Health Care Reform's 1st Challenge: Setting Up a High Risk Pool

Setting up a risk pool in 90 days for individual who cannot obtain coverage because of their health will be the task for the Department of Health and Human Services. While 34 states currently operate such programs, some are closed to new entrants and most struggle to finance coverage for approximately 200,000 enrollees nationwide. Most tend to be sicker and older than the general population, and to qualify they must have been unable to obtain coverage through other sources.

About two million people might be eligible for the new pool, analysts predict, though how it would operate is unclear – complicating a daunting timetable for implementation.

The health care law President Barack Obama signed Tuesday offers only general guidance, making the Department of Health and Human Services responsible for creating the program. It would last until 2014 when health insurance exchanges, marketplaces where companies compete for business, are scheduled to be up and running.

While people will still have to pay premiums to buy coverage, the federal government will add $5 billion to pay claims. The law allows the secretary of HHS to administer the pool or contract it out to states or a non-profit entity. Under the new law:

* Applicants must be U.S. citizens who are not covered by another form of insurance, have been denied coverage due to a pre-existing condition and have been without health care coverage for at least six months.

* Older people can’t be charged more than four times younger ones.

* The plan must cover at least 65 percent of participants’ health costs and follow annual out-of-pocket limits set in the bill.

* Premiums will be based on "standard rates," which states define as average premiums charged by private insurers for similar coverage.

Among the questions to be answered: How much will the coverage cost? Will enrollees have a choice of plans? What medical services will be covered? What hospitals and doctors and other health care providers will participate in the networks to be created? How will the new entity interact with already established state-run high-risk pools?

It will be interesting to follow the implementation of this mandate. Stay tuned.

The Massachusetts Experience: Controlling Medical Costs Is Essential

Much as been written about how the experience of Massachusetts is relevant to what could be expected for the country now that health care reform legislation has passed. As many of you know, the Bay State set up a program in 2006 that required all residents to be insured. To help them become insured the state provided subsidies to those who otherwise could not afford the premiums and also established an exchange or connector program where residents could purchase coverage.

As many predicted the cost of the program has exploded as premiums have continued to rise. Hearings were just conducted to find out the root causes for the increases.

Rate hikes get people's attention. And it was no different during the Massachusetts hearing, when one of the most remarkable statements was made early on by Eric H. Schultz, president and CEO of Harvard Pilgrim Health Care. Schultz said that some physicians and hospitals in Massachusetts are paid upward of 300% to 400% higher for some services compared to others.

"The variations in overall reimbursement to hospitals can also be as high as 300%, but the difference when comparing facility inpatient rates or outpatient rates can be as much as 300 to 400%," Schultz said in a written statement. "The difference in rates between the lowest reimbursed physicians and the highest can be as much as 300% for the same services. Some physician and hospital networks are paid well in excess of 200% of Medicare."

The hearing appeared to reaffirm much of what Massachusetts Attorney General Martha Coakley has emphasized in her health marketplace investigation. "Increasing reimbursement rates demanded by providers for medical services, and the trend toward providing care in more expensive settings are the primary drivers of increasing healthcare costs, increases that are reflected in premiums," she said.

So what can be done to control provider costs, particularly hospitals? Many have pointed to the unleashing the power of the marketplace by giving consumers the information on quality and cost that they need. But reliable information on quality and cost is very difficult to obtain. What if the state government stepped in to control costs? Most people would say to do so would produce terrible results. Well Maryland has had such a program in place since 1976.

In Maryland prices for all hospital services are set by seven commissioners appointed by the governor to four-year terms. When setting rates for at individual hospitals, the Commission takes into account each hospital's wages, charity care and severity of patient illnesses. Hospitals can appeal only to the commission or take the dispute to court.

A review of the Maryland plan published in a recent issue of Health Affairs reports that, since 1976, state regulation of hospital rates has saved $40 billion. Had a similar system been in place over the same period of time for all states, savings would have totaled $1.8 trillion or more .

More importantly, when the growth of medical spending in Maryland is compared to inflation in other states, Kaiser reports that from 1991 to 2004 Maryland’s total heath care bill was climbing by just 6.7% a year—right at the national average. The rate of growth in Maryland was slower than in 32 other states.

