Reforming the Medicare Part D Benefit Design: Financial Implications for Beneficiaries, Private Plans, Drug Manufacturers, and the Federal Government.

CONTEXT: Reforming the Medicare Part D program-which provides prescription drug coverage to 49 million beneficiaries-has emerged as a key policy priority. METHODS: The authors evaluate prescription drug claims from a 100% sample of Medicare Part D beneficiaries to evaluate the current spending distribution across different payers for different types of beneficiaries across different benefit phases. They then model how these estimates would change under a proposal to redesign the Medicare Part D standard benefit. FINDINGS: Spending patterns differ for beneficiaries who do and do not qualify for low-income subsidies. Part D plans face limited liability for total spending under the current standard benefit design, amounting to 36% of total spending for beneficiaries who do not receive low-income subsidies and 28% of total spending for those who do. Proposed reforms would increase plan liability and significantly change the distribution of liability across plans, drug manufacturers, and the federal government. CONCLUSIONS: Though the original goal of the Part D program was to create a market of competing private plans that provide prescription drug coverage to Medicare beneficiaries, the standard benefit design that was included in the original legislation reflected significant political compromises. Reforming the standard benefit design to give plans more skin in the game could significantly affect competition in the market, with differential impact across drug classes and types of beneficiaries.

Out-of-Network Air Ambulance Bills: Prevalence, Magnitude, and Policy Solutions.

Policy Points Out-of-network air ambulance bills are a type of surprise medical bill and are driven by many of the same market failures behind other surprise medical bills, including patients' inability to choose in-network providers in an emergency or to avoid potential balance billing by out-of-network providers. The financial risk to consumers is high because more than three-quarters of air ambulances are out-of-network and their prices are high and rising. Consumers facing out-of-network air ambulance bills have few legal protections owing to the Airline Deregulation Act's federal preemption of state laws. Any federal policies for surprise medical bills should also address surprise air ambulance bills and should incorporate substantive consumer protections-not just billing transparency-and correct the market distortions for air ambulances. CONTEXT: Out-of-network air ambulance bills are a growing problem for consumers. Because most air ambulance transports are out-of-network and prices are rising, patients are at risk of receiving large unexpected bills. This article estimates the prevalence and magnitude of privately insured persons' out-of-network air ambulance bills, describes the legal barriers to curtailing surprise air ambulance bills, and proposes policies to protect consumers from out-of-network air ambulance bills. METHODS: We used the Health Care Cost Institute's 2014-2017 data from three large national insurers to evaluate the share of air ambulance claims that are out-of-network and the prevalence and magnitude of potential surprise balance bills, focusing on rotary-wing transports. We estimated the magnitude of potential balance bills for out-of-network air ambulance services by calculating the difference between the provider's billed charges and the insurer's out-of-network allowed amount, including the patient's cost-sharing. For in-network air ambulance transports, we calculated the average charges and allowed amounts, both in absolute magnitude and as a multiple of the rate that Medicare pays for the same service. FINDINGS: We found that less than one-quarter of air ambulance transports of commercially insured patients were in-network. Two-in-five transports resulted in a potential balance bill, averaging $19,851. In the latter years of our data, in-network rates for transports by independent (non-hospital-based) carriers averaged $20,822, or 369% of the Medicare rate for the same service. CONCLUSIONS: Because the states' efforts to curtail air ambulance balance billing have been preempted by the Airline Deregulation Act, a federal solution is needed. Owing to the failure of market forces to discipline either prices or supply, out-of-network air ambulance rates should be benchmarked to a multiple of Medicare rates or, alternatively, air ambulance services could be delivered and financed through an approach that combines competitive bidding and public utility regulation.

Acceptability of Hospital-at-Home Care and Capacity for Caregiver Burden.

This study surveys a representative US population about aspects of hospital-at-home care, including acceptability and willingness to perform caregiving tasks.

Growing divergence between Medicare Advantage plan bids and payments to plans.

