Posts Tagged ‘Center for Studying Health System Change’

New Study Reveals Where Healthcare Costs Are Rising

Thursday, May 31st, 2012

Higher prices charged by hospitals, outpatient centers and other providers drove up healthcare spending at twice the rate of inflation during the financial crisis – even as patients sought less medical care, according to the first-ever Health Care Cost and Utilization Report. According to Kaiser Health News, prices rose five times faster than the inflation rate for emergency room visits, outpatient surgery and facility-based mental health care from 2009 to 2010, according to the Health Care Cost Institute (HCCI), a nonpartisan research group funded by insurers.  Prices fell only in nursing home care, which declined by 3.2 percent in the cost per admission.  Rather surprisingly, the fastest growing spending was in children’s medical care.

“The story really does seem to be prices,” said Martin Gaynor, chair of the institute’s governing board and a healthcare economist at Carnegie Mellon University.  One of the most comprehensive analyses at real claim payments made by insurers, the study’s findings raise questions about the nation’s $2.6 trillion annual healthcare bill: Why are medical services costs rising significantly faster than inflation?  Is the fast increase in spending on children a glitch, or a long-standing drift with major implications for future costs?  “If you don’t know what the cause is, you don’t know what the right policy lever is (for a solution),” Gaynor said.

The study’s results are based on nearly three billion claims paid by Aetna, Humana and UnitedHealthcare for 33 million people with employer-based insurance.  The data represent approximately 20 percent of the people with insurance nationally, but do not include spending for people who are on Medicare, Medicaid or those who purchase private policies.

According to the report, people with job-based insurance “are paying more and getting less,” said Chapin White, a senior researcher at the Center for Studying Health System Change, a nonpartisan think tank.  Hospitals and other medical providers “just seem to be able to raise prices faster than general inflation.”

“This is an important study that clearly demonstrates that rising prices for medical services are driving health care cost growth,” said Karen Ignagni, president and CEO of America’s Health Insurance Plans, the industry lobby. “Reducing medical costs is essential to making health care coverage more affordable for individuals, families, and employers.”

Before this treasure trove of data was available, researchers have relied on far smaller surveys of employers or on government claims statistics from Medicare, which primarily covers Americans over age 65.

Healthcare researchers have wondered why, after more than 10 years of startling growth, healthcare spending is now rising more slowly.  The researchers’ numbers lend support to one of the most popular theories: People are using less healthcare.  According to the report, between 2009 and 2010, people with employer-sponsored insurance had 3.3 percent fewer admissions to hospitals and other medical facilities, 3.1 percent fewer “outpatient” visits, and virtually no change in the number of procedures performed at physicians’ offices.  There was a slight increase in procedures performed at medical facilities, which rose by two percent, and use of prescription drugs, which went up by just under one percent.

“People had speculated that there was a decline in utilization, but by analyzing over three billion claims we now know not only the trend but the magnitude of the trend,” said David Newman, the institute’s executive director.  “It’s one thing to believe something, it’s a completely different thing to actually know it.”

If these tendencies continue, Gaynor said, “we may need to think about where we’re directing our policies” to control costs.  That’s because healthcare reform initiatives like accountable care organizations — networks of hospitals and doctors that will work together to coordinate patients’ care and cut out unnecessary services — may not help if they’re still charging more for those services.  Gaynor suggested that it might be worthwhile to keep a closer eye on consolidation in the health care sector — since larger hospitals and health systems might have the leverage to demand higher prices from insurers. He also said it might be more effective to regulate prices or increase the portion of health costs insured people pay so that they demand better deals.

Although the insurers whose data was analyzed provided “seed funding” for the study, they did not limit the questions that researchers can ask and have no control over what they produce, Gaynor said.  The group plans to update the database with more-recent claims and make the information available for further study.  “There’s been an awful lot of consolidation in certain sectors of the healthcare industry, and we know that tends to lead to higher prices, but we can’t draw any conclusions yet,” Gaynor said.

