Population Health Insider, August 2009


Consumers interested in technology, but not using it now

Five key questions about an insurance exchange

Insurers: Added regulations through health reform will increase plan costs

Health reform calls for preventive care, but questions persist about savings

Healthy San Francisco has increased access

Pharma agrees to fund part of Medicare doughnut hole

Many business associates not ready to comply with HIPAA

Many young adults don’t have health coverage

Cost of hospital care for obese children has doubled

Physician compensation trails inflation

‘Rip-off’ insurance scam shut down

Blue Cross Blue Shield of Massachusetts rewards docs for efficient quality of care

Consumers interested in technology, but not using it now

Health insurers have spent millions on improving member outreach on the Web, but most people still don’t visit their health plans’ Web sites or believe their insurers support their health, according to the Microsoft Health Engagement Survey 2009, conducted by Kelton Research.

However, that sobering news is balanced with some positive findings. Survey respondents are interested in their health plans connecting with them via e-mail and phone for electronic coaching, but they want those services integrated into their lives.

Dennis Schmuland, MD, U.S. health insurance industry solutions director at Microsoft in Redmond, WA, says healthcare must control runaway medical cost growth. One way to do that is to improve chronic disease care and wring out costs. An example is to help members self-manage their conditions with the help of their health plan and assist those without chronic diseases to stay healthy.

The survey results show that health insurers cannot wait for consumers to self-manage their chronic conditions through stand-alone Web tools, Schmuland says. Instead, patients want providers and insurers to come together to help them improve their health habits and self-manage their conditions.

This will require insurers to implement a “new generation of technology designed to proactively improve health and coordinate care at the individual and community levels,” Schmuland says.

Survey respondents were not exactly positive about the current healthcare system. A majority of those surveyed see the healthcare system as fragmented and believe it doesn’t help them proactively manage their health (see Figure 1). Those who share that view are more likely to search general health Web sites for information rather than seeking health information from doctors or insurers (see Figure 2).

Schmuland says those who feel the system is fragmented tend to believe they are on their own when it comes to their health and healthcare.

The greater consumerism movement with insurers and employers pushing more out-of-pocket costs onto members has led insurers to invest in online components in hopes of creating more educated consumers. However, nearly half of those surveyed think health plans only support them when they need a doctor (see Figure 3).

This disconnect is creating barriers. Consumers are simply not visiting their health insurers’ Web sites. Although 82% of insurers provide Web sites with health and wellness information, nearly three-quarters of respondents visited their insurers’ Web sites fewer than six times per year. That includes 16% who never visited their insurers’ sites and another 16% who only went on the sites one or two times in the past year (see Figure 4).

Schmuland says people usually trust their doctors, but insurers, advisory hotlines, and association Web sites don’t enjoy the same level of trust.

“[Consumers] perceive the health plan cares about them only when they are sick,” says Schmuland.

Those who are actually going onto the sites are not using the breadth of information either. Nearly half of those surveyed go to find provider lists or coverage information. Only one-third check out information on health and wellness (see Figure 5). For those who actually search for health information, the survey found that many of those people do so only after a diagnosis. In other words, patients are conducting reactive health information searches rather than proactive wellness searches, according to the survey (see Figure 6).

They are also not going to insurers’ Web sites, but instead visit popular health sites, such as WebMD, or conduct searches on Google (see Figure 7).

Positives for health plans

The way health plans are implementing technology might not be working, but there are two positives from Microsoft’s survey: The vast majority of people surveyed said healthcare technological solutions are inviting (see Figure 8), and most respondents were interested in communicating with their insurer through e-mail.

More than half of respondents said they are interested in using e-mail to ask questions about benefits and coverage; receive feedback about their health; and get encouragement, reminders, and advice on diet and exercise (see Figure 9).

“They are saying ‘technology is inviting. I’m not afraid of it. I want to use technology,’ ” says Schmuland. This includes Web-based products and text messaging.

Microsoft officials say the survey shows that consumers want coaching through technology. This might be a cost-effective tool for health plans, which could reach more members through the use of an online coaching program.

Not only could health plans benefit from greater technology in the area of coaching, but disease management, wellness, and population health companies could also see great savings.

“This could change the ROI to their advantage,” says Schmuland.

Chad Pomeroy, vice president for innovation and eBusiness at WellPoint, Inc., in Indianapolis, says health plans must explore ways to quickly and easily access their healthcare information to make better decisions. “This research is a wake-up call to the health insurance industry to start untethering much of the online tools and services they’ve tied to stand-alone member self-service portals and weave them into the consumer’s daily digital world,” says Pomeroy.

Opportunities for health insurers

Although the survey showed that health insurers are not maximizing member communication on their Web sites, the findings provide a glimpse into what consumers want and how health plans can implement those solutions.

The first step for health plans is figuring out how to get into members’ digital lifestyles, then concentrate on content, says Hector M. Rodriguez, industry chief technology officer/technology strategies for Microsoft’s health plan industry group in Irvine, CA.

The survey shows that people want to integrate health information into technology, which they can seamlessly connect into their daily lives. An example is cell phone applications that track a person’s calories, fat, etc.

Schmuland says health plans need to reinvest their technology and self-service portal money. Insurers have added personal health records, communications, and videos, but they are not being integrated into members’ lives.

Connecting patients with other healthcare stakeholders leads to receiving the best care possible from the doctors, says Ted Epperly, MD, FAAFP, president of the American Academy of Family Physicians in Leawood, KS.

“When patients and their personal physicians work together and involve technologies that empower them to improve their health plans, they can lower their health risks and self-manage chronic conditions,” says Epperly. “It’s critical for providers, patients, and public and private payers to work as a team to improve health, well-being, and outcomes at the individual and community levels. Such collaboration would help control the runaway rate of medical costs that keeps health coverage beyond the financial means of every American.”

The online survey took place between March 10 and 17. Kelton interviewed 1,002 Americans over age 18.

Five key questions about an insurance exchange

Imagine a Web site that allows consumers to compare health insurance plans and select one that best suits their needs. That just may become a reality if lawmakers include an insurance exchange as part of the larger healthcare reform package. There are several different insurance exchange proposals in Washington, and they vary in a number of areas.

