New Day: Managed care grabs new opportunities under Obama

The high cost of expanding government programs usually stymies reform initiatives, however, strategies for reducing healthcare costs are being championed now as key to rescuing U.S. industry. Employers are desperate to reduce soaring outlays for healthcare, while record layoffs are sharply increasing the number of uninsured. Those concentric circles provide the impetus for overhauling the inefficient and inequitable U.S. healthcare system.

“What’s an exciting paradox is that this economic downturn might force the United States to do some really creative and innovative things in healthcare,” says Georganne Chapin, president and CEO of Hudson Health Plan, a managed-care Medicaid provider in New York.

For insurers, the goal is to expand coverage by making health insurance more affordable, particularly in the growing individual market. Increased coverage will boost access to care, reduce cost-shifting to private payers and soften criticism about rising premiums and copays.

Enrollment in commercial health plans has been stagnant, except in Medicare Advantage and Part D drug plans, so the current interest in expanding coverage provides plans a desirable opportunity for new business.

Howard Dean, chairman of the Democratic National Committee told e-Health Initiative conference attendees last month that some of the billions allotted to economic stimulus programs should support expanded government health programs, subsidies for individuals and small businesses purchasing coverage, and improvements in the nation’s health infrastructure.

“This is the best time for reform,” he says. “If we can afford $150 billion for AIG, we can afford $150 billion for healthcare coverage.”

Possible implications of the Obama era

President-elect Barack Obama is less blunt, but equally supportive. In announcing the nomination of former senator Tom Daschle to head the Department of Health and Human Services (HHS), Obama said healthcare reform was critical for making U.S. corporations globally competitive.

“If we want to overcome our economic challenges, we must also finally address our healthcare challenge,” he said during the announcement.

Daschle’s intimate knowledge of the legislative process is a clear asset in leading the reform effort and dealing with turf wars on Capitol Hill.

CONGRESS ON TASK

Senate Finance Committee Chairman Max Baucus (D-Mont.) is crafting legislation based on a universal coverage plan he unveiled in early November. Similar to Obama’s campaign proposal, the Baucus plan retains the employer-based benefit system but requires large employers to play or pay. Individuals and small businesses would receive sliding-scale subsidies to purchase coverage through a new health insurance exchange, which would promote competition between commercial plans and a Medicare-like public plan.

Senator Edward Kennedy (D-Mass.), chairman of the Senate Health, Education, Labor and Pensions Committee (HELP), resigned his seat on the Senate Judiciary Committee last month in order to devote full attention to enacting health reform legislation this year. Kennedy will seek a consensus bi-partisan bill that will attract 70 to 80 votes in the Senate and hopes a fundamental reform of the system will be his public legacy.

Although Senate Democrats have taken the lead, House leaders plan to craft their own bill, says Rep. Henry Waxman (D-Calif.), new chairman of the House Energy and Commerce Committee. He says that the time is ripe for enacting legislation that “secures the goals of universal coverage, sensible controls on cost, and assurance of quality care,” and that he will work closely with the House Ways & Means Committee to build support.

The legislative process will be shaped by the economic stimulus bill before Congress. State governors want $30 billion to bolster state Medicaid programs. Democrats might try to reauthorize the State Children’s Health Insurance Program (SCHIP) and provide $10 billion to support health information technology. Ways & Means Health Subcommittee Chairman Pete Stark (D-Calif.) has pressed for added subsidies for people who lose their jobs and want to buy insurance.

A generous bailout bill now would set the stage for broader health reform legislation later in the year.

PAY-GO POLICY EXAMINED

Congressional Democrats anticipate considerable flexibility in the usual requirement to offset the full cost of legislation with comparable savings. They and Obama both talk about dropping Congress’ “pay-go” policy for expenditures related to health reform, based on the expectation that upfront investments in healthcare will save money over the long run.

Republicans and conservative Democrats are leery about creating permanent health programs that will ratchet up the federal deficit beyond the $1 trillion level already anticipated, however. New entitlements, they say, could require new taxes, which could have an adverse effect on the economy.

