A survey of more than 3,000 U.S. employers finds that 54% are paying at least 5% more for employee medical insurance this year. Nearly one in four has seen increases of at least 10%, according to a study by Arthur J. Gallagher & Co. Sixty-seven percent say that medical and pharmacy benefits are the cornerstone of their employee benefit package and an important tool to recruit and retain talent in a tightening labor market. Telemedicine, now used by 24% of employers, is predicted to reach 42% in 2018. Narrow network healthcare plans show a growth trend from 18% to a predicted 27% in 2018. A rise in adoption of consumer directed health plans is expected from 36% to 51% in 2018. Self-insuring is expected to grow from 28% to 38% in 2018. Fewer than 5% of employers have used a private exchange, but that figure is expected to triple by 2018. Employers that excel at healthcare cost management take a comprehensive, data-driven and multi-year approach to compensation and benefit planning. However, just 8% of employers do multi-year planning with multiple data inputs. Seventy-six percent plan their benefits year-to-year, which puts them in a reactive position and less able to manage costs. For more information, visit ajg.com/NBS2016.
HMOs Beat PPOs on Cost and Quality
California’s commercial HMOs outperform commercial PPOs on most clinical quality measures. They also consistently provide less costly care. The average yearly cost is $4,245 per HMO enrollee versus $4,455 per PPO enrollee, according to the California Regional Health Care Cost & Quality Atlas. The report comes from the Integrated Healthcare Assn., the California Health Care Foundation, and the California Health and Human Services Agency. Differences in benefit designs don’t explain the cost variation since the total cost of care includes enrollee cost-sharing (deductibles and coinsurance) as well as insurance payments to providers.
HMOs may be performing better because they rely on integrated care networks, which generally accept capitation (fixed per-member, per-month payments). So they are accountable for the patients’ health and are generally rewarded for it, according to the report. So why is HMO enrollment declining? PPOs are often less costly for employers since they reduce premiums with higher enrollee cost-sharing, such as deductibles and coinsurance. But employers should look at the whole picture since HMOs produce superior results when you consider quality and the total cost of care, according to the report.
Quality of Care
California’s commercial HMOs perform better than their national counterparts on every clinical quality measure except asthma medication management. At the same time, California’s commercial PPOs perform worse than the national average on five of the six measures.
When Kaiser Permanente is removed from the analysis, the difference in clinical quality between HMOs and PPOs is cut by about half. Also, the performance difference on risk-adjusted total cost of care narrows substantially, but HMOs still outperform PPOs.
Quality is highest in Northern California, solid in Southern California, and weakest in Central California. The study reveals these regional differences is quality:
- Northern California outperforms Central and Southern California on clinical quality.
- Central California falls below the statewide average on key clinical measures for cancer, diabetes, and asthma.
- The lowest performing region is the Eastern region 13, which includes Central California counties Mono, Inyo, and Imperial.
- The highest performing region is Contra Costa County region in Northern California.
- Clinical quality scores vary significantly on some measures. For example, 33% of commercial enrollees with diabetes in Alameda County region six have poorly controlled blood sugar, compared to 75% in the Eastern region 13.
- In Southern California, San Diego County region 19 is the highest performing region, outperforming Northern California regions: San Mateo County region eight and San Francisco County region four.
If all commercially insured Californians got the same quality of care as top-performing regions, nearly 200,000 more people would have been screened for colorectal cancer and 50,000 more women would have been screened for breast cancer in 2013. If care is provided to all Californians at the same cost as in San Diego, the cost of care would decrease 10% for commercially enrolled people. Many factors contribute to regional performance, including socioeconomic characteristics and the availability of medical services.
Medicare Advantage
The quality and cost of care varies widely for seniors enrolled in Medicare Advantage. For example, in North Bay counties, 91% of women have gotten appropriate breast cancer screening compared to 70% in the Eastern region 13. The average annual per-enrollee total cost of care for Medicare Advantage enrollees ranges from $11,500 in San Diego County to $14,500 a year in Los Angeles region.
Cost of Care
Geographic variation in cost of care is dramatic—a difference of $1,800 in the average annual per-enrollee total cost of care between the most costly and least costly regions. With one exception, all Northern California regions have higher annual per-enrollee costs than the statewide commercial average of $4,300 while all Southern California regions fall below the statewide average. Central California regions show mixed results on cost. HMOs have a lower average total cost of care than do PPOs in 12 of the 18 regions. More tightly managed care in HMOs may contribute to a lower cost of care. Yet, inpatient bed days and readmission rates are similar for HMOs and PPOs. Emergency department visit rates are actually higher for HMOs. The statewide average annual per-enrollee cost of care for commercially insured Californians is $4,300. Kern County is the least costly HMO region. It’s $1,800 per enrollee, per year less than in Santa Clara County, which is the costliest HMO region. The least costly PPO region is Los Angeles at $2,400 less than San Francisco County, which is the costliest PPO region.
