Category Archives: Health plans

Advances in care management: podcast interview with AxisPoint CEO Dr. Ron Geraty

Ron Geraty

Dr. Ron Geraty, CEO of AxisPoint Health

AxisPoint Health is part of the new breed of care management companies, leveraging new data sources and digital techniques that go beyond the traditional paradigm of nurse call centers focused on a handful of common chronic conditions. Industry veteran, Dr. Ron Geraty (former CEO of Alere) took the reins of the company a couple years back.

In this podcast interview, Ron and I discuss the evolution of care management, the role of digital, and what the future will bring.

  1. (0:11) What’s the current state of care management in the US?
  2. (2:27) How is care management being done differently across populations: commercial, Medicare, Medicaid, dual eligibles?
  3. (5:36) Care management traditionally focuses on 5 common chronic conditions. Has it made a significant difference in those areas?
  4. (8:26) What attracted you to AxisPoint? How is it different from other population health management companies?
  5. (13:08) Who are the customers? Who is drawn to your approach and why?
  6. (15:26) You work with the most vulnerable populations. Do you attempt to influence the social and behavioral determinants of health?
  7. (19:18) What’s at stake for AxisPoint in the debate about healthcare in Washington, DC, especially since you are serving populations that have been a major focus of the ACA?
  8. (22:33) How will digital tools be leveraged for vulnerable populations? Will you still have feet on the street?

By healthcare business consultant David E. Williams, president of Health Business Group.

What free market healthcare really looks like

piglet-1639589_640

Get while the gettin’ is good!

As an economics graduate, MBA, and entrepreneur I’m a fan of the free market system. The invisible hand is a beautiful thing, and it’s certainly been good for me.  A healthcare management consultant and board member, I make my living from the business of health.

Capitalism has a place in healthcare, but in developing policies we should also recognize the limits of free market approaches and be open to the benefits of socialist ideas. For example, before the Affordable Care Act, people with pre-existing conditions or high healthcare costs would experience “job lock.” They couldn’t afford to leave their employers’ group insurance plans even if they wanted to start their own small business. Would-be entrepreneurs used to call me asking for advice –not about business plans, raising money, hiring, or product development– but about how I handled health insurance. Fortunately in Massachusetts this was not a problem, even before the ACA, because we had guaranteed issue (could not be denied coverage for pre-existing conditions) and community rating (premium based on larger group, not individual risk). In most parts of the country, though, it was a problem, and  if the ACA is repealed it may become a problem again.

A recent New York Times article (The Company Behind Many Surprise Emergency Room Bills) provides another example of the limitations of a free market approach. It’s worthwhile for free market ideologues to understand this before setting policy. To recap:

  • Some hospitals hire outside companies like EmCare to staff their emergency rooms. To maximize profits, those companies sometimes decide not to negotiate contracts with insurance companies. Hence they are “out of network” on purpose
  • When patients come in to the emergency department –suffering a heart attack, stab wound or whatever– they are treated by these out of network doctors, who then bill the insurance company at a rate that may be a multiple of in-network rates. This is true even if the hospital itself, and most of its doctors, are in network
  • The insurance company may pass along some or all of the expense to the patient, especially if the patient has a high deductible plan
  • Patients get angry, and a story appears in the New York Times

The Times story ends there, and it’s bad enough. I guess you could argue that the free market is sort of working here. After all, physicians are setting their own rates, and in theory patients could decide to go elsewhere. The consumer making noises helps to bring the market into equilibrium. And maybe the problem is not enough capitalism. Maybe EDs shouldn’t be required to take patients who can’t pay…

What the Times doesn’t say –probably because they don’t know about it– is that there’s an additional capitalist ecosystem that comes into play here. Let’s say a physician charges the insurance company $100,000 for something that would be reimbursed at $10,000 under a network contract. In case you think I’m exaggerating, this kind of thing actually happens –if not with emergency physicians then with ambulatory surgery centers and behavioral health.

The insurance company or third party administrator may then hire a cost containment vendor to ‘re-price’ or negotiate the claim. The cost containment vendor negotiates with a separate “revenue cycle management” company hired by the physician group.

Let’s say for the sake of argument that they agree to a reduced payment of $15,000 instead of $100,000. The cost containment company might take 20% of the savings (20%*$85,000=$17,000) as a commission and the revenue cycle management company might make $1500 or so for their efforts. So everyone in this scheme is happy:

  • The physician still collects $13,500 compared to $10,000 in a network deal. (And in some circumstances if the insurer isn’t paying attention they’ll get the full $100,000.)
  • The revenue cycle management company takes its cut, even if it’s less than the others
  • The cost containment companies makes more than the physician ($17,000 v $13,500). It doesn’t usually work that way but sometimes it does. [Note that I had these numbers wrong until I was corrected in the comments.]
  • And the health plan pays $15,000 rather than $100,000. If the payer is acting as a TPA or ASO rather than bearing risk, they may even get a fee from their employer customer for the cost containment service

While it’s great that so many new jobs and business opportunities are created, this is not exactly the way to hold down the cost of healthcare and improve affordability.

