Hospitals charge employers 240% more than Medicare

Researchers hope the study will give private payors a better grasp of what health care costs are, and allow them to compare prices within a state and across states. (Photo: Shutterstock)

This article was published on May 13, 2019 on BenefitsPro written by Scott Wooldridge.

Prices range from 150 percent of Medicare prices at the low end to 400 percent at the high end.

A new study by RAND and the Employers’ Forum of Indiana (EFI) finds that hospital prices are much higher for employer-based health plans than for Medicare.

The study gathered data from hospitals in 25 states, finding a wide variation in what hospitals charged health plans. The researchers looked at claims data for more than 4 million people, with information coming from self-insured employers, state databases and records from participating health insurance plans.

Depending on the state, prices rose and fell in the period between 2015 and 2017, the data showed, but on average, private insurers were charged 240 percent more than Medicare. Prices also varied widely among hospital systems, ranging from 150 percent of Medicare prices at the low end to 400 percent of Medicare prices at the high end. The cost of outpatient care from hospitals was higher than the average inpatient costs, averaging 293 percent of what Medicare would pay.

“The widely varying prices among hospitals suggests that employers have opportunities to redesign their health plans to better align hospital prices with the value of care provided,” said Chapin White, the study’s lead author and an adjunct senior policy researcher at RAND, a nonprofit research organization. “Employers can exert pressure on their health plans and hospitals to shift from current pricing system to one that is based on a multiple of Medicare or another similar benchmark.”

The American Hospital Association has put out a statement taking issue with the report, in part because of its sample size–utilizing data from 1,598 hospitals in 25 states. In addition, wrote AHA in a statement, “Medicare payment rates, which reimburse below the cost of care, should not be held as a standard benchmark for hospital prices. Simply shifting to prices based on artificially low Medicare payment rates would strip vital resources from already strapped communities, seriously impeding access to care.”

Different payors, different rules

EFI officials noted that private health insurance contracting for hospitals is done on a discounted-charge basis, negotiated between insurance carriers and hospitals. Medicare, on the other hand, issues a fee schedule that determines the price it will pay for each service, with adjustments for inflation, hospital location, the severity of a patient’s illness, and other factors.

According to Gloria Sachdev, president and CEO of EFI, the new study will give private payors—such as employer-based plans—a better grasp of what health care costs are, and allow them to compare prices within a state and across states.

“The purpose of this hospital price transparency study is to enable employers to be better shoppers of health care on behalf of their employees,” Sachdev said. “We all want to know which hospitals provide the best value (best quality at best cost). Numerous studies have found that rising health care costs are due to high prices, not because we are using more health care services.”

RAND recommendations

The research group issued a list of recommendations with the study. Some of the recommendations are in line with the recent movement toward direct contracting, as employers seek to negotiate directly with high-quality, lower-cost facilities.

The study’s recommendations included:

  • Employers can exert pressure on their health plans and hospitals to shift from discounted charge contracts to contracts based on a multiple of Medicare or some other prospective case rates.
  • Employers can use networks and benefit designs to move patient volume away from high-priced, low-value hospitals and hospital systems.
  • Employers can encourage expanded price transparency by participating in existing state-based all-payer claims databases and promoting development of new ones.

Transparency by itself is likely insufficient to reduce hospital prices; employers may need state or federal policy interventions to rebalance negotiating leverage between hospitals and employer health plans.

More Value-Based Payments

According to a public-private partnership launched by HHS, the percentage of U.S. healthcare payments tied to value-based care rose to 34% in 2017, a 23% increase since 2015. Fee-for-service Medicare data and data from 61 health plans and 3 fee-for-service Medicaid states with spending tied to shared savings, shared risk, population-based payments and bundled payments were examined in the analysis.

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Proposals on Many Wish Lists

self-fundingNow that the makeup of the new Congress has been decided, many employers are hoping Washington can work together to address a few of their important concerns. High on many lists, especially those belonging to large employers, would be doing away with the Cadillac Tax on high-cost health plans once and for all. While implementation has been delayed until the 2022 tax year, the law will require insurers and large employers to pay a 40% excise tax on the costs that exceed $11,100 for employee-only coverage and $29,750 for family coverage.

Other items that employers have been talking about for a long time include making HSAs considerably more user friendly and easing ACA reporting requirements to allow employee statements to be provided electronically rather than by mail.