Supporters of the various insurance exchange programs agree that the program would provide one-stop shopping for individuals to compare available plans. The program would also allow for portability so a person wouldn’t lose health insurance because of job loss. After those two highlights, however, there is a lot of disagreement as to the actual makeup of the exchange.

Here are five tough questions lawmakers will have to answer if the insurance exchange remains part of a larger health reform package.

1. Does it include a public plan?

The most hotly contested healthcare reform topic in Washington has been a public insurance plan. Supporters say a public option is one key way to reduce health costs because private insurers would need to cut costs to compete against a public plan with lower overhead.

However, public plan foes say the government should not create a public plan that would pay doctors and hospitals less and potentially hurt private insurers. They argue that a public plan, paying at rates similar to Medicare, would actually cause doctors and hospitals to transfer more costs onto private insurers.

Robert E. Moffit, PhD, director of the Center for Health Policy Studies at The Heritage Foundation, wrote The Rationale for a Statewide Health Insurance Exchange in 2006 after about 15 state legislatures introduced statewide health insurance exchanges. Moffit supports an exchange that would make health insurance portable by having employers pay tax-free contributions to the exchange for their employees’ healthcare.

He says creating a health insurance exchange to work in concert with a public insurance plan, on the other hand, will mean the end of private insurance.

“In my view, we’re talking about something that looks like the Roman Coliseum, where all the private plans are the Christians and the public plan is the lion,” Moffit says. “So the national health insurance exchange becomes a giant killing field for private health insurance, which is what I think they want to do.”

2. Is it a federal or a state program?

An insurance exchange could be a federal program or a state-run program that would launch with federal seed money. Most experts agree that the exchange would need to be run at the state level because there are so many variations in mandates, laws, and insurers by state that a national exchange would be impossible.

Janet Trautwein, executive vice president and CEO of the National Association of Health Underwriters, says most of the insurance exchange proposals would create an exchange that would not preempt state law. Another option is to let individuals choose between policies with state-mandated policies and ones without those mandates.

Trautwein says lawmakers must make sure that insurers are treated the same whether outside or inside an exchange, such as offering the same subsidies to each. A level playing field is needed or people could flee their employer-based plans to take advantage of subsidies in the exchange.

“It is very important if we have an exchange that the rules be the same whether people purchase inside or outside the exchange—otherwise, it could really upset the market,” she says.

3. Will it include an individual coverage mandate?

An individual coverage mandate has been the cornerstone of Massachusetts health reform, and state officials say they wouldn’t enjoy such low uninsured numbers without the mandate.

But others say federal lawmakers should not require all Americans to have health insurance. They instead would rather a health insurance exchange that is similar to eHealthInsurance, which is a Web site that allows consumers to compare health plans. Joseph Antos, Wilson H. Taylor Scholar in Health Care and Retirement Policy at American Enterprise Institute for Public Policy Research, says lawmakers don’t need to mandate insurance to accomplish that kind of system.

“There are enough people who understand that they ought to have coverage and are interested in having some choices, and this is a viable business model,” says Antos, who recently wrote The Case for Real Health Care Reform.

Creating a program heavy with regulations and mandates would price young people out of the insurance market, Antos says, adding that young people want basic health insurance and not a plan that is designed for a middle-aged family man. Those types of plans are too expensive for recent college graduates, he says.

“If you set the bar very high—and that might be the direction that some Democrats want to go and certainly the direction Massachusetts went—then you will basically eliminate the economic incentive for insurers to try to come up with a better combination that reflects reasonable coverage at a reasonable price,” says Antos.

Rather than federal lawmakers creating mandates for insurers to follow, Antos says private insurers should be allowed to design benefit programs that interest their various members.

“What you really want to do is enlist the smart people in insurance companies who design insurance plans and give them an economic reason to design a plan that would actually be attractive to a wide range of Americans, which implies balancing the benefits with a cost,” he says.

4. Is the exchange a way to compare plans or something more?

An insurance exchange could be merely a Web site that allows people to compare prices and benefit packages or it could take a more regulatory role (such as Massachusetts) and negotiate with plans. An exchange could also mandate types of coverage and plans that it allows in the program.

The argument for setting a floor for benefits and coverage is that prospective members could compare apples to apples. However, those who oppose the idea say that coverage mandates will add costs and price out people, particularly younger people who are needed to fund health insurance.

One benefit of the exchange idea is that a Web site could go beyond providing price and benefit information and could help people learn more about health and how to become better healthcare consumers.

5. Who will have access?

Federal lawmakers can open the exchange to the individual market, small employers, or everyone.

Opening the exchange to only the uninsured to join individual plans would not help small employers who are struggling with health costs, but other experts are worried that opening the exchange to too many people initially will cause a stampede out of employer-based insurance and could flood the exchange in its infancy.

Trautwein says she would like an exchange to start with the individual market to work out the bugs before expanding to employers with as many as 50 workers.

The exchange must also provide low-cost plans to woo younger people into the plans, she says. “You have to really be careful about how you set up your rating model so it’s still affordable for young people to come in. Those are the groups you really want in. They are a big part of the group that’s not in today,” she says.

Regardless of the specifics of the insurance exchange, supporters in both parties believe it could become a part of a bipartisan reform package that gives Americans a place to become better health insurance consumers.

“Virtually all economists agree that if you provide more information to consumers and more choices, that they’re likely to pick something that is closer to the combination of benefits and cost that appeal to them personally,” Antos says.

Insurers: Added regulations through health reform will increase plan costs

For those who see private health insurance as a major problem in the healthcare system, reform is a chance to get insurers in line. But insurers and their supporters say added industry regulations will simply increase healthcare costs.

The health insurance industry has already come forward to say that it will accept certain regulations if the federal government requires all Americans to have health insurance. America’s Health Insurance Plans said health plans will accept everyone regardless of preexisting conditions and not charge women more for individual insurance if an individual mandate is part of healthcare reform.

Health insurers will allow these two changes without a fight because an individual mandate would flood the system with an influx of millions of newly insured, including young people with low health costs.

