Implementation of the Affordable Care Act: Cross-Cutting Issues: Six-State Case Study on Network Adequacy

By Sabrina Corlette, Kevin Lucia, and Sandy Ahn
Urban Institute, September 2014

During the transition to new health plans and new marketplaces under the Affordable Care Act (ACA), many insurers revamped their approach to network design, and many now offer narrower provider networks than they have in the past. In this study for the Robert Wood Johnson Foundation’s project to monitor ACA implementation, researchers assessed network changes and efforts at regulatory oversight in six states: Colorado, Maryland, New York, Oregon, Rhode Island, and Virginia. Researchers found that insurers made significant

changes to the provider networks of their individual market plans, both inside and outside the marketplaces, and that insurers took varying approaches to network design. Across all six states, insurers and state officials alike reported consumer and provider confusion about which plan networks included which providers, but most have received few consumer complaints about their ability to obtain in-network services. While three of the six states have taken action to improve provider directories, it appears unlikely that state legislatures, officials and regulators will dramatically change network adequacy standards, at least in the short-term.

Conclusion

Insurers have used—and are likely to continue to use— network design to curb costs and offer customers a more affordable premium. This was a clear trend in the individual market as insurers approached the 2014 plan year, and some of our informants believe it will soon extend to the group market as employers look for ways to reduce premiums. However, despite concerns among some regulators, consumer advocates, and providers that overly narrow networks could harm quality of care and place consumers at significant financial risk, most of our study states are not planning to significantly change their oversight of plan networks. Though consumers reported problems with inaccurate provider directories and a lack of consumer-friendly, comparable information about the scope of plan networks, only half of our study states report requiring insurers to improve the information made available to consumers. At the same time, state officials and insurers also reported that consumers were generally not complaining about difficulty obtaining needed care from providers. Consequently, most state legislatures, officials and regulators are unlikely to change network adequacy standards, at least in the short-term.

http://www.urban.org/UploadedPDF/413240-Six-State-Case-Study-on-Network-Adequacy.pdf

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Comment:

By Don McCanne, MD

Private insurers use narrow networks of physicians and hospitals so that they can negotiate more favorable provider rates which then supposedly allows them to keep their insurance premiums more competitive. The trade-off is that patients lose their choice of providers and increase the risk that they will suffer severe financial penalties because of unavoidable circumstances wherein care is obtained out of network, or worse, care is not received at all because of impaired access.

The use of narrow networks will cause harm to many patients. Yet, according to this report, for the present, “most state legislatures, officials and regulators are unlikely to change network adequacy standards.” Also, although provider directories are notoriously inaccurate, “only half of our study states report requiring insurers to improve the information made available to consumers.”

How much do the insurers really save by using narrow networks? The savings is not the difference between the prices specified by the providers and the amount contracted with the narrow network providers. Insurers already receive sharp discounts from the providers in their broad networks. So the savings is only the very modest additional amount squeezed out of those who contract for the more exclusive narrower networks. That savings is surely not worth the impaired access, loss of choice, and potential financial hardship brought by narrow networks.

With a single payer system, fair payments apply to all physicians and hospitals, therefore there is no need to establish separate networks. The one network is the entire health care delivery system (except for those who choose integrated delivery systems such as Kaiser Permanente). Government administered pricing is far more patient friendly than market-based manipulations, and isn’t the patient what it is all about?

Medicaid in an Era of Health & Delivery System Reform: Results from a 50-State Medicaid Budget Survey for State Fiscal Years 2014 and 2015

By Vernon K. Smith, Kathleen Gifford, Eileen Ellis, Robin Rudowitz and Laura Snyder
Kaiser Family Foundation, October 14, 2014

Primary Care Payments

The ACA included a provision to increase Medicaid payment rates for primary care services to Medicare rates from January 1, 2013 through December 31, 2014. The federal government funded 100 percent of the difference between Medicaid rates that were in effect as of July 1, 2009 and the full Medicare rates for these two years. States were asked about their plans to extend this provision beyond December 31, 2014 (at regular FMAP rates). For states that have Medicaid rates for physician services that were already at or close to 100 percent of Medicare rates, this issue was not significant.

