Comments on: Queries…

By: Matt

Matt — Sun, 17 Jun 2007 01:50:50 +0000

An equally important question may be what constitutes a “reasonable” premium increase for employers and members (when they pay a share of premium). Perhaps this should be defined as an increase equal to the increase in company revenues or personal income, so that health insurance premiums would in future consume no higher percent of total revenue (or income) than they do today. Based on other New England markets, increases in corporate revenue and personal income have averaged 3-6% over the past four years. I suspect that leaves very little for provider rate increases, after accounting for utilization.

If reasonable premium increases of 3-6% are unrealistic, what constitutes a “tolerable” premium hike for employers and members? We know some employers continue to offer the same benefits year after year even in the face of 10-20% annual increases, but in general, there is data to suggest that the frequency with which employers terminate coverage or buy down to less generous plans (e.g. higher deductibles) starts to jump when premium hikes top 10%. If 10% is the limit of tolerable for most employers and members, that leaves perhaps 5-6% for provider rate increases after accounting for utilization trends.

By: Charlie Baker

Charlie Baker — Wed, 30 May 2007 21:08:06 +0000

All - Linda M. has the budget numbers right. Whether or not that translates into the kinds of rate increases the money implies across some or all providers remains unclear. In following up on Paul Levy’s questions, I asked MassHealth for more information on their proposals, which I haven’t gotten, but I did hear from several hospitals that they got rate increases (5-7%ish) from Medicaid, but didn’t see much on the physician side of things. Hmmm…

In any case, I’ll be back to folks in the fall when the dust settles on our 2008 provider rates to let folks know where we land. Thanks for your input.

By: Linda M

Linda M — Fri, 25 May 2007 14:39:18 +0000

It is my understanding that Chapter 58 boosts Medicaid provider reimbursement rates by $90 million each year (85% to hospitals, 15% to physicians)—or a cumulative $270 million—for fiscal years 2007, 2008 and 2009, and provides funding guarantees for safety-net hospitals. Beginning in October 2007, the law ties provider rate increases to specific performance goals related to quality, efficiency, the reduction of racial and ethnic disparities, and improved outcomes for patients.

By: Charlie Baker

Charlie Baker — Fri, 25 May 2007 12:25:23 +0000

BC - we do price our products as a roll-up of our provider agreements, our assumptions about utilization (and what we think we can do to help our members manage it), and our projected administrative expenses. I was simply suggesting that securing a 4-5% rate increase - instead of a larger one - on the provider side for 2008 would be unlikely in MA. As far as the SGR is concerned, it is the primary calculation for determining Medicare adjustments to physician fees each year. I didn’t know the formula was calling for a 10 percent decrease next year. That will never happen, but it doesn’t bode well for physician fees generally if that’s where the formula starts. And paying more for good care and less for poor case falls smack dab into the “easy to say, very hard to do” category. I’ll blog more on that one later on.

Paul - the presentation I saw implied an 8% annual increase in Medicaid RATES - not simply an increase in Medicaid spending. But I will go back to the state officials who did the presentation to confirm my interpretation. If they do confirm that they’re raising rates by 8% per year, and BIDMC Medicaid payment rates haven’t gone up at all, one of us should check in with MassHealth to find out how that could be the case.

By: Paul Levy

Paul Levy — Fri, 25 May 2007 09:43:55 +0000

Charlie,

Please don’t confuse an increase in Medicaid spending overall with an increase in Medicaid rates to individual hopsitals. Notwithstanding the hubbub about an increase in medicaid spending coming out of Chapter 58, our rates for the subsequent year stayed constant.

Joe,

True, they may key them off of Medicare rates, but they are above Medicare rates.

