JustCare

Tag: All-payer

  • Why can’t people know their health care costs before receiving care?

    Why can’t people know their health care costs before receiving care?

    Health care should not be a commodity; it should be a right. But, so long as our country treats health care like a commodity, people should be able to know what they’ll be charged before receiving health care. Instead, it feels as if hospitals and physicians can make up their charges and insurers can make up what they cover; patients have little choice but to pay what they are billed or end up in medical debt.

    At a recent Senate hearing, policy experts explained why the current health care system isn’t working. Hospitals are supposed to post their prices, but many still don’t and, honestly, it probably would be of no help to patients if they did. The issue is not simply the costs of different services, but which services are delivered, over both of which patients have little control.

    The only solution for protecting people against high health care costs is an all-payer rate-setting system with regulated prices and public health insurance that covers them. Medicare for all. Once corporate insurers are in the mix and hospitals and physicians can charge what they please, as we know, your health care costs can be through the roof.

    The Senate Special Committee on Aging heard from witnesses about how impossible it is for patients to shop for health care effectively. Senator Mike Braun called provider behavior monopolistic. But, his solution, explained in a report, is simply for more price transparency, which will never address the problem of high prices.

    Hospitals also now get away with charging “facility fees,” which can be super high and are always unpredictable. Moreover, consolidation in the health care space is driving up prices, without any evidence of improved quality of care. But, Congress remains unwilling to address health care costs in a meaningful way.

    Congress did cap prescription drug costs for people with Medicare Part D at $2,000 a year beginning in 2025. But, that legislation continues to allow pharmaceutical companies to charge what they will for their prescription drugs. That’s not a meaningful solution. It will drive up Part D premiums further.

    For their part, hospitals argue that they need to increase prices because insurers too often refuse to pay them for the services they deliver. In addition, many patients can’t afford to pay their hospital bills, so hospitals are forced to absorb the cost of the services they deliver.

    Here’s more from Just Care:

  • Vermont Medicare experiment improves health and lowers costs

    Vermont Medicare experiment improves health and lowers costs

    Modern Healthcare reports on a Vermont Medicare experiment that has been found to improve patient health and reduce costs. The experiment relies on an all-payer model of health care or, put differently, on bringing all insurers together to pay for health care in an integrated way.

    Hospitals and doctors can choose whether they want to participate in the Vermont program. Importantly, all hospitals participate, And, more than half of primary care doctors also participate.

    The program gets support from Democrats in the state legislature and Vermont’s Republican governor. It has succeeded at reducing both Medicaid and Medicare costs.

    The biggest way to reduce costs is through fewer and shorter hospitalizations. Nearly one in five (18 percent) fewer people with Medicare in Vermont received acute care in hospital. In addition, people receiving acute care were in the hospital 14.7 percent fewer days. And, 12.4 percent fewer people were readmitted to hospital within 30 days. Cost savings were significant at about 6.5 percent.

    People with Medicare in Vermont must sign up to participate in this five-year experiment. In 2019, its second year, nearly half of all Vermonters participated.

    The experiment relies on a different payment model from fee-for-service. It pays a fixed amount per patient. And, it relies on a patient care team that often includes social workers, changing the way care is delivered.

    The Vermont experiment presents challenges and opportunities. How do you pay appropriately for value-based care? What is value-based care? How do you enlist all doctors to participate? Does the payment system create disincentives for providers to treat people with costly conditions? What is the measure of its success? Given that the vast majority of people are relatively healthy and cost our health care system little and just a small minority have complex conditions, requiring expensive treatments, how much do health outcomes for the people who most need care matter?

    Here’s more from Just Care:

  • Hospital price transparency won’t make health care affordable

    Hospital price transparency won’t make health care affordable

    In our Kafkaesque healthcare system, people are told to make an “informed choice” of health insurance when not even the prices private health insurers pay hospitals are transparent. Beginning in January 2021, hospitals might be required to disclose publicly the prices they charge private health insurers, but that won’t make health care affordable or help people make a meaningful choice of health insurance. In sharp contrast, Medicare’s rates have always been publicly available; more important, costs are predictable and you can get the care you want.

