant of long-term trends in federal spending. He said that reducing the annual rate of Medicare cost growth is the nation’s central long-term challenge in setting Federal fiscal policy.[68]

With overall health care costs expected to increase by 5.8% or more annually from now until to 2020, this projected growth rate is 1.1% higher than the projected growth in the GDP.  Increased utilization of medical services by an increasing number of beneficiaries, higher prices for services, and new technologies all contribute to these projections. The assumption for this research is that if Accountable Care under the PPACA does not “Bend the Cost Curve,” total Healthcare spending in 2020 is projected to reach $4.64 Trillion, accounting for 19.8% of GDP, nearly one-fifth of economic output. As previously stated, this represents a $1.64 Trillion increase (49%) from $3 trillion in 2013 and 17.6% of GDP in 7 years[69].

It is assumed in this Dissertation that the financial indicators to be studied include:

  1. Total Medicare spending as a share of Gross Domestic Product (GDP)
  2. The solvency of the Medicare HI trust fund
  3. Medicare per-capita spending growth relative to inflation and per-capita GDP growth; and
  4. General fund revenue as a share of total Medicare spending.

 

  1. 1.       Medicare Per-Capita Spending Growth Relative to Inflation and Per-Capita GDP Growth

For this Dissertation, the most important metric is the Medicare per-capita spending growth relative to inflation and per-capita GDP growth. This is because the Independent Payment Advisory Board (IPAB) will use this measure to determine whether it must recommend to Congress proposals to reduce Medicare costs based specifically on per-capita Medicare spending growth. Beginning in 2015, these targets are based on a comparison of the CPI-M versus the CPI-U by the CMS Office of the Actuary. If the Medical spending measure is larger than the economic measure, the IPAB must propose cost-savings recommendations for consideration in Congress and the President on an expedited basis[70].

The CPI-U is the Consumer Price Index for All Urban Consumers which examines the changes in the price of a basket of goods and services purchased by urban consumers. This population represents close to 90% of the total population and is the most frequently used statistic for identifying inflation or deflation[71].

The CPI-M is the Consumer Price Index for Medical Care.  This is one of eight major groups in the Consumer Price Index and consists of two medical care classifications: (1) Medical Care Services (MCS), and (2) Medical Care Commodities (MCC). MCS, the larger component of medical care in sample size and expenditure levels, is organized into three expenditure categories including: (a) hospital and related services, (b) professional services, and (c) health insurance. The MCC includes: (a) medicinal drugs and (b) medical equipment and supplies.[72]

 

The other important aspect of this metric is that this is the same statistical measure which the Kaiser Family Foundation uses to project success of the PPACA and Accountable Care. This is the primary benchmark that will be employed for quantitative analysis for this Dissertation. Qualitative Analysis will be performed through the Literature Research and interviews with key industry professionals.  An Interview Questionnaire will be developed according to IRB protocols and approvals if this Concept paper is accepted.

  1. 2.       General Tax Revenue as a Share of Total Medicare Spending

General Tax Revenue as a share of Total Medicare Spending is the other important metric to determine if the Accountable Care experiment is working. This metric examines Total Medicare spending as a percentage of the Federal Budget. The Medicare Modernization Act (MMA) requires the Medicare Trustees to determine if Medicare Spending is actuarially expected to exceed 45% of the tax revenue paid into General Fund of the Treasury within a 7-year period.  .

If this estimation occurs in 2 consecutive years, it causes the Medicare Trustees to issue a “funding warning” to the President. The President must then submit cost-saving legislation to Congress, which must consider this legislation on an expedited basis. This warning has been consistently issued almost every year since 2006. As the largest item in the Federal Budget, Medicare spending is already at 36% of the General Tax Revenue.  45% is not far off.

  1. 3.       Accountable Care Assumptions

One can realistically assume that 30% to 50% of the 36 million Medicare eligible beneficiaries could possibly be enrolled in ACOs in the coming years. Those Medicare beneficiaries who are already enrolled in Medicare Advantage plans are not eligible to be “attributed” to an ACO as well. Therefore, this results in a potential 11.6 to 21.6 million potential ACO members.  This new market would represent total spending of between $117 billion and $234 billion per year (using 2010 data).

In terms of market penetration, it is likely that HMOs and insurance companies will continue to aggressively pursue the market and will offer newly designed services to the emerging ACO entities. This is already occurring throughout the industry.

The majority of the new services that are sold to ACOs under the “Meaningful Use” Provisions of the HITECH Act of 2009 will be an extension of existing technology from the insurance and HMO software vendors. As more commercial ACOs form partnerships and joint ventures with insurer companies developing ACO driven integrated delivery systems these systems are likely to be implemented throughout the ACO community.

A new market is developing for hospital and provider systems desiring to pay claims under partial and global capitation arrangements under the ACOs, just insurers do now.  Hospitals and providers will move from “billing machines” to “risk takers and managers.”  This is a financial disciple and skill most providers will need to acquire.

Considering only 20% of the existing $600 Billion Medicare and Dual Eligible market is under insurer sponsored Medicare Advantage plans, 80% of this growing market is available for provider sponsored ACOs to develop software needs for claims payment and global payments structures and management.

This model is already here. 74% of all care in California is currently delivered and financed under either partial or global capitation payments and has been for the past 20 years. Under the ACOs, this model will move east to other states.

There will be a tremendous need for many of the products and customer relationships in the new hospitals and physician networks. As presented by CMS at several recent conferences, their goal is to move toward global capitation to finance healthcare under the reforms (see CMS slide, Figure 20, below).

Figure 20.  CMS Roadmap to Global Capitation Payment Structures under ACA Reform

 

Source:  Centers for Medicare and Medicaid

Perhaps more importantly, the HMOs and their vendors have sales teams that are trained to visit with and communicate with provider groups as an extension of their existing Medicare Advantage provider contracting relationships.  Half of this expansion for these new services will go likely to HMOs.

While CMS is simply “assigning” current Medicare Fee-For–Service members to ACOs through the “attribution model” (thus eliminating the annual $800 per Medicare Advantage member acquisition cost and $600 per member retention cost), the Medicare Shared Savings Plan of the ACO is also driving the formation of Commercial ACOs with insurance partners to capture the larger employers and drive non-ACO competitors into adverse risk selection. These trends are assumed to continue rapidly over the next few years in furtherance and support of the Medicare ACO Shared Savings Program.

SECTION 2:  RESEARCH APPROACH

  1. A.  Literature to be Reviewed

With all of these dramatic changes in healthcare reform, there will be enough data to witness, document and analyze the economic and financial impact of these changes on the U.S. Healthcare System in this Doctoral Thesis and Dissertation. The majority of the literature to be reviewed will focus on the effect of Accountable Care to prove the hypothesis that this enormous and critical financial experiment will have the effect of decreasing the Per Capita Medicare Growth Rate versus the Per Capita Growth rate of the Nation’s GDP. Much of this revolves around the new Medicare Shared Savings financial model which is expected to slow this growth rate as defined in the Chapin White article from the Kaiser Family Foundation last month and the Secretary of Health’s and Human Services 2014 Budget Expectations for Medicare.

The Medicare Shared Savings Model which will be employed in this research was designed by Mark McClellan, MD of the Brookings-Dartmouth Institute and Elliott Fischer, MD of The Dartmouth Institute for Population Studies. Dr. McClellan is a Stanford trained physician with a Master’s Degree from Harvard’s Kennedy School of Government. Before joining the Brookings Institute, he was Director of both the U.S. Food and Drug Administration and the Centers for Medicare and Medicaid.

Dr. Fischer is a Harvard trained physician who has spent the last 20 years doing population management studies and developing the ACO Model which Congress has adopted under the Patient Protection and Affordable Care Act.  A basic literature review will incorporate much of their work and research as well as that of the Kaiser Family Foundation which has done extensive research in the area of Medicare per capita cost and quality management. The basic Brookings Dartmouth ACO Financial Model is depicted in Figure 21 (below).  To identify the Literature to be reviewed on this subject and the Empirical Concept of the Dissertation, one must first understand the Model, its requirements and limitations discussed in this section.

Figure 21.  The Brookings Dartmouth ACO Model.

 

  1. 1.       The Brookings-Dartmouth ACO Financial Model

In the basic model, groups of primary care physicians apply to the new Center for Medicare and Medicaid Innovation to become an Accountable Care Organization. The first group of 32 was selected in December of 2011 for a January 2012 start date.  These mostly consisted of fully integrated delivery systems that already had experience in managing risk through both their insurance based managed care divisions and their integrated hospital and physician groups.  To qualify, they had to be willing to accept 70% risk that they may not achieve the shared savings targets set for them based on 3 historical years of claims data for the Fee-For-Service Medicare Patients from their Primary Care Physician Rosters.

As one can see from the preceding graph, CMMI analyzed the past 3 years of the Medicare Claims data it had on each of these proposed Medicare enrollees and applied a weighted average to then forecast the expected inflationary trend line for the next three years.  These 32 “Pioneer” ACOs had to agree to then “bend this cost curve” by a minimum of 3.9% per year for the next three years.  If the Pioneer ACO is able to do that, CMS would share 70% of the savings produced with the ACO.  However, if the Pioneer ACO is not able to achieve that target by CMS’s calculations, then the Pioneer ACO is required to pay CMS 70% of the overage. Hence, a so-called “2-Tailed” financial risk corridor.

  1. 2.       Track 1 and Track 2 ACO Models

In April of 2012, CMMI selected another group of 59 ACOs to act as Track 1 and Track 2 ACOs.  Track 2 is similar to the Pioneer ACOs except that they have a 60% risk corridor.  In Track 1, there is only an upside risk in that 50% of the savings generated by the ACO is shared by CMS, but there is no financial risk for not meeting the contracted target savings.  Most of the April 2012 ACOs applied for and selected were Track 1’s. Since then three other rounds of ACOs have been selected by CMS totaling 259 Medicare Shared Savings Program ACOs coving 4 million Medicare Enrollees (nearly 10% of the Medicare Population).

  1. 3.       3 Years, 2 Tracks, 33 Measures in 4 Domains

To qualify for shared saving under the proposed rule, an ACO must enter into a three-year agreement with CMS and must satisfy quality performance standards for each year. CMS has defined standards for the first year of an ACO’s existence and will publish standards for years 2 and 3 in later rules. The fact that CMS is still defining the rules is a limitation of the research, which will require certain delimitations on the scope of this Dissertation.

We are currently in the 2nd year of the program and the first set of financial and quality performance results should be available by the end of 2013 or the beginning of 2014.  The quality performance standard for the first year is “full and accurate measures reporting.” Under the rules, Track 1’s convert to a risk-sharing payment system in the third year.

There are 33 measures an ACO must report related to process, outcome, and patient experience of care. If an ACO reports all of these measures, it is eligible for full shared savings in the first year. Quality performance standards for later years may scale the amount of shared savings an ACO is eligible for based on the level of quality performance the ACO demonstrates.

Acquiring this proprietary data from individual ACOs may be difficult. It is expected that CMS will release the de-identified data over the next 18-24 months, in which case there will be an abundance of literature on the results and whether or not the ACOs are producing the expected financial savings and improved quality outcomes both CMS and the Kaiser Family Foundation appears to be expecting. If all else fails, since these ACOs are government contracted entities, under the Freedom of Information Act, a researcher may be able to acquire meaningful data on various ACOs directly from the Federal Government, if necessary.

