Clear Thinking on Healthcare

The last two weeks, I have written about the money-and-time-wasting complexities of hospital billing and inpatient provider billing. Are there solutions?

Remember, first, that to identify a solution to a problem, you have to accurately diagnose the cause of the problem. So we should back up and talk about that first.

I should give a disclaimer and say that, while I’ve read a variety of book chapters and articles talking about how our billing system evolved, I am no expert on this subject. Nor do I want to try to go into the deep billing history here. But maybe a big-picture summary will suffice.

Why would people design such a complicated system? On the provider side, the two reasons that stick out are as follows:

1. To make sure providers are actually delivering enough care to warrant getting paid their fee. It’s trying to prevent that small minority of “innovative” providers who would cut corners in a way that isn’t necessary illegal but that would enable them to generate way more RVUs per hour than good, thoughtful, conscientious care would allow.
2. To try to quantify differences in complexity, especially so that providers are rewarded for doing more difficult things.

On the hospital side, those same two reasons also apply, although the second one is much more relevant. There are, though, issues with the first reason as well, which is why 30-day readmission rules have cropped up.

So there you have at least a start to an understanding of why these complicated systems have evolved to what they are today. And your mind is probably brimming with solutions already based on that short explanation. For example, if most providers end up billing about the same average complexity, why not just simplify things by only having a single complexity level and trust that things will average out? Some providers will take a pay cut and some will get a raise, but most will still make the same amount of money and will save a lot of time and expense (less overhead dedicated to paying for coders to review charts, etc.). Or why not have fewer modifiers that change what DRG a patient gets assigned to? Or, heck, just fewer DRGs in general? Better yet, just have a closed integrated provider-insurer organization that can make whatever billing rules make the most sense to everyone in that organization?

We could easily come up with lots of other solutions. But remember I’m interested in fixing the whole healthcare system? Would any of these help us make progress toward actual and significant big-picture value improvements in our healthcare system? Or might they risk creating more barriers to getting to the real solutions?

Remember that my explanation of how to fix healthcare (as detailed in my Healthcare Incentives Framework) is to enable more people to identify and then choose higher-value providers and insurers. This means people need to know price and quality beforehand. (This isn’t always possible, but it is possible in more circumstances than people realize.) And when people start to know provider quality beforehand and then choose them based on that information, the issue of corner cutting by providers is greatly reduced. This would obviate the need for complicated billing requirements that are designed to make sure providers are really doing what they are supposed to do to provide good care.

But how would all those complicated documentation rules actually go away? Well, if providers start to shift to making their own prices (and insurers allow it because patients are paying most or all of the differential between provider prices), this would mean that those rules no longer apply because the providers are the ones in charge of determining how much they get paid rather than having to adhere to arcane insurer rules that dictate their fee for them.

This is probably a topic that requires further exploration another day. But my point is that all aspects of the healthcare system would change if we get more patients to make value-sensitive decisions when choosing providers and insurers.

(As a sidenote, I am sometimes asked by coworkers, “Would your solution to healthcare fix [insert specific issue here]?” And often my answer is, “Not directly.” And then I usually leave it at that because I know they don’t want 15 minutes of explanation about financial incentives and value-sensitive decisions and different types of pricing arrangements. Billing complexity is one of those issues that wouldn’t directly get “fixed,” but it would sure get better!)

In summary, the targeted easy-to-think-of solutions to all these expense-inducing coding complexities we’ve been talking about would make a difference in the problem they’re designed to solve, but remember to keep the big-picture solutions in mind to make sure any new policy doesn’t create additional barriers or detours to getting to that final destination.

Last Tuesday, I wrote about the complexities in hospital billing. This week, I’ll look at provider billing.

The same preface is required, so let me copy that from last week:

Any provider’s goal with billing is to bill honestly to the highest amount they can for the necessary work they’ve done. Not billing for something that we are legally allowed to bill for is leaving money on the table and unnecessarily lowers our income. So keep in mind that, when I talk about billing the maximum possible, this is an honest and appropriate goal that is very different than taking advantage of the system or committing some kind of fraud.

When I was in residency and would work in our outpatient clinic, we had coders reviewing every single note we wrote, checking to make sure our documentation supported the bill we’d submitted for each patient. Us residents would get messages from them fairly frequently (some of us multiple messages per week), asking to go back and clarify things like the name of a problem or to change the billing code we’d used. The worst was after doing a half-day of dermatology clinic, where there were also tons of little procedures that required procedure codes and different specific details in our notes to justify. One time, I remember taking more time to fix all the notes to the coder’s specifications than it originally took me to write all of those notes.

We hated these messages from coders because it was just one more administrative annoyance required of us. (The coders themselves were lovely and patient with us, but that can only make it so much better.) We’d have fairly frequent coding training sessions, which helped us do the right thing the first time a little more often, but short of dedicating a full week or more to coding training, there was no way to teach us all the things we needed to know to do everything right the first time. And every minute spent training us on billing meant one less minute training us how to be good doctors.

