“Single-Payer” Update
“Single-Player” Update
by Christoper E. Condeluci, Principal and sole shareholder of CC Law & Policy PLLC in Washington, D.C.
- For the reasons I discussed in last week’s update (see attached update), I am going to start a “Single-Payer” Update section going forward (i.e., as the “political” season starts to heat up – as we near the mid-term elections and the 2020 Presidential election cycle – I believe we are going to hear more and more about single-payer and “public option”-like programs).
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- Analysis: Look, I do NOT think we will ever get to a single-payer system. I believe we are too much of a capitalist society. And, I believe that the stakeholders in the health care industry – with their heavy-weight lobbying – would NEVER let our nation’s policymakers enact a single-payer system. There are also questions about the sustainability. Based on what we have seen in Vermont, California, and Colorado, the cost of establishing and maintaining a single-payer system appear to be unsustainable (that is why none of these States were able to put a single-payer system in place). BUT, it’s not as if government spending under our current health care system is sustainable either. And, employers are getting to a point where there are limited cost-containment strategies they can incorporate into their health benefits offerings to keep costs low. For example, shifting the ever-increasing cost of health care onto employees is reaching a breaking-point (e.g., the increased cost-sharing is itself becoming unsustainable for employees). Wellness programs – while increasing productivity and presenteeism – does not produce material cost reductions when measured against the investment made in these programs. Tele-medicine offerings should help, but we have seen some instances where high fees and over-utilization limits overall savings. You have heard me talk about value-based care strategies like bundled payments, shared risk models, reference-based pricing, etc. Some savings are produced under these types of programs, but these strategies are not a “silver bullet.” So what’s the answer? Single-payer? As stated above, I do NOT ever see single-payer becoming a reality. But what I do see is “shades” of single-payer. What I mean by “shades” of single-payer is this: The program is not true single-payer, but it’s a policy change where the government dictates the terms of the health coverage – in addition to the cost of the coverage – NOT the private markets. As you know, one “shade” of single-payer is some form of a “public option” health plan, where the government is the “payer” of the health coverage, typically at lower payment rates than private insurance. Another “shade” of single-payer is price controls, where the government “sets” the price for various medical procedures and services. We all know there are already variations of price controls throughout our health care system, most notably in our “public” health care programs, but in limited cases for “private” insurance too. For example, many argue that the Medical Loss Ratio (MLR) rules are a form of a price control. But – at least up and until now – the Federal government has not proposed “setting” prices for specific medical procedures and services. Are we on the precipice of government price controls, especially in light of everything I mentioned above?? Well, Maryland is already doing it, and California is now proposing to “set” medical prices for private insurance. Under the California proposal, a State “Board Authority” would regulate prices for medical procedures and services. The “set” prices would represent a percentage of Medicare prices. For example, the price for a doctor visit might be the Medicare price +10%, or the price for an appendectomy might be the Medicare price +15%, or the price for a colonoscopy might be the Medicare price +2%. You get the picture (not literally though). So in essence, while the government would NOT be running a health program and serving as the “payer” for coverage, the government WOULD be regulating the prices for private insurance. And, the “set” price would be payable under every insurance contract to every provider for the same medical procedure or service. No discounted/negotiated prices that often times vary widely from provider to provider for the same medical procedure and/or service. BTW, there is merit to trying to provide more uniformity in prices for the same medical procedures and services. To an extent, this is one the ultimate goals of increasing “transparency” and moving to a value-based health care system that operates based on uniform “standards” and “performance measures.” That is, through increased “transparency,” consumers will know the price they are paying for medical procedures/services, which should promote competition not only on price, but providers will likely compete on “quality” (and therefore – as the theory goes – the bar will be raised on the “quality” of care and “health outcomes”). A value-based health care system also determines payment rates based on “quality” and “health outcomes,” with the hope that these incentives will encourage providers to up-their-game so we have more providers providing better “quality” of care (kind of a-rising-tide-raises-all-boats theory). But that is NOT what California is doing here. Instead, California is pursuing a “shade” of single-payer which is intended to help control overall costs, and provide a much more uniform pricing system for medical procedures and services. But, a strong argument can be made that price controls will NOT improve “quality” or “health outcomes.” Proponents of this all-payer rate setting concept may disagree with me though. Last comment: In my current practice, I have the opportunity to give a lot of presentations and participate in table-talk-type discussions with stakeholders. Often times someone will say, “The reason why premiums and out-of-pocket costs are so high is because the price of health care is so high.” Another person will say, “Well, how do we lower the cost of health care?” Then, there is a deer-in-head-lights moment where no one knows how to respond. Often times I say, “Value-based care is arguably one way to reduce the cost of health care.” But I also say, “Price controls could arguably do it too.” Are we really at a point where the only 2 pathways to lowering health care costs is (1) Value-Based Care or (2) Price Controls? They are 2 vastly different strategies for sure.