As the Medicare Advantage (MA) program grows in enrollment and costs, there has been increasing concern that federal payments to MA plans exceed necessary levels. Estimates suggest that, in 2023, MA plans were paid up to 6% more per enrollee than would have been spent had that beneficiary instead enrolled in traditional Medicare (TM). We evaluated the factors driving this overpayment, characterizing trends in MA benchmarks, bids, and total payments from pre-Affordable Care Act (pre-ACA) levels through 2023. We found that, despite an overall decrease in risk-adjusted bids relative to average risk-adjusted TM enrollee costs, total payments to plans have modestly increased since 2015. Decomposing these trends into various factors in the MA payment formula, we found that divergent trends in benchmarks and bids are, in part, due to the increasing influence of payment adjustments, such as quartile spending adjustments, quality bonus payments, and risk adjustment. Our results suggest that current payment rules have contributed to overpayments and policy reform may be necessary.

Beyond average spending: distributional and seasonal commercial insurance trends, 2012-2021.

OBJECTIVES: The annual mean spending measures typically used to study longitudinal trends mask distributional and seasonal variation that is relevant to patients' perceptions of health care affordability and, in turn, provider collections. This study describes shifts in the distribution and seasonality of plan and patient out-of-pocket spending from 2012 through 2021. STUDY DESIGN: Analysis of multipayer commercial claims data. METHODS: Medical spending per enrollee was calculated by summing inpatient, outpatient, and professional services, which comprised plan payments and out-of-pocket payments (deductible, coinsurance, co-payment). To account for the long right tail of the spending distribution, enrollees were stratified by their decile of annual medical spending, and annual mean spending estimates were calculated overall and by decile. Mean spending estimates were also calculated by quarter-year. RESULTS: Inflation-adjusted medical spending grew most quickly among the highest decile of spenders, without proportional growth in their out-of-pocket expenses. Out-of-pocket spending increased for the majority of enrollees in our sample prior to the COVID-19 pandemic, in real dollars and as a share of total medical spending. Out-of-pocket spending was increasingly concentrated in the early months of the calendar year, driven by deductible spending, and was lower in 2020 and 2021, plausibly due to policies limiting cost sharing for COVID-19-related services. CONCLUSIONS: Insurance is working well to protect the highest spenders at the cost of reduced insurance generosity among spenders elsewhere in the distribution. The increasing cross-subsidization among enrollees through cost-sharing design-vs premiums-is a trend to watch among rising public concerns about underinsurance and medical debt.

Deductible double jeopardy: patients may pay more out of pocket when pregnancy crosses 2 years.

OBJECTIVES: This study explores the concern that annual high-deductible commercial insurance plan design may yield higher out-of-pocket costs when an episode of maternity care spans 2 years, exposing patients to their cost-sharing limits twice during their episode of care. STUDY DESIGN: Cross-sectional study of Health Care Cost Institute commercial claims. METHODS: The study sample comprises 1,379,300 deliveries among high-deductible health plan enrollees in years 2012 through 2021. Patients' mean cost sharing is calculated across all service types for 3 time periods: (1) delivery hospitalization, (2) maternity episode from 40 weeks prior to delivery hospitalization through 12 weeks after discharge, and (3) extended period spanning 3 years from January of the year before delivery through December of the year after delivery. RESULTS: For each of the 3 episode measurements, mean out-of-pocket spending is highest among those who deliver in January and declines in each subsequent month until August and September (the delivery months with most pregnancy and postpartum periods within the same year), then flattens for the remainder of the year. Mean cost sharing for the maternity episode was $6308 in January and $4998 in December, a difference of $1310. Patients delivering in January also had mean out-of-pocket costs $1491 greater for delivery hospitalization and $1005 greater over the 3-year period than patients delivering in December. CONCLUSIONS: Higher out-of-pocket spending is observed when patients face their cost-sharing limits twice within an episode of maternity care, and this difference persists even when evaluating 3 calendar years of patients' out-of-pocket spending.

