Welcome to Health Reform Watch, Sarah Kliff’s regular look at how the Affordable Care Act is changing the American health-care system — and being changed by it. You can reach Sarah with questions, comments and suggestions here. Check back every Monday, Wednesday and Friday afternoon for the latest edition, and read previous columns here.
Last Friday was no exception. Medicare released a 1,424-page rule that tells Medicare hospitals what they will get paid in 2014. The table of contents alone stretches on for 37 pages.
Still, if you want to understand how the country's largest health insurance plan wants to change how it pays for health care, this is the exact place to look.
Overall, hospitals seemed pretty happy with the top line number: a 0.8 percent increase in their payments next year. That works out to about $27 million more going to the Medicare program in 2014 than will in 2013. That's significant when you consider that Medicare costs grew at half that rate — by 0.4 percent — in 2012.
Hospitals were, according to Jeffries analyst Brian Tanquilit, girding for no pay raise at all— or even a small decrease.
At the same time, Medicare is making it harder to earn those dollars by increasing the payments to the very best hospitals — and trimming what it will pay poor performers. Starting in 2014, 2 percent of hospitals' reimbursements will depend on how well they prevent readmissions. That's twice as much as what's at stake this year and, combined with a few other quality programs in the health law, some think it could be enough to turn hospitals' heads.
"One percent was considered bothersome by hospitals, but necessarily traumatic to lose," says Erik Johnson, a senior vice president at Avalere Health who focuses on hospital operations. "Now they're starting to notice it a bit more."
The 2 percent penalty (or bonus) is mandated by the Affordable Care Act. But one place where Medicare did use its discretionary authority is to expand the readmission program to cover five health care services, up from three last year. Medicare will now penalize hospitals for knee or hip replacement patients who are readmitted, as they will for COPD patients.
Johnson also pointed out a new policy meant to cut hospital-acquired conditions, which begins in 2015, as an especially aggressive attempt to use Medicare payments to improve the quality of care. These are problems that arise from a hospital stay, such as an object left in the body during surgery (it happens a lot!) and accidental lacerations.
"You now have five measures in readmissions and will have eight on hospital-acquired infections," Johnson pointed out. "CMS is doubling down on this approach."
Still, its not clear that these penalties will drive the type of change that Medicare wants — or drive some vulnerable hospitals out of business. Ashish K. Jha, a professor in the Harvard School of Public Health, worries about the impact that these types of payments will have on safety-net hospitals.These are the hospitals that see the most low-income and uninsured Americans and tend to run at relatively small margins. There, a 2 percent cut in Medicare reimbursements could make a significant difference.
"For the majority of hospitals, its not big money," Jha says. "For the safety net, where they're already at low margins, Medicare is one of their best payers since they have a lot of Medicaid and uninsured. Getting the one or 2 percent hit for a bunch of these hospitals can matter."
Jha still counts himself among the relatively skeptical that these measures will actually lead to a revolution in paying for quality. When he travels to hospitals, he sees some that may have hired a few additional nurses but are not taking major steps to improve, such as overhauling the way they treat heart disease patients.
"What these measures will do, I think, is make some small incremental gains," he says. "People will probably declare victory, but the real question in my mind is: When your family member goes into the hospital, are they getting really terrific care? It's not happening at most hospitals, and I don't know these rules will fundamentally change that."
KLIFF NOTES: Top health policy reads from around the Web.
If this was a pill, you'd do anything to get it. "Health Quality Partners’ results have been extraordinary. According to an independent analysis by the consulting firm Mathematica, HQP has reduced hospitalizations by 33 percent and cut Medicare costs by 22 percent. Now Medicare is thinking of shutting it off." Ezra Klein in the Washington Post.
Next big challenge for the health law: Carrying it out. "Few government initiatives reach so many corners of the American economy and society — and have as much potential to generate trouble for the party in the White House. Among the complex imperatives: pushing reluctant states to set up insurance marketplaces and expand Medicaid programs, keeping an eye on insurance companies as they issue new rate schedules, measuring the law’s effects on small-business hiring, and coaxing healthy young people to buy coverage so the system works economically for everyone else." John Harwood in the New York Times.
Obamacare implementation won't be perfect—but it might not be a train wreck either. "The vast majority of Americans won’t notice any of these changes directly, because they will continue to get insurance the same way they do today—through Medicare, through Medicaid, or through an employer. To the extent Obamacare affects these people in the short term, it will mostly be by adding protections such as prohibitions on lifetime limits or, in the case of seniors, extra prescription drug coverage. And those changes have already started taking effect." Jonathan Cohn in the New Republic.