Network thoughts from NHPC

I was at the Academy Health National Health Policy Conference this week and it was wonderful. I learned a lot, I nerded out a lot, I saw a bunch of people that I mainly see on Twitter. I also am in the middle of a really good rethink on network choice structures.

Katherine Ho of Columbia made a very good, economist lens point that I want to paraphrase and then extend on.

Individual market products which are not just the ACA but also Medicaid Managed Care, Medicare and Medicare Advantage have a single decision maker and either a single individual reacting to the network quality or at most a single family group. If there is a sufficient network as defined by the single decision maker, the person screaming about a bad network is the decision maker. There is heterogeneity in defining what a “good” network looks like. For a lot of people a “good” network can be a very small network. Janet Weiner of Penn made the point that for most prospectively healthy people with ex ante good risk a “good network” can be what ever network that has their PCP and a local urgent care in network and everything else is almost irrelevant. This is the space for individual insurance market narrow networks that can lead to significant price per unit reductions.

On the other hand, group insurance products for large firms have the HR department being the decision maker. They face a budget constraint and a “keep most employees reasonably happy” sub-constraint. If there is a geographic dispersion of employees, knocking out one hospital in Town X and making all employees travel 15 miles to Town Y’s much cheaper and equally good hospital will produce a lot of screaming from employees. Smaller employer groups may be facing a much stronger budget constraint than large groups but this dynamic makes forcing large group insurers into narrower networks much harder. And if narrower networks are less plausible, then the negotiating leverage shifts to the providers which means higher rates for the providers.

I have no idea how to systemically measure or define a “good” network as the summary statistics wave away a lot of detail but this is forcing me to think really hard right now.

7 replies
  1. 1
    dr. bloor says:

    I have no idea how to systemically measure or define a “good” network as the summary statistics wave away a lot of detail but this is forcing me to think really hard right now.

    IANAHCG*, but it seems to me that everything above this makes it clear that the nature of the beast means that any attempt to identify a single definition of “good” is essentially a snipe hunt.

    *I am not a health care geek

  2. 2
    p.a. says:

    How about the HRs explaining to employees, instead of treating them (us) like children, without the info, that the 15 mile drive for non-emergencies of course can save the family $xx or $xxx in premiums/month or year. Not sure how much communication on these matters there is. Usually done as a fait accompli: here’s your new plan peons.

  3. 3
    Meyerman says:

    This is playing out in Massachusetts right now. The Group Insurance Commission negotiates health insurance rates for state employees and a lot of municipal employees whose towns and cities elect to insure through the GIC. The GIC recently decide to save money ($12 million was their number) by dropping some of the insurers from their menu of choices. Insureds spoke out and went to their state reps because it was done without much notice and for people in my part of the state (western Mass) dropping a network could mean one would have to travel a long way to a replacement (if you could even find one). The GIC backtracked and added the plans back in, but this burned up all but $2 million of the projected savings. So the state and municipalities will face higher insurance bills which will hit their budgets. Insureds will be mostly insulated from rate increases and won’t necessarily link service cuts in other areas of the municipal budget to their “win” in insurance. The complexity of the system means that price signals from insurers never make it to the people paying the bills (the insureds 20% – the taxpayers 80%). How are you going solve this, Mr. Anderson?

  4. 4
    Kelly says:

    I have no idea how to tell a good doctor from a bad doctor until something goes wrong. I have no idea if the network is broad enough until I need something outside. I have no idea what anything costs. I have a very limited idea of what works. Ms. Weiner is mostly right. We just changed PCP and the new guy seems just fine. The only reason it’s nice to have my current PCP in the new insurer’s network is to avoid the overhead of picking out a new one. I picked my previous PCP because he’s the son of my childhood PCP. Pleasant fellow. I’ve never been sick enough to know if he’s exceptional. Half of everything is below average. This year the Kaiser deal was too good to pass up so we changed.
    I just wish I knew I’d never get stuck with a crazy out of network bill when I’m unconscious.

