I spend most of my time thinking about how to exploit the rules of the Exchanges to improve insurance company profitability and sustainability because that is the side of the business I am on. My biggest idea (Silver gap pricing strategy) has a very nice side effect of significantly increasing high actuarial, low cost coverage but that is not an argument I can bring to my bosses and have them do anything about. Arguing that a Silver Gap strategy increases our profitability while cheaply buying risk adjustmnet data and getting us great headlines while covering more people is an argument that my C-level responds to.
Providers also try to maximize their revenue and they are trying to hack the Exchanges for their own benefits. Bruce Japsen highlights an allegation that United Health Care is making about a provider side hack.
Under the “third party” arrangements, nonprofit organizations work as a front for medical care providers trying to win higher payments from private insurers that pay more than government programs like Medicaid, insurers say. For example, UnitedHealth Group last month sued a dialysis chain, American Renal Associates, alleging fraud. In its suit, UnitedHealth said American Renal hooked patients up with a charitable organization that helped patients pay their premiums, according to media reports.
Even though patients were eligible for Medicaid coverage for the poor, according to this New York Times report, the kidney care company wanted them to be covered by a private insurer so the dialysis providers could be paid a higher reimbursement.
There is a second, related theoretical hack that I’ll explain in a bit, but first, let’s look at how this hack allegedly works.
The basis of the hack is the pricing differential. We recently looked at what a provider office in a reasonably competitive region with multiple insurers could see as their fee schedule for a given service.
A provider could see twenty or more unique prices for a given service depending on what program their patient is in and what carrier covered them. Using Medicare Fee for Service (traditional Medicare) as a benchmark of 100%, Medicaid could pay 70% of Medicare, and the most expensive Exchange plans could pay 220% of Medicare. This is, from a cynical bastards’s provider finance analyst’s point of view, is a massive arbitrage opportunity. The rule on Exchange is that a person is not eligible for subsidies if they are eligible for Medicaid. However, no one is forced to use Medicaid as their primary coverage if they are able to get covered elsewhere.
So how does this work?
A provider group that performs very high cost procedures identifies a segment of their patient population that is either uninsured or on Medicaid. They tell these patients to apply for insurance assistance help from a foundation that the provider group providers 99% of the funds. That “independent” foundation awards premium assistance and their case workers help people sign up for brand name insurance (Platinum if we’re keeping things simple, Bronze if we want to get a second grant for cost-sharing assistance) that coincidentally pays the provider group 220% of the Medicare rate instead of the 70% Medicare rate that they would have gotten for Medicaid patients. The provider group sees a massive revenue boost for the same services that would have been rendered anyways.
This scheme works well for very high cost specialties where most of the cost is not from prescription drugs. Dialysis is an obvious field where it is a plausible hack. There are a few other clusters I can think of where this type of hack is viable (hematology is the big one). The provider would be out the cost of the premium and any cost-sharing assistance while making three times as much revenue as before. The break-even point is probably procedure bundles that have a Medicaid allowed amount above $20,000.
And the targeted high provider reimbursement insurer is screwed.
The assistance for these patients is very helpful, and RA should effectively pay insurers more to cover these enrollees.
— Loren Adler (@LorenAdler) August 8, 2016
Risk adjustment won’t save them as risk adjustment is based on the average premium in a state. Average premium in the state is a combination of high and low provider reimbursement policies. This places all of a particular risk on a single high reimbursement carrier. They’ll get some money back in risk adjustment but not all of it. Furthermore, assuming the provider is not getting too greedy, they’ll prioritize the patients who they project to be more expensive/intensive than average to get the high reimbursement coverage and allow the cheap/simple cases to stay on Medicaid.
The secondary hack that I have not seen any data or allegations of is a modification of this hack. It is a shift from low on-exchange reimbursement policies to high on-exchange reimbursement policies. Let’s say Mayhew Insurance offers two policies on Exchange. The narrow network pays providers 125% of Medicare. The broad network pays providers 175% of Medicare. A provider has agreed to be in both networks. It could again route its Mayhew Narrow members to buy up to Mayhew Broad with third party premium assistance so that Mayhew Broad is cheaper on net to the sick individual than Mayhew Narrow. Again, it is the same provider that the patient is seeing with either the same or lower net premium payments after subsidy and “independent charity” premium assistance grant where the sole beneficiary of the scheme is the provider getting reimbursed at a higher rate.
Oh yeah, the provider groups gets a charitable donation tax break and good press.
As a cynical bastard, this is an impressive piece of cynical bastard hacking. As a policy geek, this is socially counterproductive.