Managed Care

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Employer Health Benefits in California in 2011

January 24, 2012 in HC Statistics, Health Insurance, Managed Care | No comments

Each year, the California Health Care Foundation (CHCF) examines trends in employer health benefits in the state of California.  Last year, I reported on the 2010 CHCF report and now I will examine the 2011 report.

Between 2010 and 2011, some things have remained the same.  Healthcare premiums are far outpacing inflation over the medium run and California premiums remain higher than average. Workers at small California firms have to cover a large share of premiums and receive less generous insurance coverage (i.e., deductibles more than $1000).

High-wage firms (66% vs. 42%), firms with few part-time workers (70% vs. 41%) and firms with at least some unionized staff (84% vs. 61%) are more likely to offer health insurance to their workers.

Growth in California health insurance premiums (9.1%) in 2011 fell below the growth rate of the U.S. overall (9.5%). In 2010, the opposite was true. California health insurance premiums rose by 7.5%, but overall U.S. premium growth rose by only 3.0%.

The stereotype that California is the land of managed care holds true. Whereas the national proportion of covered workers enrolled in an HMO declined from 20% to 17% between 2009 and 2011, in California the proportion of covered workers enrolled in an HMO held steady at 54%. Also, although the U.S. overall has seen significant growth in high-deductible health plans (HDHPs) so that 17% of covered workers are enrolled in these plans, in California, only 6% of workers have enrolled in this plan type.

Is the ACA working? The answer is probably no. “Just 32% of small California firms not currently offering health benefits were aware of the small firm tax credit that is part of the Affordable Care Act.”

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Bring Market Prices to Medicare

December 16, 2011 in Books, Health Insurance, Managed Care, Medicare, Medicare Advantage | 3 comments

Medicare is a government-run insurance program.  Can policy changes be made to add competition to Medicare, maintain quality and reduce cost?  A book titled Bring Market Prices to Medicare argues that it can through a competitive bidding process. This book makes a number of sensible arguments which I review today.

The main proposal of the book is a competitive bidding process for all Medicare plans. Currently, there is a form of competitive bidding only for Medicare Advantage (MA) managed care plans. The authors also argues for competitive bidding for fee-for-service (FFS) Medicare (i.e., Parts A and B).  There is already a competitive bidding process for Medicare’s prescription drug program (Part D) which has worked well.

One of the main advantages of Medicare FFS is that beneficiaries do not need a referral for any services and are not limited to certain provider networks. However, Medicare beneficiaries do not pay for these added benefits. In addition, even if HMOs are more efficient than Medicare FFS, Medicare FFS beneficiaries still pay the same Part B premiums.

The authors want beneficiaries to face the true price differentials between the lowest cost plans and less efficient plans., regardless if the plan is Medicare FFS or an MA plan. Thus, beneficiaries would be responsible for any premium differences due to choosing a more expensive plan.

Currently, MA plans receive a variant of the average bid in their service area. The authors propose that Medicare would only pay for the lowest cost plan. This proposal would in essence be a transfer from plans and beneficiaries (who would have to pay the cost differential between the plan they choose and the lowest cost plan) to the government. Given the fiscal hole the federal government is facing, this is a good idea.

Authors also propose to eliminate the 25% tax on premiums. According to MedPAC, “Plans that bid below the benchmark also receive payment from Medicare in the form of a “rebate.” The law defines the rebate as 75 percent of the difference between the plan’s actual bid (not standardized) and its case mix-adjusted benchmark. The plan must then return the rebate to its enrollees in the form of supplemental benefits or lower premiums” The rebate structure gives plans a disincentive from lowering their bids since they only recover a share of the cost decreases.

Another issue focuses on regional adjustments. Living in New York is expensive and health care is more expensive in New York than in rural Mississippi. However, should Medicare subsidize New Yorkers because their health care is more expensive. The authors argue no, but poor individuals in high cost areas will be adversely affected by this policy choice.

A major issue is controlling quality. Plans could create low cost plans by providing low-quality care or failing to provide mandated services. Thus, CMS will need to regulate the plans. Plans with quality levels below a specific level would be barred from enrolling individuals or the government could force beneficiaries to pay additional premiums to enroll in these low quality plans. Public reporting of plan quality is also needed.

Strategic bidding is also a problem. Plans could collude to raise the bid price. However, by having Medicare FFS as an option will cap the amount colluding firms could increase prices. Further, a small firm could bid a very low amount and set the market. Medicare could set the benchmark at the lowest cost plan which meets a minimum size requirement.

Source:

Another Review of the Book:

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Does California really love Managed Care?

