Health Policy
Nicholas B. Frisch, MD, MBA
Roshan P. Shah, MD, JD
P. Maxwell Courtney, MD
Dr. Shah or an immediate family member serves as a paid consultant to or is an employee of Link Orthopaedics and serves as a board member, owner, officer, or committee member of the U.S. Food and Drug Administration. Dr. Courtney or an immediate family member is a member of a speakers’ bureau or has made paid presentations on behalf of ConvaTec and serves as a paid consultant to or is an employee of Hip Innovation Technology. Neither Dr. Frisch nor any immediate family member has received anything of value from or has stock or stock options held in a commercial company or institution related directly or indirectly to the subject of this chapter.
ABSTRACT
With health policy at the forefront of national debate, orthopaedic surgeons must become familiar with the many recent regulatory and legislative changes affecting their ability to care for patients. This chapter provides a primer for the orthopaedic surgeon, helping understand the basics of Medicare and Medicaid and decipher the alphabet soup of acronyms including MACRA, MIPS, and BPCI. We will review reimbursement plans from both private and government payers, including several alternative payment models, which are becoming increasingly popular in adult reconstruction, spine, and shoulder. We also include a detailed discussion of the Affordable Care Act and its relevance to orthopaedic surgeons and their patients. We hope this chapter can help surgeons understand the current policy issues facing our field and continue to advocate for their patients.
Keywords: affordable care act; alternative payment models; bundled payments; medicaid; medicare
Introduction
National healthcare expenditures reached $3.3 trillion dollars in 2016, which accounts for 17.9% of gross domestic product (GDP).1 Throughout the duration of health care in the United States a variety of approaches have taken shape in the form of payment protocols. These approaches have evolved over time, and the current system represents a blend of both past and new practices. When discussing these various practices, it is important to keep in mind the impact that each has on the parties involved: payer, provider, and patient. It is also important to remember, on a broader level, the implications each approach has to the healthcare system as a whole, in terms of cost, quality, and efficiency.
According to the 2016 census, the percentage of people with health insurance coverage was 91.2%.2 Of those covered, 67.3% had private health insurance compared with 37.3% with government coverage. Major government programs include Medicare (16.7%), Medicaid (19.4%), and Military/Veterans’ Administration (4.6%), as well as other programs such as the Indian Health Service system and Federal Employees Health Benefits Program. The Centers for Medicare and Medicaid Services (CMS) is a part of the U.S. Department of Health and Human Services (HHS). CMS tracks healthcare expenditures, and as of 2016, 32% went toward hospital care, 20% physician and clinical services, 10% prescription drugs, and 3% other professional services3 (Figure 1). When comparing health spending by payer, CMS reports: 20% Medicare, 17% Medicaid, 34% private health insurance, and 11% out-of-pocket3 (Figure 2).
