As Patients Take On More Costs, Will Providers Shoulder The Burden?
By Michael Chernew and Jonathan Bush
Health Affairs Blog, May 4, 2017
Despite the uncertainty about the future of the Affordable Care Act (ACA) and any replacement, in the coming years, more Americans will almost surely find themselves in health plans with considerable patient cost sharing at the point of service (for example, high deductibles, copayments, or co-insurance). The trend toward more limited plans has been a reality for more than a decade. For example, the average deductible has grown from $818 in 2006 to $2,069 in 2015.
Moreover, Congress may try to reduce cost-sharing subsidies and encourage people to select more limited plans in other ways, such as increasing the attractiveness of health savings accounts. Cost sharing lowers premiums (an important goal for payers and policy makers) by lowering use and, to some extent, encouraging consumers to shop for lower-price care. It also shifts costs away from payers toward patients.
Public debate about more limited insurance plans has mostly focused on their impact on beneficiaries. Missing from the discussion has been an analysis of how these plans could affect providers.
Calculating The Provider Burden From Cost Sharing
Using medical claims data from athenahealth’s national network of 88,000 providers, we computed out-of-pocket obligations for commercially insured patients across all provider specialties, from 2012 through 2016. Our sample includes 125 million visits for ambulatory services (for example, office visits and ambulatory surgical procedures) by 18 million patients across 1,348 practices.
For each visit, we computed the required patient cost-sharing amount. We looked at those patient obligations across four broad categories, based on size of the patients’ out-of-pocket charge for the visit: small ($0-$35), medium ($35-$75), large ($75-$200), and very large (more than $200). We found that the average patient obligation per visit increased 20 percent between 2012 and 2016, with the overall distribution shifting from small to larger obligations.
Using the 2015 data, we then computed collection rates after 12 months for the different patient obligation size categories. For visits with small patient obligations, 93.8 percent of the balance was paid within a year. The rate drops to just 66.7 percent for visits with obligations above $200. For visits with the highest obligation, roughly 16 percent were written off as bad debt or abandoned, and about another 17 percent were sent to collection agencies.
Compounding this issue with larger patient balances is the opacity of obligation amounts at the time of service. While practices have visibility at the point of service into patient copayment amounts through eligibility data, the amount they can collect for patients with high-deductible health plans is unknown. Under current rules, they must bill the insurance carrier and wait for an explanation of benefits (often a two-week lag time) before billing the patient for his or her portion. Aside from this being an extremely complex and costly process, we know that collecting any amount becomes markedly more difficult once the patient leaves the office.
Implications
The tax on providers from increased patient cost sharing occurs against a backdrop of very slowly rising fees. The new physician payment system outlined in the Medicare Access and CHIP Reauthorization Act of 2015 calls for physician fees to rise by 0.5 percent (before accounting for inflation) through 2019 and then to be flat through 2024 and beyond. If general inflation rises by 2 percent through 2024, roughly as projected by the Federal Reserve, this represents an inflation-adjusted reduction in fees on average of more than 10 percent. While some physicians may fare well under the performance bonus system, fee increases for the high performers, beyond the exceptional performance bonus, will be funded by a reduction in fees for low-scoring physicians. The result for physicians could be a perfect storm of fee cuts and losses from writing off uncollected patient payments.
As in other markets, providers should have the price transparency and flexibility to offer discounts for time-of-service payments.
For physicians to weather the financial pressures coming, they will need to design and manage a “retail front end” for their practices, with the ability to offer “sales” to patients in return for speedy payment. They will also need to get sophisticated about accessing insurance companies online to assess what patients will owe before they leave the office. As important, physicians will need to find ways to manage their practice costs. Under existing fee-for-service payment models, however, any efficiency gains made by reducing wasteful care are captured by payers.
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Comment:
By Don McCanne, M.D.
The increasing prevalence and magnitude of cost sharing is not news. We have long recognized the burden this has placed on patients, not only the financial burden but also the decline in access to beneficial health care because of the lack of affordability due to higher out-of-pocket expenses. Today’s article adds the concern that the burden of cost sharing is being shifted onto physicians because of the difficulty that patients have in paying their cost-sharing obligations.
This is no small burden for physicians. Patient deductibles now average over $2000. It would not take very many delinquent accounts to significantly reduce the physicians’ take-home pay. Further, MACRA not only brought to physicians the burden of MIPS and APMs but it also scheduled flat fees in the future amounting to a ten percent inflation-adjusted reduction of fees. Further, the performance rewards will be financed by fee reduction penalties for those physicians who dedicate themselves to caring for the most needy since these patient populations result in empirically low “quality” scores.
Nobody expects the insurers or legislators to back off on the march toward more patient responsibility for paying medical bills. It will get worse, and, as these authors state, “a perfect storm of fee cuts and losses from writing off uncollected patient payments” will be brewing.
But what is the authors’ solution? Design and manage “a retail front end” – offer discounts, hold sales, reward speedy payments, develop more sophistication in accessing insurance companies to determine cost sharing requirements, and, of course, the inevitable recommendation that physicians are simply going to have to reduce their practice costs (where do you cut when you’re already down to the bone?).
Is this really the practice environment that patients want for their physicians (“… but today only, just for you, a deal you can’t refuse …”)? For that matter, do patients really want to exercise their consumer prowess by having the opportunity to pay upfront charges for their health care?
Sorry. This is not where we should be headed. We need to dump all this and move forward with first dollar coverage through a well-designed single payer national health program – an improved Medicare for all.
