PwC and Milliman Examination of Medical Cost Trends

by Clive Riddle, June 10, 2015

PwC projects a medical cost trend for 2016 of 6.5%, netting down to 4.5% after benefit design changes. Milliman tells us that the 2015 actual trend was 6.3%, up from 5.4% in 2014.

PwC’s Health Research Institute this week released their tenth annual Behind the Numbers report, which includes a “projection for the coming year’s medical cost trend based on analysis of medical costs in the large employer insurance market. In compiling data for 2016, HRI interviewed industry executives, health policy experts and health plan actuaries whose companies cover more than 100 million employer based members.

Milliman released their fifteenth annual Milliman Medical Index report two weeks ago, which is “an actuarial analysis of the projected total cost of healthcare for a hypothetical family of four covered by an employer-sponsored preferred provider organization (PPO) plan. Unlike many other healthcare cost reports, the MMI measures the total cost of healthcare benefits, not just the employer’s share of the costs, and not just premiums. The MMI only includes healthcare costs. It does not include health plan administrative expenses or profit loads.”

With respect to 2015, Milliman found “the cost of healthcare for a typical American family of four covered by an average employer-sponsored preferred provider organization (PPO) plan is $24,671”, up from $23,215 in 2014. The 2015 family costs works out to $2,055 on a monthly basis.

Milliman emphasizes the importance of the role the Rx costs play in the mix. They note “prescription drug costs spiked significantly, growing by 13.6% from 2014 to 2015. Growth over the previous five years averaged 6.8%. The 2015 spike resulted from the introduction of new specialty drugs as well as price increases in both brand and generic name drugs, increases in use of compound medicines, and other causes. Since the MMI’s inception in 2001, prescription drugs have increased by 9.4% on average, exceeding the 7.7% average trend for all other services. Prescription drug costs now comprise 15.9% of total healthcare spending for our family of four, up from 13.2% in 2001.”

Milliman also highlights the role of cost-sharing, citing that the “total employee cost (payroll deductions plus out-of-pocket expenses) increased by approximately 43% from 2010 to 2015, while employer costs increased by 32%. Of the $24,671 in total healthcare costs for this typical family, $10,473 is paid by the family, $6,408 through payroll deductions, and $4,065 in out-of-pocket expenses incurred at point of care.”

PwC also keys on these two issues for 2016 as well, with drugs as an inflator, and cost-sharing as a deflator of the medical trend.  PwC spotlighted two inflators of the 2016 medical trend: (1) New specialty drugs entering the market in 2015 and 2016 will continue to push health spending growth upward; and (2) Major cyber-security breaches are forcing health companies to step up investments to guard personal health data, adding to the overall cost of delivering care.

PwC notes three factors that serve to "deflate" the 2016 medical cost trend: (1) The Affordable Care Act’s looming “Cadillac tax” on high-priced plans which is accelerating cost-shifting from employers to employees to reduce costs; (2) Greater adoption of “virtual care” technology that can be more efficient and convenient than traditional medical care; and (3) New health advisers helping to steer consumers to more efficient healthcare.

PwC also comments on the longer range medical trend perspective, citing four key cost growth factors H observed over the past decade:

  • The healthcare-spending trajectory has leveled off but is not declining;
  • Cost sharing slows consumer use of health services;
  • Curtailing inpatient care lowers costs; and
  • The ACA has had minimal direct effect on employer health costs.

Track 3 For Medicare ACOs

by Clive Riddle, June 5, 2015

CMS has just issued a 592 page MSSP ACO final rule resulting from their proposed rule issue in December, which received 275 stakeholder comments.

