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Altogether Now… But Not a Single Payer

On July 5, 2017
By: Ron Peck, Esq.

I have in the past remarked both that a single payer system would be harmful to patients and providers, and that it therefore behooves providers and benefit plan administrators to collaborate on an approach that ensures long term sustainability and viability of private benefit plans.

In response, I have been asked why a single payer system is bad for providers and patients, as well as why the current benefit model is not sustainable or viable long term.  While fully responding to both of these inquiries requires way more real estate than I have here, I hope in this blog entry to briefly explain.

WHY THE STATUS QUO CANNOT CONTINUE

I was recently asked to speak about our healthcare system.  I’d planned to talk about how PPACA (aka the ACA or Obamacare) only targets one-third of the healthcare system – that being payers (insurance), while mostly ignoring the other two-thirds: payees (providers) and patients.  

When I performed a web search to find pictures of the three for my slide deck, (insurance, providers, and patients), almost all of the available stock photo images associated with each were as follows: Provider; a wise, grey haired, caring doctor gently comforting a sick child – someone we could trust.  Patient; a desperate looking otherwise average person, clearly in pain and needing help – someone we could relate to.  Insurance; a sleazy looking businessman in a fancy suit, with a slick grin and pockets full of cash – someone we could hate.

Call it a scapegoat, or something else, but of the three players in healthcare, insurance is the villain.  Small wonder, when you consider that they are the ones that employers blame when rates go up; they are the ones siphoning salary from your paycheck; and they don’t provide anything useful.  I mean – providers save lives.  Insurance ruins them, right?  Insurance profits off of others’ suffering, right?  Insurance can charge whatever they want because the alternative is death, right?  Wrong.

Health insurance is routinely ranked beneath the pharmaceutical industry, medical products and equipment, and even some hospital systems, when it comes to profitability; (https://www.forbes.com/sites/liyanchen/2015/12/21/the-most-profitable-industries-in-2016/#12b660035716).  Now – I understand that “profit” means your revenue to cost ratio is great… and that it’s absolutely possible that insurers are taking in way too much revenue, and simply fail to address costs (resulting in poorer profits), but regardless of the reason – the national belief that insurance is printing money, is misplaced.

As I’ve said many times before, insurance isn’t healthcare – it’s a means to pay for healthcare.  This idea that insurance can strong-arm people into paying whatever they want, because people can’t say no – because not having insurance means certain death – assumes that without insurance there is no healthcare.  Yet, the truth is that healthcare would exist with or without insurance; we’d just need to find a different way to pay for it.  People “need” insurance – not for its own sake – but to pay for healthcare, because healthcare itself is too expensive.  

Imagine the following scenario:  Oil changes for your car jump to $1,000 per oil change.  Rather than be outraged with the price, we turn around and demand that auto insurance start paying for it.  We then get outraged when auto insurance rates increase.

Insurance isn’t without blame.  Indeed, I believe strongly that some forms of benefit plan are the only types that should be allowed to exist; that others are too profit driven, and/or force insureds to pay the cost when they make mistakes or act inefficiently.  Yet, with that said, blaming those actors (even the bad ones) for all the problems facing healthcare is a huge mistake.

Health insurance is not a behemoth, stomping around, forcing its will on insureds and providers.  In fact, the opposite is true.  Problems with the status quo arise not from the strength of the insurance market, but rather, their weakness.  This weakness, which we’ll next dissect, would be abolished by a single payer system – at the expense of medical service providers.

Presently, insurers (try to) negotiate with hospitals and drug companies on their own.  To do this, many rely upon preferred provider organization (PPO) networks or other such programs, whereby someone (the insurer itself or a network acting on a plan’s behalf) negotiate deals with providers, which then allows the provider to be deemed “in network.”  

