Category Archives: Health Policy

Today’s health problems are tomorrow’s health crises

Posted on by • Posted in Centers for Disease Control & Prevention (CDC), Chronic Care Management, Chronic Conditions, Chronic Diseases, Diabetes, Health Policy, Heart Disease, Hepatitis C, Obesity, Opioid Epidemic, Population Health, Preventative Care, Primary Care • Leave a comment

https://www.axios.com/public-health-crisis-trends-future-c24f9720-4657-45f2-ab73-05a8bb9a4d3e.html

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The health troubles we’re seeing now — especially among young people — will continue to strain the system for years and even decades to come.

The big picture: Rising obesity rates now will translate into rising rates of type 2 diabetes and heart disease. The costs of the opioid crisis will continue to mount even after the acute crisis ends. And all of this will strain what’s already the most expensive health care system in the world.

By the numbers: 18% of American kids are now obese, according to new CDC data. So are roughly 40% of adults. And it’s projected to get worse.

  • That helps explain why diabetes rates are also rising, and why roughly 30% of adults have high blood pressure.

Why it matters: More obese children means there will be more adults down the road with chronic conditions like diabetes — which can’t be cured, only managed — and these diseases in turn increase the risk of further complications, such as kidney disease and stroke.

  • Diabetes roughly doubles your lifetime health care bills, according to the CDC, and costs the U.S. a total of $245 billion per year.
  • As the price of insulin continues to skyrocket, the disease only gets harder for patients to manage, if they can afford treatment at all.

We’re only beginning to see the full costs of the opioid crisis, even though it has raged for years.

  • A White House report earlier this week pegged the cost of the epidemic at a staggering $696 billion last year alone, including the cost of productivity lost to addiction.
  • The tide has only barely begun to turn on overall overdose deaths — they still numbered around 68,000 last year.
  • And many survivors of the epidemic will face long-term health costs. Addiction recovery can be a lifelong process requiring sustained investments. It has also led to skyrocketing rates of Hepatitis C — some states have seen their infection rates rise by more than 200% over the past decade.

Groundbreaking new treatments offer the first-ever cure for Hepatitis C, but at price tags so high that states are experimenting with entirely new ways of paying for the drugs, fearing the status quo simply can’t bear these costs all at once.

The bottom line: The flaws in the U.S. health care system compound one another.

  • They reward doctors and hospitals for performing more treatment on sick people, and those treatments are expensive. That leaves big gaps in prevention, which drives the need for more expensive treatment.
  • That’s how we ended up with the world’s most expensive health care system, but without a particularly healthy population to show for it. And that trajectory isn’t changing.

 

 

 

 

Health insurers eat higher medical costs

Posted on by • Posted in ACA, Essential Health Benefits, Health Insurance Coverage Adequacy, Health Insurance Industry, Health Policy, High Deductible Health Plans, High Premiums, Medical Loss Ratio (MLR), Operating Performance, Out of Network, Out of Pocket Expenses, Preexisting Conditions, Underinsured • Leave a comment

https://www.axios.com/newsletters/axios-vitals-b6a8b813-d93a-43d6-9080-bc9ee9606440.html?utm_source=newsletter&utm_medium=email&utm_campaign=newsletter_axiosvitals&stream=top

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Almost all of the major health insurance companies are spending more on medical care this year than they have in the past, Axios’ Bob Herman reports.

The big picture: Rising prices and more services for some sicker patients are among the many reasons why this is happening. That uptick in spending has freaked out Wall Street, even though insurers are still quite profitable.

Driving the news: Almost all of the eight major publicly traded insurers have shown their medical loss ratio — the percentage of premium revenues they’re spending on medical claims — is rising this year.

  • UnitedHealth Group, the largest insurer in the country, said its loss ratio was 82.4% in the third quarter this year compared with 81% in the same period a year ago.
  • But these companies are handling billions of premium dollars, so any increase in medical claims equates to hundreds of millions of dollars in additional spending, which they don’t want.

Between the lines: Medical loss ratios are often higher for health plans that cover more older adults, the disabled and the poor, because those groups typically need more care or are in the hospital more frequently.

But costs have been climbing in some commercial markets, too.

  • Anthem executives admitted on their earnings call that the company is dumping some employers with workers who had medical needs and costs that were too high.
  • CVS Health, which now owns Aetna, previously said some middle-market clients had employees that it thought were getting too many services and drugs.
  • CVS “intensified our medical management in those geographies,” an executive said on the earnings call.

The bottom line: Health insurance companies closely track their medical loss ratios and aim to hit those targets most often by charging higher premiums, denying care, forcing people to use lower-priced providers or declining to cover people they deem to be too expensive.

 

 

 

 

 

 

Execs flirt with ‘Medicare for All’ at HLTH19

Posted on by • Posted in 2020 Election Issues, ACA, Health Insurance Industry, Health Policy, Health System, Hospital, Hospital Industry, Medicare for All, Single Payer Healthcare System • Leave a comment

https://www.healthcaredive.com/news/execs-flirt-with-medicare-for-all-at-hlth19-despite-trump-admin-warnings/566373/

Despite Trump administration warnings about “Medicare for All” and other expansions of public coverage upending the private market, some executives at HLTH last week seemed more agnostic about the Democrat-backed plans, some of which would eliminate private insurance altogether.

​”It’s a symptom of a pricing issue, and a rate issue,” Vivek Garpialli, CEO of Medicare Advantage plan provider Clover Health, said. “Until we see a better idea, it’s actually not a bad framework to have a debate around and, unless a better one comes along in the next three, five, 10 years, it probably is inevitable.”

Democratic candidates hoping to take on incumbent President Donald Trump in 2020 are pitching a slate of proposals to give the current healthcare system a major facelift. Former Vice President Joe Biden endorses a public option and bolstering the Affordable Care Act, while Sens. Elizabeth Warren, D-Mass., and Bernie Sanders, I-Vt., are stumping for a Medicare for All-type system that would terminate private insurance.

The debate itself is a “good example of the fact that the status quo needs to change,” Tom Richards, global strategy and business development leader at Cigna, told Healthcare Dive.

Many healthcare tech startups have configured their products to be compatible within multiple platforms or companies, including myriad providers, Medicare, insurance on the ACA exchanges or employer-based coverage, so the payer platform doesn’t matter as much to them — or their margins.