• Twenty-two states indicated that they would not be continuing the primary care rate increase.
• Fifteen states (Alaska, Alabama, Colorado, Connecticut, Delaware, Hawaii, Iowa, Maryland, Maine, Michigan, Mississippi, Nebraska, Nevada, New Mexico, and South Carolina) indicated that they will continue the higher rates at least partially if not fully. For example one state will provide a proportionate increase for all primary care physicians (half of the ACA rate increase); others plan to continue temporarily or target it to certain types of primary care.
• Fourteen states indicated they had not yet made a decision on this policy and were still evaluating whether the enhanced rates had any impact on provider participation. Given the delayed implementation of the rate enhancement and the difficulty of attributing changes in provider enrollment and access to the enhanced payments, the impact of the increased rates is difficult to determine.

Medicaid in an Era of Health & Delivery System Reform: Results from a 50-State Medicaid Budget Survey for State Fiscal Years 2014 and 2015 – Provider Rates and Taxes or Fees

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Primary Care Services under Managed Care Delivery Systems

Medicaid.gov

Qs &As on the Increased Medicaid Payment for Primary Care CMS 2370-F – MANAGED CARE

The requirements under 42 CFR 438.804 specify that the states submit two methodologies to the Centers for Medicare & Medicaid Services (CMS) for review and approval to implement this rule. How does approval of these methodologies impact the approval process for managed care contracts and rate packages for 2013?

Implementing regulations at 42 CFR 438.804 require states to submit to CMS a methodology for calculating the July 1, 2009, baseline rate for eligible primary care services and a methodology for calculating the rate differential eligible for 100 percent of Federal Financial Participation (FFP) by March 31, 2013. Further, 42 CFR 438.6 (c)(5)(vi) establishes Managed Care Organization (MCO), Prepaid Inpatient Health Plan (PHIP) or Prepaid Ambulatory Health Plan (PAHP) contract requirements to comply with this provision. It is CMS’s expectation that as soon as practicable after the State submits the required methodologies in 42 CFR 438.804 and receives CMS approval, the State will:

1. submit revised actuarial certification documents reflecting the Medicare rate for eligible primary care services in their MCO, PIHP or PAHP capitation rates; and
2. submit amendment(s) to this contract to ensure compliance with 42 CFR 438.6 (c)(5)(vi).

After CMS approval of the revised contract and rates, the MCO, PIHP or PAHP must direct the full amount of the enhanced payment to the eligible provider to reflect the enhanced payment effective January 1, 2013. Federal financial participation (FFP) is available at a rate of 100 percent for the portion of capitation rates attributable to these enhanced payments; however, receipt of the enhanced FFP is contingent upon the state’s successful completion of this process.

http://www.medicaid.gov/AffordableCareAct/Provisions/Downloads/Q-and-A-on-Increased-Medicaid-Payments-for-PCPs-managed-care.pdf

CMS 2370-F – MANAGED CARE (Set II)

The final rule specified that states will need to recoup the enhanced payments made to non- eligible providers identified through the annual statistically valid sample. Must health plans follow the same procedure for non-eligible providers?

States must require health plans to recoup erroneous payments found through the sampled pools of providers, and in a number of states, this sample will include both FFS and managed care providers.

Are MCOs permitted to include amounts sufficient to account for the payment differential on expected utilization while still holding the sub-capitated primary care physicians at risk for some level of increase in utilization due to the higher rates? Or must MCOs remove the risk to primary care physicians for utilization to ensure that these physicians receive the increased amount for actual experience?

The purpose of section 1202 of the Affordable Care Act and the final rule is to ensure access to and utilization of beneficial primary care services. Towards that goal, eligible primary care physicians must receive the full benefit of the enhanced payment at the Medicare rate for eligible services rendered. If a Medicaid managed care health plan retains sub-capitation arrangements, the health plan would be obligated to provide additional payments to providers to ensure that every unit of primary care services provided is reimbursed at the Medicare rate.

http://www.medicaid.gov/AffordableCareAct/Provisions/Downloads/Qs-andAs-on-the-Increased-Medicaid-Payment-for-Primary-Care-MANAGED-CARE-Set-II.pdf

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Comment:

By Don McCanne, MD

As the Affordable Care Act (ACA) was being crafted, it was recognized that the expansion of coverage under Medicaid could result in greater access problems because of the low Medicaid payment rates and the lack of willing providers. In order to improve access, at least to primary care, it was decided to increase Medicaid primary care payment rates to the same level as Medicare for the years 2013 and 2014. As with so many of the ACA provisions, this seemingly simple solution has proven to be more complex.