Here’s what CMS, in their own words, says the new final rule will accomplish:

  • Creates a new Track 3, based on some of the successful features of the Pioneer ACO Model, which includes higher rates of shared savings, the prospective assignment of beneficiaries, and the opportunity to use new care coordination tools;
  • Streamlines the data sharing between CMS and ACOs, helping ACOs more easily access data on their patients in a secure way for quality improvement and care coordination that can drive critical improvements in beneficiaries’ care;
  • Establishes a waiver of the 3-day stay Skilled Nursing Facility (SNF) rule for beneficiaries that are prospectively assigned to ACOs under Track 3; and
  • Refines the policies for resetting ACO benchmarks to help ensure that the program continues to provide strong incentives for ACOs to improve patient care and generate cost savings, and announces CMS’ intent to propose further improvements to the benchmarking methodology later this year. 

CMS notes that “over 400 ACOs are participating in the Medicare Shared Savings Program, serving over 7 million beneficiaries.” With respect to basing their new Track 3 on selected components of their Pioneer ACO model, they tout that Pioneer ACOs “generated over $384 million in savings to Medicare over its first two years – an average of approximately $300 per participating beneficiary per year – while continuing to deliver high-quality patient care.  The Pioneer ACO Model is the first that meets the tests to have its elements incorporated into other Medicare programs.” 

California Healthline reports that “the new track for ACOs will allow them to retain up to 75% of what they save but also be responsible for up to 75% of their losses (California Healthline, 12/2/14). ACOs in the new track also will be given a fixed set of beneficiaries for which they must provide care (Modern Healthcare, 6/4)….. CMS said that it expects the rule change will help ensure that 90% of MSSP ACOs stay with the program.”


Positive Trends in the Land of Retail and Workplace Clinics

By Clive Riddle, May 29, 2015

Last month, the Robert Wood Johnson Foundation commissioned Manatt Health to issue an excellent 25 page report:  The Value Proposition of Retail Clinics, in which they remind us that “since first emerging on the health care landscape more than 15 years ago, retail clinics are now a common feature, with 10.5 million visits occurring annually at more than 1,800 retail clinics.

The report emphasizes the potential for current and future collaborations between retail clinic organizations and health care systems, noting “to date, more than 100 partnerships between retail clinics and health systems have been formed, linking care between retail sites and primary care medical homes, expanding after-hours care options and enabling health systems to provide patients with alternatives to emergency departments (EDs). In fact, one study estimated that up to 27 percent of ED visits could be handled appropriately at retail clinics and urgent care centers…”

With respect to the growth and scope of the retail clinic market, just this month CVS  Health’s MinuteClinic announced they  “will open more than 100 new clinics this year and anticipates surpassing 1,500 clinics by 2017,” and they have reached  the cumulative “25 Million Patient Visit Milestone.“

With respect to partnerships during the past month, California Healthline discussed: ”Kaiser-Target Partnership Sign of Times” and CVS Health announced clinical affiliations with Ochsner Health System in Louisiana and the University of Mississippi Medical Center, including their Center for Telehealth.

Meanwhile, on the workplace onsite clinic front, Towers Watson this week released their 2015 Employer-Sponsored Health Care Centers Survey report, which polled  137 U.S. employers in which 105 currently offer employer-sponsored health centers, and 15 are planning to offer by 2018, and represent 4.6 million employees.

Here’s some highlights of Towers Watson’s onsite clinic findings:

  • 38% of large U.S. employers with onsite health facilities plan to add new centers over the next two years,
  • 66% expect to expand or enhance the already broad services they offer by 2018
  • Wellness programs are already available at 86% of the centers
  • Lifestyle coaching to promote and reinforce behavior changes is currently offered at 63% of the centers
  • Half of employer-sponsored health centers now offer some type of pharmacy services, up from 38% in 2012
  • 35% offer telemedicine services, with another 12% planning to in the next two years.
  • 40% have two to five centers
  • 56% have had onsite health centers for over five years
  • 55% are open before 8:00 a.m.; 32% are open after 5:00 p.m., and 16% are open on weekends
  • 64% outsource managing staffing and services at the health centers
  • 23% run the centers themselves
  • 18% use local or regional provider groups or health systems
  • 75% employers with onsite health centers calculate their ROI, up from 47% in 2012

One free resource for those monitoring activities in this sector, the Workplace & Retail Clinic Bulletin, offering free twice monthly e-newsletters.