“So long as innovation is maintained, I think it could go either way,” Pranay Kapadia, CEO of voice-enabled digital assistant startup Notable, said.

But executives, even on the startup side, seemed leery about the uncertainty Medicare for All would inject into the system.

“At the end of the day, the government is already unable to fully fund its obligations, from Social Security, to Medicare, to Medicaid,” Ali Diab, CEO of employer-sponsored insurance startup Collective Health, said.

“Unless someone proposes a means to actually fund it that’s credible, I just don’t see a way for the government to take on more of the financial burden,” he said, though he clarified he didn’t have an opinion on the politics either way.

Moving to some form of a nationalized healthcare system could drag down profit margins across the industry (especially for payers). Cost estimates for the plans vary in the tens of trillions, from Sanders’ $33 trillion to Warren’s $52 trillion, both spread out over a decade.

Democratic backers say Medicare for All will drive down overall costs in the long run, despite hiking federal spending. Warren, who released her plan Friday, pledged there would be no middle-class tax increases and that Americans’ pocketbooks would be helped overall due to the elimination of premiums and other out-of-pocket costs.

But industry isn’t so sure the government could implement such a sweeping plan, even if it wanted to.

“I just don’t see the legislators getting their act together to make this happen and, frankly, I don’t want to wait for them,” Marijka Grey, executive leader for transformation implementation at 150-hospital CommonSpirit Health, said.

At HLTH, Trump administration officials kept up their drumbeat of criticism of the idea.

It would “hand the reins to government bureaucrats to fix all our problems” and is marked by an “unwarranted confidence in government central planners,” CMS Administrator Seema Verma said, while White House policy official and ex-pharma lobbyist Joe Grogan said Democrats “cannot accept no one is smart enough to design a healthcare system for all Americans.”

Few Democrats have released comprehensive healthcare proposals, though 11 of the remaining 16 candidates support some version of single-payer healthcare.

“Quite frankly, branding-wise it’s not horrible,” Adam Boehler, the former head of CMS’ innovation center, said. “In my opinion, it’s the content versus the brand in terms of whether something will work or not.”​

 

 

 

 

Number of Uninsured Children Increases by 400,000

Posted on by • Posted in 2020 Election Issues, ACA, Children's Health, Children's Health Insurance Coverage, Health Policy, Medicaid, Medicaid Childrens Health Insurance Program (CHIP), Underinsured, Uninsured • Leave a comment

https://www.thefiscaltimes.com/2019/10/30/Number-Uninsured-Children-Increases-400000

A new report from the Georgetown University Health Policy Institute says the number of uninsured children in the U.S. increased by more than 400,000 between 2016 and 2018.

Some key findings from the report:

  • The number of uninsured children rose above 4 million by the end of 2018.
  • Insurance coverage losses are concentrated in 15 states — Alabama, Arizona, Florida, Georgia,
  • Idaho, Illinois, Indiana, Missouri, Montana, North Carolina, Ohio, Tennessee, Texas, Utah, West Virginia.
  • States that have not expanded Medicaid, as allowed by the Affordable Care Act, have seen much larger increases in uninsured rates.
  • Children in non-expansion states are nearly twice as likely to be uninsured compared to states that have expanded Medicaid.
  • White and Latino children saw the largest increases in the uninsured rate.
  • Households with low to moderate income – $29,000 to $53,000 per year for a family of three – were the hardest hit.

The report’s authors said it’s no coincidence that the increases in the number of uninsured children have occurred since President Trump took office in 2017.

“This serious erosion of child health coverage is likely due in large part to the Trump Administration’s actions that have made health coverage harder to access and have deterred families from enrolling their eligible children in Medicaid and CHIP,” they wrote in their conclusion. “These actions include attempting to repeal the ACA and deeply cut Medicaid, cutting outreach and advertising funds, encouraging states to put up more red tape barriers that make it harder for families to enroll or renew their eligible children in Medicaid or CHIP (or ignoring it when they do), eliminating the ACA’s individual mandate penalty, and creating a pervasive climate of fear and confusion for immigrant families.”

 

 

 

 

Elizabeth Warren’s $20.5 Trillion Plan to Fund Medicare for All

Posted on by • Posted in 2020 Election Issues, Essential Health Benefits, Health Insurance Coverage Adequacy, Health Insurance Industry, Health Policy, Health System, Hospital, Hospital Industry, Medicare, Medicare for All, Out of Pocket Expenses, Pharmaceutical Industry, Preexisting Conditions, Underinsured, Uninsured • Leave a comment

https://www.thefiscaltimes.com/2019/11/01/Elizabeth-Warren-s-205-Trillion-Plan-Fund-Medicare-All

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Elizabeth Warren on Friday detailed how she intends to pay for Medicare for All without raising costs for middle-class households. The senator from Massachusetts said her plan will cover everyone in the country without raising overall spending, “while putting $11 trillion back in the pockets of the American people by eliminating premiums and virtually eliminating out-of-pocket costs.”

Warren’s plan relies in large part on redirecting existing spending toward a universal, federal health care system, while adding new revenues from taxes on the wealthy, the financial sector and large corporations. “We can generate almost half of what we need to cover Medicare for All just by asking employers to pay slightly less than what they are projected to pay today, and through existing taxes,” Warren said.

Some key details from the Warren plan:

Much lower cost estimate: Warren starts with the Urban Institute’s estimate that the federal government would need $34 trillion more over 10 years to pay for Medicare for All, but she slices that number dramatically — down to $20.5 trillion — by using existing federal and state spending on programs including Medicaid to fund a portion of her proposal, along with larger assumed savings produced by a streamlined system paying lower rates to hospitals, doctors and other health care providers.

Total health care spending stays about the same: Warren projects about $52 trillion in national health care spending over 10 years, close to estimates for the existing system, despite covering more people and offering more generous benefits, including long-term care, audio, vision and dental benefits. Applying Medicare payment levels across the health care system is projected to produce substantial savings that would be used to finance the expanded size and scope of the plan.

Heavy reliance on employer funding: The employer contribution to Medicare for All is pegged at $8.8 trillion, with employers required to contribute to the federal government 98% of what they would pay in employee premiums. Businesses with fewer than 50 employees would be exempt.

