Posted in Access to healthcare, Consumer-Driven Health Care, Defined Contribution Benefit Plans, Direct-Pay Medicine, Direct-Pay Practice Models, Economic Issues, Employer-Sponsored Health Plans, Health Insurance, Healthcare financing, Independent Physicians, Medical Costs, Medical Practice Models, Policy Issues, Tax Policy, third-party payments, Uncategorized

Who Pays for Your Healthcare Matters

By Robert Nelson

Zero co-pays. No co-insurance. No surprise medical bills! Considering the inflated prices we pay for healthcare, who could pass up that deal, right?

Are the new generation of value-based employer-sponsored Direct Contracting Health Plans, which often include Direct Primary Care, a great deal and more efficient use of our healthcare dollars? Absolutely yes!

real-health-care-expenditures-and-third-party-largerBut we can’t lose sight of the economic reality that individuals always pay the cost of benefits, either directly or indirectly.  And linking benefits to employment has been a colossal policy mistake and the genesis of job-lock and our 3rd-party payer system, which has been the source of runaway costs for 50 years. As the graph illustrates, insurance (3rd party payer) is now a near surrogate for total healthcare costs!

Don’t be fooled. Within the modern paradigm of healthcare financing, employers don’t pay for our healthcare. Our healthcare expense, no matter how it is structured, IS part of our compensation and a huge portion of of it.

images-223535545945618981307.jpgFACT: Every dollar of tax-favored benefits paid by our employer reduces our take-home pay.

The beauty of Direct Primary Care is the portability (no job lock) and affordability which can exist independent of the size or benefit package of the employer. But the foundation which aligns the incentives is based on the identity of the customer. This is why we have to be careful to match the buyer with the recipient of care whenever possible. To insert another 3rd party, even the employer, undermines the sovereignty of the patient and the independence of the physician.

The supply side of healthcare has served the wrong customers for far too long. DPC should not make that same fatal error by exchanging its essence for a pipeline of patients.

This linkage highlights the importance of policy decisions regarding use of HSA funds; the importance of allowing HSA dollars to pay premiums AND DPC fees can’t be overstated.

For DPC, and Direct Contracting at-large, to dig us out from under the boot of the 3rd party apparatus it must remain accessible to the sole proprietor, independent contractor and very small businesses that don’t have “health plans.” And moving to defined contribution plans and away from defined benefit plans will help get us there.

third-party-2Getting first dollar decisions in hands of consumers will also be deflationary and spur competition; and essential to the goal of eventual portability & ownership of benefits. To do otherwise, with too much focus on a new & improved generation of employer-sponsored healthcare plans, will lead us right back to where we started.

Posted in Access to healthcare, Affordable Care Act (ObamaCare), Direct-Pay Practice Models, Employee Benefits, Employer Mandate, Employer-Sponsored Health Plans, Essential Benefits under the ACA, Health Insurance, Health Reimbursement Arrangement (HRA), Health Savings Accounts (HSA's), Healthcare financing, Individual Mandate, Policy Issues, Tax Policy, Uncategorized

Healthcare: What to Watch For

“…it is important for employers to be fully aware of what the regulations may impact them to safeguard against inadvertently putting themselves, or their employees, in an untenable situation.

It is important for an employer looking to offer an unconventional or untraditional benefit package to speak with an independent health plan attorney or CPA (not employed by the agency selling the program) regarding potential liability and compliance with federal and state laws regarding employer sponsored health plans.

Can your employee afford to reimburse the IRS for taxes not collected on an inappropriately structured HSA? Can your business afford a fine of $100 per day per employee for every day that the unqualified arrangement was offered? These are just some of the potential liabilities.”

http://ushealthmedia.com/healthcare-what-to-watch-for/

Posted in Access to healthcare, Consumer-Driven Health Care, Deductibles, Economic Issues, Employee Benefits, Employer-Sponsored Health Plans, Health Insurance, Health Savings Accounts (HSA's), Healthcare financing, Medical Costs, Medical Practice Models, out-of-pocket costs, Patient Choice, Policy Issues, Price Tansparency, Uncategorized

Deductibles and HSA’s: The Devil (and the truth) is in the Details | LinkedIn

AKA…

HSA’s: The Good, the Bad and the Unexpected

free-money1

The quote below is worth pondering.

We find no evidence of consumers learning to price shop after two years in high-deductible coverage. Consumers reduce quantities across the spectrum of health care services, including potentially valuable care (e.g. preventive services) and potentially wasteful care (e.g. imaging services).                                                                                  What Does a Deductible Do? The Impact of Cost-Sharing on Health Care Prices, Quantities, and Spending Dynamics Zarek C. Brot-Goldberg, Amitabh ChandraBenjamin R. HandelJonathan T. Kolstad

These findings seem to contradict, or at least not support, another large study that clearly show a trend towards substantial savings when patients are spending more of their own money or when trying to make their deductible dollars go further.

