Shift­ing bur­dens

Hos­pi­tals in­creas­ingly con­cerned over ef­fects of cost-shar­ing pro­vi­sions in health plans to be of­fered through in­sur­ance ex­changes

Modern Healthcare - - SPECIAL REPORT - Rich Daly

Plenty of un­known fi­nan­cial chal­lenges await Caroli­nas Health­Care Sys­tem with the roll­out of health re­form pro­vi­sions next year. What’s not un­cer­tain is whether more of Caroli­nas’ pa­tients will have high-de­ductible in­sur­ance plans with cost-shar­ing pro­vi­sions they of­ten can­not af­ford.

Since 2008, the sys­tem has seen a steady in­crease in its bad debt be­cause of pa­tients un­able to pay their de­ductibles and co­pay­ments, says Michael Tar­wa­ter, CEO of the Char­lotte, N.C.-based sys­tem. Such pay­ments ac­count for a full per­cent­age­point in­crease in the 11% share of Caroli­nas’ bud­get at­trib­uted to un­com­pen­sated care and cash pay­ments dur­ing the past 12 months. “We haven’t seen it flat­ten out,” Tar­wa­ter says.

Hos­pi­tal ex­ec­u­tives are watch­ing to see whether the net fi­nan­cial gains from next year’s cov­er­age ex­pan­sion un­der the Pa­tient Pro­tec­tion and Af­ford­able Care Act sur­pass losses from the law’s loom­ing re­im­burse­ment cuts. They have fo­cused their fears on an ex­pected surge in high­d­e­ductible health plans next year, wor­ry­ing that any wide avail­abil­ity of such plans through the health in­sur­ance ex­changes set to be­gin en­roll­ment in Oc­to­ber in ev­ery state will mir­ror what has been a surg­ing trend among em­ploy­ers.

The ex­changes al­low a slid­ing scale of ben­e­fits and cost-shar­ing by their plans. The plans will range from the least com­pre­hen­sive and cheap­est “bronze plans” to the most com­pre­hen­sive and costli­est, cat­e­go­rized as “plat­inum plans.” In­come-based sub­si­dies will be avail­able to help cover pre­mi­ums, de­ductibles and co­pays on a slid­ing scale for in­di­vid­u­als and fam­i­lies earn­ing up to 400% of the fed­eral poverty level. Pre­mi­ums are gen­er­ally lower for high-de­ductible plans, which are typ­i­cally paired with health sav­ings ac­counts.

Ac­cord­ing to the Kaiser Fam­ily Foun­da­tion, bronze level cov­er­age will have much higher cost-shar­ing than typ­i­cal em­ployer-based cov­er­age. With a stan­dard 20% co-in­sur­ance re­quire­ment, a bronze plan would have an es­ti­mated de­ductible of $4,375 for an in­di­vid­ual and dou­ble that for a fam­ily. By com­par­i­son, sin­gle de­ductibles av­er­aged $675 in em­ploy­er­spon­sored PPOs in 2011.

“So what we’re go­ing to see is peo­ple are go­ing to have cov­er­age with big co­pays and de­ductibles,” says Ken­neth Raske, pres­i­dent of the Greater New York Hos­pi­tal As­so­ci­a­tion. And health­care providers are likely to have a lower prob­a­bil­ity of col­lect­ing them, Raske says.

High-de­ductible plans are among a grow­ing num­ber of fi­nan­cial con­cerns that hos­pi­tal ad­min­is­tra­tors say could tip the scales be­tween planned fed­eral re­im­burse­ment cuts and an in­crease in the num­ber of in­sured cus­tomers. Hos­pi­tals agreed to $155 bil­lion in cuts to Medi­care and Med­i­caid over 10 years un­der the re­form law in re­turn for pro­vi­sions pro­vid­ing health­care cov­er­age for 32 mil­lion unin­sured.

It was never cer­tain that the fis­cal trade­off would work out, hos­pi­tal ad­vo­cates have said. But de­vel­op­ments since pas­sage of the law have in­creased the odds that it will not.

Some of the de­vel­op­ments un­der­min­ing the out­look for hos­pi­tals have been high-pro­file, such as the re­fusal by lead­ers of about half the states to ex­pand their Med­i­caid pro­grams. States were given the op­tion to de­cline Med­i­caid ex­pan­sion as part of the U.S. Supreme Court’s 2012 de­ci­sion up­hold­ing the Af­ford­able Care Act. If ev­ery state ex­panded Med­i­caid el­i­gi­bil­ity, hos­pi­tals could net $180 bil­lion more in rev­enue over the next 10 years, ac­cord­ing to an Ur­ban In­sti­tute study pub­lished in March.

But no sim­i­lar pub­lic anal­y­sis has looked at hos­pi­tals’ fi­nan­cial im­pacts un­der var­i­ous sce­nar­ios in the health in­sur­ance ex­changes, which are ex­pected to be­gin en­roll­ment in less than four months. The cov­er­age pro­vided by plans through the ex­changes—in tan­dem with the Med­i­caid ex­pan­sion—was ex­pected to help elim­i­nate most of hos­pi­tals’ un­com­pen­sated-care costs stem­ming from unin­sured pa­tients.