Public spending continues: State and local governments would be still on the hook for the $6 trillion they currently spend on Medicaid, the Children’s Health Insurance Program and public employee premiums.

New taxes on the wealthy: Warren proposes a new 3% tax on household wealth over $1 billion — and that’s on top of her proposed wealth tax, which calls for a separate 3% tax on wealth over $1 billion (and a 2% tax on wealth between $50 million and $1 billion). Combined with an annual capital gains tax on the top 1% of households, her proposal projects that the new health-care-focused wealth taxes would produce $3 trillion.

Taxes on business and finance: Warren says she can raise $3.8 trillion through “targeted” taxes on big business and financial transactions, including a financial transaction tax of .01% on the sale of stocks, bonds and derivatives.

Reduced tax evasion: Cracking down on tax evasion is projected to bring in $2.3 trillion. “The federal government has a nearly 15% ‘tax gap’ between what it collects in taxes what is actually owed because of systematic under-enforcement of our tax laws, tax evasion, and fraud,” Warren said. “By investing in stronger enforcement and adopting best practices on tax reporting, withholding, and filing, experts predict that we can close the tax gap by a third.”

Revenue increase from higher take-home pay: Employees would no longer pay premiums for health insurance, providing a pay hike and higher tax revenues, estimated to total $1.4 trillion.

Abolishing the Overseas Contingency Operations fund: Warren is calling for reduced military spending, with a focus on what some call the “slush fund” that covers the cost of overseas military operations. Eliminating this off-budget spending is projected to save $800 billion.

Immigration reform: Expanded legal immigration would bring in $400 billion in revenue as more incomes are subject to taxes, Warren says.

A record tax cut? Once the new revenues and cost savings are added up, Warren says her plan will deliver what amounts to an historic tax cut. “No middle class tax increases. $11 trillion in household expenses back in the pockets of American families. That’s substantially larger than the largest tax cut in American history.”

Warren won plaudits from some analysts and policy wonks for releasing a plan, but the details she laid out are also being picked apart by critics and rivals, with some experts already expressing doubts about her assumptions and numbers. Here’s some of the reaction:

Congratulations from a conservative: “Kudos to Senator Warren for actually releasing a plan,” said Scott Greenberg, formerly an analyst with the right-leaning Tax Foundation. “There are a lot of things in here that will draw attacks from the left and from the right, and it might have been politically easier not to release it at all. But Warren has stuck by her commitment to explain her proposals.”

Criticism from a key rival: “The mathematical gymnastics in this plan are all geared towards hiding a simple truth from voters: it’s impossible to pay for Medicare for All without middle class tax increases,”  said Kate Bedingfield, deputy campaign manager for Joe Biden. Bedingfield argued that employees would end up paying the tax on employers.

Dire warnings from the White House: “It is the middle class who would have to pay the extra $100 billion or more to finance this kind of socialist government takeover of health care,” said Larry Kudlow, President Trump’s top economic adviser. “It would have a catastrophic effect on the economy and all these numbers that we’re seeing, all these numbers, on incomes per household, on wage increases, on jobs, all these numbers would literally evaporate and by the by, so would the stock market.”

Tax vs. premium: Warren’s plan will likely kick off a debate about the difference between taxes and health care premiums, and whether that difference matters, says William Gale of the Brookings Institution. “Does [the Warren plan] raise ‘taxes’ on the middle class?,” Gale asked Friday. “Short answer — it does not raise ‘burdens’ on the middle class.”

Cost reduction is crucial: “The key to Warren’s plan for financing Medicare for all is aggressively constraining prices paid to hospitals, physicians, and drug companies. We’d still have the most expensive health system in the world, but it would be less expensive than it is now,” said Larry Levitt of the Kaiser Family Foundation. “Warren’s plan to aggressively constrain health care prices under Medicare for all would be quite disruptive. On the other hand, every other developed country has managed to figure it out, so we know it’s possible.”

And the battle is ultimately political: “In laying out the specifics of her Medicare for all plan, Warren’s challenge is more about politics than arithmetic,” Levitt continued. “She is taking on the wealthy, corporations, and pretty much every part of the health care and insurance industries. Those are some powerful enemies.”

So don’t expect major legislation soon: “Experts will argue for months whether [Warren is] being too optimistic — whether her cost estimates are too low and her revenue estimates too high, whether we can really do this without middle-class tax hikes,” said economist Paul Krugman. “You might say that time will tell, but it probably won’t: Even if Warren becomes president, and Dems take the Senate too, it’s very unlikely that Medicare for all will happen any time soon.”

 

 

The Huge Waste in the U.S. Health System

Posted on by • Posted in 2020 Election Issues, Cost Management, Health Policy, Health System, High Drug Prices, High Premiums, High Prices, Patient Outcomes, Patient Satisfaction, Single Payer Healthcare System • Leave a comment

A study finds evidence for how to reduce some of it, but also a large blind spot on how to remove the rest.

Even a divided America can agree on this goal: a health system that is cheaper but doesn’t sacrifice quality. In other words, just get rid of the waste.

A new study, published Monday in JAMA, finds that roughly 20 percent to 25 percent of American health care spending is wasteful. It’s a startling number but not a new finding. What is surprising is how little we know about how to prevent it.

William Shrank, a physician who is chief medical officer of the health insurer Humana and the lead author of the study, said, “One contribution of our study is that we show that we have good evidence on how to eliminate some kinds of waste, but not all of it.”

Following the best available evidence, as reviewed in the study, would eliminate only one-quarter of the waste — reducing health spending by about 5 percent.

Teresa Rogstad of Humana and Natasha Parekh, a physician with the University of Pittsburgh, were co-authors of the study, which combed through 54 studies and reports published since 2012 that estimated the waste or savings from changes in practice and policy.

Because American health spending is so high — almost 18 percent of the economy and over $10,000 per person per year — even small percentages in savings translate into huge dollars.

The estimated waste is at least $760 billion per year. That’s comparable to government spending on Medicare and exceeds national military spending, as well as total primary and secondary education spending.

If we followed the evidence available, we would save about $200 billion per year, about what is spent on the medical care for veterans, the Department of Education and the Department of Energy, combined. That amount could provide health insurance for at least 20 million Americans, or three-quarters of the currently uninsured population.

