Wednesday, June 28, 2000
Thursday, June 29, 2000
Members of the Technical Panel:
Dale Yamamoto, Chairman
Senior Vice President of Merger and Acquisition Integration
Wellpoint Health Networks
Thousand Oaks, CA
Center for Health Systems Research and Analysis
University of Wisconsin-Madison
Department of Health Management and Policy
University of Michigan
Ann Arbor, MI
Professor of Economics
Department of Economics
Principal Research Associate
Health Policy Center
The Urban Institute
Consultant to the Panel:
Director and Consulting Actuary
Price Waterhouse Coopers
Staff of the Health Care Financing Administration(now known as Centers for Medicare and Medicaid Services(CMS)), Office of the Actuary:
Richard Foster, Chief Actuary
Sol Mussey, Director of the Medicare and Medicaid Cost Estimates Group
John Shatto, Actuary
John Wandishin, Actuary
W. Kent Clemens, Actuary
Jackie Carroll, Executive Officer
Donna Holt, Secretary
Terry Peach, Secretary
Staff of the Office of the Assistant Secretary for Planning and Evaluation:
Christy Schmidt, Deputy to the Deputy Assistant Secretary for Health Policy,
Ariel Winter, Executive Director of the Panel, ASPE, DHHS
Gene Moyer, Consultant to ASPE and to the Panel,
Mike Andrew, Executive Assistant to the Public Trustees
Phil Ellis, Economist
General Accounting Office
Congressional Budget Office
Proceedings of the Meeting:
The meeting was called to order at 11:09 A. M. by Ariel Winter, who welcomed the group. He introduced Christy Schmidt.
She discussed the mandates of the Panel, the role of the Medicare Board of Trustees and their apolitical nature, and a history of past Technical Panels. She also provided the charge of the Panel: To provide a ground up review including the Assumptions, the projections methodology, and the long term and short term growth rates. Finally, the Panel should advise on methods of using stochastic forecasting techniques. This includes a review of the methods currently in use for the Supplemental Medical Insurance report and suggestions for improvement. It also includes suggestions for applying stochastic forecasting to the Hospital Insurance report. If time permits, the Panel might provide advice in other areas, but the first priority is the four areas outlined above.
One area which is off the table is the assumptions underlying both the Social Security and Medicare reports. These have recently been reviewed by the Social Security Technical Panel.
Ms. Schmidt also emphasized that the work is to be completed by the end of October in order to give the Trustees time to consider the recommendations before issuing the 2001 Medicare reports.
Richard Foster welcomed the Panel and expanded somewhat on the charge provided by Ms. Schmidt. He reiterated the apolitical nature of the Board and of the reports. Further, he emphasized that while the Department of Health and Human Services is paying Panel expenses, the true "boss" of the Panel is the Board of Trustees. Mr. Foster then introduced the members of the Panel. He ended with a plea that the Panel seek consensus on any recommendations they make to the Board of Trustees.
Each Panel member then made some opening remarks. Some of these were in the form of questions which Mr. Foster answered. Many of these addressed the question of the limits to the Panel's work and how far the Panel could go toward issues other than the four major ones discussed earlier by Ms. Schmidt and Mr. Foster. Since the Panel's term is not up until August, 2001, some of these other issues might be addressed later after the work on the four major issues has been completed.
Members of the audience introduced themselves.
Mr. Yamamoto then led the Panel in a discussion of work and timing as well as other issues. Many of the issues raised in this discussion were addressed to Mr. Foster who answered them.
One suggestion made during the discussion was that there might be two reports: One on the four major issues raised by Ms. Schmidt and Mr. Foster and a second on other issues which the Panel might uncover during its deliberations.
A luncheon break was taken at 11:58.
The afternoon session began at 1:16.
Sol Mussey introduced the other actuaries to be speaking in the session and gave a presentation on the basic benefits model used by the Office of the Actuary in preparing the Medicare Reports.