Contrast this scenario with one where the patient is covered by a government program: Medicare or Medicaid. The government determines the fee for services rendered and pays it to the physician. The patient contributes at most a $50 co-pay. The physician may or may not like what he’s being paid, but there are no shenanigans.

If you adore the free market and abhor government interference, maybe the first scenario is best. Having seen it up close, I have a hard time arguing for it.

By healthcare business consultant David E. Williams, president of Health Business Group.

Could Medicaid for all be the answer?

connect-20333_1280

Putting it all together

The Affordable Care Act is a complex law, but for a major piece of legislation that actually made it all the way through a very open legislative process, it’s remarkably coherent. Republicans have tried to sabotage it since before it was passed, and yet it still managed to succeed while a Democratic Administration remained in power. I have predicted in the past that if Republicans actually managed to poison Obamacare that they would come to regret it, because it would lead eventually to the rise of a single payer (i.e., truly socialist) system.

I assumed that the move toward single payer would take a generation to happen and would be driven at the federal level. But Nevada’s quick embrace of Medicaid for everyone surprised me, and it looks like a good option that addressed a lot of tough healthcare financing problems. Even if this Nevada plan ultimately dies on the vine, it provides a template for other states.

Here’s the basic story behind the Nevada Care Plan: Obamacare supporters are worried about what will happen to people who use the exchanges/marketplaces if Trump or Congress is successful in destroying the markets. Trump has been wreaking havoc on the marketplaces by threatening to cut off the subsidies that make premiums and out-of-pocket expenses affordable. The American Health Care Act (AHCA), aka Trumpcare, Ryancare, etc. would be the death knell. As a result, millions of people who get insurance through exchanges today would be out of luck.

A Medicaid for all approach enables people at any income level to buy into Medicaid, paying premiums if their income is too high to qualify under current rules or if they are are otherwise ineligible. Medicaid provides a very comprehensive set of benefits –broader, in some ways, than commercial plans or Medicare. Prescription drugs are covered, and so is nursing home care. Even better for the patient, there are no co-pays or deductibles. Cost per patient is lower than commercial plans or Medicare because Medicaid pays physicians and hospitals rock bottom rates, and by law Medicaid gets the best pricing on drugs.

Interestingly, many of the insurance companies that have succeeded on the exchanges are Medicaid managed care plans like Centene and Molina that have adapted their products to the Obamacare population.

Medicaid for all would not preclude private plans from participating in the market. In fact, its existence could pave the way for a variety of supplemental or upgraded plans that could be purchased by individuals or offered by employers. That approach is similar to what happens in other rich countries like the UK.

In summary, Medicaid for all has some really good features:

  • It bends the cost curve considerably by forcing lower prices on hospitals, physicians and other providers. The main reason healthcare spending is higher in the US than in other rich countries is because unit prices are higher here. In one fell swoop that could be addressed, even if providers aren’t entirely pleased.
  • Drug pricing, which is such a lightning rod, could also be addressed quickly by bringing prices into the Medicaid framework, the one place where they are reasonably well controlled.
  • It would enable everyone who wants to be covered to be covered.
  • It would eliminate the vagaries of the exchanges. No one would need to worry about whether insurance companies would offer plans from year to year.
  • In theory, it could enable states to innovate, assuming that they are given the freedom to modify benefits around the edges.

Admittedly, Medicaid for all might dampen innovation by reducing the financial incentives for the introduction of new drugs and devices and placing more control in the hands of government. But frankly commercial health plans have not done a good job of spurring innovation or cutting costs; few people are likely to shed a tear if their role is reduced.

By healthcare business consultant David E. Williams, president of Health Business Group.

 

HighRoads CEO Brian Kim talks next gen health plan product management

HighRoads helps health plans automate the creation of new products to help them get to market faster and more flexibly. It may sound like an arcane corner of the healthcare world, but in this podcast interview, CEO Brian Kim argues that his company’s platform is a game changer in the market.

Here’s what we discussed:

  • (0:15)What are the fundamental functions performed by health plans?
  • (3:40) Why has the process of defining and selling plans changed much more slowly than payment processing?
  • (10:29) What is needed to spur innovation on plan definition and selling within existing organizations?
  • (13:41) What’s the impact on these topics of action in Washington DC?
  • (15:46) What does HighRoads offer the market?
  • (18:02) Where are you getting the most traction?
  • (21:50) What can we expect on your road map over the next few years?

———-

By healthcare business consultant David E. Williams, president of Health Business Group.