The largest source of waste, according to the study, is administrative costs, totaling $266 billion a year. This includes time and resources devoted to billing and reporting to insurers and public programs. Despite this high cost, the authors found no studies that evaluate approaches to reducing it.

“That doesn’t mean we have no ideas about how to reduce administrative costs,” said Don Berwick, a physician and senior fellow at the Institute for Healthcare Improvement and author of an editorial on the JAMA study.

Moving to a single-payer system, he suggested, would largely eliminate the vast administrative complexity required by attending to the payment and reporting requirements of various private payers and public programs. But doing so would run up against powerful stakeholders whose incomes derive from the status quo. “What stands in the way of reducing waste — especially administrative waste and out-of-control prices — is much more a lack of political will than a lack of ideas about how to do it.”

While the lead author works for Humana, he also has experience in government and academia, and this is being seen as a major attempt to refine previous studies of health care waste. Reflecting the study’s importance, JAMA published several accompanying editorials. A co-author of one editorial, Ashish Jha of the Harvard Global Health Institute and the Harvard T.H. Chan School of Public Health, said: “It’s perfectly possible to reduce administrative waste in a system with private insurance. In fact, Switzerland, the Netherlands and other countries with private payers have much lower administrative costs than we do. We should focus our energies on administrative simplification, not whether it’s in a single-payer system or not.”

After administrative costs, prices are the next largest area that the JAMA study identified as waste. The authors’ estimate for this is $231 billion to $241 billion per year, on prices that are higher than what would be expected in more competitive health care markets or if we imposed price controls common in many other countries. The study points to high brand drug prices as the major contributor. Although not explicitly raised in the study, consolidated hospital markets also contribute to higher prices.

A variety of approaches could push prices downward, but something might be lost in doing so. “High drug prices do motivate investment and innovation,” said Rachel Sachs, an associate professor of law at Washington University in St. Louis.

That doesn’t mean all innovation is good or worth the price. “It means we should be aware of how we reduce prices, taking into consideration which kinds of products and which populations it might affect,” she said.

Likewise, studies show that when hospitals are paid less, quality can degrade, even leading to higher mortality rates.

Other categories of waste examined by the JAMA study encompass inefficient, low-value and uncoordinated care. Together, these total at least $205 billion.

With more than half of medical treatments lacking solid evidence of effectiveness, it’s not surprising that these areas add up to a large total. They include things like hospital-acquired infections; use of high-cost services when lower-cost ones would suffice; low rates of preventive care; avoidable complications and avoidable hospital admissions and readmissions; and services that provide little to no benefit.

In addition to wasting money, these problems can have direct adverse health effects; lead to unwarranted patient anxiety and stress; and lower patient satisfaction and trust in the health system.

Here the study’s findings are relatively more optimistic. It found evidence on approaches that could eliminate up to half of waste in these categories. The current movement toward value-based payment, promoted by the Affordable Care Act, is intended to address these issues while removing their associated waste. The idea is to pay hospitals and doctors in ways that incentivize efficiency and good outcomes, rather than paying for every service regardless of need or results.

Putting this theory into practice has proved difficult. “Value-based payment hasn’t been as effective as people had hoped,” said Karen Joynt Maddox, a physician and co-director of the Center for Health Economics and Policy at Washington University in St. Louis and a co-author of another editorial of the JAMA study.

So far, only a few value-based payment approaches seem to produce savings, and not a lot. Some of the more promising approaches are those that give hospitals and doctors a single payment “as opposed to paying for individual services,” said Zirui Song, a physician and a health economist with Harvard Medical School.

“Savings tend to come from physicians referring patients to lower-priced facilities or cutting back on potentially lower-value care in areas such as procedures, tests or post-acute service,” he said.

There is evidence of savings from some bundled payment programs. These provide a fixed overall budget for care related to a procedure over a specific period, like 90 days of hip replacement care. Accountable care organizations also seem to drive out a little waste. These give health groups the chance to earn bonuses for accepting financial risk and if they reach some targets on quality of care.

The final area of waste illuminated by the JAMA study is fraud and abuse, accounting for $59 billion to $84 billion a year. As much as politicians love to say they’ll tackle this, it’s a relatively small fraction of overall health care waste, around 10 percent. More could be spent on reducing it, but there’s an obvious drawback if it costs more than a dollar to save a dollar in fraud.

Because health care waste comes from many sources, no single policy will address it. Most important, we have evidence on how to reduce only a small fraction of the waste — we need to do a better job of amassing evidence about what works.

 

 

 

Oregon insurer sues, says 3 health systems have locked it out of Portland market

Posted on by • Posted in Antitrust, Collusion, Health Insurance Industry, Health Policy, Health System, Lawsuit, Market Consolidation, Market Exclusivity, Market Power, Monopoly, Monopoly Behavior • Leave a comment

https://www.beckershospitalreview.com/legal-regulatory-issues/oregon-insurer-sues-says-3-health-systems-have-locked-it-out-of-portland-market.html?oly_enc_id=2893H2397267F7G

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Trillium Community Health Plan has filed a federal antitrust suit against three of the largest hospital systems in Portland, Ore., claiming they colluded to block the insurer from operating in the area, according to The Oreonian. 

The Eugene, Ore.-based health plan filed the suit against Legacy Health, Providence Health and Services and OHSU Health System, all based in Portland. 

Trillium alleges that the Portland health systems have engaged in a “group boycott” that if left unchecked, “would have a significant negative impact on Oregon Health Plan members, limiting the healthcare choices of some of the most vulnerable members of Oregon’s community,” according to The Portland Business Journal. 

In July, the Oregon Health Authority named Trillium a “next generation” coordinated care organization and awarded it the contract to serve Medicaid patients in the Portland area. CCOs, as they are known as, work together to provide healthcare services and benefits to patients enrolled in the state’s Medicaid program.

Since then, Trillium claims that it “pursued every avenue” to work with the three health systems without success, and without them, it is unable to break into the metro area Medicaid market.

Legacy, Providence and OHSU are all founding members of Health Share, the existing CCO in the area that will compete against Trillium.

“The hospitals’ anticompetitive behavior leaves Trillium no choice but to file an antitrust action in the hopes that the collusion will stop and that Trillium will be granted the ability to work with the Portland area hospitals,” the suit reads, according to the Business Journal. 

