Companies Steering Workers to Lower Priced Medical Care
Executive Sarah Gardner recently rolled out a plan that sets limits on how much her company will pay toward a range of tests and procedures, from MRIs to hysterectomies. She wants her workers to be savvy medical shoppers and encourages them to find the best price for the covered procedures, though the workers may choose more expensive providers and make up the difference themselves. Before the new program, workers' incentive to shop around was limited because they had no idea -- or any easy way to find out -- that prices for many types of medical treatments varied widely, says Kaiser Health News.
Other employers and insurers are pursuing the same strategy, experimenting with ways to slow rapidly rising spending on medical care. Employers say they hope the efforts, often called "reference pricing," will get patients to act more like consumers -- and drive down the cost of some procedures.
The idea of having employees pay the difference for higher-cost services is not new.
About 39 percent of large employers surveyed in an August National Business Group on Healthreportsaid they use the technique in their prescription drug programs, often by requiring workers who want a brand-name drug when a generic is available to pay the difference.
Some employers encourage workers to use "high-performance" networks of doctors or hospitals by lowering their copayments if they seek care there.
Source: Julie Appleby, "Companies Steering Workers to Lower Priced Medical Care," Kaiser Health News, September 22, 2011.
Does Health Insurance and Seeing the Doctor Keep You Out of the Hospital?
An important issue in assessing the recent health care reform is the likely cost of expanding health insurance to previously uninsured persons. Proponents of expanding health insurance often argue that in addition to improving health, expanded insurance may reduce the costs of health care because previously uninsured persons will use more primary care services that will reduce use of more expensive emergency room services and hospitalizations for conditions preventable by primary care. In this article, Robert Kaestner of the University of Illinois and Anthony Lo Sasso of the University of Illinois at Chicago assess whether health insurance coverage and the use of physician services is associated with more or less hospitalization.
To study this issue, Kaestner and Lo Sasso presented three different analyses: two that used nationally representative samples of adults from the National Health Interview Survey (NHIS), and one that used proprietary data on employees enrolled in private, employer-sponsored health insurance plans.
Results from analyses that used the NHIS provided consistent evidence that health insurance was associated with greater hospitalization.
Uninsured persons were between 33 percent and 72 percent less likely to report a hospital admission than insured persons.
Using proprietary data from an insurer, Kaestner and Lo Sasso were better able to investigate whether greater use of physician services was associated with more or less hospitalizations.
Estimates from this analysis indicated that greater outpatient spending, primarily non-pharmacy spending, was associated with more hospital admissions.
For example, a $500 increase in outpatient spending was associated with an 11.5 percent increase in inpatient spending among employees in the employer-sponsored insurance plans in the sample.
Overall, the findings suggest gaining health insurance and using more primary care services leads to more hospitalizations as a result of physicians' discretionary decisions regarding aggressive and intensive treatment. In addition, health insurance has a direct effect on hospitalization because it lowers the price of inpatient care. The implication of these findings is that expanding health insurance, as the recent Patient Protection and Affordable Care Act proposes, will be cost increasing.
Source: Robert Kaestner and Anthony Lo Sasso, "Does Health Insurance and Seeing the Doctor Keep You Out of the Hospital?" American Enterprise Institute, September 13, 2011.
Rapidly rising Medicare spending is a major cause of the federal government's budget problems. Analysts who have offered proposals to slow the pace of rising Medicare costs tend to fall into one of two competing camps, says James C. Capretta of the Heritage Foundation.
The first camp believes that central government management of prices and government reengineering of how services are delivered by doctors and hospitals can control Medicare's costs -- as well as costs in the wider health system -- without harming the quality of care.
Over the past three decades, the camp that favors government control and regulation has been calling the shots in the Medicare program, without success.
Proponents of the 2010 health care law observed the problem and concluded that better technocratic solutions were needed.
The other camp argues that strong competition in a functioning marketplace will work far better than more government micromanagement to improve quality and reduce costs.
A well-functioning marketplace would set in motion the forces needed to transform American medical care, including in the Medicare context, into a model of efficient patient-centered care.
The government can and should play an important oversight role in such a reformed system, but the difficult organizational changes and innovations needed to provide better care at lower cost must come from the bottom up, not from the top down.
In other words, changes should come from those who are delivering services to patients, not from Congress, the Department of Health and Human Services, or an appointed board of remote and unaccountable "experts."
Source: James C. Capretta, "The Case for Competition in Medicare," Heritage Foundation, September 12, 2011.
WASHINGTON – Almost 1 million young adults have signed on to new health insurance policies, government statistics released Wednesday show. Government officials credit the new federal health care law for making that possible.
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The rise in young adults 19 to 25 with insurance comes as older Americans are losing their health insurance as the economic crisis continues.
