The continuing health care rigamarole
January 25, 2010, 8:54 am
Posted by Margaret O'Brien Steinfels
Apropos of the discussion below (cf. for example, Unagidon @ 1/24, 11:59 am on the commodification of health care), this in Monday’s Times. “Insurer Steps Up Fight to Control Health Care Cost” by requiring hospitals to notify the company of a patient’s hospitalization within 24 hours or face a fifty percent cut in reimbursement.
The hospitals says the rate is confiscatory, and the requirement unnecessary. The Insurers say this is both an effort to control costs and to cut back on the readmission rates of patients. Whatever the case, it is an example of what we are likely to see on the cost-cutting front whether there is health-care reform or not.
Also: Irene Baldwin and Unagidon at 1/25; 7:46, same post: 6433.
At my agency, I’ve was seeing double digit health insurance premium increases each year for the past ten years. It was my single biggest operating expense after salaries. My question is whether, if the insurance company is successful in reducing reimbursements, some of those savings will be passed on to the subscribers. With one exception (Delta Dental), I never,ever saw a reduction in premiums, only large increases. And on the medical provider end, how do they make up the difference for lost revenues? Through efficiencies, or through the self-pay customers?
It’s hard for me to be objective on this one, since virtually all of my doctors are in the Continuum group, which is in conflict with United Healthcare. I had eye surgery at New York Eye and Ear last year, and I have what may be the last in a series of follow-up appointments in February for which will be out of network, whereas everything else was in network. I do know that New York Eye and Ear notified United Healthcare of my surgery before I checked into the hospital.
I am sure Unigadon knows infinitely more about insurance than I do, but it does strike me as unduly punitive if United Healthcare intends to cut reimbursement in all cases where the hospital fails to meet the 24-hour notification requirement. I can see it being reasonable in cases where a reasonable case can be made that the hospital did unnecessary tests or performed unnecessary surgery, and prior notification would have allowed United Heatlhcare to step in and say, “We won’t pay for that, but we will pay for this alternative.” But if the hospital is to be penalized for a simple clerical error where United Healthcare is not disputing the necessity of the services the hospital provided, that does seem unfair.
Since the mid-1990′s in most US regions, managed care initially did an excellent job of reining in MD, specialist, and hospital per diems. Gradually, this moved to specifics such as pharmacy (still have a ways to go), imagining (still new), Medicare/Medicaid via states, counties, etc.
But, by the earlu 2000′s, managed care appeared to have squeezed all the cost savings it could out of the current medical system.
Large corporations; mid-size companies have seen double digit increases for 5 years. This has led to more creative responses – disease management, wellness initiatives; moving to consumer driven health plans or high deductibles; pharmacy management companies; imaging management companies.
Yet, the above example of forcing 24 hour notification, only leads back to the old “managed care” horror days. It does nothing to change the current medical system e.g. teams of MDs, specialists, RNs, etc. working together and being paid to achieve/maintain health vs. fee for service.
UHC’s 24 hour threat is a reaction that merely reinforces an old, outdated model of delivering medical care. We need to refocus efforts on utilizing current successful healthy models e.g. Geininger, Mayo, etc. We also need to address Medicare spend/costs/delivery of service; pharmacy, etc.
This is very complicated to talk about because we have here the intrusion of ideas about general policy into a very specific and concrete negotiation. But I’ll try to be brief.
Irene, I’m afraid that at this point cost reductions achieved by insurance companies translate into a lowering of medical expense trends, not their reversal. Regarding the “lost revenue”, hospitals have what is called a “chargemaster” which is a sort of rate card for all of their procedures (at the billed cost level). They can and do raise these when they want to however they want to. If an insurance company has all fixed rates with a hospital, then the costs stay fixed. But generally, all fixed rate contracts are pretty rare unless the hospital is very small. Some percentage of the rates will be “percent of charge”, say like “the payer will pay the hospital 60 percent of charges”. If the hospital raises the underlying charge, the reimbursement automatically goes up. Much of what insurance companies do is try to cap this in some way. I don’t know the details of the case in the article, but frequently what you hear that an insurance company wants a five percent payment reduction, it’s in the context of a recent ten percent (or something) chargemaster increase by the hospital.
I know that some of you will point out that many hospitals are on “DRG” (Diagnostic Related Group) methodology payments. This is how Medicare pays. The idea is that hospitals are paid a flat rate for inpatient services for the whole case, from the room rate to the aspirin and bandages. All inpatient procedures have been classified by Medicare with “DRG weights” based on how complicated they are. Then the hospital negotiates a “base rate” that the DRG weight is multiplied by to come up with the cost of the service.