“Guaranteed issue can only work if everyone—the young and healthy, as well as higher-risk individuals—purchases coverage. This would help keep premiums affordable,” says Justine Handelman, executive director of legislative and regulatory policy at the Blue Cross and Blue Shield Association (BCBSA).

As long as everyone is required to have health insurance coverage, Handelman says, the BCBSA supports new rating rules, including phasing out the practice of varying premiums based on health status. The change must be phased in gradually state by state “to avoid major disruptions and large premium increases for current enrollees,” she adds. “It would still be critical for insurers to adjust premiums based on age [and] wellness factors, such as nonsmoking and geography.”

But there are other regulations being discussed in Congress that health insurers are not ready to accept, such as benefit design requirements that include removing lifetime benefit limits and limiting premiums based on differences in age, community, and family size; guaranteed issue without the individual mandate; and coverage mandates. Private insurers say these kinds of requirements would increase premiums and have the biggest effect on the less regulated states.

Rather than finding ways to regulate insurers, Joseph Antos, Wilson H. Taylor Scholar in Health Care and Retirement Policy at American Enterprise Institute for Public Policy Research, says lawmakers should look to reduce healthcare costs. Focusing on insurance regulation does not improve “a very inefficient healthcare system” or address the “fundamental cost drivers,” says Antos.

“The question is how onerous do we want those regulations to be, and do we want regulations that will substantially increase costs of insurance?” says Antos. “If you tell insurers that they have to take on all comers regardless of their cancer diagnosis they just got and now they want to buy insurance, that means the average premiums will have to go up to account for the fact that they are taking on people they were not taking on before. That means average cost of insurance goes up. That means young, healthy people will buy insurance less, and it will have less value to them.”

Robert E. Moffit, PhD, director of the Center for Health Policy Studies at The Heritage Foundation, says lawmakers should not place limits on health insurers’ underwriting policies, especially if new regulations supersede state law. Local conditions should drive health policy and regulations—not the federal government, Moffit says.

Regulations to the health insurance market, such as mandates and benefit design requirements, limit innovation, Moffit says. “The danger I see is the federal government creating a straitjacket that will prevent any kind of serious creativity and insurance market reform at the state level, and we can basically say good-bye to innovation,” he says.

Coverage mandates

The Council for Affordable Health Insurance, an insurance carrier research and advocacy association, reported in its Health Insurance Mandates in the States 2009 that there are 2,133 mandated healthcare benefits and providers throughout the country. Those mandates are increasing health plan costs—in some states by about 50%—according to the study.

In response, some states now let insurers offer mandate-lite plans, which allow lower-cost options to under-covered groups, such as recent college graduates. Fewer mandates allow young adults to purchase basic health insurance without being required to pay for mandated coverage that won’t likely affect them, such as chronic disease and coverage for grandchildren.

Antos says adding regulations will price people out of health insurance, especially young people, and require the federal government to offer subsidies or make exceptions for people who can’t afford it. “If you put enough regulation on it, then you better start making exceptions because you will have a fairly large population that can’t live by your rules,” he says.

Individual mandate

Health insurers are not against all new regulations. They stand behind the individual mandate, which would require most or all Americans to have health insurance.

Requiring coverage would serve as a shot of adrenaline to the health insurance industry, which is struggling with dropping enrollment in the employer-based insurance market because of layoffs and businesses dropping coverage.

President Barack Obama opposed the individual mandate during his presidential campaign, and it appeared as though the idea was dead, but the president and many congressional leaders are now open to the idea. Bruce McPherson, president and CEO at Alliance for Advancing Nonprofit Health Care, says the employer mandate is now a lightning rod for controversy.

“I’m pretty surprised that there’s been such a consensus on that one already,” says McPherson about the individual mandate. “I have to believe that labor and some other groups will be pushing back pretty hard, but it doesn’t seem like they have a lot of allies on that.”

Public insurance and insurance exchanges

If a public insurance option and/or insurance exchanges are part of healthcare reform, insurers will likely face additional new regulations. The federal government could impose minimum federal requirements for insurers to operate within an exchange.

The public insurance option would have a much larger effect on private insurers. McPherson says insurers in his group are most concerned about the public plan because they believe a public plan will lead to an unlevel playing field and the federal government will ultimately create Medicare and Medicaid for all in a few years.

“It is a scary proposition,” says McPherson.

Health reform calls for preventive care, but questions persist about savings

Supporters say prevention will save the nation billions in averted long-term healthcare costs, and recent studies show that Americans support investing in prevention. But questions persist—most notably from the Congressional Budget Office (CBO).

Prevention has been mentioned as an important piece of healthcare reform. In its health reform draft proposal, the House Committees on Ways and Means, Energy and Commerce, and Education and Labor shed some light on where the prevention dollars would flow:

  • Expand community health centers
  • Waive cost-sharing for preventive services in benefit packages
  • Create community-based programs to deliver prevention and wellness services
  • Target community-based programs and new data collection efforts to better identify and address racial, ethnic, and other health disparities
  • Strengthen state, local, tribal, and territorial public health department programs

This proposed package of prevention programs in the healthcare reform debate would go beyond provider- based healthcare, with supporters hoping to create a better wellness culture in the country. But will the government be more successful than doctors, employers, health plans, and population health companies who have struggled to get people more active and eat right? Then there’s the question of whether prevention programs actually save money.

Employers and the population health industry have been discussing the issue of prevention and ROI for years. Groups such as the Trust for America’s Health suggest the United States could save $16 billion annually within five years and experience a 5.6:1 ROI by simply investing $10 per person annually in community-based programs to increase physical activity.

Another study, funded by Pittsburgh-based health insurer Highmark, Inc., found a modest 1:64:1 ROI in a four-year review of the insurer’s employee wellness program, which includes employer health risk assessments, online programs in nutrition, weight, and stress management, tobacco cessation programs, on-site nutrition and stress classes, biometric screening, and health coaching.

Anna Silberman, vice president of preventive health services at Highmark, says the company’s prevention program stops non-healthcare users from becoming “huge users of the system.” Prevention not only reduces direct medical costs, but also saves companies and the nation on work-related costs in the areas of absenteeism, work production, and presenteeism, Silberman says.

