Dueling Statistics on High Deductible Health Plans

Today’s Managing Health Care Cost Indicator is $21.8 million.  

Or maybe it’s 40%

Click image to enlarge.  

I’ve been reviewing two related but contradictory documents over the past day. 

Aetna has released its eighth annual report on its high deductible health plan (HDHP).   Here’s a link to the press release, and here’s a link to the powerpoint slides.  Aetna says that its high deductible health plan product

o       Lowers costs by 11% (or $21.8 million per 10,000 members)

o       These savings increase year over year

o       Members

o       use more primary care and preventive services but fewer nonroutine services

o       Have fewer inpatient admissions

o       Are more engaged

o       Have fewer “gaps in care”

o       Almost three quarters of members with associated health care savings accounts do not exhaust these accounts each year.

This is an upbeat document – although the underlying data has not been subject to peer review. I've only reviewed the press release and the glossy powerpoint.  It’s likely that the high deductible plan had younger, healthier, lower risk members, and this alone could explain some of these findings. 

Click image to enlarge. 

The Journal of General Internal Medicine e-published an evaluation of foregone care in those with chronic illnesses, surveying Massachusetts families in HDHPs and traditional health plan by phone and mail. Harvard Link   This study showed that families in high deductible health plans had over three times greater likelihood of delaying or foregoing care.   This was true among low income families (<400% of federal poverty level) and higher income families, although there was far more care delayed or foregone for those with lower income and families with parents who had no college degree.  40% of those with HDHPs and income below 400% of FPL reported delayed or foregone care, compared to 15.1% of those with traditional health insurance plans.

The proof is in that HDHPs save money, and the dollar savings don’t seem to be limited to the first year or two (although there are still potential selection bias issues). It’s also clear despite the happy faces and fluorescent green graphics that members of HDHPs are less happy with their health plans, and they self-edit care. Sometimes HDHP members forego care that would have been a waste anyway –but sometimes they forego care that could help them live better quality and more productive lives.

The danger of having no health insurance at all is far greater than the danger of delayed or foregone care in a high deductible health plan.  I’ll have more on that in the next day or two.  Health care reform and the rising cost of health care has driven more and more employers to health plans that have high deductibles, and many of the future health insurance exchange programs are also likely to have high deductibles.  

We have to work harder to lower the underlying cost of health care so that we don’t have to cost-shift as much to patients, who are at serious risk of being underinsured now. That risk will continue to increase in the near future.  

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Doctor Billings Gone Wild

Today’s Managing Health Care Costs Indicator is $56,890

That’s how much a New Jersey physician billed Aetna for a bedside consultation, according to a lawsuit quoted in this month’s Managed Care Magazine (free registration required)  The physician, and a number of others cited in this article, were ‘out of plan,’ and therefore not subject to Aetna’s fee schedules.

New Jersey has a consumer protection law which makes it difficult for health plans to allow patients to be balance billed for the difference between a health plans allowable rate and the amount billed by a physician.  At the same time, there are no limits to the amount a physician is allowed to bill.  This is a well-meaning consumer protection, but it’s unbalanced, and can lead to dramatic high bills – and high costs for all insurance rate-payers.  New Jersey should couple this regulation with billing caps, but these are not surprisingly opposed by physicians. 

Aetna alleges that some physicians have set up arrangements where they refer to ‘out of plan’ colleagues or facilities which can bill unlimited amounts, increasing total revenue. (That would be increasing total cost, from the perspective of those concerned about health care inflation).

A physician who does bariatric (weight loss) surgery lucidly explained how health plan fee for service rules and ongoing negotiations encouraged him to have a high “rack rate,” the initial billing rate before discounts or negotiations:

Typically, we bill $24,000 and we expect to get half. That means we get paid $10,000 to $11,000 for the same services we charged $24,000 for last year.  So then we bump our charges up to $30,000.

This surgeon does not participate in any health plan – so all of his billing is ‘out of plan’ and not subject to health plan llimits.  The health plan medical directors interviewed complained that out of plan physicians rarely offered substantial discounts off their billed charges.

The CommonHealth blog  is collecting stories from the Boston market, and reported last week on a $23,000 estimate for an infant circumcision.

