PREVENTION OF IMPROPER PAYMENTS

Of the $4 trillion spent by the government in 2017, nearly $141 billion were improper payments. These are payments made in error either to the wrong beneficiary, in the incorrect amount, or for a service that is not legitimate. Fraud, antiquated data systems, and methodologies all lead to this wasteful spending.

Earlier in the year, the Trump administration released their efforts to address the problem with the CAP Goal Action Plan, Getting Payments Right. The plan takes a cross-agency approach to reduce the cost related to improper payments while at the same time improving the efficiencies of government programs.

PREVENTION

For starters, the CAP emphasizes incorporating preventative measures in order to reduce improper payments before there is ever a need for post-payment recovery. Recovery initiatives are largely ineffective and agencies generally recover much less than what was originally paid.

STRENGTHENING PARTNERSHIP 

The plan also noted the importance of bolstering partnerships between states and federal agencies to decrease improper payments made by federally funded state-administered programs. Currently, states have access to federal databases for data matching and analytics in order to prevent and identify improper payments. However, much of the data is not current, complete, or accurate. The CAP directs agencies to identify state agency partners that will help in screening and determining eligibility before payments are made.

Medicaid is one of the major government programs that deals with improper payments. While fraud does take place within the program, it isn't the primary contributor to improper payments. The problem Medicaid faces is that eligibility data is housed in massive data repositories, and that data is largely stale, old, and unusable. In order to provide the program with improved data, CMS is trying to develop the Transformed Medicaid Statistical Information System (T-MSIS), however it is years away from completion.

COST AVOIDANCE AND IMPROPER PAYMENTS

In addition to the Trump administration and CMS efforts to deal with improper payments, there is also progress being made in the private sector. Syrtis Solutions (Syrtis) recognized the need for a solution to reduce wasteful spending within Medicaid. The company takes advantage of e-prescribing data to provide the payer of last resort market with technology-based solutions to prospectively cost avoid pharmacy claims and increase medical cost recovery. Medicaid plans that employ the tool can optimize the efficiency of their adjudication processes while conserving valuable resources.

Based on the administration's plan, efforts from CMS and the private sector, it is obvious that the most effective way to battle improper payments is with prevention. Properly identifying claims before they are paid and cost avoidance measures will be vital steps to maximizing program efficiency. In addition, improving the quality of data used to identify claims will be paramount.

Improper payments have cost the government and it's taxpayers billions of dollars. While a few of these payments are fraudulent, the vast majority are a result of poor quality data and out-of-date methodologies. Moving forward, it will be important for agencies and states to utilize new technologies in order to improve efficiency.

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HEALTHCARE MEGA-MERGERS

Over the last year, there has been a wave of PBM and health care provider mega-mergers. The acquisitions have been under rigorous evaluation and the approvals indicate that government regulators are more comfortable with vertical integration rather than horizontal. Here is an overview of these mergers.

CVS HEALTH ACQUIRES AETNA FOR $69 BILLION

CVS Health revealed that it would merge with Aetna on December 17, 2017. The decision would add a PBM to one of the nation's leading health insurance companies.

CVS Health's President and Chief Executive Officer, Larry J. Merlo, said, "This combination brings together the expertise of two great companies to remake the consumer health care experience. With the analytics of Aetna and CVS Health's human touch, we will create a health care platform built around individuals. We look forward to working with the talented people at Aetna to position the combined company as America's front door to quality health care, integrating more closely the work of doctors, pharmacists, other health care professionals and health benefits companies to create a platform that is easier to use and less expensive for consumers."

The decision to merge went under review by the DOJ and has been met with criticism from industry groups. In June, the American Medical Association objected the deal and started pushing for regulatory authorities to block it.

In a hearing held by the California Department of Insurance, the AMA's President, Dr. Barbara McAneny, stated, "After very careful consideration over the past months, the AMA has come to the conclusion that this merger would likely substantially lessen competition in many health care markets, to the detriment of patients. The AMA is now convinced that the proposed CVS-Aetna merger should be blocked."

In August, California's Insurance Commissioner, Dave Jones, asked the DOJ to block the merger over Part D concerns. He contended that lowering competition for drug plans would lead to higher premiums. Currently, CVS Health possesses 24% market share and Aetna has 9% of Part D plans.

On October 10th, the merger was authorized by the DOJ under the condition that Aetna would sell its private Medicare drug plans. Despite criticism from industry specialists, Larry J. Merlo, stated that this, "is an important step toward bringing together the strengths and capabilities of our two companies to improve the consumer health care experience."

CENTENE PURCHASES FIDELIS CARE 

On September 12, 2017, the Centene Corporation announced that it agreed to merge with the healthcare provider, Fidelis Care. According to the terms of the deal, Fidelis Care will become Centene's health plan in New York and Centene will take ownership of Fidelis Care's assets.

In July 2018, the procurement was finalized. The deal was worth $3.75 billion and it increased Centene's position in government-sponsored healthcare significantly. As a result of the merger, Centene's national membership rose to 14 million members and the corporation assumed a leadership position in the four largest managed care membership states: New York, California, Florida and Texas.

"We are pleased to have completed our transaction with Fidelis Care on schedule and to enter the New York market by joining with a company with which we are closely aligned on many levels," said Michael F. Neidorff, Chairman and CEO of Centene. "By bringing together two leaders in high quality, affordable health care with a shared mission of promoting accessible care and services for all, this transaction creates opportunities for us to further transform the health of the communities we serve, one person at a time."

WELLCARE HEALTH PLANS ACQUIRES MERIDIAN

In May, WellCare Health Plans announced that it was looking to merge with Meridian Health Plan of Michigan, Meridian Health Plan of Illinois, and MeridianRx. Over the course of 4-months, the company obtained all the necessary regulatory approvals and on September 1st the acquisition was completed. The merger was worth an estimated $2.5 billion.

Because of the merger, WellCare will have the top Medicaid membership market share in Michigan and Illinois. Furthermore, the company will increase its leading market position from four to six states.

In addition to expanding in the Medicare Advantage market, the health care provider's Medicaid membership is projected to grow nearly 40%. WellCare's CEO, Ken Burdick, believes that the addition of a proprietary PBM platform will help support growth within government-sponsored programs.

CIGNA MERGES WITH EXPRESS SCRIPTS HOLDING COMPANY

In early March, Cigna announced that it would purchase Express Scripts Holding Company for $67 billion. Cigna is the fifth largest health insurer in the country and Express Scripts is the biggest stand-alone PBM.

Shortly thereafter, the DOJ Antitrust Division conducted a thorough six-month investigation. They investigated if the merger would significantly decrease competition among PBM services or increase the cost of these services for rival insurance providers. During that time the DOJ received more than two million documents, examined transaction data, and spoke with over 100 knowledgeable industry participants.

On September 17th, the DOJ cleared the pending merger. According to the DOJ's Assistant Attorney General of the Antitrust Division, Makan Delrahim, "After a thorough review of the proposed transaction, the Antitrust Division has determined that the combination of Cigna, a health insurance company, and ESI, a pharmacy benefit management company, is unlikely to result in harm to competition or consumers."

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