In this episode of the Empowering Plans podcast, Ron and Brady briefly discuss Phia's new headquarters in Canton, MA. Then, they jump into a discussion about recent high-profile court cases that could shape our industry: from requiring hospitals to post their negotiated rates with insurers online to the Trump administration's latest action in the Supreme Court case that could spell the end of the entire Affordable Care Act.
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By: Nick Bonds, Esq.
With the Legislature moving at a glacial pace, the Trump administration has doubled down on its policy objective to reduce health care costs through executive action and administrative rulemaking. A key part of their strategy involves a push to increase transparency in the health care industry – taking special aim at hospitals and drug manufacturers. The apparent logic being that if hospitals and drug makers have to share their actual prices, patient reaction will be strong enough to drag prices down. Experts disagree as to how effective these strategies would be in theory, but we may never have the opportunity to see their impact in practice.
High-profile initiatives to emerge from this approach have run in to a number of difficulties. The administration’s proposed rule requiring drug manufacturers to disclose their drugs’ list prices in their television ads has not been largely repulsed by the pharmaceutical industry, who have had a fair amount of success thus far blocking this rule in court. The pharmaceutical industry argued that this disclosure rule lacked authority and violated their free speech. Last summer, a federal judge in Washington, D.C. ruled that HHS exceeded its authority by compelling them to disclose their prices. HHS appealed, but this past week the U.S. Court of Appeals for the D.C. Circuit appeared unsympathetic. The appeals court agreed that HHS had not been granted the requisite authority by Congress to implement this drug pricing rule, and remained unconvinced that this pricing disclosure requirement would in fact help achieve the administration’s goal of bringing down drug costs. WE expect the administration to appeal yet again.
Announced last November, another transparency-minded federal rule requires hospital systems to disclose the price discounts they have negotiated with insurers for a wide swath of procedures. This disclosure is intended to inform patients of their prospective costs before they are incurred, empowering patients to shop around for the best prices. Here again, debate swirls as to whether this tactic would be effective. Meanwhile, hospital groups have implored the D.C. District Court to block these rules from taking effect echoing the arguments of the pharmaceutical companies before them: that the administration lacks the authority to implement its rule, and that the proposed rule violates their First Amendment rights. Time will tell if the courts come down on the administration’s side this time around.
Other Trump administration efforts have seen fewer setbacks: they have slashed regulations on short terms plans and association health plans (“AHPs”), more generic drugs have been approved, and they are plowing ahead with a notice of proposed rulemaking to allow importation of prescription drugs from Canada. Nonetheless, the number of Americans without health insurance continues to rise, as do marketplace premiums and the actual costs of care. The goal of reducing healthcare costs is an admirable one, we will see how effective the administration’s attempts will be.
By: Ron E. Peck, Esq.
I really enjoy the quote, attributed to Haruki Murakami, that “Pain is inevitable. Suffering is optional.” This really hits home for me for a few reasons, personal and professional, but for our purposes – let’s consider how it relates to the health benefits industry and healthcare as a whole.
Anyone paying attention to the media and political debates will no doubt make note of the constant rhetoric regarding healthcare, and more to-the-point, the “cost” of healthcare. I’ve (here and elsewhere) discussed ad-nauseam my position that health “care” and health “insurance” are not the same. That insurance is a means by which you pay for care, and is not care itself. That by addressing solely the cost of insurance, and not the cost of care, you build a home on a rotten foundation. So, you can likely imagine some of the “ad-nauseam” I feel in my stomach when I hear the candidates talking on and on about how they’ll “fix” the problem of rising healthcare costs by punishing insurance carriers and making health “insurance” affordable (including Medicare-for-All).
The issue is that, ultimately, whether I pay via cash, check or credit… and whether I pay out of my own bank account, my wife’s account, or my parent’s account… at the end of the day, a beer at Gillette Stadium still costs more than a beer from the hole-in-the-wall pub, and if I keep buying beer from (and thereby encouraging the up-charging by) the stadium, prices will increase and whomever is paying (and in whatever form they are paying) will be drained, and no longer be able to pay for much longer. In other words, making insurance affordable (or free) without addressing the actual cost itself is simply passing the buck.
So, this brings me to the quote: “Pain is inevitable. Suffering is optional.”