If the conclusions are valid and can be broadly applied, it would call into question a presupposition that most healthcare economists have held for quite some time: That being, when patients become medical consumers and are confronted with choices of how to spend their own money, they shop around and find better value and also don’t consume unnecessary medical services.

The summary of this newer study  published by the National Bureau of Economic Research seems to indicate that they don’t shop smarter, they don’t shop at all; but instead all the savings was from simply cutting back on all care.

This is potentially troubling on the surface. It appears to indicate that when presented with high deductibles, that patients just stopped getting as much care! Could this really be true?

Before we delve into the internals of this study, lets look at what other studies have shown. RAND Health researchers compared families before and after moving to a consumer-directed plan with similar families remaining in traditional plans to see how behaviors change in response to switching to a high-deductible plan.

  • In the most comprehensive study to date on this topic, researchers looked at claims and enrollment data for more than 800,000 households insured through 59 large employers across the U.S. in a study funded by the California HealthCare Foundation and the Robert Wood Johnson Foundation. The analysis shows clear cost reductions, but with potential areas of concern for the long-term health of enrollees.”
  • Families with HDHPs had 17 – 21% reduction in health care costs
  • …”those in CDHPs initiated less care, and when they did, they used fewer or less expensive services in a given episode of care. Enrollees used 4.9 percent fewer name-brand drugs, made 6.5 percent fewer visits to specialists, and had 17.7 percent fewer hospital stays…”
  • Vulnerable populations are not adversely affected by use of HDHPs…“key finding is that in almost all cases, CDHP benefit designs affect lower income populations and the chronically ill to the same extent as non-vulnerable populations. These effects include significant reductions in overall spending that increase with the level of the deductible and greater reductions for high deductible plans when paired with health savings accounts (HSAs) in comparison to health reimbursement arrangements (HRAs).

 

Now let’s take a closer look at the newer NEBR study and see what it really tells us. Here is the description of the circumstances of this observational study: 

  • “Kolstad and his co-authors looked at the case of a large, unnamed company that shifted more than 75,000 workers and their dependents from a plan with no deductible to one with a $3,750 deductible. When the change happened, workers received a $3,750 subsidy to a health savings account — money they could spend freely on whatever health costs they incurred. The company also gave workers online tools to look up prices for doctor visits, tests, and other services they might need.”
  • Here are some data from the study: “Average per-patient spending fell from $5,222.60 in 2012 to $4,446.08 in 2013. That’s about a 15 percent decline in a single year — and it held true across all types of health services. Between 2012 and 2014, there was a 25 percent drop in emergency room spending, an 18 percent decline in physician office visits, and a 6 percent decrease in mental health services.” “But when the researchers looked at why spending dropped, they found it had nothing to do with smarter shopping. The average price of a doctor visit wasn’t dropping. Instead, under the high-deductible plan, workers just went to the doctor way less. The paper finds that “spending reductions are entirely due to outright reductions in quantity.”

This is an odd, but interesting study, at the same time. It was designed to judge patient’s responsiveness when given choices of how to spend their healthcare dollars and to see if they would be better shoppers due to having a high deductible. Yet the employer funds the HSA with amount equivalent to the deductible.

Stay with me… So they go from zero price barrier situation where we have no idea how much of that consumption was unnecessary where the employee is completely price insensitive… to a situation where they have a high deductible fully financed by their employer in form of an HSA that the employee owns. That is free money that grows forever tax-free unless they take it out for something other than qualified expense. If they cash it out, they pay penalty and the tax, but it is still their money.

But why would the authors of the study anticipate a drop in the cost of the average doctor’s office visit due to “smarter shopping” when the deductible payments are coming from an account funded by someone else’s money? Who’s the smart one now?

Recall from above that the employer funded the HSA fully and in advance. And for those that made a prioritized decision not to go to the doctor as much as they did in the co-pay only scenario, they got to keep that deductible money because they own the HSA forever, as opposed to an Health Reimbursement Arrangement (HRA) or Flexible Spending (FSA) which are both use-it-or-loose-it propositions and unused funds are retained by the employer.

Here is something else to consider. Were there even any cash-friendly or alternative practice such as DPC available for them to chose? If the network was fairly tight with high level of provider participation, I would not expect posted CPT prices to vary all that much. And they likely ran all encounters through the billing cycle so they were billed out at the regular CPT posted rates.

Access to healthcare is often defined by how much of another person’s money is used to subsidize it; rather than focusing on reducing the real price or ways to be more efficient!