  1. 4.       Expenditure Benchmarks

The expenditure benchmark is the average amount CMS expects to pay in a year for each ACO-assigned beneficiary using the normal Medicare Parts A and B reimbursement mechanisms. The benchmark is unique to each ACO.

CMS will base the benchmark on the ACO’s most recently available three years of claim data, heavily weighted toward the most recent years. CMS will adjust the benchmark appropriately to account for the beneficiaries’ characteristics and the projected amount of absolute growth.

  1. 5.       Minimum Savings Rate (MSR)

For an ACO to receive a payment for shared savings, its actual expenditures must be less than the expenditure benchmark by more than the minimum savings rate (MSR). The MSR is a percentage CMS uses to account for normal variations in expenditures. For ACOs participating in Track 1, the MSR depends on the size of the ACO in the first two years of the agreement. Smaller ACOs must overcome a higher threshold, while large ACOs must overcome a smaller threshold.

At the lowest end (5,000–5,999 beneficiaries), the MSR ranges from 3.6% to 3.9%. At the high end (50,000 to 59,999 beneficiaries), the rate varies from 2% to 2.2 percent. At 60,000 beneficiaries or more, the rate is 2 percent. (For the complete intervals, see table 1, attached, which is based on table 6 in the proposed rule.)

To determine the MSR for a particular ACO, CMS will use linear interpolation between the appropriate MSR lower bound and upper bound based on the exact number of beneficiaries assigned to the ACO. For example, an ACO with 5,500 beneficiaries would have an MSR of 3.75% and an ACO with 6,500 beneficiaries would have an MSR of 3.5%. Thus an ACO with 6,500 beneficiaries and an expenditure benchmark of $10,000 per beneficiary, the ACO’s actual expenditures must be less than $9,650 per beneficiary for the ACO to experience any shared-savings payment.

For Track-2 ACOs, the MSR is a flat 2 percent regardless of the number of beneficiaries.


 

  1. 6.       Shared-Savings Threshold

For ACOs in track 1, CMS generally will not make a shared-savings payment on first-dollar savings. CMS will pay the ACO a percentage of savings only to the extent that the savings exceed another percentage called the Shared-Savings Threshold.

The shared-savings threshold in track 1 is a flat 2 percent of the expenditure benchmark. Using the previous example of an ACO with 6,500 beneficiaries and an expenditure benchmark of $10,000 per beneficiary, the shared-savings threshold is $200. If the ACO’s actual expenditures are $9,500 per beneficiary (which exceeds the MSR), the ACO is entitled to share a percentage of only $300 of the $500 saved per beneficiary.

However, a Track-1 ACO can eliminate the shared-savings threshold and share in the entire amount of savings if it satisfies one of four conditions:

  • the ACO comprises only ACO professionals in group practice or networks of individual practices;
  • more than 75 percent of the ACO’s beneficiaries live in counties outside Metropolitan Statistical Areas;
  • more than 50 percent of the ACO’s beneficiaries were assigned by critical access hospitals; or
  • more than 50 percent of the ACO’s beneficiaries had at least one visit to a federally qualified health center (FQHC) or rural health center (RHC) in the preceding year.

Because Track-2 ACOs take on risk, they have no shared-savings threshold and are eligible to participate in first-dollar savings.

  1. 7.       Sharing Rate

The amount of shared savings an ACO can realize is based on a percentage called a sharing rate. The sharing rate depends on how well the ACO measures up to quality performance standards. In the first year of operation, this is simply a question of whether the ACO complied with “full and accurate measures reporting.” CMS will publish quality performance standards for years 2 and 3 in later rules, and those standards may scale the sharing rate according to the ACO’s performance.

For Track-1 ACOs, the sharing rate for year 1 is 50%. Because CMS wants to encourage ACOs to take on risk and enroll in track 2, the sharing rate for track-2 ACOs in the first year is 60%. In the above example of a Track-1 ACO eligible to share in $300 of savings per beneficiary, the ACO is entitled to a shared-savings payment of $150 per beneficiary.

  1. 8.       Sharing-Rate Adjustments

ACOs participating in either Track 1 or Track 2 can increase their sharing rate based on the number of beneficiaries who visit FQHCs or RHCs during the performance year. Track-1 ACOs can increase their sharing rate by up to 2.5%, and Track-2 ACOs can increase their rate by up to 5 percent. This maximum rate is reached when the percentage of beneficiary visits to FQHCs and RHCs reaches 41–50 percent. (Rates for all intervals are available in table 2, which is based on table 7 in the proposed rule.)

Thus it is possible for an ACO in Track 1 to increase its sharing rate to 52.5% in the first two years of operation. Likewise, a track-2 ACO (or a track-1 ACO in its third year of operation) can increase its sharing rate to 65%.

  1. 9.       Shared-Savings Cap

The rule limits any Shared Savings payment made to an ACO based on a percentage of the ACO’s expenditure benchmark, called the “Sharing Cap” or “Shared-Savings Cap.” For Track-1 ACOs, the Sharing Cap is 7.5% of the ACO’s benchmark. Therefore, if an ACO’s benchmark is $10,000 per beneficiary, the amount of any Shared-Savings payment to the ACO cannot exceed $750 per beneficiary. In Track 2, the sharing cap is 10 percent of the ACO’s benchmark, another incentive for ACOs to choose Track 2 over Track 1.

  1. 10.   Shared-Savings Withhold

For ACOs in both tracks, CMS will withhold 25 percent of any shared-savings payment due to the ACO to recover any losses that may occur in later years. CMS will pay anything remaining from the withhold amount at the end of the three-year agreement term. For Track-2 ACOs, the proposed rule implements other methods to ensure recovery of any losses, including the ability to recover losses from individual providers that belong to the ACO.

  1. 11.   Minimum Loss Rate (MLR)

Sharing in a percentage of losses (actual expenditures that exceed the expenditure benchmark) applies only to ACOs participating in Track 2 (and Track-1 ACOs in their third year of operation). To trigger loss sharing, an ACO’s actual expenditures per beneficiary must exceed the benchmark by a certain percentage called a minimum loss rate (MLR).

The proposed rule sets the MLR at a flat 2 percent. Thus if an ACO has an expenditure benchmark of $10,000, its actual expenditures must exceed $10,200 per beneficiary to trigger loss sharing. Further, there is no loss-sharing threshold, so an ACO that is liable for any losses must pay a percentage of first-dollar losses (that is, a percentage of all losses above the benchmark).

  1. 12.   Loss Rate

The loss rate is the percentage the ACO must pay of the amount by which actual expenditures per beneficiary exceed the expenditure benchmark. There is no loss-sharing threshold, so a track-2 ACO (and a track-1 ACO in its third year of operation) must pay a percentage of the entire amount that exceeds the benchmark.

The loss rate is equal to 100 percent minus the final adjusted sharing rate. An ACO with a final sharing rate of 60 percent would have a loss rate of 40 percent. Thus if an ACO’s benchmark is $10,000 per beneficiary, its final sharing rate is 60 percent, and its actual expenditures are $10,400 per beneficiary, it must pay CMS 40 percent of $400, or $160 per beneficiary.


 

  1. 13.   Loss Cap

To soften the impact of loss-sharing risk, the proposed rule establishes a loss cap for each year of ACO operation. The loss cap is a percentage of the ACO’s expenditure benchmark. For ACOs participating in track 2, the loss cap is 5% of the benchmark in year 1. In year 2, the cap would increase to 7.5 percent, and in year 3, to 10%. For ACOs in track 1, the loss cap would apply to year 3, when it would be 5% (the same as the first-year cap for track 2).

Thus for a track-2 ACO with a benchmark of $10,000 per beneficiary, the maximum loss it could pay would be $500 per beneficiary in the first year of operation, $750 in the second year, and $1,000 in the third and final year.

  1. 14.   Comparison of Track 1 and Track 2

As noted, CMS created two tracks to allow less-established and smaller entities to take advantage of the shared-savings program without initially taking on risk. However, it is offering greater rewards to participants that agree to share risks. It is up to organizations to do the math and make their own decisions.

  1. 15.   Understanding the Financial Savings Model for this Concept Paper

To understand the Empirical Design of this Doctoral Dissertation and Research, one must recognize that slowing the Per Capita Growth Rate of Medicare versus the Per Capita Growth Rate is a continuous process which has just begun. It combines not only the change in the financial model based on the rules of the ACO as described above, but it involves the development and integration of new technologies around the digitization of the U.S. healthcare system, in general.

Through government sponsored initiatives under the HITECH Act of 2009 with its Mandatory “Meaningful Use” Component driving adoption, these electronic medical record systems form the basis for enabling the financial changes in the system to occur at the pace projected by both the Kaiser Family Foundation research and by the Secretary of Health and Human Services.

As a result, organizations are looking for new tools to aggregate, analyze, and report data in various ways. Such data management capabilities are critical to ensuring compliance with measures for CMS (Centers for Medicare & Medicaid Services), PQRS (Physician Quality Reporting System), pay-for-performance, ACO, and other reimbursement models.

One factor assisting in data management today is new tools for interoperability and data mapping. This type of connectivity facilitates efficient data exchange and improved data mining, and has placed powerful data analytics and predictive modeling within reach.

Under the Medicare “Shared Savings” program, which will encourage the development of accountable care organizations, ACOs will be eligible to receive additional payments if they meet predetermined quality and savings measures. The program began in January 2012. The majority of the data presented in this Dissertation will need to be based on the results of this 3 year government pilot project to see if it will work.

 

Figure 22 (below) depicts the ACO Continuum put forth by General Electric Healthcare on an electronic billboard at their booth at the HIMSS Conference in 2011. It identifies the different stages of digitization ACOs are going through to leverage technology that will “bend the cost curve” while improving the quality, digital coordination, improved patient engagement, evidenced based clinical decision support and population management tools which will help to drive the Per capital Cost of delivery of care to the Medicare population down from its current levels to meet HHS budgetary constraints put forth by the HHS Secretary in her 2014 Budget.

Figure 22. The ACO Continuum

ACOs will strive to integrate clinical information and coordinate care, thereby easing the burden of today’s fragmented system in which medical records are often lost or inaccessible, and treating providers are unable to collaborate as quickly and efficiently as professionals in other industries. For example, while it typically takes 9 milliseconds to process a credit card transaction around the world with 24 points of contact with different banks, most treating physicians can’t get copies of a patient’s recent medical record, lab results, pharmacy records, or imaging studies from other providers when needed. As a result, physicians frequently have to reorder expensive tests.

In addition, physicians often have to wait days to obtain telephonic utilization review approval for vital procedures, or wait weeks or even months to get paid for a medically appropriate visit or procedure.

CMS will establish a cost benchmark for each ACO based on the last three years of Medicare expenditures, adjusted for risk and other factors. The benchmark will be trended forward using projected growth in national Medicare spending.

CMS will use patient surveys, provider reporting and claims data to rate ACO pioneers on 33 measures of patient experience and safety, care coordination, preventive health and at-risk care. In order to succeed, ACOs must have the ability to track and report the quality and performance measures and calculate shared savings and loss rates.

The Medicare ACO program has given many hospitals, provider organizations, and large integrated healthcare systems the opportunity to consolidate independent physician practices into ACOs. These organizations have developed the legal and technical infrastructure to enable more accountable, coordinated care than the current fee-for-service system.

