Medicare Modernization Law Provisions Related to Chronic Disease Management and Long-term Care Restructuring

You asked for information on (1) opportunities for chronic disease management and long-term care service delivery restructuring in the Medicare Modernization Act of 2003 and (2) other related federal and state initiatives.

The federal “Medicare Prescription Drug, Improvement, and Modernization Act of 2003” (P. L. 108-173), also informally called the Medicare Modernization Act, is best known for its establishment of prescription drug assistance for seniors. But it also contains a number of provisions concerning chronic disease management and long-term care service delivery for Medicare beneficiaries. These include: demonstrations to create background check pilot programs in 10 states for employees of nursing homes and other long-term care facilities (§ 307) and use nursing homes as “telehealth” sites (§ 418); new coverage for an initial physical exam for new Medicare beneficiaries and improved payments for certain preventive screenings (§ 611-614); demonstrations to examine health delivery factors, incentives to improve care, and best practices at HMOs and other health care groups (§ 646) and to allow consumer-directed chronic outpatient services including personal care services (§ 648); and a care management performance demonstration to use technology and evidence-based outcomes to promote continuity of care and reduce adverse outcomes (§ 649).

Other relevant provisions include demonstrations to make more permanently disabled people eligible for Medicare home care services by exp anding the definition of “homebound” (§ 702) and allow home health care agencies to substitute adult day care services for part of their services (§ 703), a study of home health care agencies’ payment margins (§ 705), a phase-in of chronic care improvement programs under traditional Medicare fee-for-service (§ 721), a Medicare Advantage HMO quality improvement program including chronic care (§ 722), and a requirement that the Health and Human Services (HHS) secretary develop a plan to improve the quality of care for chronically ill Medicare beneficiaries and reduce its cost (§ 723). Another provision that may be of interest creates a citizens’ health care working group to hold hearing and community meetings, issue a report to the public, and make recommendations on changes to the health care system (§ 1014).

A future OLR Report will address other federal and state initiatives in chronic disease management and long-term care restructuring.

The new law creates a 10-state, three-year pilot program for national and state background checks on long-term care facilities’ or other long-term care providers’ direct patient access employees. It requires the HHS secretary to establish the program and choose the participating states. The law prescribes state procedures, applications, and selection and evaluation criteria. It appropriates $ 25 million for the pilot program for federal fiscal years 2003-04 through 2006-07. For the pilot, long-term care facilities and providers include nursing homes, home health agencies, hospice care providers, long-term care hospitals, personal care and residential care providers, intermediate care facilities for the mentally retarded, and others that a state decides to include.

All states can apply for the pilot program, including those that already require background checks, as long as they are willing to meet certain requirements. The pilot program’s goal is to identify efficient, effective, and economical procedures for facilities and providers to use when conducting background checks. More details are available in OLR Report 2004-R-0133.

The new law allows the HHS secretary to evaluate demonstration projects under which nursing homes are treated as “originating sites” for telehealth services (nurses or other staff located there monitor the health status of patients at home or at other locations electronically or by telephone). It requires him to submit a report to Congress by January 1, 2005 on his evaluation. The report must include recommendations on ways to ensure that allowing a nursing home to serve as a telehealth originating site does not replace in-person care by doctors, physician assistants, nurse practitioners, or clinical nurse specialists. If the secretary can establish appropriate mechanisms and concludes in the report that it is advisable, he can allow this new function starting January 1, 2006.

The new law authorizes Medicare payment for an initial physical exam when people first become eligible for Medicare, cardiovascular screening blood tests and diabetes screening tests. It also improves payment for certain mammography services.

The law requires the HHS secretary to establish five-year demonstration programs that use HMOs and other health care groups to examine health delivery factors that encourage improved quality in patient care. These factors can include incentives to improve safety of care, appropriate use of best practice guidelines, examination of variations in use and allocation of services and outcomes measurement to reduce scientific uncertainty, encouraging shared decision-making between providers and patients, appropriate use of culturally and ethnically sensitive health care delivery, and financial effects on the health care marketplace of changing resource allocation and care delivery incentives.