By: BC

BC — Thu, 24 May 2007 23:51:06 +0000

Charlie – I’m not sure I understand why you can’t price your product to reflect the increase in the medical cost trend. Is there a regulatory impediment? Most large employers, if they don’t want to swallow the full proposed rate increase, will “buy down” the benefit structure by increasing the copays and/or the deductible. Or, they might scrap their current comprehensive plan in favor of a CDHP which is a less than ideal solution, especially for lower paid employees.

Interestingly, non-profits are the dominant insurers in Massachusetts, yet the state has the highest medical costs per capita in the country. At the same time, Minnesota has comparatively low costs and their market is 100% non-profit by law. It seems clear that there isn’t much correlation between healthcare costs in a particular state and the market share split between non-profit and for profit insurers. In a recent interview with Matthew Holt on The Healthcare Blog, Jon Kingsdale made the point that 16% of Medicare beneficiaries on a nationwide basis who are admitted to a hospital go to an Academic Medical Center. In Massachusetts, by contrast, it’s 40%.

On physician reimbursement rates, Medicare uses a system (which I don’t understand) called SGR or sustainable growth rate. According to a couple of experts I recently heard at a conference, if nothing is done, the formula would actually cut reimbursement rates by 9.9% next year. There will probably be legislation to avoid that outcome, but the docs might be lucky to stay flat with last year.

Ideally, doctors should be rewarded for quality and cost-effectiveness and should not be paid on a cost plus basis whether they are good, bad or indifferent. Insurers apparently have plenty of utilization data to identify both the best practicers and the high utilizers. They should be rewarding the former and penalizing the latter.

By: Charlie Baker

Charlie Baker — Thu, 24 May 2007 21:46:30 +0000

ADS - what, exactly - has been happening with Medicare and Medicaid reimbursement rates for you over the past couple of years? And what do you think will happen next year? And all readers should know that it varies from specialty to specialty and from region to region - so we can’t draw across the board conclusions from what’s happening to ADS.

By: Ian M

Ian M — Thu, 24 May 2007 20:46:00 +0000

For Aggravated DocSurg: wouldn’t tying the yearly payment increase directly to expenditures just open the door for the increased inflation of physician costs? It would seem that one of the benefits of the current set up is to keep these increases in check. If they were tied together, some sort of regulation would be required, which could open all sorts of floodgates, and lead to further wrangling and headaches. A question I have is: could there be a way for those on the insurance side to control hospital costs through a process that subjected certain services to a periodic formulary review? Does that already exist in some form?

By: Aggravated DocSurg

Aggravated DocSurg — Thu, 24 May 2007 19:28:11 +0000

As far as an increase for physician services, I think the best way to determine it would be to increase the payment yearly based upon physician practice costs. Each year, the cost of practice increases based upon several factors — malpractice rates, rent, employee expenses such as health insurance and salaries, and even more mundane things like paging service costs, transcription, etc. The amount that each of these goes up is variable across the country, so a simple percentage is not applicable for everyone. However, just to maintain the same income, a yearly increase is certainly appropriate — especially in light of ongoing decreases in Medicare reimbursement.

By: Charlie Baker

Charlie Baker — Thu, 24 May 2007 19:03:15 +0000

BC - so the for-profit crowd says medical expense trend overall of 7-8%. Hmmm…that means a rate increase of what - 4-5% - with a couple of points for utilization increases? That would be grand, but unlikely, I think, in this marketplace. And Paul - I sat through a presentation yesterday that the Medicaid folks made to the MA Health Care Quality and Council, and they said hospital payments by Medicaid for this year and next year are up by 8 percent this year, and 8 percent again next year. Docs, too, but I don’t know by how much. Unless you all are getting creamed by Medicare, Medicaid, at least for now, should be a good news story.

And that’s not to diminish the shift in funding from the public payors to the private payors that’s gone on over the past few years. That’s real. But this time, Medicaid looks like they’re making up for previous shortfalls, no?

And I was on a panel with the Minute Clinic folks this AM, and when I read Susan’s comments to them about TG and cholesterol tests, they said they were “thinking” about that. Pretty cool.