How does Telehealth work?

 By now, most have heard of telehealth.  Teladoc is one popular technology provider enabling telehealth.  Telehealth utilization continues to increase and the trend will likely continue for many years into the future.

There are major benefits to utilizing telehealth services.  The first is convenience.  It can be so hard to get a timely appointment with your primary care physician and when you do, you have to travel to their clinic and wait in a waiting room full of sick people so you can be seen for 15 minutes.  With telehealth, you can instantly access a provider from the comfort of your home.  Talk about convenience.

Telehealth also shifts the venue of care to a more appropriate setting.  Many people go to the Emergency Room for things like the flu simply because they do not know where else to go.  While urgent care has helped remedy this problem, telehealth has added another tool to prevent unnecessary ER visits.

More and more insurance carriers and employers are adding telehealth to their plans and often these visits are accompanied by low copays. 

It is still important to understand telehealth services are not meant to be a replacement to your primary care physician, who can be thought of as the “quarterback” of your medical life.  Someone needs to keep your health history and be the hub for your healthcare, and that should be your primary care provider.

Why do I get an Explanation of Benefits (EOB)?

 Have you just gone to the doctor and now have lots of mail coming from various places?  You probably noticed that one of those is titled ‘Explanation of Benefits (EOB)’ and comes from your insurance carrier or health plan.  But, what is the purpose of an EOB.

An EOB lists the medical claims your plan has received from your provider.  It will show you the billed amount along with a discount, paid amount, and any amounts you owe to the provider.  It can be dizzying reading all these numbers and determining how they were calculated.  So, here is a step-by-step list:

1. You go to Provider ABC for an office visit
2. Provider ABC will take your insurance information from your ID Card and record that information in their system.
3. After the visit, your doctor or clinician will make notes on what happened during the visit.  Those notes are typically sent to a medical coder working for Provider ABC to add medical billing codes (most commonly CPT codes) that are sent on to your health plan.
4. Your health plan receives the claim with the codes and pays Provider ABC if all the criteria needed to pay the claim are verified.
5. Your health plan then sends an EOB to you explaining exactly what they paid and what you should owe.
6. You receive a bill from Provider ABC and that bill should match the amount the EOB says you should owe Provider ABC.

As you can see, an EOB is meant to be a sort of verification that you actually did receive the medical services your provider says you received and that you are charged properly.  

It’s always a good idea to hold onto these EOB’s in the event your claim has issues.  This way, you can quickly locate the EOB and reference it if needed.

How Hospital Mergers have dramatically changed healthcare in America

There has been a major wave of consolidation in the healthcare space over the last 15 years.  Today, just over 50% of physicians nationally are now employed by a hospital.  Hospitals continue to buy up primary-care practices, ambulatory surgery centers, and imaging centers as this trend continues. 

Hospitals point to increased integration between care providers as a key benefit arising out of a large integrated healthcare system.  They point to cost savings that can be had when more providers serve under one roof.

However, the data shows only one clear outcome from hospital mergers—dramatically increased prices for employers and patients.  As most know by now, costs for identical medical services can vary widely between two providers.  No rule can be followed to decipher the reasoning for this variation.  Countless articles have been written about how a knee surgery at a top hospital can cost $10,000 while that identical surgery performed two miles down the road can cost $50,000. Worse yet, that surgery with the same physician can cost 2-3 times as much if performed at a hospital versus an Ambulatory Surgery Center (ASC).

Pricing for medical services depends largely on how much leverage you have over the payor.  The payor may be Medicare, Medicaid, or a private insurer.  Hospitals have the least leverage over Medicare and Medicaid and that is why they receive vastly lower reimbursements from these payors as compared to private insurers.  Private insurers, such as United, Cigna, Blue Cross, and Aetna, often have to have all the major hospitals in a given metro in their network to compete.  And due to consolidation of hospitals, that typically means 2-3 hospitals.  These hospitals understand this requirement.  As a result, the hospitals can ‘name their price’. 