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Younger generations driving lifestyle benefits

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This article was published on February 25, 2019 on Employee Benefit Adviser written by Kayla Webster.

Younger generations are often characterized as entitled and demanding — but that self-confidence in their work is pushing companies to adopt benefits outside the traditional healthcare and retirement packages.

By 2025, millennials will make up 75% of the U.S. workforce, according to a study by Forbes. The first wave of Generation Z — millennials’ younger siblings — graduated college and entered the workforce last year. With these younger generations flooding the workplace, benefit advisers need to steer clients toward innovative benefits to attract and retain talent, according to panelists during a lifestyle benefits discussion at Workplace Benefits Renaissance, a broker convention hosted by Employee Benefit Adviser.

“Millennials came into the workforce with a level of entitlement — which is actually a good thing,” said Lindsay Ryan Bailey, founder and CEO of Fitpros, during the panel discussion. “They’re bringing their outside life into the workplace because they value being a well-rounded person.”

Catering benefits to younger generations doesn’t necessarily exclude the older ones, the panelists said, in a discussion led by Employee Benefit Adviser Associate Editor Caroline Hroncich. Older generations are accustomed to receiving traditional benefits, but that doesn’t mean they won’t appreciate new ones introduced by younger generations.

“Baby boomers put their heads down and get stuff done without asking for more — that’s just how they’ve always done things,” Bailey said. “But they see what millennials are getting and are demanding the same.”

In a job market where there are more vacant positions than available talent to fill them, the panelists said it’s important now, more than ever, to advise clients to pursue lifestyle benefits. While a comprehensive medical and retirement package is attractive, benefits that help employees live a more balanced life will attract and retain the best employees, the panelists said.

“Once you’ve taken care of their basic needs, have clients look at [lifestyle benefits],” said Dave Freedman, general manager of group plans at LegalZoom. “These benefits demonstrate to workers that the employer has their back.”

The most attractive lifestyle benefits are wellness centered, the panelists said. Wellness benefits include everything from gym memberships, maternity and paternity leave, flexible hours and experiences like acupuncture and facials. But no matter which program employers decide to offer, if it’s not easily accessible, employees won’t use it, the panel said.

“Traditional gym memberships can be a nightmare with all the paperwork,” said Paul O’Reilly-Hyland, CEO and founder of Zeamo, a digital company connecting users with gym memberships. “[Younger employees] want easy access and choices — they don’t want to be locked into contracts.

Freedman said brokers should suggest clients offer benefits catered to people based on life stages. He says there are four distinct stages: Starting out, planting roots, career growth and retirement. Providing benefits that help entry level employees pay down student debt, buy their first car or rent their first apartment will give companies access to the best new talent.

To retain older employees, Freedman suggests offering programs to help employees buy their first house, in addition to offering time off to bond with their child when they start having families. The career growth phase is when most divorces happen and kids start going to college, Freedman said. Offering legal and financial planning services can help reduce employee burdens in these situations. And, of course, offering a comprehensive retirement plan is a great incentive for employees to stay with a company, Freedman said.

Clients may balk at the additional costs of implementing lifestyle benefits, but they help safeguard against low employee morale and job turnover. Replacing existing employees can cost companies significant amounts of money, the panelists said.

“Offering these benefits is a soft dollar investment,” Freedman said. “Studies show it helps companies save money, but employers have to be in the mind-set that this is the right thing to do.”

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Drug Firms Resist Price Disclosure

Drug CostsWhile the Department of Health and Human Services has asked drug manufacturers to disclose list prices for most drugs they feature in television commercials, the industry’s largest trade group, the Pharmaceutical Research and Manufacturers of America (PhRMA), has countered with an offer to include content directing consumers to a new website where pricing information could be found.

The Administration’s request requires that list prices be featured in text on the screen in television ads for drugs covered by Medicare and Medicaid costing more than $35 per month. A great deal of debate has developed, with PhRMA arguing that featuring list prices would confuse consumers by making them think they have to pay more than they actually would. HHS is still accepting comments on the proposal.

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UnitedHealth will begin passing drug discounts to plan participants

This article was published on March 13, 2019 on BenefitsPro written by Max Nisen.

