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In another sign of healthcare moving more towards value-based payments, Kaiser Health News reported on Medicare awarding bonuses to nursing homes whose residents' readmission rates to hospitals are low and issuing penalties to nursing homes whose residents more frequently end up back in the hospital. While the actual percentages may seem small (1.6% bonuses and almost 2% penalties), the article notes that the differences can be meaningful given that nursing homes often operate on very slim margins.
The piece included one anecdote about one nursing home chain being disappointed with the penalties, noting that since most of the readmissions occurred after the residents left their facilities. If Medicare considered whether the residents had already left the nursing home, they would exacerbate an existing conflict of interest: an earlier return from the nursing home could mean more revenue for the nursing home at the expense of a less healthy patient. Instead, nursing homes now have an additional incentive to coordinate care to help the patients' transitions back to their own homes.
Since the passage of the Affordable Care Act, the Republican party has often touted the insurance plan requirements as being too burdensome to be good for the average American. It is not surprising, then, that when the current Republican administration took office, the president signaled intentions to grant health insurance exchanges additional flexibility. Kaiser Health News reported on a number of examples that the current administration would welcome.
One proposed example applies federal subsidies to help consumers who get insurance through their jobs, not just low-income consumers. Another example was to reduce the coverage requirements so that younger consumers can pay less in premiums (with the trade-off of less coverage when insurance is needed).
After years of legal action from Republicans to hinder the rollout of ACA, supporters of the ACA are now threatening legal action to preserve it, alleging that the current administration is acting beyond executive authority.
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Classic economic theory is that reducing competition in an area that is not perfectly competitive will cause prices to rise over time. Hospital systems have contended that operating at a larger scale will allow them to achieve certain efficiencies, whether that be in purchasing power, or in shared overhead. Those benefits might exist, but larger hospital systems also have more negotiating power with payers. While hospital systems claim that they are merging for the benefit of patients, who actually benefits?
From a financial perspective, the New York Times published analysis supporting economic theory, showing that generally, prices in a region have risen after major healthcare mergers. In 19 of the 25 areas with the most hospital consolidation from 2010 to 2013, the prices of the merged hospital systems experienced the highest percentage change, compared to other hospitals in the same state. Of the remaining six, the hospital merger that saw a substantial price decline was a merger that was opposed by the Federal Trade Commission, where the involved parties reached a settlement (presumably involving some pricing restrictions). The other five cases saw no substantial changes in price changes, which is actually better than the state average, which did rise over the same time period.
It's not just hospitals that are merging -- physician groups are as well. As the provider groups get larger, they are able to negotiate higher rates. Perversely, when insurers refuse to compensate smaller providers at the same rates, they make mergers more attractive to provider groups who are then able to demand higher rates. Thus, a short-term focus on reducing costs can result in higher costs for the insurer in the long run.
Kaiser Health News reported on consumers trying to save money by switching health insurance plans that charge less for monthly premiums but also have more restrictive provider networks. Over the last three years, the number of plans that offered any out-of-network coverage dropped from 58 percent in 2015 to 29 percent in 2018. A better measure of the popularity of these plans is to look at the actual enrollment: what kinds of plans are consumers signing up for? While the article did not offer national statistics, the article did cite enrollment in California's state exchange's HMO and EPO plans (more restrictive) as having grown from 46 percent in 2016 to 70 percent in 2018, with enrollment in PPO plans (less restrictive) dropping from 54 percent to 30 percent over the same time period. Many consumers appear to be electing for lower-premium plans, even if they come with more restrictions.
If this trend continues, it might be that the providers that do not contract with the lower-premium plans will need to reconsider their pricing strategy. As long as they insist on higher rates, and insurance companies will need to charge their customers higher premiums to cover them (if these providers are unable to achieve more efficient healthcare). If these providers lack sufficient volume, they might consider lowering their prices.
An important step in helping consumers avoid needless frustration is insurance companies publishing accurate and up-to-date provider directories so that consumers can make informed decisions.