Before and during this transition most states were moving many or all of their Medicaid patients into managed care programs. So the government had to issue guidelines on how to move enhanced Medicaid primary care payments into managed care organizations receiving capitation payments, and to be sure that these enhanced payments were directed to the eligible primary care providers (more administrative excesses). Although we are near the end of the two year period in which primary care payments are enhanced, news reports suggest that confusion and delays have not been entirely resolved.

Although these enhanced payments were considered to be crucial in ensuring adequate participation of primary care providers, twenty-two states have indicated that they would not be continuing the primary care rate increases. Fifteen states have decided to continue, though many at lower rates and perhaps only temporarily. Fourteen states are undecided. “Given the delayed implementation of the rate enhancement and the difficulty of attributing changes in provider enrollment and access to the enhanced payments, the impact of the increased rates is difficult to determine.”

Medicaid is a welfare program, and, as such, will continue to be chronically underfunded. Medicaid patients frequently have difficulties accessing primary care services, and the continued underfunding will perpetuate that problem. Access to specialized services is even more limited because of the very low participation rates of specialists.

Single payer would eliminate these injustices since we would all have the same high-quality program – an improved Medicare for all.

Privately Insured in America: Opinions on Health Care Costs and Coverage

The Associated Press-NORC Center for Public Affairs Research, October 2014

A significant minority of those with private health insurance, including those covered by high-deductible health plans (HDHPs), are greatly impacted by the out-of-pocket cost of health care—they are concerned with the uncertainty of major expenses, skip necessary medical treatment, and experience real financial burden when obtaining health care. All told, about 1 in 8 privately insured Americans—or more than 16 million people—face major financial hardships like going without food or using up all of their savings as a result of medical bills.

When asked about nine specific behaviors to reduce personal health care expenses, about half of privately insured adults age 18-64 experienced at least one of them.

• As a result of health care costs, significant minorities of privately insured individuals don’t go to the doctor when they are sick (19 percent), go without preventive and recommended care (18 percent), use up all or most of their savings (18 percent), and go without basic needs (13 percent).
• A quarter of privately insured adults age 18-64 lack confidence in their ability to pay for a major unexpected medical expense.
• The privately insured who report having a HDHP are more likely than those who do not to decrease their contributions to savings (41 percent vs. 26 percent) and retirement plans (28 percent vs. 15 percent) as a result of health care costs.
• Nearly 1 in 4 adults age 18-64 covered by a HDHP reports that paying for health care expenses caused them to use up their savings.
• Thirty-five percent of those surveyed indicate that when enrolling in a health insurance plan, their current plan was the only option available.
• With out-of-pocket costs emerging as a major source of uncertainty among the privately insured, more privately insured Americans choose a health care plan with a relatively high monthly premium but lower out-of-pocket costs (52 percent) over a plan with relatively low premiums and higher out-of-pocket costs (40 percent), when presented with the tradeoff.
• But, there isn’t overwhelming support for plans with select networks5 designed to keep out-of-pocket costs low. Twenty percent say they are extremely or very willing to participate in this type of plan, 38 percent are somewhat willing, and 40 percent are not too or not at all willing.

Of those who indicate they have used health care services since enrolling in their current health insurance plan, 39 percent say the out-of-pocket costs being higher than expected has been a major (14 percent) or a minor (24 percent) problem.

As the health care marketplace is evolving with the advent of new exchanges, those who purchase their health insurance plans directly or through exchanges are more likely to express difficulty finding health care providers covered under their plans.