Also, notice that the employees moved from a zero deductible plan to a fairly high deductible plan. We really have no way of knowing how much unnecessary or redundant care they might have consumed under the zero deductible plan, so we can’t speculate except to say it is hard to believe very much thought was given regarding necessity under the old plan when out-of-pocket cost were basically just co-pays.

If I were the employee in that situation, here is my thought process when it comes to spending my HSA money: If I really need medical care or want to get something done or want a certain test, who cares how much it costs, I’m not out anything really. And, If I don’t really need care, I get to keep the “free” money in an account I own forever even if I change employers . 

The design of the health plan causes a situation where there is simultaneously both price insensitivity when spending was needed AND an incentive not to spend as much due to the fact that the employer funded the deductible and because of the savings vehicle chosen, that being an HSA. Is it any wonder the study results show that the employees did not learn to price-shop?

This employer-funded HSA is extremely important when analyzing what happened. Remember, they went from essentially nearly free care to an employer-funded HSA that covers their entire deductible… and an HSA is the EMPLOYEE’S money once it hit the account.

So the design of the plan resulted in the employer essentially paying the employee NOT to consume medical services! And when they did spend their deductible dollars, they had no incentive to care about price because it was “free” money basically like a pre-paid gift card!

The study authors apparently failed to recognize this reality and instead proclaimed that high deductibles don’t lead to better consumers, just less consumption!

Let that sink in. One one hand the employees simply made a choice that favors their own economic self-interest by accumulating someone else’s cash in their HSA if care wasn’t really necessary in their view; and on the other hand they spent freely if the need arose for the same reason.

And how many people honestly would let their own health suffer when they could have used someone else’s money to pay deductible expenses? So what does that tell you about how much potentially unnecessary care was consumed in the zero deductible plan? Furthermore, there is no data indicating anyone suffered because of less consumption under the high deductible plan.

Now if they had offered employee a percent of savings in any given expenditure, paid as cash award, then you bet you would have seen some savvy shoppers.

Let me be clear, HDHPs are not the answer to controlling healthcare cost and will not result in a total alignment of priorities and incentives. Do they help move the needle in the right direction? I think yes. But the answer lies in establishing a real non-insurance market for routine care that is free of the baked-in inflation and price confusion/dishonesty of our billing protocols. Only a market with real prices will allow consumerism to work its magic. We are not there yet.

Based on the design of the health plan in this study, it is impossible to conclude that high deductible plans don’t produce smarter shoppers, because their was an incentive NOT to spend built into this particular plan and there was no reason to care about price because the deductible was funded by employer money. It their attempt to neutralize the potential negative effect of the deductible on medically necessary utilization, the plan design made the outcome a foregone conclusion. But the study does show that the employees outsmarted the authors of the study by simply acting in their own self-interests and exercising good judgement.

This study does teaches us four important things:

  1. People can easily be paid to do nothing to accumulate someone else’s money (legally).
  2. We tend to spend “free” money or other people’s money with less discrimination than when it is our own.
  3. Access to healthcare is often defined by how much of another person’s money is used to subsidize it; rather than focusing on reducing the real price or ways to be more efficient!

  4. Never take a headline at face-value or believe a study without reading it yourself.

Source: Understanding Healthcare Economics: The Devil (and the truth) is in the Details | LinkedIn

Posted in Access to healthcare, Affordable Care Act (ObamaCare), Deductibles, Employee Benefits, Employer Mandate, Employer-Sponsored Health Plans, Essential Benefits under the ACA, Health Insurance, Health Savings Accounts (HSA's), Healthcare financing, Individual Mandate, Individual Market, Individual ObamaCare Market, Individual Underwriting Standards, Large group insurance market, Medicaid, Medical Costs, Medical Practice Models, Medicare, Organizational structure, Policy Issues, Portable Insurance, Pre-existing Conditions, primary care, Reforming Medicaid, Self-Insured Plans, Small group market, Tax Policy, Uncategorized

Obamacare Replacement Act – Senate Bill 222 by Senator Rand Paul – KY

Sen. Rand Paul, R-Ky., speaks during an event at the University of Chicago's Ida Noyes Hall in Chicago on Tuesday, April 22, 2014. (AP Photo/Andrew A. Nelles) ORG XMIT: ILAN114Lots to like and consider here.  We need more details about how tax equalization in the group market vs the individual market will be handled.  The expansion of uses and benefits of HSAs is robust and will go along way to establishing more ways to self-insure and less reliance on networks and government programs; both are a good thing.  The flexible, market-friendly Interstate Market for Health Insurance Cooperative Governing of Individual Health Insurance Coverage will be a welcome change.  Again, devil is always in the details.  Stay tuned for more details and insightful analysis here on the Sovereign Patient; we will post them as available. 

Some highlights:

Effective as of the date of enactment of this bill, the following provisions of Obamacare are repealed:

  • Individual and employer mandates, community rating restrictions, rate review, essential health benefits requirement, medical loss ratio, and other insurance mandates.