November 28, 2011 in Current Events, Health Insurance, Managed Care, Medicaid, Medicare, Medicare Advantage | 1 comment

In short, yes. California is the land of managed care. Kaiser-Permanente–the managed care poster child–owns one third of the market.  Love for managed care is not just in the private market; in 2010, over half of all Medi-Cal and more than one-third of Medicare beneficiaries were enrolled in managed care plans.  Further, California managed care plans even have their own regulator.  Whereas the California Department of Insurance (CDI) regulates non HMOs, the California Department of Managed Health Care (DMHC) regulates HMOs.

A recent report by the California Health Care Foundation investigates managed care in California and provides a high quality overview of the California health insurance market.  Some of their findings include:

  • Five insurance carriers (Kaiser, Anthem Blue Cross, Health Net, Blue Shield, United Healthcare) accounted for three-fourths of the $105 billion health insurance revenues in California in 2010. Revenue growth has been slower for managed care plans in recent years, however.
  • The six largest managed care plans together lost more than 400,000 commercial enrollees. On the other hand, Medi-Cal and Medicare managed care enrollment grew.
  • Anthem Blue Cross and Blue Shield experienced enrollment decline in 2010, which reversed a previous growth trend.
  • Large majorities of HMO and PPO members rated their plan highly in terms of getting appointments quickly, finding a doctor, and getting the care they need. HMO enrollees more often rated their care highly than those enrolled in PPOs, while PPO participants were more likely to favorably cite their ability to get an appointment quickly.

Source: Katherine Wilson, “California Health Plans and Insurers” California Health Care Foundation, November 2011.

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McAllen’s Private Insurers spend less than El Paso’s?

December 9, 2010 in Managed Care, Medicare, Supply of Medical Services | No comments

For the under-65 population insured by Blue Cross, total spending per-member-year in McAllen, Texas, was 7 percent lower than in El Paso, Texas.  By contrast, Atul Gawande’s 2009 New Yorker article, which used data from theDartmouth Atlas of Health Care on variations in Medicare spending, showed that per capita spending in McAllen was 86 percent higher than in El Paso.

Price-adjusted differences in Medicare spending can be found here.  Although inpatient spending in McAllen was 63% higher than in El Paso, most interesting is that home health spending in McAllen was 4.6 times the average spending in El Paso and 7.1 times the national average!

The authors claim that private insurance may be better able to control costs.  ”For a number of reasons, insurers generally are reluctant to intrude on medical decision-making,” says lead study author Franzini.  ”But the fact that these utilization management mechanisms exist may prompt some physicians who might otherwise overuse certain services to exercise more restraint.”  Blue Cross Blue Shield (BC/BS) uses  mechanisms such as prior authorization for inpatient admissions, care management services for high-severity and/or high expense beneficiaries, and triggers to activate care management processes when a catastrophic event occurs or a patient incurs claims higher than $50,000 per month.

However, because there is more variability in cost in Medicare beneficiaries, it is unclear how much an effect utilization controls would have on Medicare spending.  For instance, total cost for the typical BC/BS beneficiary were $2,266 in McAllen and $2,428 in El Paso.  For Medicare beneficiaries in these cities, the corresponding figures were: $14,817 and $7,947.  Because Medicare beneficiaries need more care, there is likely more opportunity to induce care and increase rates.  For instance, the authors “…found less regional variation in medical services use for ischemic heart disease in the under-sixty-five privately insured population than in the (mostly) over-sixty-five Medicare population.”  However, because the Medicare population is sicker with more comorbidities than the non-Medicare population, there is much more latitude for physician decision-making.  It is unclear whether the private insurance cost control mechanisms would have a large effect on the spending levels of Medicare beneficiaries.

Additionally, many BC/BS beneficiaries likely have minimal spending (i.e., either $0 or visit a physician once per year).  For these beneficiaries, there is little room to influence care levels.  It would be interesting to view the variation beneficiary cost condition on having incurred positive costs.

Nevertheless, none of these reasons explains why there would be differences in spending across the two regions.  Is private insurance really a better alternative?  Are physicians and patients just as satisfied with the coverage they get from BC/BS as what they receive from Medicare? Imposing cost controls such as pre-authorization and care management services can certainly reduce cost.  The question is, will the Medicare beneficiary population agree to these restrictions.  If not, today’s working age American will be footing an even heftier bill as the baby boomers continue to retire.

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Medicare Managed Care vs. FFS Beneficiaries: Who receives better care?

November 29, 2010 in Managed Care, Medicare, P4P, Quality | 1 comment

Do Medicare beneficiaries in fee-for-service plans access better physicians than those in Medicare Managed Care (MMC) plans?  Huesch (2010) attempts to answer this question for beneficiary access to quality cardiologists.  Using data on heart patients without AMI in Florida, the authors observes the following results:

“No evidence was found that Medicare payor type significantly influenced the likelihood of using physicians with different admission length profiles.  Instead, MMC subscribers had significantly worse odds of seeing those physicians with favorable outcome profiles.”

