It’s the time of year when many people must choose a health insurance plan. Although the national news has focused on the problems people are having in signing up for coverage through the new federal health insurance exchange, thousands of senior citizens are also facing choices about whether to get their health coverage through the traditional Medicare program or one of many different Medicare Advantage insurance plans, and many workers with employer-sponsored insurance will have new choices to make during their open enrollment period.
Many people are being forced for the first time to evaluate different health plans based on which physicians and hospitals are “in-network,” because employers and health insurance companies are increasingly offering “narrow network” health plans in an effort to reduce premiums.
The dictionary defines a “network” as a “group or system of interconnected people or things.” Traditionally, most health plan networks haven’t really been coordinated systems, but merely lists of physicians and hospitals that have agreed to give a bigger discount to the health plan. However, research shows that patients can stay healthier and get better quality care at a lower cost if the patients use a true network of high quality physicians who work together in a coordinated way to deliver better outcomes.
What does such a “high-value” network look like?
The most important elements of a good network aren’t the hospitals, because the network’s first goal should be to help you stay well so you don’t need a hospital at all. Instead, the most important component of a network is an adequate number of high-quality primary care practices. A truly high quality primary care practice does four key things for you: (1) it helps you get the preventive care you need to stay as healthy as possible; (2) it accurately diagnoses new health problems you experience and then provides or arranges for the most appropriate treatment in a timely fashion; (3) if you have a chronic disease such as asthma, diabetes, emphysema, or heart disease, it helps you manage that chronic condition successfully so you don’t have problems and end up in the hospital; and (4) if you need specialists, the practice helps you find the right specialists and makes sure all of your care is coordinated.
Unfortunately, most people don’t get truly high-quality primary care in any network today. It’s not because the primary care physicians are bad, it’s because of the way the physicians are paid by the health plan. For example:
• If you’re frustrated by how little time your primary care physician (PCP) spends with you when you have a visit, blame your health insurance, not the doctor. Medicare and most health plans pay doctors on the assumption that a typical office visit will last only 15 minutes. Moreover, doctors get paid less if they address multiple issues in the same visit than if they bring you back multiple times, even though it would save you time and money to get everything done in one visit.
• If you’re angry because your doctor spends more time during your short visit typing on the computer than listening to you, blame your health insurance, not the doctor. Medicare and many health plans now reduce physicians’ pay if they don’t enter detailed data about you in an electronic health record.
• If you have trouble getting your PCP to answer the phone or respond to an email when you have a question or health problem, don’t blame the doctor, blame your health insurance. Medicare and most health plans won’t pay doctors for phone calls or emails with patients, they only pay for office visits. The more time a doctor spends on the phone, the less time he or she has to see patients in the office, but the only way anybody in the physician practice can get paid is if the doctor (or a nurse practitioner or physician assistant) sees enough patients in the office every day.
Some health plans are beginning to change the way they pay primary care physicians so the physicians can better customize care to what their patients really need. These “patient-centered medical home” programs are a step in the right direction, but most of them have been too small to make a significant difference. That’s starting to change, but not nearly fast enough. Fewer doctors are going into primary care because of their frustrations with the way they’re paid, so it’s going to be harder and harder for people to find good primary care physicians if health plans don’t start paying PCPs in better ways.
From time to time, you’ll have a health problem that requires help from a specialist. But which of the dozens of subspecialties is the right one? If you need multiple specialists, will they all coordinate what they do so you don’t receive conflicting medications or duplicative tests?
In a true “network,” your PCP would help you find the right specialists and work with them to ensure all of your care is coordinated. But once again, the way doctors are paid gets in the way. For example, in many cases, the specialist could advise you and your PCP over the phone about what to do, rather than making you wait for weeks or months until you can get an appointment to see the specialist in person. But Medicare and most health plans don’t pay specialists for giving advice over the telephone or by email, they only pay for office visits and procedures. As a result, many specialists can’t see new patients quickly because their calendars are filled with office visits from patients they don’t really need to see in person. Specialists also don’t get paid for time they spend talking with other specialists or with PCPs to coordinate care, so it’s no wonder that patients can find themselves falling between the cracks.
Some health plans are beginning to pay differently for the specialists in the “medical neighborhood” as well as for the primary care “medical home.” In one pilot project, paying for email consultations with specialists resulted in dramatic reductions in the delays seriously ill patients experienced in getting appointments with specialists, because the specialists were able to successfully address other patients’ problems quickly through an email exchange with their PCP.