 

Assessing Responses to Increased Provider Consolidation in Six Markets: Final Report

Posted on by • Posted in 2020 Election Issues, Antitrust, Centers of Excellence, Certificate of Need, Certificates of Public Advantage (COPAs), Federal Trade Commission (FTC), Health Insurance Industry, Health Policy, Health System, Hospital, Hospital Industry, Market Consolidation, Market Exclusivity, Mergers & Acquisitions, Monopoly, Monopoly Behavior, Narrow Network, Network Design, Noncompete, Out of Pocket Expenses, State Attorney Generals (AG), Third Party Administrators • Leave a comment

https://georgetown.app.box.com/s/65qfhbzz7fabx9oypsteg6d1aghz4fsj

INTRODUCTION

Few communities in the United States have been exempt from the recent wave of consolidation among health care providers, whether it is hospital-to-hospital mergers and acquisitions (horizontal consolidation) or hospital acquisitions of physician groups and other ambulatory service providers (vertical consolidation). Increased provider concentration has been demonstrated to lead to higher provider reimbursement rates and thus higher premiums for people with private insurance, although outcomes vary, market to market.

To examine the strategies that private insurance companies and employer-purchasers use to constrain health care cost growth and how they are affected by increased provider consolidation, we conducted six market level, qualitative case studies, focusing on mid-sized health care markets in which there had been recent consolidation activity

These are: Detroit, Michigan; Syracuse, New York; Northern Virginia; Indianapolis, Indiana; Asheville, North Carolina; and Colorado Springs, Colorado.

BACKGROUND

Hospital and hospital-physician consolidation has accelerated in recent years, creating dominant local and regional health care systems. In nine out of ten metropolitan areas, the provider market is considered highly concentrated. Although merging hospitals and health systems claim they can achieve greater efficiencies and better care coordination through their consolidation, the economic literature almost universally finds that hospitals that merge charge prices above those of surrounding hospitals. Indeed, hospital mergers have been found to increase the average price of hospital services by 6 to 40 percent.  Another study found that hospital acquisition of physician practices increased outpatient prices by 14 percent. At the same time, increased market concentration is strongly associated with lower quality care. There is also evidence that the prices of independent, non-acquired hospitals also increase in the wake of a rival’s acquisition.

Increases in provider prices have been a key factor driving the growth of commercial health insurance costs over the past decade. Annual family premiums have now surpassed $20,000, and the average annual deductible has increased 100 percent over the last 10 years. While policymakers have focused attention on rising health insurance premiums and out-of-pocket costs (for employers and employees alike), provider consolidation—and its role as a major health care cost driver—has received less attention in the media and among policymakers.

APPROACH

In a series of six market-level, qualitative case studies, we assessed the impact of recent provider consolidations, the resulting provider concentration, the ability of market participants (and, where relevant, regulators) to respond to those consolidations, and strategies for constraining cost growth while maintaining high-quality care. Our case studies focus on the employer-sponsored group insurance market, though we recognize that providers and insurers are often operating across multiple sources of insurance, including Medicare Advantage, Medicaid managed care, and the Affordable Care Act (ACA) marketplaces.  We do not attempt to quantify the effect of provider consolidation in these markets, such as through provider rate or premium changes.

For each case study, we conducted an environmental scan of local media and published literature about market conditions and structured interviews with insurer, provider, and employer representatives, as well as other experts on the health care market. We also interviewed 10 national experts on provider consolidation and payer-provider network negotiations. Over the six case studies, we conducted 77 interviews with local respondents. Each case study, as well as an interim cross-cutting report, can be found at https://chir georgetown edu/provider-consolidation-case-studies/ .

We focused on mid-sized markets that had experienced recent horizontal or vertical consolidation. We identified these through an environmental scan of local media and research literature and a review of trends in market concentration indices, primarily via the Herfindahl-Hirschman Index (HHI). The six study markets were chosen to reflect geographic diversity as well as a range of market dynamics (see Table).

In markets such as Asheville, for instance, hospital mergers and acquisitions over the last decade have left the Mission Health System virtually without competition.

Observers describe other markets, such as Colorado Springs and Detroit, as relatively competitive even with recent provider consolidation. Across all six markets, hospitals purchased or entered into clinical affiliations with physician group practices. In some markets, such as Northern Virginia and Colorado Springs, hospital systems faced competition for physician practices from outside private equity firms and practice management companies.

In four out of our six markets, the Blue Cross Blue Shield affiliate was the dominant insurer in the commercial group market, with well over half the market share. Their dominance extended to all types of employers, including for third-party administrator contracts with self-funded employer plans. In two of our markets, the local health care system or systems were the largest private employers. In the other four, the health systems were among the top three or four employers. The states in our case studies were evenly split in having Certificate of Need laws, the lack of which some stakeholders suggested contributed to significant health system construction and concomitant increases in utilization and, less intuitively, prices (explained further, below).

FINDINGS

1. Hospitals are in various phases of empire-building

Across the six markets, the hospitals’ motivations for consolidation are similar, with stakeholders reporting a pursuit of greater market share and a desire to increase their negotiating leverage with payers to demand higher reimbursement. These observations run counter to the justifications often cited by hospital systems that consolidation is needed to create efficiencies and improve care coordination. Following consolidation, the hospitals and hospital systems in our studied markets have engaged in various phases of empire building.

While approaches varied, providers had similar goals in expanding their empire: to increase their geographic footprint, acquire points of referral (such as free-standing emergency departments and physician practices), or build new facilities in areas with a higher proportion of commercially insured residents. In all study markets except Indianapolis, a larger multi-state health system acquired or merged with a local independent provider to gain new entry or additional market share in a particular region Hospital system expansion was also not limited only to study markets: many hospital systems were expanding their footprint across the state.

In addition to consolidation, hospitals have pursued other strategies to gain greater leverage in negotiations with payers. For example, the Syracuse hospital systems have developed clinical niches, so that they are perceived by local residents as the best facility for certain services, such as orthopedics or cancer care In Indianapolis, each of the four health systems carved out “mini-monopolies” within geographic boundaries that have historically been respected by the other systems. For many years, systems largely did not compete directly, although this de facto arrangement has broken down recently.