The DRG methodology would seem to be a way to make costs predictable. But there are common loopholes. Hospitals will frequently have “outlier” language where particularly expensive or complicated things revert to a higher payment level if some dollar or admission days threshold is reached. So if a particular service is billed below a certain level (either in dollars or in inpatient days) the service is paid at the DRG case rate. But if it goes above this level, the payment reverts to a percent of charge. Regarding David and Bill’s points, the reason that a payer wants the notification even if they do not intend to deny the procedure is to make sure that the hospital is not inflating the length of stay or the billed charges to push a case over the threshold. Another problem that insurance companies see is readmission rates. Some hospitals do things well the first time. Some don’t. With the DRG/case rate methodology, if someone goes into the hospital, goes home and the comes back two days later with the same problem, the second visit is a brand new case paid at the full rate.
The “managed care horror days” thing that Bill mentions here isn’t relevant, because the payer has no intention of denying the service. Note that the notification is required AFTER the person is admitted, not before. But the payer does want to manage the case better and make sure that the hospital is providing the kind of care it should be. I don’t think that “clerical error” really enters into it. Clerical errors are (supposed to be) rare. But the hospitals are not talking like they are in this case. It’s something else. They don’t want to be penalized for non-compliance.
(I apologize if this post is too wonky.)
Unagidon – is it not a reality that most self-insured plans and most insurance plans require pre-authorization or the member/patient may get reduced or no coverage. So, what is the point of this move?
Used the term ” managed care horror days” not has a literal fact but rather trying to capture the emotional reaction to these types of large insurer dictates.
Did you happen to see 60 Minutes last night? What do you think of the former CIGNA marketing senior VP who has now turned whistelblower?
“Is it not a reality that most self-insured plans and most insurance plans require pre-authorization or the member/patient may get reduced or no coverage. So, what is the point of this move?”
No, not necessarily. In any case, the 24 hour thing would still be necessary in those cases where pre-auth wasn’t possible.
Regarding horror days, people understandably don’t want to think that their insurance company might be making medical decisions for them based on cost. The thing is, though, there ARE decisions that can be made on cost. Generic drugs and pill splitting is an example. Moving someone into a long term nursing facility or rehab center instead of keeping them in an expensive hospital in-patient ward is another.
No, didn’t see the 60 Minute thing.
In previous posts much has been made of the “right” to health care. What we haven’t addressed is that like all rights, this right has limits. The right to free speech let’s you speak, but it doesn’t promise you a newspaper or TV to exercise that right.
Today, for most people, the limits to medical care are largely set by having a job that provides insurance. That insurance policy has certain limits (won’t pay for cosmetic surgery or Viagra or more than one in vitro fertilization, etc.), though if you have the money you can probably get a doctor to provide the service.
The current effort to provide most Americans with health insurance doesn’t mean that we/most of us will have unlimited right to medical care. In fact, the “death panel” metaphor had at its core the charge that rationing was in the offing, i.e., that older and ill Americans would be encouraged to decide to forego care.
In a culture where individuals see themselves as entitled to unlimited resources (water, air, food, medical care), the challenge of reform will be even greater after a/some bill passes than it is now because we will have to come to terms with the allocation of limited resources that will inevitably hit medical care.
If health care as a commodity is a problem in its distribution, it is also a problem in its consumption. As a country we seem to look at our health and everything about it as a consumer good.
In previous posts much has been made of the “right” to health care. What we haven’t addressed is that like all rights, this right has limits. The right to free speech let’s you speak, but it doesn’t promise you a newspaper or TV to exercise that right.
Margaret,
Certainly all rights have limits, but I do believe that when the Church says health care is a human right, it means everyone is entitled to it whether or not they can pay for it. In each of the documents I linked to, there is some qualifier.
Clearly the Church does not claim that any and every medical expense must be paid for everyone in the country. But I think it does mean that if your child is sick, you should be able to take him or her to the doctor and not the emergency room, and if antibiotics are necessary and you can’t pay for them, then there will be a way for you to obtain them anyway.
And don’t forget that if all goes as planned, many of the people who are brought into the system who don’t have insurance now are young and healthy. And older people, who are very expensive to cover and care for, are already covered by Medicare. So I am not sure there will be a huge drain on the health care system.
David Nickol: I agree that there is such a right at least along the lines you list (and that list could be more extensive, I’m sure you’d agree). I do think down the line we will see the rationing function that was apparent (was it yours?) in the post about the Brazilian with a fatal disease treated here though his native land has a national system, where nonetheless he would not get the treatment he is getting here.