The secretary must establish demonstration projects to evaluate methods that improve the quality of care for people with chronic conditions and that reduce Medicare spending on them. The methods must include allowing beneficiaries with chronic conditions to direct their own health care services. In establishing the projects, the secretary must evaluate best practices of group health plans, state Medicaid programs, or the private sector for methods that allow patients to self-direct their personal care services.

The secretary must evaluate best practices for one year and use them to design the demonstrations. At least one project must be in an area that has significantly higher than average diabetes rates. The secretary must then evaluate the projects two years after they start to operate.

Under the new law, the secretary must establish a three-year, pay-for-performance demonstration program with Medicare physicians that uses health information technology and evidence-based outcomes measures to promote continuity of care, stabilize medical conditions, and reduce adverse health outcomes. Health information technology means email communication, clinical alerts and reminders, and other information technology. The secretary can choose up to four project sites; two must be urban, one rural, and one in a state with a medical school geriatrics department that manages rural outreach sites and can manage patients with multiple chronic conditions, including dementia. In carrying out this demonstration, the secretary must consult with private sector and nonprofit groups engaged in similar efforts.

Participating physicians must agree, over the course of the three years, to phase in use of health information technology to manage clinical care and electronic reporting of clinical quality and outcome measures. They must show they can also assess patients for other than chronic conditions, serve as the patients’ primary contact in accessing Medicare-reimbursed services and products, set up and maintain a health care information system for these patients, promote continuity of care across providers and settings, use evidence-based guidelines, meet clinical quality and outcome measures, promote self-care by providing education and support for patients and family caregivers, refer patients to community service organizations when appropriate, and meet other complex care management requirements the secretary sets. Physicians who meet or exceed performance standards will receive a per-beneficiary amount, which can vary with performance or improvement levels.

The secretary must contract with quality improvement organizations or similar entities to enroll physicians in the demonstration and evaluate their performance. The contractors must provide technical assistance

and education to the enrolled physicians. Within one year of the demonstration’s completion, the secretary must report on it to Congress with recommendations for legislative and administrative actions.

The new law requires the HHS secretary to conduct a two-year demonstration project in three states representing the Northeast, Midwest, and West under which up to 15,000 Medicare Part B beneficiaries with certain chronic conditions are deemed to be “homebound” for purposes of receiving Medicare home health services. Specifically, the law allows a person to be considered homebound for the demonstration if he:

1. has been certified by a physician as having a permanent and severe, disabling condition that is not expected to improve;

2. depends on assistance with at least three out of the five activities of daily living (eating, toileting, transferring from a bed to a chair, bathing, and dressing) for the rest of his life;

3. requires skilled nursing services for the rest of his life that involve more than medication management;

4. needs daily attendant visits to monitor and treat his medical condition or to help him with activities of daily living;

5. needs technological or human assistance to leave home; and

6. does not regularly work in a full-time or part-time paid position outside the home.

The secretary must collect data on the project related to quality of care, patient outcomes, and potential added costs to the Medicare program and report to Congress within one year after the project’s completion. The report must include:

1. an examination of whether home health services provided under the demonstration have (a) adversely affected home health services provision under Medicare or (b) directly increased Medicare expenditures for such services,

2. specific data showing the amount of any expenditure increase directly attributable to the demonstration above what would otherwise have been spent for Medicare home health services, and

3. specific recommendations to qualify permanently and severely disabled homebound Medicare beneficiaries for home health services without additional costs to the program.

OLR Report 2003-R-0839 describes regular standards to qualify as “homebound, ” which contain restrictions on the length, frequency, and purpose of their absences from home to qualify them for home health services.

The new law requires the HHS secretary to establish a three-year demonstration project at up to five sites to permit a home health agency to provide medical adult day care services to a Medicare beneficiary as part of a plan of care for home health services and as a substitute for a portion of the services that it would otherwise provide in the patient’s home. Under the demonstration, Medicare can pay up to 95% of what it would otherwise pay for home health services for medical adult day care services. Neither the home health agency nor the adult day care facility can charge the beneficiary separately for the adult day care services.