The insurance carrier simply passes these rates onto employers and employees, who become the ultimate loser.  So, what can employers and employees do to fight back?  Employers create and pay for healthcare plans, making them the ‘customer’.  In order to address the spiraling cost of healthcare, employers must take back control of their plans from the insurance carriers that have outsourced this role to.  Often in the past, the opacity of healthcare and difficulty in customizing plans can squelch any plan innovations. 

We have developed a portal that makes it easy for you to create a customized plan in a simplified fashion.  Click here to learn more.

How healthcare costs impact your wages

While the economy expanded greatly between 2010 and 2020, many Americans wages remained stagnant.  There are many reasons for this, but I believe one major factor is the rising cost of health insurance.

The true cost of health insurance is typically hidden from employees.  Employees may pay 20-50% of their health insurance costs and typically this comes out of their check via a bi-weekly deduction.  Many employees don’t even look at these deductions.  But hidden in that calculation is a major reason why wages have remained stagnant in an expanding economy.

According to the Kaiser Family Foundation, the average total annual premium for single coverage in 2018 in an Employer –Sponsored Medical plan was $6,715.  For perspective, five years earlier in 2013, this figure was $5,571.  This represents a nearly 21% increase in five years.  According to the United States Census Bureau, the median household income in the US was $61,937.  According to the Bureau of Labor Statistics (BLS), the median wage for works in the United States was $47,060 in 2018. 

This means that merely to pay for the health insurance for an employee, an employer must contribute 10.8% of that employee’s wage.  Keep in mind, the employee still has out of pocket costs for items like copays and deductibles.   

In summary, employees are getting raises, they are just coming in the form of more and more expensive health insurance plans rather than take-home pay.   But, employees have largely been resistant to any changes to their healthcare.  Until employees make the link between out-of-control healthcare costs and the stagnation of their wages, it will be hard for employers to mobilize.

How to Lower Health Insurance Costs in Employer-Sponsored Plan

 We all know the cost of health insurance and healthcare costs is too high.  Nonetheless, most of us feel there is nothing we can do.

If you are covered by a government program like Medicare or Medicaid, there is little you can do to change that program individually.  If you are covered under an individual plan, there is not much you can do outside of selecting a less expensive plan which will come with skinnier benefits.

In an employer-sponsored plan, there are a few more levers that can be pulled.  It is useful to divide up the things that each the employer and employee can do to reduce healthcare costs. 

What Your Employer Can Do

1. Analyze claims data and institute programs based on the plan’s needs.
2. Help employees navigate the plan to reduce inefficient use of the plan.
3. Add incentives for employees to use the plan in its most effective form (i.e. Telemedicine visits when possible instead of high-cost Emergency Room visits).
4. Redesign the plan benefits to match the specific needs of the group. 
5. Look at alternative models such as Reference-Based Pricing.

What You Can Do

1. Use the appropriate venue of care for your conditions.
2. Educate yourself on the plan benefits
3. Shop around, especially for high cost procedures like surgeries.
4. Try a generic instead of a branded drug where possible

Reducing healthcare costs is truly a team effort.  It requires everyone taking a little time to understand their plan and using some simple best practices to ensure you are receiving value.

What media sources I like best

 Here is a quick list of some of the healthcare media I like:

Podcasts

• What the Health?  -Kaiser Health News
• The Rock Health Podcast –Rock Health
• StartUp Health NOW Podcast –Steven Krein and Unity Stokes
•  Relentless Health Value –Stacey Richter
• The Future of Health –Health:Further

Websites

•  Kaiser Family Foundation
• Modern Healthcare
•  AHealthcareZ
•  Fierce Healthcare

Books

• An American Sickness by Elisabeth Rosenthal
•  Flatlining: How Healthcare Could Kill the U.S. Economy by Ron Howrigon
• Where Does It Hurt? By Jonathan Bush
• Code Blue: Inside America’s Medical Industrial Complex by Mike Magee, MD

How can I get the cost of my healthcare?

