CVS-HEALTH MEGA-MERGER CREATES HEALTHCARE INNOVATION COMPANY

2018 experienced a wave of healthcare mega-mergers. One of the most noteworthy acquisitions was between CVS Health and Aetna for $69 billion dollars. The PBM announced its deal to merge with one of the nation's largest health insurance providers in December of 2017. After the announcement, the merger underwent an intense review from the DOJ and was completed on November 28, 2018.

"Today marks the start of a new day in health care and a transformative moment for our company and our industry," stated CVS Health President and Chief Executive Officer Larry J. Merlo. "By delivering the combined capabilities of our two leading organizations, we will transform the consumer health experience and build healthier communities through a new innovative health care model that is local, easier to use, less expensive and puts consumers at the center of their care. We are also leading change in healthcare by challenging the status quo with new technologies, business models and partnerships. In doing so, we will continue to deliver on our purpose of helping people on their path to better health."

Leading up to its finalization, industry groups like the American Medical Association(AMA) opposed the deal and pushed for regulators to prevent it. They were concerned as to how the merger would affect competition within existing care models.

Before a hearing with the California Department of Insurance, the AMA's President, Dr. Barbara McAneny, explained, "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."

Marilyn Singleton, MD, the President of Association of American Physicians and Surgeons(AAPS) expressed her concerns saying, "CVS is in the position to steer patients covered by Aetna to receive their care from CVS-run clinics, instead of from their own trusted physician. Moreover, the patients in the name of convenience or coerced by a limited network would get their prescriptions from CVS." 

CVS-Health considers its merger with Aetna as a significant step to emerging as a "healthcare innovation company" in 2019. The new model will surely impact the industry and engagement between patients and providers.

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MEDICAID IN 2019

In 2018, there were numerous attempts to reform the Medicaid program. While initiatives at the federal level met resistance, several reform initiatives came about at the state level. These efforts included legislation, program expansion, demonstration waivers, eligibility restrictions, and work requirements. Some of these changes have been adopted and successfully incorporated while others are still waiting for approval. For 2019, it will be important to monitor the impact of these changes to understand how the Medicaid program will evolve.

Section 1115 Medicaid Waivers

In spite of the Trump administration's failed attempts to overturn the ACA and reform Medicaid, states have sought to make reforms by utilizing demonstration waivers. Section 1115 waivers provide states the flexibility to pursue test coverage models and forgo key provisions of federal law under the condition that the changes meet the objectives of the Medicaid program.

On January 11, 2018, CMS issued new guidance for the Section 1115 waivers that made it possible for states to impose work requirements on their program's beneficiaries. According to CMS, the decision was made to "support states helping Medicaid beneficiaries improve well-being and achieve self-sufficiency." In addition to the revised eligibility requirements, states also started considering provisions including time limits, lockout periods for unpaid premiums or untimely reporting, drug testing, and premiums. The guidance has been controversial with legislators and government officials.

As of January 9th, the federal government has approved waivers from seven states. Arkansas and Indiana introduced their waivers last year. Michigan, Kentucky, Maine, Wisconsin, and New Hampshire have obtained approval and are implementing the changes in 2019. Arizona, Mississippi, Ohio, Oklahoma, South Dakota, Tennessee, Utah, and Virginia have proposed waivers but are waiting for decisions from CMS.

Regardless of its approval from CMS, Kentucky's waiver was blocked from going into effect last year after a group of 16 Kentucky Medicaid enrollees filed suit against it. U.S. District Judge James Boasberg then ruled the legislation unconstitutional. He specified that "The Secretary never adequately considered whether Kentucky HEALTH would, in fact, help the state furnish medical assistance to its citizens, a central objective of Medicaid." 

Since then, a reworked demonstration waiver was resubmitted to CMS with minor technical changes that require Kentucky to submit implementation and monitoring protocols for the eligibility requirements.

The key components submitted for approval are:

• Premiums instead of copays 
• Cost Sharing measures that would pull from HSAs for non-emergency use of the ER.
• Health Savings Accounts 
• Work Requirements 
• A six month lockout period for the failure to report a change in circumstances such as household income and hours worked.