Medicare to Tie Physician Pay to Quality, Cost

Tuesday, April 24th, 2012

Approximately 20,000 physicians in four Midwest states recently had a sneak peak at their financial future. According to Kaiser Health News, they were e-mailed links to Medicare reports detailing the amount their patients cost on average as well as the quality of the care they provided.  Additionally, the reports showed how Medicare spending on each doctor’s patients compared to their peers in Kansas, Iowa, Missouri and Nebraska.

The so-called “resource use” reports, which Medicare eventually plans to distribute to doctors nationally, are one of the most visible phases of the government’s efforts to enact a complex and delicate although little-known proviso of the Patient Protection and Affordable Care Act (ACA): paying more to doctors who provide quality care at lower cost to Medicare, and cutting payments to physicians who add to Medicare’s costs without improved results.

Requiring providers to pay closer attention to cost and quality is seen as crucial if the nation is to succeed at controlling its healthcare spending — currently more than $2.5 trillion a year.  It’s also vital to Medicare’s solvency.  Efforts are already underway to transform the way Medicare pays hospitals, physicians and other providers who agree to work together in accountable care organizations.  This fall, Medicare – which covers 47 million seniors and disabled people — will fine-tune hospital reimbursements based on quality of care.  It plans to take cost into account as early as next year.

But applying these same precepts to doctors is much more difficult, experts agree. Doctors see far fewer patients than do hospitals, so making statistically accurate assessments of doctors’ care is much harder. Comparing specialists is tricky, since some focus on particular kinds of patients that tend to be more costly.  Properly assessing how a physician impacts costs must include not just the specific services provided, but also care other providers may give.

“It may be the most difficult measurement challenge in the whole world of value-based purchasing,” said Dr. Donald Berwick, the former administrator of the federal Centers for Medicare and Medicaid Services (CMS).  “We do have to be cautious in this case.  It could lead to levels of gaming and misunderstanding and incorrect signals to physicians that might not be best for everyone.”

Dr. Michael Kitchell, a neurologist and chairman of the McFarland Clinic in Ames, IA, predicted that the Medicare reports “will be a huge surprise to almost every physician.”  That’s because the calculations of how much those doctors’ patients cost Medicare not only include the services of the individual doctor but of all the physicians who provided any treatment to the patient.  Kitchell said his own patients typically saw 13 other physicians.  “You’re a victim or a beneficiary of your medical neighborhood,” Kitchell said.  “If the primary-care doctors are doing the preventative screening tests, you’ll get credit for that, but if you’re in a community where the community doctors are doing a poor job, you’re going to look bad.”

Medicare officials are attempting to improve the way they measure physicians as they follow the ACA’s directive to phase in the new payment system, called a Physician Value-Based Payment Modifier, which is scheduled to begin in 2015.  At first, it will apply solely to physician groups and some specialists selected by the government; by 2017, the payment change is intended to apply to most if not all doctors.  The assessment “is a very important change we’re putting into place, one where we’re going to need a lot of feedback and deliberation,” said Jonathan Blum, CMS’s deputy administrator. “We’re not blind to the challenges that are coming toward us.”  Although the program is still being worked out, it will become reality for many doctors in January, because CMS wants to base its 2015 bonuses or penalties on a doctor’s patients’ outcomes during 2013.

Private insurers may decide to use a formula similar to Medicare’s, said Paul Ginsburg, president of the Center for Studying Health System Change.  Medicare’s ultimate method of judging and paying physicians could become “a valuable asset for private insurers, with a tool that will be somewhat bulletproof, that physicians won’t attack because they’ve been part of the process of developing them.”

Getting physician support might not be a peace of cake, said Margaret O’Kane, president of the National Committee for Quality Assurance.  “Doctors are a very powerful political segment,” she said. Additionally, “Patients are not behind this agenda.  The public is very scared about managing costs.”

Dana Gelb Safran, who measures quality for Blue Cross Blue Shield of Massachusetts, doubts it will be possible for the government to judge individual doctors.  “There really are very few measures that we can reliably evaluate on the individual doctor level,” she said.  “When they move forward with the value-based modifier, there is going to have to be a way to allow physicians to identify other physicians with whom they say they practice and who they say they share clinical risk for performance.”