 It is remarkably difficult to find the cost of medical services.  Many new technology providers along with certain government regulations are finally shining a bit of light on the cost of medical services.

Medicare rates have been published for years and provide a key cost benchmark.  However, contracts between private insurers and providers are under seal and closely guarded.  Those ‘negotiated rates’ are used to determine the price paid to the given provider for medical services. 

Many services have a copay attached to them which gives you cost certainty.  But, for services that are subject to the deductible or subject to coinsurance, cost may be an important driver to your decision.  There are two components you must know if you want to accurately calculate what the costs (both total costs and your patient responsibility):  1) What services will be done, and 2) What the negotiated rates between your insurance carrier and your provider for those services are.

Determining what services will be done can realistically be obtained by asking your provider what will be done during the visit and requiring you approve before other services are rendered.  Insurers will not release negotiated rates, but there are a couple of alternatives.  You can call your insurer and ask the Claims Department for Usual and Customary Rates (UCR) for that service in that area.  This is an average cost for the given area.  Alternatively, you can use a free online tool like Healthcare Bluebook to get an estimate.

What is a Facility Fee?

One of the most vexing and controversial line items in all of healthcare is the facility fee.  It confuses patients and often includes exorbitant charges that have no connection to reality.

Facility fees are most common when a hospital is involved.  Facility fees are the charges for the use of a facilities and equipment.  For example, if you have a surgery done in a hospital, your plan will be charged a Professional Fee by the surgeon and anesthesiologist as well as a Facility Fee by the hospital.

Many are shocked at how large those facility fee figures can be.  According to Healthcare Bluebook, a fair price for a Spinal Fusion in Raleigh, North Carolina is $41,305.  Of that total, $35,701 is the Facility Fee, $3,334 is the Surgeon’s fee, and $2,270 is the Anesthesiologist’s fee.

These massive facility fees have been increasing and causing health insurance premiums to continue to rise.  But, on a positive note, many surgeries that were previously done only in a hospital setting are now done in an outpatient setting.  In fact, today the occupancy of an average hospital hovers around 60% and is in decline. 

Many of these outpatient surgeries are done at Ambulatory Surgery Centers (ASC’s).  ASC’s typically have facility fees that are far lower than Hospital Outpatient Departments (HOPD’s).  ASC’s are typically physician-owned, but can be owned by hospitals as well.  The same surgery may be twice as much at an HOPD as an ASC.  However, not all surgeries can be done in ASC’s.  ASC’s can only hold patients for 24 hours.  They are most suited for high-volume, more routine procedures that have minimal complications.

 

Why is American healthcare so expensive?

 America spends twice as much on healthcare as any country.

In 2017, the United States spent $3.5 trillion on healthcare, or 18% of our GDP.  As a percentage of GDP, Switzerland ranked second at 12% of GDP.  Most other Western European countries fall between 9% and 11% of GDP.  But, worst of all, health outcomes in the United States are generally not in the top 30 countries.

There are many reasons American healthcare is so expensive.  But, put simply—prices for healthcare services in America are that much higher.  Interestingly, Americans do not use more healthcare that our neighbors in Europe. 

Answering the question of why American healthcare is so much more expensive is a complicated and hotly debated topic.  Most European countries have socialized medicine.  This can be in the form of a single-payer, nationalized healthcare system, or rate-setting standards written into that nation’s laws.  Clearly, having one payer of healthcare services provides the leverage for that payer to drive down healthcare costs.  The impacts of this on healthcare are debatable.  Some point to wait times at hospitals in countries like Canada and the United Kingdom, but others point to the fact these countries can cover their entire populations for a fraction of the cost of America.

