Medicare

Continuation of Research on Consumer Directed Health Plans: HSA Simulation Model Refinement . B. Baseline Simulation Results

Table 2 shows the results of the baseline simulation prior to iterations. We predict that approximately 3.2 million people who are not eligible for employer-sponsored health insurance (ESI) will choose an individual HDHP. This estimate was calibrated to be the same as our previous analysis in order to compare the proposed policy changes in 200

Continuation of Research on Consumer Directed Health Plans: HSA Simulation Model Refinement . 2. Health Plan Choice Model

In the new baseline simulations, we made an important improvement to the health plan choice model by including the effect of health status as a variable that affects plan choice. This is important for two reasons. First, health status may be an important factor in predicting plan choice, so the addition of this variable should improve the fit

Continuation of Research on Consumer Directed Health Plans: HSA Simulation Model Refinement . 1. HSA Contributions

To be consistent with our previous work, in the new baseline simulations we assumed that individual HDHP policies had deductibles of $3,500 per year for single coverage and $7,000 for family coverage, and no cost-sharing (i.e.

Continuation of Research on Consumer Directed Health Plans: HSA Simulation Model Refinement . A. Methods

There are three major components to our methodological approach: 1) Model Estimation; 2) Choice Set Assignment and Prediction; and 3) Policy Simulation. As illustrated in Figure 1, often more than one database was required to complete the task. Integral to this analysis was the use of consumer directed health plan data from four large employ

Continuation of Research on Consumer Directed Health Plans: HSA Simulation Model Refinement . II. Refine Baseline Simulations

To complete our current study, we needed to revise and extend our methods. We also used additional data sources and elements to more fully account for the health status of individuals in our models using claims data from the employers participating in our consumer driven health plan analysis.

Continuation of Research on Consumer Directed Health Plans: HSA Simulation Model Refinement . B. Current Study

In October of 2005, we contracted with OASPE to extend and refine the simulations that were performed under our prior contract. There were three major aspects to this work:

Continuation of Research on Consumer Directed Health Plans: HSA Simulation Model Refinement . A. Prior Study

In a previous report for the Office of the Assistant Secretary (QASPE) of the Department of Health and Human Services (DHHS), 3 we simulated the effect of the Medicare Modernization Act of 2003 (MMA) on take-up of HDHP in the individual health insurance market. High deductible health plans feature a large deductible coupled with a Health Saving

Continuation of Research on Consumer Directed Health Plans: HSA Simulation Model Refinement . I. Introduction

Consumer directed health plans (CDHPs) are recent development in the US health insurance market. Their principal economic aim is to make the consumer more engaged in health care purchasing decisions through the provision of an account from which medical services can be purchased. This system is tied to traditional indemnity insurance, usually

Continuation of Research on Consumer Directed Health Plans: HSA Simulation Model Refinement . Executive Summary

High-deductible health plans (HDHPs) are attracting attention from consumers, employers, and policy-makers. These plans couple a large out-of-pocket deductible with a tax-advantaged health savings account (HSA) that can be used to pay for eligible medical expenses. If an enrollee spends all of the dollars in the HSA in a given year, she then s

Continuation of Research on Consumer Directed Health Plans: HSA Simulation Model Refinement

The focus of this study was on the non-price program features that influence the enrollment of non-elderly adults into voluntary state and local programs that subsidize coverage or care. The study consisted of two phases -- Phase 1 was a literature review to assess the current state of knowledge regarding the impact of non-price design features

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Short-Term Fixes to the Sustainable Growth Rate Process . Footnotes

1 E.g., GAO, Medicare Physician Payments: Concerns about Spending Target System Prompt Interest in Considering Reforms. Washington GAO, Report #GAO-05-85, October 2004. 2 Data presented in this section are based on NORC’s analysis of allowed charges from the Physician/Supplier Procedure Summary Master Files (PSPSMFs) for years 1996-2004.�

Short-Term Fixes to the Sustainable Growth Rate Process . Appendix. SGR Spending Predictions

Data Sources. Implementation of the SGR process requires that CMS use the most current information at its disposal to estimate components of the SGR formula, including spending, and components that are used to calculate the SGR (which in turn, are used to calculate annual target spending and cumulated target spending). As noted in the text,

Short-Term Fixes to the Sustainable Growth Rate Process . 6.0 Discussion

The primary objective of this report has been to evaluate revisions to the current SGR physician payment update methodology with a focus on refinements to attributes of the SGR process and changes in the definition of target spending. A spreadsheet model of the current SGR process was constructed for comparative study of effects of changes in th

Short-Term Fixes to the Sustainable Growth Rate Process . 5.4 Additional Refinements

Refinements to the SGR process that have been discussed above can be considered simultaneously. Tables 15a and 15b document effects on CFs of sequentially imposing two refinements on the rebased model with drug and lab spending excluded from SGR spending: use of the higher SGR values (displayed in Table 12), e.g., to accommodate desire for hig

Short-Term Fixes to the Sustainable Growth Rate Process . 5.3 Elimination of Drug and Lab Spending from the SGR

An argument raised by some providers and critics of the SGR process is that the payment update should not be based on events beyond control of providers. An example is spending for drugs and lab tests. These components of SGR spending are less within the control of providers than services and procedures routinely provided under the MFS. Drug

Short-Term Fixes to the Sustainable Growth Rate Process . 5.2 Rebasing Target Spending

The current SGR process was implemented with an initial target level based on actual spending levels in the late 1990s. Since that time, each year’s target has been increased using the SGR. Over time, the rate of spending has increased and the cumulated difference between annual actual and target spending levels has grown rapidly.

Short-Term Fixes to the Sustainable Growth Rate Process . 5.1 Effects of Changes in SGR Values

A fundamental explanation for payment update declines that have been recently experienced and are likely in the near future without significant changes to the SGR process is that spending increases faster than target spending levels. This over-spending determines the penalty of the UAF, which can more than offset the MEI when the update is calcu

Short-Term Fixes to the Sustainable Growth Rate Process . 5.0 Changes in Target-Setting Processes

Changes in the UAF formula can be used to change the size of penalties/rewards associated with over-/under-spending, which in turn changes the rate at which provider payments would change year to year. An alternative approach is to alter the way in which target spending is defined or the composition of spending that is counted towards target spe

Short-Term Fixes to the Sustainable Growth Rate Process . 4.2.2 The Size of the UAF Penalty

In addition to changes in the UAF penalty floor, the size of the UAF penalty for over-spending can be reduced by lowering the weights applied to the measures of over-spending in the previous year and cumulated spending. A rationale for the cumulated spending term of the UAF is that CFs can be adjusted to help the Medicare program recover a porti

Short-Term Fixes to the Sustainable Growth Rate Process . 4.2.1 The UAF Floor

An option that retains some cost-containment incentives but does not lead to negative payment updates is to set the UAF floor such that the largest over-spending penalty would completely offset the MEI. Under this option, the floor is a negative percent that would be just large enough in magnitude to offset the MEI, producing a 0-percent update.

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