Widespread public enthusiasm for health reform has prompted a change in tune among insurers and MCOs that want a seat at the table. Now health plans are proposing market reforms in response to intense public complaints about costly premiums and coverage denials related to pre-existing health conditions.

“Emotion aside, it has to come down to the facts and the data,” says Martin Hauser, president of SummaCare in Ohio. “The insurance industry has that. The problem the industry has faced for years is lack of credibility. Moving forward, the proposals are a positive sign in attempting to gain credibility.”

Who are healthcare’s new political leaders?

America’s Health Insurance Plans (AHIP) and the Blue Cross and Blue Shield Assn. (BCBSA) announced in November support for guaranteed issue for all individuals—provided it comes with an enforceable mandate for individual coverage.

BCBSA President Scott Serota says requiring insurers to accept everyone regardless of health status has to be linked to required individual coverage in order to spread the risk over a broad and representative population. Otherwise, the unintended consequences are higher premiums for everyone.

An individual coverage mandate goes further than Obama’s reform plan promoted during the election campaign. In an effort to differentiate his policy, Obama called for mandated coverage for children only, leaving open the potential for a broader mandate later.

“Obama is talking about the right thing, but my fear is that the insurance paradigm is going to be replicated,” says Hudson Health Plan’s Chapin. “Not the managed care part—I love managed care—but what we need is a care paradigm, not an insurance paradigm.”

She believes that covering children has historically been a low-cost proposition, but cautions that a broad mandate could lead to a program of watered-down benefits. The government and other sponsors would simply be throwing their money away to give everyone an insurance card that entitles them to few benefits and little actual care, she says.

ESSENTIAL BENEFIT PLANS

A coverage mandate that continues current inefficiencies will not lead to a sustainable system, according to Mark McClellan, former CMS administrator, former FDA commissioner, now with the Brookings Institution. Insurers must “come up with plans that are affordable enough that people will want to sign up.”

Insurers, however, don’t support the employer mandate that Obama and Democrats offer under the pay-or-play approach. Health plans prefer to use carrots instead of sticks in the form of low-cost policies, appropriate subsidies and tax breaks. AHIP proposes establishing “essential benefit” plans that would be available on a national basis to small companies and individuals.

That approach would require an exemption from varying state benefit mandates and a shift away from disease state requirements. Basic plans would cover primary and preventive care, chronic conditions, and emergency room and hospital services, and would be at least actuarially equivalent to the minimum federal standard for a high-deductible health plan. An important plus is that these plans would be portable and provide coverage for individuals changing or losing jobs.

NEW ERA OF COMPROMISE

“We have become a society that never wants to compromise,” says SummaCare’s Hauser. “We’re all going to have to agree on what is meant by a basic benefit. We talk about fixing the problem, but we don’t talk about the fundamentals of it and getting everybody to agree.”

For example, Hauser believes that nearly every provider wants its own service or area of specialty to be considered an “essential” service so it will gain business from any new reform plan. He sites bariatric surgery and cosmetic surgery as examples of specialties that some could argue are essential to patients’ health.

“There are a lot of things that do good for people but the question is, is it something a government or insurance plan or employer should pay for?” he says.

He hopes Congress will pioneer a new era of compromise among healthcare stakeholders, including the government itself, for the sake of holding costs in check.

Insurers back additional policy changes to make individual coverage less costly. Tax reforms, for example, could permit individuals to deduct the cost of health insurance and could provide refundable tax credits for those earning less than 400% of the federal poverty level. Another idea is to permit public programs, such as Medicaid and SCHIP, to “wrap around” private plans in order to provide premium assistance to those newly eligible for public plans who want to retain a commercial plan.

Prepare for possibilities

Initiatives to streamline administration and facilitate communication among insurers, providers and patients further promise to reduce inefficiencies and waste. Health IT is intertwined with many of those efforts.

Insurers seek a streamlined system for communicating patient eligibility, benefits, coinsurance and plan limits to providers. Pilots in the works aim to establish a multi-payer online portal able to facilitate information exchange in real time, according to AHIP.