Here are some key facts in understanding some factors driving up healthcare costs in the US:

·        America pays more for prescription drugs than any other country and bans government health plans from bargaining for these drugs.  In 2018, drug spending totaled $360 billion.

·        America sees some of the highest rates of high-cost surgeries like spinal surgery, hip replacements, and knee replacements.

·        American doctors are paid more than doctors in any other part of the world.  According to Politico, Americans pay an extra $100 billion per year above the average for doctors’ compensation.

·        The American healthcare system is the most administratively complex system in the world.  According to the Center for America Progress, the U.S. spent $496 billion in 2018 on billing and insurance –related costs.

·        End-of-Life Care in the U.S. is uniquely American and staggeringly expensive.  America has rejected any sort of rationing of healthcare, regardless of age and circumstance.  According to the Seattle Times, America wastes $810 billion per year in unnecessary, unbeneficial, or wasteful care to Medicare beneficiaries who spend most of their Medicare dollars in the last year of life.

What is Reference-Based Pricing?

Reference-based pricing (RBP) may be the most powerful tool employers have ever had to control costs and demand value for their healthcare plan spend. 

We can loosely think of modern health insurance in a few phases:

·        1980 – 2000:  The Age of the Health Maintenance Organization (HMO)

o   This was a time of ‘managed care’ where patients were required to get referrals to specialists and a primary care physician was at the center of care delivery.  Employees largely reject HMO’s because they did not want restrictions on choice regardless of the cost containment provided by HMO’s.

·        2000-2010: The Age of the Preferred Provider Organization (PPO)

o   In reaction to employees rejection of HMO’s, carriers and employers shifted to a PPO-centric approach.  These plans had few cost containment mechanisms and allowed employees to go straight to a specialist without a referral.

·        2010-2020:  The Age of Obamacare and rising deductibles

o   The Affordable Care Act (aka Obamacare) was passed in 2010 and ushered in an overhaul of the health insurance industry.  Insurance carriers could no longer underwrite for pre-existing conditions, all plans had to include a baseline of benefits, employers with over 50 employees were required to provide health insurance to employees, and much more.  As a result of these new requirements, premiums skyrocketed and employers increased deductibles to help moderate the increases in premiums.

What will this decade mean for health insurance?  We think this is the decade where employers step in and take control of their health plans back from insurance carriers.  It will be a necessity for many employers who must provide coverage but cannot absorb continued rate increases.  Regardless of one’s opinions of insurance carriers, we do know that they have not been able to stop healthcare costs from growing at the rate of inflation or less.  The network model for health insurers appears to becoming obsolete as hospitals consolidate and the carrier’s believe they must pay any reimbursement to keep all major hospitals in their network.

The primary tool for employers to take back control is called Reference-based pricing (RBP).  The concept is simple.  Instead of relying on an insurance carrier’s network, employers will set reimbursement for medical services on a benchmark, typically Medicare.  This allows for transparency and most importantly, greatly reduced unit prices for the employer’s health plan. 

Under an RBP plan, an employer would set a reimbursement rate, commonly 150% of Medicare, and reimburse providers based on this rate.  That means that providers will get 50% more than they do from Medicare for the same services.  Medicare is used as a benchmark because it is tasked with determining a fair and reasonable reimbursement for providers.  RBP can drastically reduce costs and the reason is that major carrier networks are typically reimbursing hospitals 300-500% of Medicare! 

RBP is the most powerful and cleanest tool employers have had to control healthcare costs.  It removes the hassles of staying in-network for employees, it sets a maximum for what the plan can pay providers, it mitigates the cost of shock claims, it stabilizes renewals, and it allows for further customization by doing things like Direct Contracting between the employer and a provider.

If moving from a standard plan with a major network, an employer can maintain the identical benefit design, maintain the same financial structure (no additional financial risk), and often reduce premiums by 30-40%. 

