Contributor: Paula Wade
Topic: Pharmacy Cost Control

The health plan industry has become enormously creative in thinking of new ways to shape member and provider behavior to save health costs.

Some of these methods are artful—such as UnitedHealthcare’s development of a plan design specifically for diabetics, a benefit design that is tailored to promote better outcomes and lower cost to members who comply with their care regimen.

But others seem more like blunt instruments designed to keep the sick from accessing needed care, perhaps in hopes of driving off those with health risks. They’re the kind of plan designs that provide the illusion of access, and that a well-designed insurance exchange will have to be careful to flag.

One such “cost-sharing” approach, employed in some of WellPoint’s group PPO products, adds a separate deductible ($250 or $500 per family member) for the pharmacy benefit, above and beyond the plan’s deductible for medical services, and beyond traditional pharmacy copays or even coinsurance. Such a design, particularly in this economy, seems both ham-fisted and wrong-headed: it will discourage members from filling needed prescriptions, regardless of their value in keeping the member healthy.

Another WellPoint design, in the individual market, advertises a four-tier formulary but requires payment of a $7,500 deductible (!) before the benefit covers a drug on Tiers 2, 3 or 4.

Now perhaps this is just a bald attempt to create a plan design sure to repel people with chronic illness – folks who know they need medications in order to live their lives well – in order to avoid risk. Perhaps this is the kind of plan design, particularly in the individual market, that can be priced cheaply and can lurk in under-regulated “market-style” state health exchanges.

As states gear up to write the rules that will apply to their health insurance exchanges this year, these are the kinds of plan design trap-doors that the transparency movement , consumers and Pharma need to watch out for.

Contributer: Deborah White
Topic: Medicaid

State lawmakers all over the country are slicing healthcare spending as they struggle to close multi-million dollar budget gaps without tax increases. Leaders of my home state of Texas did just that in June, balancing the budget without raising taxes. However, one of many spending cuts they approved was an 8 percent reduction in Medicaid reimbursement rates for hospitals and doctors. In doing this, they created a new trickle-down effect --Texas style.

Let’s follow the money in El Paso, where the uninsured rate is 31 percent, even higher than the state average of 25 percent. El Paso County’s hospital district provides healthcare for anyone and it also has taxing authority. Cuts in the state budget caused a loss of $22 million in state money for the fiscal year that starts Oct. 1, 2011.

The El Paso Hospital District is conservative fiscally, but this year its leaders resorted to proposing a tax increase for the first time in five years. El Paso commissioners approved a 7.9 percent tax hike Sept. 26 for the hospital district. This means about a $1 more a month for an owner of a $125,000 home, the average value in El Paso. This is a small amount, but it’s not sitting well with the residents. El Paso’s politicians are blaming the state for balancing the budget on the backs of counties.

Read today’s story.

But the story doesn’t end there. An 8 percent reduction in Medicaid reimbursement rates is pretty hefty. Other hospitals without taxing authority are likely to demand higher reimbursement rates from health insurance companies. That’s called cost shifting, and it’s very common. In turn, health insurance companies will raise premiums. Employers then are likely to do one of two things – pass some of the cost on to employees or, in the case of many small businesses in Texas, drop health insurance altogether. That’s a big reason Texas has the highest uninsured rate in the county.

The issue isn’t going away anytime soon. Medicaid enrollment will speed up as the new eligibility requirements under healthcare reform are implemented. Texas lawmakers have proposed reforms intended to reduce Medicaid costs, but look for tax hikes to continue trickling down to the local level.

Contributor: Carolyn McMeekin
Topic: Comparative Effectiveness Research

Some 25 years ago, when New York State was considering epidemiological studies of the contaminated Love Canal neighborhood in Niagara Falls, state scientists frequently noted that the population of that small area was too statistically insignificant to link cancer rates among former residents to the hazardous waste in their backyards.

Indeed, the scientific world has long preached what the managed care world is practicing via outcomes studies: You need enough population, i.e., people or patients, to make an informed decision.

That was borne out in a recent 450-patient study in the New England Journal of Medicine, which reported on the results of a clinical trial that implanted wire mesh stents into the brain arteries of patients who were at high risk for a repeat stroke. The “compassionate use” of the stents was approved by the federal Food and Drug Administration after a 45-patient trial in 2005.

The NEJM study found patients who received drugs and underwent lifestyle modification did much better than those implanted with the stents. To wit: the 30-day rate of stroke or death was 14.7 percent in the stent group, as compared to 5.8 percent in the drug management group. The study concluded that aggressive medical management was superior to the stents for two primary reasons: The risk of early stroke after stent implantation was high, and the risk of stroke with aggressive medical therapy alone was lower than expected.

Comparative effectiveness research has been on the minds of healthcare stakeholders in a big way since President Obama set aside $1 billion for it in his 2009 stimulus package; CER was then included in the healthcare reform bill. At a 2010 managed care contracting conference, a statement was made that the pharmaceutical industry was scared to death of CER. Since health information technology is designed to act as a measurement—the link between evidence-based medicine, HIT and CER—especially when using large population data sets—was said to have the potential of rendering clinical trials unnecessary.

