Promoting Greater Value for Enrollees in Medicare Advantage and Drug Plans

By Jonathan Blum, Acting Principal Deputy Administrator and Director, Center for Medicare

Posted February 15, 2013

New limits on overhead and profits for health plans in Medicare Advantage and Medicare drug plans will increase value for the over 14 million seniors and persons with disabilities enrolled in Medicare Advantage and over 35 million Medicare beneficiaries in drug plans offered by private insurance companies.  This step is part of the Affordable Care Act’s efforts to ensure that consumers get the most health care for their dollars.  Last year, we issued a rule to make sure that insurance companies generally spend at least 80 percent of the premiums paid by consumers in private health plans on health care or activities that improve health care quality, instead of paying for administrative costs or overhead.  Today’s proposal for people with Medicare is similar to last year’s rule benefiting consumers in the private health insurance market.

Seniors and individuals with disabilities will get more value and be more likely to stay healthy as plans invest more in their health care.  Specifically, beginning in 2014, Medicare health and drug plans will be required to meet a minimum medical loss ratio; they must spend at least 85 percent of revenue on clinical services, prescription drugs, quality improvements, and/or direct benefits to beneficiaries in the form of reduced Medicare premiums.  The higher the medical loss ratio, the more a health plan is spending on health care services and quality improvement activities and less the health plan is spending on non-health related items.

The medical loss ratio policy will spur Medicare plans to become more efficient in their operations.  Medicare plans not already meeting the medical loss ratio can either reduce administrative costs, profits, or increase benefits to meet the minimum medical loss ratio.

The Affordable Care Act requires that if a Medicare plan’s medical loss ratio is below 85 percent, the plan must return the amount by which the plan’s medical loss ratio is below this minimum.

The proposal will also enhance transparence for prospective enrollees.  When comparing their options and making choices, people with Medicare and their caregivers will be able to consider information about a plan’s medical loss ratio, along with quality ratings, coverage, premiums and other factors that influence their health care decisions.

With careful use of taxpayers’ dollars on health care services and improvements, the Affordable Care Act will create greater value for seniors and persons with disabilities enrolled in Medicare plans by helping them stay healthy.  And with additional information about health plan spending and quality, people with Medicare are better equipped than ever before to make informed health care choices.

Bundled payments, DMEPOS, regulatory reform, and ESRD

By Jonathan Blum, Acting Principal Deputy Administrator and Director, Center for Medicare 

In the past few days, the Centers for Medicare and Medicaid (CMS) announced four critical initiatives that are designed to enhance health care delivery for millions of Medicare beneficiaries by improving care or lowering costs, or both.  Taken together the announcements illustrate the breadth and diversity of efforts underway to ensure a better, stronger, more patient-centered Medicare program.

Last week, we announced a new health care delivery system reform, made possible by the Affordable Care Act, to test how bundling of payments for episodes of care, for example a heart attack or stroke, instead of paying for each test or procedure or physician’s visit, can result in more coordinated, higher quality care for beneficiaries.  By bundling payments for services that beneficiaries receive during an episode of care, CMS hopes to encourage doctors, hospitals, and others  to work together to improve care and health outcomes, while also lowering Medicare costs.  Over 500 organizations, nationwide, have already signed-on to participate.

We also announced a major expansion of the Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) Competitive Bidding Program.  In its first year of operation, competitive bidding, where prices are based on suppliers’ bids, saved the Medicare program, and taxpayers, over $202 million, while maintaining access to quality products for Medicare beneficiaries in the nine areas of the country where the program launched.   It’s a great example of the Administration’s determination to put the brakes on runaway healthcare costs.  With this expansion in the program, Medicare beneficiaries in 91 major metropolitan areas will save an average of 45 percent on certain DMEPOS items beginning in July.  Between 2013 and 2022, we estimate that the expansion of the DMEPOS program will save Medicare $25.7 billion, while saving beneficiaries, who pay a percentage for medical equipment and supplies, $17.1 billion through lower prices.

This week, we issued a proposed rule which will help health care providers and hospitals to operate more efficiently by getting rid of regulations that are outdated, obsolete, or excessively burdensome.  Many of the rule’s provisions streamline requirements that health care providers must meet in order to participate in the Medicare and Medicaid programs, without jeopardizing patient safety, and they will save providers nearly $676 million annually.  Just as important, by eliminating burdensome requirements, health care providers can improve the quality of health care delivery for Medicare beneficiaries by spending more time focusing on patient care and less time filling out forms.

Finally this week, we announced the Comprehensive End-Stage Renal Disease (ESRD) Care Initiative.  It will help identify, test and evaluate new ways to improve care for Medicare beneficiaries living with ESRD.  We’ll be working with the health care provider community to care for a population that significant and complex health care needs.  Through better care coordination, beneficiaries can more easily navigate the multiple providers involved in their care, ultimately improving their health outcomes.

These four initiatives demonstrate that CMS is employing new and novel tools and programs, thinking outside the box and beyond the usual way of doing things, in order to improve health care delivery for people with Medicare and, in the process, strengthen the Medicare program for current and future beneficiaries.

Medicare Announces Substantial Savings For Medical Equipment Included In The Next Round Of Competitive Bidding Program

By Jonathan Blum, Acting Principal Deputy Administrator and Director, Center for Medicare

Last week, the Centers for Medicare & Medicaid Services (CMS) announced new, lower Medicare prices that will go into effect this July in a major expansion of the DME Competitive Bidding Program from nine areas to 91 areas. The CMS Office of the Actuary estimates that the program will save the Medicare Part B Trust Fund $25.7 billion and beneficiaries $17.1 billion between 2013 and 2022. Medicare beneficiaries in these 91 major metropolitan areas will save an average of 45 percent for certain DME items scheduled to begin on July 1, 2013.

To reduce costs and the fraud resulting from excessive prices, CMS introduced a competitive bidding program in nine areas of the country in 2011. Under the DME competitive bidding program, Medicare beneficiaries with Original Medicare who live in competitive bidding areas will pay less for certain items and services such as wheelchairs, oxygen, mail order diabetic supplies, and more. Competitive bidding for DME is proven to save money for taxpayers and Medicare beneficiaries while maintaining access to quality items and services.

Additionally, Medicare beneficiaries across the country will save an average of 72 percent on diabetic testing supplies under a national mail-order program starting at the same time.

Medicare thoroughly vets all suppliers before awarding them contracts in the program. Suppliers must be accredited and meet stringent quality standards to ensure good customer service and high quality items. We have also monitored the program areas extensively, and real-time monitoring data have shown successful implementation with very few beneficiary complaints and no negative impact on beneficiary health status based on measures such as hospitalizations, length of hospital stay, and number of emergency room visits compared to non-competitive bidding areas.  CMS will employ the same aggressive monitoring for the MSAs added in Round 2.

A full list of the new prices and included items is available at