If you do need hospital care, you obviously want to make sure there are high-quality hospitals in your health plan’s network that can take care of you. Unfortunately, the hospitals in our region don’t publish information about the quality of the care they provide, so it’s impossible to know whether one network’s hospitals are better than another’s. Although you hear a lot of advertising about how certain hospitals are the “best” at one thing or another, most of those rankings aren’t based on actual outcomes for specific procedures. The limited data available suggest that for common hospital procedures, most of the hospitals in the Pittsburgh Region deliver care of similar quality, and many of the independent community hospitals do it at a much lower cost. For more complex conditions, the best hospital for you may not be in the Pittsburgh Region at all. Some national employers, such as Walmart and Lowes, are now paying not only medical costs but travel expenses so their employees can go to hospitals such as the Cleveland Clinic and Johns Hopkins that have committed to provide high quality care at an affordable cost.
So before you decide which health plan to use, first choose a primary care practice that is committed to high-quality, patient-centered care. Ask the PCP which health plans pay to support high-quality care, and ask which plans pay specialists so they can work as a team with your PCP. If you choose a health plan that supports truly coordinated, high-quality primary and specialty care, you’ll be healthier, you’ll spend less, and you may never need to worry about which hospitals are in the network.
(A version of this post appeared as the Regional Insights column in the Sunday, November 3, 2013 edition of the Pittsburgh Post-Gazette.)
Two recent reports highlighted the growing consolidation of both health plans and hospitals across the country:
Which is the bigger problem — too few health plans or too few hospitals?
In a typical economic market, the more sellers of a particular product or service there are, the lower prices will be, because the sellers will compete on price in order to attract customers. This has led many people to believe that the way to get lower health insurance premiums is to have more health insurance companies competing to sell insurance in a state or region.
However, it’s not quite as simple as that, because health insurance companies are not only sellers of insurance, they’re also the buyers of our healthcare services. They negotiate with hospitals and physicians to set the prices paid for the services individuals and employers receive when they buy a health insurance policy. The more that health plans have to pay for hospital care, the more a health insurance plan will cost. And simple economic theory tells us that, all else being equal, bigger health insurance plans have more clout to negotiate lower prices for healthcare services than smaller plans do.
Most people experience this every day in retail. Consumers don’t buy goods directly from manufacturers; they buy them from retail stores. Does having more retail stores result in higher or lower prices for consumers? Big retailers like Walmart or Target can usually buy products from manufacturers for a lower price than smaller retail stores can, and so they can sell the products to consumers for less. If there were only one big retailer, consumers would probably see higher prices, because the monopoly retailer could keep the price discounts for itself in the form of higher profits. But conversely, if there were only small retailers, prices for consumers would probably also be higher, because those retailers couldn’t negotiate large price discounts from manufacturers.
What consumers pay depends not just on the number and size of retailers, but on how much competition there is among manufacturers of the product. For example, if there were only one company that manufactured televisions, it wouldn’t matter how many TV retailers there were or how big they were, because a monopoly television manufacturer could set the price as high as it wanted, and both the retailer and consumer would have to pay more to get a TV.
Just like retailers, health insurance companies sit in between the producers of healthcare services –hospitals and physicians – and the ultimate consumers of those services, i.e., patients. The more health plans there are, the smaller each of them will be, and that means they’ll have to pay higher prices to health providers, particularly big hospital systems. It also likely means the health plans will have higher administrative costs as a percentage of healthcare costs, since smaller health plans will have fewer economies of scale. Both of those things will push insurance premiums up. The only thing that competition among the health plans will reduce is their profits.
On balance, having more health plans will be more likely to increase premiums than to reduce them. Under the federal Affordable Care Act, health plans can only retain 15-20% of their premium revenues for administrative costs and profits; the remaining 80-85% must be spent on health care services and quality improvement activities. Even if greater competition among health plans resulted in, say, a 25% reduction in their administrative costs and profits, that would reduce premiums by at most 5% (i.e., 25% of the maximum 20% of premium that can be spent on non-medical expenses), whereas if bigger health plans could negotiate a 10% larger discount on the prices paid to healthcare providers, that could reduce premiums by 8% or more (10% of the minimum 80% of premium that’s devoted to medical expenses).
In fact, research indicates that having more health plans increases the prices paid for healthcare. For example, a 2010 study by Carnegie Mellon Professor Martin Gaynor and colleagues found that having five health insurers in a region instead of four would increase hospital prices by 7%, and a 2011 study by University of Southern California Professor Glenn Melnick and his colleagues found that hospital prices in markets with more health plan competition were 13% higher than in markets with a small number of large health plans.