Leveraging this infrastructure, many ACOs will use data analytics, predictive models, and business intelligence tools to analyze their local patient populations in order to target specific employers in the region and offer them better rates and coverage than competing non-ACO-based insurance companies.

Historically, providers often rely on insurance companies to provide actuarial claims data for their contract negotiations. Today, however, provider organizations can invest in their own data analytics and predictive capabilities, and connect to physician practice management and electronic medical records systems. In this way, they can gather and analyze data in order to “level the playing field,” and use business analytics to secure more favorable contract terms and rates than in the past to help reduce cost under the Medicare Shared Savings Program of the Patient Protection and Affordable Care Act of 2010.

 

  1. B.  Conceptual Empirical Design

In this Doctoral program, we have learned a great deal about research models and done some primary research for several class papers.  As a source, Creswell (2007 Edition) defined several empirical research paradigms focused on (1) Qualitative versus (2) Quantitative research models. Miles and Huberman (1994) discussed Qualitative Data Analysis.

Qualitative research focuses primarily on literature research and empirical impressions of the researcher on based on opinions, values, traditions, cultures and imprecise rules to create meaningful analysis, classifications, predictability and repeatability.

Quantitative models focus primarily on numerical proofs seeking meaning from the available data with great precision. It can be broken down into specific subcategories such as: (a) traditional, (b) positive (c) experimental, and (d) empiricist. The choice of which methodology to use is based on the researcher’s available time, data, skills and project scope.

The empirical design of this Doctoral Thesis and Dissertation will be based on the Hypothesis that over the next 18-24 month period, the Accountable Care Organizations formed and approved by the Centers for Medicare and Medicaid under the Patient Protection and Affordable Care Act will have a quantitatively demonstrable  impact on the Projected Difference Between Growth in Medicare Spending per Beneficiary and Growth in GDP per Capita in line with the projections put forth by Chapin White on page 6 of his white paper entitled, “Medicare Spending Limits: Issues and Implications,” as published by The Kaiser Family Foundation in last month (March 2013).

This Dissertation will take both a Qualitative and Quantitative Approach. For the qualitative analysis, there is literature which is being published almost every day on whether or not Accountable Care will, in fact, be able to “bend the cost curve.” This means reducing the rapid projected growth in U.S. Healthcare costs from nearly $3 Trillion to a staggering $4.8 Trillion by 2020. The corresponding change in these healthcare costs is a growth from 17.6% of the U.S. Gross Domestic Product to a projected 20%.

The effect of any change in the projected growth rate in Medicare Spending per Beneficiary and Growth in GDP per Capita due to Accountable Care can best be quantified through research over the next 18-24 months by examining the change in the rate of growth of the Medicare Security Trust Fund Expenditures on a per capita basis. This is the main problem to be addressed. As discussed in Section 1, current Medicare expenditures for 2013 are projected to be $504 Billion.  In 2014, they are projected to be $524.

Chapin White’s analysis projects a 3.5% decrease in the growth rate in Medicare Spending per Beneficiary and Growth in GDP per Capita in 2013, followed by an additional decrease of 2.1% in 2014.  In 2015, as the 3red year of the first 259 ACOs begin to show results, White projects a further peak 3.8% decline in the growth rate.   This completes the first contract year round.

 

Starting in 2016, White begins to project a smaller impact on the growth rate of approximately a 1% decline per year, leveling off at a 0% growth rate in 2019 when the Independent Payment Advisory Board (IPAB) is required to be formed to make final recommendations to Congress on how to protect the Medicare Trust Fund from exhaustion.

As described earlier in this Concept Paper, the Centers for Medicare and Medicaid and the U.S. Department of Health and Human Services have identified of the following 15 chronic conditions as the most common high cost conditions amongst Medicare beneficiaries (http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/Chronic-Conditions/index.html).

  1. Alzheimer’s disease, related disorders, or senile dementia
  2. Arthritis (including rheumatoid and osteoarthritis)
  3. Asthma
  4. Atrial fibrillation
  5. Cancer (breast, colorectal, lung, and prostate)
  6. Chronic kidney disease
  7. COPD
  8. Depression
  9. Diabetes (excluding diabetic conditions related to pregnancy)
  10. Heart failure
  11. Hyperlipidemia (High cholesterol)
  12. Hypertension (High blood pressure)
  13. Ischemic heart disease
  14. Osteoporosis
  15. Stroke/Transient ischemic attack

 

These conditions are most likely to be the highest cost drivers of Medicare expense which cause the greatest financial exposure to the Medicare Security Trust Fund. CMS has created a Chronic Conditions Dashboard to allow tracking of these costs over time as the data becomes available.  Current data for the past decade from 2000 to 2009 is already available and some of these data are put for in Section 3 of this Concept Paper (“Approach”).

By combining a (1) continuous qualitative methodology of examining the literature and gaining industry impressions from ACOs implementing their shared savings programs and receiving a portion of the Medicare shared savings which they came produce (as documented by CMS), with (2) a quantitative methodology based on the available data from both public and private sources, this researcher should be able to test and challenge the projections put forth by Chapin White last month for accuracy and relevance.

Most likely this research methodology may involve visiting and corresponding with Mr. White to discuss his assumptions and follow them through over the next 18-24 months to track the progress and analyze these data as they become available. The methodology will likely involve interviewing numerous industry experts as well as government employees who gather the data.  It will also involve interviewing Directors of ACOs to determine if they are on track to produce the savings expected by both CMS and Chapin White.

As a very active member of the ACO community and having some contacts at the highest levels of Kaiser Healthcare, the researcher believes he is in a very good position to gather this primary quantitative and qualitative data better and faster than most other industry observers.

According to the Doctoral Programs Dissertation Guidelines, on the top of page 10 it says “It is crucial to choose a topic that will sustain your interest for at least the 18 to 24 months it takes to complete the dissertation.”  This is very timely in that much of these data will become publicly available over the next 18 to 24 months.  This will allow this Doctoral thesis to be of great significance in contributing to the available body of literature in healthcare finance.

The differences in the quantitative versus qualitative approach to proving this theory will be based on the differences approach regarding the ontology (nature of reality), epistemology (relationship to the data and concepts being researched), the axiology (role of values), rhetorical (use of language/words and overall methodology.

I have already acquired these data since 2000 for the study and have included some of this in tables I have produced below. In these tables, chronic conditions were identified by CMS through Medicare administrative claims. Medicare beneficiaries were considered to have a chronic condition if the CMS administrative data had a claim indicating that they were receiving a service or treatment for the specific condition. Detailed information on the identification of chronic conditions in the CCW is available at http://www.ccwdata.org/chronic-conditions/index.htm

The statistics available in the Dashboard include: (1) the prevalence of Medicare beneficiaries with the specific 15 conditions, (2) the prevalence and per capita Medicare spending for beneficiaries with multiple chronic conditions, based upon counting the number of conditions from the set of 15 conditions and (3) utilization metrics for 30-day hospital readmissions and emergency department (ER) visits by the number of chronic conditions.

In addition to the information being available at the state, HRR, and national levels, the Dashboard also allows the user to select information for specific beneficiary sub-groups defined by gender, age group and dual eligibility status. Dual Eligibles are those beneficiaries that receive benefits from both Medicare and Medicaid. Medicare beneficiaries were classified as Dual Eligibles if in any month in the given calendar year they were receiving full or partial Medicaid benefits.

Information presented on the individual chronic conditions does not mean that the beneficiary has only that condition as beneficiaries with any of the specific conditions may have any of the other conditions examined or conditions not included in our list.

Medicare spending includes total Medicare payments for all Medicare covered services. Medicare spending is presented as standardized costs per beneficiary (per capita costs). We standardize spending to remove geographic differences in payment rates for individual services as a source of variation. To standardize spending, we examined Medicare’s various FFS payment systems and identified the factors that lead to different payment rates for the same service.

In general, those factors are adjustments that Medicare makes to account for local wages or input prices, and extra payments that Medicare makes to advance other program goals, such as compensating certain hospitals for the cost of training doctors. We then estimated what Medicare would have paid for each claim without those adjustments.

CMS are committed to ensure that this Dashboard remains accessible to everyone, so that accessing these data for this Doctoral Dissertation should be readily available for quantitative analysis. CMS is obligated by the federal Privacy Act, 5 U.S.C. Section. 552a and the HIPAA Privacy Rule, 45 C.F.R Parts 160 and 164, to protect the privacy of individual beneficiaries and other persons. All direct identifiers have been removed from this data file.  In addition, information is suppressed that is based upon fewer than eleven (11) beneficiaries in the population.

The data for this Dashboard come from the 2011 CMS administrative claims data for 100 percent of Medicare beneficiaries enrolled in the FFS program, which are available from the CMS Chronic Conditions Warehouse www.ccwdata.org.

Centers for Medicare & Medicaid Services (CMS) receives numerous requests for data which are used to develop aggregated statistics, charts and graphs. The CCW website now provides interactive Medicare dashboard reports, as well as various statistical graphs, charts, maps, tables and reports.  These resources contain valuable content on a large volume of Medicare populations, including summary statistics tables and reports for:

  • Medicare Beneficiary Count for 2000 – 2009
  • Medicare Chronic Condition Statistics
  • Medicare Cost & Utilization
  • Medicare Beneficiaries with Nursing Home or Home Health Assessment
  • Medicare Part D Prescription Drug Data

Summary statistic charts are available for various Medicare enrollment demographics, including:

  • Medicare Enrollment by Age Group, Race, Gender, Coverage Type, or Medicare Status
  • Medicare Enrollment by Age Group and FFS Status
  • Medicare Enrollment by Coverage Type and Racial Group
  • Medicare Enrollment by State by Year

 

The following interactive dashboard reports are available to view and manipulate visualizations of Medicare data:

  • Chronic Conditions Dashboard – presents 2011 state, Hospital Referral Region, and national comparison data on the prevalence of chronic conditions, as well as Medicare costs and utilization measures for beneficiaries with chronic conditions.


 

Table 9. CMS Chronic Condition Data Warehouse (CCW) Medicare 5% Sample* Medicare Beneficiary Counts for 2000 Through 2009

Beneficiary Demographics 2000 2,079,437 Ben 2001 2,100,845 2002 2,126,692 2003 2,158,600 2004 2,190,475 2005 2,232,528 2006 2,273,332 2007

2,327,327 2008 2,385,4542009 2,448,689Coverage†           Full or Nearly Full fee-for-service (FFS)1,486,0691,534,3851,586,1391,623,0591,644,1881,648,1751,601,8361,579,2921,561,6001,558,375Non-FFS593,368566,460540,553535,541546,287584,353671,496748,035823,854890,314Medicare Status           Aged1,800,6581,811,7131,824,7231,842,0141,857,5971,883,3611,909,8241,951,0781,997,9302,043,989Disabled278,779289,132301,969316,586332,878349,167363,508376,249387,524404,700End Stage Renal Disease (ESRD)          Yes16,48317,48818,55719,35319,97020,63921,34021,91522,53223,500No2,062,9542,083,3572,108,1352,139,2472,170,5052,211,8892,251,9922,305,4122,362,9222,425,189Gender‡           Male902,829914,522928,828945,953963,751985,6291,007,1101,034,8371,064,7911,096,886Female1,176,6081,186,3231,197,8641,212,6471,226,7241,246,8991,266,2221,292,4901,320,6631,351,796Race           White1,766,9291,781,1281,798,8281,821,3441,841,7931,870,2241,898,6071,939,2751,982,5152,027,883Black196,518200,362204,500209,322214,210220,950227,185233,950241,303249,962Hispanic48,69249,20349,83950,68951,24753,32555,03957,04759,30161,799Asian/Pacific Islander28,99930,58932,07333,65934,83437,31339,56041,83744,28646,966American Indian/Native American7,7738,0098,2788,4938,7289,2099,4669,91210,29910,674Other25,00626,51328,48230,70235,03537,17139,33141,40743,82146,153Unknown5,5205,0414,6924,3914,6284,3364,1443,8993,9295,252Age▲          <65278,779289,132301,969316,586332,878349,167363,508376,249387,524404,70065-74908,674908,320909,339916,163923,852936,988955,725988,5371,028,2531,065,33175-84643,244650,744658,688663,569667,576670,917669,094669,104667,385668,03585+248,740252,649256,696262,282266,169275,456285,005293,437302,292310,623

 

Footnotes

* Includes random 5% sample of Medicare beneficiaries who were enrolled in Medicare on or after January 1, YYYY.