    For decades, working-age Americans have had to choose almost blindly among health insurers, not having a clue as to what their copays would be if they needed complex care. Most people have relied on premium differences and provider network differences to make their choice. But, knowing that will not tell you your out-of-pocket costs if you develop a costly condition because hospitals charge private health insurers wildly different prices for people’s care.

    Most people do not realize that the differences in prices insurers pay could mean huge differences in their out-of-pocket costs if they need hospital care. Regardless, they have had no ability to see these prices. Until, perhaps, now. While hospital price transparency would be a step forward, it is not nearly enough to protect working people against high out-of-pocket costs. Unlike traditional Medicare, private insurers do not allow people to protect themselves against unpredictable costs with supplemental coverage.

    The US Department of Health and Human Services (HHS) is requiring hospitals to disclose their negotiated prices with insurers effective January 1, 2021. The American Hospital Association is fighting back, claiming that this requirement would violate hospitals’ First Amendment rights. As of now, the AHA is losing its lawsuit to keep hospital prices secret. The Judge in the case does not buy the First Amendment argument. Rather, he believes that disclosing hospital prices would empower patients to compare hospital prices.

    It’s not clear what good it would do patients to be able to compare prices. Hospital prices should be the same for everyone, much like restaurant prices and television prices. And, they should be reasonable. They should not be based on the hospital’s negotiating leverage with insurers, as they are today, which can drive prices through the roof. And, they should be public.

    But, disclosing prices will not rationalize them. For that, we need Medicare for All, which would ensure fair prices and guarantee everyone access to care with no out-of-pocket costs. At the very least, we need all-payer rate setting, with the government using the collective leverage of all Americans to negotiate the rates.

    Disclosing hospital prices might help people avoid some exorbitant health care charges. But, it will not help nearly as much as traditional Medicare helps, or Medicare for All, which has no copays. People have no control over how many doctors see them in the hospital or how many tests and procedures they receive. So, a hospital with higher prices could have lower total costs if it performs fewer procedures. There’s no way anyone could know that in advance.

    It’s time the federal government stopped proposing small bore fixes to out-of-control health care prices. Americans do not have choice when it comes to health care. It’s unaffordable. People face huge financial barriers to care. It is untenable and unconscionable. We need Medicare for All.

    Here’s more from Just Care:

  • Vermont prepares for all-payer health system

    Vermont prepares for all-payer health system

    Democratic Governor of Vermont, Peter Shumlin, and Republican Governor-elect of Vermont, Phil Scott, both support all-payer rate setting in Vermont. And, unless the Trump administration undoes approvals from the Centers for Medicare and Medicaid Services, CMS, Vermont will be the first state to implement an all-payer health system in decades. With an all-payer system, every insurer pays the same rate for a particular service or bundle of services.

    Back in the early 1980s, 12 states had some form of all-payer system. But, New Hampshire is the only one of those states remaining with an all-payer system, and it’s only for hospital services.

    Like a single-payer system, an all-payer system ensures that providers in a given community all receive the same rate for the same doctor and hospital services but allows for multiple payers or health insurers. These insurers generally band together to negotiate the fixed rate they all pay. Under a single-payer model, like traditional Medicare, the government is the sole insurer and sets the rate. These egalitarian approaches to paying for health care, all-payer and single-payer–are supported by a substantial majority of the population.

    According to health economist, Uwe Reinhardt, we need an all-payer system to “get a handle on health care costs,” and rein in health care spending. Hospitals would lose their monopoly leverage to drive prices up.

