Healthcare Reform Squeezing Patients and Providers

Millions of Americans are avoiding seeking healthcare now that the Affordable Care Act is in full swing. Indeed, not so “affordable” has the law become. The Kaiser Family Foundation reported that deductibles for single coverage range from about $1,100 to $1,300 across the U.S. and approximately 1 out of every 4 Americans has had to forego seeking coverage in 2014. Other sources are showing an average deductible (single coverage) of $2,000 for 20% of the population and family coverage ranging from $2,000 to $4,500.

The Commonwealth Fund recently polled Americans regarding the large deductibles and found that:

  • 40% had a medical problem but did not go to a doctor
  • 33% did not get a preventative care test
  • 43% skipped a medical test, treatment, or follow-up which was recommended by a physician
  • 35% did not see a specialist despite their physician’s recommendation

Many rates have climbed again in 2015, so we expect this trend to continue. Adding to the years of stagnant employee salaries, the issue will only be exacerbated. When patients finally do seek healthcare, they will most likely be faced with substantial debt.

For providers, this means that most likely when patients do finally come in to the office, they will be much sicker than had they sought care earlier. Moreover, providers will come up short financially because the high deductibles push the debt onto the patient and thus burden the medical and dental practices with trying to collect.

Along those same lines, Time magazine recently published an article titled “Why Millennials Hate Their Least Expensive Health Care Option.” In short, many young Americans do not want and have refused to buy health insurance coverage. The result? These individuals are coming in as self-pay patients, again financially pressuring medical and dental practices to try to collect from young Americans who, if they do have a job, have not yet amassed much in the way of financial savings.


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Primary Care Physicians Lose In 2015

Many Americans trumpeted the millions of uninsured who obtained health coverage in 2014 via Medicaid or Obamacare exchange coverage. However, the Affordable Care Act made assumptions that all states would expand Medicaid coverage and this simply has not happened. In fact, 23 states have opted not to expand Medicaid leaving healthcare providers to face even more high uncompensated care costs.

Rubbing salt in the wound, Congress failed to extend Medicaid rate increase for primary care services before they adjourned at the end of 2014. The Affordable Care Act sought to increase Medicaid payments on par with Medicare. The thought process was that this would incentivize more physicians to see this newly expanded pool of Medicaid patients.

An analysis performed by the Urban Institute shows an average 2015 Medicaid reduction of 42.8%, with physicians in California, Florida, and New York being cut more than 50%. The Kaiser Family Foundation claims that 15 states are trying to find ways to cover some of the costs (in an attempt to keep Medicaid on par with Medicare). However, with many states already in a tight budget stance, it remains to be seen if and to what extent this will come to fruition.

So, now that the temporary two year hike in Medicaid rates has come to an end in at least half of the country, we may see a reverting of physicians opting to not accept Medicaid patients. With more patients now on Medicaid as a result of Obamacare, that would mean a larger number of patients having trouble getting access to healthcare than before the law was passed.


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Are ACOs Sustainable?

The Centers for Medicare & Medicaid Services (CMS) recently proposed changes to the Medicare Shared Savings Program (MSSP) in a desperate attempt to save Accountable Care Organizations (ACOs). Unfortunately, the proposals once again fall short and fail to address what the ACOs have been asking for.

As I addressed in my last post, the cost of operations and collecting quality metrics is causing many ACOs to fail. In fact, some 80% of ACOs in the MSSP are losing money! Leading health economist Paul Keckley, Ph.D. commented on the recent CMS proposals. “So what CMS did not do is address the concerns of many of the ACOs to comply with the rules and report the quality measures. It’s going to cost ACOs more than they save.” He continued by predicting that if the proposals are implemented as is, we will see even more ACOs drop out of the Medicare program.

As I have stated in previous posts, a major issue with the Affordable Care Act is misaligned incentives. Dr. Robert Pearl, chairman of the Council of Accountable Physician Practices confirms this notion. “While ACOs might receive payment on a prepaid basis, the physicians and hospitals inside the ACO are often still reimbursed based on volume. As a result, providers often don’t have an incentive to work together to find more effective ways to deliver clinical care. And when patients seek care outside of the ACO, physicians are at financial risk for care that may be unnecessary or inappropriate.”

