Insurance

Anthem Steers Members Away from Hospitals for MRIs, CT Scans, in Favor of Freestanding Facilities

By M2|2017-11-12T22:41:42+00:00November 10th, 2017|Health care spending, Hospitals, Insurance, Uncategorized, What do we pay for and why|

Anthem Steers Members Away from Hospitals for MRIs, CT Scans, in Favor of Freestanding Facilities

Anthem is expanding its recently launched program that cuts hospital outpatient payments for MRIs and CT scans in order to steer patients toward freestanding facilities that provide these imaging services at lower cost. The program began in July with four states, and is now growing to include a total of nine states, including Colorado, New York, and Ohio.

Under its Imaging Clinical Site of Care program, Anthem no longer pays hospitals in the affected states for outpatient imaging services for MRIs or CT scans. Imaging is a large part of hospital revenue, and Anthem said it costs more to have the service done in a hospital outpatient setting than at a freestanding facility, according to a recent article in Healthcare Finance.

According to Anthem, imaging services can be just as safely provided in a lower cost, free-standing center as in a hospital outpatient setting. The cost for MRIs and CT scans can vary from $350 to $2,000 as Anthem noted when it began educating members about their options related to imaging services in 2010.

Anthem is willing to share the cost-savings with its members. In cases where it is not medically necessary to receive services from a hospital, consumers who go to a freestanding facility can save close to $1,000 out-of-pocket for some imaging services for those who have not met their deductible, and up to $200 for those whose plans require only a copay, the article notes, based on Anthem data.

Helping patients understand cost differences and sharing savings from changing the site of care is important as a recent report in Health Affairs, notes many consumers do not make any attempt to compare prices for health care services. “Most survey respondents said they didn’t comparison shop or even ask how much they would owe in copayments or other cost-sharing expenses before they turned up for an appointment.”

With a large insurer such as Anthem leading the way, other private insurers may follow suit on reimbursement for imaging services. “Hospitals need to recognize they are competing in a market already delivering on convenience, quality and affordability,” Anthem spokesperson Lori McLaughlin said.

Similar moves have been made on the public payer side as well.

Under Medicare, procedures performed in the hospital outpatient department are paid at a higher rate under the hospital outpatient prospective payment system compared to freestanding clinics, which are paid on the Medicare physician fee schedule. In July 2017, the Centers for Medicare & Medicaid (CMS) said it plans to continue implementing reductions to the outpatient prospective payment system spending in CY 2018, as it had begun in CY 2017. CMS estimated it would save approximately $500 million in 2017 by reimbursing services provided at certain outpatient provider-based departments at 50% of the Outpatient Prospective Payment System; this percentage is proposed to change to 25% in CY 2018.

This is a great example of the kind of approach that’s needed to lower health care costs. As I’ve noted in prior blogs (for example, here), we get what we pay for. If we want to move the needle on costs, we need a lot more of this type of approach, incentivizing patients to take advantage of lower cost, high quality alternatives to the way things have traditionally been done.

It’s all about the premiums, for a tiny but mighty political powerhouse

By M2|2017-10-20T04:24:21+00:00October 19th, 2017|Health Plans, Health Reform, Insurance, Uncategorized|

It’s all about the premiums, for a tiny but mighty political powerhouse

On October 17, 2017, Senators Lamar Alexander (R-TN) and Patty Murray (D-WA) announced a bipartisan deal to “stabilize individual market premiums and provide meaningful state flexibility.” The latest “repeal and replace” proposal from Alexander/Murray came just a week after U.S. Health and Human Services (HHS) Acting Secretary Eric Hargan and Centers for Medicare & Medicaid Services (CMS) Administrator Seema Verma announced cost-sharing reduction (CSR) payments would be “discontinued immediately based on a legal opinion from the Attorney General.” Lots and lots has already been written about the CSR policy change (I recommend Timothy Jost’s piece in Health Affairs for a brief summary of the major issues).