Medical Bills Major Cause of Bankruptcies

Wednesday, February 29th, 2012

Most Americans are just one illness away from bankruptcy – even those with healthcare insurance.  Unfortunately, there are millions of other Americans who don’t have the cash to cover their medical bills.  Hospitals expect quick payment and offer insured patients little flexibility if they have difficulty paying bills.  Those unpaid bills are sent to collection agencies, and damage the individual’s credit history for years.  The crisis in American healthcare is not restricted to emergency rooms where uninsured people wait – often for long periods of time — for care.

In fact, a study has estimated that as many as 62.1 percent of all bankruptcies are due – at least in part – to medical expenses that the person simply cannot afford to pay.  And, according to the study’s authors, that might well be a conservative estimate.

“Unless you’re a Warren Buffett or Bill Gates, you’re one illness away from financial ruin in this country,” said Steffie Woolhandler, M.D., of the Harvard Medical School.  “If an illness is long enough and expensive enough, private insurance offers very little protection against medical bankruptcy, and that’s the major finding in our study.”

Yet, 75 percent of the people with a medically-related bankruptcy had health insurance.  “That was actually the predominant problem in patients in our study — 78 percent of them had health insurance, but many of them were bankrupted anyway because there were gaps in their coverage like co-payments and deductibles and uncovered services,” Woolhandler said.  “Other people had private insurance but got so sick that they lost their job and lost their insurance.”

Even patients who have coverage “may not be protected from high out-of-pocket costs when they are diagnosed with cancer,” according to a report by the Kaiser Family Foundation and the American Cancer Society.  In addition to high insurance premiums, those costs may force patients to amass debt as they attempt to pay for the care they need — or postpone or skip lifesaving treatment.  “Having insurance increases people’s ability to access care,” said Mark Rukavina, an expert on medical debt and the executive director of The Access Project, a Boston-based healthcare advocacy group.  “The good news is that they get the care, but the bad news is it’s unaffordable.”

The days of Cadillac health plans are pretty much over,” said Peter Cunningham of the Center for Studying Health System Change in Washington, which found that 20 percent of American families have problems paying medical bills.  More than 44 million Americans currently are paying off medical debt, the Commonwealth Fund said, an increase over the 37 million in 2005.  Two years ago, Congress reported that 30 million Americans of working age had been contacted by a collection agency for unpaid medical bills.  One survey asks how people have been affected by their unpaid medical bills.  “Two-thirds of people say … they’ve had problems paying for some of the basic necessities — food, rent, mortgage, clothes, basic stuff,” Cunningham said. “They’ve put off major purchases.  They’ve taken money out of savings or borrowed money.  An increasing number consider filing for bankruptcy.”

Although it’s not yet known how the Patient Protection and Affordable Care Act (ACA) will impact medical bankruptcies, a study from Massachusetts since its healthcare reform became effective in 2006 offers scant good news. The study, which was published in the American Journal of Medicine, determined that between early 2007 and mid-2009, the share of all Massachusetts bankruptcies with medical grounds fell from 59.3 percent to 52.9 percent, a 6.4 percent decrease.  Because there was a sudden rise in total bankruptcies during that period, medical bankruptcy filings in the state rose from 7,504 in 2007 to 10,093 in 2009.

According to the study’s authors, “Even before the changes in healthcare laws, most medical bankruptcies in Massachusetts – as in other states – afflicted middle-class families with health insurance.  High premium costs and gaps in coverage – co-payments, deductibles and uncovered services – often left insured families liable for substantial out-of-pocket costs.”

“Despite a marked decline in the un-insurance rate in Massachusetts since the implementation of health reform, the proportion of bankruptcies that occurred in the wake of medical problems has not decreased significantly, and the absolute number of medical bankruptcies has actually increased by one third,” said David U. Himmelstein, M.D., from City University of New York School of Public Health, and the study’s lead author.