It’s important to note that what counts is not the total size of the health insurance company, but how many people it insures in the local region, i.e., its local market share. When large national insurance companies enter a market, they may offer lower premiums than existing health plans, but it’s probably not because they’re getting lower prices from hospitals; it’s more likely that they’re just setting their prices below their costs in order to build their business, and paying for those discounts by charging higher premiums in other regions.
Unfortunately, although bigger health plans may be able to pay lower prices for healthcare services, fewer health plans also means less competition among health plans, and so consumers and employers may be less likely to receive the benefits of any lower prices the health plans pay providers. In addition, bigger health plans can also unintentionally encourage the creation of large, monopoly health systems. Since big health plans can demand bigger price discounts from smaller hospitals and physician practices than from large systems, small providers may be forced to either go out of business or merge with the large systems. This is a problem because of the growing evidence nationally that high healthcare costs are being caused by the high prices demanded by large, consolidated health systems. For example, research by University of California Professor James Robinson found that in markets where there were fewer hospital systems, prices were 13%-25% higher for a range of cardiac and orthopedic procedures.
The solution to high healthcare costs isn’t to change the number or size of health plans. The solution is to completely change the way we pay for health care:
What we need from health plans is for them to implement new payment systems and benefit designs that support effective competition by providers and more value-based choice by patients. Instead of trying to get more health plans in a state or region or asking them to compete on the size of discounts they can extract from providers, employers should be choosing the health plans that will support a rapid transition to higher-quality, lower cost healthcare.
One of the goals many people have for federal and state healthcare reforms is to eliminate “medical underwriting” by health insurers, i.e., refusals to provide health insurance coverage for those with existing illnesses and conditions. How to do this — individual mandates, employer mandates, single payer, etc. — remains controversial, but the goal is widely shared.
If health plans can’t medically underwrite, how will they compete? Victor Fuchs, in a recent article in Health Affairs, says “If insurers have to provide a standard benefit package with guaranteed issue and no pre-existing disease exclusions, receive risk-adjusted premiums, and have their outcomes monitored, they will have a strong incentive to change their business model from excluding sick patients to actually managing care for efficiency and value. This is how competition can work to control costs.”
In another corner of the health reform arena, there’s deep concern about the decline in primary care and a major push for supporting creation of the patient-centered medical home. One of the core principles of the medical home is to provide comprehensive management and coordination of a patient’s care.
So which is it? Do we want health plans to manage our care, or do we want primary care practices to do it? The experience of the 1990s indicates pretty strongly that people don’t like health plans managing their care. (Based on the same experience, it’s not even clear that people like primary care practices doing it either, but the PCP gatekeeper role then was being driven by the health plan, not the practice itself.)
Yet most health plans have created an extensive care management infrastructure inside their own walls and they are already competing for business based on how extensive it is. Drive down the highway in any major city or turn on the TV to see the proliferation of advertisements by health plans. The message (unfortunately) isn’t how much less they cost, but how much they can help you manage your health care.
So not surprisingly, one of the challenges in implementing medical home initiatives is that the improved services in the medical home appear to duplicate services the health plan already claims to be delivering. Why should the health plan pay primary care practices more so they can hire nurse care managers, when the health plan is already paying for them on the health plan’s own staff, and advertising that that’s a way they control costs? Why should the health plan pay more for a physician practice to install IT systems, when the health plan already claims to provide extensive data and decision support to help physicians better manage their patients?
The problem with having these services at the health plan, rather than the physician practice, is that they cannot be effectively integrated into care delivery for patients. Health plan care managers try to help patients manage their care independent of the physician, when care management and physician treatment should be closely coordinated. Physicians need one effective IT system they can use for all of their patients, not a half dozen systems, each of which only works for the patients from a particular health plan.
In order to truly fix the healthcare system, there will need to be a resolution to what, if any, care management services should be provided by health plans instead of by health care providers. The likely answer, at least in the long run, is “as little as possible.” There will always be some patients who can’t find or won’t use a medical home, and in those cases, the health plan (assuming the patients have a health plan) may be the only practical way to provide a semblance of care coordination. But if the goals of the medical home advocates are realized, there will be fewer and fewer such patients over time.
Moreover, resolving this also helps resolve one of the key barriers to implementing the medical home — maintaining budget neutrality. Health plans are reluctant to pay more for medical home services because it may increase spending with no guarantees of offsetting reductions in other costs. Yet an obvious place to achieve offsetting reductions is reducing the spending on similar services inside the health plans. Moreover, in light of the results of several recent studies showing low effectiveness of disease management programs, such a shift may result in better outcomes and lower costs.
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