In exchange for agreeing to the network terms, providers are promised prompt payment, and reductions in (or elimination of) audits and other activities payers otherwise engage in when dealing with medical bills submitted by out of network providers.  Indeed, benefit plans unilaterally calculate what the covered amount is when paying an out of network provider (usually resulting in the “balance” being “billed” to the patient).  When paying an in-network provider, however, benefit plans are required to pay the network rate (the billed charge minus an agreed upon discount), regardless of what pricing parameters they’d usually apply to out of network bills.  This is agreeable to the payer, meanwhile, because it means they get a discount (albeit off of inflated rates), and – more importantly – the payment is payment in full… meaning patients aren’t balance billed.

Due to the payer’s size (or lack of size) and number of payers present, competition between payers and networks, and other elements present in our market, payers cannot “strong arm” providers.   Compare this to markets where there is a single payer; when providers must agree to terms controlled by the payer, since it’s their way or no way.  

In other words, in a pure single-payer system, there is only one payer available – and you play by their rules, or you don’t play at all. Currently, in the United States, Medicare and Medicaid are the two “biggest” payers, and thus, it should come as no surprise that they routinely secure the best rates.

So – when you ask why the current system can’t survive, look at the prices.  Yes – instead of focusing on getting everyone enrolled in an insurance plan, and hoping that will somehow make things less expensive, instead look at what we’re actually paying.  As with the $1,000 oil change, sometimes the simplest answer is the right answer.  Healthcare is too expensive because healthcare is too expensive.

A 2011 study (http://content.healthaffairs.org/content/30/9/1647) found that reimbursements to some US providers from public payers, such as Medicare and Medicaid, were 27% higher than in countries with universal coverage, and their reimbursements from private payers were 70% higher.  This tells you two things – private plans pay way more than Medicare, and Medicare pays way more than “single payer systems.”

What does this mean?  If providers fail to offer private payers better rates soon, they will bankrupt the system.  If that happens, Medicare will go from being the “biggest” payer to the “only” payer… and the rates they pay will drop accordingly.  This then, brings us to the next chapter…

THE ISSUES WITH A SINGLE PAYER

Businesses need to stay profitable to stay afloat, and medical providers are no different.  In a single payer system, usage increases (because – from the “consumer” perspective [aka patients] it’s free), and reimbursement to providers decreases (for reasons discussed above).  That means providers are expected to do more with less.  Naturally, this results in decreases in quality, and longer waiting times (assuming access is available at all).  

To counter this natural shift, many nations with single payer systems also implement strict central planning.  This moves many healthcare choices from individual patients and providers, and instead allows the government to set the rules.

Months to have a lump examined?  Hours upon hours sitting in a waiting room?  Death panels?  The “horror” stories we hear from other nations with single payer systems are not shocking – they are expected.  Yet, those who support a single payer system do so because the current system is too expensive.  Thus, to avoid a single payer system, we need to make healthcare less expensive.  How do we do that?  Reduce the cost of healthcare, and reduce the cost of health insurance accordingly.

IDEAS FOR THE FUTURE

First, many have argued (and I tend to agree) that health insurance pays for too many medical services.  Routine, foreseeable services should not be “insured” events.  Insurance is meant to shift risk, associated with unforeseen catastrophic events.  A flu shot doesn’t fall into that category.  If people paid for such costs out of their own pocket, hopefully the cost of insurance would decrease (adding cash to the individual’s assets with which they can pay for said expenses).  Likewise, hopefully providers would recognize that people are paying for these services out of their own pockets, and reduce their fees accordingly.  If an insurance carrier wanted to reimburse insureds for these expenses (promoting a healthy lifestyle and avoiding some catastrophic costs insurance would otherwise pay) or employers want to cover these costs as a separate and independent benefit of employment (distinct from health insurance) so be it; (cough*self-funding*cough).

Next, we need to refocus on primary care as the gatekeeper.  I’ve seen a movement towards “physician only” networks, direct primary care, and other innovative methods by which benefit plans and employers promote the use of primary care physicians, and I applaud the effort.  They provide low cost services, identify potential high cost issues before they multiply, and steer patients to the highest quality yet lowest cost facilities and specialists when needed.

