Issue Autopsy

Healthcare Facts and Fiction: What the General Public Needs to Understand About Healthcare in America, Part IV.

Understanding healthcare delivery, pricing, payment and business is a complex topic dissection. As such, we initially approached healthcare in a general fashion for Part I. Part II explained drug procurement and pricing. Part III explored the physician pathway educational process, practice and physician expected earnings. Part IV explores insurance and how it both impacts healthcare costs and dictates physician care.

Part Four: Healthcare Insurance- The dog that wags the tail

Editors note: This is a vastly wide, complex and varying subject, consequently this article is general. The intent is defining who really runs US medical care.

The snow fell hard and fast that late winter day. Two feet, then three and finally a bit more than four feet of the fluffy stuff. The above freezing warm weather following this snow roared in quickly accompanied by rain. The snow soaked in the rain, sponge-like, increasing the already stressed roofs with even more weight. With a crack, screech, and whine all 1248 square feet of the greenhouse roof buckled. In a snap the greenhouse was no more. Oh well, insurance picked up most of the cost to rebuild, but not all of it. Hey that's why we pay for property insurance after all. It's something we have for various needs, but never want to use. When required though, it can be a financial life saver.

Health insurance is probably the most confusing, convoluted, user unfriendly and all-controlling part of the US medical system. What other business is told how much they can charge and then how much they will be paid of that charge? Imagine a mechanic replacing your brakes and being told they can only charge $175 for the complete job regardless the time and resources utilized AND then being told the type of brake, manufacturer, and that the insurance company will be renegotiating this cost next year based on the mechanic's final work outcomes and customer satisfaction ratings. Oh, and the mechanic will not be paid for 90 -120 days or not at all if the billing and coding are not exactly as the payer dictates. Let that sink in for a moment and you realize rather quickly that your mechanic will stop doing brake jobs as he is losing money on that facet of vehicle maintenance and repair. Or he might find a competitive advantage that includes not working on your car because you have a heavy brake foot and need new brakes more frequently than the payer deems necessary. Your medical care is dictated by the medical insurance industry including Medicare and Medicaid (CMS- Center for Medicare and Medicaid Services) in just such fashion. If you understand this example you understand what your hospital and physician endure taking care of you and staying in business. Operating in the medical arena is demanding, difficult, and dictated. 

How is reimbursement decided? For CMS there is a disparity between payment based on geography, and outcomes ranking. For example: a routine total knee replacement may be reimbursed $36,000 in Philadelphia and $31,000 in State College, PA. So if you live in a high cost of living area you will probably be paid more than a lower cost of living area of the country. And if the physician's over-all outcomes are good the physician will also be reimbursed more than if his outcomes are not as good as the area average standard outcomes. Private insurances usually follow CMS's lead with one exception: they usually negotiate the fee and renegotiate that price annually. So one hospital or physician group may receive differing reimbursements than another in the same geography. 

If profits indicate the health of a business then health insurers are doing just fine. 

Favorite Strategies for health insurance companies profit line.

Insurances make money. Lots of it. So how do they become so profitable? By not paying out more in claims than they collect in premiums. For simplicity and brevity the following are some strategies used to make sure the equation: money in > money out remains intact.

High premiums and high deductibles- From CNBC, "According to eHealthInsurance, for unsubsidized customers in 2016, "premiums for individual coverage averaged $321 per month while premiums for family plans averaged $833 per month. The average annual deductible for individual plans was $4,358 and the average deductible for family plans was $7,983" (1). By 2017, according to PeopleKeep, the average family premium (without subsidies)—$1,021, which is 23 percent higher than the average premium of $833 for 2016 open enrollment. Average annual deductible for families—$8,352, which is a 5 percent increase since 2016 (2). Let's view this another way: in 2017 a family paid out of pocket    $12, 336 in monthly premiums and $8,352 in deductibles for a total of $20,688 out of pocket. Keep in mind this is paid with after tax dollars so the financial hit is significant, as in afford a home or not. For some it is more cutting. After meeting the deductible the insurer typically pays 70-80% of billed services. Again, there are many numbers and variations. I am using the "typical" ones. 

Rejecting claims- insufficient documentation or incorrect documentation are usual excuses along with non required care, uncovered care (I.E.- you go to an urgent care or ED for a strep throat when your doctor's office is open.)

