ICYMI: Expert Highlights Lessons to Be Learned From MassCare
Posted by The Campaign on June 09, 2010 at 1:42 PM
This OpEd from a employee benefits expert in Massachusetts is a little delayed in being posted, but is still incredibly relevant. It is written by Mark Gaunya who has over 20 years experience in the employee benefits field.
Gaunya argues that Massachusetts is a perfect test case of what to expect from the new health care reform law. He writes:
"Almost four years after implementing the Massachusetts health care reform law (MassCare), the private market is 'wrestling' with state government to address rising health insurance costs. What was lost in the national debate and threatening the sustainability of MassCare is the fact that health insurance is expensive because health care is expensive."
While this observation is not new, it certainly carries a lot of weight coming from someone who is living the experience of expanded access without controlling costs.
In fact, Gaunya argues that a lot of the rhetoric used against health plans is off the mark, writing "Pointing the finger at health insurers is politically convenient, but significantly misguided."
He also offers a series of five lessons that can be learned from Massachusetts' health care reform law, concluding with this: "MassCare created an unsustainable 'access' model, because it didn't address cost at the same time as access."
Sound familiar? That's because it was the same argument made by hundreds of experts about what will happen at the national level if costs are not addressed.
And it leads to Gaunya's conclusion:
"One thing is clear - health insurance is expensive because health care is expensive."
The fortunate thing the nation has going for it is we can see firsthand what happens if we do address costs at the same time as expanding access. It's not too late, but the question is will policymakers heed the warning and learn the lessons of recent history?
ICYMI: The New York Times Highlights The ‘Incidentaloma’ Problem
Posted by The Campaign on June 09, 2010 at 1:16 PM
Over the past year here at the blog we have shined the spotlight on some of the problem areas in our health care system that lead to higher costs and no corresponding increase in quality of outcomes or patients' care. And even in some cases potentially causing patients to become sicker.
No where is this more of an issue than in the explosion of medical tests and imaging over the past 10 years. In fact, many recent studies have come out highlighting the potential negative impact of medical tests and imaging on patients including potentially more cases of cancer.
Today's New York Times focuses on this topic and coins a phrase for it "The 'Incidentaloma' Problem". The article highlights the story told by Nicholas Kristoff's experience with CT scans. The article notes:
"His tale also brings to the fore a conundrum the medical community confronts with increasing urgency, given the pressing need to deploy expensive imaging technologies in a manner that balances risks and costs with benefits."
But, the article continues, this is the problem with with screening by imaging "...medical scans pick up incidental findings that may be benign, leading to complications that make an otherwise healthy person ill."
The author of the article, Dr. Peter Libby, further notes "...it's important to think rigorously about the benefits versus the risks and costs of medical procedures, rather than relying on impressions or remarkable individual cases. The medical literature indicates that incidental findings leading to follow-up medical procedures occur in more than 8 percent of cardiovascular imaging studies."
Dr. Libby concludes that while medical imaging is useful when used correctly, all of the benefits must weighed against all of the potential PROBLEMS that could arise. He writes "...we should bear in mind the potential risks they entail if used indiscriminately. In most situations, a prior consideration of risk for disease using non-imaging markers like medical history, physical exams and simple blood tests may help us target imaging in a way that better balances risks with benefits, and help us avoid in particular encountering those 'incidentalomas' best left undetected."
Fact Check on the Impact of New Medicare Advantage Cuts on Seniors
Posted by Campaign on June 08, 2010 at 7:12 AM
Fact Check on the Impact of New Medicare Advantage Cuts on Seniors
"Seniors are going to be shocked when they see the impact recently enacted Medicare Advantage cuts will have on their health care coverage. These are the largest ever cuts to Medicare Advantage and will result in higher premiums and reduced access to vital health care services for seniors in the program," said AHIP Press Secretary Robert Zirkelbach.
AHIP letter to Secretary Sebelius
Last Friday, AHIP President and CEO Karen Ignagni sent a letter to Secretary Sebelius expressing concern about the impact new cuts to Medicare Advantage will have on seniors in the program. Highlights of the letter include:
- "The new health care reform law includes $136 billion in direct cuts to Medicare Advantage, along with $70 billion in indirect cuts. This amounts to the largest funding reduction in the history of this program."