    Governor Shumlin supports an all-payer system that allows Vermont to move away from a fee-for-service system that pays for each service delivered. Vermont’s all-payer system, as envisioned, would pay based on health outcomes and promote preventive services. That said, the jury’s still out on whether value-based insurance design, sometimes called a pay-for-performance model, will improve health outcomes for people or simply steer them to low-cost providers who may or may not deliver good care.

    Vermont’s all-payer system will pay doctors a monthly rate to care for people with particular conditions and additional money when their patients’ health outcomes are good.

    Here’s more from Just Care:

  • Paying less for hospital care through reference pricing

    Paying less for hospital care through reference pricing

    Only an an all-payer system with uniform health care rates, will keep us from wildly varying and out-of-control hospital and doctor rates. But, since Congress is not likely to go that route any time soon, CALPERS, the California Public Employees Retirement System, is using reference pricing to pay less for hospital care.

    Last year we reported on the benefits and risks of CALPERS’ initiative to drive down hospital prices. In brief, CALPERS used its leverage to set the amount it would pay for a range of routine services and told its 450,o00 members that they could go to a hospital that priced the service at that rate or lower to keep their out-of-pocket costs down. Or, they could go to any other hospitals and pay the difference between the price CALPERS set and the price that hospital charged plus the copay.

    The price of hip and knee replacements could be more than $100,000, depending on the hospital. CALPERS set its fee for a hip or knee replacement at $30,000 with a 10 percent copay and urged its members to use one of the 41 hospitals that charged this amount. People who chose to go to hospitals with a $50,000 charge would have to pay the $3,000 copay plus $20,000.

    This pricing strategy is called reference pricing. And, Austin Frakt reports for the New York Times that it has not only saved CALPERS millions of dollars, but it has pressured the higher priced hospitals to rethink their charges for a variety of common services.

    Not surprisingly, the CALPERS members favored the lower-priced hospitals to keep their costs down. And, those hospitals saw heir business increase by 28 percent, Moreover, when the hospitals with higher prices saw they were losing business to the lower-cost hospitals with similar quality, they reduced their prices by an average of 20 percent.

    So, why isn’t reference pricing a solution to high-priced hospital care?

    • It only works for elective services, where people have time to shop around. But, 60 percent of hospital services are not elective; they are emergency services or inpatient services over which patients have no control.
    • It only works where there is price and quality transparency. Often, hospital charges and quality information are not available to patients.
    • It only works when people have the wherewithal to navigate it. Patients with mental disabilities or low health literacy levels may not be able to use it and may end up with exorbitant out-of-pocket costs.
    • It only works when there is a competitive market. If there’s only one hospital in the area, people have little choice where to go.

    Opponents of reference pricing would like to see stronger government regulation of the health care market, the strategy of every other developed country. Essentially, do what Medicare does and negotiate prices for all medical and hospital services.

    Here’s more from Just Care:

     

     

  • If commercial insurers paid hospitals Medicare rates, spending would drop 31 percent

    If commercial insurers paid hospitals Medicare rates, spending would drop 31 percent

    There continues to be irrational variation in hospital prices in the United States, both within a given area and across markets. Hospital market-power forces commercial insurers to pay excessive rates. In most markets, commercial insurers do not have the leverage to rein in hospital prices, but Medicare does. If commercial insurers paid hospitals Medicare rates, health care spending would drop 31 percent, and premiums and out-of-pocket costs would also come down considerably.

    Shockingly, we have very little hospital-specific price data and very little data on health care spending by people with commercial insurance, let alone quality information. Hospitals and insurers are allowed to claim their data is proprietary. Without data, there is no effective competition.

    Prices should be transparent. Moreover, there’s a strong case for an all-payer system. An all-payer system would help rationalize the prices.

    A paper by Zach Cooper, Stuart Craig, Martin Gaynor and John van Reenen, which analyzes health insurance claims data from three commercial insurers for 27.6 percent of people with employer coverage, between 2007 and 2011, reveals that prices are all over the map.