Now hos­pi­tals are in­creas­ingly wor­ried that large num­bers of low­in­come ex­change en­rollees could opt for the high­est cost-shar­ing plans, be­cause they will have the low­est monthly pre­mi­ums. The num­bers of pa­tients who opt for high-de­ductible plans will not be known for months af­ter the Oct. 1 start of open en­roll­ment. But some health pol­icy ex­perts see an in­creas­ing like­li­hood that many low­in­come pa­tients will grav­i­tate to­ward those plans be­cause fed­eral sub­si­dies will cover most or all of the pre­mi­ums. Sub­si­dies will cover much less of the de­ductibles or co­pays.

A grow­ing num­ber of sur­veys seem to sup­port the no­tion that the high-de­ductible ex­change plans could at­tract sig­nif­i­cant num­bers of ex­change en­rollees be­cause of their lower up­front pre­mium charges. For in­stance, 2011 sur­veys by the Cicero Group of the pop­u­la­tion ex­pected to seek ex­change plan cov­er­age in Mis­sis­sippi found that 59% listed monthly cost as a top con­cern when weigh­ing plans. By com­par­i­son, only 47% listed “ser­vices of­fered” as a ma­jor fac­tor in choos­ing a plan.

High-de­ductible plans paired with HSAs were of­fered by 66% of com­pa­nies with at least 1,000 em­ploy­ees, ac­cord­ing to an an­nual sur­vey spon­sored by the National Busi­ness Group on Health. That fig­ure is ex­pected to grow to nearly 80% in 2014. Also, nearly 15% of the larger com­pa­nies of­fered those plans as the only in­sur-

ance op­tion. Ex­change en­rollees who pur­chase cov­er­age that meets IRS stan­dards as high­d­e­ductible plans will be able to pair them with HSAs, which they can fund with tax-free con­tri­bu­tions to cover their health­care costs.

Smaller com­pa­nies are also turn­ing to the high-de­ductible op­tion. Al­most a quar­ter of work­ers at com­pa­nies with fewer than 200 em­ploy­ees were cov­ered by such plans last year, ac­cord­ing to the Kaiser Fam­ily Foun­da­tion’s an­nual em­ployer health ben­e­fits sur­vey.

Wide­spread se­lec­tion of high-de­ductible plans could ex­ac­er­bate the in­creased un­com­pen­sated-care costs that Caroli­nas Health­Care and other hos­pi­tals are re­port­ing.

“If you get sick and go to the hos­pi­tal, you may have to pay the first $5,000 or $6,000 out of pocket” un­der such plans, says Stan Dorn, a se­nior fel­low at the Ur­ban In­sti­tute. “I wouldn’t blame hos­pi­tals for be­ing ner­vous.”

Hos­pi­tals have found that pa­tients with high­d­e­ductible plans of­fered through their em­ploy­ers are more likely than those with tra­di­tional plans to have un­paid de­ductibles and co­pays, says Xiaoyi Huang, as­sis­tant vice pres­i­dent for pol­icy at the National As­so­ci­a­tion of Pub­lic Hos­pi­tals and Health Sys­tems.

The at­trac­tive­ness of high-de­ductible plans to low-in­come ex­change en­rollees could in­crease fur­ther in states that do not ex­pand their Med­i­caid pro­gram, Dorn says. Ex­changes in states not ex­pand­ing Med­i­caid will of­fer sub­si­dized cov­er­age to many low-in­come res­i­dents who would oth­er­wise be re­quired to en­roll in Med­i­caid.

Na­tion­ally, hos­pi­tals’ un­com­pen­sated-care costs have risen from $3.9 bil­lion in 1980 to $41.1 bil­lion in 2011, the last year re­ported in Amer­i­can Hos­pi­tal As­so­ci­a­tion fig­ures re­leased in Jan­uary. How­ever, un­com­pen­sated-care costs as a share of hos­pi­tals’ to­tal costs have re­mained fairly sta­ble dur­ing that pe­riod, vary­ing be­tween 5.1% and 6.4% of to­tal ex­penses, ac­cord­ing to the AHA sur­vey. In 2011, un­com­pen­sated care ac­counted for 5.9% of hos­pi­tals’ costs.

But AHA of­fi­cials are “very con­cerned” about the po­ten­tial for high-de­ductible plans driv­ing un­com­pen­sated-care costs and are track­ing such costs through their mem­bers, an of­fi­cial says.

“His­tor­i­cally, we have found that about a quar­ter of un­com­pen­sated care re­lates to un­paid co­pays and de­ductibles, and we ex­pect that could rise if more peo­ple en­roll in high­d­e­ductible plans,” says Marie Wat­teau, an AHA spokes­woman.

