Employers Pay Hospitals Billions More Than Medicare

How Much More Than Medicare Do Private Insurers Pay? A Review of the  Literature | KFF

Source: Axios, by Adriel Bettelheim and Caitlin Owens

Employers and private insurance plans in 2020 paid hospitals 224% of what Medicare paid for the same services, with rates for inpatient and outpatient care varying widely from site to site, a new report from RAND finds.

The intrigue: The report found that hospital prices had no significant correlation with hospitals’ share of Medicare and Medicaid patients, which hospitals say factor into private rates. Price did positively correlate with hospital market share.

Why it matters: Hospitals account for about 37% of health spending for the privately insured — and even people who don’t use hospital services foot some of the bill through their premiums.

The big picture: Annual per-person spending growth for workplace health coverage has exceeded spending growth for government programs in nine of the past 13 years, largely because enrollment and demand for services among the commercially insured has barely changed.

  • * The divergence in pricing has been linked to mergers and acquisitions, affiliation agreements and other consolidation that increases hospitals’ leverage.
  • * In 2021, the average premium cost of an employer-sponsored family plan was more than $22,000, an increase of 47% from 2011, according to the Kaiser Family Foundation.

What they found: The report draws on medical claims data from employers and state databases from 2018 to 2020 covering 4,102 hospitals and 4,091 ambulatory surgical centers that account for $78.8 billion of spending.

  • * States like Hawaii, Arkansas and Washington had relative prices below 175% of Medicare prices, while others including Florida, West Virginia and South Carolina had prices at or above 310% of Medicare levels.
  • * In 2020, COVID-19 inpatient hospitalizations averaged 241% of Medicare, which is similar to the relative price for all inpatient procedures.
  • * Prices for common outpatient services performed in ambulatory surgical centers such as imaging and colonoscopies averaged 162% of Medicare payments. However, Medicare pays the centers less than it pays hospital outpatient departments for the same services, the study notes, and the ratio would be lower if centers were paid the same way.
  • * Medicare per-procedure payments to hospital outpatient departments were 2.1 times higher than payments to ambulatory surgical centers and commercial payments were 2.6 times larger, the study found.
  • * If the same providers were paid Medicare rates for the same services, employers and private plans would have saved $49.9 billion, researchers said.

The other side: Hospitals say Medicare reimbursement rates are too low, so they have to charge privately insured patients more to make ends meet. The pandemic has also disrupted many hospital business models — for example, by forcing the cancellation of elective procedures.

The bottom line: Health costs are likely to keep rising for those with private insurance as employers use higher deductibles, copays and coinsurance to offset some of the rising costs.

  • * While employers back reforming how workplace health care is paid for, they don’t agree on many of the details or how significant changes would be.
  • * The more information about pricing disparities that becomes public, the more likely it is that pressure on hospitals to justify their prices will build.

White House Warns Of COVID Surges In The Winter

White House warns of Covid surges in the winter - POLITICO

Source: Politico, by Hannah Farrow

Covid cases surged during the last two winters and are likely to again this year — unless the country can prepare and act, White House Covid-19 response coordinator Ashish Jha said Sunday morning.

“If we don’t get ahead of this thing, we’ll have a lot of waning immunity, this virus continues to evolve and we may see a pretty sizable wave of infections, hospitalizations and deaths this fall and winter,” Jha said on ABC’s “This Week.”

Congress needs to provide resources, Jha said, specifically $22.5 billion, a number that will help with a vaccine supply that’s dwindling. In March, White House Coronavirus Response Coordinator Jeff Zients said: “If the science shows that fourth doses are needed for the general population later this year, we will not have the supply necessary to ensure shots are available.”

The money, once allocated, would go toward Covid vaccine supply and coronavirus testing.

“If Congress doesn’t step up and fund these, I think, urgent and emergent priorities … they can’t wait until the fall, it will be too late,” Jha said.

And the proof is in the jab. With cases increasing in the Northeast, deaths remain low because of high vaccination rates.

“That’s not true for the whole country,” Jha said.

With enough resources to get more people vaccinated and more therapeutics in place, he said, “I do think we can get through this winter without a lot of suffering and death.”