Trump v. Clinton: How They Line Up On Health
The Philadelphia Inquirer offers an analysis on the Candidate’s Position on health care. The following is a summary the article:
Health insurance
- Clinton: Wants to improve the Affordable Care Act. She wants to reduce the cost of health insurance purchased on exchanges and provide a tax credit of up to $5,000 a family to offset out-of-pocket costs and premiums above 5% of household income. She would expand tax credits and cap the cost of premiums at 8.5% of family income. She calls for fixing the “family glitch” so families can access coverage in the exchanges when their employer’s family plan is not affordable. She would allow undocumented immigrants to buy insurance through the exchanges. In what is seen as a nod to Bernie Sanders’ supporters, she is affirming support for a public option that would allow people as young as 55 to buy health insurance through Medicare.
- Trump: Opposes requiring people to buy health insurance. He wants to repeal the Affordable Care Act. He proposes to make coverage more affordable by allowing sales of health insurance across state lines and permitting people to deduct health insurance premium payments from their taxes. He would emphasize tax-deductible health savings accounts (HSA) where funds could accumulate if they are not used. He wants to require price transparency by health-care providers so that people can shop around for the best prices. He also wants would-be immigrants to certify that they can pay for their own health care.
Prescription drugs
- Clinton: Wants to eliminate tax breaks that pharmaceutical companies get for direct-to-consumer advertising, and require those that benefit from federal research spending to reinvest profits into research. She would ban legal settlements in which pharma companies pay competitors so they will hold off on introducing generics and would allow consumers to import cheaper drugs from countries such as Canada. She supports allowing Medicare to negotiate lower drug prices and would cap out-of-pocket costs for people with chronic health problems.
- Trump: Calls for a free market for prescription drugs, including allowing consumers to import them from countries that regulate prices. This practice is now illegal, though the law is not firmly enforced.
Medicaid
- Clinton: Supports president Obama’s proposal to let states that sign up for Medicaid expansion to get a 100% match for the first three years. She would expand access to Medicaid and children’s health insurance.
- Trump: Wants states to get federal Medicaid funding through block grants, which could mean fewer dollars for many states, but would give local officials more authority over expenditures.
Medicare
- Clinton: Has vowed to fight proposals to privatize or phase out Medicare, and would give Medicare the power to negotiate lower drug costs.
- Trump: Is against abolishing Medicare.
Social Security
- Clinton: Opposes privatizing Social Security, reducing annual cost-of-living adjustments, and raising the retirement age. Clinton would expand Social Security for some, such as widows and caregivers, and help to fund the benefit through a wealth tax.
- Trump: Has voiced support for Social Security and called it “honoring a deal.” He has said that Republicans cannot win elections if they seek to change it substantially.
Veterans Administration
- Clinton: Says she would ensure more timely benefits, block privatization efforts, and strengthen services for military families and employment programs for veterans.
- Trump: Has vowed to reform the agency and make it more efficient in delivering service and employment assistance.
Abortion
- Clinton: Wants to protect access to safe and legal abortion.
- Trump: Back in 1999, he told Meet the Press that, despite his personal dislike of abortion, “I’m very pro-choice.” More recently, he announced, “I am pro-life.” This year, Trump he said on MSNBC that if abortion were banned, women who violated the law would have to be punished. Soon after, his campaign released a statement saying that providers, not patients, should be held liable. His running mate, Indiana Gov. Mike Pence, has backed some of the nation’s toughest abortion restrictions.
HIV/AIDS
- Clinton: Her proposals include funding research to seek a cure; finding more affordable treatment, including capping prescription costs; urging all states to extend Medicaid coverage for people living with HIV; and increasing use of HIV prevention medication.
- Trump: Has not issued a policy on HIV and AIDS, though some in the advocacy media say his goals of lowering prescription drug costs and increasing transparency about health care pricing could be beneficial.
Medical research funding
- Clinton: Advocates increasing funding for Alzheimer’s research to $2 billion a year, paying for care-planning services through Medicare, and funding a federal program to help locate Alzheimer’s patients who wander.
- Trump: Has called funding for Alzheimer’s research “a total top priority,” but he has not offered many specifics about policies he would pursue. He has alarmed the research community with scientifically unfounded statements about Ebola, autism, and climate change.
Autism
- Clinton: Has called for a nationwide early-screening campaign. She wants to push all states to require health insurance coverage for autism services, help get adults on the autism spectrum connected to employment opportunities, and fund more research.
- Trump: In tweets and during a presidential debate, Trump has linked autism to some vaccinations, a tie that has been widely debunked by international medical authorities and advocates, such as Autism Speaks, a group that Trump has supported.