†Full or Nearly Full fee-for-service (FFS) indicates the beneficiary had 11 or 12 months of both Part A and Part B fee-for service coverage, or for persons who died during the year, from January 1 until date of death. Non-FFS indicates the beneficiary had less than 11 months of Part A and Part B fee-for-service coverage or coverage that started March or later – includes people with more than one month of HMO coverage. Some FFS beneficiaries are participants in case or disease management demonstration projects (effective 2005 forward) indicated by a value of “4” for the monthly HMO indicator in the CMS Denominator File. These beneficiaries are not considered to have HMO coverage during these months.

‡ Where category totals do not sum to the total sample, there may be a small number of ‘unknowns’.

▲Age is calculated based on the age of the Medicare beneficiary as of December 31, YYYY. If the beneficiary expired, the age is calculated based on age at the time of death.

 


 

Table 10. CMS Chronic Condition Data Warehouse (CCW) Medicare 5% Sample* Medicare Beneficiary Counts† for Chronic Conditions for 2000 Through 2009

Beneficiary Demographics 2000 2,079,437 Ben 2001 2,100,845 2002 2,126,692 2003 2,158,600 2004 2,190,475 2005 2,232,528 2006 2,273,332 2007

2,327,327 2008 2,385,4542009 2,448,689Acute Myocardial Infarction

17,819

16,897

16,612

16,904

15,468

17,819

16,897

16,612

16,904

15,468

Alzheimer’s Disease

87,567

89,687

90,706

90,619

90,179

87,567

89,687

90,706

90,619

90,179

Alzheimer’s Disease, etc.

186,159

188,601

190,474

191,822

192,300

186,159

188,601

190,474

191,822

192,300

Atrial Fibrillation

128,102

130,154

130,132

127,975

129,727

128,102

130,154

130,132

127,975

129,727

Cancer, Colorectal

16,844

16,371

16,149

15,908

15,241

16,844

16,371

16,149

15,908

15,241

Cancer, Endometrial

2,499

2,596

2,548

2,607

2,617

2,499

2,596

2,548

2,607

2,617

Cancer, Female Breast

31,555

31,774

31,848

32,162

32,309

31,555

31,774

31,848

32,162

32,309

Cancer, Lung

16,390

16,230

16,608

16,571

16,494

16,390

16,230

16,608

16,571

16,494

Cancer, Prostate

48,610

48,094

48,124

47,626

46,582

48,610

48,094

48,124

47,626

46,582

Cataract

390,007

377,252

363,390

346,728

339,718

390,007

377,252

363,390

346,728

339,718

Chronic Kidney Disease

160,399

184,686

205,626

221,245

235,300

160,399

184,686

205,626

221,245

235,300

Chronic Obstructive Pulmonary Disease

190,768

187,094

186,421

184,715

182,062

190,768

187,094

186,421

184,715

182,062

Depression

205,688

211,272

215,953

225,975

235,374

205,688

211,272

215,953

225,975

235,374

Diabetes

439,621

460,048

471,052

479,474

483,678

439,621

460,048

471,052

479,474

483,678

Glaucoma

171,669

171,331

169,485

167,554

168,182

171,669

171,331

169,485

167,554

168,182

Heart Failure

313,995

310,098

301,225

292,743

283,170

313,995

310,098

301,225

292,743

283,170

Hip/Pelvic Fracture

13,789

13,561

13,542

13,244

12,695

13,789

13,561

13,542

13,244

12,695

Ischemic Heart Disease

574,817

573,443

566,431

560,071

549,785

574,817

573,443

566,431

560,071

549,785

Osteoporosis

203,498

204,172

203,285

207,405

208,753

203,498

204,172

203,285

207,405

208,753

Rheumatoid Arthritis / Osteoarthritis

350,803

351,147

349,092

351,035

354,969

350,803

351,147

349,092

351,035

354,969

Stroke / Transient Ischemic Attack

78,922

76,100

73,990

72,151

69,867

78,922

76,100

73,990

72,151

69,867

 

Footnotes

* Includes random 5% sample of Medicare beneficiaries who were eligible for or enrolled in Medicare on or after January 1, YYYY.

† Beneficiaries may be counted in more than one chronic condition category.

▲ Chronic conditions have a 1 to 3 year look-back time period (reference period). Since the data included in the CCW begins in 1999, beneficiaries cannot meet any chronic condition algorithm that has a 2 or 3 year look-back until 2000 or 2001 (respectively). Please refer to the CCW Condition Categories for more information.

NOTE: These counts consider fee-for-service administrative claims only. The beneficiaries included in these counts may have any combination of Medicare coverage, including full or partial fee-for-service and/or HMO coverage. The application of coverage restrictions/criteria will impact the size of these samples.

 

 

Table 11. CMS Chronic Condition Data Warehouse (CCW) Medicare 5% Sample* Total Number of Medicare Claims† by Claim Type 2006 Through 2009 Table C.1 Page 1 of 1 This material was developed under a contract with the Centers for Medicare & Medicaid Services (CMS).

Medicare Claim Type

2006

2007

2008

2009

Total Claims:

50,674,161

50,586,952

50,934,912

51,815,888

Inpatient

666,092

654,454

647,701

622,696

Skilled Nursing Facility

241,578

260,501

276,394

278,593

Home Health Agency (HHA)

277,499

295,761

313,457

334,319

Hospice

170,937

182,866

185,040

193,091

Outpatient

7,089,939

7,055,616

7,082,430

7,257,295

Physician/Supplier

39,085,755

38,970,496

39,204,739

39,975,773

Durable Medical

3,142,361

3,167,258

3,225,151

3,154,121

 

Table 12. CMS Chronic Condition Data Warehouse (CCW) Medicare 5% Sample* Total Medicare Fee-for-Service Reimbursements† (in Millions) by Claim Type 2006 through 2009 Table D.1 Page 1 of 1 This material was developed under contract with the Centers for Medicare & Medicaid Services (CMS).

 Medicare Claim Type

2006

2007

2008

2009

Total Claims:

50,674,161

50,586,952

50,934,912

51,815,888

Inpatient

$5,818

$5,844

$6,015

$6,293

Skilled Nursing Facility

$1,020

$1,114

$1,219

$1,280

Home Health Agency (HHA)

$707

$793

$862

$954

Hospice

$461

$517

$558

$605

Outpatient

$1,774

$1,879

$2,009

$2,232

Physician/Supplier

$3,809

$3,816

$3,921

$4,098

Durable Medical

$478

$489

$506

$480

The CMS Chronic Condition Data Warehouse (CCW) http://www.ccwdata.org/web/guest/medicare-charts can provide this researcher with Medicare and Medicaid beneficiary, claims, and assessment data linked by beneficiary across the continuum of care. In the past, researchers analyzing data files were required to perform extensive analysis related to beneficiary matching, de-duplication, and merging of the files in preparation for this Doctoral Dissertation’s quantitative analysis.

The Chronic Condition Data Warehouse (CCW) is a research database designed to make Medicare, Medicaid, Assessments, and Part D Prescription Drug Event data more readily available to support research designed to improve the quality of care and reduce costs and utilization. This should allow this researcher the opportunity to perform both a thorough and meaningful qualitative and quantitative analysis for this Doctoral Dissertation.


 

SECTION 3:  REFERENCES

  1. A.  Suggested Reference Texts, Articles and Data Sources

 

The following references are an initial list of Reference Texts, Articles and Data Sources for this Doctoral Dissertation. This research expects to add to this list extensively during Dr. Bendixen’s Literature Review Course (DOC6011), if accepted.

 

Reference Texts:

 

  1. Brown, G.D., Patrick, T. B. & Pasupathy, K. S. (2013). Health Informatics: A Systems Perspective. Chicago: Health Administration Press. ISBN 13: 978-1-56793-435-9

 

  1. Creswell, J.W. (2007). Qualitative Inquiry and Research Design, Choosing Among Five Approaches. Sage: Thousand Oaks, CA.

 

  1. Duncan, I. (2011). Healthcare Predictive Modeling and Risk Adjustment. Winsted, CT: ACTEX Publications. ISBN-13: 978-1566987691

 

  1. Feldstein, P., (2011). Health Policy Issues: An Economic Perspective, Fifth Edition. Chicago: Health Administration Press. ISBN 13: 978-1-56793-418-2. http://www.ache.org/pubs/redesign/productcatalog.cfm?pc=WWW1-2182

 

  1. Gapenski, L. C., (2013).  Fundamentals of Healthcare Finance, Second Edition. Chicago: Health Administration Press.  ISBN 13: 978-1-56793-475-5.

 

  1. Glandon, G.L., Smaltz, D.H. & Slovensky (2013). Austin and Boxerman’s Information Systems for Healthcare Management, Seventh Edition. Chicago: Health Administration Press. ISBN 13: 978-1-56793-297-3

 

  1. Herzlinger, R.  (2007). Who Killed Healthcare? New York: McGraw-Hill.

 

  1. Miles, M.B. & Huberman, A.M. (1994).  Qualitative Data Analysis, 2nd Edition. Sage: Thousand Oaks, CA.

 

  1. Shi, L. and Singh, D., (2012).  Delivering Healthcare in America, A Systems Approach, Fifth Edition. Maynard, MA: Jones and Bartlett Learning, LLC.  http://www.amazon.com/Delivering-Health-Care-In-America/dp/1449626505#reader_1449626505

 

  1. Smith, P.A., (2012). Making Computerized Provider Order Entry Work (Health Information Technology Standards), First Edition. London: Springer. ISBN: 144714242X http://www.amazon.com/Computerized-Provider-Information-Technology-Standards/dp/144714242X/ref=tmm_hrd_title_0

 

  1. The Society for Healthcare Strategy & Market Development (2012). Futurescan 2013: Healthcare Trends and Implications 2013-2018. Chicago: Health Administration Press.

Reference Articles: These articles were referenced in preparing this Concept Paper Draft. This researcher would expect to add additional references under Dr. Bendixen’s direction.

