private health care coverage lhco 215 oct. 13, 2011 robert kaplan
TRANSCRIPT
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Private Health Care Private Health Care CoverageCoverage
LHCO 215LHCO 215
Oct. 13, 2011Oct. 13, 2011
Robert KaplanRobert Kaplan
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Goals for this class are to Goals for this class are to understand:understand: Private Health Care Coverage and
their effects on the delivery of health care
Different Models of Private Health Coverage
Regulations of PHCC State and Federal
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Pre-1940sPre-1940s
Financing of Health Care Fee For Service Private Pay and Charity Care
Organization of Health Care Delivery Solo practice Public, religious and private non-profit
Hospitals A few alternative systems:
Multi-specialty Group Practices Community Health Centers
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Transformation of out-of-Transformation of out-of-pocket into third-party pocket into third-party paymentpayment Growth of private insurance
Blue Cross/Blue Shield during Great Depression
Non-profit organizations, closely tied to state hospital associations (BX) and state medical societies (BS)
Employer-sponsored insurance in WW II and beyond
Medicare and Medicaid enacted in 1965
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Why do so many people highly Why do so many people highly value health insurance?value health insurance? Protect against financial risk
Need for health care is unpredictable (20/80 rule) As a result of risk aversion, most people would
rather spend $4,000 every year rather than face a 1 in 10 chance of a $40,000 loss
Protect against health risk Some care may be so expensive that it would be
unobtainable in the absence of insurance
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Status Quo Ante, 1980Status Quo Ante, 1980
Insurers paid any licensed doctor or hospital for all the care the patient received
No selective contracting BX/BS were creatures of hospital/physician
associations Paid for any services that were
‘medically necessary’ Exclusions for ‘experimental’ therapy, but virtually
no utilization review Insurers had little influence on the practice of
medicine
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Status Quo Ante, 1980 (cont.)Status Quo Ante, 1980 (cont.)
Physicians were paid at ‘Usual, Customary, and Reasonable’ rates (UCR) by Blue Shield
Hospitals were paid at cost by Blue Cross
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Medicare payment methods, Medicare payment methods, 1965-19821965-1982 When enacted in 1965, Medicare was
designed to mimic prevailing BX/BS plans, both in benefit design and payment methods
Contracted with intermediaries and carriers (mostly BX/BS associations) to make payments to MDs and hospitals
UCR method for physicians; cost-based payments for hospitals
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Results of Well-Insured FFSResults of Well-Insured FFS
Hospitals competed for doctors in a medical arms race
New technology is attractive to physicians, and resulted in higher revenues
Little financial reward to physicians for fee restraint
Physicians were not rewarded for using fewer rather than more resources to get patients better
Specialists performing newly developed procedures were able to make much more money than primary care physicians because they had substantial flexibility in establishing UCR amounts
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Results of Well-Insured FFS Results of Well-Insured FFS (cont.)(cont.) Emphasis on episodic care for acute
problems; limited ability to provide coordinated care for chronic conditions
Large variations across geographic areas in how care was delivered, with no organization having authority, responsibility, or accountability to figure out which rate is right
Few financial rewards for improvements in quality or patient safety
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Concerns about Open-ended Concerns about Open-ended FFS PaymentFFS Payment
Expenditures increasing at an unsustainable rate
Payment for quantity, not for value
Quality Little accountability for quality Underinvestment in management of
chronic disease Underinvestment in primary and
preventive care
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Types of insurance productsTypes of insurance products
Conventional FFS Preferred Provider Organizations
(PPO) Point-of-Service (POS) Health Maintenance Organization
(HMO)
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Types of Insurance ProductsTypes of Insurance Products
Conventional FFS Any MD or hospital in town; no UR Deductibles and co-payments
Preferred Provider Organization (PPO) Contracted list of MDs and hospitals Lower deductibles and co-payments when using ‘in-
network’ providers e.g., $500 deductible and 80/20 in-network; $1,000 deductible
and 60/40 out-of-network (plus balance billing) Minimal utilization review, although pre-admission
approval for inpatient care and high cost procedures/imaging typically required
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Types of Insurance Products Types of Insurance Products (cont.)(cont.) Health Maintenance Organization (HMO)
Care paid for only if provided by doctors or hospitals under contract
