Medicare and Massachuseets HCR

Question 1

Common features of Medicare prospective payment systems (148)

Answer 1

1. A system of averages - providers cannot expect to make a profit on each case, but efficient providers can make a reasonable return on average
2. Increased complexity - DRGs are more complicated than a system based on per diem payments
3. Relative weights - associated with each patient group to reflect the average resources used by efficient providers
4. Conversion factor (base price) - the dollar amount for a unit of services. Is multiplied by the relative weight to determine payment
5. Outliers - unusual cases that require above-average resources and receive extra payments
6. Updates - the conversion factor and relative weights are adjusted annually to reflect new technologies and changing practice patterns
7. Access and quality - policymakers monitor PPSs and survey patients to ensure that beneficiaries have adequate access to high quality care and that providers are compensated adequately

Question 2

Challenges with patient classification systems based on coding systems (148)

Answer 2

1. Need for new DRGs - due to new diseases and new procedures
2. ICD coding - some codes may not be sufficiently precise as diseases and procedures are refined
3. Upcoding - providers may be tempted to exaggerate a patient’s secondary diagnoses to get paid more
4. New coding systems - adopting the new ICD-10 systems will be a major challenge for hospitals and CMS

Question 3

Factors used in developing risk scores in the CMS-HCC risk model (157)

Answer 3

HCC = hierarchical condition category

1. Demographics - age and gender factors are the starting point. Higher risk scores are assigned to beneficiaries who are eligible for both Medicaid and Medicare.
2. Disabled indicators - a separate set of age and gender factors are used for beneficiaries under age 65 who are eligible for Medicare due to disability
3. Separate models are used for beneficiaries who:
   a. Reside in a long-term care institution, or
   b. Suffer from end-stage renal disease
4. New enrollees - since no claim history exists, only age and gender factors are used. Separate factors are developed for new enrollees
5. A prospective risk adjustment methodology is used to risk-adjust future payments based on actual historical medical experience
6. Calibration - every 2 yrs, CMS re-calibrates by updating the model weights to reflect new prescription drugs and changes in medical technologies, practice patterns, and provider coding practices
7. Health status risk factors are developed from the beneficiary’s diseases (using ICD-9 codes and grouping into HCCs)

Question 4

Central features of Massachusetts health care reform (160)

Answer 4

1. Establishment of an exchange (purchasing pool)
2. A Requirement that all employers establish Section 125 accounts (so employees could pay premiums on a pre-tax basis)
3. Large subsidies for families living below 300% of FPL
4. For those above 300% of FPL, availability of a more limited plan (so insurance would be affordable even outside the subsidy range)
5. A mandate that all individuals must purchase health insurance coverage
6. Funding through use of federal funds previously paid to safety net hospitals or paid for uncompensated care

Question 5

Formulas for payment for Medicare Advantage plans (157)

Answer 5

1. Govt payment
   a. If bid lt benchmark: bidrisk adjustment +75%(benchmark-bid)
   b. If bid gt benchmark: payment=benchmark*risk adjustment
   c. The risk adjustment score is determine for each member as the sum of an age/gender factor, any applicable HCC factors, and certain other factors (disease interaction factors, zeroing out HCCs that are trumped by other HCCs, and adjustments for those with Medicaid, a disability, ESRD, or in LTC)
2. Basic member premium (only if bid > benchmark) = bid-benchmark
3. Supplemental member premium = MCO member premium, if any, for additional benefits or reduced cost sharing
4. Total payment to MCO = govt payment + basic member premium + supplemental member premium