Starting this spring, five corporate giants — Anthem, Cigna, CVS Health, Humana and UnitedHealth Group — will control health insurance and pharmacy benefits for more than 125 million Americans.
Why it matters: Most of this happened through rapid consolidation, and now the pressure is on these companies to prove they can better control both medical and drug spending with everything under the same roof.
The 5 largest conglomerates combining health insurance and pharmacy benefits are on track this year to be bigger than the 5 preeminent tech companies.
The big picture: Anthem, Cigna, CVS Health, Humana and UnitedHealth Group cumulatively expect to collect almost $787 billion in 2019, compared with $783 billion of projected revenue for Facebook, Amazon, Apple, Netflix and Google.
Centene, the nation’s largest Medicaid managed care provider, wants Congress to change the eligibility requirements around Medicaid, the government-sponsored safety net program that covers one in five low-income Americans.
Its proposal would ultimately push more people onto the Affordable Care Act exchanges by allowing states to adopt a partial Medicaid expansion, an idea typically embraced by red states.
CEO Michael Neidorff told Healthcare Dive the company has been quietly talking to lawmakers on both sides of the aisle on Capitol Hill about the plan, though he emphasized nothing of substance will happen until after the 2020 election.
Centene says its proposal is an attempt to strengthen the ACA markets by increasing the pool of people while enticing holdout states to partially expand their Medicaid programs.
“I think there’s a way to get it done,” Neidorff told Healthcare Dive. “We have a very powerful Washington office and they’ve been working with leadership and their staff.”
Centene filed lobbying forms totaling about $2 million in spending in the congressional lobbying database for 2019, as of Dec. 11. In 2018, the payer reported spending roughly $2.5 million.
However, policy experts caution that it would result in increased spending for the federal government and fewer protections for those enrolled in Medicaid who are then pushed into the exchanges.
It’s unclear how receptive Congress will be, but experts were skeptical of any consensus on the polarizing health law.
“It would be a very major change. I certainly don’t see that happening. It’s opening up the ACA and as we know from past history, it’s a battle royale when you go into the ACA,” Joan Alker, executive director and co-founder of the Center for Children and Families at Georgetown University, told Healthcare Dive.
Under the ACA, states can expand their Medicaid programs to cover all adults whose annual incomes does not exceed 138% of the federal poverty level, or $17,236 for an individual.
Centene’s proposal calls for lowering that income ceiling from 138% to 100%, or $12,490 for an individual.
That would shrink the pool of who is eligible for Medicaid and push those people into the exchanges. Neidorff said the move would grow the exchange pool and ultimately drive down prices. High costs have attracted criticism as they play a role in forcing those who are not subsidized to leave the market.
For Centene, it would be a notable shift because its core business has long been in Medicaid. The insurance exchanges only became a viable business beginning in 2013 with the advent of the ACA. It’s a nod to how important the exchange business has become for the payer.
Centene arguably stands to benefit the most as the nation’s largest insurer on the exchanges in terms of enrollment, plus the exchanges generate higher profit margins than its Medicaid book of business.
“You move those lives into exchange and your profitability is higher,” David Windley, an analyst with Jefferies, told Healthcare Dive.
In the states that have not expanded Medicaid, there are about 2 million people with incomes between 100% and 138% of the federal poverty level, according to the Kaiser Family Foundation.
Hospitals and providers are likely to favor the proposal because Medicaid plans tend to pay less than commercial ones. The idea could garner support from states with tight budgets as some, even Massachusetts, have already expressed a desire to adopt a partial expansion. (Both the Trump and Obama’s administrations have denied providing the enhanced match rate for states seeking partial expansions).
Still, there are potential drawbacks, according to analysts and policy experts. For example, the plan could potentially cost taxpayers more if there is a greater shift to the exchanges away from Medicaid coverage.
“Medicaid is broadly accepted as the cheapest coverage vehicle in the country,” Windley said, noting that the exchanges are typically a more expensive insurance product than Medicaid coverage.
Plus, because of the way the ACA was written, the federal government would be forced to pick up the entire tab of the subsidies for those between 100% and 138% of FPL.
“As a result, the states save money for every beneficiary whom they can move from Medicaid into their exchanges,” according to a previous paper in the New England Journal of Medicine.
However, policy experts warn the proposal may not be in the best interest of Medicaid members who would migrate to the exchanges.
These members are better off with Medicaid, Alker said.
“From a beneficiary perspective it’s problematic because there are no premiums in Medicaid for that group, 100-138 [FPL]. The cost sharing is very limited,” she said.