So, are ACOs sustainable? It most certainly does not seem so at this point in time. As Dr. Pearl stated, “Even among the most efficient practices, the cost of delivering care must be adequately funded. When payments are too low for physicians to deliver quality care and keep their practices viable, there is no good solution.” And once again, healthcare reform fails to consider physicians as stakeholders. “Physicians often feel relatively powerless and struggle to commit fully to the goals of performance improvement and cost containment,” says Dr. Pearl.


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ACOs Are Coming to an End

A report by the National Association of ACOs (NAACOS) shows that ACOs (Accountable Care Organizations) participating in the Medicare Shared Savings Program are making preparations to abandon Obamacare’s ACO initiative. The report shows that 66% are not intending to stay in the program and another 26% are currently undecided. That leaves a mere 8% of ACOs which are planning to sign a second contract with the government. The president of NAACOS stated that if CMS doesn’t address issues, the program “will no longer exist and the high hopes of DC policy-makers to migrate ACOs to capitation and two-sided risk will be impossible.”

NAACOS also reported that the costs to run the ACOs are insurmountable. Respondents reported an annual mean of $1.5 million management costs directly attributable to ACO operations.

There are also issues with the metrics CMS uses. The report shows that no ACO would have had a perfect quality score, and every ACO that achieved shared savings with CMS would have had those savings reduced by the quality scores. The president of NAACOS summed it up well when he stated, “The huge investment by ACOs in improved care goes largely unrewarded.” This is yet another example of how healthcare reform has fallen short of intended goals. NAACOS President Clif Gaus said, “While CMS has made modest improvement to the ACO Quality Benchmarking, it is still a punitive program that will only lead to future reductions in savings paid to the ACOs who have worked hard to achieve those savings. Coupled with the many attribution and financial benchmarking defects, the Medicare Shared Savings Program is not sustainable in its current configuration and will decelerate the pathway to accountable care for Medicare Beneficiaries.”


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Obamacare Increasing Medical Tourism

This year will see a huge increase in Americans seeking medical care outside of the United States due to the changes in insurance plans driven by President Obama’s signature healthcare reform law. In 2014, approximately one million Americans will travel abroad for health care services. Last year’s numbers totaled 750,000 people.

Dental procedures are the most frequently sought after foreign medical care. Coronary bypasses and bariatric operations are tied for second and cosmetic surgery ranks third. In fourth place is orthopedic procedures, most notably hip and knee replacements. These categories comprise about 82 percent of the procedures that are done out of the country.

Obamacare plans are the driver with their notoriously high deductibles ($10,000 in the bronze family plan). The new healthcare law has mandated so many changes to insurances that some procedures are simply no longer covered under employer insurance plans. This lack of coverage is what is driving more Americans to get those particular procedures done outside of the United States.

Due to location, Canada is the most popular place for Americans to seek medical care and they are likely to see more Americans over the years. Studies are showing that the exodus of Americans seeking medical care abroad is expected to increase 25 to 35 percent per year! Perhaps the most interesting trend is that some employers are not only picking up the cost for overseas health care, but may even add a cash bonus for the employee as an incentive. As we have seen time and again, the healthcare reform law in the United States is full of misaligned incentives.


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40% Have Dropped Out of ACOs

More hospital systems are dropping out of the Medicare Pioneer Accountable Care Organization (ACO) program. Recently four more hospital systems joined the ranks of the departing. These recent departures include systems in California, Michigan, Indiana, and Pennsylvania. To date, 40% of the original have dropped out of the program, all citing similar reasons which are based on rules that are too strict and benchmarks that are unobtainable.

In the case of the Michigan system, they were able to lower Medicare spending by $20 million but at a cost to the organization overall. The CEO stated they simply could not make the economic model work. The Indiana system was able to increase quality but not costs of patient care and thus did not receive a shared savings payment. In fact, 60% of the hospital systems in the pioneer program did not receive a shared savings payment in 2012.

Other data shows that of the ACOs started in 2012, 53% were not able to lower expenditures in the first year. CMS states the ACO programs are meant to create savings over the long term. But, with all of the other financial pressures providers are facing, how many will stick it out for the years it takes to show savings and thus receive shared savings payments?