John Shatto gave a presentation on the Medicare enrollment model. He discussed the separate groups into which the population is divided for preparing the projections and the methods of projecting each group.
He also discussed the determination of the division of the population into persons enrolled in managed care and in fee-for-service Medicare. The Panel asked several questions about these determinations, especially about age divisions and geographic divisions in the basic data.
The questions segued into a presentation by John Wandishin on the ways the population or enrollment projections are combined with utilization and price factors to arrive at reimbursement estimates and projections. The bulk of the presentation was on HI fee-for-service beneficiaries since these are the bulk of beneficiaries.
There were many questions by Panel members about the process which were answered by Mr. Wandishin and Mr. Foster. These questions centered around groupings of the population, estimation of the functional relationships used, and decedents versus survivors and the average costs in each group as a result of differential death rates. The questions and the presentation also concerned selection issues in managed care and in the fee-for-service residual group.
Mr. Wandishin also discussed the general method for estimating the split in home health care visits between those paid for by HI and those now paid for by SMI as a result of the Balanced Budget Act of 1997.
There was a feeling that Mr. Wandishin had done a marvelous job at explaining the most difficult of the sections, but that the Panel was still confused about much of the content. After a short break, the Panel asked to see the spreadsheets to try to understand them better or at least to enable them to formulate better questions.
Mr. Shatto then began a presentation on the SMI or Part B program. Again, one of the major concerns was the estimation of the managed care population and expenditures associated with them.
Ms. Rosenblatt was concerned about the recency of the data available for any given trustees report.
Mr. Cutler and Mr. Chernew asked about definitions of categories and sub-categories of enrollees for purposes of estimating reimbursements. Mr. Cutler also asked about how the shorter term and longer term projections fit together. Mr. Chernew expressed a concern that the estimation and projection models had no information about physician specialty markets.
Mr. Clemens then made a presentation on the managed care model. He emphasized that it was not done on a geographic basis, but on a national basis.
Several members of the Panel were concerned about the recency of available data and the tracking mechanisms available to the model. Ms. Rosenblatt was concerned about the projection factors used and whether feedback was used to adjust them from one year to another. Later this concern became a request for more data collection and analysis of utilization and reimbursement for shorter time periods. Further, she asked about whether the managed care data could be analyzed on a geographic basis.
The actuaries agreed that these were problems, but as with any attempt to forecast, they have to exercise judgement which may well turn out to be erroneous.
Mr. Chernew asked whether the factors could be done on a legislation-constant basis and then separately project the results of legislation, and especially the indirect results of legislation.
Mr. Cutler asked whether more effort should be expended to study private sector prices and utilization since private sector values influence Medicare utilization. He also asked whether more thinking about the drivers of increase factors might result in more accurate projections.
Mr. Winter then thanked the actuaries for all their hard work and gave an assignment to the panel to think over night about what presentations or analyses they would like the actuaries to do in future meetings.
The actuaries agreed to make certain additional tables available to the Panel before the next meeting in July. The meeting was adjourned at 5:08 P.M. until the following day.
The meeting was called to order at 9:11 A. M. by Ariel Winter, who welcomed the group and summarized the planned activities for the day.
Mr. Cutler then asked the Panel and the audience to provide any papers that they have written or that they know about to the members. Mr. Winter promised to email to the Panel any papers emailed to him.
Mr. Yamamoto asked if there were any questions as a result of dinner or other evening conversations.
Mr. Cutler asked about the furthest most people in the private sector forecast medical expenditures. Ms. Rosenblatt answered that her organization generally forecast three to five years. Mr. Yamamoto mentioned retiree studies which for closed groups forecast 70 years or so.
Mr. Nichols then asked about references to stochastic forecasting techniques. Several members suggested various references. Mr. Foster agreed to try to find and make available some papers written by his staff on the subject.
Mr. Wandishin then went through Table II.F1 from the 2000 HI Trustees Report. He and Mr. Foster answered questions about the calculation of the table as well as other tables in the report.