Disparate Patient Advocacy When Facing Unaffordable and Problematic Medical Bills.

Importance: People in the US face high out-of-pocket medical expenses, yielding financial strain and debt. Objective: To understand how households respond to medical bills they disagree with or cannot afford. Design, Setting, and Participants: A retrospective cohort study was carried out using a survey fielded between August 14 and October 14, 2023. The study included a random sample of adult (aged ≥18 years) survey respondents from the Understanding America Study (UAS). Participant responses were weighted to be nationally representative. The analysis took place from November 3, 2023, through January 8, 2024. Main Outcomes and Measures: Respondents reported if their household received a medical bill that they could not afford or did not agree with in the prior 12 months, and if anyone contacted the billing office regarding their concerns. Those who did reach out were asked about their experience and those who did not were asked why. Results: The survey was sent to 1233 UAS panelists, of which 1135 completed the survey, a 92.1% cooperation rate. Overall, 1 in 5 of the 1135 respondents received a medical bill that they disagreed with or could not afford. Leading bill sources were physician offices (66 [34.6%]), emergency room or urgent care (22 [19.9%]), and hospitals (31 [15.3%]), and 136 respondents (61.5%) contacted the billing office to address their concern. A more extroverted and less agreeable personality increased likelihood of reaching out. Respondents without a college degree, lower financial literacy, and the uninsured were less likely to contact a billing office. Among those who did not reach out, 55 (86.1%) reported that they did not think it would make a difference. Of those who reached out, 37 (25.7%) achieved bill corrections, better understanding (16 [18.2%]), payment plans (18 [15.5%]), price drop (17 [15.2%]), financial assistance (10 [8.1%]), and/or bill cancellation (6 [7.3%]), while 32 (21.8%) said that the issue was unresolved and 23.8% reported no change. These outcomes aligned well with respondents' billing concerns with financial relief for 75.8% of respondents reaching out about an unaffordable bill, bill corrections for 73.7% of those who thought there was mistake, and a price drop for 61.8% of those who negotiated. Conclusions and Relevance: This cross-sectional survey of a representative sample of patients in the US found that most respondents who self-advocated achieved bill corrections and payment relief. Differences in self-advocacy may be exacerbating socioeconomic inequalities in medical debt burden, as those with less education, lower financial literacy, and the uninsured were less likely to self-advocate. Policies that streamline the administrative burden or shift it from patients to the billing clinician may counter these disparities.

Fostering Flexibility: How Medicare Advantage Potentially Accelerated Telehealth Benefits.

In 2018, the US Congress enacted a policy permitting Medicare Advantage (MA) plans to cover telehealth services in a beneficiary's home and through audio-only means as part of the basic benefit package of services, where prior to the policy change such benefits were only allowed to be covered as a supplemental benefit. MA plans were afforded 2 years of lead time for strategizing, negotiating, and capital investment prior to the start date (January 1, 2020) of the new coverage option. Our data analysis found basic benefit telehealth was offered by plans comprising 71% of enrollment in 2020 and increased to 95% in 2021. At the same time, remote access telehealth was offered as a supplemental benefit for 69% of enrollees in 2020, a decrease of 23% compared to 2019. These efforts by MA plans may have enabled traditional Medicare (TM) to leverage an existing telehealth infrastructure as a solution to the access issues created by public health policies requiring sheltering in place and social distancing during the COVID-19 pandemic. The success of this MA policy prompts consideration of additional flexibility beyond the standard basic benefit package, and whether such benefits reduce costs while improving access and/or outcomes in the context of a managed care environment like MA. Subject to oversight, such flexibility could potentially improve value in MA, and facilitate future changes in TM, as appropriate.

Financial assistance and payment plans for underinsured patients shopping for "shoppable" hospital services.