Plus, there are benefits in Medicaid members would no longer have access to if they move to the exchanges, Adrianna McIntyre, a health policy researcher at Harvard University, told Healthcare Dive, including non-emergency transportation and retroactive eligibility.
Centene argues many states have avoided expanding Medicaid because of cost concerns, which then leaves some residents without access to affordable care, particularly those in the coverage gap, or those with incomes below 100% of FPL.
If a partial option convinces some holdout states to expand “that’s a tradeoff some may be willing to make,” McIntyre said.
Some states that did expand are looking for ways to curb costs and have decided to implement work requirements, Neidorff noted. He believes the proposal is the answer to both these problems for states.
Centene’s plan comes as a slate of Democratic presidential contenders are calling for “Medicare for All,” a single-payer or public-option healthcare system.
Not surprisingly as such a plan would at a minimum sideline private plans and at the extreme eliminate private payers, Neidorff dismissed the idea.
He estimates his plan would cost $6 billion a year, which he characterized as “very affordable” when compared to a Medicare for All plan, which some studies estimate could cost as much as $32 trillion over 10 years.
Still, some policy experts say the change being proposed by Centene is a tall order.
Though the changes may seem small, the consequences of adopting a partial expansion are large, researchers wrote in a NEJM report: “The damage to Medicaid beneficiaries, the exchange population, and the federal budget could be serious.”
https://www.healthcaredive.com/news/health-insurers-stable-ma-seen-diminishing-in-2020-fitch/568859/
Even anticipating an increase in the growth of U.S. health expenditures, Fitch expects insurers to deliver solid operating results, including improved medical loss ratios, for 2020.
There is even a chance for insurers to garner positive ratings outlooks as many look to continue to execute on merger integration and deleveraging, according to Fitch.
Thanks in part to the return of the health insurance fee, Fitch expects medical loss ratios to drop to 82.5% in 2020. A decrease from the expected 83.9% for the full year of 2019 for the nation’s eight largest publicly traded insurers, which cover about 165 million people, according to Fitch.
MLR is an important measure, showing the amount an insurer spends on medical claims as a percentage of premiums. Lower MLRs leave more room for covering administration costs and garnering profit.
Even an upcoming election year and a slate of Democratic presidential hopefuls touting support to expand Medicare, the agency does not expect seismic changes to the system.
“Healthcare will certainly continue to be one of the most prevalent discussion topics among candidates for the U.S. presidency in 2020, but Fitch does not anticipate significant change in the structure of the U.S. healthcare system over the next couple of years,” the report said.
The agency also said it expects major mergers to slow significantly in 2020. The insurance sector has experienced significant M&A activity over the last few years, including CVS Health’s buy of Aetna and Cigna’s acquisition of Express Scripts. Centene is near closing on its purchase of rival WellCare.
Fitch expects consolidation activity next year to focus more on “modest build-out of care delivery opportunities in various regions or care management and technology initiatives.”
https://www.healthcarefinancenews.com/node/139468
Changes in insurance benefit design that shift greater financial responsibility to the patient, rising healthcare costs and confusing medical bills will continue to drive growth in bad debt — often faster than net patient revenue, according to a new report from Moody’s.
Legislative proposals to simplify billing have the potential to reduce bad debt, but the downside for hospitals is that they’ll likely introduce additional complexity to billing processes and complicate relationships with contracted physician groups. A recent accounting change will reduce transparency around reporting bad debt.
Higher cost sharing and rising deductibles are the main contributors to the trend of patients assuming greater financial responsibility, a trend that’s been occurring for more than a decade, and that will further increase the amount of uncollected payments. Hospitals and providers are responsible for collecting copays and deductibles from patients, which may not always be possible at the time of service; the longer the delay between providing service and collecting payment, the less likely a hospital is to collect payment.
On top of that, the higher an individual’s deductible is, the greater the share of reimbursement that a hospital has to collect. The prevalence of general deductibles increased to 85% of covered workers in 2018, up from 55% in 2006, and the amount of the annual deductible almost tripled in that time to an average of $1,573.
Multiple factors are driving the trend toward higher cost sharing, including a desire among employees and employers for stable premium growth despite steadily rising healthcare costs and the growing popularity of high deductible health plans.
WHAT’S THE IMPACT
Hospitals face an uphill battle when it comes to reducing bad debt. Strategies include point-of-service collections, enhanced technology to better estimate a patient’s responsibility for a medical bill, and offering low-cost financing or payment plans.
A common feature of these approaches is educating patients about what portion of a medical bill is their responsibility, after taking into account the specifics of their insurance plan. But hospitals often find it hard to provide reliable cost estimates for a given service, which can thwart efforts to provide patients with an accurate estimate of their financial responsibility.