  1. Blahous, C. P. and Reischauer, R. D. (2013). A Summary of the 2012 Annual Social Security and Medicare Trust Fund Reports. A Message from the Public Trustees. January 13. As found at: http://www.ssa.gov/oact/trsum/

 

  1. Brino, A. (2013) HHS proposes $967B budget for 2014, budget up $60M from last year would boost Medicare enrollment, fund HIXs, Healthcare IT News: Washington, D.C. (April 11). As accessed at: http://www.healthcareitnews.com/news/hhs-proposes-967b-budget-2014?single-page=true

 

  1. Budget of the United States Government, FY 2008. (2008) Department of Health and Human Services.

 

  1. Caramenico, A. (2013) Survey: ACOs want help from pharma to reduce costs. Fierce Healthcare (April 15). As found at:  http://www.fiercehealthcare.com/story/survey-acos-want-help-pharma-reduce-costs/2013-04-17?utm_medium=nl&utm_source=internal

 

  1. Centers for Medicare and Medicaid. As found at: http://www.cms.gov/Research-Statistics-Data-and Systems/Research/ActuarialStudies/downloads/MedicaidReport2010

 

  1. Centers for Medicare and Medicaid. (2013). How Medicare is funded. Medicare.gov. As found at: http://www.medicare.gov/about-us/how-medicare-is-funded/medicare-funding.html

 

  1. Centers for Medicare and Medicaid. Medicare Costs at a glance. Medicare.gov. As found at: http://www.medicare.gov/your-medicare-costs/costs-at-a-glance/costs-at-glance.html

 

  1. Centers for Medicare and Medicaid. How Original Medical works. Medicare.gov. As found at: http://www.medicare.gov/sign-up-change-plans/decide-how-to-get-medicare/original-medicare/how-original-medicare-works.html

 

  1. Cubanski, J., Huang, J., Damico, A., Jacobson, G., & Newman, T. (2010). Medicare ChartBook, 4th edition. Kaiser Family Foundation: Menlo Park, CA. Accessed at: http://facts.kff.org/chart.aspx?cb=58&sctn=168&ch=1785

 

  1. e-healthlink (2013). “Where Do Medicare Funds Come From?” Roseburg, OR. As found at: http://www.ehealthlink.com/Senior/medicare-funding.aspx

 

  1. Fleming, C.  (2011). U.S. Health Spending Projected to Grow 5.8 Percent Annually, July 28th post. As found at:http://healthaffairs.org/blog/2011/07/28/u-s-health-spending-projected-to-grow-5-8-percent-annually/

 

  1. Galewitz, P. (2010). Consumers guide to health reform. Kaiser Health News, Menloe Park, CA.  March 26.

 

 

 

  1. Geithner, T., Sebelius, K., Blahous, C.P., Solis, H.L.& Berwick, D.M. (2010).  The 2010 Annual Report of the Boards of Trustee of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds. As found at: https://www.cms.gov/ReportsTrustFunds/downloads/tr2010.pdf

 

  1. HIMSS Analytics. www.himssanalytics.org.

 

  1. Geithner, T., Sebelius, K., Blahous, C.P., Solis, H.L., Astrue, M.J., Reischauer, R. D., (2012). Social Security and Medicare Boards of Trustees, A Summary of the 2012 Annual Social Security and Medicare Trust Fund Reports. As found at: http://www.ssa.gov/oact/trsum/

 

  1. Georgetown University (2008).  Medicaid and state budgets: looking at the facts.  Georgetown University Center for Children and Families. May 2008.

 

  1. Health Data Management (2013). The rush toward value based purchasing is on. Will accountable care organizations run quickly across the finish line?  Source Media Marketing Solutions Group (April Issue).  As posted at: http://digital.healthdatamanagement.com/healthdatamanagement/2013acos/?pg=2&pm=2&u1=friend#pg2

 

  1. Health Data Management On-line. As found at: http://www.healthdatamanagement.com/news/medicare-cms-accountable-care-organization-bundled-payments-45919-1.html?ET=healthdatamanagement:e3347:194670a:&st=email

 

  1. Investopedia (2013). Definition of the CPI-U as found at: http://www.investopedia.com/terms/c/cpiu.asp

 

  1. Investopedia (2013). As found at: http://www.investopedia.com/terms/o/oasdi.asp

 

  1. Jacobson, G., Damico, A., Neuman, T. & Huang, J. (2009).  What’s in the stars? Quality ratings of medicare advantage plans, 2010. Kaiser Family Foundation, Menlow Park, CA. December Issue.

 

  1. Kaiser Family Foundation, (2010). Focus on health care reform: A summary of the new health reform law. As found at: http://www.kff.org/healthreform/upload/8061.pdf

 

  1. Medix (2013). “What is hospice care? Medix.com. As found at http://www.medicare.com/assisted-living/hospice-care.html

 

  1. Muhlestein, D., Crowshaw, A., Merrill, T., Pena, C., (2012). Growth and dispersion of accountable care organizations, Leavitt Partners (June).

 

  1. Office of Retirement and Disability Policy (2013). OASDI and SSI rates and limits – 2013. Social Security.gov.  As found at: http://www.socialsecurity.gov/policy/docs/quickfacts/prog_highlights/RatesLimits2013.pdf

 

 

 

  1. Orszag, P. L., (2008). The long-term budget outlook and options for slowing the growth of health care costs before the committee on finance United States Senate, June 17, 2008. Washington, DC: Congressional Budget Office. As found at: http://www.cbo.gov/sites/default/files/cbofiles/ftpdocs/93xx/doc9385/06-17-ltbo_testimony.pdf

 

  1. Potetz, L.  Cubanski, J., and Neuman, T. (2011). Medicare spending and financing, a primer. Kaiser Family Foundation: Menlo Park, CA.  Accessed at: http://www.kff.org/medicare/upload/7731-03.pdf

 

  1. Quinn, J.  (2013). The truth about how bankrupt the social security system is.  As found at:http://www.zerohedge.com/news/2013-01-12/guest-post-social-security-system-already-broke

 

  1. Social Security Act. Title IX, Sec. 1101(a)(8)(B). As found at: http://www.SSA.gov.

 

  1. Social Security Act. Title XVIII. As found at: http://www.SSA.gov

 

  1. United States Department of Labor, Bureau of Labor Statistics. As found at: http://www.bls.gov/cpi/cpifact4.htm

 

  1. Villarreal, P., (2006). Federal Medicaid Funding Reform. National Center for Policy Analysis, July 31, 2006, No. 566. As found at: http://www.ncpa.org/pub/ba566/

 

  1. Waters, J. (2013). Making sense of social security and medicare.  The Wall Street Journal Online. March 24. As found at: http://online.wsj.com/article/SB10001424127887323869604578368481493685730?mg=reno64-wsj.html?dsk=y

 

  1. White, C. (2013). “Medicare Spending Limits: Issues and Implications,” The Kaiser Family Foundation (March)]. As found at: https://snt143.mail.live.com/default.aspx?id=64855&rru=inbox#n=116480129&rru=inbox&fid=1&fav=1&mid=e5460902-9687-11e2-9878-001e0bcc060c&fv=1

 

 

Data Sources: This is an initial list of data sources used in the preparation of this Draft Concept Paper.

HHS Strategic Framework on Multiple Chronic Conditions:  (http://www.hhs.gov/ash/initiatives/mcc/).

The CMS Chronic Condition Data Warehouse (CCW): http://www.ccwdata.org/web/guest/medicare-charts and http://www.ccwdata.org/chronic-conditions/index.htm

CMS.gov. Medicare Shared Savings Program. As found at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/sharedsavingsprogram/index.html?redirect=/sharedsavingsprogram/

Geithner, T., Sebelius, K., Blahous, C.P., Solis, H.L., Astrue, M.J., Reischauer, R. D., (2012). Social Security and Medicare Boards of Trustees, (2012). A Summary of the 2012 Annual Reports. Social Security and Medicare Boards of Trustees, A Summary of the 2012 Annual Social Security and Medicare Trust Fund Reports. As found at: http://www.ssa.gov/oact/trsum/

  1. B.  Proposed Journal Articles For Review

 

 

  1. Berwick, D.M. (2011). Making good on ACOs’ promise — the final rule for the Medicare Shared Savings Program. New England Journal of Medicine, 365:1753-1756. November 10, DOI: 10.1056/NEJMp1111671. As found at: http://www.nejm.org/doi/full/10.1056/NEJMp1111671

 

  1. Berwick, D.M. (2011). Launching accountable care organizations — the proposed rule for the Medicare Shared Savings Program. New England Journal of Medicine, 364:e32 April 21,:DOI: 10.1056/NEJMp1103602. As found at: http://www.nejm.org/doi/full/10.1056/NEJMp1103602

 

  1. Crosson, J.C., Stroebel, C., Scott, J.G., Stello, B., & Crabtree, B.F. (2005). Implementing an electronic medical record in a family medicine practice: communication, decision making, and conflict. Annals of Family Medicine, 3(4):307–311.

 

  1. Fisher, E.S., McClellan, M.B., & Safran, D.G. (2011). Building the path to accountable care

New England Journal of Medicine, 365:2445-2447. December 29. DOI: 10.1056/NEJMp1112442.  As found at: http://www.nejm.org/doi/full/10.1056/NEJMp1112442

 

  1. Fisher, E.S. (2008). Building a medical neighborhood for the medical home. New England Journal of Medicine, 359(12):1202-1205.
  2. Grumbach, K., & Bodenheimer, T. (2002). A primary care home for Americans: putting the house in order. Journal of the American Medical Association, 288(7):889–893.

 

  1. McWilliams, J.M., & Song, Z. (2012). Implications for ACOs of variations in spending growth

New England Journal of Medicine, 366:e29. May 10. DOI: 10.1056/NEJMp1202004 As found at: http://www.nejm.org/doi/full/10.1056/NEJMp1202004

 

  1. Nutting, P.A., Miller, W.L., Crabtree, B.F., Jaen, C.R., Stewart, E.E. & Stange, K.C., (2009). Initial lessons from the first national demonstration project on practice transformation to a patient-centered medical home. Annals of Family Medicine. As found at: http://www.annfammed.org/content/7/3/254.full

 

  1. Paulus, R.A., Davis, K., & Steele, G.D. (2008). Continuous innovation in health care: implications of the Geisinger experience. Health Affairs (Millwood), 27(5):1235-1245.

 

  1. Reid, J., Fishman, P.A., Yu, O., Ross, T.R., Tufano, J.T., Soman, M.P., and Larson, E.B., (2009). Patient-centered medical home demonstration: a prospective, quasi-experimental, before and after evaluation.  American Journal of Managed Care: 15(9):71-87. As found at: http://www.ajmc.com/articles/AJMC_09sep_ReidWEbX_e71toe87

 

  1. Rittenhouse, D.R., and Shortell, S.M., (2009). The Patient-Centered Medical Home: Will It Stand the Test of Health Reform? Journal of the American Medical Association. 301(19):2038-2040. doi:10.1001/jama.2009.691.

 

SECTION 4: APPENDICES

  1. A.    What is the Outlook for Social Security and Medicare Costs in Relation to GDP?

According to the Trustees of the Social Security Trust Fund[73], one of the best ways to examine the projected cost of Social Security and Medicare is to “compare the cost of scheduled benefits for the two programs with the gross domestic product (GDP).” The Gross Domestic Product is considered by this government entity to be the most frequently used measure of the total output of the U.S. economy (Figure 23). All the following data and information in this Appendix Section A are paraphrased from this Summary of the 2012 Annual Social Security and Medicare Trust Fund Report written and published by the Trustees of these Funds.