Recent price transparency laws are designed to better inform patients as they compare hospital options and "shop" for health care services. In addition to prices, underinsured patients seeking care need information on financial assistance, discounts, payment plans, and upfront payment requirements to compare the affordability of care across hospitals. Little is known about the availability of this information and the experience of prospective patients seeking it. We contacted a random sample of 10% of general short-term hospitals across the United States in this "secret shopper" telephone study to assess financial options and navigation challenges faced by underinsured patients in need of a non-emergency procedure. The administrative friction was substantial. Most hospitals have 3 siloed offices for (1) financial assistance, (2) payment plans and discounts, and (3) upfront payment requirements. All relevant offices were unreachable in 3 attempted calls at 18.1% of hospitals. Among hospitals with available information, the majority have financial options for patients: 86.7% of hospitals offer financial assistance and 97.0% of hospitals offer payment plans to underinsured patients for non-emergency care. The length and terms of payments plans varied widely for hospital-administered and third-party financing arrangements. Upfront payments were sometimes required, potentially posing barriers for patients without cash or credit access.

Trends in the level and composition of supplemental benefits in Medicare Advantage.

Medicare Advantage (MA) plans that bid below benchmarks (or bidding targets) receive a portion of that difference as rebates, which they then must return to beneficiaries through supplemental benefits or reduced premiums or cost-sharing. Using Centers for Medicare & Medicaid Services data, we evaluate the growth in rebates and concomitant changes in supplemental benefit composition among health maintenance organizations (HMOs) and local preferred provider organizations (PPOs) from 2011 through 2022. Average rebates grew considerably, particularly after 2015 and among PPOs. Alongside this rebate growth, the share of enrollees in plans offering dental, vision, and hearing benefits also increased, with nearly universal coverage of these benefits among both HMOs and PPOs by 2022. Medicare Advantage plans also increasingly reduced beneficiary Part D premium obligations, while increasing beneficiary financial exposure in the form of higher Part D deductibles, medical out-of-pocket maximums, and cost-sharing for inpatient stays. These findings are particularly relevant as policymakers debate the merits of various reforms to MA payment policy.

Part D beneficiaries' incentives and responses under preferred pharmacy networks.

OBJECTIVES: The share of Medicare stand-alone prescription drug plans with a preferred pharmacy network has grown from less than 9% in 2011 to 98% in 2021. This article assesses the financial incentives that such networks created for unsubsidized and subsidized beneficiaries and their pharmacy switching. STUDY DESIGN: We analyzed prescription drug claims data for a nationally representative 20% sample of Medicare beneficiaries from 2010 through 2016. METHODS: We evaluated the financial incentives for using preferred pharmacies by simulating unsubsidized and subsidized beneficiaries' annual out-of-pocket spending differentials between using nonpreferred and preferred pharmacies for all their prescriptions. We then compared beneficiaries' use of pharmacies before and after their plans adopted preferred networks. We also examined the amount of money that beneficiaries left on the table under such networks, based on their pharmacy use. RESULTS: Unsubsidized beneficiaries faced substantial incentives-on average, $147 annually in out-of-pocket spending-and moderately switched toward preferred pharmacies, whereas subsidized beneficiaries were insulated from the incentives and demonstrated little switching. Among those who continued to mainly use nonpreferred pharmacies (half of the unsubsidized and about two-thirds of the subsidized), on average, the unsubsidized paid more out of pocket ($94) relative to if they had used preferred pharmacies, whereas Medicare bore the extra spending ($170) for the subsidized through cost-sharing subsidies. CONCLUSIONS: Preferred networks have important implications for beneficiaries' out-of-pocket spending and the low-income subsidy program. Further research is needed about the impact on the quality of beneficiaries' decision-making and cost savings to fully evaluate preferred networks.

Substantial Growth In Medicare Advantage And Implications For Reform.