The healthcare system should reward physicians for educating their patients about prevention and reminding patients of recommended tests, such as mammograms and diabetes screenings, says Silberman. “There are so many things that we can do that often get put on the backburner because we’re dealing with the acute thing that’s happened as a result of not addressing them earlier in our lives,” she says.

However, there are others who say prevention doesn’t save much—if anything. The issue is that preventive programs are open to a wide population rather than those who could be at risk of chronic diseases, such as diabetes, heart failure, or kidney disease. So, in fact, the companies are using a wide net to help people who may never have a chronic disease or are destined for a chronic disease regardless of activation level or food choices.

One group to question the cost-effectiveness is the CBO, which suggested in December 2008 that more prevention would bring modest cost reductions over 10 years and could actually increase costs.

Mary Jane Osmick, MD, vice president and medical director at LifeMasters, a health management company in Irvine, CA, supports wellness programs, but acknowledges there are still questions about whether wellness programs can save money.

“My guess is that there is a [positive] ROI, but I don’t know that we have the methodology to say this is what it is and this is when you’ll see it. I think the jury’s still out on that,” says Osmick. “But I sure believe it from a physician standpoint, that prevention is the absolute way to go.”

Whether prevention is cost-effective depends on the program, says Judith H. Hibbard, PhD, professor of health policy in the University of Oregon’s Department of Planning, Public Policy and Management in Eugene, who created the Patient Activation Measure, a questionnaire that gauges an individual’s activation level in health. “If you mean by clinical prevention, I don’t think it’s going to get us that far,” Hibbard says. “If you mean to really help people to avert illness or avert future declines in health, then yes, I think it could [save money].”

Hibbard says prevention programs can’t merely happen in physicians’ offices. Ninety percent of what determines an individual’s health state is outside of the healthcare system. For prevention to be successful, the country will need a more encompassing wellness program.

“I think we have to take a more holistic view and get outside the system too. People live inside the community and not just look for the medical system to make that happen. They need to be part of the solution too—not divorced from it,” says Hibbard about empowering the individual.

With that thought in mind, Sen. Tom Harkin (D-IA) filed legislation that would provide tax credits for employers that spark employees to participate in programs such as health education and behavior change.

Health management company Alere also recently presented its National Health Improvement Strategy that it claims could save American businesses and health insurers “tens of billions of dollars” by focusing on preventing health risks and chronic illness.

Alere CEO Ron Geraty, MD, promotes more collaboration between providers, employers, and health plans in the areas of health information technology, home monitoring services, rapid diagnostic tools, clinical outreach, and health coaching.

Geraty says these program could avoid episodic visits, procedures, and treatments. In addition to national nutrition programs, the government needs to kick off a national healthy pregnancy campaign because healthy babies lead to healthy adults, he adds. “We think a concerted strategy for the country is needed to say ‘we care about health, we promote health, and then when there is disease, we are actively managing the longitudinal impacts of those illnesses.’ That will really change the way healthcare is delivered in the country,” says Geraty.

To change the healthcare system to focus on prevention, industry experts pointed to several needed changes:

  • Paying healthcare providers for keeping patients well, such as reimbursing for patient education, prevention, and early detection. “I think it’s important for physicians and other healthcare professionals that there be a mechanism introduced where immunizations are adequately reimbursed for,” says Silberman.
  • Physicians need to be trained on nutrition and exercise so they can provide guidance to patients.
  • Incentive programs for people who are active in physical or nutrition programs, which employers have found can improve the wellness culture.
  • Technology to make health a more compelling choice, such as portable interactive Web sites that integrate a person’s personal health record and patient history. “Most people when they think of personal health records think of a place to store medical information, which I think is critically a part of it, but we think the PHR ought to be a personal healthcare planner,” says Geraty.

Silberman says the good news is that much of the costs associated with healthcare are preventable. But to benefit from prevention, the nation will need to make major investments inside and outside of healthcare.

“There’s so much potential when you think about the fact that 75% of what we cope with as a country is preventable,” says Silberman.

Healthy San Francisco has increased access

Healthy San Francisco, held up as a model employer “pay or play” strategy, is two years old today—and its supporters view the program as a possible solution to the nation’s 47 million uninsured.

The program has added 43,000 of 60,000 targeted San Franciscans to its rolls since it began and has been adding about 1,800 people per month.

The earliest participants in the program appear to have reduced their need for the most expensive kinds of healthcare, such as ER care. For example, the number of hospital admissions declined from 28.2 per 1,000 participants to 18.4, and the number of hospital days declined from 103 to 61 per 1,000 participants.

“San Francisco’s Health Care Security Ordinance has a number of features that should serve as a model for a national policy,” says Ken Jacobs, chair of the Labor Center at the University of California at Berkeley and coauthor of the report How to Structure a “Play-or-Pay” Requirement on Employers: Lessons from California for National Health Reform.

But it is not yet clear about the financial portion of the program, and there are two other questions too:

  • Can the program’s timely access to care and prevention improve patient outcomes over the long term?
  • Can members avoid enough expensive care to produce a net savings?

Also unclear is how much support will continue to come from employers, especially those dependent on tourism, if the economy continues to slide. Some businesses fear that scheduled 2010 increases in the amount they will have to pay for each employee hour will provoke some companies to move out of town.

Jacobs, who has studied the city’s program, says so far, the program is operating well. “Employers have adapted to the SF ordinance relatively easily,” he says. “The earliest evidence is that employers are by and large keeping the coverage they have for those workers who were already covered on the job and paying into the city for those jobs that did not previously provide coverage.”

Healthy San Francisco, a program run by the city, provides primary, mental health, and acute care, as well as substance abuse treatment for adults under age 65 who have been uninsured for the most recent 90 days, regardless of immigration status. It does not pay for dental or vision care and it is not an insurance program. All care is provided through medical homes in a network of 30 community clinics throughout the city plus Kaiser Permanente as of July 1.

In a nutshell, here’s how the program works: Employers with at least 20 employees must either “pay” the city based on the number of hours their employees work, or “play,” which means finance employee health plan coverage at a similar value for their employees. If the employer chooses to pay, but employees do not qualify for Healthy San Francisco, the funds are deposited into a Medical Reimbursement Account that the employee can use for out-of-pocket healthcare expenses.