How AHCA makes healthcare unaffordable

Some opponents of the Affordable Care Act (aka Obamacare) like to trash individual insurance policies sold on the exchanges for having out of pocket costs that make them too expensive to actually use and premium increases that make them too expensive to keep.

I’ve always been annoyed by this criticism because it doesn’t stand up to reality. That’s because the detractors ignore the cost sharing reduction (CSR) subsidies that sharply reduce deductibles and out-of-pocket payments for lower income individuals. More than half of individuals who buy coverage on the exchanges receive CSRs, so we are talking about a major part of the market.

As a new analysis by Avalere demonstrates, average deductibles for individuals at 100-150% of the federal poverty level (FPL) in silver plans are only $243 compared with $3703 for people who don’t qualify for CSRs. For maximum out of pocket costs, the figures are $978 and $6528 respectively.

1494937058_csr chart

As for premiums, those increases have been absorbed by the federal government through increased subsidies for those who qualify and are not a deterrent to purchasing or renewing a plan.

Dismantling the ACA and replacing it with the American Health Care Act (AHCA) will eliminate the CSRs. The AHCA tax credits are stingier and not targeted based on need or premium cost. The enhanced flexibility plans have to modify benefits won’t make insurance more affordable, especially for those who actually need treatment.

———-

By healthcare business consultant David E. Williams, president of Health Business Group.

 

Can Congress agree on the Cadillac tax?

3665019700_871e103b4b_z

Cadillac taxi?

Health care is too costly in the US. One reason is that health insurance premiums are fully tax deductible for employers. This distorts the market, causing employers and employees to prefer devoting the next dollar of compensation to healthcare rather than wages. That’s fine in any given year but over time it’s helped drive up healthcare spending and hold down wages.

One of the many things the Affordable Care Act did right was to start to address this issue with the so-called Cadillac Tax, an excise tax on high cost employer plans. Like everything in the ACA it has been attacked and derided by the law’s opponents. But many Republican plans have equivalent measures, which would cap the deductibility of health insurance. Either one of these approaches would help by causing employers to work harder to hold down healthcare spending and by generating tax revenue that could be used for other health law goals or for general purposes. The end of tax deductibility only kicks in at a high threshold, which means the impact in the early years is limited and everyone has time to get used to the new rules. I’d like to see Congressional leaders be brave and embrace some form of cap as a bi-partisan consensus move.

Alas, the caps are opposed by an array of forces: employers don’t want a new tax, labor groups are worried that benefits will be eroded and out-of-pocket costs increased, and the healthcare industry worries about a squeeze on revenue.

Without strong leadership in Congress, it seems doubtful that new legislation will be passed. So maybe the best bet is to leave the Obama era Cadillac tax in place, imperfect as it may be.

By healthcare business consultant David E. Williams, president of Health Business Group.

 

Public option pops up again

private-or-public-signpost-10067190

Where do we go from here?

The so-called “public option” is back on the table. According to Politico there’s a “feud” between liberal and moderate Democrats about the wisdom of such an approach. That’s an overstatement, and really it doesn’t even matter if they are fighting about it or not.

Health insurers have a problem, which is that it’s hard for them to prove that they add value. Does all their utilization management, network development, formulary administration and price negotiation improve cost, quality and patient experience enough to justify the extra administrative costs and hassles they impose on the system? It’s an open question, and one that health plans have a hard time answering convincingly.

Since the Affordable Care Act (ACA) passed, health plans haven’t really had to address this fundamental question. With all the new regulations, marketplaces, and mandates, customers and plans have been busy getting themselves into compliance and learning and testing out the new system. No one has really asked the question about whether we need plans or not.

ACA health insurance marketplaces in some parts of the country are seeing less competition than is ideal as some health plans give up. Aetna gave the feds the middle finger by announcing plans to exit exchanges in retaliation for the government’s opposition to the company’s mega merger plans. The exchanges are fixable but opponents in Congress prefer to let them die if possible rather than fix them. However, this passive aggressive approach to the exchanges could ultimately backfire if it means the government sponsors a “public” competitor to give people choice.

For some, opposition to the ACA is ideological. They don’t like federal mandates, or expanding access to birth control, or they just don’t like Obama. But opposition to the public option is more about business considerations than ideology. Apple wouldn’t be worried if the government started making smartphones, but health insurers are worried about whether they can do a better job than Uncle Sam.

And let’s face it, a government option brings us a big step closer to a single payer system under which insurance companies would essentially be out of business.

Health plans don’t have to worry too much today about single payer or even a public option. Even Senate Democrats can’t agree, so it’s unlikely a public option will make it through Congress. But give it another 10 to 15 years and we’ll see.

Image courtesy of Stuart Miles at FreeDigitalPhotos.net

——-

By healthcare business consultant David E. Williams, president of Health Business Group.