Medicare Advantage (MA) enrollment increased by 22.2 million beneficiaries (337.0 percent) from 2006 through 2022, whereas traditional Medicare enrollment declined by 1.0 million (-2.9 percent) over that period. In 2022, adjusted MA penetration was 49.9 percent nationally, and 24.0 percent of Medicare beneficiaries with Parts A and B lived in a county with adjusted MA penetration equal to or exceeding 60 percent.

Ground Ambulance Billing And Prices Differ By Ownership Structure.

The No Surprises Act prohibits most surprise billing but notably does not apply to ground ambulance services. In this study we created a novel data set that identifies the ownership structure of ground ambulance organizations to compare pricing and billing between private- and public-sector ambulances, with a specific focus on organizations owned by private equity or publicly traded companies. Overall, we found that 28 percent of commercially insured emergency ground ambulance transports during the period 2014-17 resulted in a potential surprise bill. Our analysis illustrates that being transported by a private-sector ambulance in an emergency comes with substantially higher allowed amounts, patient cost sharing, and potential surprise bills compared with being transported by a public-sector ambulance. Further, allowed amounts and cost sharing tended to be higher for private equity- or publicly traded company-owned ambulances than other private-sector ambulances. These findings highlight substantial patient liability and important differences in pricing and billing patterns between public- and private-sector ground ambulance organizations.

Medicare Advantage Plans Pay Large Markups To Consolidated Dialysis Organizations.

The 21st Century Cures Act of 2016 lifted regulations prohibiting Medicare Advantage (MA) enrollment after patients initiate dialysis, starting in 2021, and early reports indicate increased MA enrollment among such patients. Large shifts into Medicare Advantage could disrupt the market because the consolidated dialysis industry can negotiate payment from MA plans that is higher than that for fee-for-service Medicare. For three large insurers representing 48 percent of the 2016-17 MA market, we found that MA plans paid 27 percent more than fee-for-service Medicare. Larger dialysis center chains commanded higher markups. Virtually all facilities of the two largest chains were in network, suggesting that they leverage their market power into all-or-nothing negotiations with plans. Policy makers should consider regulations that limit market consolidation among dialysis providers, as well as their ability to exercise that power in the MA market.

Pharmacy switching in response to preferred pharmacy networks in Medicare Part D.

OBJECTIVE: To evaluate the effects of preferred pharmacy networks-a tool that Medicare Part D plans have recently adopted to steer patients to lower cost pharmacies-on the use of preferred pharmacies and factors underlying beneficiaries' decisions on whether to switch to preferred pharmacies. DATA SOURCES: Medicare claims data were collected for a nationally representative 20% sample of beneficiaries during 2010-2016 and merged with annual Part D pharmacy network files. STUDY DESIGN: We examined preferred networks' impact on pharmacy choice by estimating a difference-in-differences model comparing preferred pharmacies' claim share before and after implementation among unsubsidized and subsidized beneficiaries. Additionally, we evaluated the factors affecting whether a beneficiary switched from mainly using nonpreferred to preferred pharmacies. DATA COLLECTION/EXTRACTION METHODS: We examined stand-alone drug plans that adopted a preferred network during 2011-2016. Our main sample included beneficiaries 65 years and older who stayed in their plan in both the first year of implementation and the year before and whose cost-sharing subsidy status and ZIP code remained unchanged during the 2-year period. PRINCIPAL FINDINGS: Unsubsidized Part D beneficiaries faced an average difference of $129 per year in out-of-pocket spending between using nonpreferred and preferred pharmacies, while subsidized beneficiaries were insulated from these cost differences. The implementation of preferred networks resulted in a 3.7-percentage point (95% CI: 3.3, 4.2) increase in preferred pharmacies' claim share in the first year among the unsubsidized. Existing relationships with preferred pharmacies, the size of financial incentives, proximity to preferred pharmacies, and urban residence were positively associated with beneficiaries' decisions to switch to these pharmacies. CONCLUSIONS: Preferred pharmacy networks caused a moderate shift on average towards preferred pharmacies among unsubsidized beneficiaries, although stronger financial incentives correlated with more switching. Researchers and policymakers should better understand plans' cost-sharing strategies and assess whether communities have equitable access to preferred pharmacies.