When I started working as a hospitalist, I had a coding training session as well. And then I, like every new hire, was on a probation period, during which time a coder reviewed every single patient note I wrote to ensure I was doing everything properly.

My first day off after starting my new job, feeling overwhelmed at all the medicine I was supposed to know, do you know what I did? I went to a public library and spent a whole day studying the pages and pages of coding requirements the coder had given me. Over the next week or so, I took copious notes, and eventually I was able to clarify things in my mind enough to feel confident. This required multiple email and phone discussions with another very patient coder. Sometimes communication was a challenge because we had to try to translate her coder’s brain and terminology to a lowly physician’s clinical brain and terminology.

I wanted to be studying medicine, but without getting the bills right, the hospital doesn’t get paid!

Do you want to hear a little of what I learned? Let me tell you. I’ll insert the five-digit billing codes next to each one, just for fun.

When a patient is seen the first time by a member of my hospitalist group (not to be confused by the first day a patient is in the hospital), we need to code for an initial encounter. There are only three levels of complexity we can use, so let me lay out the requirements to bill at the highest level (99221).

First, their level of “risk” has to be high. There’s a long list of things that qualify, such as a change in neuro status, giving them a drug that requires intensive monitoring, or a “severe” exacerbation or progression of a medical problem.

Second, they also need to have at least four problems we are treating (a max of two of them can be self-limited), or at least one new problem that requires a workup, or a new problem without workup plus at least one other problems, or just a worsening established problem plus at least two other problems.

If they don’t meet the high-complexity level based on their problems, you can instead use a points system to meet the second criterion. If you get at least four points, it counts. There is, again, a nice list of things that get you points, such as ordering or reviewing labs, ordering or reviewing imaging, ordering or reviewing an EKG, personally viewing an image/EKG, discussing results with a provider, deciding to obtain collateral information about the patient from another person, deciding to get a consultation from another provider, deciding to request records from another location, and actually getting collateral information/consultation/records. Each one counts as a point. But if you order two imaging studies or EKGs or labs, you can’t double-count. This points system is part of what explains why there are so many seemingly unusual comments in a patient’s chart, such as, “I personally reviewed the EKG.”

So, let’s say the patient qualifies for high complexity based on those first two criteria, now I need to make sure I put all the other information in the patient’s note that will allow me to bill to that level. This includes at least four details of history from the patient (there is a specific list of what qualifies, but it includes the location of a symptom, its quality, severity, duration, timing, context, . . .), at least one symptom question about at least 10 different organ systems, and at least one thing about the patient’s medical history, family history, and social history.

Then, I need to document an exam with at least one thing in eight different systems. Or, if I’m a specialist focusing on one specific organ, I need to document at least eight things about that one organ. And some things don’t count. I thought I could use “Head/eyes/ears/nose/throat: atraumatic” as one of my systems, but it turns out I can’t. But I can instead say “Head/eyes/ears/nose/throat: Vision grossly intact.” Physicians, even internists like me, are rarely concerned about eight different body systems at the same time, so we have learned to say things to check off the eight systems without having to do too much extra work. For example, my standard physical exam includes the very useful “Dermatologic: No rash noted” because, when I’m looking at the patient’s face and belly and legs, I didn’t note a rash. My standard exam also includes the very useful “Psychiatric: Normal affect” and “Genitourinary: No Foley.”

Now you know the requirements to bill for a high level of complexity for an initial care episode. If I don’t meet every single one of those requirements, I can’t bill at that level, and I need to see what lower level my documentation would qualify for.

There’s another set of requirements for moderate level (99222) and low level of complexity (99221), each with their own list of what constitutes the right level of risk, the right number of problems or points, and the right number of history and exam details. And there’s yet another set of requirements for all three levels for subsequent encounters (99231, 99232, 99233). And another set of codes if the patient doesn’t qualify as sick enough to be considered an “inpatient” but is only here “under observation” (99218, 99219, 99220).

But you could bill for time instead of complexity! In this case, the documentation requirement is much simpler. You just have to have a statement in your note that tells how much time you spent on the patient (but time spent doing procedures counts separately), and at least 50% of it has to be related to direct patient care and also coordination of care. You also have to give some details about the content of what took longer than would have been otherwise justified based on the patient’s level of complexity. And you need to remember that, to bill for a high level of complexity, you need to have spent at least 70 minutes on an initial encounter or 35 minutes on a subsequent encounter. And for a moderate level of complexity, you need to have spent at least 50 minutes on an initial encounter or 25 minutes on a subsequent encounter. And for a low level of complexity, you need to have spent at least 30 minutes on an initial encounter or 15 minutes on a subsequent encounter.

But what if the patient was admitted after midnight? That means they have already been billed for that calendar day. But if you spend at least 30 minutes on the patient (or, if you are doing an initial admit and spend the expected amount of time plus at least 30 minutes more than would be expected), then you can bill for a “prolonged service” (99356). But you have to make sure that the total time the initial provider took plus your time is at least equal to 30 minutes plus the expected amount of time the initial provider should have taken based on the level of complexity and encounter type they billed for. This is why we have to put our time in every note, even if we aren’t going to bill for time.