- "Medicare Advantage beneficiaries are likely to begin to feel the effects of these cuts starting next year."
- "History has demonstrated that inadequate Medicare Advantage payments result in higher premiums and reduce benefits and choices for seniors."
CBO: Millions to Lose Medicare Advantage Coverage, Benefits Cut in Half
The Congressional Budget Office released its projections of the impact proposed cuts to Medicare Advantage would have on the millions of seniors across the country who rely on this program for their health security. Here are a few highlights:
- 5 million seniors will lose their coverage:
According to CBO, Medicare Advantage enrollment in 2019 will drop from 13.9 to 9.1 million. This is a 35 percent decline in enrollment based on current projections - a loss of 4.8 million seniors.
- Benefits will be cut in half:
According to CBO, the average value of additional benefits provided by Medicare Advantage plans will decline from $135 in 2019 to $67 - a 50 percent decline.
CMS Actuary: "Less Generous Benefit Packages" and 50 percent of Seniors to Lose Medicare Advantage Coverage
The Centers for Medicare and Medicare Services Chief Actuary Rick Foster released an analysis of the Patient Protection and Affordable Care Act in late April. The analysis showed that the reform law would have the following impact on Medicare Advantage beneficiaries:
- Benefit reductions:
"The new provisions will...result in less generous benefit packages."
- 7.4 Million seniors will lose coverage:
"We estimate that in 2017, when the MA provisions will be fully phased in, enrollment in MA plans will be lower by about 50 percent (from its projected level of 14.8 million under the prior law to 7.4 million under the new law."
Seniors in Medicare Advantage receive high quality health care services
AHIP released a new publication that provides company specific examples of the types of programs and services that health plans have implemented to reduce preventable hospital admissions, readmissions, and emergency room visits:
- Expanding patient access to urgent care centers, after-hours care, and nurse help lines give patients safe alternatives to emergency rooms for non-emergency care.
- Arranging for phone calls and, in some cases, in-home visits by nurses and other professionals to make sure that follow-up appointments are kept, medications are being taken safely, care plans are being followed, medical equipment is delivered, and home health care is being received.
- Offering intensive case management to help patients at high risk of hospitalization access the medical, behavioral health, and social services they need.
- Arranging for home visits by multidisciplinary teams of clinicians, who provide comprehensive care, teach patients and their caregivers how to take medications correctly, and link families with needed community resources.
- Revamping physician payment incentives to promote care coordination and improved health outcomes.
A new analysis of federal and state government data provides further evidence that seniors in Medicare Advantage have lower risk-adjusted hospital readmission rates than patients in Medicare's traditional fee-for-service (FFS) program. The study analyzed data from nine states and found reductions in risk-adjusted hospital readmission rates averaging 14-29 percent among seniors in Medicare Advantage compared with Medicare FFS enrollees.
BREAKING NEWS: New Survey Shows Employers Think Costs Will Rise Under New Reform law
Posted by The Campaign on May 26, 2010 at 6:47 AM
Throughout the health care reform debate, there were many voices that raised concerns about the issue of health care costs and whether the new reform law would adequately address in a meaningful way the ever increasing growth in costs. One of those voices was America's employers, and while they regularly raised the issue of costs, the law seemed to have ignored those concerns and did not effectively develop long term strategies on this issue.
It is not surprise then that a survey released yesterday by Towers Watson shows that employers' concerns about health care costs has not abated. Click here for the full survey, and read below for some highlights as reported in an AP story from today:
"Big companies think health care reform will hike their costs..."
"...94 percent of those that responded believe the reform law passed by Congress earlier this year will raise costs."
"Some companies could see small reform-related cost hikes next year, after the start of provisions that ban lifetime maximums for benefits and extend coverage of young adult dependents on parental plans to age 26."
"Containing health care costs was an essential or high priority for 96 percent of survey respondents..."