There continues to be other roadblocks to general ACO success. Two key areas are that payers are reluctant to offer ACO contracts and the fact there has not yet been a proven ACO model. Regarding the payers, this is a free and capitalist society so movement from the payers will be dependent upon how it benefits them . . . period. Regarding the lack of a proven model, there are some ACOs that appear to be doing well. It will take time for those to be analyzed in detail (and honestly) and determinations made as to whether models can be duplicated throughout the country. Everyone working in the healthcare industry acknowledges the mantra, “healthcare is local”, so time will tell if ACO models can be replicated.


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Obamacare led to an increase in ER visits

A recent study has shown a 5.6% increase in ER visits. The study by the Colorado Hospital Association included 450 hospitals in 25 states and demonstrated the increase is specifically due to the expansion in Medicaid. Moreover, the increase was three times higher than for hospitals in states that did not expand Medicaid. Additionally, the study implies that the newly insured Medicaid patients are sicker.

The Obama administration’s response? They claim they will educate these patients on how to obtain the right care, at the right place and time. I wouldn’t hold your breath on that.

Healthcare coverage was expanded and indeed that was a good thing for at least now those sick patients are going in to receive medical care. The problem is of course that the hospitals will have to figure out how to survive on Medicaid payments. Perhaps a time will come years down the road where patients will seek more preventative care via their primary care physician. In the meantime, however, hospitals are going to need to retool their operations and take a very hard look at their budgeting processes going forward.


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Patients’ Financial Responsibilities are Destroying Practices

The argument that patients’ deductibles will rise as a result of Obamacare is over as we have all seen it time and again in every state. What is now going to start making headlines is not only the damaging effect it has on personal finances but also the impact this change has on medical and dental practices, as well as hospitals. Here’s a quick look at the numbers:

  • 41% of employees who get health coverage at work have deductibles of at least $1,000; in 2006, only 10% of employees had such a deductible – Kaiser Family Foundation
  • The average deductible for the 7 million new Obamacare enrollees is $2,267 (for the most popular silver tier) – Robert Wood Johnson Foundation
  • 86% of insured Americans do not understand what is meant by “copays”, “deductibles”, “out of pocket maximums”, and “coinsurance” – Journal of Health Economics
  • 44% of U.S. households have less than 3 months of savings – Corporation for Enterprise Development

These statistics are staggering as they clearly show . . . Americans’ health insurance responsibility is rising, most (86%) do not understand what that means, and many will not be able to pay their medical and dental bills going forward. After we get through the politics of this upcoming November 2014 election, I predict that this impact on medical providers will start to become public knowledge. Combined with Americans paying their taxes the first part of next year, I believe 2015 will be a very heated year for the discussion of the impacts of healthcare reform that have now hit our society.


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Obamacare Open Enrollment

Believe it or not, it is almost that time of year already for open enrollment. This year, however, Obamacare enrollment could add new issues that have yet come to light. For the program itself, some of the challenges are the length and timing. The open enrollment season this year will be half as long as last year’s sign-up period. Additionally, the season (Nov 15 — Feb 15) overlaps with the holiday season.

But the larger implications are for those already enrolled. For starters, when you signed up last year the system set you up for automatic renewal. That fine print could turn out to be a bad thing because you may miss out on lower premium options and consequently be stuck with an outdated and possibly incorrect government subsidy.

Additionally, if you received tax credits to help pay your premium, you will have to file new forms with your 2014 tax return to prove you received the correct amount. A large majority (approximately 84%) of Obamacare enrollees fall into this category. The subsidies are tied to income, thus your tax filings will definitely be impacted in one way or another.

And for those who remained uninsured for this past year? Well, this is where you reap the well-published “gift” of Obamacare. For those of you in this category, you will receive a tax penalty (unless you can somehow secure an exemption).

So why all of these tax issues and penalties? Remember that, in short, the Supreme Court upheld the constitutionality of Obamacare only because the new healthcare law is . . . a TAX.


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New Plan for Health Coverage

Indiana Governor Mike Pence’s new plan to provide health coverage for more of the state’s low-income residents is another sign that few if any of the states holding out on Obamacare’s Medicaid expansion will do it in the way the law envisioned. The proposal also will test the Obama administration’s appetite to meet its coverage goals against its reticence to approve policies, such as cost-sharing requirements, favored by some conservatives.

Not counting Indiana, 23 states have yet to move forward with some form of expansion. Like several other Republican-led states, Indiana plans to apply for a waiver that will allow it to use federal Medicaid expansion funds to purchase coverage for adults earning up to 138% of the federal poverty level.


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