Out-of-network payments in Medicare Advantage

What Are the Causes of Surprise Medical Bills?

The complexity of Medicare Advantage (MA) physician networks has been well-documented, but the payment regulations that underlie these plans remain opaque, even to experts. If an MA plan enrollee sees an out-of-network doctor, how much should she expect to pay?

The answer, like much of the American healthcare system, is complicated. We’ve consulted experts and scoured nearly inscrutable government documents to try to find it. In this post we try to explain what we’ve learned in a much more accessible way.

Medicare Advantage Basics

Medicare Advantage is the private insurance alternative to traditional Medicare (TM), comprised largely of HMO and PPO options. One-third of the 60+ million Americans covered by Medicare are enrolled in MA plans. These plans, subsidized by the government, are governed by Medicare rules, but, within certain limits, are able to set their own premiums, deductibles, and service payment schedules each year.

Critically, they also determine their own network extent, choosing which physicians are in- or out-of-network. Apart from cost sharing or deductibles, the cost of care from providers that are in-network is covered by the plan. However, if an enrollee seeks care from a provider who is outside of their plan’s network, what the cost is and who bears it is much more complex.

Provider Types

To understand the MA (and enrollee) payment-to-provider pipeline, we first need to understand the types of providers that exist within the Medicare system.

Participating providers, which constitute about 97% of all physicians in the U.S., accept Medicare Fee-For-Service (FFS) rates for full payment of their services. These are the rates paid by TM. These doctors are subject to the fee schedules and regulations established by Medicare and MA plans.

Non-participating providers (about 2% of practicing physicians) can accept FFS Medicare rates for full payment if they wish (a.k.a., “take assignment”), but they generally don’t do so. When they don’t take assignment on a particular case, these providers are not limited to charging FFS rates.

Opt-out providers don’t accept Medicare FFS payment under any circumstances. These providers, constituting only 1% of practicing physicians, can set their own charges for services and require payment directly from the patient. (Many psychiatrists fall into this category: they make up 42% of all opt-out providers. This is particularly concerning in light of studies suggesting increased rates of anxiety and depression among adults as a result of the COVID-19 pandemic).

How Out-of-Network Doctors are Paid

So, if an MA beneficiary goes to see an out-of-network doctor, by whom does the doctor get paid and how much? At the most basic level, when a Medicare Advantage HMO member willingly seeks care from an out-of-network provider, the member assumes full liability for payment. That is, neither the HMO plan nor TM will pay for services when an MA member goes out-of-network.

The price that the provider can charge for these services, though, varies, and must be disclosed to the patient before any services are administered. If the provider is participating with Medicare (in the sense defined above), they charge the patient no more than the standard Medicare FFS rate for their services. Non-participating providers that do not take assignment on the claim are limited to charging the beneficiary 115% of the Medicare FFS amount, the “limiting charge.” (Some states further restrict this. In New York State, for instance, the maximum is 105% of Medicare FFS payment.) In these cases, the provider charges the patient directly, and they are responsible for the entire amount (See Figure 1.)

Alternatively, if the provider has opted-out of Medicare, there are no limits to what they can charge for their services. The provider and patient enter into a private contract; the patient agrees to pay the full amount, out of pocket, for all services.

Figure 1: MA HMO Out-of-Network Payments

MA PPO plans operate slightly differently. By nature of the PPO plan, there are built-in benefits covering visits to out-of-network physicians (usually at the expense of higher annual deductibles and co-insurance compared to HMO plans). Like with HMO enrollees, an out-of-network Medicare-participating physician will charge the PPO enrollee no more than the standard FFS rate for their services. The PPO plan will then reimburse the enrollee 100% of this rate, less coinsurance. (See Figure 2.)

In contrast, a non-participating physician that does not take assignment is limited to charging a PPO enrollee 115% of the Medicare FFS amount, which can be further limited by state regulations. In this case, the PPO enrollee is also reimbursed by their plan up to 100% (less coinsurance) of the FFS amount for their visit. Again, opt-out physicians are exempt from these regulations and must enter private contracts with patients.

Figure 2: MA PPO Out-of-Network Payments

Some Caveats

There are two major caveats to these payment schemes (with many more nuanced and less-frequent exceptions detailed here). First, if a beneficiary seeks urgent or emergent care (as defined by Medicare) and the provider happens to be out-of-network for the MA plan (regardless of HMO/PPO status), the plan must cover the services at their established in-network emergency services rates.