Pain – the pain we feel as we are forced to deal with a costly, yet necessary, thing … healthcare. As technologies improve, research expands, and miracles take place every day, I absolutely understand that with the joys of modern medicine, come too the pain of cost. We must identify ways to reward the innovators, the care takers, the providers of life saving care.
Yet, we – as not only an industry, but as a nation – also assume that with this inevitable pain, so too must come the suffering. Suffering in the form of bankruptcy for hard working Americans and their families. Suffering in the form of unaffordable care, patients being turned away by providers, and steadily rising out of pocket expenses.
I do not believe that this suffering needs to be inevitable. If instead we accept the inevitability of the “pain” inherent in healthcare, and the costs of providing healthcare, but instead identify innovative ways to address those costs, then we can avoid the suffering. Our own health plan, for instance, rewards providers that identify and implement ways to provide the best care, for the least cost. Our plan rewards participants who utilize such providers as well. We educate our plan participants regarding how, unlike in many other aspects of life, in healthcare you do NOT “get” what you “pay for.” That fancy labels, advertisements, and price tags do not equate to better care. We teach our participants how to leverage not only “price transparency,” but also quality measurements to identify the “best of the best” when seeking care – providers that perform as well or better than the rest, for the lowest cost. Rather than accept the “inevitability” of suffering, we embrace the pain – we endure the costs, the time, the resources necessary to actually care, and make ourselves educated consumers of healthcare.
The result? Plan participants – employees that have been on the plan for five or more years – will, beginning in 2020, not make any contribution payment to our plan. That’s right; their “premium” is zero dollars. The cost of their enrollment is covered, 100%, by the plan sponsor. The plan sponsor, meanwhile, can afford to do this thanks to efforts it has made, as well as efforts made by its plan participants, to keep the costs down. Indeed, a self-funded employer like us can make a choice – either assume that the suffering is inevitable, and pass the cost onto the plan members (incurring the wrath of your own employees and politicians alike), or, see that the suffering is optional, and nip it in the bud. We have identified ways to better deal with the inevitable pain, thereby minimizing the suffering endured by our plan participants.
It can be done, and we did it. You can too, but the first step is accepting that some things are inevitable, and others are not. Assigning inevitability to something that is not in fact inevitable is a form of laziness and blame shifting; and the time has come to stop that behavior, accept responsibility, do the painful work necessary to change things, and recognize that – no pain, no gain.
By: Nick Bonds, Esq.
With Presidential impeachment eating up the above-the-fold coverage pretty much universally, it is important to remember that Congress has other pressing issues to attend to. While a number of Democratic candidates are worried their mandatory attendance at the Senate trial will eat up valuable campaign time on the ground in the early primary states, the rest of Congress is still trying to keep the country running.
For instance, while Democrats and Republicans have an “agreement in principle” on a stopgap appropriations deal to fund the government through the end of the fiscal year, the spending package still needs to be finalized an passed before December 20 to avoid another looming shutdown. Meanwhile, the House Ways and Means Committee is working to ratify the United States-Mexico-Canada Agreement (USMCA), the Trump Administration’s replacement for NAFTA. Both of these urgent matters of business appear to have bipartisan support, but Congress is certainly feeling the pressure as this week gets underway.
The major sticking point in the USMCA negotiations appears to be the debate around the trade deal’s prescription drug provisions. The pharmaceutical lobby has long been pushing for prescription drug protections in trade deals – remember the TPP – but this time around the White House’s primary objective appears to be lowering drug prices. A concession to strike protections for biologics from the trade agreement appears to have clinched Democratic support, who opposed the deal’s 10 years of regulatory data protection for biologics innovations. Democrats argued that the biologics protections would increase drug prices in the U.S. and delay development of cheaper biosimilar drugs.
While the USMCA appears on track for ratification, Speaker Pelosi’s prize fight of the moment is her drug pricing bill – which passed the House along party lines last Thursday. The bill, named for late Representative Elijah Cummings, aims to expand Medicare, reign in drug prices, and allow the HHS Secretary to negotiate prices of between 50 and 250 prescription drugs (including insulin). President Trump appears poised to veto the Elijah Cummings Lower Drug Costs Now Act, while the Senate is debating a more moderate proposal – the Prescription Drug Pricing Reduction Act (PDPRA). The PDPRA would add consumer protections to cap out-of-pocket (OOP) prescription drug spending, and take measures to redesign Medicare Part D and reign in drug prices.
