Modern Healthcare reports on a letter from late last week asking for a new regulation that allows for third party payment of premiums:
A group of 184 lawmakers want HHS to rescind an Obama-era policy that discouraged insurance companies from accepting payments from hospitals or other entities to buy insurance on the exchange for their patients…
“This practice essentially allows insurers to steer patients to the government or to other plans to avoid providing coverage.”
This is an attempt to get a higher level of payment for the same services that are delivered to Medicare and Medicaid patients. We looked at this last summer:
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….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…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….
Adrianna MacIntyre raised a good point last year in that the Exchange plans provide financial protections that are not in traditional Medicare. There is a limit to out of pocket costs in an Exchange plan but not in Medicare.
the cost of Medicare coverage for ESRD enrollees. The Kaiser Family Foundation estimates that these individuals face annual out-of-pocket costs of $6,918 in 2010, on average (that’s $7,622 in today’s dollars). People forget that traditional Medicare doesn’t have an out-of-pocket maximum like the $6,550 cap for private insurance under the Affordable Care Act. Medicare Advantage plans have a cap, but ESRD patients generally aren’t eligible for MA plans, unless they were already enrolled prior to developing their disease. Medigap plans are another way to shield against catastrophic costs—but in many states, Medigap plans can refuse to enroll ESRD beneficiaries.
Moving these folks into private plans that help pad dialysis companies’ bottom lines might not be the ideal policy solution. But leaving some of Medicare’s most vulnerable patients exposed to these kinds of out-of-pocket burdens doesn’t seem ideal, either.
From an insurance side, I don’t like concentrating risk on a single high reimbursing plan. That creates a very strong self-protection incentive to narrow networks and race to the bottom on pragmatic access to care. The cap on exposure though is a very attractive consumer pull factor towards jumping from a societal low cost plan to a societal high cost plan.
Another Scott
There are some what-we-normally-think-of-as-good-guys-and-gals on the letter including my former (redistricting) Congressman Gerry Connolly, Shiff, Lee, etc. Along with some of the usual suspects (King, Brat).
The letter expresses the need in terms of non-profits helping people with horrible diseases get insurance (of course). I’m sure there’s a need, but the risk of abuse, and of constructing a quasi-official high-risk pool with all the bad that entails, sounds too great to me.
I’m sure I’m missing the nuance, and maybe the problems can be fixed, but color me skeptical.
Thanks for the heads-up on this stuff.
Cheers,
Scott.
mjg
While it does sound like there are some abuses, especially in the ESRD context, there also is a real need for these programs in other cases, especially for people dealing with chronic disease. Think about people who are not eligible for Medicare, and who live in a non-Medicaid-expansion state (like Virginia). They desperately need insurance but can’t afford it, can’t get Medicaid, and don’t qualify for premium tax credits or cost sharing to buy insurance on the exchanges (thanks again, Supreme Court). No gaming of the system here, just a solution to a problem that wouldn’t exist in a fairer set of circumstances.
Another Scott
@mjg: Thanks for this.
The obvious solution for corner-cases like this is a pool that covers everyone. We know we won’t get there anytime soon (< 4-6 years). We know that people like David, and company lawyers, are clever and will work to find every scrap of advantage (if only to keep up with other competitors that are also working to find every scrap of advantage). Is there a way to construct a system for these people in need that can't be turned into a dumping ground for insurance companies that don't want to pay for patients that cost X% more than their assumed baseline?
I get nervous about introducing new exceptions rather than tweaking existing programs. Yeah, someone who has some horrible rare disease needs help, but so do people who have not-quite-horrible, not-quite-rare diseases.
Why not simply expand Medicaid? Because the Teabaggers don't want to do that (they want to cut it), because hospitals and doctors don't like the pay scale, because the states don't want to have to pay more, etc., etc. So this "non-profit" route is constructed and puts people in the position of begging for charity, and being at the mercy of for-profit insurance gatekeepers, rather than being eligible for benefits that we all pay for with our taxes…
:-/
What's the solution? My guess is there isn't one. Every system can be gamed. But we need to do our best in making any fixes (and re-visit it after it's been in place for a while).
It would be good to see the Obama Administration's rationale for the rule/recommendation. Maybe David/Richard covered that earlier…
Thanks.
Cheers,
Scott.
Buskertype
The deeper into the weeds we get on this stuff the better a U.K.-style NHS looks.
I get a certain name-brand very expensive medicine through a similar system. My doc thinks it’s really better than the alternatives. My monthly supply costs about $250. (The most similar-but-different generic drug costs around $10). The insurer doesn’t like this so they make the copay $100, but the drug maker, through a third party, subsidizes my purchase so I end up paying $30 a month. It’s a stupid, stupid system.
Good news is I’m scheduled for a surgery this week that should make the drug unnecessary.
Barbara
The biggest issue that has arisen with these payments is that people are being steered to benefit plans based on the provider’s interests, not the individual’s. The most well-advertised case are charities funded by dialysis companies that stop paying premiums once someone no longer needs dialysis, typically because they have undergone a transplant. Depending on how this is done, e.g., the timing of the benefit cessation, it means people could be left without private insurance for services post-transplant, without necessarily being able to immediately enroll in a government program. Many people claim that they were not told that would be the case. Likewise, the private plans typically require a lot more financial sharing than Medicaid for other expenses, like prescription drugs. While Medicare has unlimited out of pocket expenditures, Medicare Advantage has out of pocket limits (one of the things that really does give the enrollee an advantage over traditional Medicare), and most individuals who are Medicare eligible can enroll in an MA plan. So while the provider might be better off, the enrollee might not be. That’s the issue — making sure providers are not steering individuals with biased information.
Camembert
“The deeper into the weeds we get on this stuff the better a U.K.-style NHS looks.”
I have long thought that a #SinglePayerNow system was necessarily also going to engender public and public/private solutions to keep costs sane and extend coverage to where it was otherwise nonviable.
Barbara
@Buskertype: Without arguing with you on specifics, the NHS is more likely to second guess your doctor’s decision regarding whether you need the more expensive product. Now, that product is unlikely to be as expensive within the NHS system, so there might not be any issue, but NHS has become a lot more proactive with respect to the use and availability of expensive pharmaceuticals. I inherently do not trust doctors who say that they think a more expensive product is better. It is rarely based on unbiased information and it is often influenced by pharmaceutical marketing.
Origuy
Hi, David. Any thoughts on Nevada’s latest move to allow people to buy into Medicaid?