"We feel quite confident in attributing virtually all of the change to the provisions in the Affordable Care Act," said Rick Kronick, deputy secretary for health policy for the U.S. Department of Health and Human Services.
As of September 2010, the Affordable Care Act allowed young adults up to the age of 26 to remain on their parents' health insurance plans. Previously, adult children could stay on their parents' plans only if they remained in college or lived in a state with laws similar to the Affordable Care Act. HHS estimated that 650,000 people would sign up for the new coverage.
However, through the end of March, the number of young adults ages 19 to 25 with health insurance rose by about 900,000 or 3.5%, from the same period in 2010, according to records from the National Center for Health Statistics.
The same report shows that the percentage of all adult Americans with health insurance increased from 77.7% to 78.5% in the same period, a change attributed to the rise in young adults with insurance.
Other recent studies by government and independent groups show the same trend.
An independent Gallup survey released Wednesday showed that insurance for young adults jumped from 71% in the first quarter of 2010 to 75% in the second quarter of 2011, which ended in June. Also, a U.S. Census Bureau report this month showed that insurance for young adults rose by 2% from 2010 to 2011.
The number of older Americans without insurance keeps growing as the economy stagnates, Kronick said, but the number of younger adults with insurance rose just as the law took effect.
Health care providers should see fewer unpaid bills because of this trend, he said, and that should cause everyone's insurance premiums to drop. At the same time, insurance costs for employers could rise about 3.4%, he said.
HHS officials led by Secretary Kathleen Sebelius focused Wednesday on how the law helps young people: If they become ill while going to college, they don't have to worry about losing their insurance if they must drop out of classes. If they have pre-existing conditions, such as asthma or diabetes, they may remain on their parents' insurance until a provision in the health care law kicks in that prohibits insurers from denying coverage based on a person's health. And young people can take jobs at a start-up rather than take a job with benefits.
You can't open a newspaper or turn on the TV these days without tax talk. But no one seems to be talking about the $2,000 per worker tax on employers, to begin in 2014. Enacted as part of the 2010 Patient Protection and Affordable Care Act, it will be levied on firms with 50 or more employees who do not offer the right kind of health insurance to their workers, says Diana Furchtgott-Roth, a senior fellow at the Manhattan Institute.
Franchisors, like Dairy Queen, and franchisees, the local business people who operate individual Dairy Queen stands, own groups of small businesses, such as stores, restaurants, motels and hotels. They often employ 50 or more people at several locations that are commonly owned.
The multiunit franchisees will have a particularly difficult time operating in this uneven business environment.
Suppose a single multiunit franchisee owns four establishments with 15 full-time employees each.
Under the new health care law, this multiunit franchisee will be treated as a single firm with 60 full-time employees, and the employer will be required by law to provide health care benefits for all employees or pay the tax of $2,000 per full-time employee per year.
But if these four establishments were owned and operated separately, they would be exempt from the requirement of providing health care benefits.
Further, if these four separately-owned businesses choose to offer health insurance, they would in some cases be entitled to a small-employer tax credit.
When the employer mandates go into effect in 2014, many franchised businesses will be motivated to reduce the number of locations and move workers from full-time to part-time status.
The problem is not limited to franchise businesses. It also will affect entrepreneurs who open additional branches of their businesses. It is an obstacle to expansion, says Furchtgott-Roth.
Unemployment is stubbornly high and employers show little willingness to hire. It's time for President Obama and Congress to review the new health care law to see if it may be more of a problem than a solution to securing America's future.
Source: Diana Furchtgott-Roth, "Slow Employment Growth? Look to ObamaCare," Real Clear Markets, September 15, 2011.
CMS Head Touts the Need for a Comprehensive Strategy to Support Medicare: Calls for Partnership with the Private Sector
September 13, 2011 - 3:11 PM
In a keynote address delivered at the American Health Insurance Plan’s (AHIP) annual Medicare Conference on September 12, Donald M. Berwick, MD, administrator for the Centers for Medicare & Medicaid Services (CMS), addressed a number of issues associated with the long-term financial health of the Medicare Program.
His 45-minute speech centered on the need to address the rising costs required to fund the federal program supporting American seniors and a few special populations. In a humorous moment, Dr. Berwick noted that he just celebrated a big birthday last week and is now eligible to become a Medicare beneficiary himself, which has added some urgency to the matter.
On a more serious note, Dr. Berwick observed that there are two ways two deal with the expense side of the equation. First, the “easy way” is to just cut Medicare benefits or payments to providers. He noted that this is fairly straight-forward and can happen quickly. However, from a public policy perspective, he does not recommend it.