The secretary must monitor expenditures for home health services under the demonstration project and under Medicare. If he estimates that these total expenditures exceed those that would otherwise have been made during the period, the secretary must adjust the adult day care payment rate under the demonstration to eliminate the excess.

The secretary can choose up to five demonstration sites in states that license or certify medical adult day care services. Medicare beneficiaries’ participation is voluntary and the total number of participants is capped at 15,000. In selecting participating home health agencies, the secretary must give preference to those that are currently licensed or certified through common ownership and control to provide medical adult day care services. The medical adult day care facilities must have been licensed in the state for two years and must provide skilled nursing services and other therapeutic services directly or under arrangement with a home health agency. The secretary can waive Medicare requirements as needed to carry out the demonstration.

By six months after the project’s completion, the secretary must submit an evaluation report that includes (1) an analysis of patient outcomes and costs of furnishing care to participants compared to beneficiaries receiving only home health services for the same conditions and (2) recommendations to extend, expand, or end the demonstration.

The new law requires the Medicare Payment Advisory Commission to study payment margins of home health agencies under the home health prospective payment system. The study must examine whether systematic differences in payment margins are related to case mix differences among such agencies.

The new law requires the HHS secretary to provide for the phased-in development, testing, evaluation, and implementation of chronic care improvement programs. Each program must be designed to improve clinical quality and beneficiary satisfaction and achieve spending targets for targeted beneficiaries with one or more threshold conditions. A threshold condition is a chronic condition, such as congestive heart failure, diabetes, chronic obstructive pulmonary disease, or other diseases the secretary selects as appropriate for the programs.

The law defines a “chronic care improvement organization” as an entity that has agreed to provide a chronic care improvement program under this law, directly or through contracts with subcontractors. The law allows such an entity to be a disease management organization, health insurer, integrated delivery system, physician group practice, a consortium of such entities, or any other legal entity the secretary determines is appropriate.

Programs offered must be in geographic areas that, in the aggregate, are where at least 10% of total Medicare beneficiaries live. In selecting sites, the secretary must ensure that each program is conducted in an area that has at least 10,000 targeted beneficiaries living among other Medicare beneficiaries, who can serve as a control group. He must enter into three-year agreements with chronic care improvement organizations for the development, testing, and evaluation of chronic care improvement programs using randomized controlled trials.

The secretary must contract for an independent evaluation of the Phase I programs by a contractor with knowledge of chronic care management programs and demonstrated experience in their evaluation. Each assessment must include: (1) quality improvement measures such

as evidence-based guidelines and rehospitalization rates; (2) beneficiary and provider satisfaction; (3) health outcomes; and (4) financial outcomes, including any cost savings to Medicare.

If the secretary finds the independent evaluation results show that chronic care improvement programs meet required conditions, he can enter into agreements to implement the program in more geographic areas, including potentially nationwide. The conditions are that the program is expected to: (1) improve the clinical quality of care, (2) improve beneficiary satisfaction; and (3) achieve targets for savings within an appropriate range determined by the secretary. Expansion can begin no sooner than two years after the program is implemented and no later than six months after its completion. The secretary must conduct evaluations of Phase 2 in the same way as for Phase 1.

Each chronic care improvement program must (1) have a process for screening each targeted beneficiary for conditions other than threshold conditions in order to develop an individualized, goal-oriented care management plan, which it must provide to every participant, and (2) carry out the plan and other chronic care improvement activities in accordance with the law.

The care management plan must be developed with the beneficiary and must, to the extent appropriate, include:

1. a designated point of contact responsible for communicating with the beneficiary and for facilitating communications with other health care providers under the plan;

2. self-care education for the beneficiary through approaches such as disease management or medical nutrition therapy and education for primary caregivers and family members;

3. education for physicians and other providers and collaboration to enhance communication of relevant clinical information;

4. use of monitoring technologies that enable patient guidance through exchange of pertinent clinical information such as vital signs, symptoms, and health self-assessment; and

5. information about hospice care, pain and palliative care, and end-of-life care.