Professor Jost explains the CSRs succinctly:

The Affordable Care Act (ACA) requires insurers to reduce cost sharing for individuals who enroll in silver plans and have household incomes not exceeding 250 percent of the federal poverty level (FPL). These provisions reduce the out-of-pocket limit for these enrollees—particularly for those with incomes below 200 percent of poverty—and sharply reduce deductibles, coinsurance, and copayments. The reductions cost insurers around $7 billion a year currently.

Based in part on what the Senators heard from state officials in early September (see this ) the Alexander/Murray deal would continue to fund the CSRs for two years, would allow people of any age to purchase catastrophic health plans and would allow states even broader latitude to waive provisions of the Affordable Care Act (ACA) in order to lower premiums – for example, by allowing health insurers to offer products that do not cover all of the essential health benefits.

If lower priced products can’t be offered in the portion of the market that is unsubsidized, it is difficult to foresee how a bill gets through Congress. A tiny but mighty political powerhouse is fighting hard for a fix that solves a very particular problem in the current ACA structure.

It’s all about the premiums

Keep in mind, about 17 million people receive their health insurance through the ACA health exchanges (see Charles Gaba chart – aka The Psychedelic Donut – below) – approximately 5% of the American public. Of those 17 million people, 1.6 million are in Exchange plans, but do not receive a subsidy. That is, health insurance companies are not obliged to reduce their premiums or cost-sharing requirements, most likely because they make more than 250 percent of FPL – about $30,000 for a single person, or $61,500 for a family of four.

Charles Gaba’s Psychedelic Donut Chart

Florida’s 6.6%

Let’s take the example of Florida. Just before the CSR announcement from the Trump Administration, one of the state’s largest insurers, Florida Blue, said it would be raising premiums, on average, 38 percent, for the 2018 plan year. A spokesperson explained:

“So who’s the one losing in this scenario? It’s the people who don’t get a subsidy to help out. Florida Blue has about 66,000 of their 1 million Obamacare customers who would have to cover the premium increases on their own. These are people with higher incomes, many who are maybe freelancers or self-employed.

But who are those 66,000 people? In my estimation, that mighty 6.6%, and their counterparts across the U.S., are the ones who have effectively driven this policy change, and much of the “repeal and replace” demands over the past few years. Small business owners, especially tiny ones with fewer than five employees, are very focused on the issue of rising premiums and have been instrumental in communicating to their elected officials that their premiums are too high. The National Small Business Association (NSBA) 2016 Politics of Small Business Survey last year asked nearly 1,000 small business owners (47% of the respondents had five or fewer employees) what they contacted elected officials about.

What was the top issue? Controlling the costs of health care (see chart).

And amazingly, “97 percent of small-business owners say they vote regularly in national contests, compared to” only 58 percent turnout for the general election in 2012.

The Florida Blue spokesperson explained why this is such a hot-button issue for these politically-motivated, non-CSR-receiving, small business owners:

“The good news in all this: most people in Florida get private health insurance through their work. Those increases are going to be much more normal – about 8 percent on average for small companies.”

There is the whole issue in a nutshell. If you run a business or are self-employed and you make more than about $30,000 a year, you pay high premiums that jump 20, 30, 40 percent or more a year. In Florida, the average premium increase on the Exchange will be 45 percent in 2018, and the highest approved rate increase was 71 percent according to the Florida Office of Insurance Regulation. But if you buy the same insurance a slightly different way, either by becoming self-insured or becoming an employee of a bigger company, your premium increase will not be as great.

As Washington and the states continue to debate “repealing and replacing” the Affordable Care Act, keep an eye on what policy proposals mean for the politically-active small business owner. Fixes such as allowing anyone to buy catastrophic health plans (not just those under the age of 30) or allowing health insurers to sell products that offer fewer benefits will likely lower the premiums for people who buy health insurance on their own, whether tiny businesses or freelancers. Stopping payment of the CSRs won’t fix the problem small business voters are having with health care. If a proposal fixes this tiny but mighty political group’s problem with the ACA, the likelihood of passage improves immensely.