While the advantages are huge, there are risks.  The key risk in RBP is the risk of a balance bill.  Balance bills are rare, generally occurring in 1-2% of claims, but the risk does exist and can create consternation among employees.  This scenario occurs when an employee receives services from a provider and the provider rejects the reimbursement from the plan after the fact and chooses to bill the member directly for the difference of what the provider expects to be paid and what the plan paid.

RBP plans build in many defense mechanisms to address balance bills.  First, an RBP plan typically contracts with a firm providing Negotiation Services for providers.  Often, providers simply do not understand how an RBP plan works and will accept reimbursement after learning about the plan.  Some plans allow for a corridor to increase reimbursement to providers in order to settle the balance bill.  In exceptionally rare cases, a plan uses legal services built-in to the plan to settle the balance bill with the provider.  These settlements can be acrimonious, but to date, there is no precedent for a case going to court.

Why You Should Consider Direct Primary Care

 Direct Primary Care (DPC) is a new trend in American healthcare with lots of potential.

In a Direct Primary Care arrangement, an employer contracts directly with a Primary Care Provider (PCP) to provide primary care for all of its employees.  PCP’s are typically paid a Per Employee Per Month (PEPM) fee instead of being reimbursed in a fee-for-service model.  This arrangement is often attractive to both parties for a couple of reasons:

1. The PCP receives steady, guaranteed revenue and has an incentive to keep the employees healthy.  There is no incentive to rush through visits and bill more.
2. The employer can assure employees they have found and vetted a quality PCP to meet their needs.  The employer knows the PCP has no incentive to overbill and in fact has every incentive to keep employees healthy.

Beyond these major benefits, employers are also seeing major benefits to this model from eliminating conflicts of interest a PCP within a large hospital system may have.

How does Coinsurance work?

 

Navigating your medical insurance benefits can be complicated.  While most people understand how a deductible and copays work, not everyone understands what coinsurance is and how it works. 

Coinsurance is a cost-sharing arrangement between you, the member, and your insurance carrier.  Coinsurance activates after you have met your deductible and typically stays in effect until you reach your Out-of-Pocket Maximum. 

Example

You receive a hip replacement on January 1^st.  You have not used your medical plan for the current plan year and your deductible is $3,000, your Coinsurance is 70%, and your Out-of-Pocket Maximum is $6,000.  Your provider bills your insurance for $80,000 and your insurance carrier’s allowed amount is $30,000.  Here is how your benefits will work:

1.      Provider sends bill to your insurance carrier for $80,000

2.      Insurance carrier adjusts bill down to $30,000 (called Allowed Amount) based on negotiated rate between the carrier and provider.

3.      You will be charge your $3,000 deductible, payable to your provider.  

4.      The remaining $27,000 falls into coinsurance until you hit your Out-of-Pocket Maximum of $6,000.  So, the insurance carrier will pay 70% of the costs until you have paid out another $3,000 in costs beyond your deductible.  After you hit your $6,000, the carrier pays 100%.

Why Can’t I Find out what my Medical Care will Cost?

 Few things are more confusing then determining costs for medical care.

Lots of factors contribute to the lack of transparency in healthcare pricing.  Here are the major contributors:

1. A Third Party Payer structure leads to patients asking less questions surrounding pricing since they are generally not charged directly.
2. Negotiations between insurance carriers and providers are bound by confidentiality
3. Different care venues have wildly different pricing structures for given procedures.  For example, a hospital may charge $80,000 while an Ambulatory Surgery Center specializing in the procedure may charge $20,000. 

There are several ways to get a baseline of what your medical care should cost.  The most common baseline used is Medicare rates.  The Center for Medicare & Medicaid Services (CMS) negotiates rates with medical providers.  These rates are typically multiples below what private insurers pay.  If you are a cash buyer, don’t expect to pay Medicare rates.  However, it is not unreasonable to negotiate a rate between 120% and 160% of Medicare rates.

There are not many great resources to easily access pricing benchmarks for medical procedures.

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