Value-Based Care Update
HHS Requires Hospitals to Disclose Their “Standard Charges” for Medical Services
- I am considering HHS’s announcement here as a “value-based care” issue because many believe that requiring hospitals to publish their “standard charges” for medical services is a big step toward providing more “transparency” of medical prices. HHS certainly thinks that finally enforcing this “price disclosure” requirement is a step toward moving to a value-based health care system. And, HHS considers this announcement as an example of what Secretary Azar was talking about when he recently put the health care industry on notice that his Department intends to require meaningful price transparency so consumers – as Secretary Azar put it – can be “in charge of their own healthcare dollars.”
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- Analysis: What’s interesting here is that the requirement that hospitals publish their standards rates has been on the books ever since the ACA was enacted. This requirement, however, was never implemented. Until now… But, in the wake of this announcement, stakeholders have argued that disclosing “standard charges” for medical service won’t help all that much. That’s because – critics argue – what consumers really need to know is their share of the “standard charge” that they will be responsible for. Standard charges also do not reflect the negotiated or discounted rates insurance carriers have secured with a particular provider, so surprise balance billing may still occur. It appears, however, that HHS understands the challenges of simply disclosing “standard charges.” As part of the requirement to disclose medical prices was a Request for Information (RFI) asking: What price transparency information is the most useful, and how can hospitals develop and implement consumer-facing platforms that allow consumers to easily access relevant healthcare data and comparison shop among providers. The RFI also asks whether making the disclosure of medical prices should be a “condition” for contracting with the government to participate in Medicare (something I think HHS should do, as discussed in the 2nd attached update, the Value-Based Care Update).
HHS Decides to Share Medicare Advantage Claims Data With Researchers
- I am not a “Big Data” expert, but I – like many – believe that data analytics is the future, and hopefully data analytics is something that can be leveraged to help lower health care costs. To that end, HHS is moving in the direction of sharing data with private- and public-sector researchers in an effort to determine health and spending trends on various medical conditions in various parts of the country. The data should also help private-sector companies currently building transparency tools, which should further help Medicare beneficiaries seeking to purchase a Medicare Advantage (MA) plan – or those enrolled in an MA plan – to better manage their out-of-pocket costs and utilization.
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- Analysis: While this issue may not fit squarely into the “value-based care” category, this data-sharing can be used to figure out how private insurers providing supplemental coverage to seniors can start paying for “value” instead of “volume.” This data-sharing may also help drive innovation and competition among providers that treat the roughly 19 million Medicare beneficiaries enrolled in MA plans. It will be interesting to see whether the private-sector can readily use this data to produce material changes for Medicare beneficiaries. I say that because arguments have been made that the “Medicare claims data” for the fee-for-service program that was shared with private-sector researchers back in 2014 was in no way “user-friendly” and in some cases it was incomplete. As a result, most say that this data dump was not easily researchable, and to an extent, relatively useless at least as it relates to improving “transparency” and “quality.” I am hoping that is not the case with the recent (and ongoing) release of Medicare Advantage data. I am also hoping that this move puts pressure on the private insurance markets for consumers under 65 (i.e., both the “individual” and “group” markets). As I argued in a previous update (see the 2nd attached update, Value-Based Care Update), it is ridiculous that insurance carriers and providers continue to refuse to share with consumers, employers, and researchers health claims data and prices for medical services for people covered under private insurance plans. I actually think that HHS should require providers that participate in, for example, Medicare to – as a “condition” of contract – not only disclose certain information relating to the Medicare or MA programs, but these providers should ALSO be required to disclose the prices of medical services provided to private insurance policyholders in the individual and group markets. Congress could also go the tax route by imposing tax penalties or providing tax incentives as a way to get providers and carriers to disclose information to private planholders.