Figure 23. Social Security and Medicare Cost as a Percentage of GDP

 

Source:. A Summary of the 2012 Annual Reports. Social Security and Medicare Boards of Trustees

As depicted in Figure 23 (above), in 2012, the combined cost of the Social Security and Medicare programs equaled 8.5% of GDP. The Trustees are now projecting that this will increase to about 12.1% of GDP by 2035.  The combined programs are then expected to reach 12.8% of GDP by 2086.

Medicare Costs

Since Medicare costs are currently 3.7% of GDP, it is smaller than Social Security at 4.9% of GDP.  As per the Figure 23, Medicare costs as a percentage of GDP gradually rise until it equals Social Security in 2049.  At that point, Medicare becomes more expensive that Social Security. By 2059, Medicare cost is projected to be roughly 10% larger than the cost of Social Security.

These Medicare cost increases are primarily due to:

(1) The rapidly rising number of beneficiaries rises as the baby-boom generation retires; and

(2) The lower birth rates that have persisted since the baby boom cause slower growth of the labor force and GDP.

According to the Trustees, Medicare costs are expected to rise to 5.7% of GDP by 2035. This is primarily due to the increasing number of eligible Medicare beneficiaries. By 2086, 50 years later, the growth in the cost per beneficiary is expected to contribute more to the cost increase than simply the growing number of Medicare enrollees.  This is projected to further raise the Medicare growth rate to 6.7% of GDP.

Social Security Costs

Meanwhile, Social Security costs are projected to increase to 6.4% of GDP by 2035 and then decline to 6.1% by 2055 because after the baby boomer generation will have passed through the system, there will be fewer workers expected to be on the Social Security liability roles. This annual 6.1% growth rate is expected to remain at about that level through 2086.

The projected costs for OASDI and HI depicted above in Figure 23 reflects the full cost of scheduled current-law benefits regardless of whether or not there are sufficient funding resources to meet expected obligations. The law precludes payment of any benefits beyond the amount that can be financed by the Trust Funds.  But the amount of benefits that would be payable in years after Trust Fund exhaustion is lower than shown.

The projected costs assume the full estimated savings of the Affordable Care Act as well as adherence to Medicare’s sustainable growth rate (SGR) limits. However, at the end of 2012, lawmakers prevented the 27% SRG reductions in payment rates for physician services that would otherwise have taken effect in 2013. Also, as described in the Medicare Trustees Report, the projections for HI and SMI Part B “depend significantly on the long-range feasibility of the various cost-saving measures in the Affordable Care Act. In particular, the lower increases in Medicare payment rates to most categories of health care providers. For such efforts to be successful in the long range, providers will have to generate and sustain unprecedented levels of productivity gains or other improvements in efficiency[74]”.

Figure 24. Outlook for Social Security and Medicare HI Costs in Relation to Taxable Income.

Source: A Summary of the 2012 Annual Reports. Social Security and Medicare Boards of Trustees

Employer and employee payroll taxes are the primary source of income for the OASDI and HI Trust Funds. Both the OASDI and HI annual cost rates are projected to rise over the long run from their 2011 levels (13.52% and 3.0% of taxable payroll, respectively).  By 2035, projected Social Security costs are projected to grow to 17.41% of taxable payroll.  It declines to 17.07% in 2052, and then is projected to rises gradually to 17.83% by 2086. The projected Medicare HI cost rate rises to 5.82% of taxable payroll in 2050 under the intermediate assumptions employed in this report, and thereafter gradually increases to 6.28% by 2086.

The OASDI income includes payroll taxes, taxes on benefits, and any other transfers of revenues to the Trust Funds except payments of interest.  The rate is 12.89% in 2012. It is projected to increase slightly over time, until it reaches 13.33% in 2086. Scheduled payroll tax rates are assumed to remain unchanged from 1990 levels, with the exception of temporary reductions in the tax rates for 2010, 2011, and 2012 that are offset by reimbursements from the General Fund of the Treasury[75].

Figure 25. OASDI and HI Income and Cost as a Percentage of Taxable Payroll

Source: A Summary of the 2012 Annual Reports. Social Security and Medicare Boards of Trustees

Annual income from the other tax source, the taxation of OASDI benefits, will increase gradually relative to taxable payroll as a greater proportion of Social Security benefits are subject to taxation in future years, but will continue to be a relatively small component of program income.

The projected HI income rate rises gradually from 3.20% in 2012 to 4.32% in 2086 due to the Affordable Care Act’s scheduled increase in payroll tax rates for high earners starting in 2013. Individual tax return filers with earnings above $200,000, and joint return filers with earnings above $250,000, will pay an additional 0.9 percent tax on earnings above these earnings thresholds. An increasing fraction of all earnings will be subject to the higher tax rate over time because the new law does not index the thresholds.

How Will Cost Growth in the Different Parts of Medicare Change the Sources of Program Financing? As Medicare costs grow over time, general revenue and beneficiary premiums will play an increasing role in financing the program. Chart C shows scheduled cost and non-interest revenue sources under current law for HI and SMI combined as a percentage of GDP. The total cost line is the same as displayed in Figure 23 and shows Medicare cost rising to 6.7% of GDP by 2086[76]

Figure 26. Medicare Cost and Non-Interest Income by Source as a Percentage of GDP

Source: A Summary of the 2012 Annual Reports. Social Security and Medicare Boards of Trustees

Projected revenue from payroll taxes and taxes on OASDI benefits credited to the HI Trust Fund increases from 1.4% of GDP in 2012 to 1.8% in 2086 under current law, while projected general revenue transfers to the SMI Trust Fund increase from 1.4% of GDP in 2012 to 3.0% in 2086, and beneficiary premiums increase from 0.5% to 1.0% of GDP. The share of total non-interest Medicare income from taxes would fall substantially (from 43% to 31%) while general revenue transfers would rise (from 42% to 50%), as would premiums (from 14%to 17%).

The distribution of financing changes in part because Part B and D costs increase at a faster rate than Part A cost under the Trustees” projections. By 2086, the Medicare SMI program will require general revenue transfers equal to 3.0 percent of GDP. Moreover, the HI deficit represents a further 0.8 percent of GDP in 2086. There is no provision under current law to finance this deficit through general revenue transfers or any other revenue source.

The Medicare Modernization Act (2003) requires that the Board of Trustees determine each year whether the annual difference between program outlays and dedicated revenues (the bottom four layers of Chart C) exceeds 45 percent of total Medicare outlays in any of the first seven fiscal years of the 75-year projection period. In effect, the law sets a threshold condition that signals that general revenue financing of Medicare is becoming excessive.

In that case, the annual Trustees Report must include a determination of “excess general revenue Medicare funding.” Two consecutive reports with such a determination triggers a “Medicare funding warning.” The warning directs the President to submit proposed legislation within 15 days of the next budget submission to respond to the warning and requires Congress to consider the proposal on an expedited basis. To date, elected officials have not enacted legislation responding to these funding warnings which have been included in the five previous reports.

This year’s report projects the difference between outlays and dedicated financing revenues to exceed 45 percent of total Medicare outlays during fiscal year 2012, prompting a determination of “excess general revenue Medicare funding” for the seventh consecutive report, triggering another “Medicare funding warning.”

What are the Budgetary Implications of Rising Social Security and Medicare Costs? Concern about the long-range financial outlook for Medicare and Social Security often focuses on the exhaustion dates for the HI and OASDI trust funds—the time when projected trust fund balances under current law would be insufficient to pay the full amounts of scheduled benefits. A more immediate issue is the growing burden that the programs will place on the Federal budget well before exhaustion of the trust funds.

Chart D shows the excess of scheduled outgo over dedicated tax and premium income for the OASDI, HI, and SMI trust funds expressed as percentages of GDP. Each of these trust funds’ operations will exert rapidly rising pressure on the Federal budget in future years. General revenues pay for roughly 75 percent of all SMI costs. From now through 2024, interest earnings and asset redemptions, financed from general revenues, will cover the shortfall of HI tax and premium revenues relative to expenditures. In addition, general revenues must cover similar payments as a result of growing OASDI deficits through 2033.2

 

Figure 27. Projected SMI General Revenue Funding plus OASDI and HI Tax Shortfalls
[Percentage of GDP]

Source: A Summary of the 2012 Annual Reports. Social Security and Medicare Boards of Trustees

In 2012, the projected difference between Social Security’s dedicated tax income and expenditures is $165 billion. For HI, the projected difference between dedicated tax and premium income and expenditures is $38 billion. The projected general revenue demands of SMI are $217 billion. Thus, the total general funds for Social Security and Medicare in 2012 are $420 billion, or 2.7% of GDP. Redemption of trust fund bonds, interest paid on those bonds, and transfers from the general funds provide no new net income to the Treasury, which must finance these payments through some combination of increased taxation, reductions in other government spending, or additional borrowing from the public.

Figure 27 shows that the difference between cost and revenue from dedicated payroll taxes, income taxation of benefits, and premiums will grow rapidly through the 2030s as the baby-boom generation reaches retirement age. This imbalance would result in vastly increased pressure on the Federal budget if the law were changed to maintain scheduled benefits in the absence of an increase in dedicated tax revenues, with such financing requirements equaling 4.8 percent of GDP by 2040.

What Is the Outlook for Short-Term Trust Fund Adequacy? The reports measure the short-range adequacy of the OASI, DI, and HI Trust Funds by comparing fund assets to projected costs for the ensuing year (the “trust fund ratio”). A trust fund ratio of 100 percent or more—that is, assets at least equal to projected costs for a year—is a good indicator of a fund’s short-range adequacy. That level of projected assets for any year suggests that even if cost exceeds income, the trust fund reserves, combined with annual tax revenues, would be sufficient to pay full benefits for several years.

By this measure, the OASI Trust Fund is financially adequate throughout the 2012-21 period, but the DI Trust Fund fails the short-range test because its projected trust fund ratio falls to 83 percent by the beginning of 2013, followed by exhaustion of assets in 2016.

The HI Trust Fund also does not meet the short-range test of financial adequacy; its trust fund ratio was 90 percent at the beginning of 2012 based on the year’s anticipated expenditures, and the projected ratio does not rise to 100 percent within five years. Projected HI Trust Fund assets are fully depleted in 2024. Chart E shows the trust fund ratios through 2040 under the intermediate assumptions.

The Trustees apply a less stringent annual “contingency reserve” test to SMI Part B assets since the overwhelming portion of the financing for that account consists of beneficiary premiums and general revenue contributions that are set each year to meet expected costs. Part D financing is also set on an annual basis. Moreover, the operation of Part D through private insurance plans, together with a flexible appropriation for Federal costs, eliminates the need for a contingency reserve in that account.

Note, however, that estimated Part B costs are improbably low for 2013 and beyond because the projections assume that current law, which substantially reduces physician payments per service under the sustainable growth rate system, will not change. The estimated physician fee reduction for 2013 is 30.9 percent. A reduction in fees of this magnitude is highly unlikely; lawmakers have acted to prevent smaller reductions in every year since 2003. Underestimated payments to physicians would affect projected costs for Part B, total SMI, and total Medicare.

 

Figure 28. OASI, DI, and HI Trust Fund Ratios [Assets as a percentage of annual cost]

Source: A Summary of the 2012 Annual Reports. Social Security and Medicare Boards of Trustees

The trust funds are required by law to hand over all surplus revenues to the Treasury and the Treasury then provides “special issue” non-marketable bonds—essentially electronic IOUs—to the trust funds in return for the cash. These “IOUs” become part of the national debt. When the Treasury pays “interest” that increases the value of the Social Security Trust Funds it does so by increasing the number of IOUs it owes the trust funds. When the Social Security program runs a net cash flow deficit, as it has in the last three fiscal years, the Treasury needs to borrow cash from the “public” to keep the program funded.