Medicare, Medicaid Costs Rising More Slowly

Tuesday, January 24th, 2012

Healthcare spending nationally grew slowly for the second successive year in 2010, bringing it in line with growth in the U.S. economy as a whole, according to the Department of Health and Human Services (HHS).  Spending rose by 3.9 percent in 2010, to $2.6 trillion, while the GDP rose 4.2 percent, according to HHS, which published its findings in the journal Health Affairs.  In 2009, spending increased nearly the same by 3.8 percent, but in contrast it’s growth rate was twice that by 7.6 percent in 2007.  Spending increases frequently hit double digits in the 1980s and 1990s.  While spending growth in general remained slow, premiums for people in private insurance plans grew faster for the first time in seven years than what was spent on their care, according to the Centers for Medicare and Medicaid Services (CMS).  Premiums in 2010 rose 2.4 percent, slightly less than the 2.6 percent increase in 2009, although private health insurers’ spending on actual benefits rose only 1.6 percent in 2010, down from 3.7 percent in 2009.

Healthcare represents 17.9 percent of the U.S. economy, the same proportion as in 2009, according to a government report. “Persistently high unemployment, continued loss of private health insurance coverage and increased cost sharing led some people to forgo care or seek less costly alternatives than they would have otherwise used,” the report said.

The report showed that the federal government paid 29 percent of the nation’s healthcare bill in 2010, up from 23 percent in 2007. Some of that increase reflects a transitory increase in federal aid to states to enroll more uninsured people in Medicaid. The percentage of spending by private businesses and state and local governments fell.

The recession played a large role in impacting spending, CMS officials said.  Because fewer people were insured, and private insurers generally picked up less of the cost, patients went to the doctor and hospital less frequently.  The answer may go beyond the recession.  “The utilization slowdown is at least in part structural, and not just cyclically driven by the economy, and the adoption of higher cost sharing plan designs will result in some level of permanent slowdown in trend,” said Ana Gupte, a senior analyst at Sanford Bernstein, which conducts research for investors.

“Premiums grew faster than benefits for the first time in seven years, and benefits grew at their slowest rate in the history of the accounts, according to Anne Martin, a CMS economist.  Martin said this was because private health insurance companies lost enrollees as people were laid off, moved to cheaper health insurance plans as a result, cost-sharing increased.

Karen Ignagni, president of America’s Health Insurance Plans, said that the portion of premiums “allocated to health plans administrative costs was among the lowest in recent years, despite the fact that health plans have been in compliance with the healthcare reform law.”

Additionally, spending on prescription drugs declined in 2010.  Not only did individuals buy fewer drugs, but there were also more switches from brand to lower-cost generic medications. According to CMS, fewer new drugs came onto the market.

Paul Ginsburg, president of the Center for Studying Health System Change, a Washington research group, said the report didn’t address the biggest question: “When the economy gets strong again, do we just return to the old business as usual?  Probably,” he said. “But there’s a chance that the experience of people economizing may have longer-lasting effects.”

The Obama administration was pleased with the report and called it good news for the healthcare law, although some researchers found the law had a less than 0.1 percent impact on national health spending in 2010.  “These numbers do not take into account all of the cost-saving provisions in the Affordable Care Act that are still being implemented.  But they do show why the Affordable Care Act is so important,” senior White House adviser Nancy-Ann DeParle said. According to DeParle, the insurance regulations in the law will keep insurance companies “in check.”

The phasing in of the patient Protection and Affordable Care Act (ACT) which will expand insurance coverage to as many as 32 million people, will incur larger cost increases later in this decade. National health spending is expected to increase by 8.3 percent in 2014, when the most ambitious coverage expansions take effect, according to CMS projections.  “The law will control the growth of healthcare spending through fraud prevention, better coordination of care, disease prevention and overhauling insurance markets,” DeParle said.

According to DeParle, “Starting in 2011, insurance companies were required to publicly disclose and justify any premium increases larger than 10 percent. Many states have the authority to reject unreasonable premium increases and the Affordable Care Act gives states $250 million to strengthen their rate review programs. Additionally, insurers are required to spend at least 80 percent of your premium dollars on healthcare expenses instead of overhead and profits.”