Insurers negotiate lower hospital prices for HIX than for commercial groups.

OBJECTIVES: This study investigates a sample of the pricing data released by hospitals under the price transparency law effective January 2021 to better understand the prices paid by health insurance exchange (HIX) plans relative to commercial group and Medicare Advantage plans. STUDY DESIGN: Cross-sectional analysis of hospital pricing data. METHODS: We compared allowed amounts for 25 common inpatient services and 56 common outpatient services across 22 hospital-insurer dyads, selected by the availability of plan-specific pricing data from the top 100 hospitals by bed counts and the top 100 hospitals by gross revenue based on 2017 CMS data. RESULTS: Insurers in our sample generally negotiated allowed amounts for their HIX plans that were lower than their commercial group rates and well above their Medicare Advantage contracts within the same hospital. CONCLUSIONS: Allowed amounts for HIX plans were generally lower than commercial group rates and higher than Medicare Advantage rates. Better information on HIX pricing is needed as the federal government and states consider additional ways to expand health care coverage, such as public options or expanded Medicaid or Medicare eligibility.

Comparison of Estimated No Surprises Act Qualifying Payment Amounts and Payments to In-Network and Out-of-Network Emergency Medicine Professionals.

Importance: The No Surprises Act (NSA), which took effect on January 1, 2022, applies a qualifying payment amount (QPA) as an out-of-network payment reference point. An understanding of how QPA measures compare with the in-network and out-of-network payments physicians received before the NSA implementation may be useful to policy makers and stakeholders. Objective: To estimate the QPA for geographic and funding markets and compare QPA estimates with in-network and out-of-network payments for 2019 emergency medicine claims. Design, Setting, and Participants: This cross-sectional study of US commercial insurance claims assessed the Health Care Cost Institute's 2019 commercial professional emergency medicine claims (Current Procedural Terminology [CPT] codes 99281-99285 and 99291) and included enrollees in commercial health maintenance organizations, exclusive provider organizations, point of service, and preferred provider organizations self-funded and fully insured through Aetna, Humana, and some Blue Health Intelligence plans. Claims with missing or inconsistent data fields were excluded. Data were analyzed November 1, 2021, to April 7, 2022. Main Outcomes and Measures: The QPA was calculated as the median allowed amount of all observed claims within strata defined by geographic region, CPT code, and funding market. For each stratum, the ratio of mean in-network allowed amounts to QPAs and mean out-of-network allowed amounts to QPAs were calculated. Then the volume-weighted mean of these ratios was computed across CPT codes within each geographic and funding market stratum. Results: The analytic sample included 7 556 541 professional emergency claims with a mean (SD) allowed amount of $313 ($306) and mean (SD) QPA of $252 ($133). Among the 650 geographic and market strata in the sample, the mean in-network allowed amounts were 14% (ratio, 0.96) higher than the estimated QPA. For the subset of strata with a sufficient sample of out-of-network claims (n = 227), the mean out-of-network payments were 112% (ratio, 2.12) higher than the QPA. More generous out-of-network payments were from self-funded plans (120% [ratio, 2.20] higher than the QPA estimate) vs fully insured plans (43% [ratio, 1.43] higher than the QPA estimate). Mean in-network allowed amounts for nonphysician clinicians were 4% (ratio, 1.04) lower than the QPA, whereas mean in-network allowed amounts for physicians were 15% (ratio, 1.15) higher than the QPA estimates. These differences remained after adjusting for geographic region. Conclusions and Relevance: The findings of this cross-sectional study of US commercial insurance claims suggest that the NSA may have heterogeneous implications for out-of-network payments and negotiating leverage experienced by emergency medicine physicians in different geographic markets, with the potential for greater implications in the self-funded market.