And if the total extra time on the patient was at least 60 minutes, then you can add two prolonged service codes (99356, 99357), one for each 30-minute chunk. But make sure you specify how much actual face-to-face time if the patient is on Medicare, because that’s the only kind of time that counts for prolonged service codes for Medicare.

Maybe I should stop. I know everyone also wants to know the details of how to bill and properly document if a patient is admitted and discharged the same day (99234, 99235, 99236), which code to use on discharge day (99238, 99239, or 99217), when you can bill for critical care time (and what you have to document) (99291, 99292), but I’ll stop.

When I think about the cost to code this way, it’s significant. There are costs for the armies of coders reviewing providers’ notes and sending messages, costs in doctors’ time (learning this stuff, responding to coding queries, getting refresher trainings, documenting so many things that are irrelevant to medical communication), costs in software to make sure we are all billing to the maximum allowable, costs in consultants and administrative personnel analyzing our coding data and figuring out how to optimize it, and (most important of all) costs in quality of care because doctors have to spend so much time on this rather than learning more medicine.

I talk sometimes about despising the complexity of our healthcare system and that it is a major component of its crazy high cost, and billing complexity is one of the things I am referring to. I hope now you can see why.

And since I like thinking and writing about solutions, so I’ll give some thoughts on that next week.

I work as an inpatient internal medicine physician, usually referred to as a hospitalist. People sometimes hear about how complex billing and coding are in our system, so today I’d like to give a taste of my experience with this.

Before I explain this, I should be clear that any provider’s goal with billing is to bill honestly to the highest amount they can for the necessary work they’ve done. Not billing for something that we are legally allowed to bill for is leaving money on the table and unnecessarily lowers our income. So keep in mind that, when I talk about billing the maximum possible, this is an honest and appropriate goal that is very different than taking advantage of the system or committing some kind of fraud.

Each day when I see a patient, I am expected to write a daily progress note. Originally, these were strictly for communication with other caregivers so everyone would know what’s going on with the patient and nurses would know what needed to happen for patients. Then EMRs came along, the primary motivation behind them being that it would streamline the process of sending bill to insurers. Helping with the clinical care of patients was a secondary purpose. I’m not sure whether the data-capturing ability of EMRs allowed coding policies to become more detailed/specific/complex, but it sure seems that way, as you will see.

When a patient is in the hospital, the hospital charges a bill and each doctor who sees the patient charges a bill. This week, I’ll focus on the hospital side.

Hospital contracts with insurers are mostly based on DRGs, which stands for “diagnosis-related groups.” Essentially, the hospital sends to the insurer a list of the diagnoses that were treated during the hospitalization, and then, based on that list, the patient is assigned to a certain DRG, and the hospital gets paid the standard amount for that DRG. There are a bunch of little adjustments here and there for location, hospital type, etc., but that’s the essence of it.

As a hospitalist, I am usually the primary doctor over a patient’s hospitalization, so making sure all the right diagnoses are listed in the patient’s chart is super important if I want the hospital to get paid for the work we did. It would be nice if there were just a few different DRGs, but there aren’t. There are 1,000 arcane rules that make a big difference in which DRG the patient ends up getting assigned to, which means trainings about how to add the right DRGs take up a significant percentage of hospitalist meetings (as opposed to trainings on how to be better doctors!). They give us pamphlets full of suggestions on how to correctly add problems to the patient’s problem list. Here’s part of a single page of one of these multi-page pamphlets:

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When I am working in the EMR, we also have some built-in software through which coders somewhere who are reviewing every single patient’s chart will send me messages (“coding queries”) with suggestions about which additional problems to add or how to make diagnoses more specific to get the patient lumped into a higher-paying DRG. It’s implemented very well, but it definitely disrupts my workflow.

Another issue is that sometimes these DRGs use old diagnostic rules. For example, anytime someone has at least two of the following–high heart rate, fever, high white blood cell count, high respiratory rate–there is a sepsis alert that tries to get me to add that to the problem list (and make sure you specify what the source is, which organ system is involved, and how severe it is!). The problem is, that’s the old definition of sepsis that has been proven to be less useful than newer definitions. So sometimes my clinical judgment says a patient doesn’t have sepsis, but I have to remember the old definition to make sure I add it to the problem list where that definition fits.

And don’t worry–if I forget to add something and the patient gets discharged, those coders can always track me down and have me sign forms that go into the patient’s chart stating there were other problems that were not added but that we took care of in the hospital.

All of this results in many patients having problem lists in excess of 30 items. It’s completely overwhelming! These lists are automatically inserted into every note I write and form the template for writing my problem-based assessment and plan, which means my assessment and plan looks incredibly long and interferes with communicating to other caregivers what’s important and what’s actually going on with the patient.

Not only is the list burdensome because of its length, but also the names of these problems are often less useful. If I wanted to, I could take the time to go and manually change them in the patient’s chart before generating my daily progress note, but then it’s that much extra administrative time I’m taking. And, if I manually change the problem name, now the name is different than the underlying problem code’s name, which may mean I or a colleague who takes over the patient’s care will not notice if the problem code becomes inaccurate or not specific enough, causing further confusion and messages from coders.