Those who have changed health insurance plans and say they have HDHPs are especially likely to cite increased costs without a corresponding increase in quality.

http://www.apnorc.org/PDFs/Coverage/AP-NORC-Opinions%20on%20Health%20Care%20Costs%20and%20Coverage_FINAL%20web%20(1).pdf

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Comment:

By Don McCanne, MD

This new survey conducted by the Associated Press-NORC Center for Public Affairs Research confirms, once again, that private health insurance in the United States often is not providing adequate financial protection for those with health care needs. More than 16 million people who have private insurance “face major financial hardships like going without food or using up all of their savings as a result of medical bills.” The one-half of Americans who use hardly any health care at all likely do not realize that they are one major illness away from similar financial hardship.

When something is not working, we should fix it. The inadequacies of private plans cannot be repaired without intolerable increases in health insurance premiums. Yet a well designed single payer national health program could remove the financial barriers to care – for everyone – without any increase in our current national health expenditures. Without action, 30 million will remain without any insurance at all, and many of the rest of us could remain vulnerable to high out-of-pocket medical costs in spite of our private insurance coverage.

Reference Pricing: A Small Piece of the Health Care Price and Quality Puzzle

By Chapin White, Megan Eguchi
National Institute for Health Care Reform, NIHCR Research Brief No. 18, October 2014

As purchasers seek strategies to reduce high health care provider prices, interest in reference pricing—or capping payment for a particular medical service—has grown significantly. However, potential savings to health plans and purchasers from reference pricing for medical services are modest, according to a new analysis by researchers at the former Center for Studying Health System Change (HSC) using 2011 private insurance claims data for about 528,000 active and retired nonelderly autoworkers and their dependents. In 2011, the California Public Employees’ Retirement System (CalPERS) adopted reference pricing for inpatient knee and hip replacements. Using quality and price information, CalPERS set an upper limit of $30,000—the reference price—for hospital facility services for a knee or hip replacement. CalPERS designated certain in-network hospitals as meeting the reference price, and patients using designated hospitals are responsible only for the health plan’s usual cost-sharing amounts. However, if patients use a non-designated hospital, they are responsible for both usual cost sharing and any amount beyond the $30,000 reference price. While reference pricing for inpatient services has some potential to steer patients to hospitals with better quality metrics, only limited savings—a few tenths of a percent of total spending—are possible from applying a similarly narrow reference pricing to other privately insured populations. The potential savings from reference pricing are modest for two reasons: Shoppable services only account for about a third of total spending, and reference pricing only directly affects prices at the high end of the price distribution. When considering reference pricing, employers and health plans need to weigh potential savings against increased plan complexity and financial risk to enrollees, along with the analytical and financial resources needed to create and manage the program.

From the Implications

The CalPERS reference pricing experience tells two different but equally true stories—a dramatic percentage decline in prices and spending on knee and hip replacements and an extremely small percentage decline in total spending. To significantly impact spending among the privately insured, reference pricing would have to be applied quite broadly. And, even using a very inclusive list of shoppable services, the potential savings are relatively modest.

Both conventional network-based plans—preferred provider organizations and health maintenance organizations—and reference pricing suffer some of the same limitations. Both types of plans rely on patient cost-sharing differentials to steer patients to certain providers, but the higher cost sharing cannot reasonably be applied in emergencies when patients can’t choose their provider. Also, both types of plans are vulnerable to the demands of dominant “must-have” providers, either to be in network or to be both in network and designated.

Compared to a limited-network plan, reference pricing faces at least three additional logistical hurdles. First, the health plan must have reliable price data for specific providers for specific services so that it can set the reference price and designate providers. Even very large plans will lack the historical data to accurately measure the prices they typically pay to smaller hospitals. Second, the plan would ideally have provider-specific quality metrics on hand that can be used to assure patients that they are not being steered to low-quality providers. Although hospital quality metrics and rankings abound, the methodologies behind those rankings are still under development. Third, reference pricing requires new customer-service tools to support shopping by patients and to deal with inevitable member complaints. Implementation would require commitment of significant resources by the plan, potentially offsetting some or all of the savings from reductions in payments to high-price providers.

The main disadvantage of reference pricing is that it adds a new layer of complexity for plan administrators and enrollees. Rather than facilities simply either being in or out of the network, there are now three types of facilities: in-network designated, in-network non-designated and out of network. Even more confusingly, a single facility might be designated for one type of service—for example, an inpatient hospital providing a knee replacement—but not designated for another—that same hospital providing a colonoscopy in an outpatient department. Additional complexity raises significant concerns, given that the basic elements of conventional benefit design are already beyond the grasp of many consumers.