One difficulty is that medical bills partly depend on the complexity of service and amount of resources consumed — which may not be known ahead of time. There’s also the need to incorporate specific benefits of the patient’s own insurance plan. A certain amount of bad debt is likely to arise from patients accessing emergency care given the insufficient time to determine insurance coverage.
Another difficulty in billing is surprise medical bills, received by insured patients who inadvertently receive care from providers outside their insurance networks, usually in emergency situations. While the term “surprise medical bills” refers to a specific, narrow slice of healthcare costs, they have become part of the broader debate about the affordability and accessibility of U.S. healthcare.
THE LARGER TREND
To minimize surprise bills, Congress is considering proposals to essentially “bundle” all of the services a patient receives in an emergency room into a single bill. Under a bundled billing approach, the hospital would negotiate a set charges for a single or “bundled” episode of care in the emergency room. The hospital would then allocate payments to the providers involved.
This approach, which major hospital and physician trade groups oppose, has the potential to significantly affect hospitals and disrupt the business models of physician staffing companies, according to Moody’s. Many hospitals outsource the operations and billing of their emergency rooms or other departments to staffing companies. Bundling services would require a change in the contractual relationship between hospitals and staffing companies.
Another recent proposal in Congress would require in-network hospitals to guarantee that all providers operating at their facilities are also in network. This approach adds significant complexity because many physicians and ancillary service providers are not employed or controlled by the hospitals where they work. Some hospitals would likely seek to employ more physicians, leading to increases in salaries, benefits and wages expense.
https://mailchi.mp/1d8c22341262/the-weekly-gist-the-spotify-anxiety-edition?e=d1e747d2d8
Alarming statistics appeared this week in the journal JAMA Pediatrics, based on an analysis conducted by researchers at the Centers for Disease Control and Prevention (CDC) that showed that 20 percent of adolescents (ages 12-18) and 25 percent of young adults (ages 19-34) in the US are now prediabetic. These young people are at substantially increased risk for developing type 2 diabetes, as well as related cardiovascular diseases, as they grow older.
The numbers are a staggering picture of what confronts the American healthcare system as the millennial generation (whose median age is now 30) and the younger “Gen-Z” generation (born after 1997) move closer to their prime care consumption years. These age cohorts are likely to be much more medically complex, and will drive even higher healthcare costs, than previous generations—especially since both of the younger generations are larger than those that preceded them. But the statistics also raise important health policy questions.
To what extent should we “medicalize” prediabetes? In other words, should we begin to flag and treat prediabetes, which is more of a predisposition than an actual medical condition, with medications and interventions? Surely the reimbursement system will create a powerful temptation to do exactly that—at exorbitant cost. Or will we instead focus efforts on “reversing” prediabetes, with more robust attempts to encourage lifestyle changes (diet, exercise) and drive environmental changes (neighborhood walkability, availability and affordability of healthy foods)?
And there’s an information privacy issue looming as well—how will “prediabetics” be flagged, and could prediabetes be viewed as a “pre-existing condition” that might be used in coverage (and even employment) decisions should the regulatory environment change? As much as we focus today on the healthcare impact of the aging Baby Boom generation, we need to get out ahead of some of the issues we’re certain to face as our younger citizens grow older (and sicker).
Spending levels for people in the traditional Medicare program are expected to rise by 4.5% in 2021, the Centers for Medicare & Medicaid Services said in a memo sent this week.
Why it matters: This growth rate is the key number government actuaries use when figuring out how much to pay Medicare Advantage plans, Bob writes.
Go deeper: The war over Medicare Advantage audits heats up
A five-day strike that was postponed last month after the sudden death of Kaiser Permanente Chairman and CEO Bernard J. Tyson is back on the calendar.
Thousands of psychologists, therapists, psychiatric nurses, and other healthcare professionals plan to strike December 16–20 at more than 100 Kaiser Permanente facilities across California, the National Union of Healthcare Workers (NUHW) said Wednesday.
“Mental health has been underserved and overlooked by the Kaiser system for too long,” said Ken Rogers, PsyD, MEd, a Kaiser Permanente clinical psychologist who serves as a vice president on the NUHW executive board, in a statement released by the union.
“We’re ready to work with Kaiser to create a new model for mental health care that doesn’t force patients to wait two months for appointments and leave clinicians with unsustainable caseloads,” Rogers said. “But Kaiser needs to show that it’s committed to fixing its system and treating patients and caregivers fairly.”