Rather, Dr. Berwick suggested that a “better way” is to focus on “improving care” in a comprehensive and systematic manner. He asserted that a primary strategic goal of CMS is to provide better care, improve health, and reduce costs through an integrated approach. He elaborated that this requires leveraging the strengths of both public and private sectors in a collaborative fashion. CMS has the size to implement change and can scale new ideas fairly quickly. Private health plans have maneuverability and the ability to innovate quickly. He hopes that in a “shared learning” environment, better outcomes can be achieved all the way around.
Dr. Berwick said that “waste” also must be removed from the U.S. health care system. This includes eliminating activities that do not add value to the Medicare Program. He cited a number of non-value based activities including: 1) failure to coordinate care; 2) deficiencies in maintaining appropriate care processes which can create unnecessary delays and complications; 3) patterns of overtreatment; 4) excessive administrative costs; 5) problems associated with health care pricing; and 6) those few bad actors that perpetuate fraud and abuse in the system.
In terms of health care reform and response to a question from the audience, he commented that the accountable care organizations (ACOs) are not a cure-all but do hold some promise to improve care for Medicare beneficiaries. He also stressed the need for all stakeholders to become involved in improving the Medicare Program.
Dr. Berwick’s comments were well received by the health plan audience. For someone immersed in a very political position, he appears genuinely open to hearing and discussing new ideas. That being said, the federal government is implementing significant changes to the U.S. health care system in hyper-speed. Therefore, it is important that the industry keep intact strong communication links with key policymakers like Berwick to provide feedback.
Source: Benefitmall Health Exchange Notes 9/14/2011
The most significant reason for our out-of-control deficit spending is health care. And the biggest federal health care program is Medicare. That's why almost everybody agrees that Medicare must be reformed. A good place to start is recognizing that what Medicare is trying to do is impossible, says John C. Goodman, president and CEO of the National Center for Policy Analysis.
Each price Medicare pays is tied to a patient with a condition. And with the 7,500 things doctors could possibly do to treat a given condition, Medicare has to be just as diligent in not paying for inappropriate care as it is in paying for procedures that should be done. So, in fact, Medicare isn't just setting prices. It is regulating whole transactions.
What happens when Medicare gets it wrong?
One result is that doctors face perverse incentives to provide care that is costlier and less appropriate than the care they should be providing.
Another result is that the skill set of our nation's doctors becomes misallocated, as medical students and practicing doctors respond to the fact that Medicare is overpaying for some skills and underpaying for others.
A more sensible approach is to begin the process of allowing medical fees to be determined the way prices are determined everywhere else in our economy -- in the marketplace. Here are three ways to start:
First, Medicare should allow enrollees to obtain care at almost all walk-in, free-standing emergency-care clinics that post prices and usually deliver high-quality care. Since these fees are well below what Medicare would have paid at a physician's office or hospital emergency room, this reform would lower Medicare's overall costs.
Second, Medicare should allow enrollees to take advantage of commercial telephone and e-mail services. Again, it is important to pay the market price, not Medicare's price, although Medicare patients should probably pay a good portion of the cost of each phone call out of pocket.
Finally, Medicare should encourage physicians to repackage and reprice their services in ways that are good for the doctor, good for the patient and good for Medicare. For example, Medicare should encourage concierge doctor arrangements.
Source: John C. Goodman, "Three Simple Ways Medicare Can Save Money," Wall Street Journal, August 11, 2011.
It seems like forever that Consumer Reports has been telling people to haggle over the price of a microwave or a car. Now the folks behind the magazine want you to haggle with your doctor -- or at least let her know that you can't afford that bypass, says National Public Radio (NPR).
The cost of health care is expected to almost double in the next decade, and insurers and employers are increasingly shoving that cost onto individuals.
As a result, even people with good insurance are finding it harder to pay medical bills.
NPR talked with John Santa, an internal medicine doctor who directs the magazine's Health Ratings Center and wrote this call to medical bargain shopping. He says it's the first time the organization has advised people to bargain with their doctors, he says. And he understands why some people would rather have a colonoscopy than tell their doctor they're having money trouble. Still, he says, "Your doctor needs to know about the stresses in your life."
Santa says a doctor really wants to know if money is tight, because there are many treatment options that are just as good if not better, and also less costly.
Doctors and other health care providers also have an ethical obligation to put patients' financial situations ahead of their own, he notes.
Talking with the doctor about costs before treatment is the best bet, but it's still OK to negotiate after getting slammed with a big bill for a high-ticket item, Santa says.
One of the biggest hang-ups in shopping for health care is that it's hard to find out the real price. There's no Google Shopper for hip replacements. But the Healthcare Blue Book is a good start. This free service provides at least an inkling of what the going rate might be for that hip replacement ($20,566) or dental crown ($959), says NPR.
