— Dave Weigel (@daveweigel) July 26, 2019
This is interesting to me as it strongly implies that the health insurers and providers has two pathways towards increasing revenue:
1) Cover more people
2) Increase average payment level per person
From a business perspective this makes sense.
Let’s unpack it a bit as we looked at provider side accounts receivable preferences years ago:
Providers have their preferences as to what patients and insurance scenarios they see. Uninsured individuals have always been the least preferred by both the treatment/clinical side and the finance side for a multitude of reasons….
Providers have clear account receivable preferences as to what patients they treat.
The ideal patient from an account receivables perspective pays a very high percentage of the billed charge with a high degree of certainty and a short turn around time and minimal haggling. Excluding celebrity rehab centers and $40,000/year per person coverage, there are few payers who meet this provider ideal. Everything else is a trade-off.
Let’s look at it from an insurer revenue side perspective now.
An uninsured individual brings no revenue. An individual in Medicaid fee for service brings in no revenue. However an individual in Medicaid managed care brings in some revenue. This is a direct revenue source and also a source of slightly more leverage on payer-provider negotiations that would allow the insurer to get slightly lower rates. Insurers support expanding Medicaid because most of the incremental money is flowing through managed care and a good chunk of the incremental ACA covered population is either getting a new Medicaid ID card or were uninsured.
Medicare Advantage tends to pay more than Medicaid. Exchange plans tend to pay anywhere from Medicare Advantage-esque rates to full commercial rates. Large group plans tend to pay the highest as they have the strongest network constraints if they have a large geographic footprint for their critical employees.
These industries want a one way ratchet where program expansion is only allowed to go from lower paying subgroups to higher paying subgroups.
Medicare Advantage for All, Medicaid Buy-ins, Medicare Buy-ins, Medicare for All would move a tremendous number of people out of higher paying categories and into lower paying categories. That is what the fight was about in the Washington State public option bill as the original proposal was for it to pay providers Medicare plus a little bit and the final proposal ended up at basically commercial rates. This is the fight in North Carolina where the state treasure wants to “only” pay 200% Medicare for the State Employee Health Plan. The large hospital groups in North Carolina have not signed onto the proposal.
Providers and insurers are talking their book of business and they want a one way ratchet. And from a business perspective, that makes sense. From a societal perspective, let’s just be aware of what is happening here.