CLN Article

Federal Insider

Moderate Health Spending Growth Projected Through 2024

Total U.S. healthcare spending growth is expected to average 5.8% in aggregate over 2014–2024, according to a report by the Centers for Medicare and Medicaid Services’ Office of the Actuary (Health Aff 2015;34:1407–17). The authors noted that this rate of growth is still substantially lower than the 9% average rate seen in the 3 decades before 2008.

In 2014, health spending is projected to have reached $3.1 trillion, or $9,695 per person—an increase of 5.5% from the previous year as millions gained health insurance coverage and as new expensive drugs hit the market. Prescription drug spending increased 12.6% in 2014, the highest growth since 2002.

While more are getting coverage, annual growth in per-enrollee expenditures in 2014 for private health insurance (5.4%), Medicare (2.7%), and Medicaid (-0.8%) remained relatively slow. The report also found that medical price inflation in 2014 was a historically modest 1.4%.

Looking toward the future, the report predicts that approximately 19.1 million additional people will enroll in Medicare over the next 11 years as more members of the baby boomer generation hit retirement age. Overall, the insured rate will rise from 86% to 92.4% as the number of uninsured falls by 18 million over the next 11 years. That rising insured rate should reduce how much Americans pay out-of-pocket, from 11.6% in 2013 to 10% in 2014.

New Advisory Panel on Lab Testing Begins Work

A new advisory panel created by the Protecting Access to Medicare Act of 2014 began its work with a late August meeting to discuss proposed 2016 code changes to the clinical laboratory fee schedule. The Advisory Panel on Clinical Diagnostic Laboratory Tests has 15 members, one of whom AACC nominated—William Clarke, PhD, MBA, DABCC, FACB, an associate professor of pathology at Johns Hopkins University in Baltimore, Maryland.

The panel is charged with advising the Department of Health and Human Services on payment rates for laboratory tests. Its input will be closely watched as the lab community braces for historic changes to Medicare payment in 2017, as the law’s rules on market-based pricing and other provisions come into full effect.

The panel will advise on whether to use crosswalking or gapfilling to determine payment for new tests; the factors for deciding coverage and payment; the calculation of weighted medians of private payer rates for existing tests; possible phase-in of reductions in Medicare payment rates based on private payer rates; and evaluating “advanced diagnostic laboratory tests” under the new law.

More Hospitals Signing Up for New Bundled Payment Plans

The bundles keep rolling. More than 2,100 hospitals, physician group practices, and other providers have taken on Medicare’s latest bundled payment plan, called the Bundled Payments for Care Improvement Initiative. Under the program, the Centers for Medicare and Medicaid Services (CMS) pays for an episode of care, defined as the set of services provided to treat a clinical condition or procedure, such as a heart bypass surgery or a hip replacement. The initiative includes four models of bundled payments tied to inpatient hospital admission.

“By focusing on outcomes for an episode of care, rather than separate procedures in care delivery, we are incentivizing hospitals, doctors, and other providers to work together to provide high quality, coordinated care for patients,” said Patrick Conway, MD, CMS acting principal deputy administrator and chief medical officer.

Through this and other bundling programs, CMS is testing how bundled payments for clinical episodes can result in better care and lower costs. Similar to other CMS initiatives focused on value, this program rewards hospitals and other providers for increasing quality and reducing costs, but penalizes them if costs exceed a set amount, similar to the idea behind Accountable Care Organizations.

CMS earlier this year announced the goal of tying 30% of Medicare payments to quality and value through alternative payment models by 2016 and 50% of payments by 2018. These programs have their own website,