Balance Billing: California Latest State to Protect Patients Against Surprise Bills From Out-of-Network Providers

By M2|2017-10-08T11:21:23+00:00September 19th, 2017|Hospitals, Insurance, Uncategorized|

Balance Billing: California Latest State to Protect Patients Against Surprise Bills From Out-of-Network Providers

As of this summer, California is joining other states that have consumer protection laws prohibiting balance billing. Balance billing – also known as surprise medical bills – refers to the practice of billing patients for out-of-network providers even when the care was given in an in-network facility.

“Here’s a common scenario: A patient takes pains to ensure her hospital and surgeon are in-network, only to get billed by the out-of-network anesthesiologist who appears at her bedside to put her under,” according to a recent article by Kaiser Health News published in Healthcare Finance.

“This situation could arise in an emergency when the patient has no ability to select the emergency room, treating physicians, or ambulance providers,” the Kaiser Family Foundation says. “Surprise medical bills might also arise when a patient receives planned care from an in-network provider (often, a hospital or ambulatory care facility), but other treating providers brought in to participate in the patient’s care are not in the same network.”

“These can include anesthesiologists, radiologists, pathologists, surgical assistants, and others. In some cases, entire departments within an in-network facility may be operated by subcontractors who don’t participate in the same network,” the foundation notes.

A total of 21 states now have laws protecting consumers against balance billing. A brief by The Commonwealth Fund classify the laws as partial or comprehensive protections (see map below). Six states are considered to have a comprehensive approach: California, Connecticut, Florida, Illinois, Maryland, and New York. Fifteen states’ approaches are considered “limited”: Colorado, Delaware, Indian, Iowa, Massachusetts, Mississippi, New Hampshire, New Jersey, New Mexico, North Carolina, Pennsylvania, Rhode Island, Texas, Vermont, and West Virginia. The comprehensive approach includes some sort of provider prohibition on the practice.

California’s new law covers residents who have private health insurance plans that are regulated by the state Department of Managed Health Care (DMHC) and the state Department of Insurance, which includes about 70% of the state’s private insurance market, the California Health Care Foundation says.

However, it does not cover the roughly 5.7 million people whose employer-sponsored insurance plans are regulated by the U.S. Department of Labor.

Balance billing is a great example of what is still wrong with health care despite the repeal and replace rhetoric. It affects actual patients and families, not theoretical interests. For patients undergoing major medical procedures, such as surgery, it is often extremely difficult or impossible to gain a complete and accurate picture ahead of time as to what the cost will be to the patient. California’s new law and others like it are a move in the right direction to protect patients.

13 Ways You Might Not Realize Floods Are Like Health Care

By M2|2017-10-08T11:25:08+00:00September 13th, 2017|Insurance, Uncategorized|

13 Ways You Might Not Realize Floods Are Like Health Care

Hurricane Harvey has officially dissipated, but it has wiped out the Federal Emergency Management Agency (FEMA) disaster relief fund, and despite Congressional efforts to provide additional funds, Hurricane Irma will probably require yet another injection of relief funding before the end of September. Like most people, we at M2 are thinking about our friends and family – and all people – in the affected areas and are donating money to local organizations lending a hand.

Unlike most people, though, we at M2 are also noticing the ways these disasters and the National Flood Insurance Program mirror the issues we grapple with in health care and the ACA repeal and replace debate.

Disaster relief and health care are essentially social issues that force the government to decide who they will help and when. Which is better: paying for those affected by disaster or significant health care needs, or helping people to buy insurance against those possibilities?

If the government “helps people buy insurance,” in other words, provides subsidized insurance, how much of the premium should be subsidized? For whom should the premium be subsidized? This year the U.S. Government Accountability Office (GAO) called the National Flood Insurance Program (NFIP) high risk, in part because of a simple math problem that all insurance products must address. What happens if you can’t charge a rate high enough to cover the cost of insuring the risk?

The GAO wrote, “Since the program offers rates that do not fully reflect the risk of flooding, NFIP’s overall rate-setting structure was not designed to be actuarially sound in the aggregate, nor was it intended to generate sufficient funds to fully cover all losses.” Slightly different language, but same concept as the current fight over cost-sharing reduction (CSR) payments to health insurance companies: the government subsidizes the cost of insurance for certain people because otherwise the premiums would be too high for them to afford coverage.

