Yesterday I argued that the fundamental point of most liberal health policy wonkery is to drive more people to coverage that pays providers closer to Medicare rates than employer sponsored insurance (ESI) rates. The Exchange subsidy design forces a convergence, Exchange risk adjustment encourages a convergence, Medicare buy-in removes a significant chunk of the non-Medicare utilization and moves those services (and people) from ESI based rates to Medicare based rates. The Public Option in any and all of its variants is premised on paying providers Medicare plus a little bit in order to create a low cost broad network product.
However even in a universe where there is a convergence of private, public and qasui-public/private health insurance where the vast majority of the services are paid for at or near Medicare rates, there is still a lot of space for private insurers to operate in.
— Richard Mayhew (@bjdickmayhew) July 12, 2016
The biggest reason for this space to still be open to private insurers is provider practice profiles.
And before we go there, I want to divert for a moment.
Monday night I was taking out the trash. As I was walking down the alley, I saw two fluffy rabbits doing their best to look like rocks as there was a red tail hawk circling overhead. With a garbage bag in one hand, I tried to creep past them without making any noise. One step, two steps and then my right ankle turned in on itself and I am flying in the air. I hear a pop and feel things move like my ankle was on a major slip fault line and as I am twisting in mid air so that I can not land on the garbage bag, I think to myself if I would prefer a break or sprain. Since the college season is starting soon, I would prefer a sprain as I can grit my teeth and hobble through a season with a few turnbacks and competition downgrades. From November through June I would have preferred a break as those things actually heal. I landed, gingerly put weight on my right foot and it is a painful Grade 1 sprain.
Unfortunately I know what to do with a sprain so I am on a good RICE regime right now with the hope that I can start running again next week.
However if I did not know what I did to my ankle or if it needed more treatment I would go to either Dr. Smith or Dr. Jones.
Let’s imagine that they are both in the Medicare +10% Public Option. Would both of them be in the Mayhew Narrow product that is priced at Medicare +10% as well?
Maybe, maybe not.
Let’s explore why below the fold:
The key determinant of whether or not a provider who is willing to take a given rate is included in a narrow network is their pattern and practice of care.
Dr. Smith and Dr. Jones both have good patient outcome measures, they both are board certified and stay active in their professional development. As far as we can tell from claims data, both docs are in the top decile of outcomes for our members in the broad commercial network.
I saw Dr. Smith for an ankle problem about a decade ago. His first reaction was to order an MRI and he was leaning surgery. He was privileged at a regional academic medical center and liked to slice and dice and turn ankles into Julienne fries there. Since I had to pay $300 out of pocket for the MRI and would be on the hook three weeks of pay for the surgery, I wanted a second opinion.
And that is when I saw Dr. Jones. She was a former soccer player so we talked about the way referees view the game versus players. As we were talking she was twisting and turning and poking my ankle. She ordered an X-ray. At the end of the appointment her prognosis was that physical therapy, electro-stim and rest would most likely get me back on the field in six weeks. Total out of pocket cost for me would be $300. Total health insurance costs with the PT would be under $1,500. She said that if I did not show improvement in six weeks, surgery might be an option. She had privileges at the regional academic medical center as well as a community hospital. Since the surgery if needed would be a straight forward operation, she was more than happy to do it at the community hospital.
Thankfully I responded well to the physical therapy and within five weeks I had been released to referee competitive games again.
Both Dr. Smith and Dr. Jones were under contract for the same Medicare + X rate. However Dr. Smith consistently is one of the top billers on a risk adjusted basis. Dr. Jones is consistently an average biller on a risk adjusted basis. The difference is not the rate of pay, it is the number and types of services that the provider orders and where those services are performed. Dr. Smith aggressively orders everything and most of those services are done at the local academic medical center. There the Medicare base is much higher than the Medicare payment base at a non-hospital facility. He is also willing to go to surgery as an early option. He is technically very skilled (if I had my foot smashed by a motorcycle, he is one of the three docs within 100 miles that I want working on me) but everything he does is expensive. Dr. Jones orders fewer tests, and performs fewer surgeries. Those services are more likely to happen either at outpatient centers or community hospitals. Again, she is very skilled (if I have a three knee ligament explosion, she is a top choice to fix me) .
In a world where there is a public option priced at Medicare +10%, both Dr. Smith and Dr. Jones would be in that option. However Dr. Jones would be in the competing Mayhew Super Duper Narrow product. We might even pay her Medicare +25% because we would make up the savings on lower utilization and her particular pattern of care. We could offer a network that pays certain providers Medicare +25% and price that network cheaper than the public option that probably would be built on the any willing provider model because we could exploit lower cost patterns of care.