On November 20, 2018, Kentucky's revised waiver was approved by CMS; however, health advocates argued that it was nearly identical to the original. Recently, the National Health Law Program, Kentucky Equal Justice Center, and the Southern Poverty Law Center joined together to file a lawsuit against the law. Kentucky is set to have the waiver carried out in April of this year but Governor Bevin is ready to pull coverage if the waiver does not survive the lawsuit.

Arkansas was the first state to implement its work requirement. It's waiver called for enrollees to report 80 hours of work or community engagement activities each month in order to be eligible for coverage. Merely six months since the implementation 17,000 members have been disenrolled either because they did not comply or they had failed to be given an exemption. According to state officials, enrollees were not informed of the requirements or they misunderstood them. Furthermore, enrollees reported having difficulty getting enrolled and accessing support. States intending to implement equivalent waivers can learn from Kentucky's uncoordinated implementation. It will be extremely critical for states to proficiently communicate their intended program changes to their communities. At the moment, there is litigation challenging Arkansas's waiver and the state has not received approval for its work requirement evaluation process.

States Adopt Medicaid Expansion

In states that had previously expanded Medicaid under the ACA, research studies have revealed that the decision to do so has been economically beneficial; moreover, it has also improved coverage, access to care, and service utilization. Due to the success, Medicaid expansion was a popular issue at the ballot box for voters in the midterm elections.

After the polls closed, Washington D.C. and 37 states approved expansion of their Medicaid programs. Idaho, Nebraska, and Utah adopted expansion using ballot initiatives. Maine also successfully passed a ballot initiative in 2017 but the governor at that time, Paul LePage (R), refused to carry it out referring to it as it "fiscally irresponsible". Fast-forward to this year, newly elected governor, Janet Mills (D) signed an executive order that began the expansion. In states such as Wisconsin and Kansas, Governor Tony Evers (D) and Governor Laura Kelly (D) ran on expansion and will now be working with legislators to pursue it.

Apart from the 37 states that have expanded or are expanding in 2019, there are also developments in other areas of the country. Historically, Mississippi and Georgia have fought Medicaid expansion but they might possibly consider the option this year.

Montana pushed to continue funding for their Medicaid program with the I-185 ballot initiative. However, the attempt failed to secure the necessary votes and the state is now in a similar situation to Alaska where expansion is in the hands of law-makers.

Regardless of the nationwide momentum to expand Medicaid under the ACA, there has also been a recent effort in Texas that would overturn the law for the entire country. In December, U.S. District Judge Reed O'Connor found the ACA unconstitutional as a result of changes in federal tax law. While the court's ruling could possibly dismantle the health-care law, appeals have been filed and it will not be addressed until it arrives at the Supreme Court.

Reform Of Medicaid Payment And Delivery Models

Medicaid relies on risk-based managed care as the program's main delivery system. This year, states will be seeking to utilize alternative delivery systems and payment models. These efforts will work to improve MCO's while also addressing social determinants of health.

On November 8th, CMS submitted considerable regulatory revisions aimed towards updating the managed care regulatory framework from 2016. According to CMS, these changes "reflect a broader strategy to relieve regulatory burdens; support state flexibility and local leadership; and promote transparency, flexibility, and innovation in care delivery." CMS, the National Association of Medicaid Directors (NAMD) and State Medicaid Directors organized a group to develop the framework. The group serves "to identify opportunities to achieve a better balance between appropriate federal oversight and state flexibility, while also maintaining critical beneficiary protections, ensuring fiscal integrity, and promoting accountability for providing quality of care for Medicaid beneficiaries."

States will want to improve access to care within rural communities in 2019. Some of the components used to accomplish this include: e-Consult, telehealth, telemonitoring, and telemedicine. Additionally, there will probably be increases in funding for primary care residency programs and providers in these communities, increased SUD services, and the incorporation of multi-payer models. Additionally, the reduction of skyrocketing pharmaceutical drug costs will certainly be another issue on the new year's agenda. To lower this spending, states will look to implement cost containment initiatives that will maximize rebate opportunities and enact revised utilization controls.