The second caveat is in regard to the declared public health emergency due to COVID-19 (set to expire in April 2021, but likely to be extended). MA plans are currently required to cover all out-of-network services from providers that contract with Medicare (i.e., all but opt-out providers) and charge beneficiaries no more than the plan-established in-network rates for these services. This is being mandated by CMS to compensate for practice closures and other difficulties of finding in-network care as a result of the pandemic.

Conclusion

Outside of the pandemic and emergency situations, knowing how much you’ll need to pay for out-of-network services as a MA enrollee depends on a multitude of factors. Though the vast majority of American physicians contract with Medicare, the intersection of insurer-engineered physician networks and the complex MA payment system could lead to significant unexpected costs to the patient.

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One-third of small businesses say health insurance is a top concern during COVID-19: survey

Dive Brief:

  • Small businesses are struggling to cover the high costs of healthcare for their employees after a year of COVID-19, according to a new poll sponsored by the Small Business Majority and patient advocacy group Families USA.
  • More than one in three small businesses owners said it’s a challenge getting coverage for themselves and their workers. That pain is particularly acute among Black, Asian American and Latino businesses, which have fewer resources than their White counterparts, SBMfound.
  • As a result, small businesses want policymakers to expand coverage access and lower medical costs, beyond the temporary fixes included in the sweeping $1.9 trillion American Rescue Plan passed by Congress earlier this month.

Dive Insight:

Providing health insurance can be pricey for small employers, a challenge that’s been exacerbated by the pandemic and its subsequent economic downturn.

Accessing health insurance has been a major barrier over the course of COVID-19, the national survey of 500 businesses with 100 employees or fewer in November found. The poll, conducted by Lake Research Partners for SBM and Families USA, found many such businesses have had to slash benefits during the pandemic. Among small business owners that have reduced insurance benefits, 36% have trimmed their employer contribution for medical premiums and 56% switched to a plan with a lower premium.

Additionally, one in five small business owners say they plan to change or lower coverage in the next few months, while only about a quarter have been able to maintain coverage for temporarily furloughed employees.

The situation is bleaker for minority-owned small businesses. Overall, 34% say accessing health insurance has been a top barrier during COVID-19, but that figure rises to 50%, 44% and 43% for Black, Asian American and Latino business respondents, SBM, which represents some 80,000 small businesses nationwide, said.

That’s in line with past SBM polling finding non-white entrepreneurs are more likely to face temporary or permanent closure in the next few months than their white counterparts, and are also more likely to struggle with rent, mortgage or debt repayments.

Though employers expect a more stabilized business environment starting in the second quarter, many are still reeling from difficult economic circumstances last year. COVID-19 capsized normal efforts to calculate medical cost trends for 2021, complicating financial planning for the year ahead — especially for fragile small businesses.

Washington did allocate a significant amount of financial aid for small businesses last year, and the ARP includes numerous provisions including increased subsidies for health insurance premiums for two years, and extended COBRA coverage for laid off employees through September.

But respondents to this latest polling urged for more long-term support.

The most popular policy proposal was bringing down the cost of prescription drugs, with 90% of businesses saying they supported the measure and 54% saying they were in strong support. Protecting coverage for people with pre-existing conditions was also popular, with 87% of small business owners in total support and 51% strongly supporting.

Three-fourths of small business owners strongly support a public health insurance option, while 73% support expanding Medicaid eligibility in all states and 66% support letting people buy into Medicare starting at age 55.

Both a public option and lower age of eligibity for Medicare are key tenets of President Joseph Biden’s healthcare plan — though getting both through Congress is unlikely. And long-time business groups like the Chamber of Commerce and the National Federation for Independent Business hold major sway on such issues and tend to be more recalcitrant on progressive policy changes.

Still, calls have been mounting for employers, which insure more than half of the U.S., to do more to move the needle on medical costs, as price increases outpace overall inflation.

A survey of large to mid-size employers from the National Alliance of Healthcare Purchaser Coalitions published Wednesday found at least three-fourths of employers support drug price regulation, surprise billing regulation, hospital price transparency and hospital rate regulation.

Another kind of surprise medical bills

Kaiser Health News’ latest edition of its “Bill of the Month” series features a patient who was charged a “facility fee,” which drove up what she owed to more than 10 times higher than what she’d previously paid for the same care.

