Michigan Association of Health Plans

Health care continues to be hot election issue

Patients tell pollsters they are afraid of receiving surprise medical bills they can’t afford. They express anger that rising deductibles and co-payments means they pay more out of pocket for health care. They are also upset about high prescription prices.

But all this angst, which is spilling out this year because health care is a top presidential election issue, boils down to rising health care costs. Over the past decade, health care costs have risen twice as fast as wages.

At Crain’s 12th annual Health Care Summit, moderator Marianne Udow-Phillips asked a group of health experts their thoughts about rising costs.

“Health care continues to be one of the top polling issues that consumers are concerned about in this election,” at least so far on the Democratic side, said Udow-Phillips, who is executive director at the Center for Health and Research Transformation at the University of Michigan in Ann Arbor.

“When consumers talk about health care costs, they are predominantly talking about issues that are really quite clear, right? They’re talking about too high deductibles and co-pays. They’re talking about prescription drug costs, and they’re talking about surprise medical bills.”

Mark Bertolini, former chairman and CEO of Aetna, said he believes income inequality is at the root of the problem and exacerbates the impact of rising costs because lower-income people just can’t afford the prices.

“We have 60 percent of the American public right now are $400 away from a financial disaster,” said Bertolini, a native Michigander, adding: “The fear that they have is that they’re not going to be able to pay their bills and they’re not going to be able to keep their homes and they’re not going to be able to support their children.”

Bertolini said that over the past 45 years people in the “wage economy” haven’t had any appreciable increase in wages as compared with people in the “wealth economy,” where people invest in assets and have seen “amazing wealth growth.”

“Income inequality is not that there are billionaires and millionaires,” he said. “The issue is that income inequality creates social mobility problems that don’t allow people to continue to be a vibrant part of our economy. … I would argue that the opposite of health is poverty.”

Bertolini said governments and communities need to also invest more in education, which can help raise people out of poverty. “If we don’t take care of people’s poverty, we will never solve the health care costs problem,” he said.

Bill Manns, president of St. Joseph Mercy Hospital in Ann Arbor, agreed. He said he has believed since college that the best way to impact health of individuals is by giving them a job. But he had another suggestion to lower health care costs.

“From my perspective, I do think health care is disgustingly expensive. What we don’t talk a lot about though is the pharmaceutical industry and the impact that it’s had, right?” Manns said. “Hospitals are dealing with very slim margins (average about 3 percent). Insurance companies have a margin (average 5 percent), but pharmaceutical companies have an out-of-control double digit margin (average 14 percent) that’s totally inappropriate in most cases.”

Manns said there should be stronger regulation on the pharmaceutical industry with price controls.

Elizabeth Hertel, deputy director at the Michigan Department of Health and Human Services, said focusing financial resources on prevention of disease would help address rising health care costs.

“Investing in community health workers (and) in early identification and treatment of behavioral health issues … embedding behavioral health workers into primary care clinics, doing screenings and using community health workers to go out into the community and ensure that individuals, particularly those with chronic diseases or behavioral health issues, are receiving the care that they need to keep them out of higher cost care setting,” Hertel said.

Dominick Pallone, executive director of the Michigan Association of Health Plans, said one way to address rising costs is by treating the whole individual, before and after a health care encounter.

“Social determinants (are) rapidly becoming that new frontier of treating the whole individual. So understanding how a payer fits into that is the new frontier (of) where we’re spending a lot of our energy and driving new public policy, working with our partners at the state” as well as provides and community agencies that ” historically payers have not had.”

Medicaid carve-out

Udow-Phillips asked the panel to debate whether the state MDHHS should go forward with its proposed policy to carve out pharmaceutical benefits from Medicaid health plans.

Hertel said MDHHS has long considered removing pharmacy benefits from control of the Medicaid health plans because of rising drug costs. She said the state’s budget problems this year caused the department to bring it to the forefront now.