Protecting Individuals with Pre-Existing Conditions:

  • Provides a two-year open-enrollment period under which individuals with pre-existing conditions can obtain coverage.
  • Restores HIPAA pre-existing conditions protections. Prior to Obamacare, HIPAA guaranteed those within the group market could obtain continuous health coverage regardless of preexisting conditions.

Equalize the Tax Treatment of Health Insurance:

  • Individuals who receive health insurance through an employer are able to exclude the premium amount from their taxable income. However, this subsidy is unavailable for those that do not receive their insurance through an employer but instead shop for insurance on the individual market.
  • Equalizes the tax treatment of the purchase of health insurance for individuals and employers. By providing a universal deduction on both income and payroll taxes regardless of how an individual obtains their health insurance, Americans will be empowered to purchase insurance independent of employment. Furthermore, this provision does not interfere with employer-provided coverage for Americans who prefer those plans.

Expansion of Health Savings Accounts:

  • Tax Credit for HSA Contributions
    • Provides individuals the option of a tax credit of up to $5,000 per taxpayer for contributions to an HSA. If an individual chooses not to accept the tax credit or contributes in excess of $5,000, those contributions are still tax-preferred.
  • Maximum Contribution Limit to HSA. Removes the maximum allowable annual contribution, so that individuals may make unlimited contributions to an HSA.
  • Eliminates the requirement that a participant in an HSA be enrolled in a high deductible health care plan. This section removes the HSA plan type requirement to allow individuals with all types of insurance to establish and use an HSA.
  • This would also enable individuals who are eligible for Medicare, VA benefits, TRICARE, IHS, and members of health care sharing ministries to be eligible to establish an HSA.
  • Allowance of Distributions for Prescription and OTC Drugs o Allows prescription and OTC drug costs to be treated as allowable expenses of HSAs.
  • Purchase of Health Insurance from HSA Account o Currently, HSA funds may not be used to purchase insurance or cover the cost of premiums. Allowing the use of HSA funds for insurance premiums will help make health coverage more affordable for American families.
  • Medical Expenses Incurred Prior to Account Establishment o Allows qualified expenses incurred prior to HSA establishment to be reimbursed from an HSA as long as the account is established prior to tax filing.
  • Administrative Error Correction Before Due Date of Return o Amends current law by allowing for administrative or clerical error corrections on filings.
  • Allowing HSA Rollover to Child or Parent of Account Holder o Allows an account holder’s HSA to rollover to a child, parent, or grandparent, in addition to a spouse.
  • Equivalent Bankruptcy Protections for HSAs as Retirement Funds o Most tax-exempt retirement accounts are also fully exempt from bankruptcy by federal law. While some states have passed laws that exempt HSA funds from being seized in bankruptcy, there is no federal protection for HSA funds in bankruptcy.
  • Certain Exercise Equipment and Physical Fitness Programs to be Treated as Medical Care. Expands allowable HSA expenses to include equipment for physical exercise or health coaching, including weight loss programs.
  • Nutritional and Dietary Supplements to be Treated as Medical Care o Amends the definition of “medical care” to include dietary and nutritional supplements for the purposes of HSA expenditures.
  • Certain Providers Fees to be Treated as Medical Care o Allows HSA funds to be used for periodic fees paid to medical practitioners for access to medical care.
  • Capitated Primary Care Payments o HSAs can be used for pre-paid physician fees, which includes payments associated with “concierge” or “direct practice” medicine.
  • Provisions Relating to Medicare o Allows Medicare enrollees to contribute their own money to the Medicare Medical Savings Accounts (MSAs).

Interstate Market for Health Insurance Cooperative Governing of Individual Health Insurance Coverage:

  • Increases access to individual health coverage by allowing insurers licensed to sell policies in one state to offer them to residents of any other state.
  • Exempts issuers from secondary state laws that would prohibit or regulate their operation in the secondary state. However, states may impose requirements such as consumer protections and applicable taxes, among others.
  • Prohibits an issuer from offering, selling, or issuing individual health insurance coverage in a secondary state: If the state insurance commissioner does not use a risk-based capital formula for the determination of capital and surplus requirements for all issuers. Unless both the secondary and primary states have legislation or regulations in place establishing an independent review process for individuals who have individual health insurance coverage; or The issuer provides an acceptable mechanism under which the review is conducted by an independent medical reviewer or panel.
  • Gives sole jurisdiction to the primary state to enforce the primary state’s covered laws in the primary state and any secondary state.
  • Allows the secondary state to notify the primary state if the coverage offered in the secondary state fails to comply with the covered laws in the primary state.

Source: Microsoft Word – Obamacare Replacement Act SBS.docx