Why it matters: Facility fees — which are essentially room rental fees, as KHN puts it — are becoming increasingly controversial, and patients often receive the bill without warning.

  • Hospitals aren’t required to inform patients ahead of time about facility fees.
  • Hospitals say they need the revenue to help cover the cost of providing 24/7 care.

What they’re saying: “Facility fees are designed by hospitals in particular to grab more revenue from the weakest party in health care: namely, the individual patient,” Alan Sager, a professor at the Boston University School of Public Health, told KHN.

  • The practice is becoming more popular as more private provider practices are bought by hospitals.
  • “It’s the same physician office it was,” said Trish Riley, executive director of the National Academy for State Health Policy. “Operating in exactly the same way, doing exactly the same services — but the hospital chooses to attach a facility fee to it.”

Perils of High Deductible Health Insurance

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Rural MA Enrollees Have Substantial Rates Of Switching To Traditional Medicare

Brent Langellier (@blangellier) | Twitter

In their recent Health Affairs paper, Sungchul Park and coauthors examine rates of switching from Medicare Advantage (MA) to traditional Medicare by patient characteristics. MA plans are the private insurance alternative to traditional fee-for-service Medicare overseen by the Centers for Medicare and Medicaid Services. While enrollment in MA has doubled over the past decade, Park and coauthors find that the needs of certain enrollees are not being met by MA plans.

Park and coauthors report that rural enrollees switch from MA to traditional Medicare at an adjusted annual rate of 10.5 percent, significantly higher than metropolitan residents, who switch at a rate of 5.0 percent

This phenomenon was more pronounced among those who required the use of costly services such as facility stays or hospitalizations, those who had poor self-reported health, and individuals who reported lower satisfaction with their access to care.

Sutter’s $575M antitrust settlement gains preliminary approval

Sutter Health, CA Reach $575M Settlement Over Anti-Trust Concerns

Dive Brief:

  • A San Francisco Superior Court judge has granted preliminary approval of the $575 million settlement agreement Sutter Health reached in the antitrust case that alleges it drove up healthcare prices in Northern California through anticompetitive practices.
  • A hearing for final approval of the settlement has been set for July 19, according to the judge’s order issued Tuesday.
  • Now, class members, or certain self-funded payers in California, will be notified of the preliminary approval and may object to part or all of the settlement agreement.

Dive Insight:

This preliminary approval comes more than a year after Sutter Health first agreed to settle the case with the plaintiffs, including California Attorney General Xavier Becerra, now nominee for HHS secretary, and a grocer’s union.

To put the settlement and all its elements in motion, it must first be approved by a judge. Tuesday’s order moves the case one step closer to final approval.

That 2019 settlement came on the eve of a court case that was supposed to lay out in open court how the regional powerhouse’s practices led to higher healthcare costs.

Even though the settlement averted a trial, it was designed to force Sutter to change some of these practices. As part of the settlement, Sutter agreed to stop “all-or-nothing” contracting and instead allow insurers and other payers to contract with some, but not all, of Sutter’s facilities.

The settlement is also designed to limit what patients pay out-of-network in an effort to shield them from exorbitant, surprise medical bills.

Sutter Health has tried to delay the $575 million antitrust settlement, citing the fallout from the novel coronavirus that has squeezed providers, including Sutter.

The health system, though battered by the pandemic’s fallout, was still able to post net income of $134 million for 2020, in part thanks to investment income. However, it did report an operating loss of $321 million as expenses outpaced revenue. Sutter said it was launching a sweeping review of its finances and operations as a result.

The litigation was first initiated in 2014 when the grocer’s union, joined by other plaintiff’s, filed suit against Sutter’s practices. It ultimately drew the attention of Becerra’s office.

CommonSpirit, Blue Shield of California expand payment platform to 20 hospitals

Blue Shield of California Expands Collaboration with Dignity Health  Hospitals to Make Billing and Payment Easier for Patients, Providers |  State | ttownmedia.com

Chicago-based CommonSpirit and Blue Shield of California expanded a new billing program to 20 Dignity Health hospitals, the organizations said Jan. 11.

The Member Payments billing program aims to create faster and more transparent billing processes for Blue Shield of California members who receive care at Dignity facilities and owe money after their insurance is processed. CommonSpirit is the parent organization of Sacramento, Calif.-based Dignity. 