What They Are Saying - Medical Loss Ratio
Posted by Campaign on May 19, 2010 at 2:22 PM
What They Are Saying - Medical Loss Ratio
(Excerpts taken from comment letters submitted to HHS or NAIC)
American Academy of Actuaries
o "...we would like to raise a broader policy concern-namely, the potential disruptive impact that the implementation of §2718 could have on the individual health insurance market prior to (and potentially beyond) the effective date of the guaranteed issue requirements, due in large part to historical pricing practices employed in the individual market."
o "Materially reducing the non-claims costs associated with existing business in order to reduce financial losses is unlikely to be feasible. Such a situation might lead some companies currently active in the individual market to terminate the existing blocks of business and leave the market, in an effort to avoid those future losses and the potential solvency concerns associated with those future losses."
o "If some companies do exit the individual market, then those companies' former policyholders may find themselves unable to find new coverage in the individual market for a period of years (noting that guaranteed issue requirements do not take effect until 2014), and would not be eligible for the new high risk pools created by PPACA §1101 during the first six months after cessation of coverage."
o "Individual policies underwritten and issued prior to the introduction of guaranteed issue requirements in 2014 will continue to exhibit traditional patterns of having loss ratios that increase by policy duration. Issuing new underwritten policies over the next few years would therefore tend to make it more difficult for an insurer to achieve an 80 percent annual MLR across its entire block of individual medical business. This could serve as an incentive for carriers who remain in the individual market to minimize their marketing activity prior to 2014, creating a potential lack of product availability in the individual market over the next few years."
o "In order to mitigate these potential disruptive factors in the individual market, the NAIC may wish to explore alternatives to a straight-forward application of an annual MLR threshold to the individual market, at least in a transition period over the next few years."
o "...we have concerns regarding the application of the required annual MLR calculation to individual business priced to a lifetime MLR target. Due to the inherent inconsistency between the lifetime pricing methodology used for individual underwritten medical business, including the expected pattern of durational loss ratios, and an annual MLR computation, it may be prudent for the NAIC to swiftly consider options for adjusting the MLR computation for individual medical products."
National Business Group on Health
o "...we support the inclusion of a broad array of quality improvement activities in this calculation for the insurance market because of our own plans' positive experiences with these programs, the Federal Employee Health Benefit Plan's positive experiences with them, the fact that the PPACA expands many of them to the Medicare and Medicaid programs and because these programs will not be available to self insured employers if they are not supported in the marketplace."
o "Broad inclusion of quality improvement activities in this calculation will help to ensure that these programs continue to be available for the benefit of consumers in the individual and small group markets, and the exchange plans in the future."
o "Employers and insurers have vast experience with, and rely heavily upon, a range of clinically proven tools and services that promote high-quality health care focused on improving care for the patient (consumer), including: care coordination, patient decision aids, patient support services and health information technology (HIT) for clinical care and population health management. It is vital that these clinically proven services are included in the clinical services/health care quality categories of expenses under MLR to continue to improve health care outcomes for the patient and to reduce harms, disease burden, disparities, waste, and costs."
o "HHS must ensure that it develops a MLR definition that is aligned with the PPACA efforts to encourage and reward high-quality, integrated health care systems that offer these types of services..."
Physicians Group for Coordinated Care
o "Our experience has shown us that our patients are better served through robust systems of coordinated care that encompass prevention, chronic care management, health care information technology and better physician patient communications."
o "However, clear guidelines regarding the implementation of this new minimum MLR policy - especially around the definition and calculation of MLR - will be critical to preserving patients' access to coordinated care, encouraging the use of quality improvement methodologies, and ensuring adequate competition in every market. How MLR is defined will have enormous implications on the coordinated care model."
o "It will most certainly create incentives (or disincentives) for the acquisition and use of strategies and technologies relating to disease management and care coordination."
o "If, payments made to physician groups were to be allocated as other than MLR, you could create a disincentive for plans to contract with physician groups. If that were to happen, the model under which physician groups successfully operate would be severely undercut. As a result, patients would experience a disruption in the continuity of their care, the value recognized in the study, referenced above, would be lost, and the foundation for the development of Accountable Care Organizations would be significantly eroded."
