How America skimps on healthcare

Posted on by • Posted in ACA, Cost Management, Cost Reduction, Cost Shifting, Delayed Care, Denial, Denial Rates, Employee Benefits, Health Insurance Coverage Adequacy, Health Insurance Denial, High Deductible Health Plans, Labor Spend Management, Medicaid, Medical Loss Ratio (MLR), Medicare, Prior Authorization, Shrinkflation, Utilization Trends • Leave a comment

https://www.linkedin.com/pulse/how-america-skimps-healthcare-robert-pearl-m-d–p1qnc/

Not long ago, I opened a new box of cereal and found a lot fewer flakes than usual. The plastic bag inside was barely three-quarters full.

This wasn’t a manufacturing error. It was an example of shrinkflation.

Following years of escalating prices (to offset higher supply-chain and labor costs), packaged-goods producers began facing customer resistance. So, rather than keep raising prices, big brands started giving Americans fewer ounces of just about everything—from cereal to ice cream to flame-grilled hamburgers—hoping no one would notice.

This kind of covert skimping doesn’t just happen at the grocery store or the drive-thru lane. It’s been present in American healthcare for more than a decade.

What Happened To Healthcare Prices?  

With the passage of the Medicare and Medicaid Act in 1965, healthcare costs began consuming ever-higher percentages of the nation’s gross domestic product.

In 1970, medical spending took up just 6.9% of the U.S. GDP. That number jumped to 8.9% in 1980, 12.1% in 1990, 13.3% in 2000 and 17.2% in 2010.  

This trajectory is normal for industrialized nations. Most countries follow a similar pattern: (1) productivity rises, (2) the total value of goods and services increases, (3) citizens demand better care, newer drugs, and more access to doctors and hospitals, (4) people pay more and more for healthcare.  

But does more expensive care equate to better care and longer life expectancy? It did in the United States from 1970 to 2010. Longevity leapt nearly a decade as healthcare costs rose (as a percentage of GDP).

Then American Healthcare Hit A Ceiling

Beginning in 2010, something unexpected happened. Both of these upward trendlines—healthcare inflation and longevity—flattened.

Spending on medical care still consumes roughly 17% of the U.S. GPD—the same as 2010. Meanwhile, U.S. life expectancy in 2020 (using pre-pandemic data) was 77.3 years—about the same as in 2010 when the number was 78.7 years.

How did these plateaus occur?

Skimping On U.S. Healthcare

With the passage of the Affordable Care Act of 2010, healthcare policy experts hoped expansions in health insurance coverage would lead to better clinical outcomes, resulting in fewer heart attacks, strokes and cancers. Their assumption was that fewer life-threatening medical problems would bring down medical costs.

That’s not what happened. Although the rate of healthcare inflation did, indeed, slow to match GDP growth, the cost decreases weren’t from higher-quality medical care, drug breakthroughs or a healthier citizenry. Instead, it was driven by skimping.

And as a result of skimping, the United States fell far behind its global peers in measures of life expectancy, maternal mortality, infant morality, and deaths from avoidable or treatable conditions.

To illustrate this, here are three ways that skimping reduces medical costs but worsens public health:

1. High-Deductible Health Insurance

In the 20th century, traditional health insurance included two out-of-pocket expenses. Patients paid a modest upfront fee at the point of care (in a doctor’s office or hospital) and then a portion of the medical bill afterward, usually totaling a few hundred dollars.

Both those numbers began skyrocketing around 2010 when employers adopted high-deductible insurance plans to offset the rising cost of insurance premiums (the amount an insurance company charges for coverage). With this new model, workers pay a sizable sum from their own pockets—up to $7,050 for single coverage and $14,100 for families—before any health benefits kick in.

Insurers and businesses argue that high-deductible plans force employees to have more “skin in the game,” incentivizing them to make wiser healthcare choices.

But instead of promoting smarter decisions, these plans have made care so expensive that many patients avoid getting the medical assistance they need. Nearly half of Americans have taken on debt due to medical bills. And 15% of people with employer-sponsored health coverage (23 million people) have seen their health get worse because they’ve delayed or skipped needed care due to costs.

And when it comes to Medicaid, the government-run health program for individuals living in poverty, doctors and hospitals are paid dramatically lower rates than with private insurance.

As a result, even though the nation’s 90 million Medicaid enrollees have health insurance, they find it difficult to access care because an increasing number of physicians won’t accept them as patients.

2. Cost Shifting

Unlike with private insurers, the U.S. government unilaterally sets prices when paying for healthcare. And in doing so, it transfers the financial burden to employers and uninsured patients, which leads to skimping.

To understand how this happens, remember that hospitals pay the same amount for doctors, nurses and medicines, regardless of how much they are paid (by insurers) to care for a patient. If the dollars reimbursed for some patients don’t cover the costs, then other patients are charged more to make up the difference.

Two decades ago, Congress enacted legislation to curb federal spending on healthcare. This led Medicare to drastically reduce how much it pays for inpatient services. Consequently, private insurers and uninsured patients now pay double and sometimes triple Medicare rates for hospital services, according to a Kaiser Family Foundation report.