Below are 13 ways you might not have realized floods are like health care (and why insurance is so important):

Personal costs are likely to far exceed a person’s ability to pay for them
When a catastrophe occurs, many people receive aid, and many who should have had insurance don’t, which may cost the government more than the insurance would have cost
Government must decide how much subsidy is enough to entice participation, but not so much as to discourage personal responsibility
States’ rights must be balanced against the federal government’s interest in sharing the expense of providing aid to people affected by catastrophic events
A small percentage of policy holders account for a large percentage of claims
Insurance is required by government, for at least some people
Insurance is subsidized by government, for at least some people
If premium rates are tied to actuarial rates, rates will skyrocket
To reduce what the government spends on subsidies without raising premiums, insurance policies with higher deductibles may be offered
Eventually Congress may establish a fee on all insurance policies sold to recover part of its costs for operating the federal program
A constant debate rages about the length of waiting periods because too short of a waiting period allows people to buy insurance coverage when they already know they will have a claim
There is some kind of national educational campaign to help people understand the importance of having insurance
Proposals are floated to ban people from receiving assistance if they have had repetitive losses

In an article called, “The US Flood Insurance Market is a Mess,” (paywall) a reporter from The Financial Times asked a reinsurer from Bermuda how to fix the U.S. flood insurance market. His response could just as easily apply to the current health care debate:

“This is a big social issue. Should mortgage companies require more people to get flood insurance? Should the government provide reinsurance, or buy more reinsurance? There is no fast and cheap fix on offer.”

N.B. Our “13 ways” list would not have been possible without the information compiled by the American Institutes for Research, The Pacific Institute for Research and Evaluation, and the Deloitte & Touche LLP October 2002 report for the Federal Emergency Management Agency (FEMA) called A Chronology of Major Events Affecting the National Flood Insurance Program.

Light Health Care Users: Most Americans Use Few Health Care Resources and Have Low Out-of-Pocket Spending

By M2|2017-10-09T01:49:05+00:00May 23rd, 2017|Health care spending, Health Care Trends, Insurance, Out-of-pocket spending, Uncategorized, What do we pay for and why|

Light Health Care Users: Most Americans Use Few Health Care Resources and Have Low Out-of-Pocket Spending

Every day we read news coverage focused on rapidly rising health care costs, but a seldom-reported part of the story is how very few people are responsible for those costs.

A study of health care costs from 1977 to 2014 shows that over the length of the study period, the top 1 percent of the health care using population consistently cost the system more than the bottom 75 percent. Just 1 percent of the population, in fact, accounts for nearly a third of medical spending.

The study, published in the April 2017 issue of Health Affairs, finds that “most Americans use few health care resources and have low out-of-pocket spending.”

In addition, more than 93 percent of these light spenders (those in the bottom half of the population) believe they have received “all needed care in a timely manner,” and the light spending by the majority of the population “has remained almost unchanged during the thirty-seven-year period.”

This light spending has also remained “unchanged since the inception of the Affordable Care Act (ACA),” as a Medscape article on the study notes.

These findings matter because most health care policy discussions focus on spending at the population level – in other words, on the 1 to 5% of the U.S. population that incurs significant medical costs. That isn’t how individuals think of health spending, however. Most of us think of what we as individuals, or perhaps our family, spends on health care.

Insurance, by design, must include many non-users, so to speak, in order to work. Most of us buy home insurance or car insurance and never use it. That is, we make payments to an insurer in the form of premiums, but we typically don’t have car accidents and don’t have house break-ins or fires. Similarly, most people don’t have much in the way of medical spending.

But if too many light spenders don’t buy insurance, the price of insurance increases for everyone. And in fact, that is what happens.

This chart from the April 2017 Health Affairs article shows that the highest spenders are the most likely to be on public insurance – think Medicaid for the severely disabled – and light spenders are the most likely to be uninsured – they don’t think they need it, and they probably don’t for years and years – until something catastrophic happens.

