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Health Reform and Medicare

The reforms to the Medicare system are aimed at improving the quality of care for beneficiaries, altering our health care delivery system, appropriately pricing services, and fighting waste, fraud and abuse. The Affordable Care Act has several provisions, which aim to satisfy these goals.

Hospital Re-admissions Reduction Program

This program will help hospitals smooth transitions for patients and reward hospitals that are successful in reducing avoidable re-admissions. The Center for Medicare & Medicaid Services (CMS) is working with hospitals at the local level to reduce avoidable re-admissions through its Quality Improvement Organizations, and are developing regulations to be issued sometime in 2011. The new law imposes payment penalties on the 25 percent of hospitals whose rates of hospital-acquired conditions like bedsores, complications from extended use of catheters, and injuries caused by falls are the highest. These penalties will help fund the cost of Medicare. The penalties incentivize hospitals to improve conditions, which means higher quality of care for consumers. In 2013, CMS will expand payments for value by rewarding better care. There will be a launch of a physician value-based payment system and implementation of a “value-modifier” that rewards physicians who deliver better care. CMS is also working on value-based payment strategies for additional providers of Medicare, which include skilled nursing facilities, home health care providers, hospice care, rehabilitation hospitals, and ambulatory surgery facilities.

Accountable Care Organizations

The Affordable Care Act promotes team-based care through Accountable Care organizations (ACOs) by utilizing a shared-savings program. Accountable Care Organizations are scheduled to be operational by 2012. Accountable Care Organizations create delivery systems that encourage and support teams of physicians, hospitals, and other healthcare providers to collaboratively manage and coordinate care for Medicare beneficiaries. If these providers meet certain quality and efficiency benchmarks, they can receive a share of the savings.

The new law establishes the Center for Medicare and Medicaid Innovation. The Affordable Care Act invests $10 billion in this Center over the next 10 years to test payment and delivery innovations that can improve the quality of care and/or increase cost efficiency, identifying successes that could be expanded by the Secretary of Health and Human Services.

Pricing Services and Modernizing Financing Systems

The law takes immediate steps to align Medicare Advantage plan payments with costs under traditional Medicare while protecting Medicare’s guaranteed benefits, and provides clear incentives for plans to improve the quality of care and outcomes provided to beneficiaries. Higher performing plans will qualify for payment bonuses beginning in 2012. Many provisions of ACA address areas of overutilization, such as advanced imaging services, which not only wastes resources but may also pose a danger to beneficiaries from needless exposure to radiation. CMS has recently issued proposed rules that will be finalized the fall of 2011. The law also accelerated the implementation of competitive bidding for durable medical equipment (DME). This competitive bidding will bring down the costs of the medical equipment and create a ripple effect, which will lower overall premiums. Hospitals will ultimately pay less for necessary equipment, which will be reflected in the cost of care to consumers.

Fighting Waste, Fraud and Abuse

ACA provides CMS with aggressive new authorities and enhanced screening tools to ensure that only legitimate providers are enrolled in Medicare. CMS will screen providers as they enter Medicare and periodically re-screen and re-validate provider information. Screenings will be based on risk, and providers may be subject to on-site visits, criminal background checks, or even a period of probation with enhanced review of claims submitted to Medicare. The Secretary can impose a moratorium on enrollment of new providers where necessary to combat fraud, waste and abuse. Certain suppliers and providers will be required to post surety bonds based on the level of risk and volume of their billings to Medicare. The law also provided CMS with $350 million in new resources to boost anti-fraud activities. This money will partially be spent on new hires that will be responsible for on-site inspections of suspicious entities. This money is appropriated as a part of “getting boots on the street” initiative which will help to combat fraud.

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