There is no perfect answer here, and there are times when health plans arbitrarily set fee for service rates too low.  But the kind of unbridled billing described in the Managed Care article contributes to health care inflation.   Overbilling makes health care less affordable, and is not a victimless crime.

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The Future of Health Plans

It’s been a bad week for health insurers – most of them lost substantial value in the stock market this week after the Obama budget was released, causing investor worry due to lower payments to Medicare HMOs.  Further, the economic funk and rising unemployment will lead to a decrease in the number of Americans insured through the private marketplace, and continuing “buy downs” from comprehensive coverage to policies with higher deductibles and copays.  These plans are also far less profitable to the insurers.

 

Perhaps the biggest threat to health insurers is the possibility that health care reform could allow those under 65 without disabilities to “buy into” Medicare.   Proponents argue that Medicare has low transactional costs, obtains high levels of provider discounts and offers excellent choice to its patients.  How does Medicare achieve these economies?

(1)Medicare spends less than commercial health plans on administration as a percentage of premium – in part because it need do no marketing to attract enrollees, and in part because the premiums are so much higher for the Medicare population than they are for those under 65 (so administration costs shrink as a percentage of total costs.)

(2)Medicare does not do “network contracting” as private health plans do.  All licensed physicians who have not been convicted of fraud are eligible to join – and to do so they must agree to follow a uniform set of Medicare rules and to accept Medicare reimbursement rates. 

(3)Hospitals have long collected data showing that they lose money on Medicare, and make this up by obtaining high rates from commercial insurance plans.  It’s a classic example of cost-shifting.  If the commercial plans didn’t exist, we would either have to take billions out of our inpatient facilities, or Medicare would have to pay substantially higher rates.  

 

Today’s NY Times has an article by Reed Abelsonon how health insurers are positioning themselves for health care reform. The article contrasts the approach of United Health Care, which boasts of diversifying its business, with Aetna, which promotes itself as a company that can actually influence the delivery of health care.

 

Without diversifying out of health insurance, how can health plans add value and continue to prosper in the coming years?

 

(1)Empower patients

Engaged patients who know about their illnesses and their medical care have better outcomes, and sometimes they even prevent medical errors.  Health plans are excellent at marketing, and know how to get the attention of their enrollees.

(2)Convert vast quantities of data into information to transform health care

Some commentators decry the inaccuracy and lack of timeliness of claims data.  But my experience is that claims information is very complete, since few providers fail to bill for their services. Unfortunately, electronic medical record data tends to be unstructured and is documented differently from system to system.

(3)Promote innovative payment methodologies for providers

The current predominately fee for service reimbursement encourages additional units of service, and does not encourage coordination of care.   Medicare is statutorily mandated to pay fee-for-service, and based on its size alone would have a hard time moving ambulatory care into episode based payment or capitation.  Health plans have to compete with each other for patients and for provider networks, and the existence of multiple competing insurers makes it more likely we will see innovation in payment methodology.  

(4)Develop selective networks

Medicare is too big to develop exclusive networks, and the political fallout from excluding a major hospital or a large group of physicians from Medicare would be huge.  Health insurers can develop selective networks for a broad range of patients, or can develop selective networks for narrow groups such as patients who require organ transplantation or inpatient behavioral health care.   Multiple competing insurers are key to this type of innovation.

(5)Transparency

Medicare made some substantial strides in promoting transparency over the last few years   But health plans have put dramatically more information on the web about provider quality.  Health plans should make their data available to state agencies or collaborative to do reporting, and should continue their efforts to educate their members about where to get the highest quality, cost-effective care.

(6)Promote evidence-based care

We have adequate evidence of the efficacy of too few medical decisions. But even where the evidence is in, our health care system remains unreliable.  We treat few diabetics to blood pressure, blood sugar, and cholesterol goal, and we send patients out of our offices with blood pressure which is often too high.  We miss vaccinations and cancer screenings. We give patients medications that are dangerous in combination, and medicines that are dangerous in the context of an individual patient’s coexisting medical illnesses.   Health plans should use claims and other data to identify opportunities to improve care for individuals and populations, and implement programs to alert providers and patients to opportunities to deliver better health care.

 

 

Health care reform will mean enormous changes – and much disruption in the health insurance market.  There will be plenty of opportunities for innovative health plans to add value and use their expertise to improve the quality and the cost-effectiveness of care.

 

 

 

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