“We have an initial estimate (of savings of) just under $10 million general fund,” Hertel said. Public comments were being taken until Nov. 4. As of deadline, MDHHS said it has received many comments and it might take several weeks for a decision.

Pallone said health plans have been fighting against the proposal for a number of reasons. “This proposal affects us, but more importantly affects the members we serve, the Medicaid members that we serve today in Michigan,” he said.

Pallone said separating pharmacy benefits from physical health benefits only leads to problems in delivering services. “We’ve seen studies from some states (Arkansas) where (physical health costs increased) 7.5 percent” because of the carve-out of pharmacy benefits, he said.

Hertel said the danger of looking at experiences in other states is that “if you’ve seen one Medicaid program, you’ve seen one Medicaid program.”

Manns interjected that as a provider, he hopes the state and health plans work out the dispute because “what happens is that those patients end up in our (emergency department) because they don’t have access to those resources. They (also) come back as readmissions … because they don’t have access to the pharmaceuticals.”

Pallone agreed that rising health care costs are primarily a function of rising drug prices.

“We’re seeing tremendous growth in the pharmaceutical costs (that are) eating up a larger and larger portion of the premium dollars,” he said. “Well over 20 percent of a premium dollar is going to pharmaceutical costs. These are lifesaving drugs, life-extending drugs, and we need to maintain access.”

Then came an interesting back and forth between two knowledgeable health insurance executives.

Bertolini asked Pallone how much did the health plans receive from the pharmaceutical companies in the form of retained rebates to take care of the Medicaid population?

“That’s a great question,” said Pallone, adding he couldn’t cite the exact numbers. “We have a transparent model in Michigan where all of the Medicaid plans are filing quarterly financial reports and disclosing survey information to the department.”

Bertolini then asked if the health plans would be willing to give the rebates up to the state to help solve their budget problem? If so, he said, “you could keep your pharmacy program.”

Pallone replied: “We’d be open to those conversations. I think there’s plenty of middle ground here.”

Hertel seemed intrigued by the exchange and told Pallone the state would like to hear more about the concept.

Surprise medical bills

One major issue in front of Congress and the state Legislature has to do with surprise medical bills. Most surprise medical bills are charges from providers that do not have contracts with a patient’s health insurer.

Manns said he doesn’t want government to hamper the ability hospitals have to negotiate prices with health insurers.

“Giving providers and insurers that space to negotiate and deal with surprise medical bills is important,” he said. “The second piece is educating the public on the importance of staying within the network is critical as well.”

In Michigan, two bills are being debated whether to tie insurance reimbursement at Medicare-plus rate and to require providers to obtain written consent before proceeding with nonemergency services. The Michigan House health policy committee approved on Nov. 7 House Bills 4459 and 4460.

The Michigan Health and Hospital Association supports the legislative intent, but wants the bills to simply ban balance billing to patients. The Michigan State Medical Society opposes the bills, saying they are price controls.

Udow-Phillips said various proposals offer options to hospitals, insurers and patients that include arbitration on surprise charges or fee schedules to deal with how much out-of-network providers can charge.

Pallone said the health plans support the surprise billing legislation. He said there are times when providers don’t agree with prices health insurers are willing to pay. Large health systems, he said, can mandate providers on their medical staffs accept negotiated rates.

“The problem is then when you get into the smaller provider system, smaller provider hospitals, they don’t have the ability to negotiate with certain provider types that way. We feel as though the market is broken,” Pallone said.

“We need to create a backstop (of legislation),” he said. “Without that backstop, I think we’re just going to continue to have surprise billing and folks be taken advantage of.”

Bertolini said there are a number of approaches to deal with surprise medical billing.

For example, New York City created a payment estimator where about two weeks before an elective surgery patients are notified how much they will have to pay.

“Can you pay that? And we’ve seen huge cancellations and surgeries up to 40 percent because people can’t find a way to pay it unless they negotiate with their provider,” Bertolini said.

This article appeared in Crain’s Detroit Business. Read more here.