One question is whether a reference pricing program can steer patients to lower-price, adequate-quality providers. The answer, based on the CalPERS experience, appears to be yes. But, that may not be the right question. A better question may be why private health plans would ever pay negotiated prices over $30,000 for inpatient knee and hip replacements. The CalPERS reference pricing program seemingly took a hard line against hospitals charging unreasonably high prices—$30,000 or more—for knee and hip replacements. But, is $30,000 really a reasonable price for an inpatient knee or hip replacement? To put that amount in perspective, the Medicare program on average paid $14,324 for inpatient knee and hip replacements in 2011.

http://www.nihcr.org/Reference-Pricing2

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Comment:

By Don McCanne, MD

Our policy wonks continue to look for methods of controlling health care costs that will protect the role of private insurers, and, above all, prevent us from drawing the inevitable conclusion that we desperately need a single payer national health program. Reference pricing is one more supposed cost-saving tool that has garnered much interest. What is it and will it work?

Reference pricing is a process in which a maximum price is set for a given medical service. The patient then either goes to a designated provider who has agreed to accept that amount, along with contracted patient cost sharing, as payment in full, or, if the patient chooses a provider with higher prices, the patient must pay the full difference.

California Public Employees’ Retirement System (CalPERS) experimented with reference pricing by establishing $30,000 as a reference price for the hospital services for a knee or hip replacement. The experiment was considered to be a success based on the fact that 15 to 30 percent of patients who would have gone to a non-designated hospital switched and went to a designated hospital instead. But how do you define success?

The package fee that the private market was able to negotiate was $30,000. Medicare on average paid $14,324 for the same services. Is it a success when private insurers are paying double the fees set by a public insurer?

Some might consider it to be a success when the patient did not have to pay the difference between the reference price and the price that would have been charged in a non-designated hospital, though what is the patient giving up?

Consider how a decision is usually made to have a joint replacement. The patient typically goes to his or her primary care professional where initial evaluation indicates that a joint replacement may be indicated. A referral is made to a specialist qualified to do joint replacements. If the decision is made to go ahead with the procedure, arrangements are made with the hospital the specialist is associated with. But then the insurer intervenes and threatens the patient with severe financial penalties (all costs above the reference price) unless the patient agrees to give up the specialist and hospital that is part of the team of her primary care professional, either as a formal integrated health system or as an informal team of community professionals working together. To escape the financial penalty, the patient pays the penalty of disruption in care.

So what did this successful experiment that everyone wants to emulate actually accomplish? Care of 15 to 30 percent of patients was disrupted in exchange for establishing a cap on payment that was twice what Medicare pays, and yet netting only “an extremely small percentage decline in total spending.”

Another important consideration discussed in this report is that reference pricing significantly increases administrative complexity – just what we need in a system that is unique in the world for all of its profound administrative waste. But very telling is the comment in this report that some of this administrative increase will be in the form of new customer-service tools “to deal with inevitable member complaints.”

Great – a disruptive program that doesn’t work very well but ticks everyone off! We’ll say it again – single payer.

Low-Income Residents In Three States View Medicaid As Equal To Or Better Than Private Coverage, Support Expansion

By Arnold M. Epstein, Benjamin D. Sommers, Yelena Kuznetsov and Robert J. Blendon
Health Affairs, October 8, 2014 (online)

Abstract

Expansion of Medicaid under the Affordable Care Act to millions of low-income adults has been controversial, yet little is known about what these Americans themselves think about Medicaid. We conducted a telephone survey in late 2013 of nearly 3,000 low-income adults in three Southern states—Arkansas, Kentucky, and Texas—that have adopted different approaches to the options for expansion. Nearly 80 percent of our sample in all three states favored Medicaid expansion, and approximately two-thirds of uninsured respondents said that they planned to apply for either Medicaid or subsidized private coverage in 2014. Yet awareness of their state’s actual expansion plans was low. Most viewed having Medicaid as better than being uninsured and at least as good as private insurance in overall quality and affordability. While the debate over Medicaid expansion continues, support for expansion is strong among low-income adults, and the perceived quality of Medicaid coverage is high.