Differences for patients from FFS/PPO coverage: Minimal co-payments and out-of-pocket liability Restricted to a panel of MDs and hospitals Referrals must be authorized by PCP
Point-of-Service (POS) Combination of HMO and PPO -- HMO-style benefits
and restrictions, plus the option of using other physicians with relatively high co-payments and deductibles
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Quick History LessonQuick History Lesson Multi-Speciality Group Practice (1900)
Mayo Clinic, Meninger, Palo Alto Foundation
Prepaid Group Practice & HMOs (1929-30) Ross-Loos – D of Water & Power Kaiser – Dr. Sidney Garfield – Grand Coulee Dam
Richmond, CA – Kaiser Industries/ PMPM
UMW, Group Health Cooperative of PS
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Quick History Lesson Quick History Lesson ConitnuedConitnued First generation – HMOs Vertical Integrated
KFHP, KF Hospital, Permanente Medical Group
Second Generation HMOs/ IPA – Virtually Integrated San Joaquin Foundation for Medical Care (1954)
Alternative to Kaiser Rapid growth conversion to for- profit
Paul Ellwood HMO Act Pres. Nixon(1973) Federal Qualification an HMO must be offered + FFS
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Types of HMOsTypes of HMOs Kaiser – vertically integrated health plan
Hospitals and medical group providing service only to Kaiser members
Clinical autonomy within a system of constrained resources
‘Managed’ fee-for-service Insurance company contracts with providers on a
FFS basis 1-800-RN-MAY-I utilization review Managing prices more than care
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Types of HMOs (cont.)Types of HMOs (cont.)
CA HMOs – Virtually Integrated-the Delegated Model
Capitated payments to medical groups and hospitals; financial risk and utilization management delegated to medical groups
In theory, provided physician groups with flexibility to use resources more efficiently
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Distribution of Health Plan Enrollment for Covered Distribution of Health Plan Enrollment for Covered Workers, by Plan Type, 1988-2009Workers, by Plan Type, 1988-2009
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Basis of competition among Basis of competition among private insurers in the private insurers in the employer marketemployer market Almost entirely self-insured and experience rated –
employer determines product design Administrative costs and customer service
(including, to a limited extent, provider satisfaction) Success at negotiating lower unit prices (primarily a
result of leverage, although in this decade, providers have more leverage than insurers in most markets)
To a limited extent, ability to lower claims costs through selective contracting with high quality/low cost providers, innovative disease management programs, and utilization review/hassle factor
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Regulation of Private Health Regulation of Private Health Care Coverage -FederalCare Coverage -Federal
ERISA (1974) Preempts state laws especially on
benefit plan No mandate on benefit or coverage level Fiduciary Manager Summary plan description, claim and
appeal info Annual reporting requirements IRS/DOL Remedies and enforcement but no “pain” Continuation Coverage-COBRA (1985)
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Federal - ContinuedFederal - Continued
HIPAA (1996) Privacy rule for personal health
information
Pre-exisitng conditions 12 mos/63 days
Access to coverage employers 2-50
State High Risk Pool’s Renewability guarantee but no control of
price
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Federal - ContinuedFederal - Continued
Women’s health and coverage Act Newborns and Mothers HPA Mental Health Parity Pregnancy Discrimination Act ADA
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Regulation of Private Health Regulation of Private Health Coverage – State Coverage – State
McCarran – Ferguson Act (1945) CA- Dept Managed Health Care –
HMOs DOI – Insurance Prodcuts Financial standards Market conduct, Access Stds &
benefits, Forms Premium Increase- Input -
Approval
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State - ContinuedState - Continued
Network Adequacy UR Practices Credentialing Quality Assessment and
Improvement Appeal and Grievance Sue Only under Malpractice
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SummarySummary
Physicians and hospitals receive most of their revenue from public and private insurers
Most revenue is from fee-for-service payment
FFS payment systems pay more for more service, regardless of the value produced by that service
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Summary - ContinuedSummary - Continued
Flailing about for some method of controlling expenditure growth:
Medicare limits price increases, but has few tools for limiting volume increases
Private insurers attempt to limit price increases, with some success from 1993-99, but little success from 2000 and beyond
Private insures hassle physicians and hospitals, and these hassles somewhat restrain volume growth
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DiscussionDiscussion
Divide by Healthcare Coverage types Present Pro’s and Con’s of each type Does a “gatekeeper” Model work? Hold
costs down? Lessons Learned by being a consumer of
healthcare