Oh, also this all supposes that the patient is sick enough to be considered an “inpatient” when they are here. If they aren’t sick enough (based on a whole different set of criteria), then they are only here under “observation,” and DRGs don’t apply, so the patient is billed for each individual service done.

So, that’s just a taste of the hospital side of billing. Next week, I’ll give you a taste of how provider billing works.

I focus mostly on aligning financial incentives to fix the healthcare system. But what about QI and implementation science–how do those fit with my interest in aligning incentives?

If you’ve ever been to an Institute for Healthcare Improvement conference, you have seen thousands of passionate individuals finding ways to improve healthcare, both from the provider level and the insurer level. I have sat through so many presentations by these innovators explaining their impressive improvements, and, in addition to being impressed at their work, I am almost always thinking, “They are working at odds with their financial incentives!” In other words, their QI efforts–were it not for them almost always being supported by grant funds–would be costing their organization a lot more money than the organization would ever make from those improvements.

Now, to be clear, making more money is not the main purpose of QI projects! They are improving patients’ lives, and that’s where the focus should be. But do you ever wonder why so many of those successful improvements don’t spread like wildfire through the country’s healthcare organizations?

The reason is because, while all good healthcare administrators truly want to improve the value their organization delivers to patients, they cannot be expected to add such costs to their balance sheet. There are too many uncertainties about reimbursement and government policy changes to take risks like that! And if they go bankrupt, they’re not doing patients any good.

An example from my residency clinic is having social workers full time in the clinic. We cared for many of the vulnerable populations of our city, and those social workers made a huge difference in many of our patients’ lives. But, were it not for grant money to pay those social workers, they would have been costing the clinic quite a bit of money (their salaries) without bringing any extra money in. This is one of thousands of examples in healthcare of what I refer to as “value improvements at the expense of profitability.”

Now, what if our healthcare system were designed in a way that, any time a provider or insurer improves value, they end up making more money as a result of it? What would happen to all those successful QI projects? They would disseminate like crazy. That is my goal.

This is why I think my work to align financial incentives in healthcare is actually the most important work the QI crowd could ask for right now. It’s Step 1 of fixing the healthcare system. And then they get to do Step 2 by responding to those good incentives by innovating in ways that improve the lives of the people they serve.

Part 1 reviewed Title 1, which states that basically everyone will be covered and can receive care from pretty much any provider. Part 2 reviewed Title 2, which states that insurance benefits will be comprehensive without any regular out-of-pocket expenditures. Part 3 reviewed Titles 3 and 4, which lay down some provider standards and also some expectations regarding data reporting. Part 4 reviewed Titles 5 and 6, which establish some quality standards and a national health budget, plus it gives an updated process for how fee schedules will be made. Part 5 reviewed Titles 7, 8, and 9, which are primarily nuts and bolts of where tax money will be placed, some clarifying statements, and a lot of conforming  amendments. Part 6 reviewed Titles 10 and 11, which describe the transition plan and give a few definitions.

Now that we’ve spent all this time reading the bill and summarizing all 11 titles of it, let’s do some analysis.

First, here is a summary of the key points from Parts 1-6 that give the overall description of the style of M4A that this bill would create:

• Coverage is universal–it will probably include everyone who is legally in U.S.
• The government will have a monopoly on the essential benefits–meaning no duplicate coverage can be sold
• Benefits will be comprehensive, including long-term care, vision, and dental, and states will have the freedom to add even more benefits
• There will be no cost sharing requirements (including premiums, copays, coinsurance, etc.) except for $200 max annual cost for choosing brand name medications when generic alternatives are available
• All providers who meet federal and state minimum requirements will be in network
• Participating providers will be required to report outcomes and quality information in a standardized way
• A national provider fee schedule will set prices nationwide (subject to a cost-of-living multiplier), and the making and updating of this fee schedule will be required to include MedPAC
• A national health budget will be created annually, and my guess is that this will be used as a multiplier to reduce all prices across the board if that budget is exceeded
• Drug prices will be negotiated annually

Remember that, of the three main issues everyone is trying to solve in healthcare systems (usually referred to as “cost, quality, and access”), the access piece is the simplest to understand. It’s conceptually easy to grasp how a government program could achieve universal coverage. This M4A bill is a prime example–just change Medicare eligibility criteria to include everyone in the country.

The most difficult of the three problems to crack is cost. Sure, a government can reduce prices to unilaterally lower cost (and when I say cost, really I mean total healthcare spending), but that would not change the actual cost of the inputs that go into delivering care to patients–it just means providers are getting paid less. And with average provider profits being less than 10%, that means that approach can only lower prices by a maximum of less than 10%. And with continued demographic changes and new medical innovations as they are, total healthcare spending will continue to go up and up even if we force profits down to zero.

You see the problem? Administratively lowering prices to control spending is not a winning or sustainable formula.