Source: Nancy Shute "Haggle, Don't Settle, When It Comes To Health Costs," National Public Radio, September 6, 2011.
Utah's experience demonstrates why unsubsidized exchanges are unlikely to attract significant numbers of beneficiaries from the small-group market, says John R. Graham, director of health care studies at the Pacific Research Institute.
Key points Graham makes in his study:
The Utah Health Exchange is failing to meet its goals.
It is almost certainly true that the administrative costs of operating an exchange are greater than the administrative costs of the traditional small-group market.
Any exchange that offers unsubsidized, voluntary coverage will likely have the same poor results as the Utah Health Exchange.
Reformers who believe that they can overcome the federal government's discrimination against individually owned health insurance by establishing such exchanges are misguided.
Only federal tax reform can remove the impediment to individually owned health insurance.
The failure of the Utah Health Exchange is not idiosyncratic. It is the destiny of any unsubsidized and voluntary exchange. The reason is pretty straightforward: The administrative costs of operating an exchange plus the administrative costs to a small business of migrating to the exchange are almost certainly greater than the administrative costs of participating in the traditional small-group market (or taking a chance on other "work arounds" promoted by some insurance producers). Therefore, unless an exchange is subsidized from non-exchange sources (as per the new health care reform law, "ObamaCare"), it will not attract many participants.
Eliminating employer-monopoly health benefits in favor of individually owned health plans is a critical goal of health reform. The evidence strongly suggests that this can only be done through federal tax reform. Unfortunately, those brave souls who attempt it through non-ObamaCare, state-based exchanges are engaged in a fruitless quest.
Source: John R. Graham, "Why Health Exchanges Don't Work," Pacific Research Institute, August 2011.
Success of Consumer-Driven Principles in Medicare Programs
Medicare is in crisis. Already generating tens of billions of dollars annually in deficits, its financial challenges threaten taxpayers and enrollees alike. Moving to a premium-support model would reverse the program's deterioration by using the dynamics of the free market to contain costs and improve consumer satisfaction, says Kathryn Nix, a policy analyst at the Heritage Foundation.
Heritage's Saving the American Dream proposal builds on the most successful of the principles already guiding portions of seniors' care today. Individuals could still choose premium-based Medicare fee-for-service. They would have a new menu of options, however, of private plans including fee-for-service, managed care, Medicare Advantage, association plans, employer-based plans and more.
Contributions would be income-adjusted, restoring Medicare to its original function as a genuine social insurance program.
Very wealthy seniors would continue to benefit from access to an insurance marketplace where they could not be denied coverage, but they would no longer receive taxpayer subsidies to purchase coverage.
Low-income seniors would continue to receive additional aid under Medicaid if they remain in traditional Medicare; if enrolled in a private plan, states could "top off" the federal contribution with further financial assistance.
Costs would be controlled in part through competition.
The federal contribution for premium support would be based on bids submitted by participating plans to cover traditional Medicare benefits, as well as a new catastrophic care benefit.
As Medicare enrollment grows, increasing demand for medical services cannot be fulfilled through the program's current, outdated fee-for-service structure that rewards volume -- not quality care -- and exacerbates rising costs, says Nix.
Source: Kathryn Nix, "A Recipe for Reform: Success of Consumer-Driven Principles in Medicare Programs," Heritage Foundation, August 10, 2011.
Five years after Gov. Mitt Romney signed Massachusetts' groundbreaking health care legislation, it has met its chief goal of extending insurance coverage to most residents -- but with costs rising faster than inflation, lawmakers face the challenge of how to pay for it all. Although the law has extended coverage, it has done little to fundamentally change the way consumers shop for health care, which analysts say is the only lasting solution to ballooning costs, reports the Washington Times.
Massachusetts' uninsured rate plunged to the lowest in the nation, from 6.4 percent to 1.9 percent, after the law was enacted in 2006.
The rest of the nation averages close to 17 percent.
At the same time, health care premiums continued to outpace inflation by rising an average of 5 percent to 10 percent each year.
Reforming health care in Massachusetts -- and the challenges that came with it -- foreshadowed President Obama's health care initiative, which he signed into law last year. The Affordable Care Act closely mirrors Mr. Romney's overhaul, leaving in place the employer-coverage model but expanding subsidized coverage.
Both laws include mandates on individuals to purchase health insurance or pay a fine, and on businesses to offer insurance, though they exempt small firms.
Both establish insurance exchanges that offer subsidized coverage to low-income individuals and families and ban insurance companies from rejecting individuals with preexisting conditions.
Now, both plans face questions over how to pay for their reforms over the coming decades.
Source: Paige Winfield Cunningham, "Health Coverage, Rates Rise in Massachusetts," Washington Times, August 16, 2011.
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