In terms of out-of-pocket spending, for light spenders in 2014 this figure was just $75 on average, which is less than the $94 (in adjusted 2014 dollars) spent in 1977, the authors find. On the other hand, high spenders averaged $1,096 in out-of-pocket costs. And 50% of light spenders had no spending at all (not including health insurance premiums, if they were insured), whereas only 6.1% of high spenders had none.

As we continue to think about how to improve or change health care insurance, delivery, and payment in the U.S., it is important to remember how few people actually interact with the health care system every year. Even for people buying health insurance, a large proportion of people spend little on actual health care services, and that has remained stable for decades.

This makes some complaints about the Affordable Care Act a little easier to understand. As the study explains, light spenders “as a group are unlikely to receive substantial short term benefits from the Affordable Care Act.”

The question is, what is insurance for? We probably shouldn’t design the entire U.S. health care system for people who don’t need care. But the subtle lines of who pays more, the sick or the well, the old or the young, are something we still need to work out.

Hospital Consolidation as One Potential Solution to Financial Impact of ACA

By M2|2017-10-09T01:50:11+00:00May 19th, 2017|Hospitals, Insurance, Uncategorized|

Hospital Consolidation as One Potential Solution to Financial Impact of ACA

While some have looked at financial issues related to the ACA and called for its repeal, others are taking a different tack. One example is Toby Cosgrove, President and CEO of the Cleveland Clinic, one of the largest and most respected medical centers in the world.

While Dr. Cosgrove will be stepping down later this year from CEO to an advisory role at Cleveland Clinic, Cosgrove has a big idea for how to address rising health care costs in the U.S., and it is not to repeal Obamacare.

His idea? Hospital consolidation.

“We have to realize that not all hospitals can be all things to all people,” he said at an event in Washington, DC in April.

He would know; the Cleveland Clinic has been experiencing financial strain, along with many other hospitals across the country. The struggles have been attributed in part to some of the new regulations resulting from the ACA. The Cleveland Clinic recently reported a steep 70% drop in operating income, from $480.2 million in 2015 to $139.3 million in 2016.

Cosgrove said consolidation would not only improve financials, but would also increase efficiency and help decrease the burden of disease.

Looking further at ACA-related financial impacts, every sector of the health care industry is concerned about the stability of the ACA-related insurance exchanges. In mid-April, several organizations wrote a letter to the Trump administration asking for a commitment to fund cost sharing reduction (CSRs) for 2018. CSRs provide assistance to low- and modest-income consumers earning less than 250 percent of the poverty level to help reduce deductibles, co-pays and/or out-of-pocket limits.

“A critical priority is to stabilize the individual health insurance market,” the letters read. “The window is quickly closing to properly price individual insurance products for 2018.”

Signatories to the letter include not only the two main hospital associations – the American Hospital Association and the Federation of American Hospitals – but also several of the large physician, insurance, and employer groups: the American Medical Association, the American Academy of Family Physicians, America’s Health Insurance Plans, BlueCross BlueShield Association, the American Benefits Council and the U.S. Chamber of Commerce.

Without funding of the CSRs, U.S. consumers will be “dramatically impacted,” the groups say; for example, they predict there will be more limited choices for consumers; premiums will be higher for 2018 and beyond; if more people are uninsured, providers will give more uncompensated care, which will raise costs across the system; and taxpayers will pay more than they would otherwise, as premiums grow and tax credits for low-income families increase.

Regardless of the ultimate fate of Obamacare, and whether changes are made at the federal or state level, some truths about the U.S. health care delivery system remain. Technology is improving, as we explored in a recent blog post on telemedicine and knee pain treatment, for example, and the care that works best for patients is less likely to be hospital based, as we noted in this recent blog post highlighting that sometimes “less is more” when it comes to breast cancer treatment.

At this point, if one of the largest health care systems in the U.S. is arguing that fewer hospitals are needed, it is certainly time to pay attention to what true change in health care will look like.