Addiction and drugs
- Clinton: Would increase funds for addiction treatment and prevention, and emphasize rehabilitation over prison for low-level and non-violent drug offenses. She wants more preventive services for adolescents, opioid antidotes for all first responders, and more training for drug prescribers.
- Trump: In New Hampshire, Trump vowed to fight addiction on two fronts saying, “First, we have to support locally based and locally run clinics, and we have got to close the border. That’s where the drugs are coming from.”
Medical marijuana
- Clinton: Supports the use of medical marijuana.
- Trump:.Supports the use of medical marijuana.
Family and medical leave
- Clinton: Advocates a paid family and medical leave of up to 12 weeks with at least a two-thirds wage replacement rate. She proposes paying for the plan with taxes on the wealthy.
- Trump: He told Stuart Varney on Fox News last year, “Well, it’s something that’s being discussed. I think we have to keep our country very competitive, so you have to be careful of it.”
Federal funding of Planned Parenthood
Clinton: Supports federal funding of Planned Parenthood.
Trump: At a news conference on Super Tuesday, Trump said he would not give federal funds to Planned Parenthood because the organization performs abortions. But he praised the health care it provides, saying, “millions and millions of women – cervical cancer, breast cancer – are helped by Planned Parenthood.”
Early Alzheimer’s Treatment Saves Medical Costs
Alzheimer’s patients who received medication for the disease ended up costing the health system less and had lower mortality rates, according to a study presented the Alzheimer’s Association International Conference (AAIC) in Toronto last week. “Even with today’s first-generation therapies, early Alzheimer’s treatment has significant potential to benefit the individual with the disease as well as the economy,” said Maria Carrillo, PhD, chief science officer, Alzheimer’s Assn. Christopher Black from Merck said, “Since Alzheimer’s is incurable and progressive, some assume that treating dementia is an unjustified cost drain on our healthcare system, but this study presents compelling arguments for prescribing the standard of care.”
Average health care costs more than tripled in the month after an Alzheimer’s diagnosis. But those receiving an Alzheimer’s treatment had lower health care costs in the month after they were diagnosed compared to those who did not receive a treatment ($5,535 versus $6,711). Though people who initiated taking medications had higher pharmacy costs, their total health expenditure was less than the people who did not take approved medications ($2,207 vs. $2,349 per patient per month).
Generic Drugs and Multi-Tiers Dominate Employer Plans
Forty-nine percent of employer-sponsored prescription drug plans have three tiers, and 44% have four or more tiers. That’s an increase of 34% from 2014 to 2015 and 58% since 2013, according to a report by United Benefit Advisors (UBA). “The market will continue to adapt. We’re already seeing the advent of six-tier prescription drug plans,” said Scott Deru, president of UBA Partner Firm Fringe Benefit Analysts. The Affordable Care Act will drive changes to plan design. Employers struggle with balancing cost containment and employee retention. The biggest challenges are for employers that are losing their grandmothering or grandfathering protection.
Healthcare costs for a Typical American Family Will Exceed $25,000 in 2016
In 2016, the cost of healthcare for a family of four with group PPO coverage will increase 4.7%. These costs have tripled since 2001 to exceed $25,000 in 2016, according to the Milliman Medical Index study. “It’s a significant and somewhat unsettling milestone,” said Chris Girod, co-author of the Milliman Medical Index. This year, the family’s share of healthcare costs reached $11,033 out of $25,826. In 2001, employers paid 61% of costs while employees paid 39%. In 2016, the split is 57% and 43%.
Though 2016, marks the lowest rate of increase in the history of the study, the total dollar increase is $1,155, marking the 11th consecutive year that the increase has exceeded $1,100. Healthcare has represented an increasing share of the national GDP. With an average of 7.8% in annual increases, the MMI has more than tripled in 15 years. The annual medical cost increase has ramped down from more than 9% in 2001 to less than 4% this year. But cost changes related to prescription drug coverage have been more volatile, with drugs becoming a larger portion of family healthcare expenditures—this year reaching 17%. (That number does not include prescription drug manufacturer rebates for specialty and other high-cost drugs). “The steady decline in annual cost trends over the 15 years…provides a ray of hope. Hopefully, future efforts to control costs will continue this trend,” said Scott Weltz, co-author of the MMI.
Group Proposes Replacement to Obamacare
With health care costs and insurance premiums rising, the National Center for Policy Analysis developed a plan to create accessible, affordable and high quality health care for many more Americans. NCPA senior fellow and author Devon Herrick said, “Our health care system is simply not sustainable under Obamacare. Reform is inevitable. The longer that takes, the more hard it will be on everyone, including consumers.”
Dr. Herrick outlines the following alternatives to the ACA:
- Increased flexibility in health plan design.
- Tax fairness regardless of where Americans get their health coverage.