o "...the definition of clinical services should, by necessity, encompass activities such as quality improvement initiatives, medical records review, evaluation of appropriate diagnoses, pharmacy treatments (including medication therapy management), clinical data collection and analysis for quality improvement purposes, care coordination activities, patient education, and many of the supporting clinical IT investments and operating expenses."
o "Excluding such expenses from the definition of clinical services would create a powerful disincentive for these services, which by their very nature require critical internal resources. Moreover, this would be incongruent with PPACA's fundamental intent and overarching value-based objectives because it would, in effect, undermine the efficiency and effectiveness of our health care system."
o "Accordingly, there must be a robust definition of what constitutes such activities ("activities that improve health quality"). We believe this definition should include activities that promote access to care and choice for beneficiaries."
American Benefits Council
o "In particular, large employers that sponsor group health plans have a strong interest in encouraging activities that improve the quality and appropriateness of the health benefits they offer and the health status of their employees. We therefore urge that your guidance on the calculation of medical loss ratios continue to recognize the importance of these value- added services."
o "We ask that certain quality measures which are valuable to employers and their employees be included in the MLR calculation, including: wellness programs, disease management programs, fraud, waste and abuse activities, and certain health information technology tools. These quality measures provide valuable services to employees improving their health and the value of the care they receive. Failure to include these measures would increase costs for employers, and could jeopardize programs that are valuable to employees and beneficial to their health."
o "Everyone benefits when we prevent fraud, waste and abuse, and employers rely on initiatives that intervene when these costly and inappropriate practices are identified in their plans. This not only prevents unnecessary premium increases, but helps to improve patient safety -- and therefore the quality of care -- for employees. It is important to employers that fraud, waste and abuse detection and prevention activities be included in the MLR definition of quality."
National Coalition on Benefits
o "Based on our members' experience in sponsoring and financing employee health benefits, we believe a very important goal of the Department's guidance on the MLR provision as they apply to fully insured products should be to support and encourage employers to promote higher quality health care and receive greater value for the dollars we spend on health care."
o "Specifically, we support investments that are made in improving the delivery of appropriate medical services, such as in disease management, care coordination programs and wellness programs, health information technology tools and solutions and fraud and abuse prevention initiatives, to be included as 'activities that improve health care quality' in the calculation of MLRs."
o "These investments are supporting the direct delivery of medical services and should not be categorized as administrative costs, since they improve patient care and health outcomes. The above efforts will improve the value and the delivery of the medical services offered under the plan."
US Chamber of Commerce
o "The Chamber urges the agencies to approach the divide between 'quality improvement' costs and 'administrative' costs in a way that will minimize disruption, maximize the kind of activities that improve the quality and affordability of health care, and avoid overly regulating the health care sector."
o "In general, agencies will fail consumers if this regulation imposing strict medical loss ratios leads to a decline in wellness and case management programs, quality programs, efficiency and adherence programs, programs to combat fraud and abuse, and programs to drive down premiums. The Chamber believes that all of the above are in the best interests of patients and consumers, and thus should not be considered 'administrative' on the part of the insurer who is paying for these efforts."
o "Worst of all, imposition of an overly strict MLR creates a perverse incentive for insurance companies, wherein the only way to increase profits or hire staff or improve infrastructure, etc., will be to increase spending on medical services, thus further increasing costs for everyone involved."
o "The drawbacks of categorizing disease or case management activities as 'administrative' include that if the Departments elect to classify these types of programs as 'administrative' expenses, insurers who currently offer disease management programs as an offering in a larger health care package, could elect to cut or even stop offering disease management programs to their clients."
o "The costs associated with coordinating care are far more affordable than the costs to consumers (in both dollars and in health outcomes) and insurers of silos of care lacking appropriate coordination. Care coordination efforts should not be considered administrative, and they pave the way to improved quality of care."