Does this look like a trend that is going to reverse itself or level out with 10,000 Boomers turning 65 years old every day?


 

  1. B.          The Outlook for Social Security and Medicare Costs versus GDP?

 

  Figure 29.  Total Annual Cost of Social Security

These costs will be exceeding $1 trillion per year in the near future. Meanwhile, the number of workers per retiree will continue to fall as it has for decades. In 1945 there were 42 workers per retiree. In 1965 there were 5 workers per retiree. Today there are less than 2.5 workers per retiree. There are only 1.6 full time private workers for every one retiree. There is much less revenue going into the Social Security System. The system is unsustainable and ignoring the problem will not make it go away.

Figure 30.  Ratio of Workers to Beneficiaries

A recent article on Bloomberg below barely scratches the surface of the massive fraud going on in the SSDI program. Those who think we owe them a living are faking disabilities by the millions. The number of annual applications were flat at 2.1 million per year between 2004 and 2007. They now exceed 3 million per year

Figure 31.  Monthly Trend of Extended and Emergency Unemployment Claims Compared to the Number of People on Disability (June 2008- April 2012).

.

http://www.zerohedge.com/news/2013-01-12/guest-post-social-security-system-already-broke


  1. C.  Sources of Income to the Trust Funds (2011)  

 

 

The following table shows income, by source, to each trust fund in 2011 (totals may not add due to rounding).

Table 13. Income, By Source, of each of the Social Security Trust Funds

Source (in billions)

OASI

DI

HI

SMI

Payroll taxes

$482.4

$81.9

$195.6

Taxes on benefits

22.2

1.6

15.1

Beneficiary premiums

3.5

65.4

Transfers from States

7.1

General Fund reimbursements

87.8

14.9

0.5

General revenues

$222.8

Interest earnings

106.5

7.9

12.0

3.2

Other

a

2.2

2.5

Total

698.8

106.3

228.9

301.0

a Less than $50 million.

 


 

  1. D.    Assets and Expenditures of the Social Security Trust Fund, 2012

Table 14. Assets of the Social Security Trust Fund, 2012

OASI

DI

HI

SMI

Assets (end of 2010)

$2,429.0

$179.9

$271.9

$72.1

Income during 2011

698.8

106.3

228.9

301.0

Outgo during 2011

603.8

132.3

256.7

292.5

    Net increase in assets

95.0

-26.1

-27.7

8.6

Assets (end of 2011)

2,524.1

153.9

244.2

80.7

 

Table 15. Expenditures of the Social Security Trust Fund, 2012 (totals may not add due to rounding).

Category (in billions)

OASI

DI

HI

SMI

Benefit payments

$596.2

$128.9

$252.9

$288.5

Railroad Retirement financial interchange

4.1

0.5

Administrative expenses

3.5

2.9

3.8

4.0

Total

603.8

132.3

256.7

292.5

 

Source:

  1. E.  OASDI and SSI Program Rates & Limits, 2013
Table 16. Social Security (OASDI) Program Rates & Limits

2013

Tax Rates (percent)
Social Security (Old-Age, Survivors, and Disability Insurance)
Employers and Employees, each a

6.20%

Medicare (Hospital Insurance)
Employers and Employees, each a,b

1.45%

Maximum Taxable Earnings (dollars)
Social Security

$113,700

Medicare (Hospital Insurance)

No limit

Earnings Required for Work Credits (dollars)
One Work Credit (One Quarter of Coverage)

$1,160

Maximum of Four Credits a Year

$4,640

Earnings Test Annual Exempt Amount (dollars)
Under Full Retirement Age for Entire Year

$15,120

For Months Before Reaching Full Retirement Age in Given Year

$40,080

Beginning with Month Reaching Full Retirement Age

No limit

Maximum Monthly Social Security Benefit for Workers Retiring at Full Retirement Age (dollars)

$2,533

Full Retirement Age

66

Cost-of-Living Adjustment (percent)

1.7%

Self-employed persons pay a total of 15.3%—12.4% for OASDI and 2.9%for Medicare.

Certain high-income taxpayers will be required to pay an additional Medicare tax beginning in 2013. For details, see the IRS information on this topic.

 

Source: http://www.socialsecurity.gov/policy/docs/quickfacts/prog_highlights/RatesLimits2013.pdf

 

 

Supplemental Security Income (SSI) Program Rates & Limits

2013

Monthly Federal Payment Standard (dollars) Individual

$710

Couple

$1,066

Cost-of-Living Adjustment (percent)

1.7%

Resource Limits (dollars) Individual

$2,000

Couple

$3,000

Monthly Income Exclusions (dollars) Earned Income a

$65

Unearned Income

$20

Substantial Gainful Activity (SGA) Level for the Non-blind Disabled (dollars)

$1,040

The earned income exclusion consists of the first $65 of monthly earnings, plus one-half of remaining earnings.

 

 

Source: http://www.socialsecurity.gov/policy/docs/quickfacts/prog_highlights/RatesLimits2013.pdf

  1. F.     Medicare Part B and Part D Income Based Copayment and Surcharge Schedules, 2013

Table 17. Medicare Part B and Part D Income Based Copayment and Surcharge Schedules, 2013

Beneficiaries who file an individual tax return with income:

Beneficiaries who file a joint tax return with income:

Income-Related Monthly Part B Adjustment Amount

Total Monthly Part B Premium Amount

Part D Surcharge

Less than or equal to $85,000 Less than or equal to $170,000

$0.00

$104.90

$0.00

Greater than $85,000 and less than or equal to $107,000 Greater than $170,000 and less than or equal to $214,000

$40.00

$146.90

$11.60

Greater than $107,000 and less than or equal to $160,000 Greater than $214,000 and less than or equal to $320,000

$99.90

$209.80

$29.90

Greater than $160,000 and less than or equal to $214,000 Greater than $320,000 and less than or equal to $428,000

$159.80

$272.70

$48.10

Greater than $214,000 Greater than $428,000

$219.80

$335.70

$66.40

Source: http://www.ehealthlink.com/Senior/medicare-funding.aspx

In addition, the monthly premium rates to be paid by beneficiaries who are married, filing a separate return from their spouse and living with their spouse at some time during the taxable year are:

Table 18. Medicare Part B and Part D, Married Filing Separately, Income Based Copayment and Surcharges

Beneficiaries who are Married but File a Separate Tax Return From Their Spouse: Income-related Monthly Part B Adjustment Amount Total Monthly Part B Premium Amount Part D Surcharge
Less than or equal to $85,000

$0.00

$0.00

$0.00

Greater than $85,000 and less than or equal to $129,000

$159.80

$259.70

$48.30

Greater than $129,000

$219.80

$319.70

$66.60


  1. G.  Per Capita Medicare Costs vs. Employer Sponsored Insurance Costs

The Red Line indicates Per Capita Medicare expenditure (in 2010 dollars) for the over 65 year olds and other Medicare eligible beneficiaries, while the Blue Line indicates the Per Capita Employer-Sponsored insurance expenditure (in 2010 dollars) between 1070 and 2009.

Figure 32. Per Capita Medicare Costs vs. Employer Sponsored Insurance Costs

Source: http://Social_Security_Expenditure_and_Eldery_Poverty%2C_1959-2010.png

http://upload.wikimedia.org/wikipedia/commons/f/f6/Social_Security_Expenditure_and_Eldery_Poverty%2C_1959-2010.png

 

 

The blue line indicates per capita Social Security expenditure (in 2010 dollars), while the red line indicates the percentage of the population aged 65 or older with an income at or below the poverty line

http://upload.wikimedia.org/wikipedia/commons/f/f6/Social_Security_Expenditure_and_Eldery_Poverty%2C_1959-2010.png


 

  1. H.    2014 Proposed CMS Budget (April 2013)

                

Figure 33. 2014 Proposed CMS Budget (April 2013)

 

 


 

  1. I.       2014 Proposed Federal Healthcare Budget (April 2014)

 

Figure 34. 2014 Proposed Federal Healthcare Budget (April 2013)

 

 

  1. J.     Medicare, Medicaid and Private Health Insurance Comparisons

 

Figure 35. Simulated Comparison of Relative Medicare, Medicaid and Private Health Insurance Prices

 

Figure 36. Comparison of Relative Medicare, Medicaid and Private Health Insurance Prices for MD Services

 


[1] From Centers for Medicare and Medicaid as reported by, EVP, PNC Bank, Improving Quality/Reducing Cost of U.S. Health Care by Improving Administrative Efficiencies, Marcus Evans Healthcare Banking Conference, September 22, 2007, Millenium Hotel, New York, New York.

 

 

 

[2] Geithner, T., Sebelius, K., Blahous, C.P., Solis, H.L., Astrue, M.J., Reischauer, R. D., (2012). Social Security and Medicare Boards of Trustees, A Summary of the 2012 Annual Social Security and Medicare Trust Fund Reports., as found at: http://www.ssa.gov/oact/trsum/

[3] Waters, J. (2013). Making Sense of Social Security and Medicare.  The Wall Street Journal Online. March 24. http://online.wsj.com/article/SB10001424127887323869604578368481493685730?mg=reno64-wsj.html?dsk=y

[4] Medicare News Group. (2013). Is the Hospital Insurance (HI) Trust Fund, Which Finances Part A, Expected to Run Out of Money? Medicare Faqs. As found at: http://medicarenewsgroup.com/news/medicare-faqs/individual-faq?faqId=84fa4f6d-73d9-4f2e-8ecb-289709cdfe6b

 

[5] Waters, J. (2013). Making Sense of Social Security and Medicare.  The Wall Street Journal Online. March 24. http://online.wsj.com/article/SB10001424127887323869604578368481493685730?mg=reno64-wsj.html?dsk=y

[6] Ibid., Geithner, T., Sebelius, K., Blahous, C.P., Solis, H.L., Astrue, M.J., Reischauer, R. D., (2012).

[7] Brino, A. (2013) HHS proposes $967B budget for 2014, Budget up $60M from last year would boost Medicare enrollment, fund HIXs, Healthcare IT News: Washington, D.C. (April 11). As accessed at: http://www.healthcareitnews.com/news/hhs-proposes-967b-budget-2014?single-page=true

[8] Investopedia (2013). As found at: http://www.investopedia.com/terms/o/oasdi.asp

[9] Geithner, T., Sebelius, K., Blahous, C.P., Solis, H.L., Astrue, M.J., Reischauer, R. D., (2012). Social Security and Medicare Boards of Trustees, A Summary of the 2012 Annual Social Security and Medicare Trust Fund Reports., as found at: http://www.ssa.gov/oact/trsum/

[10] Investopedia (2013). As found at: http://www.investopedia.com/terms/o/oasdi.asp

[11] Ibid. Geithner, T., Sebelius, K., Blahous, C.P., Solis, H.L., Astrue, M.J., Reischauer, R. D., (2012).

[12] Ibid.

[13]Geithner, T., Sebelius, K., Blahous, C.P., Solis, H.L., Astrue, M.J., Reischauer, R. D., (2012). Social Security and Medicare Boards of Trustees, A Summary of the 2012 Annual Social Security and Medicare Trust Fund Reports., as found at: http://www.ssa.gov/oact/trsum/

[14]Ibid.