To control for within-hospital omitted variables such as hospital discharge policies and staffing levels, the author conducted a within hospital analysis to arrive at this conclusion.  In addition, all outcome measures are risk adjusted for patient health. Does this finding imply that MMC beneficiaries receive worse care than Medicare FFS beneficiaries? Maybe not.

“..this study’s findings are largely consistent with unobservable adverse MMC member health status leading to marginally worse outcomes.  Put differently, observed outcome differences may just be a proxy for unobserved health status or illness severity.  Nonuniform concentration of MMC patients among particular physicians then ensures that a typical MMC patient will see a physician whose profiles have become slightly worse over time than his or her peers in the same hospital. ”

Determining whether patient outcomes are due to physician performance or unobserved differences in baseline patient health is the key to having valid measures.

Why providers love ACOs

October 13, 2010 in Health Insurance, Health Reform, Managed Care, Physician Compensation, Supply of Medical Services | 4 comments

“The good thing about the systems not being highly integrated and coordinated is that premiums are lower. Why are those hospitals and physicians [integrating]?  It wasn’t for increased coordination of care, disease management, blah, blah, blah—that was not the primary reason. They wanted more money and market share.”

  • A Fresno, California medical group physician

Using examples from the California market, Berenson, Ginsburg and Kemper (2010) detail how accountable care organizations (ACOs) may be used by providers to drive up prices.  California is an interesting market to study for ACOs as they have a number of their prototypes: multispecialty group practices and large independent practices associations (IPAs).

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Do Medicaid Managed Care Organizations Save Money?

September 28, 2010 in Managed Care, Medicaid, Medicaid/Medicare | No comments

In the 1990s, State Medicaid programs turned to Managed Care Organizations (MCOs) to reduce costs.  States such as Florida, Indiana, Kentucky, Louisiana, Missouri, Ohio, South Carolina and Texas attempted to turn over their entire Medicaid programs to MCOs through waivers.  For instance, in 2007 MO HealthNet mandated managed care for all participants by 2013.

Some of the larger Medicaid MCOs are subsidiaries of large insurance groups.  Two examples include WellPoint Health Networks and AmeriChoice (a Medicaid-only subsidiary of United Health Group, Inc.).

Do MCOs offer better care at lower costs than State governments?  Laura Katz Olson believes not.  Many Medicaid MCOs instituted “gag rules” which controlled what physicians could disclose to their patients about treatment options.  Other MCOs gave bonuses to physicians who limited services to their patients.

A study by Mark Duggan (2004) found that “the resulting switch from fee-for-service to managed care was associated with a substantial increase in government spending but no corresponding improvement in infant health outcomes. The findings cast doubt on the hypothesis that HMO contracting has reduced the strain on government budgets.”

Another study by Landon et al. (2007) found that “the performance for the commercial population exceeded the performance for the Medicaid population on all measures except 1, ranging from a difference of 4.9% for controlling hypertension (58.4% for commercial vs 53.5% for Medicaid; P = .002) to 24.5% for rates of appropriate postpartum care (77.2% for commercial vs 52.7% for Medicaid; P = .001). Differences of similar magnitude were observed for commercial and Medicaid populations treated within the same health plan.”

One alternative to compelling  beneficiaries to enroll in MCOs is to allow them to choose which MCO they want.  In 2006, Florida Governor Jeb Bush began an “empowered care” pilot which gives Medicaid beneficiaries a subsidy based on their health status and prior use of health services.  Beneficiaries could use the subsidy to buy their own health insurance if they wished.  Because of limited government oversight, low physician participation rates, and a lack of clarity of the benefits which were covered, the Florida inspector general found that MCOs have “too few specialist, untimely access to care, inaccurate information about resources and patient needs, and inaccessible drug coverage information and consumer service phone numbers.”

Although I am in favor of additional patient choice, additional transparency is needed in order for patient choice to work.  Even if beneficiary choice improve satisfaction, one must still worry that risk adjustment will be imperfect and MCOs will “select” the healthiest beneficiaries to enroll in their plan.

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Explaining Any-willing-provider and Freedom-of-choice laws

May 7, 2010 in Managed Care, Regulation | 1 comment

Hellinger (1995) defines any-willing-provider (AWP) and freedom-of-choice (FOC) laws.  These laws have been enacted by a number of states.

“AWP laws require managed care plans to accept any qualified provider who is willing to accept the terms and conditions of a managed care plan. These laws do not require managed care plans to contract with all providers. However, they do require managed care plans to explicitly state evaluation criteria and ensure “due process” for providers wishing to contract with the plan.”