What we need is to find some way to get providers to innovate in ways that actually reduce the costs of delivering care. And to motivate providers to risk innovating like this, they need financial incentives. If they could be assured their value-improving innovation would somehow lead to greater profits, they would be willing to try. And if it succeeds, their competitors would also try the same thing.

What I’m saying is that if we could structure our healthcare system in a way that makes it clear to providers that they will increase their profitability if they find a way to deliver better value (usually this means equivalent quality at a lower price), then the incentives will be properly aligned for long-term reductions in total healthcare spending.

This isn’t something government can do directly–it’s not like CMS can say, “All providers do this specific thing differently and, voila, your cost of delivering care to your patients will decrease.” No, this is something that government can only create the incentives for and then watch how providers respond. It’s galling not to be able to control such an important thing directly. But this is the most important issue for all healthcare systems that no existing system has seemed to solve. This M4A bill we’ve been examining is no different.

What’s the solution? I’ve already spent many words explaining my Healthcare Incentives Framework, which shows in detail how to create those incentives for providers (and, if applicable, insurers). I won’t rehash all of it here. But I will summarize it by saying that if we can ensure that providers will win increased market share and profit when they raise their value relative to competitors, they will have a profit motivate to innovate in value-improving ways. That’s an important point.

How do we get market share to flow to higher-value providers? Patients have to be able to identify and then choose those higher-value providers! This is what they want to anyway. But how do we accomplish that?

It requires patients to have three things: (1) multiple provider options, (2) knowledge of the quality and price of each of those options beforehand, and (3) some incentive to actually be willing to consider price when choosing between providers.

That third requirement is not as intuitive. What I mean is that, if someone will pay the same price regardless of which option they choose, don’t you think they will ignore price and simply choose the highest-value option every time? Yes. But if they can choose a slightly lower-quality option and save hundreds or thousands of dollars, now they start considering price. The principle is this: patients must pay more if they choose a more expensive provider and pay less if they choose a less expensive provider. This is what will cause them to consider price as well, and it is what will assure providers that, if they find a way to lower their costs of delivering care and decide to lower their price, they will win more market share and increased profits.

Can we tweak this bill to enable all of that? Of course.

First, I commend the drafters for including a requirement to report standardized quality and outcomes data. Only with those data can you compare the relative quality of the different provider options. The Secretary just needs to make sure that the quality and outcome metrics they use are the ones most relevant to patients trying to choose between multiple provider options.

Next, we need to get patients to know prices beforehand. But just having access to the individual prices of the 30 different things that are included in a care episode isn’t enough. It needs to be a single price (known as a “bundled price”) that covers all the services involved in that care episode. This bundled price could be something like a surgery, or it could be a 60-minute diagnostic appointment, or it could even be a year’s worth of managing a chronic condition.

The challenge, here, is that all prices would be the same, so prices would become irrelevant and only quality would be considered. My recommendation is that this bill allows providers to offer to charge Medicare a lower price than the listed price, and then Medicare would have to share some of those savings with the patients who choose those cheaper providers. This could come in the form of cash rebates, although it might encourage people to find ailments for which they can choose cheaper providers and make some money off Medicare. I would rather it be money that is put toward reducing future expenses of some sort. If, for example, everyone had to at least pay an income-dependent nominal premium every year, the shared savings money from Medicare could go to reducing their future premiums. This may be too indirect/time lagged to provide sufficient immediate motivation to actually consider choosing a lower-cost provider, but I’m guessing that would be the most palatable way (in the minds of the sponsors of the bill) to achieve this.

Remember how this idea of getting patients to pay less if they choose a less-expensive provider fits into the big picture. If patients are motivated to choose providers based on quality and price, they will be choosing based on which is the highest value to them (because value is quality/price), and the incentives for providers to innovate to improve value relative to competitors will be in place.

I would also like to see a Medicare website (and accompanying app) that lists all providers in the region, their quality and outcomes data, and their prices. This would make it easier for people to choose providers based on quality and price.

Of course, there will always be healthcare services for which this kind of deliberate selection is impossible, either because the patient’s symptoms are too ambiguous to know even what they need, or because time or emotional capacity is limited. And many patients will not be able to integrate all these different pieces of information to make a rational decision. But even without 100% perfect decisions all the time, it will create a strong enough incentive for value-improving innovation that the cost of healthcare will go down and the quality will go up. And even for services that are not amenable to this kind of value-based decision, the value-improving innovations from other services will likely bleed into them as well.

So, I guess the Medicare for All Act of 2019 didn’t need as many changes as I expected when I was reading through it. A few simple yet substantial changes are all that it needs to make it truly transformative–not just from a coverage perspective, but also from a cost and quality perspective.

This bill is dead, but I’m confident another single-payer system bill will be proposed in the next few years, and I hope it includes the changes detailed here so that it will not create yet another healthcare system in the world that achieves universal coverage but at the expense of creating barriers to solving the cost and quality problems.