    Overall, hospitals with monopoly power command prices that are 15.3 percent higher than hospitals in competitive markets.  So, a knee replacement in South Dakota costs more than a knee replacement in Manhattan. An MRI of the lower limb, a standard procedure, can cost 12 times more in one area than another area.  Within a market, prices for a given procedure at one hospital can be four times more than at another hospital.

    This makes no sense. It also rewards inefficient hospitals. And, it drives up our overall health care costs and individual insurance premiums considerably. It’s time Congress stepped in to rationalize hospital prices and rein in spending on medical care since insurers are unable to do so.

    A recent report from the Center for Improving Value in Health Care looks deeper into these findings and shows both tremendous variation in commercial insurance prices in different areas of Colorado as well as just how much more commercial insurers pay for hip and knee replacements in Colorado than Medicare. In the northeast of Colorado, the price of hip and knee replacements is $55,000 more (232 percent higher) than Medicare. In Denver, the price is $17,000 more. It’s not surprising that a single-payer health care proposal is on the Colorado ballot this year.

    Here’s more information from Just Care on health care costs:

  • Competition can’t rein in health care costs

    Competition can’t rein in health care costs

    Like many policy debates, there are two principal schools of thought regarding how to rein in health care costs, with many variations on the themes. One school believes that competition is key to bringing down health care costs, which we can achieve through price transparency and other means. The other believes that an all-payer system with negotiated prices is the way to go.

    Because health care costs are growing so quickly, in a 2015 report, the National Academy for Social Insurance reviews the range of options for controlling costs. Spending growth for health care is projected to be 5.7 percent annually until 2023, way higher than the rate of inflation. By then, health care spending will account for about 19.3 percent of GDP.

    Proponents of competition to bring down costs have little data to support their position. It’s hard to imagine how consumer choice would bring down costs because the health care market differs from other markets in three fundamental ways. First, insurance keeps people from making health care decisions based on price, as they do with other goods (although copays and deductibles can keep people from getting needed care altogether). Second, putting aside insurance, there’s precious little reliable health care data that allows people to make decisions based on price and quality that would drive competition. And, third, even with good data, we generally defer to health care experts to decide the services we need. Medical professionals are trained, and we lack the skills to know better.

    Furthermore, commercial insurers are unable or unwilling to use their market power to rein in prices in meaningful ways. In fact, the Medicare managed care plans tend to piggy back on the prices Medicare has negotiated for health care services. As Wendell Potter explains, insurers drive profits by dropping unprofitable business lines not by bringing down prices.

    To make matters worse, consolidation of provider markets has led to insurers having even less clout today than they’ve had in the past to drive down prices. Areas with consolidated provider markets have been shown to drive up prices 12 percent in a year.

    The health care marketplace is always in flux, with new entrants, as well as mergers and acquisitions of companies, which often drives up prices. And, while these market shifts also may drive innovations, it can be hard to see the value. No commercial business worth its salt is prone to share its best practices with its competitors.

    In sharp contrast, an all-payer or single-payer system, like Medicare, can both drive system change and control prices. Medicare is our most powerful tool for driving system-wide improvements in the health care marketplace. It can offer price and quality transparency. It also reins in prices through negotiated rates.  Some argue that if we extended Medicare to the entire marketplace it would disincentivize market winners and losers from innovating.  But, many innovations happening today are not public and not benefiting our health care system.

    We would be smart to take a page from Medicare, along with the rest of the developed world, and implement policies that prevent big increases, let alone wild surges, in health care prices. For sure, these price increases feed the financial goals of the medical industrial complex, but the they do little to promote value in our health care system.

  • Driving hospital prices down through reference pricing

    Driving hospital prices down through reference pricing

    Until we have an all-payer system with uniform health care rates, we will have wildly varying and out-of-control hospital and doctor rates.  Some purchasers, however, are innovating to rein in or reduce some hospital and doctor rates on their own. The California Public Employees Retirement System, CalPERS is using “reference pricing” to force providers to compete on price and bring down health care costs.