The city’s Health Care Security Ordinance of 2006 established the employer mandate that took effect January 9, 2008, for large employers, and April 1, 2008, for medium-sized employers, six or nine months after the start of Healthy San Francisco. Employers with 20 or more full- or part-time employees must spend $1.23 per worker hour. Employers with 100 or more employees must spend $1.85 per hour; those rates will go up to $1.31 and $1.96 next year.

As of December 14, 2008, more than 850 employers covering nearly 33,000 employees had elected to use the city option, contributing $37.3 million to the city, roughly half to Healthy San Francisco and half to the Medical Reimbursement Account. However, it is too early to know whether all the employers who are required to pay or play are actually doing so.

Applicable employers had until just two months ago, April 30, to file a “mandatory annual reporting form,” indicating precisely how they complied and whether they had “paid” into the city’s Healthy San Francisco plan or “played” by spending at least that amount on an employee health plan.

Two months after that deadline, employers returned 5,000 of those forms to the city, says Joannie C. Chang, contract compliance officer at the city’s Office of Labor Standards Enforcement. However, some of the employers were apparently confused and did not fill out the forms correctly, requiring the city to make follow-up calls to verify the accuracy of the data they submitted.

“Overall, I believe there’s been good rates of compliance,” Chang says, adding that the city has conducted 70 presentations to employers and HR consultants as well as mailings, “so most employers are aware of their obligations.”

For those employers found to be out of compliance, she says, “the biggest challenge is making sure they understand the legal requirements, but once they do, they comply.”

Chang says the city has 187 open investigations, about half initiated by employees who realized they were not receiving benefits, and the other half involving employers who recently learned about the law and sought assistance from her office to come into compliance.

“Given the city’s budget and our limited staffing at this time, we definitely have our work cut out for us,” Chang says.

Restaurant group suit

Another looming issue is the staunch objections to the ordinance now being litigated by the Golden Gate Restaurant Association. A three-judge panel with the Ninth Circuit Court of Appeals ruled in favor of San Francisco in September 2008, but the association has appealed that decision to the U.S. Supreme Court.

The association, which represents 800 restaurants in the city limits, including some of the city’s largest, supported the original legislation that created Healthy San Francisco but takes issue with the employer mandate, saying it is much too excessive.

Kevin Westlye, the association’s executive director, says that many restaurants are already having to limit their hours or days of operation and let go paid staff members not just because of the economic downturn, but because of the expense of this ordinance.

One way to look at it, Westlye explains, is that an employer with 100 workers, half full-time and half part-time, would be spending $100,000 on health insurance plans for their employees before the ordinance. Today, he says, “that same restaurant is spending $250,000. And that’s on a payroll of $2 million. We just don’t think this is affordable.”

For many of the younger workers in the food service industry, says Westlye, a Kaiser plan can be purchased for $250 with dental and vision. Under the city’s ordinance, businesses and their employees are spending a total of $450. Westlye says until the case is heard or rejected, restaurants will continue to uphold the law, but he worries that some restaurants may leave the city or be forced to reduce their quality.

City officials are cautious despite early successes.

Outlined in the March 17 report are some apparent successes. The average number of health visits went down between the first year and the first six months of the second year on an annualized basis. So did the number of surgeries, need for radiology, average number of prescriptions filled, hospital admissions, number of hospitalization days, and average lengths of stay.ED visits also declined. Visits for urgent, mental health, and substance abuse treatment reduced as well.

However, city officials are cautious.

“Any changes in utilization or costs that are observed are most likely due to how participants were enrolled in the program (in this case, at the point of service),” the program’s administrators said in the March 17 report. “Changes in health seeking behavior (emergency department utilization) due to system changes take time, perhaps two to three years to observe.”

Although most of the enrollees are the neediest, earning below 100% of the federal poverty level, the maximum annual earning for eligibility has been expanded over the two years, from 100% of the federal poverty level to 300% and now 500%.

One of the early fears was that many patients who had long deferred healthcare would suddenly become eligible and swarm the clinics. So far, that hasn’t happened, says Tangerine Brigham, director of San Francisco’s Health Access Program. Of the 30 clinics, only five are no longer accepting new patients.

Other clinics have been expanded, and wait times have been dramatically reduced, Brigham says.

Another stumbling block that has proved challenging is the requirement that patients renew their standing as participants each year, something many have neglected to do, Brigham says. “We’re implementing a number of strategies to get people to renew their eligibility on time so there’s no break in their coverage,” she said.

As far as whether the San Francisco plan can be adopted nationally, one concern is that employers will cut workers’ hours to part-time to avoid having to pay health insurance costs. San Francisco’s plan, however, requires employers to pay a rate for all employees, part- or full-time.

“This is a real strength in avoiding any perverse incentives for firms to lower hours of work to avoid the requirement,” said Jacobs. “Not having such a requirement was a notable flaw in the original Senate Finance Committee options paper. The House bill prorates the requirement for part-time workers.”

Pharma agrees to fund part of Medicare doughnut hole

The Pharmaceutical Research and Manufacturers of America, following negotiations with lawmakers, said in an agreement that it would spend $80 billion over the next decade to assist Medicare beneficiaries and defray drug costs.

Under the deal, drug companies would pay as much as half of the cost of brand‑name drugs for lower- and middle‑income seniors in the so‑called Medicare doughnut hole, which is a gap in prescription coverage in which the beneficiary pays the full price for medication without help from Medicare.

The pharmaceutical companies have also agreed to pick up some of the costs of the president’s health reform plan.

“The agreement by pharmaceutical companies to contribute to the health reform effort comes on the heels of the landmark pledge many health industry leaders made to me last month, when they offered to do their part to reduce health spending $2 trillion over the next decade,” President Barack Obama said in a statement.

The deal marked a small victory for Sen. Max Baucus (D-MT), chair of the Senate Finance Committee, who has been negotiating with health industry groups as he was working on drafting health reform legislation with his committee.