Medicare At 60 Would Have Harmful Unintended Consequences

Unintended Consequences Of Medicare-for-All

Source: STAT News, by Tom Church and Daniel L. Heil

In an era of rising inflation and trillion-dollar deficits, there appears to be growing bipartisan support for fiscal restraint. President Biden’s recent budget proposal featured more than $1 trillion in deficit-reducing policies. And his administration is now promising that the proposals once comprising the president’s Build Back Better agenda will be, at worst, deficit neutral.

But despite the changing fiscal environment, many in Congress are still eager to enact a costly and risky expansion of Medicare.

This idea seems simple: lower the eligibility age of Medicare from 65 to 60 to make out-of-pocket health care costs and premiums more affordable for millions of Americans. Supporters of the idea point to Medicare’s popularity among the elderly and argue that the policy would extend coverage at the stage of life when health care costs begin to rise.

This seemingly simple idea, however, would come with significant downsides and unintentional consequences. With support from the Partnership for America’s Health Care Future, we scored the distributional and fiscal impacts of lowering Medicare’s eligibility age on both the newly eligible population and on health care providers.

Expanding coverage wouldn’t be cheap. We estimate that the federal deficit would rise by as much as $42.6 billion in the first year of the program and $452 billion over its first 10 years — not counting increased interest costs to the federal government.

But the fiscal costs are only part of the story. Medicare at 60 poorly targets those in need and relies on cost-shifting to hide its true cost.

One of the justifications for lowering the eligibility age for Medicare is to help those in need of purchasing health insurance. Yet our analysis finds that compared to the 18- to 59-year-olds who would remain ineligible, the newly eligible population would be less likely to be uninsured and more likely to have incomes above 400% of the federal poverty line.

And even among the newly eligible, it is far from clear whether the policy would help low-income Americans. Many of these individuals are already receiving health care subsidies through the Affordable Care Act, so shifting them to Medicare could mean higher premiums and increased out-of-pocket spending. We estimate that 36% of Affordable Care Act enrollees would see their combined premiums plus out-of-pocket spending rise under Medicare at 60. Even worse, the group most likely to see their combined costs rise are those with incomes between 150% to 250% of the federal poverty line. Conversely, 90% of ACA recipients with incomes above 400% of the poverty line would see their combined costs fall under Medicare at 60.

There’s one other group that would be financially affected by Medicare at 60: doctors, hospitals, and other health care providers. Previous efforts to rein in growing costs have focused on paying physicians and hospitals less for their services, and Medicare at 60 is no different.

The issue is that physicians and hospitals receive less for providing the exact services to patients covered by Medicare or Medicaid than they receive for those who are privately insured. Medicare at 60 would shift more reimbursements from private rates to government-mandated Medicare rates, resulting in revenue cuts for health care providers.

Actuaries at the Centers for Medicare & Medicaid Services project that, under current law, reimbursement rates for Medicare services relative to private insurers will continue to fall. In the absence of cost-cutting measures or large increases in utilizations, reductions in inpatient hospital service payments from Medicare at 60 would reduce annual profits by about 25% for the median hospital and by even larger amounts for hospitals with below-average margins. Physicians would be less affected in the short term, but face steeper growth in cuts in the long term.

These cuts would have significant financial effects on hospitals and providers. Congress’s past behavior suggests these cuts may not come to fruition. From 2003 to 2014, Congress repeatedly overrode scheduled cuts to providers as part of the near-annual legislation that came to be known as the “doc fix.” But if Congress succumbs to political pressures and prevents reimbursement rates from falling any further, we estimate the fiscal cost of Medicare at 60 would rise by $72 billion during the 10-year budget window. The trade-off is inevitable: either Medicare at 60 will mean steep revenue cuts for physicians and hospitals, or much higher costs for taxpayers.

Lawmakers are now admitting that the federal government faces a genuine budget constraint. That makes it an odd time to think about expanding Medicare to 60-to 64-year-olds. Even under optimistic fiscal assumptions, the proposal would add billions to federal deficits, while poorly targeting those in need and straining the finances of hospitals and physicians.

Small Businesses Owe Billions In Unforgiven PPP Loans

Small Businesses Owe Billions in Unforgiven PPP Loans | Word & Brown

Source: Word & Brown, by Alex Strautman

The Paycheck Protection Program (PPP), launched as part of the federal government’s Coronavirus Aid, Relief, and Economic Security (CARES) Act to aid to small businesses coping with the impact of COVID-19, ended on May 31, 2021. However, nearly 350,000 small businesses that received a PPP loan have not had their loans forgiven. Another 380,000 loans have been only partially forgiven.