Lastly, I’ve seen benefit plans attempt to remove themselves from traditional “binding” network arrangements and instead contract directly with one or two facilities in a given geographic area.  By engaging with the facility directly, they can find common ground, and identify valuable consideration not previously considered.  Between increased steerage, true exclusivity, electronic payment, prompt payment, dedicated concierge, and other services payers can offer hospitals – above and beyond dollars and cents – some facilities are able to reduce their asking price to a rate that will allow the plan to survive… and thrive.

From ACOs to value based pricing… from direct primary care to carving out the highest cost (yet rarest) types of care – to be negotiated case by case – many innovative payers are trying to cut costs and ensure their survival.  The next step is getting providers to agree that such survival is good for the provider as well.  Compared to the alternative, I hope they will not cut off their noses to spite their faces.

Behind Closed Doors

On June 19, 2017
By: Brady C. Bizarro, Esq.

Anyone paying attention to national politics in the past six months knows that Washington has a problem with leaks; leaks from the White House, leaks from the intelligence community, and unsurprisingly, leaks from Capitol Hill. While many of these leaks come from “anonymous” sources and some are later debunked, they can be extremely damaging to both administration officials and lawmakers. Leaks, however, are not typically an issue in the legislative process. This is because, although legislation is not usually made public until it reaches a congressional committee, Congress routinely holds public hearings, meetings, and roundtable discussions after introducing legislation that could have a significant impact on domestic policy. This time around, however, Republican leaders have chosen to write their health care bill behind closed doors, and that decision should worry employers, insurers, and providers alike.

Back in March, the Washington Post reported that the House bill to repeal and replace Obamacare was being kept secret in an undisclosed room in the U.S. Capitol. This led Republican Senator Rand Paul (R-Ky) on a rather public quest to find the bill and to demand that his House colleagues show him the secret draft. Eventually, a draft leaked to the press, causing Republicans significant grief and making the task of passing the legislation that much more difficult. The Senate has also chosen secrecy, opting not to hold any public meetings on their version of a repeal and replace bill. The strategy seems to be to wait until the Senate has enough votes to pass the bill before unveiling it. Unsurprisingly, an outline of that bill emerged last week and is now causing Senate Majority Leader Mitch McConnell (R-Ky) many headaches.

According to the leaked outline, the Senate bill requires insurance companies to offer coverage to people with preexisting conditions and, unlike the House bill, it prohibits them from charging sick people higher premiums. The outline still permits states to seek waivers that would permit insurers to decide not to cover essential health benefits. This effectively means that insurers can reinstate lifetime and annual limits on coverage since the ban on limits applies only to essential health benefits. Finally, the outline reveals that heavy cuts to Medicaid are still planned, but are pushed out a few more years. In short, these changes represent a compromise between hardline conservatives who want a full repeal of Obamacare and moderate Republicans who are concerned about the impact on low-income Americans and those with pre-existing conditions.

Since we do not know for sure what the final bill will look like, it is futile to try to assess its impact on the health care industry as a whole and on the self-insurance industry in particular. Still, one conclusion we can draw is that the legislative strategy at play is creating substantial uncertainty for our industry. When the Affordable Care Act was being passed, Democrats held public hearings involving industry experts, advocacy groups, and other key stakeholders. While the bill was far from perfect, at least interest groups got the chance to give their input and to discuss their concerns in an open forum. By writing their health care reform bill behind closed doors, Republicans are making themselves susceptible to leaks and to charges that they shut key stakeholders out of the process. It remains to be seen if this strategy is more or less likely to produce a bill that works for the health insurance industry and the American people.

It's Never Too Soon

On May 22, 2017
By: Jen McCormick, Esq.

Although the regulations may change, it's important to begin thinking about plan changes for the upcoming plan year.  The specifics for compliance requirements may still be unclear, employers should already be in process of contemplating cost containment updates.

There are many ways to add value to an employee health benefit plan. An employer should perform an annual review of their plan to confirm that the plan takes advantage of as many cost containment opportunities as possible. For example, does the plan have strong third party recovery language? Overpayments language? Clearly defined terms? Appropriate definitions? Vendor program with corresponding language? If not, the plan should be cognizant of what's missing or not working, so updates can be made.