[15] Centers for Medicare and Medicaid. (2013) Medicare.gov. As found at: http://www.medicare.gov/about-us/how-medicare-is-funded/medicare-funding.html

[16] Ibid.

[17] Office of Retirement and Disability Policy (2013). OASDI and SSI Rates and Limits – 2013. Social Security.gov http://www.socialsecurity.gov/policy/docs/quickfacts/prog_highlights/RatesLimits2013.pdf

[18] Brino, A. (2013) HHS proposes $967B budget for 2014, Budget up $60M from last year would boost Medicare enrollment, fund HIXs, Healthcare IT News: Washington, D.C. (April 11). As accessed at: http://www.healthcareitnews.com/news/hhs-proposes-967b-budget-2014?single-page=true

 

[19] Waters, J. (2013). Making Sense of Social Security and Medicare.  The Wall Street Journal Online. March 24. http://online.wsj.com/article/SB10001424127887323869604578368481493685730?mg=reno64-wsj.html?dsk=y

[20] Waters, J. (2013). Making Sense of Social Security and Medicare.  The Wall Street Journal Online. March 24. http://online.wsj.com/article/SB10001424127887323869604578368481493685730?mg=reno64-wsj.html?dsk=y

[21] Brino, A. (2013) HHS proposes $967B budget for 2014, Budget up $60M from last year would boost Medicare enrollment, fund HIXs, Healthcare IT News: Washington, D.C. (April 11)

 

[22]Geithner, T., Sebelius, K., Blahous, C.P., Solis, H.L., Astrue, M.J., Reischauer, R. D., (2012). Social Security and Medicare Boards of Trustees, A Summary of the 2012 Annual Social Security and Medicare Trust Fund Reports., as found at: http://www.ssa.gov/oact/trsum/ .

[23]Ibid.

[24] Brino, A. (2013) HHS proposes $967B budget for 2014, budget up $60M from last year would boost Medicare enrollment, fund HIXs, Healthcare IT News: Washington, D.C. (April 11). As accessed at: http://www.healthcareitnews.com/news/hhs-proposes-967b-budget-2014?single-page=true

[25] Chapin White, “Medicare Spending Limits: Issues and Implications,” The Kaiser Family Foundation (March 2013). p. 6.

[26] Ibid., p. 6.

[27] Ibid.

[28] Ebeler, J., Neuman, T. and Cubanski, J. (2011). The independent payment advisory board: a new approach to controlling Medicare Spending.  The Kaiser Family Foundation. Menloe Park. California. As found at: http://www.kff.org/medicare/upload/8150.pdf

[29] White, C. (2013). Medicare spending limits: issues and implications. The Kaiser Family Foundation (March). As found at: https://snt143.mail.live.com/default.aspx?id=64855&rru=inbox#n=116480129&rru=inbox&fid=1&fav=1&mid=e5460902-9687-11e2-9878-001e0bcc060c&fv=1

[30] Centers for Medicare and Medicaid. As found at: http://www.cms.gov/Research-Statistics-Data-and Systems/Research/ActuarialStudies/downloads/MedicaidReport2010

[31] SSA.gov, Social Security Act. Title IX, Sec. 1101(a)(8)(B)

[32] “Medicaid and State Budgets: Looking at the Facts”, Georgetown University Center for Children and Families, May 2008.

[33]  “Budget of the United States Government, FY 2008”, Department of Health and Human Services, 2008.

[34] Galewitz, Phil (March 26, 2010). “Consumers Guide To Health Reform”. Kaiser Health News.

[35] “5 Key Things to Remember About Health Care Reform”. CNN. March 25, 2010.

 

[36] Chapin White, “Medicare Spending Limits: Issues and Implications,” The Kaiser Family Foundation (March 2013). p. 2.

[37] Ibid.p2.

[38] Health Data Management On-line as found at: http://www.healthdatamanagement.com/news/medicare-cms-accountable-care-organization-bundled-payments-45919-1.html?ET=healthdatamanagement:e3347:194670a:&st=email

 

 

[39]Walters, B. Medical Home Reimbursement Models: Funding Patient‐Centered Care with Multi‐Stakeholder Collaborations. The Healthcare Intelligence Network. 2008.

[40] Healthcare Intelligence Network. Model Medical Homes: Benchmarks and Case Studies in Patient‐Centered Care. 2009.

[41]Paulus, R. A., Davis, K. & Steele, G. D.  (2008).  Continuous Innovation in Health Care: Implications of the

Geisinger Experience, Health Affairs, Sept./Oct. Issue.

[42] Centers for Medicare and Medicaid (2013). Accessed at: https/: www.Medicare.gov .

[43] Cubanski, J., Huang, J., Damico, A., Jacobson., G., & Newman, T. Kaiser Family Foundation (2010). Medicare Chartbook, 4th edition: Menlo Park, CA. Accessed at: http://facts.kff.org/chart.aspx?cb=58&sctn=168&ch=1785

[44] Ibid.

[45] “Self-Employment Tax (Social Security and Medicare Taxes)”. IRS. As found at: http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Self-Employment-Tax-%28Social-Security-and-Medicare-Taxes%29

[46] Social Security Administration.  As found at: http://www.ssa.gov/OACT/ProgData/taxRates.html

[47] Centers for Medicare and Medicaid. Medicare.gov. As found at: http://www.medicare.gov/your-medicare-costs/costs-at-a-glance/costs-at-glance.html

[48] Ibid.

[49] What Is Hospice Care? Medix.com. As found at http://www.medicare.com/assisted-living/hospice-care.html

[50] Centers for Medicare and Medicaid. Medicare.gov. As found at: http://www.medicare.gov/sign-up-change-plans/decide-how-to-get-medicare/original-medicare/how-original-medicare-works.html

[51] Centers for Medicare and Medicaid. Medicare.gov. As found at: http://www.medicare.gov/sign-up-change-plans/decide-how-to-get-medicare/original-medicare/how-original-medicare-works.html

[52]Where Do Medicare Funds Come From? As found at: http://www.ehealthlink.com/Senior/medicare-funding.aspx

 

 

[53] Jacobson,G.,  Damico, A.,  Neuman, T. & Huang, J. (2009).  What’s in the Stars? Quality Ratings of Medicare Advantage Plans, 2010, Kaiser Family Foundation, Dec.

[54] Centers for Medicare and Medicaid (2013). CMS ENSURES GREATER VALUE FOR PEOPLE IN MEDICARE DRUG AND HEALTH PLANS, April 1. Press Release. As found at: http://www.cms.gov/apps/media/press/release.asp?Counter=4568&intNumPerPage=10&checkDate=&checkKey=&srchType=1&numDays=3500&sr?siteTool=

 

[55] Health Data Management (2013). The Rush Toward Value Based Purchasing is On. Will Accountable Care Organizations Run Quickly Across the Finish Line?  Source Media Marketing Solutions Group (April Blog), As posted at: http://digital.healthdatamanagement.com/healthdatamanagement/2013acos/?pg=2&pm=2&u1=friend#pg2

 

[56]Health Data Management (2013). The Rush Toward Value Based Purchasing is On. Will Accountable Care Organizations Run Quickly Across the Finish Line?  Source Media Marketing Solutions Group (April Blog), As posted at: http://digital.healthdatamanagement.com/healthdatamanagement/2013acos/?pg=2&pm=2&u1=friend#pg2

[57] Ibid, p. 8.

[58] Ibid, p. 8.

[59] As reported by the CEO and CFO of Aurora at the J.P. Morgan Healthcare Investment Banking Conference, Westin St. Francis Hotel, San Francisco, California, January 2012.

[60]Centers for Medicare and Medicaid Services (2013). Chronic Conditions Warehouse. As accessed at: http://www.ccwdata.org/web/guest/interactive-data/chronic-conditions-dashboard

 

[61] Kaiser Family Foundation (2010). Medicare Chartbook. Fourth Edition, Menlo Park, CA.  “Figure 1.3”

[62] Kaiser Family Foundation (2010). Medicare Chartbook. Fourth Edition, Menlo Park, CA. “Section 1: Medicare Beneficiaries”

[63] U.S. Census Bureau, “Income, Poverty, and Health Insurance Coverage in the United States: 2006.”” August 2007

[64] Harriet Komisar, Juliette Cubanski, Lindsey Dawson, and Tricia Neuman, “”Key Issues in Understanding the Economic and Health Security of Current and Future Generations of Seniors.”” Kaiser Family Foundation Issue Brief, March 2012

[65] Kaiser Family Foundation (2010). Medicare Chartbook. Fourth Edition, Menlo Park, CA.  “Figure 7.1”

[66] Kaiser Family Foundation (2010). Medicare Chartbook. Fourth Edition, Menlo Park, CA. “Section 1: Medicare Beneficiaries”

 

[67]Geithner, T., Sebelius, K., Blahous, C.P., Solis, H.L.& Berwick, D.M. (2010).  The 2010 Annual Report of the Boards of Trustee of the Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds. As found at: https://www.cms.gov/ReportsTrustFunds/downloads/tr2010.pdf

[68] Orszag, P. L., (2008). “The Long-Term Budget Outlook and Options for Slowing the Growth of Health Care Costs

before the Committee on Finance United States Senate June 17, 2008”. Washington, DC: Congressional Budget Office. As found at: http://www.cbo.gov/sites/default/files/cbofiles/ftpdocs/93xx/doc9385/06-17-ltbo_testimony.pdf

 

[69] Fleming, C.  (2011). U.S. Health Spending Projected to Grow 5.8 Percent Annually, July 28th post. As found at:

http://healthaffairs.org/blog/2011/07/28/u-s-health-spending-projected-to-grow-5-8-percent-annually/

[70] Kaiser Family Foundation, (2010).Focus on Health Care Reform: A Summary of the New Health Reform Law. As found at:

http://www.kff.org/healthreform/upload/8061.pdf

[71] Definition of the CPI-U as found at: http://www.investopedia.com/terms/c/cpiu.asp

[72] United States Department of Labor, Bureau of Labor Statistics. As found at: http://www.bls.gov/cpi/cpifact4.htm

[73] Geithner, T., Sebelius, K., Blahous, C.P., Solis, H.L., Astrue, M.J., Reischauer, R. D., (2012). Social Security and Medicare Boards of Trustees, (2012). A Summary of the 2012 Annual Reports. Social Security and Medicare Boards of Trustees. As found at: http://www.ssa.gov/oact/trsum/

[74]Geithner, T., Sebelius, K., Blahous, C.P., Solis, H.L., Astrue, M.J., Reischauer, R. D., (2012). Social Security and Medicare Boards of Trustees, (2012). A Summary of the 2012 Annual Reports. Social Security and Medicare Boards of Trustees. As found at: http://www.ssa.gov/oact/trsum/

 

[75] Geithner, T., Sebelius, K., Blahous, C.P., Solis, H.L., Astrue, M.J., Reischauer, R. D., (2012). Social Security and Medicare Boards of Trustees, (2012). A Summary of the 2012 Annual Reports. Social Security and Medicare Boards of Trustees. As found at: http://www.ssa.gov/oact/trsum/

 

[76]Geithner, T., Sebelius, K., Blahous, C.P., Solis, H.L., Astrue, M.J., Reischauer, R. D., (2012). Social Security and Medicare Boards of Trustees, (2012). A Summary of the 2012 Annual Reports. Social Security and Medicare Boards of Trustees. As found at: http://www.ssa.gov/oact/trsum/