Congress has a lot of irons in the fire this week. We shall see what they can hammer out.
As the 2020 Presidential Election draws closer, the topic of healthcare continues to dominate the airwaves. Be it media or debate, this is one of the (if not the) issue about which everyone is talking; but pay close attention and you’ll notice they aren’t all speaking the same language.
Access vs. Care vs. Insurance
One word everyone can agree upon is “affordability.” The issue, however, is that depending upon whom you ask, what it is that ought to be “affordable” differs. Some people throw the term “access” around, while others seek affordable “care,” whilst still others focus (candidly) on affordable insurance.
Interestingly, for many, the term they use (access versus healthcare) matters little, as – once their position is better defined – a shrewd listener will note that the goal is ultimately the same; make insurance cheaper. They seem to believe that insurance is healthcare, and cheaper insurance is thereby cheaper healthcare. Further, they believe that the only “cost” of healthcare, incurred by an insured person is their premium, co-pay, coinsurance, and deductible.
This, then, is one misconception that continues to dominate political, regulatory, and economic discourse; that by attacking the cost of insurance for the general populace (i.e. premiums/contributions, co-pays, coinsurance, and deductibles), you somehow fix the problem of limited access and/or the high cost of healthcare.
Health Insurance is Not Healthcare
I’ve written in the past, and continue to argue today, that health insurance is not healthcare. Health insurance is one means by which the risk of payment for healthcare is shifted from the consumer of healthcare to a third-party payer. Changing who pays for healthcare doesn’t (on its own) address how much the healthcare costs. For instance, before you argue that Congress should establish a funding mechanism to support the “cost of caring” for those with significant medical needs, ask first what it means to pay for care. Are you referring to the cost of insurance, or the cost of the “actual” health care for which insurance pays?
Some might argue, however, that when a “new” payer is designated, (be it insurance, a self-funded plan, or the government), if they are large enough and possess enough clout, they can strongarm the provider into accepting lower prices for care – thereby reducing the actual cost of care. Thus, while making insurance more affordable doesn’t in and of itself reduce the cost of care, by providing more lives (and this negotiation power) to the payer, those payers in turn are provided with more “power” to force providers into accepting lower prices. Indeed, a single-payer would hold all the cards, and thus name their own price.
In a vacuum it makes sense, and if we were purchasing potatoes or tires it may work (in a truly free-market environment), however, in healthcare some features apply that are unique to this industry.
A Non-Market Market
In any other market, a vendor of goods or services can set any price for those goods or services. Supply, demand, and competition will then force the vendor to increase or reduce their price or fail. This allows the “free market” to naturally set prices at a level both the seller and buyer can live with. In healthcare, however, providers leverage things like technology, reputation, rankings, and sponsorships to compete for “customers” (a/k/a patients), rather than the price. Providers compete for these other things; if and when price is a matter over which there is competition between vendors (providers), it’s a competition to see who can charge the most. Indeed, one of the big pushbacks against transparent pricing in healthcare is that some providers will see that other providers “get away” with charging higher prices for the same services … and will increase their rates to match. Imagine if that same argument applied to every other industry; that the cost of bananas couldn’t be transparent, because grocers will compete to raise prices faster than the competition. Welcome to a world where the consumer has no skin in the game, and no price-based incentive to pick the lower cost options exists.
In healthcare, where patients don’t know, or (they think) pay the price of healthcare (at the time the care is consumed), and the consumer doesn’t appreciate the impact of higher healthcare prices on insurance costs, providers are able to freely raise prices without the negative repercussions vendors in other industries would immediately suffer. Additionally, even if patients know the price, if they (at least in their mind) don’t think they are the ones paying the price, then higher prices will – at best – not dissuade them from consuming care, and – at worst – will steer them away from reasonably priced care to higher cost providers, thanks to an (inaccurate) assumption that higher price equates to higher quality.