  5. 5
    Daddio7 says:

    “Making all employees travel 15 miles to Town Y’s much cheaper and equally good hospital.” Why can’t every hospital be town Y’s hospital. Why is it fine for government to control the health insurance industry but not the healthcare provider industry? This also shows the danger of group insurance plans. If individuals were responsible for paying their own healthcare bills hospitals and doctors would have to fairly price their services. End group insurance now.

    With an auto insurance claim you have to get three quotes. There are dozens of makes of cars and hundreds of models but it takes just a few minutes for a shop to lookup the basic labor charge for that repair to give a quote. There is only one make of human and just two closely related models yet no hospital will give you a quote. Having competing health insurance providers is useless to control costs when providers can pull what they charge for any procedure out of their nether regions.

  6. 6
    stinger says:

    As someone on the cusp of changing from having an HR department offer me a couple of choices and being the single decision maker myself, this is an interesting topic. Rather like commenter Kelly above, I pick a PCP and stay with them until they move away or retire. I want somebody who listens well and explains well; I have very little basis to know if she or he is otherwise “good”, or is charging a fair price. I hate having a PCP I like suddenly being off limits to due a plan change.

    Health care is something I “want” only reluctantly — only when sick or injured. Shopping for it, and for health care insurance, is an activity I prefer to keep at arm’s length.

  7. 7
    ProfDamatu says:

    @Daddio7: OK, I’m going to use this comment as a jumping off point, but I don’t mean it as an attack on you personally!

    The lack of price transparency is a major problem, but the solution is going to be much more complicated than implied here, I think. For one thing, the idea of people having to get multiple quotes for medical treatments/procedures is…deeply problematic, for a number of reasons. First, in many areas, there simply won’t be multiple providers available for a given procedure or treatment. I’m thinking of my town in particular – about 50,000 people, one hospital (that’s better for some things than others) that serves as the major option for three counties (and a couple of counties in the next state). The nearest town with comparable (actually, better, probably) facilities is an hour away (over a mountain). It’s one thing to say, well, you need to be willing to make that trip when it’s, say, a one-off day surgery or colonoscopy or similar, but gets much more complicated if it’s, say, chemo treatments that occur every three weeks with weekly bloodwork, or radiation treatments that the patient has to attend 5 days a week for a month.

    I can tell you right now, if that had been the case when I was being treated for lymphoma, good luck hanging onto my job! I do realize that people do this sort of thing every day, but that tends to be when it’s a medical necessity (i.e., care not available closer to home, as with the folks from the neighboring state – and even there, they try to minimize the road trips taken by patients). I’d be concerned that it would be massively disruptive (in a bad way) if suddenly this kind of forced price shopping became the norm. Second, at some point what’s better for patients has to come into this, and I’m pretty sure there’s research that shows that people have better outcomes when it’s easier for them to get to their providers.

    I also have to push back on this idea that somehow human medicine is less complicated than car repair, because there’s only “one make and two models,” so price quotes should be easy to produce. First, there are of course more than two models of human – let’s not erase intersex and trans* individuals! But the real problem with this is not just the vast variation among humans (there’s a reason that good electronic records could make healthcare so much better) but also the vast array of things that can go wrong, and all the different flavors of such. Just to take a brief example from my own history – based on my presenting symptoms, my doctors initially thought I had thyroid cancer. Complete testing revealed it to actually be lymphoma, and it took a surgery to find out for sure what type of lymphoma it was (which REALLY REALLY matters in terms of treatment approach). Three rounds of chemo plus radiation were prescribed.