The union accuses Kaiser Permanente of refusing to negotiate unless mental health clinicians agree to “significantly poorer retirement and health benefits” than those received by its more than 120,000 other California employees.
Dennis Dabney, senior vice president of national labor relations and the Office of Labor Management Partnership at the Kaiser Foundation Health Plan and Hospitals, said the parties have been working together with an external mediator in pursuit of a collective bargaining agreement. The union rejected a compromise solution proposed last week by the mediator, Dabney said.
“The only issues actively in negotiation in Northern California are related to wage increases and the amount of administrative time that therapists have beyond patient time,” Dabney said. “We believe these issues are resolvable and there is no reason to strike.”
The mediator’s recommendation includes about 3% in annual wage increases for therapists in Northern California for four years, plus a $2,600 retroactive bonus, Dabney said
“In Southern California, the primary contract concern relates to wage increases and retirement benefits,” Dabney said.
The mediator’s recommendation includes about 3% in annual wage increases for therapists in Southern California for four years, plus a $2,600 retroactive bonus, even though the organization’s therapists in Southern California “are paid nearly 35% above market,” Dabney said.
“Rather than calling for a strike, NUHW’s leadership should continue to engage with the mediator and Kaiser Permanente to resolve these issues,” Dabney said.
The intervention slashed PMPM billing by 61% in three years for a small cohort of plan members.
What makes this program atypical is the way the hospital took a broad problem-solving approach while minimizing its expenses.
Patients who use the emergency department at least three times within four months at Allina Health’s New Ulm Medical Center in New Ulm, Minnesota, have their names added to a high-utilization list.
The keeper of that list is Jennifer Eckstein, a licensed social worker who follows up with each patient directly, looking to solve underlying problems that may be driving their frequent ED use. Whether the patients need a primary care physician, a mental healthcare provider, supportive housing, or another solution, Eckstein does her best to address their social determinants of health and steer them away from the ED for non-emergent care.
The intervention is a straightforward concept. Many other hospitals have similarly hired social workers to help meet the needs of these ED frequent flyers. The program at New Ulm Medical Center, in fact, was inspired in part by an earlier and narrower intervention that focused exclusively on mental health needs of ED patients at Allina’s Owatonna Hospital in Owatonna, Minnesota.
But what makes this program a bit different from others is the way New Ulm Medical Center took a broad problem-solving approach while minimizing its expenses. Rather than shouldering the full cost of employing a full-time ED social worker, the hospital partnered with local insurer South Country Health Alliance. They struck a deal and signed a contract agreeing to split the personnel expense 50/50, beginning in 2012.
Allina’s four hospitals in the Twin Cities metro area have regularly staffed social workers in their EDs, too, but none of them fund those positions through cost-sharing arrangements with health plans, according to a spokesperson for the nonprofit health system.
South Country Health Alliance CEO Leota Lind, who has been with the organization since its founding in 2000, says her organization didn’t need much convincing to sign the contract with New Ulm Medical Center. While unmet mental health needs are often a major factor contributing to ED overuse, they are far from the only factor, so the broader approach taken at New Ulm offered a chance to solve a wider range of the challenges that were leading plan members to an ED when they should be seeing a more cost-effective primary care physician instead, Lind says.
“We really just were looking at ways to influence and reduce emergency department visits,” Lind tells HealthLeaders. “By taking that broader scope, it gave us the opportunity to identify what other issues were contributing to that high utilization of the emergency department.”
South Country Health Alliance and New Ulm Medical Center each contribute about $40,000 per year to cover Eckstein’s salary and benefits—which, at about $80,000 per year, are in line with what other hospital social workers earn in total compensation in the Midwest, says Carisa Buegler, MHA, director of operations for the hospital.
Both the hospital and payer say their shared investment has been paying off.
Before the social worker was introduced, a small cohort of 28 South Country Health Alliance plan members who received care in New Ulm Medical Center’s ED generated $731 per member per month (PMPM) in hospital bills, according to Buegler. A year after Eckstein began her work, in 2012, those bills fell to $416 PMPM, then they kept falling. By the end of the third year, in 2014, the 28-patient cohort generated $286 PMPM in bills, Buegler says.
That 61% reduction means the hospital billed the payer nearly $150,000 less in 2014—just for those 28 patients—than it had before the social worker was introduced. By the end of the third year, the cohort’s overall ED utilization was cut in half, and its inpatient admissions fell 89%, Buegler says.
That’s only part of the impact Eckstein’s labor has produced, since she doesn’t work exclusively with South Country plan members. Eckstein, who was hired into the position when it was created, says she helps roughly 150–200 patients per year, regardless of who’s paying for their care. Some needs are easier to meet than others, so she’s built a sense of rapport with some returning patients over the years.