These higher prices generate heftier out-of-pocket expenses for privately insured individuals and massive bills for the uninsured, forcing millions of Americans to forgo necessary tests and treatments.

3. Delaying, Denying Care

Insurers act as the bridge between those who pay for healthcare (businesses and the government) and those who provide it (doctors and hospitals). To sell coverage, they must design a plan that (a) payers can afford and (b) providers of care will accept.

When healthcare costs surge, insurers must either increase premiums proportionately, which payers find unacceptable, or find ways to lower medical costs. Increasingly, insurers are choosing the latter. And their most common approach to cost reduction is skimping through prior authorization.

Originally promoted as a tool to prevent misuse (or overuse) of medical services and drugs, prior authorization has become an obstacle to delivering excellent medical care. Insurers know that busy doctors will hesitate to recommend costly tests or treatments likely to be challenged. And even when they do, patients weary of the wait will abandon treatment nearly one-third of the time.

This dynamic creates a vicious cycle: costs go down one year, but medical problems worsen the next year, requiring even more skimping the third year.

The Real Cost Of Healthcare Skimping

Federal actuaries project that healthcare expenses will rise another $3 trillion over the next eight years, consuming nearly 20% of the U.S. GDP by 2031.

But given the challenges of ongoing inflation and rapidly rising national debt, it’s more plausible that healthcare’s share of the GDP will remain at around 17%.

This outcome won’t be due to medical advancements or innovative technologies, but rather the result of greater skimping.

For example, consider that Medicare decreased payments to doctors 2% this year with another 3.3% cut proposed for 2024. And this year, more than 10 million low-income Americans have lost Medicaid coverage as states continue rolling back eligibility following the pandemic. And insurers are increasingly using AI to automate denials for payment. 

Currently, the competitive job market has business leaders leery of cutting employee health benefits. But as the economy shifts, employees should anticipate paying even more for their healthcare.

The truth is that our healthcare system is grossly inefficient and financially unsustainable. Until someone or something disrupts that system, replacing it with a more effective alternative, we will see more and more skimping as our nation struggles to restrain medical costs.

And that will be dangerous for America’s health.

Walmart partners with a health system and insurer in Florida

Posted on by • Posted in ACA, Complex Care, Complex Care Coordination, Innovative Care Models, Narrow Network, Primary Care, Primary Care Strategy, Retail Clinic, Retail Healthcare, Retail Pharmacy • Leave a comment

https://mailchi.mp/f12ce6f07b28/the-weekly-gist-november-10-2023?e=d1e747d2d8

On Tuesday, Walmart Health announced deals with nine-hospital system Orlando Health and Ambetter from Sunshine Health, a Centene subsidiary offering Affordable Care Act exchange plans, to become a preferred provider in the Ambetter Value Plan. 

Walmart Health’s 23 Florida-based centers will provide primary care services and care coordination in a narrow-network health plan that includes Orlando Health. The Ambetter Value Plan is available in seven counties, covering the Orlando, Tampa, and Jacksonville areas.

While this partnership is limited to Florida, Walmart Health operates 48 centers in five states, with plans to open dozens more locations and expand into three additional states next year. 

The Gist: With a strong foothold and customer base in states that haven’t expanded Medicaid, Walmart Health centers are well positioned to be part of low-cost, narrow-network plans targeted at individuals who don’t qualify for Medicaid, or who were recently removed from the program. 

While Walmart Health already works with major insurers, this first-ever network partnership with a health system is a notable step forward for Walmart, advancing its healthcare delivery business beyond meeting basic primary care needs into more complex care coordination. 

While other large retail and pharmacy chains have opted to buy their way into the primary care space, Walmart is thus far building its own retail store-based clinic enterprise, with plenty of room to scale. 

Amazon announces One Medical membership discount for Prime members

Posted on by • Posted in Affordability, Amazon, Amazon Care, Amazon Clinic, Amazon Pharmacy, Consumer Focus, Consumer Marketing, Consumer Value Proposition, Consumerism, Convenient Access, Innovative Care Models, Primary Care, Primary Care Strategy, Urgent Care, Urgent Response, Virtual Care Strategy, Virtual Healthcare, Virtual Office, Virtual Visit • Leave a comment

https://mailchi.mp/f12ce6f07b28/the-weekly-gist-november-10-2023?e=d1e747d2d8

On Wednesday, e-commerce giant Amazon announced that its 167M US-based Prime members can now access One Medical primary care services for $9 per month, or $99 per year, which amounts to a 50 percent annual discount on One Medical membership. (Additional Prime family members can join for $6/month or $66/year.) 

One Medical, which Amazon purchased for $3.9B last year, provides its 800K members with 24/7 virtual care as well as app-based provider communication and access to expedited in-person care, though clinic visits are either billed through insurance or incur additional charges. Amazon also recently started offering virtual care services through its Amazon Clinic platform, at cash prices ranging from $30 to $95 per visit. 

The Gist: After teasing this type of bundle with a Prime Day sale earlier this year, Amazon has made the long-expected move to integrate One Medical into its suite of Prime add-ons, using a similar pricing model as its $5-per-month RxPass for generic prescription medications.