So perhaps government proce control regulation could be the answer in containing hospital costs?

Jumbo Employer to Assess Penalties

From Mercer and Buck Consulting experts:

Almost half of jumbo employers offer financial incentives to employees who complete a health risk assessment. The average incentive is $150. Some employers intend to take that idea a step further and limit the number of coverage options available to employees who opt not to complete an assessment, Domaszewicz said. Others could make risk assessments a condition of having coverage, added Jorge Font, a principal at Buck Consultants who leads the health and productivity consulting practice in the Houston office. Font also spoke at the webinar.

Another growing trend among some large employers is to require that members contact a health coach before non-emergency surgeries. Non-compliance could result in surcharges or substantially higher deductibles. Employers that opt to implement such strategies will need help from their health plan to communicate and administer them, the speakers agreed.

Health Care Reform's Impact on Health Insurers

Given the rise in health insurance companies' stock prices yesterday, Wall Street certainly thinks the health care reform bill will be positive for health insurers. I think this optimism is mostly based on the requirement that individuals obtain insurance thereby creating a new pool of customers for carriers. But the penalty for not obtaining coverage is so weak, I wonder how many people will risk paying the penalty instead of signing up for coverage? An increase in the number of people "in the pool" is critical for the elimination of medical underwriting to work. So will the insurance mandate really will be a benefit to health insurers or will it just mean that a significant number of sick people will seek coverage only when they have to because of illness?

Plus right now attorney generals from 11 states are banding together to bring suit against the federal government regarding the legality of this mandate. But if you want to eliminate medical underwriting, you have to have the mandate. More comments to follow in future posts.

Health Care Reform Changes

If health care reform passes in the next few days, what will be its impact in the near future. The following is a good list:

• Within 6 months of enactment, elimination of pre-existing condition exclusions for children (and for everyone beginning in 2014, when the Exchanges are operational)
• Within 6 months of enactment, dependents may remain on their parents' health insurance policy until age 26
• No lifetime limits on benefits, restricted use of annual limits and no rescissions
• $5 billion for high risk pools
• Re-insurance for employer health plans for early retirees
• New insurance plans required to offer free preventive care and immunizations without cost-sharing
• Development of uniform coverage documents will begin immediately to help people compare different insurance policies and creation of an internet portal for better health policy shopping
• Creation of an appeals process and consumer advocate for insurance customers

Primary Care Recruitment Efforts Still Hurting

One of the reasons medical costs continue to grow at an unsustainable rate is the inordinate amount of specialists in the medical community. There have been numerous calls to increase the number of primary physicians by increasing the reimbursements levels for them. In fact the health care reform legislation before Congress would do so. But what are med school students doing? While the percentage of them going into primary care has increased, we still have a ways to go:

Huge salary disparities and onerous student loans appear to be dampening the enthusiasm of medical school students for primary care. The 2010 National Resident Matching Program shows that the number of U.S. medical students choosing internal medicine residencies grew slightly from 2009, but not enough to impact the shortage of primary care physicians.

The NRMP data show that 2,722 seniors at U.S. medical schools enrolled in an internal medicine residency program, a 3.4% increase from 2,632 in 2009. Those enrollment numbers are similar to 2008 (2,660), 2007 (2,680), and 2006 (2,668). In comparison, 3,884 U.S. medical school graduates chose internal medicine residency programs in 1985, the American College of Physicians reported.

The 2010 match numbers include students who will ultimately enter a subspecialty of internal medicine, such as cardiology or gastroenterology. About 20% to 25% of internal medicine residents eventually choose to specialize in general internal medicine, compared with 54% in 1998, ACP said.

"Because it takes a minimum of three years of residency after four years of medical school to train an internist, it is critical to begin making careers in internal medicine attractive to young physicians," said Steven Weinberger, MD, an executive with ACP. "As America's aging population increases and more people gain access to affordable coverage, the demand for general internists and other primary care doctors will drastically outpace the primary care physician supply."

The 2009 Review of Physicians Recruiting Incentives from physician recruiters Merritt Hawkins shows that huge salary disparities continue to exist between primary care physicians and subspecialties. The average salary offered to family physicians in the Merritt Hawkins study was $173,000, the lowest of any specialty. By comparison, cardiologists were guaranteed average base salaries of $419,000 a year, and orthopedic surgeons were guaranteed $481,000.