Not paying the hospital or doctor for 90-120 days- This situation makes money management (revenue cycle management in business jargon) challenging. The insurance company uses this time period ostensibly for billing accuracy and revue, but investing the proceeds (short term treasury notes for example) for that extra time makes the insurer money. You may have heard this as "investing the float".

"Gaming the system"- Medicare Advantage Plans are sold by private insurance companies like Aetna, Human, and United Health. These Advantage plans are quality rated with Medicare paying annual bonuses to those with the highest ratings. If a plan was not rated high enough to receive the bonus, insurers would move the patients to their other high rated plans. This process is known as "cross walking" and thus insures they will receive the Medicare bonus payments. According to the WSJ, 1.45 million Medicare Advantage members were moved into higher-rated plans for 2018 (3).

Prior authorizations and step therapy- Prior authorization (PA) is a tedious process utilized by insurers to limit or not pay for certain medications, diagnostic tests, and specific treatments. PA mandates specific forms by the insurer before the treatment is OK'd by the insurance company, meaning they will pay for it. It also is a direct wedge between the patient and physician. This PA process burden is the physician's or health system's responsibility and becomes quite expensive in human hours invested. That computes to an average 36.6 PAs per week taking 16.4 hours. This PA process costs patient care delays of greater than 0ne day and up to five days for 60% of respondents in this AMA survey of 1000 doctors(4). If not PA'd the patient pays the entire fee or foregoes the prescribed therapy. 

Step Therapy is simply trying one treatment course (the cheapest), failing it and moving to the next one. The problem is this is a cookbook approach. Your specific situation may require the most expensive therapy in your doctor's clinical experience, yet that is pushed aside for the "one size fits most" approach. After the requisite failures (steps) the optimal treatment is reached. The problem remains the time delay achieving the best patient treatment the physician initially decided. For some ailments the delay is inconsequential,  for others it is mortal. 

Formulary- A doctor can write for a drug but that does not mean you will get it. To receive a drug it must be on the insurance formulary list of accepted medications. This is another way to drive insurance company costs down using lesser cost meds known as generics or non-branded drugs Many times it is fine and generics suffice. Other times it simply does more harm than good (Some doctors and patients swear by certain branded meds such as specific thyroid preparations, anti-hypertensives, and many diabetic meds.).

Quality Measures- Let's look at Comprehensive Primary Care 3 (CPC3) an alternative payment program run by CMS. This program attempts to improve population health by signifying specific goals For example, CMS deems it essential that everyone have a flu vaccine annually. If you decide you don't want a flu shot that is flagged by data collection and the doctor gets "dinged' for it meaning it is like a demerit. It also means lesser payment from Medicare or Medicaid (CMS). Type II diabetic? Hemoglobin A1c needs to be less than or equal to 6.5. If a patient does not take their medicine, control their diet, exercise and lose weight, chances are they are not to goal. Ding, ding, ding! 

HMOs, PPOs- If you seek or receive medical care out of network you will pay a higher fee. You can't always see who you want without your plan's authorization.

Of note there are also alternative payment models such as "bundling" for a specific procedure such as a total hip replacement. Bundling is a lump sum for patient's care across all providers for the patient. This is not an exclusive list but it does represent some of the most prevalent insurance company cost avoidance tactics.

Findings:

1. Remember the golden rule: He who has the gold makes the rules. Insurance companies and the government via CMS have the gold and dictate what care and increasingly how your physician cares for you. Also note health care rationing comes in many colors, sizes and shapes such as PAs.

2. Patients are a huge and rarely mentioned component driving up medical cost and usage. Look around. See any examples today?

3. Socialized medicine is here under the guise of "Population Health", a one size fits all approach. Look around at others when you are out today and think about that carefully. 

Part V, the final installment in this series, will list US healthcare facts and solutions. Some folks will probably take offense and label the solutions "controversial." Reality remains reality no matter who is uncomfortable with it.

(1) https://www.cnbc.com/2017/06/23/heres-how-much-the-average-american-spends-on-health-care.html

(2) https://www.peoplekeep.com/blog/affordable-care-act-policy-costs-up-in-2017

(3) https://www.wsj.com/articles/insurers-game-medicare-system-to-boost-federal-bonus-payments-1520788658

(4) https://www.ama-assn.org/sites/default/files/media-browser/public/government/advocacy/2016-pa-survey-results.pdf

(5) https://health.usnews.com/health-care/for-better/articles/2017-07-13/5-ways-insurance-companies-meddle-in-your-health-care