o "Many activities undertaken already, and many that will be required as a result of PPACA, include the developing, gathering, aggregation, and analysis of data in order to measure and incentivize quality...If these activities are considered 'administrative', insurers will be incentivized to reduce or eliminate their involvement - perhaps a welcome occurrence to providers who do not want to be measured or compared, but certainly a devastating consequence for consumers."
o Consumers demand that insurers help in efforts to control premium costs, and a key way of doing so is to prevent fraud and abuse...Programs which prevent fraud and abuse improve the quality of care for patients by freeing up funds that would otherwise be wasted, and improve patients' ability to afford health insurance, as well as their financial freedom."
o "A sure way to drive up premium costs for consumers, thus making it more difficult for them to obtain insurance, is to categorize broad swaths of cost-‐control programs as 'administrative', thus via the MLR incentivizing insurers to drop these programs...The agencies should not designate programs that are aimed at helping consumers control costs as 'administrative' in nature, because these programs make health benefits more efficient, driving quality for consumers."
NCQA
o "NCQA strongly supported the statutory provision to include activities that improve health care quality together with clinical services in calculating the medical loss ratio."
o "In our experience, activities that improve health care quality would encompass expenses related to: wellness and health promotion, care coordination, disease management, accreditation, activities supporting health information technology and reporting quality measures. All of these activities represent investments that can lead not only to higher quality but better value in health care spending on clinical services."
o "Health plans that invest in prevention - for example through appropriate immunizations and tobacco cessation counseling-will have healthier enrollees, whose spending on health care services should be lower over the long run."
o "These types of services are clearly intended to improve the health of populations."
NAIFA, NAHU, IIABA, and CIAB
o "We hasten to underscore that in and of itself, imposing minimum MLR requirements does not address many of the public policy concerns surrounding the health system. MLRs do not help contain medical care spending growth, ensure that health care services are appropriate and accurately billed, or address directly the quality and efficiency of health care services."
o "It would be a disservice to patients and run counter to Congressional intent to mandate the inclusion of many new services as essential health benefits, and then define allowable expenditures for calculating the MLR in a way that makes it difficult or impossible to support these programs while maintaining an MLR that meets an inflexible threshold. In a post reform environment, limiting incentives for health plans to use dollars to better coordinate and manage care and to protect consumers' premiums through plan integrity efforts would be counterproductive and wasteful."
o "...we are extremely concerned that narrow MLR definitions would adversely impact spending on such important health plan activities as case management, wellness, disease management, and fraud and abuse prevention programs, among others...If they are somehow diminished due to narrow MLR definitions and enforcement, the quality of care delivery for consumers will deteriorate and health care costs will surely increase."
o "Many insurer activities are designed to ensure that consumers receive the best care at the best time-which leads to higher overall quality of health...These types of activities have been recognized as quality enhancing by many respected national organizations-such as the National Committee for Quality Assurance, the National Quality Forum and the Leapfrog Group, among others."
o "A reasonably broad definition of quality improvement activities will allow plans to advance new patient health and wellness programs that ultimately could 'bend the cost curve' and help make coverage more affordable."
o "These activities are not administrative in nature, but rather help to support direct patient care benefits through improved care management, support and activities to reduce health premiums. We encourage HHS to adopt a flexible and reasonably broad definition of these activities so plans are provided incentives to innovate based on improved knowledge of what works well to improve health care quality and that incorporates advances in medical science."
o "We share the concerns previously expressed by the NAIC and American Academy of Actuaries, among others, that the new MLR requirements may have a potential disruptive impact on health insurance markets-especially individual and small group markets. We are particularly concerned about the impact of the MLR requirements prior to the effective dates of other insurance market reforms, due in large part to historical pricing practices employed in these markets."
o "It is unlikely that some carriers can reduce the non‐claims costs associated with existing business in order to reduce financial losses in seeking to comply with the MLR. Such a situation might lead some carriers currently active in the individual market to terminate the existing blocks of business and leave the market... If some carriers do exit the individual market, then those insurance plans' former policyholders may find themselves unable to find new coverage in the individual market for a period of years, and would not be eligible for the new high risk pools created by the PPACA §1101 during the first six months after becoming uninsured."
