Economist: Health care transparency coming

ABA News

In the past, Americans with health insurance had reasonable deductibles and were indifferent to the cost of a doctor-ordered MRI or other procedure. But that’s changing, and a much more price-sensitive consumer is demanding laws requiring transparency in pricing.

That was one of the points made by Ford Koles, who gave the keynote speech at the Washington Health Care Summit at the Ritz Carlton Hotel on Dec. 7. An economist by training, he spoke on “Population Health, Consumerism and the Future of Health Care Delivery.”

Koles noted that The Advisory Board, which provides research and strategic guidance to health care and higher education organizations, is apolitical and does not lobby nor do advocacy.

He spoke of an ongoing tension between promoting “population health,” which is an approach to health care that aims to improve the health of an entire population, vs. consumerism, which is the protection of the interests of consumers. He said the average citizen doesn’t want population health, but does want consumerism.

However, Koles reminded the audience that the U.S. population is getting old fast: 7,000 people a day turn 65 years old. At the height of the baby boom, it will be 10,000-11,000 people a day turning 65. And these older Americans just might want population health, he said.

Koles pointed to the three big players in health care — the government, employers and consumers — each of whom wants and is getting different things from the system.

The government is the epicenter of the drive for population health, he said. The Obama administration is in its last year, so they’re trying to get as much done as they can to fortify the Affordable Care Act, including “doubling down on risk” for Medicare, Koles said.

He presented the continuum of risk models that the three players are choosing among: Pay for performance — bundled payments — shared savings — shared risk — full risk, and offered examples of how these are playing out.

The pay for performance model is a value-based payment, in which a physician meets the payer’s criteria and target and is eligible for a bonus. Recent statistics show that 28 percent of hospitals are receiving bonuses for good outcomes, 50 percent are receiving net penalties of 0-1 percent and 6.5 percent are receiving net penalties of 2 percent or more, he said.

Bundled payments (when a payment covers services by two or more providers) is another recent model that is proving attractive. These have created average savings per episode for orthopedic cases of about $4,000. They are mandatory in 67 markets, including New York and San Francisco, and have resulted in an estimated $343 million savings to Medicare, he noted.

Koles said 30 states and Washington, D.C., have approved Medicaid expansion, which requires states to expand coverage to everyone making less than 138 percent of the federal poverty level or lose federal funding for it. These states are experimenting with risk and consumerism. Oregon, California and Minnesota give the risk to providers, and other states are looking at it. Oregon is the farthest along and on track to generate 2 percent per member per month savings.

Medicare Advantage, the managed health care that serves as a substitute for Parts A and B Medicare benefits, is a full-risk program that has drawn 22 percent of eligible citizens to enroll in it, and the numbers are going up, Koles said. These new enrollees are used to managed care. ”They think it’s typical, so it’s a fast-growing business. They want to take the risk themselves,” he said.

On the commercial side, employers worry about a 40 percent Cadillac tax levied on employer-sponsored health plans that provide high-cost benefits set to go into effect in 2018. “They’re terrified of it,” Koles said, “and all of the presidential candidates want to get rid of it.”

Employers have had it with 11-12 percent inflation on health care costs, he said, so they are looking at alternative ways of saving money, including:

Activation: Some companies, even small ones, are now self-insuring. “They’re thinking, it’s my money, so I’ll get the money back from any savings,” Koles said.

Delegation: Others want health insurance problems off their plate in order to concentrate on their main business, so they’re outsourcing it, he said. For instance, Intel has an exclusive deal with Presbyterian Healthcare Systems in New Mexico as a one-stop shop for all its health care needs. Health systems want this, Koles said, and government wants this, too.

Abdication: Employers are saying they can’t afford to offer health insurance anymore, even though they’ll get penalized. Not many are doing this now. Still, “this is a big break from the social contract,” Koles said.
Koles pointed to the example of Compass Professional Health Systems, based in Dallas, a high-end concierge service, which offers directed care based on price and outcomes. They investigate options per procedure, not per system.

This scenario terrifies the hospitals and health systems that The Advisory Board works with, Koles said.

Consumers, meanwhile, continue to have premium sensitivity on the ACA’s public exchanges, Koles said.

The ACA has an affordability mandate — an employee can’t spend more than 9.5 percent of his/her household income on coverage. The public exchanges are the most consumerist model: 10 million people are enrolled, but nobody thinks that number will go up, he said.

Only 28 percent of 18-34 year-olds have signed up and that’s not going up, either, Koles said. The system needs more healthy young people to make Obamacare work. That’s why United Health Care may pull out of it altogether.

The marketplace is more fluid than expected, Koles said, and people are signing up for high deductibles (averaging $2,000), which means:

• There’s a fear people won’t get care because they’d have to pay for it, so they just take their free yearly physical and skip the rest (although they still have catastrophic coverage if they need it)

• They will get services despite being unable to pay

• They will shop more actively for services, which is what is desired

People care more about pricing information for procedures, and has traditionally been very hard to get. But transparency is coming, Koles said.