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.