URAC
o "Through the URAC accreditation process insurers can demonstrate that the service provided meets the NAIC cost category identified."
o "URAC accreditation could be utilized as independent verification of services which clearly fall into the health care quality expense category."
o "Accreditation is widely recognized and utilized by both federal and state regulators as a quality assurance process and quality improvement tool."
o "Accreditation costs are clearly related to ensuring quality in the delivery of health care and should be counted as a direct quality cost for purposes of medical loss ratio calculations."
o "In addition, URAC is supportive of the conclusions a recent paper developed on minimum loss ratios by the American Academy of Actuaries where they describe case management, disease management, 24-hour nurse hotlines, and wellness programs as more 'akin to benefits than administrative expenses' and appropriately factored into the value of benefits for the calculation of medical loss ratio."
o "These programs and their pharmacy counterparts, drug therapy management and medication therapy management are critical components of population health management programs which support physician-guided health care delivery system which supports, engages, and empowers patients to adhere to treatment protocols, reduce the likelihood of illness and improve health care."
Pharmaceutical Care Management Association
o "PCMA is concerned that any calculation that does not continue to include all expenses in connection with the adjustment and recording of claims and "cost containment" expenses in the "loss" portion of the ratio will create perverse incentive for insurers to reduce the amount spent on these functions. Such activities, which serve to lower employer premiums and bring value to the health care system as a whole, include accurate and timely claims payment, fraud enforcement and prevention, case management, utilization review and other functions that lower costs or the number of unnecessary services."
o "Appropriate adjudication of claims and prompt payment to providers are activities that health plans should not be encouraged to curtail, as would happen if they were classified as administrative expenses for purposes of MLR."
o "Likewise, 'cost containment expenses', which are currently defined as a subset of 'loss adjustment expenses,' should also be included in the definition as reimbursement for clinical services. These functions, including fraud detection and prevention, serve to lower the costs of health care services and ensure that only valid claims are paid. The functions should continue to be encouraged as they serve the goals -- outlined in health care reform -- of containing cost and preventing waste while providing broad health care coverage at a reasonable cost."
ICYMI: The Milliman Medical Index -- Costs Keeping Rising
Posted by The Campaign on May 12, 2010 at 10:04 AM
Everyday seems to bring to light new information about rising health care costs and the impact of the new health care reform law on costs (HINT: It is going to increase them.) The latest information comes from the Milliman Medical Index, an annual report that shows "total annual medical spending for a typical American family of four covered by an employer-sponsored preferred provider organization (PPO) program."
The report provides further evidence that health care costs continue to rise at an unsustainable rate and are being driving by soaring prices for medical services.
Here are some nuggets from the report:
"Increasing healthcare costs remain a challenge for both employers and employees and are largely driven by increases in the underlying cost of care."
"The 2009 to 2010 hospital inpatient annual rate of increase grew from 7.7% to 9.8%. Most of the inpatient annual rate of increase is driven by average unit costs; we are seeing very little change in utilization. The hospital outpatient annual rate of increase grew from 10.2% to 11.6%, mostly because of increased average unit costs. Hospital outpatient care is the area of highest growth for the second year in a row."
"Most of the hospital and physician cost increases identified in this year's MMI have been driven by average unit cost, not utilization, which frames the coming effort to control costs. Provider/payor negotiations will be more visible and intense in the reform environment and as regulators put more pressure on the premium rate-setting process."
"Only about 17% of this year's increase in pharmacy spending is due to increased utilization, and the other 83% of the increase is due to average unit cost increases."
"While employers are making the immediate changes required to their benefit plans and adapting their longer-term benefit strategy to the new regulatory environment, healthcare costs continue to increase at rates exceeding most other costs of doing business."
"Efforts to enforce insurance rate controls may have indirect impact on the growth in healthcare costs but still do not address the underlying cost of care."
"While underlying cost drivers as yet remain relatively unchanged, there are some changes that will have a predictable effect on cost. The most immediate changes, such as increasing dependent coverage up to age 26 and elimination of lifetime and annual benefit maximums, will cause a direct shift in costs from employees to employers."