Lastly, states are also focused on LTSS issues and expanding coverage within community settings this year by extending provisions from existing support programs. Money Follows the Person (MFP) and Spousal Impoverishment are two programs being considered by Congress. MFP helps states in rebalancing their Medicaid long-term care systems. The Spousal Impoverishment provision dates back to 1988 and serves to protect the financial resources of elderly couples when employing nursing home care. CMS has also reached out to State Medicaid Directors in a November letter "to announce opportunities to design innovative service delivery systems including systems for providing community-based services for adults with a serious mental illness (SMI) or children with a serious emotional disturbance (SED) who are receiving medical assistance." The invitation authorizes states to waive the federal IMD payment exclusion in order to improve care for beneficiaries.

2018 was a significant year for Medicaid, the largest public health care provider in the United States. A variety of attempts were made to reform the program at the federal and state levels. Some of these efforts have turned out to be beneficial while others have become contentious with legislatures and enrollees. In 2019, Medicaid expansion, Section 1115 waivers, and new payment and delivery models will be some of the key issues to keep an eye on.

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EXECUTIVE ORDER: MEDI-CAL TO NEGOTIATE PRESCRIPTION DRUG COSTS

California's newly elected governor; Gavin Newsom (D) has recently taken a legislative measure to address skyrocketing drug prices. Shortly after he was sworn in last week, Newsom signed an executive order making the state responsible for negotiating drug prices directly with pharmaceutical drug companies. In addition, the governor is seeking increased funding for Medi-Cal and a state-level individual mandate.

The order outlines a singular purchasing model which intends to achieve better drug pricing for the state's Medicaid program. Newsom is attempting to making use of the purchasing power that comes along with a Medicaid population of over 13 million and growing. In addition, there is very little doubt that executing the order will have ramifications with California's relationship with big pharma. Under the order, California will develop a list of drugs to be purchased in bulk as well as target specific medications for negotiation. It would also enable private payers to enter into the public system and negotiate prices.

Advocates of the initiative view it as an opportunity to not only reduce costs locally but also at the federal level. Jack Hoadley, a researcher at Georgetown University's Health Policy Institute, believes that the order could encourage the use of costly pharmaceuticals and make them more common.

Hoadley explained, "States like California could bring a lot of leverage to a sole-source drug that is priced very high."

Friso van Reesema concentrates on Medicaid pharma at Cipher Health and sees Newsom's order as an "interesting move that shows that states are diving deeper into their budgets to identify ways to allocate funds to priority programs." Reesema believes that pharmaceutical companies will have to comply with the state's new purchasing model, thus allowing payers to negotiate drug pricing based on health outcomes rather than models that are based solely on volume.

On the other hand, some experts are concerned about the fact that managed care plans will no longer have complete control over their formularies. This could lead to denied prescriptions and could greatly impact patient and provider satisfaction.

Dr. Adam Fein from Pembroke Consulting is skeptical of the governor's order. Fein points out, "It sounds like a supplemental rebate play. States can negotiate supplemental rebates with manufacturers (either through state pools or via managed care). Nearly all states already do this as single states or as part of a multistate group."

Sandeep Wadhwa, MD, chief health officer and senior vice president of government programs at Solera Health, agrees with Fein's observation. According to Wadhwa, "This is a bit like other state-administered services such as long-term services or dental care which may not be part of managed care contract. This will almost certainly require a state plan amendment to be approved by feds."

Discover more here.

TEXAS JUDGE ORDERS THE ACA UNCONSTITUTIONAL

The future of the Affordable Care Act (ACA) is at risk after a federal district court judge ruled the law to be unconstitutional. On Friday, Judge Reed C. O'Connor (TX) sided with twenty Republican legislators and ruled the law unconstitutional after congress passed the December 2017 tax bill.

Last years tax bill removed the laws Individual Mandate that penalized taxpayers for failing to have healthcare coverage. Preceding the bill, the Supreme Court ruled in favor of the ACA due to the fact that the mandate was considered a tax and an appropriate power of the Congress. However, Judge O'Connor's position is that the law is no longer constitutional without the penalty.