Those compensation figures are consistent with other studies, such as the Medical Group Management Association's recently released Physician Placement Starting Salary Survey: 2009 Report Based on 2008 Data. The MGMA study found that median starting salaries for all primary care physicians grew by 7.4% between 2005-2008, to $150,000, while the median starting salaries for all specialists grew by 25% for the same period, to $275,000.

The ACP has called for increasing primary care physicians' Medicaid and Medicare payments, expanding pilot testing and implementation of patient-centered medical homes, and increasing support for primary care training programs as ways to increase the number of primary care physicians.

Weinberger said the rising cost of medical education and the financial burden on physicians is pushing many young doctors toward more lucrative subspecialties.

Employers Adding More "Sticks"

I am not surprised at all by this:

Employers’ appetite for penalizing workers for unhealthy behaviors is growing, according to a new survey by Hewitt Associates Inc.

Hewitt’s annual health care trends survey shows that 47% of employers either already use or plan to use financial penalties during the next three to five years for employees who do not participate in certain health improvement programs.

Of those companies, 81% say they will penalize employees through higher premium contributions. About 17% said they may increase deductibles, while another 17% said they were considering higher out-of-pocket expenses as penalties.

When asked what types of behaviors or programs they were planning on penalizing, 64% cited smoking, while 50% said they would penalize those not participating in disease management or lifestyle behavior programs. Indicating that they may assess penalties in more than one area, 45% of employers responding to the survey said they would penalize workers for not participating in biometric screenings.

Explaining the survey findings, Cathy Tripp, a principal in Hewitt’s Health Management practice in Lincolnshire, Ill., said in a statement that “the economy and continued escalation of health care costs have driven many employers to be a little more bold and demanding of their employees, making disincentives an increasingly attractive option.”

“As companies learn more about their workforce, they’re realizing that some people may be more motivated to take action if they risk losing $100 vs. gaining $100. The key for each employer is to find the right mix of strategies and plan designs that will motivate employees to be healthier, but not go so far as to drive the wrong behaviors,” Ms. Tripp said.

Although a growing number of employers are leaning toward penalties, the majority continue to use financial incentives to encourage employees to participate in wellness programs. This year, about 63% are offering employees cash incentives for completing health risk questionnaires, up from 35% in 2009. In addition, 37% of employers are providing cash incentives to employees who participate in health improvement and wellness programs, up from 29% in 2009.

The Hewitt survey did not ask employers about their use of penalties in 2009.

The survey included responses from nearly 600 large U.S. employers representing more than 10 million employees, conducted from December 2009 to January 2010.

Valued Based Insurance in Oregon

From Kaiser Health News:

Workers at a Portland, Ore., steel mill soon will be able to pick a new type of insurance that offers free care for some illnesses, such as diabetes or depression, but requires hefty extra fees for treatments deemed overused, including knee replacements, hysterectomies and heart bypass surgery.

The insurance, which will be offered by five different insurers in Oregon, is the most far-reaching and potentially controversial step in an effort by employers nationally to rein in medical spending by redesigning health benefits.

"We’re trying to make people better consumers," says John Worcester, head of benefits at Evraz Oregon Steel, the sole employer to sign up since the plans began coming on the market earlier this year.

Workers who choose the option over a more traditional plan next year could see their costs drop sharply if they have one of six chronic conditions but might pay hundreds more in deductibles and co-payments if they need a hip replacement or a heart stent.

The policies are among the first to apply financial incentives on both sides of one important factor driving up the nation’s health care tab: The underuse of proven treatments and overuse of certain surgeries and diagnostic tests that may be less valuable.

Proponents like Worcester say such efforts, dubbed "value-based insurance design," help steer patients to high-quality treatments, which could improve health and possibly slow health costs over time.

The article goes on to say that this will be an option for employees and only 10% are expected to choose it. Premiums for valued based benefits will be 10% less than the standard coverage.

I have followed value based benefits for years and looked into offering them when I worked at UPMC Health Plan. Two things were an issue for us at the time: First there was no evidence that this would save an insurer money and therefore allows us to offer the benefit at a reduced rate. All experience to that point was with self-insured groups over a fairly long period of time. Second our medical directors had difficulty developing a list of treatments it would deem "unnecessary" saying it really depended on the member's health needs. It is fairly amazing to me that the Oregon insurers have heart bypass surgery on their "unnecessary" list given the discussions I had.