Part 1 reviewed Title 1, which states that basically everyone will be covered and can receive care from pretty much any provider. Part 2 reviewed Title 2, which states that insurance benefits will be comprehensive without any regular out-of-pocket expenditures. Part 3 reviewed Titles 3 and 4, which lay down some provider standards and also some expectations regarding data reporting. Part 4 reviewed Titles 5 and 6, which establish some quality standards and a national health budget, plus it gives an updated process for how fee schedules will be made. Part 5 reviewed Titles 7, 8, and 9, which are primarily nuts and bolts of where tax money will be placed, some clarifying statements, and a lot of conforming  amendments.

Let’s look at the last two titles of this bill today.

Title 10

Title 10 is a huge chunk of this act. It describes how we’ll get from here (current healthcare system) to there (M4A). I’m more interested in the description of the final destination titles 1-9 have given rather than how we get there. After all, the transition time, no matter how it’s managed, will be disruptive and time-limited, and then it will be over. This doesn’t mean I want to completely ignore it. But it does mean I will not get mired down in all the details.

There are 3 subtitles that make up Title 10:

• Subtitle A lowers the Medicare age and establishes a “Medicare Transition Plan.”
• Subtitle B makes a number of reforms to Medicare to get us closer to the end goal, such as decreasing out-of-pocket limits for Parts A, B, and D, and eliminating Parts A and B deductibles, plus adding dental, vision, and hearing aid coverage to Part B.
• Subtitle C provides some protections to maintain continuity of care during this transition time.

Subtitle A is the meat of the transition plan, so let’s talk about that just a little more.

First, it creates what I will call a “young Medicare” plan. The ages of eligibility are phased in over a few years, but it’s lowering the age of Medicare to 35. Coverage and cost sharing requirements are the same, but the premium is calculated differently for this young Medicare group from 35 to 64 years old. Enrollees will pay a monthly premium of 1/12 of “the average, annual per capita amount for benefits and administrative expenses.” So, from how this reads, everyone in this young Medicare plan is lumped into the same risk pool, and they all pay the average expected cost. This means there are no age rating bands.

Since there will still be private insurers offering all their plans for the under-65 crowd, this is essentially a public option. It will be offered on the insurance exchanges alongside private insurance plans, and it will be eligible for cost-sharing subsidies just like any other plan on the exchanges. And based on the lack of age rating bands, it will probably be an amazing deal for the 64-year-olds and a bad deal for the 35-year-olds. This is a situation ripe for a “death spiral,” but that won’t matter too much because this is a time-limited thing anyway.

Next, Subtitle A creates a “Medicare transition plan.” This is a health insurance plan that is also a public option like young Medicare, but it’s more ACA style. It will be sold on the exchanges, and it will adhere to all the requirements that other plans sold on the exchanges follow: anyone can enroll, premiums will be determined by age and tobacco status, and premium assistance and cost-sharing subsidies will all apply. The huge advantage this plan has over private plans being sold on the exchanges is that it piggybacks off the Medicare network of providers and Medicare fee schedule, so I expect it will be a market killer as long as premiums are competitive (and they should be based on how much lower their provider rates will be).

With the combination of lowering the Medicare age substantially and also adding an ACA-style public option that will take a large share of the market, most people will end up on public health insurance of some form.

Title 11

This simply updates the resource limits for Supplemental Social Security Income eligibility and then provides a few definitions.

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There we have it! Reading a healthcare bill can be pretty dry stuff, but now we have all the important details and can start looking at this bill as a whole to give some final evaluative and prescriptive commentary.

Continue to Part 7 (Conclusion).

Part 1 reviewed Title 1, which states that basically everyone will be covered and can receive care from pretty much any provider. Part 2 reviewed Title 2, which states that insurance benefits will be comprehensive without any regular out-of-pocket expenditures. Part 3 reviewed Titles 3 and 4, which lay down some provider standards and also some expectations regarding data reporting. Part 4 reviewed Titles 5 and 6, which establish some quality standards and a national health budget, plus it gives an updated process for how provider fee schedules will be made.

We’ve gotten through the main architectural parts of this bill, but let’s see if the rest offers any additional insight into how M4A would be structured so we can evaluate it properly.

Title 7

This creates a universal Medicare trust fund, which is where the taxes used to fund M4A will be placed. It reappropriates all the funds that used to go to Medicare, Medicaid, the Federal employees health benefit program, the TRICARE program, and a variety of smaller programs that M4A will make obsolete.

It also dedicates a short paragraph to ensuring that any prior restrictions on spending federal funds on “reproductive health services” do not apply to any money in this trust fund.

This is just administrative stuff that is important but not so germane to our purposes.

Title 8

There is no new exciting information in here, it is just clarifying statements that there cannot be health plans administered by employers that duplicate any of the M4A benefits, plus a number of clerical statements to amend some existing laws so that they conform to the changes proposed in this bill.

Title 9

I don’t think I mentioned it in Title 2, but states will receive grants to pay for “institutional long-term care services” (nursing facilities, inpatient psychiatric care, intermediate care facilities). That’s basically the one category of healthcare expenditures that will be delegated to the states. I’m not sure I understand why this decision was made.

This title also clarifies that if states are already providing benefits over and above what M4A will provide, it doesn’t automatically take those away; states can continue to provide those extra benefits.