2. Providers are exercising their increased market clout

Consolidation appears to be having the providers’ desired effect in our study markets: hospital systems reportedly use their market clout to seek higher reimbursement from payers. For example, a payer representative in Colorado noted that when an independent hospital is acquired by one of the major health systems: “the next thing I know, I see a 100 percent increase [in prices] ”. Similarly, payers in Detroit noted a “toughened stance” from a local hospital system following a recent consolidation.  They, along with payers in other markets, also noted that when independent local hospitals are acquired by large national systems, negotiations shift from the local provider to the central corporate office, where there are fewer long-standing relationships, less understanding of local needs, and often a demand to take all or none of the hospitals in the system.

Even non-dominant hospitals appear to benefit from the consolidation of their rivals. For example, a small hospital in Northern Virginia was able leverage its position as an alternative to the dominant Inova Health System, effectively telling insurers: “If you think it’s healthy to have independent health systems in this market, then give us [higher prices] ”. In other cases, hospitals appear to use their market power to build more market power. For example, Asheville’s Mission hospital reportedly used its dominance to pressure physician groups to join their accountable care organization (ACO).

At the same time, our case studies provide examples of constraints on market power. The local nature of health care delivery sometimes demands that providers “play nice” in the sandbox. In Syracuse, executives of the providers and payers have longstanding personal and professional relationships. “Everyone knows each other and we all go to the same meetings,” said one observer, who believed the tight-knit nature of the community contributed to less-than-hardball tactics in the negotiating room. In Northern Virginia, some thought Inova, based just outside of D C , had been relatively restrained in its demands for increased reimbursement in part to avoid raising red flags with federal regulators.

3. Payers have tools to constrain cost growth, but lack the incentive and ability to deploy them effectively

As third-party administrators for self-insured employer-sponsored group health plans, insurers are typically paid a percentage of the overall cost of the plan. As a result, these insurers have a perverse incentive to keep costs high and growing, limiting their motivation to pursue aggressive strategies to reduce provider prices, a phenomenon one respondent called “middleman economics.” This incentive for payers is compounded by the fact that some of the more obvious strategies to contain costs (cutting or threatening to cut a high-cost hospital from their plan networks, for example) are likely to result in negative publicity and resistance from employers and their employees. The result is a strong incentive for commercial insurers to agree to providers’ demands for price increases each year, which employers and their employees will feel more gradually over time than a provider termination. The result is that employers and employees become the proverbial “frogs in the pot of water.”

Payers identify several cost containment strategies, but all come with downsides. Payers in our study markets do negotiate to limit price increases and are pursuing some cost containment strategies, but none identified a “magic bullet” approach that would moderate price growth while minimizing negative feedback from employers and employees.

Network design

One obvious strategy for insurers in response to a provider’s demand for a price increase would be to decline to contract with that provider and terminate them from their network. However, most payers and purchasers described this as a non-viable “nuclear option.” In addition to concerns about bad publicity, unhappy employer customers, and lost competitive advantage over other payers, quite often the provider at issue is essential to an adequate network, either because it is the sole provider within a reasonable geographic distance or because of its dominance in a particular clinical specialty.

Payers in several markets also noted that, more often than not, employers “don’t have their back” during provider negotiations, taking away their ability to credibly threaten to drop the provider from the network. Many large employers were loath to limit their employees’ choice of providers. Without the ability to credibly cite demand for lower prices from employers, insurers have less leverage in their negotiations with providers.

There are exceptions to this rule, but they were quite rare in the study markets. The only exception we observed was when Blue Cross Blue Shield of North Carolina (BCBSNC) terminated Mission Health System, Asheville’s only hospital system, from its network for two months in 2018. When BCBSNC, the dominant insurer in North Carolina, did so, it reportedly faced little public backlash. Rather, the public largely took BCBSNC’s side in the dispute Mission was forced to rejoin the network without the hoped-for price increases.

Designing “narrow” network product is another option for payers. By offering to drive more patient volume to a limited set of providers, payers can, in theory, extract greater price concessions. But payers across our study markets have found little interest among employer customers in narrow network products. As with the “nuclear option,” employers were typically not willing to restrict their employees’ choice, with several noting that the savings rarely outweigh the perceived limits on employees’ choices.  At the same time, several payers are successfully marketing narrow network products in the individual market, where consumers may be more price sensitive and appear more willing to accept a constraint on their choice of providers in exchange for a lower premium.

Provider tiering and centers of excellence

A few payers in our markets offer plans that tier providers based on cost and quality, so that enrollees who choose lower cost providers will pay lower cost-sharing. However, the strategy is limited to markets in which there is sufficient competition so that lower-cost options are available. Payers and purchasers also noted that they often lacked the necessary data to effectively tier providers, and that patients lacked access to real-time pricing tools to enable them to make cost-effective choices.

In Asheville, a tiering strategy is difficult because the Mission Health System is so dominant. However, at least one large, self-funded employer in Asheville has designated out-of-state “centers of excellence” hospital systems that can offer lower prices and high quality for certain elective procedures. Even after reimbursing enrollees’ travel costs, this employer said, it is still more cost effective than receiving the care at Mission. However, there is a small set of elective procedures that can be performed at these facilities, and the bulk of enrollees’ care must be delivered locally.

Risk-sharing arrangements

Payers in Detroit and Northern Virginia suggested they were pinning at least some cost-containment hopes on risk-sharing arrangements with providers. In this they are following the Medicare program, and several hospital systems in our study markets participate in Medicare risk-sharing programs. However, most payers acknowledged that risk-sharing arrangements they have implemented to date have had only a limited impact. Current arrangements have largely involved only upside risk for providers, with the aim of having the provider take on more downside financial risk at a future date. Payers reported deploying risk-sharing arrangements with physician group practices more than hospitals, likely because they have greater leverage with physicians in most of the studied markets. For example, while hospital executives in Northern Virginia told us they had been presented with possible risk-sharing payment models, they declined to participate due to their lack of “economic incentive.”

Provider-payer partnerships

In some cases, payers have taken a “if you can’t beat ‘em, join ‘em” tactic, by entering into partnerships or joint ventures with health systems. For example, in 2012 Aetna entered into a joint venture with Inova in Northern Virginia to create Innovation Health. More recently, the self-insured General Motors plan entered into an exclusive partnership with the Henry Ford Health System in Detroit. While it is too early to say what the impact of the GM-Henry Ford partnership will have, observers in Northern Virginia largely dismissed Innovation Health’s impact on the market, noting that Aetna had obtained no discernible competitive advantage from the venture.