Initially, a draft bill was expected from the committee. However, Congressional Budget Office (CBO) questions over costs may have slowed that down; the CBO had estimated that the costs of reform legislation may be closer to $1.6 trillion.

Baucus was pushing for the final price tag to be around $1 trillion. A draft summary that surfaced recently showed that the committee was still examining whether to create consumer‑governed nonprofit medical cooperatives.

The committee was also reviewing how to limit the ability of workers to leave employer‑sponsored health plans in favor of subsidized insurance that would be offered through state exchanges.

Meanwhile, hearings continued in the Senate Health, Education, Labor and Pension Committee.

Republicans seemed to be stepping up their resistance to the bill—criticizing Democrats for providing inadequate time for reviewing the proposals related to creating insurance programs and restructuring the way providers are paid.

Many business associates not ready to comply with HIPAA

Since the Health Information Technology for Economic and Clinical Health (HITECH) Act passed February 17, we’ve heard a lot of banter about business associates (BA). Of course, BAs must comply directly with the HIPAA security rule and components of the privacy rule by February 18, 2010.

One HIPAA privacy and security officer told us in a focus group that she’s concerned because it’s not clear what a covered entity’s role should be as far as educating BAs. (Technically, covered entities have no obligation to train BAs.) That same HIPAA officer is working on a final draft of a BA contract, and her facility is unsure whether it will have one standard contract or individual language for each BA.

It makes sense for a covered entity to develop a template, then only change some of the details, in particular the description of what uses and disclosures of protected health information (PHI) the BA is permitted, says Kate Borten, CISSP, CISM, president of The Marblehead Group in Marblehead, MA, and a HIPAA privacy and security expert.

John C. Parmigiani, MS, BES, president of John C. Parmigiani & Associates, LLC, in Ellicott City, MD, sees some BAs abandoning healthcare because they fear they can’t fully comply with HIPAA. And many experts simply feel BAs are not ready to comply.

Perhaps the most telling news is that some covered entities don’t know all of their BAs, and they’re trying to identify them.

All this with a crucial eight-month road ahead for covered entities and BAs as they get ready to comply.

In the next eight months, the U.S. Department of Health and Human Services will define the meaning of unsecure PHI, which goes hand in hand with new breach notification requirements. CMS will also publish its definition of “meaningful use” regarding electronic health records. And then the big date—February 18, 2010—which is the compliance date for BAs under the security rule and HITECH.

If you don’t have a grip on your BAs by then, you’ll not only be behind the eight ball but the entire rack on the pool table.

Borten says there is “absolutely no excuse” to not know all your BAs. She reminds covered entities that they must not only know their BAs, but must already be entered into contracts with them per the HIPAA privacy and security rules.

“You absolutely have to know who they are,” Borten says. “And you have to make sure you have legal contracts and that they have all the language required in the privacy and security rules. This should all be in place now. Imagine an auditor walking through the door and asking for this, and you can’t produce it? You’re in big trouble right off the bat.”

Potential BAs are organizations that provide data transmission of PHI, such as regional health information organizations.

The act also clarifies that personal health record (PHR) vendors who contract with covered entities to provide a PHR to their patients or health plan members are another example of BAs.

Some other examples of BAs are:

  • Transcriptionists
  • Contract coders
  • Contracted laboratory and radiology departments
  • Third-party billers
  • Collection agencies
  • Software vendors who have access to PHI
  • Outsourced IT support
  • Interpreters
  • Hospital couriers
  • Pharmacies with hospital contracts
  • Security shredding companies
  • Waste management companies
  • Off-site storage facilities
  • Auditors who have access to PHI
  • Marketing contractors who have access to PHI
  • Consultants who have access to PHI

Many young adults don’t have health coverage

Almost half of young adults—a group some would argue are the most insurable—went without health coverage for more than one month in 2006, and almost one-fourth, or 3.5 million Americans, were uninsured for the entire year, according to a new federal report.

Authors of the Agency for Healthcare Research and Quality (AHRQ) report said this population, ages 19–23, were almost twice as likely to be uninsured all year as adults aged 45–64 (see Figure 10). The agency compiled the report based on the most recent data from the ongoing Medical Expenditure Panel Survey.

Most significantly, nearly one-third of those who had no insurance for an entire year felt health insurance was not worth the cost.

It was not clear from the report how much money the illnesses and injuries in this group of uninsured cost the healthcare system through uncompensated care and how much the patients paid out-of-pocket.

The group is largely healthy, with only 6.5% reporting they’d been diagnosed with any form of chronic condition by a health provider.

But the fact that a disproportionately larger number of people in this age bracket are uninsured relative to older groups of adults is cause for concern, the authors said.

The report, Characteristics of Uninsured Young Adults: Estimates for the U.S. Civilian Noninstitutionalized Population, 19–23 Years of Age, 2006, was written by Karen Beauregard and Kelly Carper.

Among its other findings:

  • Those who were uninsured for the entire year were more than twice as likely to have been unable to obtain necessary healthcare as their insured counterparts (see Figure 11).
  • Although some insurance companies allow young adults who are students to be covered on their parents’ health insurance policy until they are 23, only 18.5% were enrolled and eligible under this provision. However, of those young adults who were uninsured for the whole year, 18.6% were full-time students in contrast to 42.2% of those who had health insurance for some portion of the year, indicating that some students were able to take advantage of their parents’ policies.
  • Hispanics were more than twice as likely to have no health insurance for the entire year (43.9%) than black non-Hispanics (21.1%) and whites (19%) (see Figure 12).
  • The lower the level of education attained, the more likely a young adult was to have no health coverage through the year, with 30.6% who had not graduated from high school, compared to 15.5% of those who had at least some college.
  • Males were more likely to be uninsured for the entire year (29.8%) than females (17.9%).

Joel Cohen, director of the division of Social and Economic Research at the AHRQ, suggested that females tend to not lack health coverage as much as males because in many cases, they are eligible for programs such as Medicaid. In many instances, individuals within this age bracket work in settings that offer health coverage, but “it may not be considered affordable by the workers, so they may not sign up,” says Cohen.