From the Discussion

In our survey of nearly 3,000 low-income adults in three states, we found strong and consistent enthusiasm—among nearly 80 percent of respondents—for expanding Medicaid under the ACA and a more nuanced picture of whether it would be preferable to gain coverage via traditional Medicaid or subsidized private insurance.

Support for expansion by the population who would most likely be eligible for it may provide further impetus for expansion, although low-income adults and the uninsured may lack the clout to bring about this policy change in many states where the ACA remains unpopular among the political leadership.

Quality and affordability of care were generally rated as better with Medicaid coverage, while private coverage was seen as offering better access to and more respect from providers. These views represent a nuanced but reasonable comparison of Medicaid versus private health insurance and are consistent with some of the empirical evidence in this area. Recent studies indicate that Medicaid provides low-income adults with better financial protection than does private coverage, while lower reimbursement rates in Medicaid have been linked to lower physician participation rates in that program compared to private coverage. Favorable views toward Medicaid were most common among racial and ethnic minorities, people with lower education and income, and those in worse health.

http://content.healthaffairs.org/content/early/2014/10/02/hlthaff.2014.0747

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Medicaid, Often Criticized, Is Quite Popular With Its Customers

By Margot Sanger-Katz
The New York Times, October 9, 2014

A study published in the journal Health Affairs found that poor residents of Arkansas, Kentucky and Texas, when asked to compare Medicaid with private coverage, said that Medicaid offered better “quality of health care” and made them better able to “afford the health care” they needed.

Medicaid, the federal-state program for poor and disabled Americans, is a frequent political target, often described as substandard because of its restricted list of doctors and the red tape — sometimes even worse than no insurance at all.

But repeated surveys show that the program is quite popular among the people who use it.

When asked to consider it alongside other big, popular government programs, Medicaid compares favorably, said Robert Blendon, a public health professor at Harvard who studies public opinion on health care issues and was a co-author on the recent study. “It’s only when you compare it to Medicare, which is so much more popular than 96 percent of what the federal government does, that it looks unimpressive,” Mr. Blendon said.

The people surveyed by the Harvard researchers didn’t prefer Medicaid to private insurance in every respect. They gave private coverage the edge when it came to seeing “doctors you want, without having to wait too long” and “to have doctors treat you with care and respect.” But Medicaid came out ahead on the question of whether it enabled them to “be able to afford the health care you need,” and on the overall question of “quality of health care.”

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Comment:

By Don McCanne

Low-income patients strongly support the Medicaid program. It provides better financial protection than does private insurance, and they perceive the care to be of high quality. Their primary concern is that “private coverage was seen as offering better access to and more respect from providers” than does Medicaid.

When asked whether it was better to have Medicaid or to be uninsured, there was strong agreement that Medicaid patients have higher quality of care, have greater access to doctors, are treated with better respect, and, especially, are better able to afford the health care that they need, than are the uninsured.

In fact, according to Harvard’s Robert Blendon, Medicaid compares quite favorably to other popular government programs, though the support is “unimpressive” when compared to the support for Medicare.

Unfortunately, the politicians in many states do not seem to care. Even though the federal government would provide most of the funds, they would rather leave these people uninsured. Obviously, they could care less about the opinions of this low-income population that lacks political clout.

Why would Medicare be more popular than Medicaid? Medicare that is supplemented with Medigap, retiree plans, or Part C plans removes financial barriers to care, thus providing a similar level of financial protection as Medicaid – with the exception that Medicaid covers long term care as well. Medicaid does have the stigma of a welfare program whereas Medicare is considered to be an earned right available to all qualified by age or disability. The greatest reason that Medicare is preferred is that the patients have free choice of their physicians, including specialists.

Under what system would a low-income patient fare best? One in which the welfare stigma is removed, and everyone is treated equal. One in which financial barriers such as large deductibles and coinsurance are removed. One in which patients have free choice of their health care professionals and hospitals. One in which a high standard of quality is the norm for all. In other words, low-income patients would fare best is a system that would work well for all of us – a single-payer, improved Medicare for all.