4. Employers’ tools to help control costs are limited

Unable (or unwilling) to push back on high and rising provider prices, employers have historically looked elsewhere to contain costs. Across our six markets, the most widespread strategy among employers to constrain their health plan costs has been to shift them to employees, largely through higher deductibles Increasing deductibles and other enrollee cost-sharing has been an attractive strategy because it can be ratcheted up slowly over time, limiting employee pushback. At the same time, several employer respondents in our study markets observed that this cost-shifting strategy may have been tapped out, noting that many of their employees can no longer afford the deductibles. One also observed that, because of high provider prices, employees often exceed their deductible after just one imaging service or ER visit, limiting its utility as a cost-containment tactic.

Employers reported investing in employee wellness programs. However, they were unable to document whether these programs generated savings. This is not surprising given that the weight of the evidence to date suggests minimal, if any, return on investment. Employers also touted on-site primary care as a promising strategy in Indianapolis, in part because they offer a subscription-based (capitated) model for the delivery of primary care services. However, not all employers have the requisite size or centralized location to offer this service.

Another strategy, direct contracting, is similarly limited to employers with sufficient size and human resources capacity to bypass payers and negotiate with providers. But this trend may be catching on among some Large employers in both Detroit and Indianapolis are actively considering direct contracting, and as noted above, General Motors directly contracted with the Henry Ford system in 2018. In 2019, the Peak Health Alliance, a coalition of employers and citizens of Summit County, Colorado, successfully negotiated price discounts from local providers, lowering 2020 premiums an estimated 11 percent. It remains to be seen whether such efforts are replicable outside of Summit County and if employers will, over the long term, be able to strike better bargains than private payers.

Employers also differ dramatically in their level of engagement and willingness to push insurers to deliver lower prices. One significant impediment is the lack of access to claims data, which would enable them to identify and address cost drivers.  Indeed, in Indiana, a coalition of large, self-funded employers was forced to take Anthem to court in order to obtain access to their claims data, even though they bear the financial risk of their plans. For many other employers, the expertise and knowledge needed to negotiate effectively with sophisticated provider systems are well outside their core competency; they have delegated that responsibility to their third-party administrators and will continue to do so.

5. Public policy strategies have had limited effectiveness

Across our six markets, anti-trust and other public policy strategies have been deployed to constrain the ill-effects of market concentration, but they have had limited effectiveness.

Anti-trust enforcement

Stakeholders in Northern Virginia suggested that the Federal Trade Commission’s (FTC’s) intervention in Inova’s attempted acquisition of a smaller independent hospital in Prince William County has had a dampening effect on what had been a region-wide buying spree. However, respondents suggested perhaps the FTC intervention was too little, too late, noting that it would be hard for the “super concentrated” region to become any more concentrated. Nationwide, a lack of resources, a narrow focus on horizontal consolidation within local markets, and some negative court decisions have limited the FTC’s ability to be more than a speed bump to the consolidation boom of the past 10 years.

State attorneys general (AGs) have also played a role in our markets. When the for-profit hospital chain HCA acquired Mission Health System in Asheville, the state AG demanded a 10-year commitment that HCA will not close rural hospitals or require major cuts to services. Similarly, in the wake of Optum’s acquisition of the DaVita Medical Group, which owned many of the largest primary care practices in Colorado Springs, that state’s AG imposed time-limited restrictions on Optum and its owner UnitedHealthCare to mitigate anti-trust concerns in the Colorado Springs market. Specifically, UnitedHealthCare had to lift its exclusive Medicare Advantage contract with one of the two major hospital systems for at least 3.5 years and honor DaVita’s prior agreement with Humana (the main Medicare Advantage competitor in Colorado Springs) through at least 2020.

The “Certificate of Public Advantage” or COPA, has been another tool used by states to limit anti-competitive behavior, post-merger. A COPA allows a state, rather than the FTC, to oversee antitrust issues after a consolidation among providers. In North Carolina, the state legislature granted a COPA to Mission after it merged with the competing hospital system in Asheville in 1998. However, COPAs can be subject to “regulatory capture,” where regulators become overly influenced by the industry they are meant to police At least in North Carolina, the COPA appeared to do little to limit Mission’s acquisition of other nearby hospitals or physician groups. In 2015, Mission lobbyists convinced the legislature to repeal the COPA, paving the way for its purchase by the for-profit HCA system.

Certificate of Need laws

Stakeholders offered competing views on the value of state certificate of need (CON) laws. These laws generally require the state’s review and approval of new hospital facilities. Some observers argued that lifting these laws would encourage competing hospitals to enter the market, potentially putting pressure on the dominant hospital system to lower prices However, while Indianapolis experienced a hospital building boom after it repealed its CON law, payers and purchasers alike report that the increase in capacity not only led to a spike in utilization, it also, somewhat counterintuitively, drove hospitals to hike their unit prices. With more competition, hospitals had fewer patients but the same (or higher) overhead costs, leading them to demand higher prices from commercial insurers.

Rate setting and purchasing alliances

Market and public policy failure to adequately counter rising costs has prompted policymakers in some states to consider using the power of the government to set provider payment rates or to encourage the formation of multi-purchaser alliances to demand price concessions from providers. For example, a bill promoted by the Colorado insurance department would have linked some hospital reimbursement to the amount reimbursed by Medicare, while the administrator of North Carolina’s state employee health plan has proposed setting rates via reference to the Medicare program. Although Maryland was not part of our market case study, stakeholders in Northern Virginia attributed that state’s lower hospital prices to its all-payer rate setting program.

As noted above, Colorado leaders have also encouraged the formation of locally based purchasing alliances—built on the Peak Health Alliance model—that could combine the purchasing power of multiple employers to directly negotiate with hospitals.  Although a payer would be sought to administer the plan, their role in contracting with providers would be greatly diminished.  The concept of employer purchasing pools is not new: past efforts, such as California’s PacAdvantage program, ultimately floundered But it is too soon to tell if these nascent efforts to harness government—or employers’—purchasing power will generate significant cost savings or the type of political support needed to initiate and sustain them.