Robert Zirkelbach, a spokesperson for America’s Health Insurance Plans, says many health plans have devised policies to meet specific pricing and insurance needs of young adults. However, says Zirkelbach, “certainly, there’s a recognition that many young adults simply don’t choose to participate.”

As policymakers design comprehensive healthcare reform legislation in Washington, Zirkelbach says they need to require that all people participate in the healthcare system. This would mean that all Americans, including individuals aged 19–23, would have to sign up, although the federal government could provide subsidies through tax breaks to help with the cost of premiums.

The insurance industry will do its part by guaranteeing coverage for preexisting conditions and no longer performing health status ratings for its applicants. “But for that to work, there needs to be a personal coverage requirement to get everybody into the system,” Zirkelbach says.

He adds that price differentials would still exist based on an applicant’s age, geographic residence, family size, and the design of the benefit plan.

Cost of hospital care for obese children has doubled

Americans, and specifically taxpayers, paid nearly double in costs of hospitalizing obese children between 1999 and 2005, with almost twice as many such children requiring hospital care, according to a new report in the journal Health Affairs.

The authors don’t know exactly why, since the prevalence of childhood obesity did not change. However, they speculate that physicians may be more frequently listing obesity as a primary or secondary reason for admission. Another possible reason is that children are becoming even more obese and for longer periods of time, giving disease processes much more time to cause damage. Hospitalizations increased even for children as young as 6.

The report evaluated hospitalizations whose primary or secondary diagnosis was listed as mental illness, pregnancy-related conditions, asthma, diabetes, appendicitis, pneumonia, skin and subcutaneous infections, biliary tract disease, and other bone diseases in children and adolescents aged 2–19. All told, their care cost the healthcare system $237.6 million in 2005, up from $125.9 million in 2001, measured in 2005 dollars.

Seen in 2008 dollars, the numbers are 20% higher.

This is despite evidence from federal reports that the prevalence of obesity in children and adolescents did not go up in that period, the authors wrote.

“This is an unfortunate finding,” said Leonardo Trasande, MD, assistant professor of community and preventive medicine at Mount Sinai School of Medicine in New York. Even if it’s true that doctors are now more likely to list obesity as a contributing comorbidity, “it means the cost burden is more reflective of reality, and people will need to refine their perspective of how much obesity is immediately contributing to children’s health problems,” Trasande said.

Obesity-related hospitalizations increased 8.8% per year among children aged 2–5, 10.4% per year among children aged 6–11, and 11.4% per year among adolescents aged 12–19 between 1999 and 2005.

Trasande and coauthors noted that it is likely the numbers are much worse, because there is evidence that physicians may not list obesity as a condition in the patient’s chart.

“If obesity prevalence among children with asthma is roughly equal to that for all American children, then one would expect about 20% of children hospitalized with asthma to be obese, yet we found less than 2% of asthma hospitalization with obesity listed as a comorbidity,” the authors wrote.

The study used patient discharge statistics from the National Inpatient Sample, which reflects costs from government and private insurance payers at sampled hospitals across the United States.

There is caution in the report, the authors wrote. “Diagnosis is a product of clinical judgment and reimbursement by hospital payers and is subject to inaccuracy,” they said.

In addition, CMS “officially recognized obesity as an illness in late 2004, and a diagnosis of obesity does not routinely result in additional reimbursement or risk adjustment. Obesity is unlikely to be included to justify an adverse outcome that might have occurred, because coding is unlikely to protect from litigation or otherwise exaggerate the impact of obesity on lengths-of-stay charges or costs,” the authors wrote.

Obesity likely influenced the reason for admission in a variety of ways. For example, obesity during pregnancy is a risk factor for perinatal complications and sleep apnea, and it also can affect skin function. Obesity is associated with postoperative complications for appendicitis, and children who are obese may be likely to suffer from mental disorders.

Medicaid bears a large share of the cost of hospitalizations in children with a secondary diagnosis of obesity, with a cost of about $118 million in 2005, up from $53.6 million in 2001. “Increasing obesity among children appears to be driving increases in Medicaid spending,” the authors wrote. “Given the increasing burden of obesity-associated hospitalizations, our findings suggest that additional federal support of prevention programs could reduce obesity treatment costs borne by federal and state governments.”

John Baker, MD, president of the American Society for Metabolic and Bariatric Surgery, said the study points to the need for more aggressive interventions, because clearly the higher costs associated with these hospitalizations justify spending more money to prevent them.

“We need to start with our children and adolescents as well as our young adults to treat obesity at all levels,” says Baker, who practices in Little Rock, AR. “And there needs to be a core benefit added to our national health reform agenda.”

Physician compensation trails inflation

Flat compensation for primary care

Physicians’ overall compensation in primary and specialty care did not keep pace with inflation in 2008, reports the Medical Group Management Association’s (MGMA) Physician Compensation and Production Survey: 2009 Report Based on 2008 Data.

Primary care physicians saw generally flat compensation with a reported 2% increase, which was a 1.73% decrease when adjusted for inflation, for a median of $186,044. Specialists’ compensation rose 2.19%, a 1.59% drop when adjusted for inflation, to a median of $339,738. Inflation in 2008 amounted to a 3.8% increase in the U.S. consumer price index (refer to Figure 13).

“Physician practices endure tough economic challenges to stay solvent, especially these days. For physicians to have a chance to hold their incomes steady, it’s vital that they pay close attention to their bottom line and benchmark their practices and compensation levels against their peers,” says William F. Jessee, MD, MGMA president and CEO. “With physician payment rates lagging behind inflation, physician practices need as many tools as possible to maintain their incomes.”

Internists fared worst among primary care physicians, with an increase of less than 1% in compensation in 2008, a 3.37% decrease with inflation factored.

Among specialists, emergency medicine physicians, dermatologists, and general surgeons all reported flat salaries before inflation was factored in, with inflation- adjusted declines of up to 3.2%. Among the few specialties that posted nominal compensation gains in 2008 were gastroenterology, up 7.38%, and pulmonary medicine, up 6.65%. Psychiatry posted a 1.32% loss before inflation. With an increase of 7.16% from 2004 to 2008, psychiatry’s five-year compensation increase was half that of other specialties.