According to Judge O'Connor, "The Court finds the Individual Mandate "is essential to" and inseverable from "the other provisions of" the ACA." Last week, the ruling was reached while most plans were approaching the close of open enrollment. Despite his order, enrollee's coverage should not be affected and a final decision will not likely be made until it reaches the Supreme Court. Up to this point, the Supreme Court has made two constitutional related rulings to the ACA and this will more than likely be the third.

Soon after, Attorney General Becerra and fifteen other Democrats vowed to appeal the ruling. Becerra stated, "Today's ruling is an assault on 133 million Americans with preexisting conditions, on the 20 million Americans who rely on the ACA for healthcare, and on America's faithful progress toward affordable healthcare for all Americans. The ACA has already survived more than 70 unsuccessful repeal attempts and withstood scrutiny in the Supreme Court. Today's misguided ruling will not deter us: our coalition will continue to fight in court for the health and wellbeing of all Americans."

Senate Minority Leader Chuck Schumer commented, "The ruling seems to be based on faulty legal reasoning and hopefully it will be overturned."

According to legal experts, this effort has very little chance of standing up in court and it will most likely be denied. If the order was supported in the Supreme Court, it would seriously affect the nation's health care system given that the ACA touches nearly every aspect of it.

Read more about Medicaid and the ACA here.

CMS ACHIEVES THE LOWEST IMPROPER PAYMENT RATE IN TEN YEARS

Medicare and Medicaid accounted for $40 billion dollars in improper payments in 2017 and the Medicaid program has been on the GAO's High Risk List since 2003 because of insufficient fiscal oversight. However, last month CMS announced that the agency achieved the lowest improper payment reduction rate for the programs in 8 years. This makes 2018 the second consecutive year that the rate has been below the 10% threshold following the compliance initiatives established in the Improper Payments Elimination and Recovery Act of 2010.

Leading up to this point, CMS has made a concentrated effort to decrease improper payments by focusing on claims identification, reporting, and technology solutions that address payment error vulnerabilities.

CMS Administrator Seema Verma said, "Our accomplishments over the past year were the result of a focused effort to target root causes of improper payments. CMS also implemented a targeted review strategy that focused on provider education, assistance and burden reduction. The agency's actions emphasized prevention-oriented activities."

Defining and understanding this wasteful spending is a prime focus for effective oversight according to the administrator. She recognizes that not all improper payments are fraud but that these payments fail to "meet statutory, regulatory, administrative or other legally applicable requirements."

CMS determined that the decreased rate was a consequence of their targeted review strategy that concentrates on provider education, assistance, burden reduction, and prevention activities that simplify and clarify policy. In addition, the agency also favors the implementation of innovative solutions from the private sector that will combat improper payments and assist Medicaid and Medicare providers.

In spite of the success, the agency is aiming to reduce the rate even further. Verma states, "While we have made progress on reducing the improper payments rate, we are not satisfied and more work needs to be done to achieve increased and consistent reductions in the future by implementing already existing initiatives as well as innovative processes."

HOW IMPROPER PAYMENTS OCCUR

The vast majority of improper payments result in government-funded health care systems as a result of antiquated data systems and methodologies. Specifically, the data employed by the federal government to detect overpayments and fraud is unreliable.

In 2012, HHS Regional Inspector General Ann Maxwell declared, "... much of the data used to identify improper payments and fraud is not current, available, complete, [or] accurate."

Throughout Medicaid, the coordination of benefits and ascertaining who is responsible for a claim is complicated. It demands timely data and the use of numerous data sources. Also, eligibility data is uncoordinated between federal and state systems and it is often not accurate.

PREVENTION OF IMPROPER PAYMENTS 

On a legislative level, Congress made efforts to remedy improper payments with the introduction of the Improper Payments Elimination and Recovery Improvement Act of 2012 and the Fraud Reduction and Data Analytics Act of 2015. Nevertheless, without reliable, complete, and accurate data, Medicaid will continue to make payments in error.