Medicare
The Social Security Amendments of 1965 signed by President Lyndon B. Johnson established Medicare and Medicaid as the dominant public programs for health care in the United States. The programs have undergone significant modification over the years and represent a substantial portion of health care coverage. Medicare represents 20% of total national healthcare expenditures or roughly $672.1 billion.1
Medicare provides health insurance for (1) people aged 65 or older, (2) people younger than 65 years with certain disabilities, and (3) people of all ages with end-stage renal disease. It is estimated that as of 2016 there
were 56.5 million people enrolled in Medicare programs in the United States. Medicare is composed of the following parts:
were 56.5 million people enrolled in Medicare programs in the United States. Medicare is composed of the following parts:
Medicare Part A is hospital insurance, which helps cover inpatient care in hospitals and skilled nursing facilities, as well as some hospice care and home health care for those beneficiaries who meet specified criteria. All individuals are automatically eligible if they paid into the Medicare trust fund for 10 or more years (40 quarters) and have reached the age of 65. It should be noted that skilled nursing facility coverage is only for posthospital coverage within 30 days of hospital stay of at least 3 days. Most people covered by Part A do not pay a premium because they, or their spouse, have paid for it through their payroll taxes while working. The US payroll tax, or the Federal Insurance Contributions Act (FICA) tax, requires employers and employees to pay a tax on their income to fund Social Security and Medicare. In general, employers and employees each pay 1.45% of worker’s wages and self-employed workers pay 2.9% of net earnings. In 2017, Medicare covered 58.4 million people of which 49.5 million aged 65 and older and 8.9 million were disabled.4
Medicare Part B is medical insurance, which helps cover physician services, outpatient care, and various home health care, as well as some additional medical services not covered under Part A (ie, physical therapy and laboratory work). Part B is financed by a 25% beneficiary premium and annual federal appropriations for the rest. Most people pay a monthly premium for Part B. As of 2017, the Medicare Trustees reported enrollment of 53.4 million people for Part B.4
Medicare Part C, which is also referred to as Medicare Advantage Plan, provides all Part A and Part B coverage as well as additional coverage (ie, vision, hearing, dental, etc). These plans are purchased through Medicare-approved private companies and charge different out-of-pocket fees. Medicare Advantage enrollment has grown 71% since 2010 and as of 2017 roughly 33% of people with Medicare is enrolled in an Advantage plan.5 The Kaiser Family Foundation reports that in 2017, 63% of Medicare
Advantage enrollees are in Health Maintenance Organizations (HMOs) compared with roughly one-third in Preferred Provider Organizations (PPOs).5
Advantage enrollees are in Health Maintenance Organizations (HMOs) compared with roughly one-third in Preferred Provider Organizations (PPOs).5
Medicare Part D, which was started in January 2006, provides prescription drug coverage to everyone with Medicare. This program is an insurance product, whereby Medicare beneficiaries may choose to purchase a drug plan through Medicare-approved private companies and pay a monthly premium. The purpose of the program is to lower prescription drug costs and help shield Medicare beneficiaries from higher costs in the future. As of 2017, the Medicare Trustees reported an enrollment of 44.5 million people for Part D.4 In 2016 prescription drug spending reached $328.6 billion.1
Medicaid
Medicaid is a social program that is available to certain low-income individuals and families. It is a state-administered program, such that each state sets specific guidelines for utilization. Although eligibility requirements vary by state, in general, eligibility may be determined by age, pregnancy status, disability, or income. Children may also be eligible for Medicaid, independent of parent’s eligibility. Unlike Medicare, which is funded at the federal level, Medicaid is funded partly by the federal government and partly by states. Medicaid represents 17% of total national healthcare expenditures or roughly $565.5 billion.1
The State Children’s Health Insurance Program (SCHIP) is administered through the Centers for Medicare and Medicaid Service (CMS) to provide health care to millions of children across the country. The program is jointly funded by the federal and state governments and administered by states. As with Medicaid, states determine eligibility and benefits. In 2017, CMS reported enrollment in CHIP to be 9.4 million.6
Private Payer Reimbursement Models
Private health insurance can be purchased by individuals or through employers. There are many different commercial health insurance products available, which
may include traditional fee-for-service, managed care, or consumer-directed health care programs. In 2014, it was estimated that 66% of nonelderly workers participated in employer-sponsored health coverage.7
may include traditional fee-for-service, managed care, or consumer-directed health care programs. In 2014, it was estimated that 66% of nonelderly workers participated in employer-sponsored health coverage.7
Health Maintenance Organizations (HMOs) are managed care programs. These programs provide integrated coverage for patients that typically involves providers either employed by the HMO directly or in separate groups contracted with the HMO and often practicing in the HMO facilities. There is a strong emphasis on preventive medicine in these programs and it is not uncommon that primary care providers (PCPs) are required to access specialty services. The insurance company defines what services are paid for, controls the costs of those payments often through prospective payment models, and in many cases shares financial risk with physicians, health systems, and patients. The disadvantage of these plans is that if the patient chooses to receive care from an out-of-network provider or system, the individual cost may rise substantially (emergency medical care may be an exception).