Such plans were al­lowed in the Mas­sachusetts ex­change. De­spite that, un­com­pen­sated-care pay­ments de­clined by al­most 40% in the first full year un­der the 2006 law, ac­cord­ing to anal­y­sis by the state bud­get of­fice. The pri­mary dif­fer­ence from Mas­sachusetts that could pro­duce much worse out­comes na­tion­ally, ac­cord­ing to hospi- tal ad­vo­cates, is that providers in that state were not try­ing to com­pen­sate for state and fed­eral cuts in un­com­pen­sated-care as­sis­tance.

Most of those cuts will come through re­duced dis­pro­por­tion­ate-share hos­pi­tal pay­ments, which re­im­burse hos­pi­tals for large num­bers of low-in­come pa­tients. The first phase of Med­i­caid DSH cuts are set to be­gin in the next fis­cal year, which starts Oct. 1. Calls for de­lay­ing or elim­i­nat­ing the DSH cuts are one way hos­pi­tals are re­spond­ing to con­cerns about ris­ing costs, in­clud­ing the in­creas­ing im­pact of cost-shar­ing.

Hos­pi­tals have ral­lied be­hind the Obama ad­min­is­tra­tion’s pro­posal to de­lay the Med­i­caid DSH cuts for a year, but the only re­lated leg­is­la­tion is a two-year de­lay spon­sored by Rep. John Lewis (D-Ga.). The bill has gar­nered only 20 cospon­sors. Ab­sent leg­isla­tive in­ter­ven­tion, the ad­min­is­tra­tion is mov­ing for­ward with im­ple­ment­ing the Med­i­caid DSH cuts as man­dated un­der the 2010 health­care over­haul.

In ad­di­tion to their leg­isla­tive push, hos­pi­tals are ask­ing the CMS to tweak Med­i­caid DSH rules to ac­count for the an­tic­i­pated ef­fect of un­paid cost-shar­ing from pa­tients with high­d­e­ductible health plans.

“Based on our hos­pi­tals’ ex­pe­ri­ence, what we’re ar­gu­ing to the CMS is that th­ese peo­ple may have in­sur­ance in that they have third-party cov­er­age, but the third-party cov­er­age is so skimpy it’s al­most as if they are unin­sured be­cause they have no fi­nan­cial abil­ity to meet the high cost-shar­ing,” Huang says of the de­ductibles that must be paid be­fore as­sis­tance is pro­vided. Hos­pi­tals also are push­ing back on state and lo­cal ef­forts to re­duce un­com­pen­sated-care as­sis­tance to hos­pi­tals with the ex­pec­ta­tion that providers will need less help with fewer unin­sured peo­ple seek­ing care. States are mov­ing at dif­fer­ent speeds to col­lect some of the cov­er­age ex­pan­sion’s ex­pected sav­ings, which in­clude a to­tal of $18 bil­lion less in state un­com­pen­sated-care as­sis­tance, ac­cord­ing to a June anal­y­sis by the RAND Corp.

The high­est-pro­file ef­fort to re­duce such state-pro­vided as­sis­tance is Cal­i­for­nia Gov. Jerry Brown’s pro­posal to shift $2.5 bil­lion over three years from county-based in­di­gent care to Med­i­caid. The fund­ing trans­fer would cover the state’s cost of in­sur­ing some of the 2.5 mil­lion peo­ple cur­rently el­i­gi­ble but not yet en­rolled in Medi-Cal, the state’s Med­i­caid pro­gram. The Cal­i­for­nia shift has sparked con­cerns from hos­pi­tal of­fi­cials wor­ried that the county money pro­vided by the state will be cut be­fore the tar­get pop­u­la­tion moves to Medi-Cal.

“We cer­tainly do have con­cerns over how much fund­ing will be left in the coun­ties de­pend­ing on their in­di­vid­ual re­spon­si­bil­i­ties for the re­main­ing in­di­gent pop­u­la­tion,” says Anne McLeod, se­nior vice pres­i­dent for health pol­icy at the Cal­i­for­nia Hos­pi­tal As­so­ci­a­tion.

Hos­pi­tals aren’t likely to avert all of the cuts planned at var­i­ous lev­els of govern­ment, but they hope to at least mit­i­gate the ad­verse fi­nan­cial ef­fects of high-de­ductible plans. For in­stance, the Health­care Fi­nan­cial Man­age­ment As­so­ci­a­tion is urg­ing hos­pi­tals to ed­u­cate their ex­change-el­i­gi­ble pa­tients on the short­com­ings of such plans.

“Es­pe­cially for folks who may never have had in­sur­ance be­fore, they are go­ing to buy the prod­uct on the ex­change and think that they are cov­ered, not re­ally real­iz­ing it’s not first-dol­lar cov­er­age,” says Chad Mul­vany, tech­ni­cal di­rec­tor on reg­u­la­tory and re­im­burse­ment is­sues for the HFMA.

Hos­pi­tals fear ris­ing un­com­pen­sated-care costs from un­paid de­ductibles, co­pays.

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