Not One Penny More

By Kim Bellard, May 21, 2015

If you've been to a doctor's office or seen some other health care provider, chances are you've had to sign a patient consent form that, among other things, makes you promise that whatever they end up doing to you, and however much they choose to charge you for it, you're responsible for paying.  If your health plan happens to get you a negotiated rate and perhaps covers some of the expenses, that's great, but the provider is still looking to you for payment.

Maybe you shouldn't be so quick to sign.

I don't know which is worse: that providers don't think they should tell you in advance what they plan to do to you, or that they don't want to admit how much they will try to charge for it.  Honestly, why do we keep falling for this?

I thought about this when reading Kaiser Health News' Radical Approach to Huge Hospital Bills: Set Your Own Price.  It profiles benefits consulting company ELAP Services, which goes beyond traditional services like benefits design, direct contracting, and medical bill reviews by also vowing to go to court if necessary to support their customers in disputes over medical bills.

The KHN article cited the example where an employee of one of ELAP's clients had back surgery and was billed $600,000 by the hospital.  ELAP analyzed the hospital's Medicare's cost reports, and advised the client to pay a much lower amount.  "We wrote a check to the hospital for $28,900 and we never heard from them again," said the client's CFO.

ELAP CEO Steve Kelly says "overwhelmingly, the providers just accept the payment."  ELAP has clients write their process for determining reimbursements into benefit plan documents to give greater legal weight.  They already have a federal court ruling in support of their process.  The contract requires them to defend patients from any collections efforts, in return for a percentage of the savings.

Most health plans base their out-of-network payments on "reasonable charges," which is how most health insurance plans worked prior to the advent of network plans like PPOs, when negotiated payment rates became the norm.  

Whether it has worked as intended is not entirely clear, but what is clear is that providers can come after patients for amounts not paid out-of-network by the health plans, all the way up to billed charges, not just to the "reasonable charges."

What I want to know is, if health plans truly believe their limits on charges are reasonable, why don't more of them act like ELAP when providers' charges exceed them?   ELAP makes it clear whose side they are on; health plans, not so much.

I view the charge structure of most providers as a pernicious symptom of much of what is wrong with our health care system.  They rarely have much to do with either actual costs or market forces, and they reflect an arrogant attitude that consumers are there to be gouged as much as possible.  Or, more charitably, if not arrogance, then a certain benign neglect to patients' financial well-being.  

I'd love to see a health plan whose EOBs not only detailed how much they were paying and how much of the remaining balance the consumer had to pay, but also said, "by the way, we think $X is the most your provider should charge you for this service, and we don't think you should pay a penny more.  If they try to charge you more, let us know and we'll help you fight it."

Now that would be a health plan that consumers would think more of, one that is truly on their side.

This post is an abridged version of the posting in Kim Bellard’s blogsite. Click here to read the full posting


Impact of Stress on Health Risk

By Claire Thayer, May 20, 2015

Stress is prevalent, and at some point, all of us are faced with some type of stress in our lives.  What is considered as a stressful situation to one person may be inconsequential to another.  A recent WebMD study finds that 43% of all adults suffer adverse affects from stress. WebMD tells us that a little stress every now and then is not something to be concerned about. However, it’s the ongoing chronic stress that can cause or exacerbate many serious health problems, including:

  • Mental health problems, such as depression, anxiety, and personality disorders
  • Cardiovascular disease, including heart disease, high blood pressure, abnormal heart rhythms, heart attacks, and stroke
  • Obesity and other eating disorders
  • Skin and hair problems, such as acne, psoriasis, and eczema, and permanent hair loss
  • Gastrointestinal problems, such as GERD, gastritis, ulcerative colitis, and irritable colon

MCOL’s infoGraphoid for this week takes a look at the impact of stress on health risk, outlining three different types of stress and the impact on both overall physical and mental health:

MCOL’s weekly infoGraphoid is a benefit for MCOL Basic members and released each Wednesday as part of the MCOL Daily Factoid e-newsletter distribution service – find out more here.