Under the program, Dignity can get a patient’s portion of a bill at the time of claim adjudication. Patients who receive care from a Dignity facility get a monthly bill from Blue Shield of California. Through that bill, patients can then pay for their cost-sharing amount in full or through installments. 

The program, announced in 2018, was launched in September 2019 by Dignity, CommonSpirit, Blue Shield of California and technology startup company Ooda Health. The program’s 12-month pilot started at two hospitals in Sacramento and grew to six hospitals by the end of the pilot year.

The addition of 20 Dignity hospitals comes after the process was found to streamline cost-sharing payments, resulting in a 92 percent satisfaction rate from patients who used the platform, the organizations said.

Fewer than 40% of Americans could afford $1K unexpected medical bill

Man with empty pockets Acrylic Print by Blink Images

Fewer than four in every 10 American adults can afford a $1,000 surprise medical bill, according to survey results released Jan. 11 by finance company Bankrate.

Bankrate surveyed 1,003 Americans about their personal finances from Dec. 8 to 13, finding a 2 percent drop from the previous year in respondents who said they could comfortably cover a $1,000 expense. The study noted that credit card finance charges can often add up to hundreds of additional dollars when surprise expenses are not paid quickly.

However, some Americans have an optimistic outlook on their financial situation going forward, with 44 percent of respondents believing their personal finances will improve in 2021.

Congress agrees on $900B COVID-19 relief package, $1.4 trillion funding deal: 7 things to know

Mixed reaction as Congress seals agreement on $900 billion COVID relief  bill - 6abc Philadelphia

Congressional leaders have reached an agreement on a $900 billion COVID-19 relief package and $1.4 trillion government funding deal with several healthcare provisions, according to Senate Majority Leader Mitch McConnell, R-Ky., and Minority Leader Chuck Schumer, D-N.Y.

Here are seven things to know about the relief aid and funding deal:

1. Congressional leaders have yet to release text of the COVID-19 legislation, but have shared a few key details on the measure, according to CNBC. Becker’s breaks down the information that has been released thus far. 

2. The COVID-19 package includes $20 billion for the purchase of vaccines, about $9 billion for vaccine distribution and about $22 billion to help states with testing, tracing and other COVID-19 mitigation programs, according to Politico.

3. Lawmakers are also expected to include a provision changing how providers can use their relief grants. In particular, the bill is expected to allow hospitals to calculate lost revenue by comparing budgeted revenue for 2020. Hospitals have said this tweak will allow them to keep more funding. 

4. The agreement also allocates $284 billion for a new round of Paycheck Protection Program loans

5. The COVID-19 relief bill also provides $600 stimulus checks to Americans earning up to $75,000 per year and $600 for their children, according to NBC. It also provides a supplemental $300 per week in unemployment benefits.

6. The year-end spending bill includes a measure to ban surprise billing. Under the measure, hospitals and physicians would be banned from charging patients out-of-network costs their insurers would not cover. Instead, patients would only be required to pay their in-network cost-sharing amount when they see an out-of-network provider, according to The Hill. The agreement gives insurers 30 days to negotiate a payment on the outstanding bill. After that period, they can enter into arbitration to gain higher reimbursement. 

7. Lawmakers plan to pass the relief bill and federal spending bill Dec. 21

Health industry has evaded major changes under Trump

Status quo in healthcare is no longer an option

President Trump vowed to overhaul the health care system, notably saying in one of his first post-election speeches that pharmaceutical companies were “getting away with murder” over their pricing tactics.

Yes, but: Four years later, not a lot has changed. If anything, the health care industry has become more financially and politically powerful, Axios’ Bob Herman reports.

“Most of the bigger ideas have either been stopped in the courts or just never got implemented,” said Cynthia Cox, a vice president at the Kaiser Family Foundation who follows the health care industry.

  • The administration killed its own regulation that would have changed behind-the-scenes negotiations between drug companies and pharmacy benefit managers.
  • One of the most consequential drug proposals — tying Medicare drug prices to lower prices negotiated abroad — is not remotely close to going into effect.
  • Forcing drug companies to disclose prices in TV ads was a small gambit, and the courts ultimately struck down the idea.

The other side: The policies the administration has seen through, so far, have been relatively modest.

Between the lines: Health care has consistently raked in large sums of profit every year of Trump’s presidency. That has been especially true during the pandemic.