To read the whole report, click here.
POLL VAULT: No Shock Here -- Nearly 6 in 10 Americans Think Reform Law Will Increase Costs
Posted by The Campaign on May 11, 2010 at 1:43 PM
While the health care reform debate has receeded a little bit from the public domain, America's views on the bill haven't changed very much. In fact, Americans continue to think, overwhelmingly, that the reform law will increase their health care costs.
The latest proof comes from Rasmussen's latest poll:
"Fifty-eight percent (58%) expect the cost of health care to go up under the new law, up slightly from last week and the highest result found so far."
Click here for more on results from Rasmussen's latest poll.
POLL VAULT: 3 Out of 4 Americans Rate Their Current Health Plan As Good or Excellent
Posted by The Campaign on May 04, 2010 at 12:45 PM
The health care reform debate may be over, but polling on the issue has not stopped. The latest Rasmussen Poll was released and it includes the usual questions about people's support for the health care system (it's up) and about the reform law and its impact on people's coverage (that's down). But it also included this nugget:
"Three-out-of-four (75%) adults who currently have health insurance rate their coverage as good or excellent, showing virtually no change since February but up five points from a year ago. Just seven percent (7%) rate their own health care coverage as poor."
To read full results and analysis of the poll, click here.
ICYMI: The New York Times on the Need to Bring Down Underlying Medical Costs
Posted by The Campaign on April 21, 2010 at 5:49 AM
With each passing day, there seems to be a greater and greater recognition of the fact that health care costs are growing out of control. And it is these costs that are driving the icnreases in premiums. Thus if the country is going to get premium growth under control it has to design a strategy to get these underlying costs under control.
The New York Times picks up this line of argument today in its editorial "Health Care Reform and Massachusetts." First, the NY Times recognizes that premium caps are "a short-term fix."
The editorial goes on to argue:
"Like the rest of the nation, the state needs to deal with the underlying issue: the relentlessly rising prices charged by health care providers. Those are driven in part by costly new technologies and treatments. In Massachusetts, it is exacerbated by the outsized bargaining power of prestigious teaching hospitals and regionally dominant community hospitals."
This argument follows closely to the points made by AHIP in yesterday's hearing in front of the Senate HELP Committee. The Committee held a hearing on premium increases. The New York Times covered the hearing and picks up AHIP's point of view here:
"Congress, [AHIP's President and CEO Karen Ignagni] said, has largely ignored the cause of rising premiums: the explosive growth of medical costs and the power of hospitals and other health care providers to dictate prices. Ms. Ignagni said the law imposed new requirements, taxes and fees on health plans, which could further drive up costs."
Rising Cost of Health Care and the Effect on Health Premiums
Posted by Campaign on April 20, 2010 at 9:08 AM
Rising Cost of Health Care and the Effect on Health Premiums
Washington, DC - AHIP President and CEO Karen Ignagni today addressed the rising cost of health care and the effect on health premiums before the Senate Committee on Health, Education, Labor and Pensions. Below are excerpts from her written testimony:
"Our community is strongly committed to the successful implementation of the 'Patient Protection and Affordable Care Act' (PPACA), and we already have begun taking important steps to lay the foundation of a health care system that rewards value, not volume. Health plans are pioneering new initiatives for improving patient care, enhancing quality, and helping enrollees receive the highest possible value for their health care dollars."
"Health insurance plans are committed to engaging physicians, hospitals, and other health care professionals in the design and implementation of payment reforms. Our members also are working with various stakeholders to make performance measurement more consistent. We urge the committee and policymakers to assess these efforts and consider building upon the PPACA initiatives to ensure a system-wide approach to delivery reform."
"When the cost of health care services increases, the cost of providing health benefits also rises. The federal government's data on national health expenditures indicate that over the past 20 years (1989-2009) health benefit costs have increased by an average of 7.2 percent annually and premium increases likewise have averaged 7.1 percent annually. This trend clearly demonstrates the importance of addressing underlying medical costs through measures that achieve system-wide cost containment."