QUALITY COLLABORATION

Hauser remembers the days when banks managed credit-card transactions independently but later moved to the clearinghouse model to streamline the laborious and often redundant processes in simple financial transactions. Today, a credit card from nearly any issuer can be used worldwide, and he believes healthcare organizations should adopt that collaborative model, too.

“Why can’t the health industry, not just the insurance industry, but the health industry as a whole come to that kind of mindset?” he says. “The reason why the banks did it is because they figured out it makes more sense to compete on service, quality and attributes than on who can process the credit-card claim infrastructure better.”

He says streamlining healthcare will require “a huge commitment,” and personal health records should be a priority.

Insurers are working with providers to develop uniform methods for physicians to submit performance information. Instead of dozens of different performance measurement systems, a collaborative effort aims to create standard metrics for measuring, reporting and evaluating quality information across all public and private providers and payers.

A uniform template to measure provider performance would improve a system that is “very confusing and frustrating to providers,” says AHIP President Karen Ignagni.

Standard data aggregation, moreover, would give providers and consumers more useful performance information. And better information on provider performance could support payment systems that reward excellence. Insurers have been implementing P4P for several years and want to extend these and other new payment models to the broader healthcare system.

Newly insured under Obama’s proposal

Carriers also are working with state agencies to establish online consumer information on all available plans and coverage options in a state. Many health plans are supporting community health programs, such as campaigns to reduce obesity and tobacco dependence.

“The shift toward improving personal and population health as a core strategy to contain medical costs will fuel demand for a new generation of innovative, Internet-based technologies” says Dennis Schmuland, MD, Microsoft health plan industry solutions director and MHE editorial advisor. “These technologies will need to go where consumers go and make it easier and more natural for them to communicate with payers and doctors, share insights, work together and coordinate care across the workplace, home and company boundaries.”

INDEPENDENT PANELS

While there is loud applause for health reform in principle, there also is considerable trepidation about how how policy makers will define “affordable,” and what constitutes “basic” benefits and “adequate” coverage. Similarly, the impact of an individual coverage mandate will be shaped by enforcement policies.

Reformers propose to leave some of these tricky issues to independent, expert panels. AHIP suggests that a federal board would define the components of a minimum benefits package and its relationship to state coverage mandates. An expert group also could recommend ways to cut healthcare costs. Insurers recommend setting targets for reducing the projected growth in health expenditures by 30%—from a 6.6% annual increase to a 4.7% rise. That would save more than $500 billion annually and make coverage more affordable.

Senator Baucus proposes establishing an independent health coverage council with considerable authority to protect consumers. It would set coverage requirements, annual out-of-pocket spending limits, standards for chronic care and quality reporting requirements.

This council also would oversee the public plan option available to individuals and small companies through a health insurance exchange.

Baucus says that his private plan would be similar to Medicare, which raises questions about how it would compete in the commercial market. If the public option is able to reimburse providers at Medicare rates—which can be much lower than payments negotiated by private plans—the government plan then would be able to offer lower premiums and gain a competitive advantage.

Analysis by the Lewin Group shows that if the public plan enjoys even moderately lower rates, it could offer premiums about 25% below those offered by private insurers. That change could prompt some 32 million people to join the public plan, while commercial insurers could lose almost 22 million enrollees. If the public plan pays providers at current Medicare rates, premiums would be 40% below those at commercial plans, and 43 million individuals would sign up.

Democrats believe that a public plan will prompt private insurers to hold down costs and improve quality. Republicans fear such a move will create an uneven playing field and will only compound the inefficiencies of existing government health programs. Over time, says Mark Hayes, Republican staffer on the Senate Finance Committee, such migration to the public plan would erode the private insurance market.

Reform advocates recognize that the public plan option already is creating a sharp rift in health policy circles, and they are looking for ways to provide low-cost coverage alternatives in an equitable manner. Insurers will be watching closely to see if these proposals prompt a shift to a government-run, single-payer system that pushes commercial plans out of the market.

SummaCare’s Hauser believes the government is not in a position to run the nation’s healthcare delivery system.

“Long term, the role of government is a purchaser and regulator,” says Hauser. “It does not perform as well as a provider or a payer.”