At such a low price, Amazon risks flooding One Medical’s patient population with demand it may struggle to meet. But if Amazon can scale One Medical, while maintaining its quality and convenience, it may be able to make the provider organization profitable. 

Known for its willingness to take risks and absorb financial losses, Amazon is continuing to build a healthcare ecosystem focused on hybrid primary care and pharmacy services that delivers a strong consumer value proposition based on convenience and low cost. 

The sudden strategic importance of the CNO

Posted on by • Posted in Board, C-Suite, Leadership, Nurses Leadership, Talent Management • Leave a comment

https://mailchi.mp/f12ce6f07b28/the-weekly-gist-november-10-2023?e=d1e747d2d8

One welcome side effect of the current economic challenges health systems face has been the return to prominence of the chief nursing officer (CNO) as a pivotal driver of system strategy. 

So many of a hospital’s important operating and margin pressures intersect with the CNO’s domain: staffing shortages, nurse recruiting and retention, workplace violence, rising union activity, care model redesign, adoption of new care technologies (including AI), the shift of the clinical workforce into non-hospital settings, and on and on. 

Never has the role of the CNO been more important to ensuring systems’ continued ability to deliver high-quality, cost-effective care in a sustainable way. 

Even more heartening, we’ve been part of a number of system board retreats and strategy discussions over the past several months at which the CNO has been an important voice in the room.

We’d argue that, given how important these issues will be over the coming years, it may be time to give CNOs a permanent role in health system governance, just as boards often include physician members.

One additional agenda item that will be critical for systems to address, given the demographics of nursing executives: 

what’s being done to cultivate the next generation of strong nursing leadership to fill the CNO role? A topic worth keeping an eye on.

CMMI increased Medicare spending in its first decade

Posted on by • Posted in ACA, Center for Medicare and Medicaid Innovation (CMMI), Congressional Budget Office (CBO), Health Policy, Transition to Value-Based Healthcare • Leave a comment

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In this week’s graphic, we highlight the recent Congressional Budget Office (CBO) analysis of the budgetary impact of the Center for Medicare and Medicaid Innovation (CMMI), which has gotten off to a disappointing start. 

CMMI was created by the Affordable Care Act in 2010 to test new payment models and other initiatives for reducing the federal government’s healthcare costs, but of the nearly 50 models it has run, only four have become permanent programs. 

Originally projected to generate $2.8B in savings between 2011 and 2020, CMMI was responsible for a net spending increase of $5.4B, having achieved only one quarter of its projected Medicare savings. 

Moreover, the CBO predicts that CMMI won’t produce net annual savings until 2031. 

There are several factors to blame for CMMI’s initial shortcomings, including the lack of mandatory participation for providers, conflicting incentives across care models, patient attribution challenges between providers, and insufficient commercial payer support to scale new care models. 

CMMI intends to simplify its approach, according to its 2021 “strategy refresh”, which should address some of these issues, though requiring commercial payers to participate in new models seems unlikely.

However, despite the discouraging results so far, CMMI’s mission is still laudable and important, and the transition to value remains a key priority for federal regulators.

Medicare finalizes physician pay cuts as Congress considers stepping in

Posted on by • Posted in American Medical Association (AMA), Center for Medicare and Medicaid Services (CMS), Medicare Payment Advisory Commission (MedPAC), Medicare Reimbursement, Physician Compensation, Physician Fee Schedule, Primary Care • Leave a comment

https://mailchi.mp/f12ce6f07b28/the-weekly-gist-november-10-2023?e=d1e747d2d8

Last week, the Centers for Medicare and Medicaid Services (CMS) issued the final 2024 Physician Fee Schedule, which reduces overall payment rates for physicians by 1.25 percent, including a 3.4 percent decrease in the conversion factor for relative value units, compared to 2023. 

The rule also implements a new add-on payment for complex evaluation and management visits, which is expected to boost pay for primary care physicians.

The American Medical Association (AMA) strongly opposes these cuts and immediately appealed to Congress for a reprieve. In response, the Senate Finance Committee unanimously advanced a bill to the Senate floor that would reduce the conversion-factor rate cut from 3.4 percent to 2.15 percent, while also delaying reductions in Medicaid disproportionate share funding for safety-net hospitals. Senate Majority Leader Chuck Schumer (D-NY) has indicated he intends to assemble a broad healthcare bill, including some or all of these provisions, by the end of this year. 

The Gist: Physicians were hopeful that inflation’s toll on labor and supply costs would earn them a break from continued Medicare pay cuts, but CMS remains committed to reductions within its budget neutrality framework.

Earlier this year, the Medicare Payment Advisory Commission (MedPAC) recommended for the first time that physician payments be tied to an index of physician practice inflation, but that would require legislative intervention, which Congress has not taken up. 

The AMA calculated that Medicare physician pay has lagged inflation by 26 percent since 2001, pointing to burnout and large numbers of physicians exiting the profession as a result. 

Until calls for Medicare payment reform are heeded, physicians, like health systems, will have to adopt new, lower-cost models of care to cope with what they will continue to see as insufficient reimbursements.