1. guide the participant in managing his health, including all other conditions, relevant health care services, and pharmaceutical needs, and in performing activities specified in the care management plan;

2. use decision-support tools such as evidence-based practice guidelines or other criteria the secretary determines; and

3. develop a clinical database to track and monitor each participant across settings and to evaluate outcomes.

Each entity offering a program must monitor and report on health care quality, costs, and outcomes. An entity must demonstrate to the secretary’s satisfaction that it can assume financial risk for performing under the agreement. The secretary may deem that programs and entities accredited by qualified organizations satisfy the law’s requirements.

Payments will be computed on a per-member per-month basis for Phase 1 and either the same way or on whatever other basis the secretary decides for Phase 2. Agreements must specify performance standards for each of the measured factors. Payment rate adjustments can be made if an entity fails to meet performance standards. The secretary can fully recover the amount by which the fees paid the entity exceed estimated savings attributable to the program’s implementation.

The secretary must ensure that aggregate Medicare expenditures for participants in these programs and money paid to the chronic care improvement organizations under this law do not exceed what Medicare would otherwise have spent on such targeted beneficiaries. The law allows appropriation of up to $ 100 million for a three-year period beginning October 1, 2003.

The law requires the secretary to give Congress an interim report within two years after implementing Phase 1 and an updated report within three years and six months after implementation, followed by two additional reports at two-year intervals.

The deadline for applications for Phase 1 was August 6, 2004. More details are available on the Centers for Medicare and Medicaid Services website at: http: //www. cms. hhs. gov/medicarereform/ccip/

The law requires the Medicare Advantage HMO and preferred provider programs to have ongoing quality improvement programs. These must include a chronic care improvement program with a method for monitoring and identifying enrollees with multiple or sufficiently severe chronic conditions that meet the organizations’ criteria for participation in the program.

CHRONICALLY ILL MEDICARE BENEFICIARY RESEARCH, DATA, DEMONSTRATION STRATEGY — § 723

The secretary must develop a plan to improve care quality and reduce its cost for chronically ill Medicare beneficiaries.

The secretary, through the Agency for Healthcare Research and Quality, must establish a 15-member Citizens’ Healthcare Working Group. The membership must include consumers of health services who are uninsured, have chronic illnesses, or are Medicare or Medicaid beneficiaries, as well as people with expertise in benefits payments, financing, and access to care, those with business and labor perspectives, and health care providers. The membership must reflect a broad geographical representation and be balanced between people from urban and rural areas. Within 90 days after the chairman is chosen, the group must hold hearings to examine:

1. the public and private health care systems’ capacity to expand coverage options;

2. health care costs and the effectiveness of care provided at all stages of disease;

3. innovative state strategies to expand coverage and lower costs;

4. local community solutions to accessing coverage;

5. efforts to enroll people currently eligible for public or private coverage;

6. the role of evidence-based medical practices and use of technology to support providers in improving quality of care and lowering costs; and

7. strategies to help health care purchasers, including consumers, become more aware of cost impacts and to lower these costs.

The law also allows the working group to hold additional hearings on other subjects. The working group must issue a “Health Report to the American People,” that must include a summary of health care services and costs, sources of coverage and payment, reasons people are uninsured or underinsured and its costs to taxpayers, consumers, and communities, health care cost containment strategies, information on the cost of care in different settings, including institutional care and home and community-based care, and other subjects.

The working group must hold community meetings throughout the country to seek the public’s views on what health care benefits should be provided, how services should be delivered, how health care coverage should be financed, and what trade-offs the public is willing to make to assure access to affordable, high-quality care. It must make an interim set of recommendations available to the public for comment and then must make its final recommendations to the President.


September 2, 2004		2004-R-0520
MEDICARE MODERNIZATION LAW PROVISIONS RELATED TO CHRONIC DISEASE MANAGEMENT AND LONG-TERM CARE RESTRUCTURING

By: Helga Niesz, Principal Analyst