"As we examine issues surrounding health insurance premiums and medical costs, it is important to look at recent history, particularly the decade of the 1990s when premium growth was well below historical trend and stable for several years, contributing toward economic growth and growth in coverage. We know from this experience that health plans can hold down premiums when they are able to use care management tools to reward the delivery of high quality, appropriate and efficient care."
"In today's health care system, we face new challenges - most notably, rapid increases in the unit price of medical services - that are contributing to higher health care costs. In fact, according to the 2008 National Health Expenditures (NHE) report issued in January 2010, price increases constituted two-thirds of the year-over-year increase in health spending. Specifically, of the 4.6 percent annual increase in personal health expenditures reported in 2008, price accounted for 3.1 percentage points, while 1.5 percentage points was driven by non-price factors. The NHE report also indicated that for 2008, health insurance premiums increased at 3.1 percent, approximately one-third below the increase in total health spending."
"In the face of these exploding costs, our members are deploying the next generation of medical management tools to promote a high-value health care system, including:
- Targeting disease management services to enrollees who stand to benefit the most from pro-active interventions;
- Working with primary care physicians to expand patient-centered medical homes that promote care coordination and accountability for clinical outcomes;
- Providing incentives to promote the use of decision-support tools and health information technology;
- Providing quality improvement reports for physicians to monitor their progress in managing disease;
- Offering personalized risk assessments and wellness programs;
- Encouraging electronic prescribing and consumer safety alerts;
- Providing peer-to-peer comparisons to demonstrate the appropriate use of health care services across specialists and manage the use of high-cost imaging services."
"Many of the quality programs and innovative initiatives being implemented in various markets across the country by the private sector would improve the delivery of care and patient outcomes in a more timely and efficient manner if public programs were part of the local initiatives. Expanding these programs to encompass the full health care system - both public and private payers - is an important step toward identifying gaps in care, pursuing opportunities for improvement, and evaluating innovations so adoption can occur more broadly."
"The debate leading up to passage of health care reform ultimately became framed as a need for insurance market reform and greater regulation of health plans, creating legislation disproportionately focused on health plans, which make up only 4 percent of national health expenditures, and doing little to address the underlying drivers of health care costs, which have a substantial affect on premium increases."
"Massachusetts and California provide high profile examples of a public discussion about insurance rates entirely delinked from an examination of the factors driving these rates. In the case of Massachusetts, a comprehensive and in-depth report from Attorney General Martha Coakley recently reported two findings: that the market leverage of providers was leading to higher prices, without any noticeable difference in quality; and that increases in the price of health care services had caused most of the increase in health care costs - not utilization."
"Capping premium increases without looking at the underlying components is similar to capping the prices auto makers can charge consumers, while allowing the steel, rubber, and technology manufacturers to charge the auto makers whatever they want. This will lead to financial instability throughout the system. What has occurred in Massachusetts is a politicization of processes related to premium review and approval, creating benchmarks for review that do not reflect the underlying cost drivers."
"The new health care reform law recognizes that states properly serve as the primary regulators for health plan activities, subject to new and consistent federal standards impacting a wide range of activities, including annual rate review."
"The real question, therefore, is not whether additional legislation is needed to further address the operation of 4 percent of the health care sector as a percentage of total spending, but whether policymakers will now broaden their focus to address sectors accounting for the remaining 96 percent of our health care system."
"To succeed on a long-term basis, health reform ultimately must include bolder steps to achieve system-wide cost containment. We believe this can be achieved with a more comprehensive effort to reduce the rate of increase in costs, better alignment of public and private sector payment reform efforts, and broader medical malpractice reform. Perhaps most important, we believe that efforts to reduce costs are complementary to our nation's effort to improve quality as policymakers attempt to drive greater value in the delivery of care. Focusing only on premiums and not the components that are driving premiums makes little sense."
"Our members remain strongly committed to working with the committee to ensure the successful implementation of the new health reform law, while also working to slow the growth of underlying medical costs to make health insurance more affordable."
The full written testimony can be found at: http://bit.ly/d7jHAg.