    Through reference pricing, CalPERS sets a cap on what it will pay for a range of services, limiting its expenses and requiring individuals to pay the difference between its payments and what providers charge. Reference pricing relies on individuals to be more informed about the costs of the services they receive and to seek out providers with lower rates in order to limit their out-of-pocket costs.

    Supporters of reference pricing see it as a smart way to engage people in their health decisions. It also incents providers to bring down their rates if they want to attract more patients.

    Opponents of reference pricing believe it places an unfair burden on people who may have low health literacy levels or who may choose doctors and hospitals with lower rates and, in the process, receive lesser quality care. Rather than burdening people with these decisions, opponents would like to see stronger government regulation of the health care market, the strategy of every other developed country. (Medicare is more efficient than private insurance.)

    In a new paper for Health Affairs, Ann Boynton and James Robinson report that CalPERS is lowering costs and increasing value through reference pricing. They recognize that good quality data for comparing hospitals and doctors is limited at best, but they found that people receiving care through CalPERS’ reference pricing system had as good health care outcomes as others. At the same time, they appreciate the importance of incentivizing providers and insurers to bring down costs, with reference pricing complementing those incentives.

    Boynton and Robinson make clear that reference pricing only works for services that are “shoppable,” where the patient has the time and ability to choose a hospital or doctor based on price. CalPERS recognizes that reference pricing cannot work for emergency services–although you should choose your hospital emergency room carefully—or bundled services, where people are unable to make choices about their health care services. Nor can reference pricing work when people have to travel long distances to receive lower-cost care. And CalPERS makes exceptions and pays more for care in higher-priced facilities where medically justified.

    If you’re preparing for a trip to the hospital, click here to see what to bring.  And, before you or someone you love leaves the hospital, here are seven things you should do.

  • The rationale for an all-payer system for doctors and hospitals

    The rationale for an all-payer system for doctors and hospitals

    Unlike other developed countries, which negotiate or set uniform rates with doctors and hospitals regardless of who is paying the bill, an “all-payer system,” the United States takes a hands-off policy with regard to provider rates for private insurers and the uninsured. The result—except in the two states with an all-payer system for hospital services–is wildly varying rates that can be exorbitant, as Gerard Anderson and Ge Bai recently showed in their analysis of hospital prices. Health economist Uwe Reinhardt argues that if the U.S. had an all-payer payment system, we could more effectively control costs and help ensure that charges to patients were fair.

    Looking at steep hospital price increases in California and Oregon during the Great Recession, 2005-2009, Reinhardt shows that even in a weakened economy insurers were not able to control costs. He does not buy the argument that these increases were necessary to offset payments from Medicare and Medicaid. There is every reason to believe that hospitals and doctors negotiate for the largest rates they can get from insurers, regardless of their government payment rates.

    Put differently, private insurers are not forced to pay hospitals and doctors rates that are high to compensate for lower Medicare and Medicaid rates. That’s a myth. Hospitals and doctors are charging private insurers high rates because they can, because the health care market is broken.

    Moreover, if insurers lack the leverage to rein in costs for whatever reason, they should not be responsible for controlling costs. And, if provider rates are in any sense rational, how do you explain the huge differences in rates for the same services even within small geographic areas?

    According to Reinhardt, an all-payer system eliminates price discrimination in the health care marketplace. It prevents people from being charged wildly different amounts for the same service depending upon their insurer or their lack of insurance. It also simplifies the system for everyone and reduces administrative costs considerably.

    Our current system of giving insurers responsibility for negotiating provider rates adds no value to the system. They generally can’t control them effectively. Moreover, it incents providers to keep pushing prices higher.

    At a minimum, we should give everyone the option of enrolling in Medicare, as Robert Reich explains in this video.  It’s far more effective at controlling costs than private insurers.