    At what point in that process should I have been shopping around, looking for the best quote? I mean, I’d known I had cancer for over a month before we had enough information to start the treatment; would you really want someone in that position to take another couple of weeks to shop for the best deal on chemo? And is the answer that I should have been shopping at each stage of the process – cheapest ultrasound, cheapest needle biopsy, cheapest PET scan for staging, cheapest surgery cost…? Surely it’s apparent that this approach becomes flat-out dangerous when applied to many serious conditions. Not to mention more expensive in the end – I promise you that, as expensive as my treatment was, it would have been tens of thousands of dollars more if I’d ended up at Stage II instead of Stage I, so all that shopping would have been for naught. And let’s not forget, it’s entirely possible that the cheapest providers for each of those steps might well have been completely unconnected facilities…which imposes another burden on the patient, of obtaining and schlepping results all over town. And, on top of that, I’m incredibly privileged as a patient. I’ve been educated to the PhD level, in a field closely enough related to medicine that I was able to do and understand a lot of research into my condition, so I could immediately tell when I was being offered the standard of care, and so on. I cannot even imagine trying to do that kind of shopping as, say, someone with a high school education, or even a college degree. It’s not that I’m smarter than those hypothetical people, but I know where to look for reliable info, I have access to primary literature through my job, and I have decades of experience doing lit review type research. And I’m not going to lie, doing that research made me less effective at my job – and all I had to understand was what each part of the treatment was actually doing, not figuring out what the best value for price would be on top of that!

    Oh, and there’s also a difference between looking up a basic labor charge for a car repair, and estimating what a surgical procedure will cost. With a car, you can look under the hood, examine the car’s guts pretty well, but with a human, none of our imaging modalities can tell you exactly what you’ll be dealing with until you actually open the person up. At best, I would predict that you’d get ranges of several thousand dollars, as surgeons and hospitals hedged against unexpectedly complicated anatomy and/or pathology and surgical complications. (And surely we’ve all had the experience of a car repair coming in hundreds of dollars over the estimate!)

    Finally, I have to question the idea that if individuals were responsible for paying their own bills, we’d magically get fair prices for services. This at first blush sounds like a variant of that odious “the poors need to have skin in the game” argument. When it comes to health care, we do – it’s our literal fucking skin! – and you can’t get blood from a stone (riddle me this – how exactly is someone making $38k/year lacking skin in the game, when paying over 8% of their income for insurance premiums alone?). It’s true that prices might come down somewhat if what you suggest were to come to pass, but I suspect that it wouldn’t be nearly enough for the vast majority of people to pay for anything serious on their own, especially not if it happened early in their lives, so no savings…or right after having a baby…or to someone with three kids and a median-wage job…or right after losing a job…or just as the stock market shits the bed yet again, wiping out your get the idea. I think back on my own treatment, which IIRC cost in the neighborhood of $150,000 (which is pretty damn near a best case scenario for lymphoma). Even if your scenario worked, and the cost of that treatment dropped to $15,000 (which is an overly generous assumption; in no way would things magically cost a tenth what they do now)…well, at the time I was making $36k/yr; you do the math. Point being, for big-ticket items, $15k might as well be $150k in terms of the ability of close to half the population to actually pay for it. And of course all of this ignores the fact that it’s not just the price transparency and payer =/= service recipient issues that drive up medical costs; the insane cost of medical education, doctor shortages (especially primary care), the fact that we’re paying for massive amounts of pharmaceutical advertising, among many other things, also play a role, and would be completely unaffected by making people responsible for their own health care bills. Even if one wanted to argue that eventually all that would sort itself out once the vast majority of the population was on their own for medical costs, the human suffering would be unimaginable in the interim.

    If you’re talking instead about people being responsible for their own insurance, rather than allowing group insurance…well, all insurance works by pooling risk. If you want to truly make people individually responsible, I would imagine you’d need to not only end employer-sponsored insurance, but also community rating on the individual market as well (because that also functions to create a group of people, a risk pool, some of whom will by definition be subsidized and thus shielded from some portion of their costs). At that point, we’re talking about throwing everyone into something like the pre-ACA individual market, which…no thanks. I guess my TL;DR is this: I agree that a basic problem with our system is that things cost too damn much, but intervening only at the point of patient payment is going to create tremendous misery, and probably not come close to solving the problem.

    I realize this is probably a dead thread, but I thought I’d take the opportunity to work through some of my thoughts on these issues. :-)

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