Additional initiatives to combat Medicaid's improper payments are developing from the private sector. Syrtis Solutions (Syrtis) has ushered a technology-based solution to assist the program in determining third party liability (TPL) before medical and pharmacy claims are paid improperly. Our company discovered that Medicaid's traditional TPL discovery processes' are primarily retrospective and fail to capture 13.4% of individuals who have unreported primary commercial coverage. Because of this, Medicaid loses billions in improper claims payments; consequently, inefficient post-payment recovery processes are employed to recoup the improper payments. To make matters worse, these post-payment recovery initiatives only recover less than $0.20 on the dollar.

CMS's announcement in November was a notable achievement in light of the high rate of improper payments within government-funded programs. For the first time in history, improper payment reduction rates were reported for Medicare, Medicaid, and the Children's Health Insurance Program. While Congress and federal agencies are working to keep the momentum by implementing legislation and prevention activities, the private sector is also creating innovative solutions to minimize waste and help these programs operate more effectively.

Click here and learn more about Syrtis Solutions.

THE 2018 MIDTERMS FAVOR MEDICAID EXPANSION

Medicaid expansion was a key subject in this year's midterm elections. Three states - Idaho, Nebraska, and Utah - successfully passed ballot initiatives to expand their Medicaid programs, while Kansas and Maine elected pro-expansion governors. Because of this, almost 500,000 additional low-income citizens will be permitted to enroll in the government-run health program. Here is a recap of the latest expansion activity.

MEDICAID EXPANSION BALLOT INITIATIVES

IDAHO

Since voters in Idaho favored Idaho Proposition 2, Governor-elect Brad Little (R) will implement the initiative. The state is now obligated to submit an amendment plan to CMS that will carry out the expansion within 90 days of the approval. Additionally, the Idaho Department of Health and Welfare is authorized to take any actions needed to put the regulations into effect.

NEBRASKA

In spite of Governor Pete Rickett's (R) resistance to Medicaid expansion, Nebraska Initiative 427 successfully passed. The state will be required to submit a state plan amendment or documents for waiver approval on or before April 1, 2019 to CMS. Furthermore, the Department of Human Services is responsible for taking "all actions necessary to maximize federal financial participation in funding medical assistance pursuant to this section."

UTAH

Utah Proposition 3 was voted in favor of and it calls for Utah to expand Medicaid by way of the ACA starting April 1, 2019. The effort also restricts future changes to the program or CHIP that could possibly reduce coverage, benefits, or payment rates below policies from January 1, 2017. In order to fund the program expansion, the proposition will also increase the state's sales tax by 0.15%.

PRO EXPANSION GOVERNORS

While Kansas and Maine did not expand their programs with ballot initiatives, they are going after it with support from newly elected pro-expansion governors.

KANSAS

In 2017, the Kansas legislature passed a bill that would have extended Medicaid. However, the governor at that time, Sam Brownback (R), vetoed it. Presently, with Governor-elect Laura Kelly (D) assuming office, Medicaid expansion could very well materialize. Kelly has been a supporter of expansion and even ran on it.

MAINE

In 2017, Maine also passed a ballot initiative to expand Medicaid but the then governor, Paul LePage (R) refused to carry out the regulations. In fact, LePage even claimed that he would go to jail before putting the ballot initiative into action. Regardless of his resistance, voters elected Janet Mills (D) on Tuesday. The governor-elect ran on Medicaid expansion and is committed to implementing the 2017 initiative immediately after she takes office.

Medicaid expansion has bipartisan appeal. Based upon the Midterm results, voters appreciate better access to care and improved outcomes for low-income Americans.

Health economists have been monitoring the program's development and are optimistic about the impact expansion will have. Benjamin Sommers analyzes Medicaid expansion at Harvard and states, "In terms of what happens to patients, we have 40-plus studies looking at this over the past decade. It makes a major difference in patients' ability to access health care, to pay their bills, and in many studies, we see improved health outcomes too."

According to research, populations in states that expand the program have improved access to a larger range of health services. Individuals also declare that by having coverage, they incur less debt and are more capable of paying their health care bills. Other research found that states who expand Medicaid see a larger decline in infant mortality compared to states that do not participate in the program.

The discoveries from these studies highlight the benefits of Medicaid expansion. After the recent elections, a number of states move closer to expanding coverage and making a difference in nearly half a million lives.

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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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