State Of Health Care, Part 3

by Rachelle Schultz, Ed.D., president/CEO, Winona Health

I want to tackle one of the next building blocks – or Jenga blocks – of our health care system: insurance. Recent announcements by many plans to pull out of Minnesota counties or restructure their offerings are top-of-mind topics, with open enrollment starting November 1. Insurance, too, benefits from a bit of a background review.

I am old enough to recall when I had to get health insurance for the first time, more than 40 years ago. At that time, insurance was not generally a benefit one accessed through an employer. You went to an insurance agency and shopped for plans. And coverage was pretty minimal, depending on the risk tolerance of the individual. In fact, a common reason for getting insurance then was for young couples considering having a baby. Patients paid for primary services out of pocket – physicals (often called checkups), vaccinations, and minor illnesses and injuries like earaches, minor cuts, rashes and the like. And prices were a lot lower. And people were a lot healthier.

Then, once a patient received services, they got a bill from the provider and submitted it to their insurance company. The insurer in turn would determine how much of it was covered by the policy and send a check directly to the patient. That money was intended to go toward the bill, along with any other outstanding amount not covered. Unfortunately, too many people kept the money and paid off their bill (or not) in installments to the provider. Internal billing and collections departments did different work back then to get payment for services provided. As payment issues grew, a shift was made to have the insurer pay the covered amount directly to the provider, leaving only the uncovered balance to be paid by the patient. And that continues to this day.

Insurance itself has gone through massive changes over the years, and I only have space for a few highlights. One of the most significant shifts was employer-sponsored health insurance as a benefit. This was a nice enticement for recruiting talent and adding value to a compensation and benefits package. This change was smooth and easy and quickly found its way into most employment offerings. Families might even have more than one plan, as spouses were provided plans through their respective employers. The issue of which one pays first seems like a small battle in today's environment. The net effect of this was more people covered by commercial insurance plans and relatively smooth processes to access care and have it paid for – narrow networks to control where you could go were non-existent.

Back in the late 1980s and 1990s, Minnesota was an early adopter of "managed care plans," attempting to control costs, access, and networks of where people could go for care. Back then, it did not go over very well, and with few exceptions, it fell by the wayside, particularly for commercial insurance plans. Choice was expected, and the term "gatekeeper" was used with distaste toward anyone trying to direct care. What a difference a few decades makes!

To summarize the past, overall, there was generally good access to insurance through employers, Medicare was stable, and Medicaid was a program for folks who met specific criteria (e.g., income level, elderly, disabled). There was not 100% access for all, however, as some smaller employers did not offer insurance, some folks fell through the qualifying cracks, some didn't believe they needed health insurance, and there were a few other miscellaneous reasons. Through all of this, we need to keep in mind that our not-for-profit hospital cared for everyone who came through our doors; insurance coverage was not the first question asked. In many ways, it was an easier time.

Fast forward to today. The ACA (Affordable Care Act) sought to ensure every person had access to affordable insurance coverage. State insurance exchanges were created, basic health insurance plans were sold through the exchanges, and employers still provided coverage as a key tool for recruiting talent. And then Medicare Advantage (MA) plans, which started in the late 1990s, began making moves to gain market share.

Medicare Advantage plans are private, for-profit plans that contract with the Centers for Medicare and Medicaid Services (CMS) to sell "managed care plans" to Medicare-eligible folks. Their target population is the healthy Medicare beneficiary. Each of these plans has its own controlled network of providers, so folks need to do a lot more due diligence in choosing a plan. What is rarely talked about, or known, is that CMS pays MA plans more than they pay for traditional Medicare, but these plans have not proven to perform better on cost or quality. In fact, they cost the government (us) more.

Medicare beneficiaries, on the whole, choose these plans because they are less expensive. I also want to point out that it is under the MA plans that patients experience significant issues with coverage through denials and prior authorizations. We have spent enormous resources helping people navigate these issues to get care paid for. I suppose the old adage, "you get what you pay for," applies here.

Traditional Medicare, however, is probably the closest plan that looks and feels like a universal plan. As long as a provider sees Medicare patients (and the vast majority in the country do), one can go there for care (if you can get in for an appointment). The premiums for traditional Medicare are higher than the MA plans, but the coverage is far better. The "but" or "and" that goes along with this, though, is that there is another program called an ACO, or Accountable Care Organization, a care delivery model designed to address both quality and cost of care and that has proven to be effective in reducing costs and increasing quality. We were an early adopter of this approach when we created a Minnesota rural ACO with two other rural hospitals back in 2016, and we have continued that work since then through a much larger national ACO.