- Increased access to primary care by removing barriers to innovative medical practices and services.
Reform of hospital regulations to better serve patients.
- Reduced costs through price transparency to boost competition and innovation in medical services and prescription drugs.
- Strengthened Medicare, Medicaid, and Veterans Health that better serve the needs of patients.
- Changes in the financing of medical care so that people have control over their health care dollars and the means to pay for medical care over their lifetimes.
Costs, Not Utilization Are Driving Children’s Healthcare Spending
In 2014, rising prices were largely to blame for the growth in children’s health care spending, according to a report from the Health Care Cost Institute (HCCI). Health care spending for children under employer-sponsored plans grew 5.1% a year from 2010 to 2014, reaching $2,660 in 2014. But the use of health care services declined from 2012 to 2014. HCCI senior researcher Amanda Frost said, “The decline in children’s use of health care services is a relatively new trend…While we know that prices have fueled much of the spending growth in 2014, future research should examine whether these higher expenditures are leading to better health care outcomes for children.” The survey also reveals the following:
- Out-of-pocket health care spending on children increased 5.5% a year to $472 in 2014. This growth was due partly to higher out-of-pocket spending on ER visits, which increased 11.7% annually.
- The average price for brand prescriptions went from $7 a day in 2010 to $16 a day in 2014.
- The rise in the average price of brand prescriptions drove spending increases. In 2014, spending for brand prescriptions rose 6.8%. The average price for generic prescriptions remained stable.
- In 2010, the average price of a surgical admission for a child was $35,423, and jumped to $53,372 in 2014.
- ER visits accounted for 8% of health care spending for children in 2014.
- The average price of an ER visit increased $298 from 2010 to 2014. At the same time, the number of ER visits dropped from 181 visits per 1,000 children in 2010 to 177 visits in 2014.
- In 2014, there were 3,228 doctor visits per 1,000 children, down slightly from the previous year.
- Doctor visits accounted for 12% of spending in 2014 ($339 a child), and made up the largest share of health care spending for the average child.
Drug Spending Growth Reaches 8.5% in 2015
Total spending on drugs in the United States reached $310 billion in 2015, up 8.5% from the previous year, according to a report by the IMS Institute for Healthcare Informatics. The surge of new drugs remained strong last year, and demand for new brands was high. Savings were relatively low from branded drugs facing generic competition. Price increases on brands had a limited effect due to higher rebates and price concessions from manufacturers. Specialty drug spending reached $121 billion on a net price basis, up more than 15% from 2014. (Net-price spending does not relate to a patient’s out-of-pocket costs or the amount health plans pay for drugs. It estimates the amount received by pharmaceutical manufacturers so it reflects rebates, off-invoice discounts, and other price concessions that manufacturers make to distributors, health plans, and intermediaries.)
Manufacturers are accepting lower price increases on existing products. At the same time, spending on new brands continued at near-historic levels. Increasingly, healthcare is being delivered by different types of healthcare professionals and from different facilities while patients face higher out-of-pocket costs and access barriers. The study predicts mid-single digit growth for drug spending through 2020, driven by innovative treatments and offset by brands facing generic or biosimilar competition.
Heightened competition among manufacturers, along with more aggressive efforts by health plans and pharmacy benefit managers to limit price growth, resulted in significantly lower price increases than in prior years. The report also reveals the following:
- Spending on specialty drugs has nearly doubled in the past five years, contributing more than two-thirds of drug spending growth from 2010 to 2015. Treatments for hepatitis, autoimmune diseases, and oncology drove increased specialty spending. The year 2015 saw a 21.5% spending increase for specialty drugs.
- Forty-three new active substances were launched in 2015 with a third receiving orphan drug designations from the FDA. An additional 30 brands were launched last year, bringing new combination therapies, alternative dosing, and treatment administration options to patients. The strong momentum of breakthroughs and R&D productivity is reflected in the 2015 cohort of new drugs.
- Total prescriptions dispensed in 2015 reached 4.4 billion, up 1% year over year. Demand was higher in some therapy areas, such as antidepressants and anti-diabetes, each of which increased about 10% in 2015.
- Over the past five years, integrated-delivery networks have expanded their affiliations with healthcare professionals to increase negotiating power with insurers, save money, and drive pay-for-performance initiatives. More than 54% of healthcare professionals are affiliated with integrated-delivery networks. In the past five years, there has been a 115% increase in urgent care centers and pharmacy in-store clinics. The number of prescriptions written by nurse practitioners and physician assistants more than doubled over the past five years.
- While brand price increases are expected to continue in the 10% to 12% range, they will be significantly offset by rebates, discounts, and other price concessions.
- The are very bright prospects for innovative drugs becoming available through 2020. The late-phase pipeline holds 2,320 novel products, with an average 43 to 49 to be launched annually over the next five years.