In addition to cost containment, and while some rules are in flux, there are many regulatory requirements a plan must be aware of and having corresponding language. For example, is the employer subject to ACA Section 1557? Employer Mandate? Does the plan comply with the MHPAEA? Did the plan pick a benchmark for defining essential health benefits? With all the regulatory changes, plans should stay alert and ready to make renewal modifications.

Last, but definitely not least, employers should ask their employees to weigh in on the plan. Remember it's an employee benefit to offer coverage - so employers should be offering beneficial coverage.  For example, is there a specific service that many employees wish was covered? Could that be added to the plan? Is there a trend in services for employees for which you may want to offer an incentive?  Being self funded allows you to be creative - take advantage!

Plans have freedom to design benefits to suit their needs. With this privilege comes the need to plan ahead and be creative.  Employers should be proactive and ensure this opportunity to annually update the plan design is taken seriously!

My Trip to the Emergency Room

On April 18, 2017
By: Jen McCormick, Esq.

Since becoming a mom, I’ve experienced two pretty scary parenting adventures – taking a toddler to Disney World solo and taking a toddler to the emergency room. While I faced long lines, costly food, and anxiety during both events, it was the emergency department visit that by far was the scariest.

After a same-day sick visit at the pediatrician’s office, we were sent to the emergency room. Our pediatrician administered a treatment onsite, but after not quickly seeing results or improvement in my toddler’s condition, we were sent to the emergency department. This was terrifying to hear, but also a bit surprising to me. My toddler seemed in good spirits and seemed happy.

Of course I didn’t want to second guess the doctor, especially when my child’s health may be on the line, but I had to ask why they needed us to rush to the emergency department – was something happening and I just didn’t realize it? Not exactly. The pediatrician said that our toddler’s oxygen level was too low and his respiratory rate was too fast – and he needed to be monitored and that was not something the pediatrician’s office could do or had time to do.

I couldn’t help but question whether this was the most effective (cost or otherwise) way to manage care. Then again, it was my toddler and being a mom superseded my desire to argue. We went, and were monitored, and I continually questioned what was happening (and why) during each treatment step.

We try to encourage patients to take control of their health care – make informed decisions and properly utilize the emergency room (for emergency situations). I am not suggesting that our situation was not urgent or an emergency, but it was unexpected that the next step for us was the emergency department.  Maybe this is a trend (sending patients to emergency departments after a primary care visit) or due to time or resources. Either way, question what is happening so you better understand, and more importantly, ensure you receive the most appropriate care (particularly for our patients too young to speak for themselves).


Trump’s Healthcare Bill Failed… Here’s Why

On April 3, 2017

By: Adam Russo, Esq.

The fact that Trump’s healthcare bill failed is big news and now everyone in Washington and in the media is trying to place blame on someone, whether it’s president Trump, Speaker Ryan, the Freedom Caucus or the Democrats. The reality is that this bill would not have worked and I believe that no bill passed in the next few years will work either and the reason is simple. Neither the Democrats nor the Republicans are willing to truly lower the overall cost of healthcare.  The only way that we can have a successful health plan for all Americans is by fighting the root of the problem – the ridiculously high priced hospital and other facility bills and the huge sticker prices on specialty drugs.

There is an easy solution – force the hospitals to justify their charges and negotiate with the pharmaceutical companies on what they can charge. However, the politicians in Washington will never do it because these two entities are the reason they are in DC in the first place. They fund the campaigns, they feed the lobbyists, they are the biggest employers in most representatives’ districts.  They will never push them or fight them or even question them because they need them. If you are a politician and the largest employer in your district that employs the most people is the hospital, then are you really going to criticize their practices? Hell, no! Until this changes, we will see the same games being played as they are now. That’s why we are here at The Phia Group, because we are not afraid to criticize, to fight, to question and to ensure that our clients can offer their employees the best health care coverage at the lowest prices possible.