For example, an old friends of ours in his sixties was stricken with Leukemia; he lives in a country with a very good national health care system. But his age prohibited treatment, at least for the form of cancer he had. I doubt many Americans would tolerate such a rule. Will it come to some forms of rationing by age? by cost? by approved treatments? I don’t see how we can avoid it. As I pointed out above we have a rationing system right now: people with health insurance get better care than people without (cf: Jean Raber below).
Margaret, David,
I’m inclined to agree with both of you, but I find I rather disagree with one of the phrases David quoted – “…even free of charge.” I very strongly believe that only a very few types of medical care should generally be free, and that list is determined by identifying things like immunizations and fundamental prenatal care, which offer a greater benefit to public health than the cost of providing them. The rest should require some degree of payment, however nominal.
People value what they pay for. They also tend to not abuse or waste it. In other words, they are responsible about it, or are at least more likely to be so. That’s a big reason for co-pays and deductibles. No one should have to choose among groceries, medicine, and rent. But, it’s okay if you have to think a minute about heading off to the doctor for a 2 day case of sniffles.
So, for some folks the co-pay should perhaps be only a dollar or two. But it shouldn’t be zero.
And, we should admit that we can’t make a health-care delivery system in this country that is entirely equal for everyone. There will always be more things – in this case medical care – available to people who have the resources to pay for them. Or at least, more easily available. What we need to create is a system that defines an acceptable minimum and does its best to ensure that everyone gets at least that.
And as to rationing systems, approved treatments seems a far better approach than age. Cost is a factor, too. It always has been and always will be, I’m afraid. Better is cost-effectiveness, if we can get there. But there’s a lot of mud in those waters.
I’m inclined to agree with both of you, but I find I rather disagree with one of the phrases David quoted – “…even free of charge.” I very strongly believe that only a very few types of medical care should generally be free . . .
Lynn,
I was quoting John Paul II from Laborem Exercens.
I don’t disagree with your general point, but I am recalling right now the company where I used to work. There was a nurse on duty during working hours, and visiting her was free. She was very helpful in terms of treating minor complaints, giving advice, and telling you when you really ought to see a doctor instead of ignoring your complaint or trying self-treatment. It was a great service the company provided, and I don’t think anyone took it for granted.
It seems to me there are thousands of things like having a nurse available that could cut down on medical costs. I think inexpensive flu shots at drug store clinics are a great idea, as well as the treatment of minor complaints in mini-clinics by nurse practitioners.
David,
YES!!
The nurse was not exactly free, but probably cost the company, say, $100K at most including benefits, office space, equipment etc. But the nurse probably saved the company 5 to 10 times that in medical costs.
Right now, since health care is a commodity, it looks to many like health care reform would be making something like free cheeseburgers available to 30 million people. If we treat health care like cheeseburgers, then the conservative nay sayers have a point. But we don’t have to treat it this way and we don’t even have to ration it (at least at this point). We really just need to rationalize it so that the people needing the expensive care get the expensive care and the people needing the inexpensive care get the inexpensive care. Right now, it’s too much the other way around.
I agree that we need more nurse practioners for routine ailments and physicals and for chronically and terminally ill patients. Dad’s hospice nurses have been utterly fabulous.
Maybe we could use some vets on the front lines, too.
In college, a friend in vet school was learning about heart murmurs in dogs and made us all submit to her stethoscope. She told me she thought I had a murmur.
I didin’t think much about it, but many years later, I happened to get the nurse practioner instead of my regular doc, and she asked, “Has anyone ever told you you had a heart murmur?”
“Yep,” I said, “a vet.”
My vet friend was the first to diagnose my mitral valve prolapse.
Moreover, my mother-in-law and my cat were both taking the same heart medicine. The cat’s was $8 a month, Ma’s was $100. Ma was taking four times the cat’s dosage. So how come her meds weren’t $32 a month?
I’m guessing partly b/c the vets filled their own scrips, which cuts down on the overhead, while the doc’s offices send you to a pharmacy, so you’re paying to support a whole separate biz.
Has she tried the cat’s medicine? In an emergency, of course!
An aside. If you seem to be having an insurmountable problem with your insurance company (where you don’t think they are paying attention to you or you think someone is pulling a fast one) I strongly suggest that you immediately look up your local State Department of Insurance on the internet and make a formal complaint. insurance companies take these very seriously. First, because the complaint and resolution volume is usually public information. Second, because the state backs up their tight timelines with fines and in these times they are most happy to collect these when they can. Third, the insurance company may be doing the right thing, but you will probaby feel better if the regulators agree.
You complain, the states tells the insurance company to respond to them, they look at the response to see if it is reasonable, then they get back to you. But the insurance company probably will have too at that point.