A recent analysis by Bloomberg News says total PPP debt amounts to $28 billion, with most loans for less than $25,000. During 2021, the Small Business Administration (SBA) reported distributing more than $400 billion to more than six million businesses through the PPP, Restaurant Revitalization Fund, Shuttered Venue Operators Grant, COVID Economic Injury Disaster Loan (EIDL), and targeted and supplemental advance programs.

Employers receiving a PPP loan during the first funding round had until August 30, 2021, to apply for loan forgiveness. However, advocacy groups, community leaders, and business owners say the process for seeking forgiveness is burdensome for businesses. Indeed, the loan forgiveness application, SBA Form 3508S (07/21), is seven pages and requires considerable documentation regarding how PPP funds were used.

The SBA boasted in 2021 that it had streamlined its forgiveness application processes. In a press release, the SBA said, “a borrower of a participating lender can now complete most or all of a forgiveness application using a computer or, for the first time, their smartphone. On average, users are able to complete and submit directly to the SBA their applications in just six minutes, and most receive their forgiveness decisions within a week from the date of submission.“

More than six months after the forgiveness application deadline, 50+ business and advocacy groups are still pushing the SBA, Treasury Department, and Congress to forgive automatically PPP loans of $25,000 and less. They argue that many sole proprietors face challenges with income, payroll, and expense documentation. They are also seeking rescission of a rule that denied forgiveness to businesses making a good-faith effort to comply with forgives rules.

In other PPP-related news, the Justice Department continues to go after individuals and businesses that have misused funds related to CARES assistance. In March, charges were filed in Louisiana against an Amtrak employee who sought approximately $89,000 in PPP funds, even while working full-time.

Sentencing also took place last month for two Michigan residents who obtained nearly $1.5 million in PPP funds. Authorities have recovered more than $1.123 million traced to the fraudulently obtained funds through a parallel civil asset forfeiture action. California convictions include seven individuals in Los Angeles sentenced in November for PPP and EIDL fraud in excess of $20 million, as well as a separate action last year against a Temecula business owner who sought and obtained $7.25 million in federal assistance.

Biosimilar Medications Could Save Billions

Over the next decade, the United States could save $44 billion by introducing competing biosimilar versions of complex biologic drugs, according to a report by the RAND Corporation. Biologics, which treat conditions, such as cancer and rheumatoid arthritis, are often effective, but expensive. Patient copays can be several thousand dollars a year. In 2011, eight of the 20 best selling drugs were biologics. Also, annual spending on the drugs has grown three times faster than spending for other prescription medications. Introducing biosimilar drugs into the U.S. marketplace is expected to increase competition and drive down prices, saving money for patients, health care payers, and taxpayers. However, savings are not expected to be as dramatic the as savings we have seen for an earlier generation of less-complex generic drugs.

The Affordable Care Act authorizes the FDA to develop a regulatory framework for approving biosimilar drugs. Draft materials released by the FDA suggest that not all biosimilars will be interchangeable with their original counterparts. In addition, nearly all biosimilars will require at least one head-to-head clinical trial to confirm similarity to the original biologic, which is a more-strenuous process than what is required for standard generics. A number of issues will determine the savings and who will benefit. One issue is how much the use of biologics grows as some patients switch to biosimilar drugs as they become more affordable. Patients will see some cost savings. But physicians and hospitals may also benefit because biologicals are often purchased by health providers and administered in clinics and other treatment settings. For more information, visit www.rand.org.

HHS Says That MLR Rules Have Saved Consumers $9 billion on Premiums

HHS secretary Sylvia M. Burwell announced that consumers have saved $9 billion on their health insurance premiums since 2011 as a result of the Affordable Care Act. The Medical Loss Ratio (MLR) rule requires insurers to spend at least 80% of premium dollars on patient care and quality improvement activities. If insurers spend an excessive amount on profits and red tape, they owe a refund back to consumers. The report shows that, since the rule took effect, more insurers year over year are meeting the 80/20 standard by spending more of the premium dollars they collect on patient care and quality, and not red tape and bonuses. For more information, visit http://www.cms.gov.

Last Updated 05/25/2022

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