LOOKING AHEAD

As the literature and our case studies show, consolidation leads to higher provider prices and ultimately higher premiums for consumers. Any policy discussion about improving health care affordability will need to confront the limits of the market to constrain provider monopolies and their resulting increased negotiation leverage.

Misaligned incentives among commercial payers and the “must have” status of many hospital systems mean that market-based tools to hold health care costs down have been largely ineffective or difficult to replicate. And, with 90 percent of markets in the country already highly consolidated, the prospect of greater anti-trust enforcement is “too little, too late.”

In addition to the public policies discussed above, states have implemented or are considering requiring providers to work within cost growth targets and leveraging the power of state agencies to demand price concessions from providers. For example, Delaware and Massachusetts have set targets for annual increases in health care spending, while Montana’s state employee plan recently began setting a Medicare-based “reference price” for covered hospitalizations. In California, state agencies are consolidating their pharmacy purchasing authorities to negotiate lower drug prices, pursuant to a 2019 executive order by Governor Newsom. Also, in litigation that has been closely watched because it could embolden more post-consolidation anti-trust lawsuits nationwide, the California AG and a coalition of roughly 1,500 self-funded employers reached a settlement agreement with one of that state’s largest health systems, Sutter Health, over allegations that Sutter used its market power to drive up prices.

Policymakers can also do more to activate or assist employers in demanding lower prices. The first step is to help inform employers about the true drivers of health care costs by banning clauses in payer-provider contracts that prohibit the sharing of data on reimbursement rates. Employers, particularly those that self-fund their plans, should not have to sue their third-party administrator (as they did in Indiana) to gain access to their own data. Being able to clearly see the data on hospital prices has sparked a number of Indiana employers to demand change. However, if incremental steps such as data sharing don’t ultimately reduce provider prices, it could increase the support for more dramatic steps, such as rate-setting, in response to provider consolidation. “The status quo isn’t an option anymore,” one large employer told us. Indeed, the status quo is no longer an option for most employers, and certainly not for their employees, who are bearing an ever greater burden of the cost of care.

 

 

Advocates submit signatures to get Medicaid expansion on Oklahoma ballot in 2020

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https://thehill.com/policy/healthcare/467382-advocates-submit-signatures-to-get-medicaid-expansion-on-oklahoma-ballot-in

Advocates submit signatures to get Medicaid expansion on Oklahoma ballot in 2020

Supporters of Medicaid expansion in Oklahoma said they submitted more than enough signatures on Thursday to get the measure on the ballot in 2020.

The “Yes on 802” campaign said it submitted more than 313,000 signatures, far more than the roughly 178,000 it needed, to qualify to get Medicaid expansion on the ballot in Oklahoma next year. 

Campaign manager Amber England said in a statement that her group had “a mandate from a record-breaking number of Oklahoma voters who want the chance to bring more than a billion of our tax dollars home from Washington every single year to deliver healthcare to our neighbors, keep our rural hospitals open, and boost our economy.”

Oklahoma is one 14 GOP-controlled states that have not accepted the expansion of Medicaid under ObamaCare. Republicans have traditionally raised concerns about the cost of the program. 

More states have been expanding recently, however. Utah, Idaho and Nebraska voters approved ballot measures approving Medicaid expansion in last year’s elections. 

The Yes on 802 campaign estimates almost 200,000 people in Oklahoma would gain coverage if expansion were adopted in next year’s election.

The Oklahoma Council of Public Affairs, a conservative think tank in the state, has vowed an opposition effort.

“There will obviously be significant opposition once it gets to the campaign stage,” the group’s president, Jonathan Small, told The Oklahoman earlier this month.

 

 

 

Feds owe health insurers $1.6 billion in unpaid subsidies, judge rules

Posted on by • Posted in ACA, Class Action Lawsuit, Cost Sharing Reduction Payments, Health Insurance Industry, Health Policy, Lawsuit • Leave a comment

https://www.modernhealthcare.com/legal/feds-owe-health-insurers-16-billion-unpaid-subsidies-judge-rules

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A federal judge this week ordered HHS to pay about 100 health insurance plans a total of $1.6 billion in unpaid subsidies.

While the federal government will likely appeal the case, the judgment illustrates the sheer magnitude of the funds the Trump administration could be forced to pay.

The insurers are part of a class action brought by Wisconsin-based Common Ground Healthcare Cooperative, which challenged the federal government’s failure to pay cost-sharing reduction subsidies that were intended to lower healthcare costs for certain people who bought coverage on the Affordable Care Act exchanges.

The amounts owed to each insurer range from tens of thousands to hundreds of millions of dollars. Kaiser Foundation Health Plan is owed the largest amount—$220.3 million for 2017 and 2018 across its plans in several states, according to Modern Healthcare’s analysis of damages outlined in the order.

The federal government owes $159 million to Blue Shield of California and $132.1 million to Blue Cross and Blue Shield of South Carolina to make up for the unpaid cost-sharing reduction subsidies. Utah-based SelectHealth, Dayton, Ohio-based CareSource and Oscar Health, headquartered in New York, are also owed some of the largest amounts.

Judge Margaret Sweeney in the U.S. Court of Federal Claims in February 2019 ruled in favor of Common Ground and other insurers that brought similar lawsuits, finding that the government violated its obligation to pay the cost-sharing reduction subsidies when the Trump administration abruptly cut them off at the end of 2017. The government argued that Congress never appropriated the payments.

Insurers responded by hiking premiums to make up for the absence of those subsidies. Because of the way ACA premium tax credits are structured, the federal government ended up paying higher premium tax credits as a result.

But Sweeney said the lack of an appropriation and the insurers’ strategy for mitigating the loss of the cost-sharing reduction subsidies by hiking premiums doesn’t get rid of the government’s liability. Sweeney ordered the insurers to file a report indicating the amounts they each were owed for 2017 and 2018 and entered judgment on the claims on Tuesday.

Katie Keith, a health law professor at Georgetown University and ACA expert, said the judgment, while big, is less than the $2.4 billion that insurers initially estimated they were owed.

Nicholas Bagley, law professor at the University of Michigan Law School, said the government will likely appeal now that a judgment has been entered; the merits of that appeal will likely be resolved by some consolidated cases related to the cost-sharing reduction payments already pending in the U.S. Court of Appeals for the Federal Circuit, which has not yet set a date for oral arguments.