“The good thing is they utilize me now instead of the ER, so when they get into a pickle or if they’re having trouble with something, they call me,” she says.
Across all payers, the intervention has likely been saving $500,000 or more, Buegler says.
The intervention is about more than just money, of course. It aims also to improve clinical care and patients’ quality of life.
“I don’t think the driver was necessarily just cost but appropriate care at the right place, at the right time, with the right kind of provider,” says South Country Health Alliance Chief Medical Officer Brad Johnson, MD.
But the financial implications of this intervention are especially interesting considering the fact that New Ulm Medical Center is spending $40,000 per year on a program that delivers cost-savings to payers while reducing the hospital’s revenue. The immediate financial benefit goes to the payer, not the provider.
The hospital has seen a 20% reduction in its overall ED volumes in the past five years, and that’s likely the direction in which most hospitals’ EDs are headed, which is generally good news, Buegler says. The situation presents a challenge, though, since value-based payment arrangements haven’t matured and proliferated to a point where they can compensate adequately for the trend, she says.
Why, then, would the hospital keep investing in this intervention?
“It’s the right thing to do,” Buegler says. “It’s providing the best level of care to our patients who are coming in the emergency department seeking help and then providing another level of service to those individuals to help them improve their social conditions, that will then help them to improve their health. … It’s really looking at the patient as a whole person.”
There’s also a longer-term business case to be made for the hospital’s continued investment, Buegler says.
“From a financial perspective, we’re preparing for more value-based payment contracts,” she says.
Although risk-based contracts have been arriving more slowly than many industry stakeholders had expected, leaders remain confident that more value-based models are on the way, so it makes sense for hospitals like New Ulm Medical Center to invest in the future it anticipates, Buegler says.
Eckstein is the sole social worker stationed in the ED, but she’s not running a one-woman show.
New Ulm Medical Center has a social worker assigned to its clinic, too, and South Country Health Alliance employs a physician as a community care connector in each of the 11 counties it serves—so Eckstein has multiple partners just outside the ED’s walls.
“By having that hospital social worker work in partnership with the community care connector at the county, they’re able to effectively make referrals and access some of those other types of community supports that have also helped address the issues that individuals may be experiencing as barriers to managing their healthcare,” Lind says.
This idea of bridging the gap between traditional medical care and broader social services has been central to South Country Health Alliance’s mission since it was founded, Lind says.
“We recognized way back then that those other aspects, those other social, environmental aspects of an individual’s life, impact their ability to manage and maintain their healthcare,” she adds. “That’s been a part of our program since the beginning.”
Johnson says this care coordination is a vital component of the local safety net.
“In rural Minnesota,” he says, “there’s lots of opportunities for people that are not savvy users of the healthcare system to fall through the cracks.”
UnitedHealth Group projected it will generate $242 billion in revenue in 2019 and expects to report another 7% to 8% increase in top-line growth in 2020.
The insurance group presented updated figures during its investor conference that kicked off Tuesday with officials saying they expect to increase the company’s 2020 revenue to between $260 billion and $262 billion.
They project between $21 billion and $22 billion in operating earnings in 2020.
In comparison, UnitedHealth Group generated $17.3 billion in profits on $226 billion in revenue in 2018. The company is projecting to report $19 billion in profits in 2019.
The biggest driver of growth this year has been UnitedHealth’s Optum, the company’s pharmacy benefit management and care services group. Optum revenue is projected to have increased by 11% from 2018 to 2019, earning UnitedHealth $112 billion in revenue compared to $101 billion in 2018.Optum is expected to continue to be a major growth driver for the company in its 2020 earnings projection, with UnitedHealth pegging growth to increase again between 13% and 14%. UnitedHealth executives said that Optum is expected to make up 50.5% of the company’s total after tax operating earnings this year..
Optum could also be the key for UnitedHealth to improve its Medicare Advantage business.
“We don’t like being third, that’s fundamentally where we landed for the year,” said UnitedHealth Group CEO David Wichmann, “Over time I think we will continue to grow and outpace the market.”
Executives said that the key to growth is to keep its networks consistent as well as pharmacists and pharmacies consistent for seniors.
“We believe we maintain in the Medicare market a strategic cost advantage because of the capacities we have as an organization,” Wichmann said.
UnitedHealth pointed to the success of OptumCare, the company’s primary and specialty care provider. The highest performing Medicare Advantage plans were in markets that had an OptumCare presence. Wichmann said that growing the OptumCare platform is a majority priority for UnitedHealth over the next seven years.
HENRY KOTULA 