It will be interesting to follow developments in Oregon. Presently five carriers are offering value based benefits but this steel employer is the only to offer this coverage as an option to its employees.

Perfect Example of the "Death Spiral" Insurers Talk About

Facing a sharp rise in costs, Pennsylvania has almost doubled the monthly bill for a state health insurance program for poor people who do not qualify for Medicaid and are on a waiting list for a less costly option. On March 1, the cost of the plan rose to about $600 a month, up from $313 a month, for the roughly 2,400 state residents on the waiting list. The increase comes as Congress is poised to act on a health care overhaul and as the Obama administration has been highly critical of insurance companies for rate increases of 30 percent to 40 percent. State officials said that the program had become a magnet for the sickest people in the state, even as rising unemployment had driven more people to sign up. ... The increase may cause even more people to drop out of the program, he said, leaving mainly the people most in need of costly health care and making the program even more expensive" (Urbina, 3/16).

Not to get too political here but can anybody explain to me how high risk pools are the answer to covering those who can't get insurance because of their health condition?

Another Technology that Helps Reduce Costs

A pilot project at the Cleveland Clinic that monitored 250 patients with chronic diseases showed patients were able to increase the number of days between visits. The study used a medical device that shared daily patient data online with doctors and nurses and found that patients better managed their care using the system. "The project found a significant change in the average number of days between doctor's office visits for diabetic and hypertensive patients, who were able to increase the number of days between appointments by 71 percent and 26 percent, respectively … Doctors and nurses, using electronic medical records and the uploaded data, were able to monitor, for example, a heart-failure patient's daily weight, blood pressure and activity level." Clinic officials said the devices also helped patients manage medications and flag for doctor intervention should they need it. They hope the next step is an even larger study.

What insurer will step up and offer this technology to their chronic members to see if it reduces costs?

Moving Away from Fee for Service Payment

As I have said in previous posts, one of the best ways to control health care costs is to change the way providers are reimbursed. Paying them on a fee for service basis everyone agrees provides an incentive for unnecessary care which by some estimates makes up over 30% of the total medical expenditure in this country. However moving away from FFS will not be easy for a variety of reasons. One just has to look at the experience of BCBS of Massachusetts. This Blues Plans is at the forefront of developing an episodic payment structure or as they called them, Alternative Quality Contracts or AQCs. Well the Plan reported a loss of over $150M in 2009 and a report in the Boston Globe said up to a third of the deficit could be attributed to the company's effort to establish AQCs with its providers. On top of this, their CEO, Cleve Killingsworth resigned after six years which some say was due to the poor financial performance. I have no idea if this is true but it certainly will give senior management some pause as they think about changing their provider reimbursement methodology which if true would be unfortunate.

Great Article on Medical Advances

The March issue of HealthLeaders has an great cover story on the various medical breakthroughs that will change the business and delivery of health care. One I found of particular interest:

One wireless device in the pipeline could improve medication compliance. It fits onto a prescription bottle and alerts patients when it's time to take their pills—and reminds them if they forget. In trials now at the Center for Connected Health, the device senses when a patient unscrews the cap on the prescription bottle and sends the information through a secure network to an online site. "I'm using it myself and I find it very helpful," says Joseph C. Kvedar, MD, director of the center, a division of Partners HealthCare in Boston.

"Adherence to medication alone can lower costs," Kvedar says. "It's a powerful tool, and just about every person should have some kind of medication device when we get them to the point where they're affordable and reliable."

As accountable care, bundled payments, and pay-for-performance become more common, improving health outcomes with wireless technology and other tools and devices makes business sense, Kvedar says. Partners is also using such cutting-edge technology to differentiate itself in the marketplace, he adds.

As I have mentioned in previous posts, managing the health care costs of their members will be critical for any managed care organization. Increasing medication compliance through this type of technology is something that should be explored and perhaps offered to members.

Employees Still Not Stepping Up

The latest survey on employee participation in employer health promotion programs is not very encouraging:

Employers are frustrated that too many of their workers are failing to change their unhealthy habits and take advantage of health and wellness programs that include financial incentives, according to a survey by Towers Watson and the National Business Group on Health.