“FOC laws permit an enrollee to obtain reimbursable health care services from any qualified provider even if the provider has not signed a contract with the managed care plan. These laws often compel managed care plans to pay the same amount to a nonnetwork provider chosen by an enrollee as they pay to a network provider. Yet this does not guarantee that an enrollee will incur the same out-of-pocket costs. Enrollees who obtain all of their care from non-network providers pay the fixed copayment per service (or a fixed percentage of covered charges) their plan requires, plus any charges in excess of the plan’s  overed charges.”

Michael Morrisey recommends repealing these two laws to increase competition and I tend to agree with him.  Both laws limit managed care organizations’ ability to effectively negotiate on price.

California’s Current Health Insurance Market

January 6, 2010 in Health Insurance, HSA, Managed Care | No comments

The California Healthcare Foundation looks at the latest health insurance trends in the nation’s most populous state.

  • In California, like in many states, there is a blurring line between what defines an HMO compared to other forms of health insurance.  Almost all insurance carriers now offer “a broad array of products, some of which do not conform to traditional product designs.”
  • While HMO enrollment has declined in other states recently, HMO enrollment has been steady in California.  Over 60% of commercial enrollees have either an HMO or POS plan.
  • California has 2 health insurance regulatory bodies: the Department of Managed Heath Care (DMHC) and the California Deparment of Insurance (CDI).  DMHC is responsible for regulating all HMO plans and some PPO plans, while CDI regulates other PPO plans.
  • Consumer Directed Health Plans are gaining ground.  Most large employer offer CDHPs as one choice among many health insurance options.  On the other hand, many small businesses are replacing traditional health insurance products with CDHPs as the employees only option.
  • Anthem, Aetna and Cigna have introduced 3 tiers of network physicians.  There is a high-performance tier (based on physician cost and quality), a second in-network tier, and an out-of-network tier.
  • Some employers have cut cost by giving employees a narrow network plan, which gives them access only to a narrow set of physicians out of the carrier’s entire network.  For instance, when Scripps Health System in San Diego started paying doctors via fee-for-service, many plays excluded Scripps doctors from many benefit packages.  Other plans are attempting to remove the UCSD Medical Center physicians.

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How has episode-based P4P worked in California?

November 30, 2009 in Health Insurance, Managed Care, P4P, Quality | No comments

Episodes of care are defined as the bundle of medical treatments used to treat an illness over  a specified time period.  Because all treatments are bundled together, these episodes have been thought to provide a superior unit of analysis in pay-for-performance (P4P) systems.  In fact, Oxford Health Plan pioneered episode payment in the 1990s.  [Later, the health plan abandoned episode payment due to data and computer system difficulties]

How has episode-based pay-for-performance worked in California?  A paper by Robinson, Williams and Yanagihara (2009) looks at Integrated Healthcare Association (IHA) initiative.  This association of health plans, hospital systems, and medical groups manages California’s P4P program.  The P4P program gives large physician groups a P4P score based on all of its commercial HMO patients. Using the Thomson Reuters Medical Episode Grouper (MEG), $264 million was spent on the California P4P between 2003 and 2007.  Although this is the largest P4P program in the nation, it amounts to less than 2% of California physician’s income.

Using medical groups rather than individual physicians has a number of advantages.  First, a larger number of patients are attributed at the medical group level compared to the individual provider.  Also, having multiple physicians within a single group treating a patient does not complicate the analysis.  Despite the use of medical groups rather than physicians, Robinson and co-authors found a number of problems with episode-based P4P:

  • Small Sample Size: The IHA technical committee stated that a physician organization must have a minimum of 30 episodes to be evaluated.  However, most physician organizations did not have enough episodes to be scored.  The main problem is that most enrollees are healthy during the year and thus do not generate as many episodes.  However, this may be less of a problem if P4P was to be applied to Medicare beneficiaries.
  • Data Completeness: “Prior to P4P, there was little incentive for the medical group to fully code what is done to the patient (procedures) and why it is done (diagnoses) on encounter forms.”  If P4P were applied to the Medicare population, procedure codes would likely be coded more accurately (because physicians are mostly paid by the procedure), but the diagnoses fields would likely suffer from similar problems.

Today in 2009, IHA has mostly abandoned episode-based P4P.  The metrics to be used going forward include: the percentage of prescriptions filled which are generic, the percentage of ambulatory surgery procedures that take place in freestanding centers compared to hospitals, ER visits per 1000 enrollees, non-maternity hospital visits per 1000 enrollees.

The authors note that episodes of care still may be appropriate for high-volume, high cost procedures in orthopedics and interventional cardiology, but California’s enthusiasms for episode-based P4P seems to be waning.

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