The health-care policy environment is shifting in a dangerous way for insurance giants. A seemingly small change in how drugs are paid for could be the beginning of a response.

UnitedHealth Group Inc., the largest U.S. health insurer, announced Tuesday that its pharmacy-benefit management arm OptumRX will mandate that all new employer health-plan clients pass the drug discounts it obtains for them directly to plan participants. That’s a big shift from the current system, under which OptumRX and other PBMs negotiate prices with drugmakers and hand the resulting rebate checks to clients to use as they wish. PBMs profit from this arrangement, and have an incentive to favor heavily rebated drugs. That pushes drugmakers to hike prices, and patients are exposed to artificially inflated costs.

UnitedHealth’s new policy means lower drug costs for more people. But it has broader implications. It smartly preempts Trump administration efforts to reform rebates, and shows that the industry can make needed changes ahead of pushes for an even bigger government-led overhaul of the way they do business.

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Increasing costs and unhappiness with the status quo are motivating the administration’s regulatory effort to end rebates in Medicare. It is also thinking about forcing insurers to reveal the hidden prices they negotiate with hospitals, which would wreak havoc on their ability to negotiate. Consumer dissatisfaction also behind broader reform efforts championed by Democrats, such as Medicare for All. Such plans are distant threats, but they are present and existential enough to weigh on shares.

Making the switch to so-called point-of-sale rebates for new clients is a big and unique step for UnitedHealth, and it builds on its January transition of a different subset of its business. While the impact will be small at first as existing clients can stick to the old system, the new model could eventually impact as many as 18 million Americans, according to a research note from Royal Bank of Canada analyst Frank Morgan.

UnitedHealth says people already on its point-of-sale plans save an average of $130 per eligible prescription and that medication adherence is up by as much as 16 percent. People are happier and healthier when they can afford to take their medicine, and are more likely to avoid larger medical costs down the line.

If the administration’s efforts on rebates succeed, UnitedHealth will face less disruption and have more experience in making a new business model work. Slower rivals such as CVS Health Inc. and Cigna Inc’s Express Scripts – which offer point-of-sale rebates as an option but don’t mandate it – may suffer. Already in February, CVS attributed part of its weak 2019 guidance to the impact of shifting drug-pricing trends on its PBM as drugmakers held back on price hikes under political scrutiny.

Plans that offer point-of-sale rebates have a chance to focus more on reducing overall costs for both patients and payers, especially when integrated with an insurance plan. This isn’t going to make insurers and PBMs beloved overnight, or produce instant systemic cost-savings. But UnitedHealth is taking a needed and bigger step toward a better and more patient-friendly system.

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How Is Your Health Plan Responding to Millennials?

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You might be surprised to hear that millennials represent one third of the American workforce, but Pew Research Center confirms it. If your health benefit plan hasn’t adapted to the needs and lifestyles of these young people, you’re missing an opportunity to boost retention, build loyalty and enhance wellness.

For starters, it’s important to realize that 45% of young adults age 18 to 29 do not have a primary care doctor. They do, however, have a smartphone and you can bet they use it to access the internet constantly. With online sources like WebMD offering so much healthcare information, it’s no wonder that millennials are likely to self-diagnose and even treat one another at home before seeing a doctor. If young people can find much of the healthcare information they need in the palm of their hand, you can bet they expect to find benefits and enrollment information easily accessible as well.

They Want Information Now
Just like so many of us who have come to expect an immediate response to everything, millennials who do need a doctor expect the visit to happen quickly and easily. According to PNC Healthcare, this explains why 34% of millennials prefer to use a retail clinic rather than waiting several days to see a primary care physician in their office – a rate twice as high as baby boomers. It would also seem to point to an increased use of telemedicine.

Cost Matters to Millennials
Millennials face more than their fair share of financial pressures and take their finances seriously. Surveys show they are more willing to request a cost estimate prior to choosing a treatment option than baby boomers or seniors ever were. This not only makes cost transparency tools important, but it’s a very positive trend that should contribute to lower claim costs going forward.

Whether it be treatment options, provider access or cost of care, the demand for health and benefit plan information will only increase as more and more millennials enter the workforce. In order to respond to change, self-funded employer groups will need the resources of an independent TPA that can combine the right plan design with more personalized, interactive communications and more innovative ways for younger employees to access the more personalized care they will need going forward.

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