At the same time, contract law states that a customer who agrees to pay a certain price for a service or product has entered into a contract with the vendor. This preemptive agreement between the customer and vendor, regarding what will be paid, and what will be received by the customer, is titled a “meeting of the minds.” If the customer later fails to pay the amount to which they’d previously agreed, this would be deemed a breach of contract. Even if objectively, one could argue the agreed upon price is excessive, assuming the customer had the requisite capacity to enter into such a deal, the contract is binding. If, however, someone receives a good or service but there was no meeting of the minds (agreement about what would be provided, and a specific price for said goods or services), the customer will be forced to pay an objectively reasonable price – determined by an objective third party, using objective pricing parameters – and NOT whatever price the vendor chooses to collect. This concept, called Quantum Meruit, ensures vendors are adequately compensated based upon objectively reasonable parameters, and customers are not unjustly enriched (don’t “get something for nothing”) but also aren’t forced to pay a price they never agreed to (and which is excessive by all reasonable, objective measurements).
In healthcare, however, rarely can we say there is truly a meeting of the minds. It is rare indeed to see a provider (the vendor) and patient (the consumer) agree upon a price prior to the provision of services. Yet, despite this, Quantum Meruit – applicable to other commercial exchanges – has no place in healthcare, and rather, the provider is allowed to balance bill the patient whatever amount it wants – usually the amount that exists between the provider’s “charge master” price, and what it already received from the applicable carrier or benefit plan. Note that the only prohibition on this billing practice is the prior existence of a contract between a payer and the provider, by whose terms the provider agrees to accept the payer’s payment as payment in full. This agreement, many argue, is the greatest value a network offers.
Given that the law protects a provider’s right to charge whatever they wish – with no limits based in reasonableness, meeting of the minds, or Quantum Meruit – and limited only by pre-negotiated contracts, payers generally negotiate from a weak position.
As such, simply ensuring everyone has insurance will not drastically reduce the cost of healthcare itself. Further, people – whether they are insured or not – will pay the cost when healthcare is too expensive. Be it balance bills for the uninsured, or rising premiums and deductibles for the insured – the money needs to come from somewhere.
Compounding the issue further is that fact that Americans generally suffer from a lack of long-term vision. We are, as a society, driven by a need for instant gratification. People use credit cards to buy things now, that they can’t afford later. People purchase homes and take out mortgages now, that they can’t afford later. Likewise, people obtain healthcare now that they can’t afford later. Make no mistake; even those with insurance pay the cost later, in the form of higher premiums, co-pays, deductibles, and co-insurance. Therein lies the rub – people are quick to target out of pocket expenses at the time care is received, and the cost of insurance in general, but they do so without asking why insurance is expensive or addressing that root cause.
Until people understand that – with or without insurance – patients will ultimately be responsible for the actual cost of care, then the issue will not be resolved. In other words, focusing on the rising out of pocket expenses, such as premiums, co-pays, and deductibles – without also focusing on why these expenses are increasing – addresses a symptom without diagnosing the disease.
What Does This Mean for Us?
Many candidates and their supporters are proponents of the so-called “Medicare for All” plan, yet even many who support those candidates are beginning to hesitate, worrying that under Medicare payment rates (forced down providers’ throats by a single-payer monopoly), some hospitals struggling to stay open might close. Here, then, we see the opposite issue – ushered in when a monopoly is in place. A single-payer with too much power can force opposition into accepting unduly low, unfair rates.
Is there a happy medium? Some have argued that a so-called “public option” may be one such “middle ground,” but this idea cannot live in harmony with private benefits for long … resulting in the demise of private plans, and eventual monopoly that is a single-payer, and which (as already discussed) most agree needs to be avoided.
Consider as “Exhibit A” the State of Washington. Washington is set to become the first state to enter the private health insurance market with a so-called “public option,” at rates supporters say will be 10% cheaper than comparable private insurance. Almost as if the lawmakers read my article above (before I even wrote it), they claim these savings will be achieved thanks to a cap on rates paid to providers.
Without going into too much detail regarding the pricing model (spoiler alert – it’s a percentage of Medicare), if this public option is indeed available to all residents, and if they can “force” providers to accept these payments as payment in full (thereby preventing balance billing), why would anyone sign up for a private plan? If, then, all private plan members are steered by sheer common sense to this public option, private plans will cease to exist and – in this way – a single-payer emerges from the exchange.
It was this threat that caused a public option to be removed from the proposed PPACA legislation, but now it’s back, at the State level as well as in proposals presented by Democratic candidates for the Presidency.
In the end, unless private plans and providers can achieve a meeting of the minds … and make healthcare affordable long term … this may be the future sooner than we think.