Other naysayers think it has the potential of tripping up the booming personalized medicine movement, which—to undoubtedly oversimplify it a bit—seeks to customize treatments to a person’s genetics. They say the conclusions drawn by CER, by virtue of using data and groups of people, are generalizations. And the public itself worries, according to a 2010 brief in Health Affairs, that CER will limit healthcare choices and lead to restrictive reimbursement decisions.

Yet the NEJM study would seem to indicate the value and logic of numbers. Take ten times as many people as the original 45, and you get entirely different results. Does that mean that everyone in the new study had a negative result from an implanted brain stent? Probably not. But it does give patients about to undergo a risky procedure some better information from which to make a life-or-death decision. And it may just lead to reduced costs and better medicine down the road.
 

Contributor: Jane DuBose
Topic: Wellness

All it takes is a drive around Nashville, or perhaps most any city, to validate the results of a new study on the health of hospital employees. Along sidewalks on 21st Avenue – a major artery near Vanderbilt University Medical Center—scores of hospital employees, banned from smoking inside, huddle together in a cloud of their own cigarette smoke. Just a few blocks away, the Krispy Kreme doughnut shop is across the street from Baptist Hospital, luring those hospital employees into artery-clogging treats of fried batter. Like the hospital, it is open 24 hours.

Hospital employees are less healthy than the general workforce, Thomson Reuters says in a study released Sept. 12, adding that healthcare spending is 10 percent higher for hospital employees than the general population and 13 percent higher when their dependents are added in. Part of the reason is the 24-hour nature of hospital work, which requires thousands of personnel on shifts that make it hard to maintain a discipline of cooking healthy meals at home.

Hospital employees and their dependents had an 8.6 percent greater illness burden than the U.S. workforce at large and were more likely to be diagnosed with chronic medical conditions, including asthma, diabetes, congestive heart failure and others, the study concludes.

While some may look at this study and get even more depressed about medical spending trends, another way to look at it is as an opportunity, especially for accountable care organizations, or ACOs.

ACOs are one of the big, new things in the Affordable Care Act. They’re set to launch in 2012 for Medicare patients, but hospital systems and payers are developing ACO-like projects for commercial and Medicaid patients. They basically involve being accountable for a specific group of members/patients to improve their health long-term—and save the system money.

Hospital systems can start their ACOs with their own employees, and can incentivize the use of onsite fitness facilities by their own employees. Healthcare folks like to talk about low-hanging fruit. Improving the health of hospital employees may be the very definition of picking low-hanging fruit.

Thomson Reuters says a hospital or health system with 16,000 employees could save an estimated $1.5 million annually in medical and pharmacy costs for each 1 percent reduction in health risk. Hospitals might need to change a few business practices that could relieve stress and make the working environment more amenable to good health—something employers of all stripes are doing to get on the improve health/lower cost bandwagon.

But it also sounds like a coordinated care approach for hospital employees through an ACO might be just the ticket. Seeing the right specialists, coordinating care through a primary-care physician, staying compliant with prescription drugs are all concepts ACOs will be promoting. Those measures—plus wellness benefits built around no smoking, more exercise and fewer doughnuts—may help make the 7 a.m. shift change at Krispy Kreme a lonely time.

Contributer: Joel Peyton
Topic: Medicare Advantage plans

During the past year, several large Medicare Advantage carriers have acquired smaller Medicare Advantage HMO plans. First, there was HealthSpring, which acquired Bravo, next, there was WellPoint, which bought CareMore and most recently there was Humana, which snapped up Arcadian.

This is most certainly just the beginning of a floodgate of MA plan consolidations. Seeking to capitalize on millions of baby boomers who will age into the program, large MA carriers will look for opportunities to expand services areas to attract more enrollees. Smaller plans that have good star ratings and have integrated healthcare systems will be prime targets for acquisition.

However, the thinning out of MA plans will not only occur because of future acquisitions. Because of requirements from the federal healthcare reform law and more stringent Centers for Medicare & Medicaid Services requirements, some smaller companies may not be able to cut the mustard.

Beginning in 2014, MA plans must meet a minimum medical loss ratio of at least 85 percent. Smaller carriers with much less economies of scale than bigger MA players like UnitedHealthcare and Humana are likely to have trouble meeting this standard. If struggling plans cannot find an interested buyer by 2014, then they may have to shutter their doors.

Adding even more complexity to the mix, beginning next year, CMS will begin doling out reimbursement bonuses to MA plans that perform well in meeting numerous star rating quality measurements. The bonuses are coupled with reimbursement rate cuts that begin next year. For companies with just a few MA plans in their portfolio, a bad star rating and a shrinking reimbursement rate could be disastrous enough for them to exit the MA business entirely. Making matters worse for poor performers, CMS has threatened to terminate plan offerings that receive consistently lackluster star ratings.

If this isn’t enough to make your head swim, smaller companies will also have to adjust to meeting CMS requirements such as e-prescribing and the switchover from ICD-9 diagnosis codes to ICD-10 diagnosis codes, which will be very costly. Larger companies are able to afford the staffing additions and IT upgrades more easily that smaller carriers.

For many smaller companies, the strategy now may be to make their plans attractive enough so that if the stars don’t align quickly enough on patient outcomes, perhaps they will on a buyout offer they can’t refuse.