|THIS WEEK IN HEALTHCARE
What happened in healthcare this week—and what we think about it.
Playing politics with the CDC’s guidance
Concern about the politicization of the Centers for Disease Control and Prevention (CDC) was heightened this week with new reporting from Politico that top appointees at the Department of Health and Human Services (HHS) repeatedly sought to modify the CDC’s Morbidity and Mortality Weekly Report (MMWR), a key public health document relied upon by healthcare providers and researchers nationwide. The officials, including HHS spokesman Michael Caputo and his science advisor, Paul Alexander, demanded to personally review and edit the MMWR in ways that would downplay the spread of COVID-19, claiming in an internal communication that CDC scientists were trying to use the reports to “hurt the President”. In a Facebook livestream on Sunday, Caputo claimed that CDC scientists were engaged in “sedition”, describing them as agents of a “deep state” conspiracy against the Trump administration. By midweek, it was announced that Caputo would be placed on temporary leave due to health concerns, and that Alexander’s contract would be terminated.
The controversy came the same week as reports that HHS officials had intervened last month, against the guidance of CDC scientists, to alter recommendations regarding COVID testing for asymptomatic individuals. Today, under pressure from the public health community, who warned that such testing was critical to control the spread of the virus, the CDC reversed those changes, adding a note to its website that “further reinforces the need to test asymptomatic persons, including close contacts of a person with documented SARS-CoV-2 infection.” The credibility of the nation’s leading public health agency has increasingly come into question during the pandemic, and this week’s events risk further undermining public confidence in the government’s messaging about the virus. As development and testing of several COVID vaccines nears completion, it will be critical to reassure the public that the advice of government health officials can be trusted—otherwise, the drive to vaccinate hundreds of millions of Americans against the deadly virus may fall far short of its intended goal. US coronavirus update: 6.7M cases; 198K deaths.
CMS axes an unpopular change to Medicaid financing
State budgeteers and hospital executives breathed a sigh of relief this week when Centers for Medicare and Medicaid Services (CMS) Administrator Seema Verma announced her decision to withdraw a controversial new rule that would have made significant changes to the way states manage their Medicaid funding. The proposed Medicaid Fiscal Accountability Regulation (MFAR), first introduced late last year, would have made technical changes to supplemental payments and financing mechanisms used by states to maximize the money they receive in the form of federal matching dollars for Medicaid enrollees. In particular, the rule targeted the use of provider taxes and intergovernmental transfers of public funds, as well as proposing restrictions to “upper payment limit” reimbursement to providers and tighter scrutiny on the distribution of “disproportionate share” payments made to hospitals that care for a high percentage of Medicaid patients. (A more detailed analysis of MFAR is available here—please don’t operate heavy machinery after reading it.)
Hospitals and Medicaid program directors expressed deep concern about the unanticipated, and largely unknown, impact of MFAR, particularly if it were implemented amid the financial pressures caused by COVID. In thanking CMS for the decision to withdraw MFAR from its regulatory agenda, the American Hospital Association (AHA) pointed to a potential $50B hit to Medicaid payments, and said that the regulation would have “crippled state financing and limited access to care, especially in rural and underserved areas.” Hospital executives were surely grateful as well; as we reported in January, we were hearing health system finance executives bracing for massive margin hits as a result of MFAR. At the state level, Medicaid financing has always been a thicket of tangled monetary transfers and accounting hocus-pocus. Even though the withdrawal of MFAR is welcome short-term news, there’s still work to be done to rationalize Medicaid funding to ensure that the program—ever more vital as the pandemic wreaks economic havoc—remains sustainable.
Yet more arcane, but meaningful, regulatory change from CMS
Alongside its announcement that it plans to withdraw the proposed MFAR regulation, CMS also released the first part of its 2022 Medicare Advantage (MA) Advance Notice this week, detailing changes to how it pays insurers for beneficiaries enrolled in private Medicare coverage. Of particular note, CMS intends to complete the transition to a new risk adjustment methodology first mandated by the 21st Century Cures Act of 2016. Previously, CMS adjusted the per-member capitation rate it paid MA plans to reflect the health status of enrollees using diagnosis information submitted by insurers to the Risk Adjustment Processing System (RAPS). For 2022, CMS will instead adjust for enrollee health risk solely using “encounter data”, actual clinical information on diagnosis and treatment entered by hospitals and doctors. This follows a multi-year phase-in of the new methodology, which has consistently been met with the ire of insurers, who complain that encounter data are less accurate and reliable than RAPS data. Not coincidentally, the newer methodology has also tended to result in lower payments by CMS to MA plans.
That savings is part of the rationale for the new method, which is intended to reduce the long-standing industry practice of conducting retrospective chart reviews to flag additional diagnosis codes for enrollees, often with the help of third-party vendors, in order to “game” the risk adjustment process and garner higher payment rates. Softening the blow somewhat, CMS will also complete the phase-in of new supplemental adjustments for patients with behavioral health conditions, substance abuse issues, and chronic kidney disease, which were also mandated by the 21st Century Cures Act. As with murky Medicaid financing schemes, the machinations of private Medicare insurers to maximize government payments have often resulted in overspending and excessive administrative cost and complexity. This week’s announcements from CMS, along with efforts to increase price transparency and simplify Byzantine regulations, are welcome steps toward ensuring that taxpayers are getting their money’s worth as healthcare consumes an ever-larger share of the federal budget.