Who Deserves Health Care? (a.k.a. Health Care is Hard)

By M2|2017-10-09T01:51:07+00:00May 17th, 2017|Health care spending, Insurance, Uncategorized|

Who Deserves Health Care? (a.k.a. Health Care is Hard)

Congressional efforts to repeal (and replace?) Obamacare seem to be on track to continue over the summer. The American Health Care Act (AHCA) passed the House May 4, 2017, and as written will gut Medicaid, defund Planned Parenthood for one year, and allow health plans to charge older, poorer people way more than they are paying now for health insurance.

You can read all sorts of news and opinions about why the House-passed AHCA bill is problematic if the goal of the bill was either to reduce health care costs for consumers or ensure access to health insurance coverage. But you might not read this: Late in February President Trump said health care is unbelievably complex – he was right and this is why.

Health care comes down to two questions that are easy to ask, but hard to answer. First, who deserves health care? Second, who should pay for it?

Question 1: Who deserves health care?

If you think everyone deserves health care, great. Then you can just jump ahead to the second question. However, to understand the current health care debate, it is important to know that many people, including many elected officials, think only certain people deserve health care. And when they say health care, they mean health care insurance.

For those promoting a “free market” approach, they support a system in which a person who “works hard” is rewarded with health insurance coverage. That is how most people in the U.S. get health insurance now. The problem is the definition of “works hard.” In 2014, 83% of people with a full-time job who made more than about $48,000 per year (400% of the federal poverty level or FPL) were offered insurance by their employer (see chart from Kaiser Family Foundation).

So one definition of “works hard” to the proponents of “let the free market decide” is well-paid full-time workers. Indeed, employer-sponsored insurance is the basic building block of the U.S. health care system. Historians will explain that in 1940 about 9 percent of the population had health insurance. In 1943, the Internal Revenue Service (IRS) ruled an employer offering the fringe benefit of health insurance could do so tax-free. As a result, in 1953, health plan participation jumped to nearly 65% of people. The IRS giving certain kinds of health insurance tax-free status hardly seems to be “letting the free market decide,” but we digress…

Besides full-time employees, who else worked “hard” enough to deserve health insurance? The second biggest group are Medicare enrollees. About 15% of Americans receive Medicare. But again, they “deserve” it, because every worker in the U.S. pays a portion of his or her paycheck to the Medicare fund. A person receives Medicare because they earned it – he or she either worked a certain number of years during their lifetime and paid into the fund, or their spouse did.

Yes, health insurance is different from health care. Emergency rooms are required by federal law to accept emergency patients. And community health clinics provide care on a sliding scale. So technically, everyone can get health care because we have emergency rooms and free health clinics.

Question 2: Who should pay for health care?

Even if your answer to question 2 is, “We should all pay!” it doesn’t necessarily make the mechanics of everyone paying any easier. If everyone pays, how do we do it? A flat tax for every person? A tax based on income? A tax based on how much health care costs where you live?

Should sick people pay more than people who are well? Should older people pay more than younger people? Should we all pay for a basic set of benefits, even those we don’t use? For example, should men have to pay for maternity care? Should young people have to pay for prostate exams or colonoscopies? Should middle-aged people have to pay for childhood vaccines?

As mentioned previously, we all pay for health care in the system we have today because our taxes go to support free health clinics and to cover the costs of hospitals who provide emergency care that is “uncompensated.”

Which brings us to why health care is so unbelievably complex. Each of us has our own experience with the system, and whatever we don’t like, we blame on “the system.” If your premiums have gone up in the past few years, you might blame Obamacare, but it is just as likely that your employer changed your health insurance plan so they could save some money for their shareholders. On the other hand, if you couldn’t get insurance before Obamacare because you had a pre-existing condition, you might credit Obamacare for that access.

One individual’s experience of health care or health insurance is not everyone’s experience, and your experience may or may not be because of Obamacare. But every story counts. Many elected officials are hearing from constituents that Obamacare is failing them, and that may very well be true. Other constituents are saying Obamacare saved their life, and that may also be true. Having an honest conversation about all the ways Obamacare helps and hurts people, and who deserves what, would be a better way to get to policies that would work. But that would be hard.

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