The rest of Title 9 is just a list of other “conforming amendments.”

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Ok, we’re getting close to finishing. Title 10 is a big one–it discusses details of the transition to M4A, so that should be interesting. And the last title–Title 11–is a number of miscellaneous crossing of T’s and dotting of I’s. So this means that, after next week, we will have looked at the entire bill! And after that I will proceed with giving a more complete assessment of what changes would be needed for this bill to get M4A right.

Continue to Part 6.

Part 1 reviewed Title 1, which states that basically everyone will be covered and can receive care from pretty much any provider. Part 2 reviewed Title 2, which states that insurance benefits will be comprehensive without any regular out-of-pocket expenditures. Part 3 reviewed Titles 3 and 4, which lay down some provider standards and also some expectations regarding data reporting.

Ok let’s continue. I’ll try to make the less exciting stuff concise but still get through it so we have the foundation of understanding necessary to critically evaluate this bill.

Title 5

The Centers for Medicare & Medicaid Services (CMS) will be responsible for establishing and reviewing quality standards, such as clinical practice guidelines and other performance reviews and standards.

There’s also a section on health care disparities in here. Providers will be required to report data that help CMS evaluate health care disparities, and then those data have to be reported to Congress regularly.

I don’t have any commentary on this title.

Title 6

Ok this is an important one. It talks about establishing a national health budget. It requires a budget to be made that includes the cost of health services but also covers the cost of other components, including administration, quality assessment activities, innovation, and public health activities.

Interestingly, it says that up to 1% of the budget can be, for up to 5 years, allocated to support people whose health insurance-related jobs are displaced by the implementation of M4A. It will also have a “reserve fund,” which will be available to be used during health emergencies, such as natural disasters or pandemics. Yeah that’s probably a good idea!

The Secretary is responsible for establishing fee schedules for provider reimbursement. And the Secretary will also have to “establish, document, and make publicly available a standardized process for reviewing the relative values of physicians’ services. . . .” And then there are requirements added to make the Secretary accountable by requiring these efforts to be tracked and reported to Congress.

The U.S. Code Title 42 is where payments for physician services is discussed. This bill adjusts that a little bit to require the Secretary to make fee schedules in coordination with the Medicare Payment Advisory Commission (MedPAC), which is a 17-member group of diverse healthcare experts who are appointed for 3 years at a time to analyzing Medicare payments and other Medicare-related issues and then advising Congress on them. One of my health policy idols, Paul Ginsburg, is currently the Vice Chairman of MedPAC. (If anyone wants to introduce me to him, let me know.)

The Comptroller General is also assigned to do periodic audits on these relative values established for physicians’ services.

This title also establishes an Office of Primary Health Care within the Agency for Healthcare Research and Quality (known as AHRQ–I fondly know this agency as the one that funded my first two years of med school and then dropped my institution’s funding when I was about to start my full-time health policy PhD). This Office of Primary Health Care will be tasked with monitoring the number of PCPs and generally working to develop policies that improve the access to and implementation of primary care.

Lastly, the title talks about prescription drug prices. It says drug prices shall be negotiated annually by the Secretary. And the Secretary will develop a prescription drug formulary that promotes generic drug use and discourages the use of “ineffective, dangerous, or excessively costly medications when better alternatives are available.”

I wish I had a better sense for what the implications are of giving the Secretary power to adjust fee schedules and to involve MedPAC in the decisions. Does this mean the not-well-known but still highly criticized RVU Update Committee (known as the RUC, generally referred to as the secretive specialist-dominated group that sets the fee schedule that is, with little to no editing, implemented by CMS) will be a thing of the past? The RUC, by the way, is the reason why proceduralists are paid so much more than non-proceduralists–it’s easy to over-estimate the amount of time it takes to perform a procedure, which then translates into higher per-minute reimbursements to proceduralists.

From a high level, establishing a system of administrative pricing in this way, where smart individuals confer and do it rationally with good oversight and accountability, seems like a great idea. But remember that even the smartest experts will never be able to take all the factors into account that should determine a price. Not only are there different influencing factors that would make the price different in each locality, but also the knowledge of all the factors to get even one price right in one locality is dispersed over all individuals who deal with the service, its necessary inputs, and the alternative uses for those inputs. This is an insight from Friedrich Hayek, and I believe it correctly explains why administrative prices will never be efficient. Read more about that directly from Hayek here. I’ll have to write more on this in the future.

But short-term efficiency aside, I have explained in my Healthcare Incentives Framework how administrative prices also create a major barrier to healthcare evolving toward higher value.

So, maybe a different group of experts making prices with lots of oversight and transparency would be better than what we have now. I’m guessing it would be. But if these experts were willing to set these best-guess prices as price ceilings (allowing providers to choose to be reimbursed less than the set price) and then if Medicare could also somehow pass part of those savings on to the patients, this would overcome some of the issues caused by administrative prices. I’ve explained how this would work and why it’s important in my description of an optimal single-payer system article.

Continue to Part 5.