MGMA observed that median collections for professional charges were flat in primary care and declined by 6.53% for specialties, which reflects on widespread reports that financially strapped patients are postponing care (see Figure 14).

This year’s 25th annual compensation report provides data on nearly 50,000 providers and includes physicians and nonphysician providers in more than 110 specialties. MGMA has 22,500 members who lead 13,700 healthcare organizations nationwide representing 275,000 physicians.

‘Rip-off’ insurance scam shut down

A nationally widespread insurance scam has been shut down in California after hundreds of victims were duped into paying premiums for a Kaiser Permanente health plan through a phony labor union, state officials said. Kaiser never received a large portion of the money the enrollees paid.

The Ponzi-like scheme, operated by Raymond, Thomas, and Jean Palombo of Riverside, CA, under the name Contractors and Merchants Association or CMA, has also been shut down in at least six other states, including Texas, Georgia, Oklahoma, Nebraska, Florida, and North Carolina, in recent years.

The Palombos also operated the scam under the name Progressive Health Alliance in some of those states and involved other health insurance companies such as Aetna and Healthnet, according to state documents. A previous Palombo operation was shut down by another California state agency in 1999, but the Palombos were not personally named in that order. This time, the Palombos and CMA have been permanently barred from selling HMO or PPO plans in California.

“It is critical that we protect healthcare consumers from phony, Madoff-like scams that take their scarce dollars and leave them without insurance coverage,” said a statement from Cindy Ehnes, director of the state Department of Managed Health Care (DMHC), which issued the order to stop the fraudulent plan. “We shut down this particular operation before Californians were severely harmed, and with Kaiser’s support, got them into secure coverage. Our action sends the message that fraudulent health coverage rip-offs will not be tolerated by this administration.”

In California, about 200 people and another 300 of their dependents were wooed through the Internet to join CMA, says Michael McClelland, lead counsel for the DMHC. Additionally, they were required to join a phony labor union, International Union of Industrial and Independent Workers, to buy the plan, McClelland says. Most of those recruited were older or had preexisting conditions such as diabetes that made them ineligible for most private insurance plans, he says.

Labor unions can legally purchase and organize health insurance plans for their members; however, this labor union did not represent any workers or engage in collective bargaining, and thus was not legally entitled to purchase health insurance from Kaiser, says McClelland.

“It’s not lawful to use a labor union to sell health insurance to the general public without a license,” he says.

Across the country, the Palombo operations paid health plans in “spits and spurts to keep delaying the inevitable, which is to default paying the premium entirely,” says McClelland, who characterizes the operation as “a Ponzi-like” fraud.

The DMHC negotiated with Kaiser to enable CMA’s victims to continue to be enrolled under a Kaiser individual rather than a Kaiser group plan without having to apply for medical underwriting, which would have disqualified most if not all of them, McClelland says. Their premiums did undergo adjustment based on their age and residence, and although some rates rose a bit, most went down or remained the same, he says.

“Kaiser also continued CMA coverage throughout the DMHC’s investigation, despite not receiving the premium payments for months at a time,” the agency said in a statement.

CMA and the labor union paid some money to Kaiser from the enrollees’ premiums, but for various periods of time “were a couple hundred thousand dollars behind in payment,” McClelland says. “Kaiser could have cut them off, but they did not.”

As long as there were “tons of people buying the plans, there was enough money to pay the premiums and skim money off the top,” says McClelland. “The average enrollee was paying roughly $500–$600 per month, and the actual premiums Kaiser was charging was half of that. Half of the money was going into the pockets of Palombos and the union.”

He says the deal went sour when, “for whatever reason—greed, falling membership—the union stopped paying on the contract.”

According to the U.S. Department of Labor, when the labor union was shut down, health plans across the country had provided $4 million in care for enrollees who paid their premiums to the Palombo operations, but those operations never forwarded that money to the health plans during time, says McClelland.

The state first got wind of the CMA two years ago when an enrollee objected to being required to join a labor union to obtain health coverage. After a lengthy investigation, the state agency discovered that enrollees were solicited through the Internet and by licensed brokers. The state has also suspended the license of one of those brokers who sold the union contract to Kaiser.

The California department is the only one of its kind in the country, overseeing health plans that enroll more than 21 million Californians. Amy Dobberteen, chief of the agency’s Office of Enforcement, said several other sham health insurance operations are currently under investigation in the state.

Blue Cross Blue Shield of Massachusetts rewards docs for efficient quality of care

Many primary care physicians practicing under contract with Blue Cross Blue Shield of Massachusetts (BCBSMA) received a total of $27 million as a reward for meeting certain cost and quality goals in an annual incentive program that was among the first of its kind in the country when it began in 2000, the health plan said this week.

For all eight years of the award payouts, physicians have received a total of $164 million under the project, called the Primary Care Physician (PCP) Incentive Program. The latest round covered achievements in 2007.

The recent payout, which was awarded to an undisclosed number of doctors, was a reward for high rates of ordering mammographies for their patients, appropriate management of diabetes and lipid levels, and for reporting outcomes from treatment of various chronic conditions.

Physicians who were more likely to receive the additional payment included those who routinely ordered body mass index tests for children, prescribed certain generic drugs instead of brand-name, and appropriately utilized laboratory testing services. “The PCP Incentive Program is consistent with our work to transform the healthcare system to address the underuse, overuse, and misuse of healthcare services to award for the quality and outcome of care and of care our members receive,” said John Fallon, MD, chief physician executive at BCBSMA.

BCBSMA spokesperson Jenna McPhee emphasized that “choosing which drug to prescribe is always at the discretion of the physician, and the targets for this measure were set to allow physicians to choose name brands when they feel necessary.”

The establishment of electronic medical record systems in doctors’ practices also helped them achieve a qualifying score, as did completion of cultural competency training, said BCBSMA.

Each year, the health plan releases a list of the incentives and gives physicians a review after six months to illustrate how far they may be from their goals.

BCBSMA representatives said that by giving doctors such incentives to incorporate these practices into their treatment settings, they have increased Healthcare Effectiveness Data and Information Set scores, a well-recognized way in which health plans and others measure the effectiveness of types of care.




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