Looking Forward


by Susanne Madden

Many bloggers have used the New Year as an opportunity to reflect on 2010. It was a big year for health care, certainly, and there is much to write about in looking back. However, I believe that 2011 will be the year that we begin to see and feel the results of the passing of the PPACA (both the impact of legislation and the maneuvering of the insurers), and as such, think it’s worth taking a look at what lies ahead instead.

Think of 2011 as the year of the ‘medical cost ratio’ or MCR (also known as ‘medical loss ratio’, or MLR), the advent of ‘value-based payments’ (VBP), and the demise of the primary care physician.

MCR is the amount of premium dollars that insurers spend on medical costs, the amount they pay out to providers of medical care. Or is it? Due to PPACA, insurers now have to spend at least 80-85% of premiums on care, but to date there has been little definition of what can actually be counted toward that ‘cost’.  For example, Wellpoint informed its shareholders in early 2010 that it would simply re-classify certain administrative costs in order to reach the required MCR number.  Thanks to that memo, the issue got some attention, with the NAIC (National Association of Insurance Commissioners) regulators in August rejecting many of the procedures that the insurance industry wanted to include as counting under the MCR. It is hoped that some clear definitions of MCR will be forth-coming early this year.

But that’s only a part of the story. Regardless of how the MCR is defined, it is still a highly elastic number that insurers can play with. Medical costs get too high to meet Wall Street targets and the insurers simply adjust payment rates (downward) to providers of care. In 2010, there were many public battles between hospitals and insurance company negotiations. But there are far more ‘providers’ (physicians, nurse practitioners, etc) than there are hospitals. For example, there may be as many as 500,000 providers in Wellpoint’s network, a large percentage of which are not employed by hospitals. They are in private practice. In fact, 78% of private practices have less than 5 providers. In primary care, two-thirds of practices are 2 providers or less. As you can imagine, these groups do not have the same sort of negotiating power as the hospitals do.  That makes them an easy target for decreasing payments for care (see the Physicians Practice fee surveys 2009 here and 2010 here note: 2010 link is to year-to-year comparison of average commercial ‘reimbursement’ to illustrate my point).

In addition to putting downward pressure on physician rates, insurers also change medical policies constantly. Medical policies determine what gets paid and how, rather than how much. For example, a preventive medicine policy may be changed to state that hearing and vision screening is “considered part of, but not separately reimburseable to,” a preventive care visit. That means that the payment that used to be given for those services is paid no longer. But as a covered service, providers cannot bill their patients for it either. (For more information on this please see my Testimony to State Senate Affairs Committee, Texas, May 2008, page 7, Fig. 4).

Therefore, regardless of how well MCR is defined, insurers can adjust payment and policies anytime to ensure that their profits remain up. And that’s critical to the next trend – value-based payments. Employers have had enough of sky-rocketing premiums. The pressure is on insurers to show how they are controlling costs and ensuring better health outcomes for the dollars spent. In reality, insurers serve little purpose, except as cost drivers and for building share-holder wealth (but I’ll save that topic for another day). Regardless of the moniker ‘managed care’, up until recently insurers were simply managing dollars, not managing care. Now they need to justify their premiums and somehow prove that they add value to the health care equation. They can do this by incentivizing health care providers to follow evidence-based medicine, pay for adoption of better patient safety guidelines, and provide bonuses to providers to meet certain targets or benchmarks in compliance and outcomes.

In primary care, patient-centered medical home (PCMH) accreditation is one of the ways in which we see this playing out. Some (certainly not all) insurers are providing additional dollars to help primary care practices move to a better care-coordination (or patient-centered) model. These schemes are in the form of helping to pay for the initial transition, adding a percentage to practices’ routine payment schedule (such as 10% above), and/or providing pay-outs to practices to reach certain qualifiers, such as having 80% or more of a pediatric practices’ patients immunized on time.

But there is so much further development needed here. And I, for one, worry that these incentives will be short-lived. The few dollars ponied up for PCMH schemes may only last a year or two – by the time the market has caught up, there will be penalties rather incentives faced by practices who have yet to make the transition. And yet this concern pales next to the emerging trend we are observing through insurers advertising and conferences attended – the demise of the primary care physician altogether.

Last spring, I wrote a Pearls piece about a conference I attended where insurers were showcasing direct-to-consumer wellness plans. At that time, I expressed concerns about how insurers were simply cutting providers out of the equation when it came to delivering certain services. Well, now that time has come.

Last night I watched a UnitedHealthcare ad – one of its recent ‘strength in numbers’ pieces – which had a member discussing how he was struggling with a recent cancer diagnosis. The line goes something like this ‘speaking with my doctor was okay, but UHC’s nurse assigned to my care helped me understand my disease and my options’. Subtle enough to fly under the radar but the message (in the context of their campaign and policy-making) is clear enough to me – UHC is taking over certain aspects of the patient-physician relationship and care delivery model. Why?

It’s simple. Physicians are an insurers’ largest cost. If insurers provide clinical teams to provide various care services, that cost gets booked under their MCR and the value and quality of that care can be completely controlled by the insurer. . .

Stayed tuned. We’ll be watching to see how things unfold in 2011.

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