As a result, some employers are "accelerating" efforts to find ways to further motivate employees and also tighten their requirements for participation in certain healthcare plans, says Ted Nussbaum, senior consultant for Towers Watson, a global professional services company, and co-author of the survey. The National Business Group on Health is a nonprofit association of large employers.

'As employers continue to be more health-focused, they are beginning to target and reward those workers who demonstrate a real commitment to making positive lifestyle changes,' Nussbaum says.

The survey, Raising the Bar on Health Care – Moving Beyond Incremental Change, states that the effort to change employee behaviors related to health has been a 'major obstacle for many companies.' Still, most companies have no plans to abandon their health promotion programs and will continue their existing strategies, according to Nussbaum. More than 500 employers participated in the survey—the 15th annual NBGH/Towers Watson Employee Survey on Purchasing Value in Health Care—conducted between November 2009 and January 2010.

I wonder how many of these same companies communicate to their employers what their poor health habits costs them in lower raises and bonuses and "skinnier" benefits. It is amazing but many employees do not understand this connection.

ACOs Show Promise

A critical component of controlling health care costs is moving away from the present fee for service payment structure which promotes unnecessary care in many cases. One proposed solution to FFS payments are Accountable Care Organizations which will provide care for a "pre-paid" fee and also will be rewarded with additional payments if certain quality measures are met. What is the latest with ACOs? According to Mark McClellan, former, CMS head, they show promise:

For the past four years, he said ACO programs have shown improvements in quality and many lead to lower costs. While there are some technical issues that must be addressed, he said, "It seems like a promising foundation for future work," McClellan said.

"One of my first experiences at CMS, I started hearing about integrated provider groups and independent practioners trying to do things to improve quality—like having nurse practioners in disease management, and pharmacists [following up] on medication adherence. They showed me the numbers and these things were actually working. Unfortunately they were getting killed on Medicare reimbursement fees." At that point, CMS embarked on ACO pilot programs, he said.

How well insurers partner with ACOs will be critical for the industry's success in the coming years.

PSA Testing a Waste of Time

There is an amazing op-ed piece in the NY times regarding PSA testing by the man who invented it, Richard Ablin.

In an editorial in today's NYTimes, Richard Ablin, who discovered PSA (the enzyme that is the target of the test), publicly disavowed the test, calling it a "hugely expensive public health disaster". He went on to detail the statistics: "American men have a 16 percent lifetime chance of receiving a diagnosis of prostate cancer, but only a 3 percent chance of dying from it. That's because the majority of prostate cancers grow slowly. In other words, men lucky enough to reach old age are much more likely to die with prostate cancer than to die of it." [emphasis added]

The cost of prostate hysteria comes to about $3 billion a year for the tests, plus the pain and discomfort and sexual dysfunction - and cost - of men treated unnecessarily.

One study found "1410 men would need to be screened and 48 additional cases of prostate cancer would need to be treated to prevent one death from prostate cancer."

Another study found "94% of the cancers detected with the routine PSA blood test would not cause death before the age of 85."

PSA testing is the perfect example of unnecessary care in this country.

One Week Later: Reflections on the HC Summit

There obviously has been a great deal written about the 7.5 hr. HC summit held last Thursday. Obama to no one's surprise displayed an incredible knowledge of the issues. But I was surprised by a few things. First, many Republicans repeatedly mentioned how poll after poll showed people were against HC reform. While this is true, why didn't the President or other Dems mention that a Kaiser poll showed that HC reform rose in popularity when people were informed about its specific provisions (e.g., out-lawing pre-existing conditions exclusions)?

And while all agreed that the cost of care needed to be controlled and that 30% of prescribed care in this country was unnecessary, no one talked specifically about what needed to be done. As I have mentioned in previous posts, moving away from a fee-for-service reimbursement system would be the Number 1 way to reduce costs. The Dems legislation calls for funding of pilot accountable care organizations under Medicare or ACOs. ACOs would likely be a consortium of providers who agree to care for a minimum of 5,000 patients for a pre-determined fee. Many details need to be worked out but I think ACOs are likely our best chance for cost of care control. More to come about them in future posts.