ACOs seek to support patients by intervening early and reducing the number of hospitalizations and emergency room visits, primarily for folks with chronic diseases who need closer management. We do this in partnership with the patients, supporting their needs in lower-cost ways. This model is one where the savings achieved are first shared with CMS (they take 50% of the savings). The ACO gets the other 50% and distributes that among the respective hospitals in the ACO. Winona Health has been a top performer in this model, reducing the total cost of care and delivering high-quality care. I believe this is a care model that is the sweet spot for rural providers.

Ultimately, CMS has a goal for all Medicare beneficiaries. For traditional Medicare, it is to be in an ACO. The problem with that is that many hospitals and providers do not participate in ACOs. Or, CMS want beneficiaries in an MA plan with the assumption that the costs of care will be managed by the plan.

I share this detail on Medicare for a key reason: population demographics skew toward an increasing number of people on Medicare plans and the subsequent cost of those growing programs. For rural providers, on average, more than 65% of our revenue comes from government payers (Medicare, Medicare Advantage, and Medicaid). All of these programs reimburse less than the cost of care – not charges, cost. So every hospital loses money delivering care under this payer model.

In addition to this, we have seen Medicare Advantage plans pull out of counties, reducing the number of options available to people. Last year, it was Quartz and UCare that pulled their MA plans from Winona County. This year, Humana pulled out of the state of Minnesota, while Medica, HealthPartners, and UnitedHealthcare have left counties. Blue Cross Blue Shield restructured their plans to have one Medicare Advantage offering in counties. The payer argument is that they are losing money on these plans, so they cannot continue to provide them in certain areas. To state the obvious, it is in areas where the demographics are less than ideal to insure – aging, low income, disabled – i.e., a lot of rural areas.

But plans are not the only ones making these changes. Health systems have also made decisions not to accept some Medicare Advantage plans. This, too, has caused issues for people who need to consider their plan choice when it doesn't include their providers. These actions should give us all pause. The plans are, in effect, the financing side of health care for a large aging population, but it is not aligned with the care delivery side. Unless both health care delivery and the financing of it come into alignment, we are going to experience lose-lose-lose scenarios. It is already happening. As an aside, Winona Health is in network for all plans serving our community, with the exception of one that removed us from their (commercial) network, Quartz.

The effect of all of this isn't just about Medicare beneficiaries. It's about everyone. To close the loop – because the government plans reimburse less than the cost of providing a service, there is a "hidden tax," if you will, on the commercial side. The gap to cover that cost is borne on the backs of commercial insurance – whether you get that through your employer, on the exchange, or through an individual plan purchased from a broker. It is why hospitals and health systems aggressively target commercial populations; they need that business to shore up their financials.

A few weeks ago, the announcement came out that commercial insurance rates for the individual and small business markets were increasing by an average of 25%. In a nearby state, I know some types of businesses saw increases of 40-50%. If Minnesota didn't have reinsurance in place, the average increase would be closer to 69%. It boggles the mind.

My point in walking through all of this is to share the intertwined complexity of the system we have in the U.S. As we pull Jenga blocks, we might be okay for a time, but ultimately there is one Jenga block that topples the entire structure. The trick is figuring out which one not to pull.

Perhaps we are looking at this all wrong. What if we stepped back and imagined something entirely new? There are flaws in all of the plan designs, whether government payer or commercial – too much variation to manage. Add to that misaligned incentives among payers, providers and patients. Who hasn't heard someone comment, "I reached my out-of-pocket cap this year, I need to see what else I can get done since it won't cost me anything"? This aligns with the year-end rush when that scenario is actually in play. Does anyone think this way when it comes to their homeowners insurance, car insurance, disability insurance, life insurance or any other type of insurance product out there? No, we do not.

Maybe the insurance model is the wrong model – government or commercial. What could we imagine? It would have to hold all parties accountable, be fair and recognize that not everyone was gifted the same genes, so allowances must be made, and more.

The current fighting over the dead horse won't make the horse any deader; the fighting will turn toward each other, again, creating lose-lose-lose scenarios. We can do better than that.

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