Next, Mr. Wandishin discussed and answered questions about HI Trust Fund operations and a new model constructed for the 2000 Trustees Report.
Mr. Clemens discussed funding mechanisms for the SMI report. In each year, the funding is set for the succeeding year. Having determined earlier what expenditures for the aged are likely to be for that year, interest earnings are subtracted from the total and the rest is allocated 25% for premiums and 75% for general revenue financing. This determines the aged premium.
By law, the disabled premium is set equal to the premium calculated for the aged. This allows total premium income to be calculated for the disabled. Since total reimbursement has already been calculated, general revenue is set as a residual. He also discussed contingency margins set to keep the SMI fund at a level of about two months worth of benefits, the hold harmless provision which limits premium increases for each beneficiary to the amount of the beneficiary's increase in Social Security benefits, and the surcharge for beneficiaries who do not join the program in the first year of eligibility.
The Balanced Budget Act transferred a portion of the home health benefit - home health visits after the 100th visit - from the HI Fund to the SMI Fund. The cost of the transferred portion of the benefit will be phased in to the SMI Fund over a six-year period beginning in 1998. The premium increase associated with the transfer will be phased in over seven years. Mr. Clemens then discussed how the SMI contingency margin is set.
The Panel asked questions about the formula for setting the premium, the contingency margin, and the investment philosophy of the Managing Trustee in investing the trust funds.
There was a further discussion of physician behavior as physicians transfer patient visits from low payment visits to higher payment visits and also shift inpatient services to outpatient services.
The Panel and the actuaries had a discussion of growth rates for medical care and whether Medicare's growth rates interacted with private growth rates either to depress or to increase each other.
There were questions about the long term rates of growth for Gross Domestic Product, wages, and health care costs or reimbursements. At the end of this discussion, the group took a break.
After the break, Mr. Yamamoto attempted to enumerate the things that the Panel had asked of the actuaries during the two days. Mr. Foster had a list of 14 items the Panel had requested of the actuaries. Three additional items were added to the list of 14. The actuaries agreed to provide them.
Ms. Rosenblatt asked for geographic detail on managed care enrollment.
Mr. Chernew asked about the relationship of the shift of beneficiaries from fee-for-service to managed care to the utilization residual.
Mr. Robinson had earlier agreed to review the spreadsheets used by the Office of the Actuary. He told that group that he intended the output of his review to include a technical description, a comprehensive notation set, and a list of all the inputs. Several members of the group volunteered to help him, but he said he would enlist others when he needed their help.
Mr. Gutterman asked about experience in other countries and whether they make long term projections. Mr. Foster said that they do them for pensions, but in general, their health plans do not set up long term obligations and so they do not make projections for health.
Mr. Chernew asked about CBO and whether their assumptions were similar to those of the Office of the Actuary. Several people felt that the Panel should hear from CBO. Mr. Nichols agreed to call and see if he could arrange a presentation.
The group discussed forming subgroups and agreed they did not have enough information to do it now.
The Panel then discussed the time for the next meeting and decided on Wednesday, July 26, and the morning of Thursday, July 27.
Mr. Nichols asked whether the Panel would write the report of the Panel or if the actuaries would write the report. Mr. Foster assured him that the Panel was expected to write the report so that it would be their report, although the Panel could take advantage of Office of the Actuary resources, such as editing assistance.
Mr. Foster asked about other presentations they would like at the next meeting. Mr. Chernew and Mr. Cutler agreed on stochastic modeling or research for such a model as a topic.
Mr. Yamamoto suggested that someone make a presentation on the history of utilization changes. Mr. Mussey said the actuaries could do that.
Mr. Winter mentioned that the Federal Register notice needs to include a general description of the agenda. The actuaries and the members should think about the specific agenda items before the next meeting.
The Panel agreed to form subgroups at the next meeting and the meeting was adjourned at 12:30 P. M.