Employer Update
IRS Issues Guidance Confirming That the HSA “Family” Contribution Limit for 2018 Is $6,900
- Back in March, I reported that the Tax Reform legislation changed the “index” rate for most of the Tax Code’s limits to a slower growth rate – called “chained” CPI. This new slower growing “chained” CPI became effective Jan. 1, 2018, and therefore, the change in the law required the IRS to modify the affected Tax Code limits for 2018, including the HSA “family” contribution limit. These modifications were announced March 2, 2018.
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- Analysis: The rub here is that back in May 2017, the IRS already announced what the HSA “family” contribution limit for 2018 would be based on the old index rate (the announced limit was $6,900). Soooo, when the IRS modified the Tax Code’s limits due to the new “chained” CPI index rate, the IRS REDUCED by $50 the HSA “family” contribution limit for 2018 (that’s $6,850 for those keeping score at home). Which threw a lot of things out-of-whack. What I mean is, based on the mid-2017 announcement, HSA banks and administrators set their systems to $6,900 beginning Jan. 1, 2018. And, employers communicated to their employees that the 2018 HSA “family” contribution limit would be $6,900 during their 2018 “open enrollment” last year (e.g., during the Oct., Nov., and/or Dec. 2017 time-frame). So here was the problem: With the new limit of $6,850, HSA banks and administrators would now be required to change their systems after-the-fact. And, employers would have to send new communications to their employees telling them that the HSA “family” contribution limit for 2018 is no longer $6,900, rather it is $6,850. This did NOT go over well with the HSA community, as well as the employer community. As a result, the Treasury Department was inundated with letters from the HSA community asking for reinstatement of the $6,900 limit. Employers scheduled meetings with Treasury to ask for some sort of relief. And members of Congress even got into the act by sending a letter of their own, asking Treasury to find a solution here. Well, all of that advocacy worked. While most expected Treasury would fix this issue about 3 weeks ago, Treasury and IRS finally came to the rescue, issuing guidance that confirms that the 2018 HSA “family” contribution limit will remain at $6,900 for ALL HSA-holders who have yet to contribute up to this maximum amount. The guidance also speaks to the tax consequences that would arise in cases (1) where HSA-holders contributed the max amount of $6,900 BEFORE the modified limit of $6,850 was announced this past March and (2) where the HSA-holders received a distribution of the “excess contribution” of $50. Specifically, in cases where an HSA-holder made a contribution OUTSIDE of a 125 cafeteria plan, and where the HSA bank distributed the “excess contribution” back to the HSA-holder, no tax consequences would arise, and the HSA-holder can actually re-contribute the $50 with no questions asked. However, in cases where an employee maxed out the $6,900 through their 125 cafeteria plan, and where the extra $50 was distributed back to the employee as an “excess contribution,” the IRS says that the $50 MUST be included back into income AND the employee would have to pay a 20% excise tax on the $50, unless the employee uses the $50 to pay for a “213(d) medical expense.” Now, I get why this employee is required to include the $50 in income (because this $50 was originally considered “wages” that the employee opted to contribute to their HSA on a pre-tax basis instead of including this amount in income). BUT, I do NOT get why the 20% excise tax would apply here. I recognize that a 20% excise tax on $50 is not much ($10). And I recognize the employee can avoid the excise tax by using the $50 to pay for a “213(d) expense.” But it does NOT seem like any of this is necessary. Just sayin.’