 

This is my ongoing series summarizing and evaluating the Medicare for All Act of 2019, sponsored by Senator Sanders. Even though he is out of the running now for president, this Medicare for All (M4A) idea is gaining steam and will come back every few years with seemingly increasing popularity. People need to understand that there are quite a few implementation details of M4A that, if done wrong, will cause it to fail. This is yet another attempt of mine to help us avoid that if it does in fact eventually pass!

Part 1 reviewed Title 1, which states that basically everyone will be covered and can receive care from pretty much any provider. Part 2 reviewed Title 2, which states that insurance benefits will be comprehensive without any regular out-of-pocket expenditures.

Title 3

This title reviews which providers get to participate in M4A–any who meet state and federal requirements–and also outlines the rules of participation, which include the usual nondiscrimination requirements, no charging fees to patients, submission of proper statistical information, and submitting bills in a timely manner. It also includes the usual national standards for healthcare facilities.

It also says providers can enter into private contracts with patients (and sets forth in detail what needs to be written in that contract) as long as they’re not also receiving any reimbursement from M4A for those same services.

All necessary stuff, but really nothing to see here.

Title 4

This talks about how this law would be administered. The Secretary of Health and Human Services is granted the power to develop policies, procedures, guidelines, and requirements to carry out the act, including eligibility, enrollment, benefits, provider participation, and really anything I’ve already discussed in the prior titles. Nothing new here.

Title 4 does get interesting though. It also requires the Secretary to develop uniform reporting standards and then require providers to report on those things, including quality and outcomes (without “excessively burdening providers”). And it says this information will be made available for research purposes.

I like all of that. It’s the necessary groundwork for getting patients standardized quality information about providers, and it’s exactly what I have requested patients be given so that they can make good decisions and, thereby, reward better providers with more patients. Unfortunately, as discussed last week, there would be no cost sharing, so there will be no motivation to offer slightly lower quality at a drastically lower cost, but at least there would competition to optimize quality at the pre-specified level of reimbursement.

It then goes on to establish regional offices, which will be responsible for providing regular state health needs assessments, recommending changes in provider reimbursement, and establishing quality assurance mechanisms.

Ok, that’s it for this week. I am starting to think that, at the end of this series, I will need to write a list of recommended changes to this act–just the minimum necessary–to allow us to build an optimal M4A system. That should be fun!

Continue to Part 4.

This is a 7-part series. Links here: Part 1, Part 3, Part 4, Part 5, Part 6, Part 7.

Before I get into the M4A Act, I want to update my assessment of how providers will fare with this whole coronavirus pandemic. I said they will love it because hospital beds will be full. I am aware of many more factors now that will be fighting against that increase in revenue from COVID-19 patients . . .

• Most surgeries have been canceled, so ORs are sitting empty
• Most outpatient clinics are closed
• People are generally doing fewer things that lead to hospitalizations
• Many caregivers are dependent on a continued stream of income, so hospital systems are trying to help them out by either continuing to pay them the same for less work (a personal example: as a hospitalist at a hospital where we have very few COVID-19 positive patients, I’m seeing about half the patients I usually do, but my pay per shift remains the same; we are feeling like it is the calm before the storm though, and I may make up for that by seeing many more patients than usual a few weeks from now) or are re-deploying them
• Hospital systems are organizing testing sites and doing informational campaigns, all of which cost a lot of money too without much coming back

This does not mean providers are guaranteed to suffer a profitability loss this year compared to the counterfactual no-COVID-19 world. It depends on how many extra patients they end up getting from the pandemic, and the time course of which those patients are spread. Plus, a decreased demand for services now means there will be a lot of pent-up demand that will still be serviced after things calm down a bit. My best guess is that places that get hit hard with a high prevalence of COVID-19, especially early on, will do ok. But others, especially those still waiting for the surge of COVID-19 patients, will likely end up losing money from all this. I’ll be interested to look back a year or two from now and see how profitability turns out.

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Now, back to the M4A Act. In Part 1, I said there are 11 titles, and I only looked at title 1. Let’s continue!

Title II

This title starts out by listing the benefits everyone gets under M4A. I could sum it up by saying it will cover . . . everything. Notable inclusions: psychiatric treatment, outpatient prescriptions, long-term care (home and community based), EMS, transportation for low-income or disable individuals, oral health, audiology, vision, and even alternative/complementary medicine (if it has evidence to suggest it’s useful). States can add more services if they want to cover additional things.

This does not talk about how they will decide whether a boderline more effective treatment that costs way more than the standard of care will be covered. But it does specifically talk about “experimental” treatments, which are defined as anything that is not consistent with accepted treatment guidelines. Experimental treatments may or may not be covered, it just depends on the Secretary, who will make a nationwide coverage determination for each one that is being considered.

This title also reviews cost sharing. There will be no cost sharing (no premiums, no copays, no coinsurance, no balance billing, etc.) except for a maximum of $200 out of pocket per individual per year, which would only take effect if someone is choosing a brand-name medication when there is a generic alternative available.

Finally, this title gives states the freedom to set additional standards of their own for benefits or eligibility or minimum provider standards, but it’s clear in stating that none of those state standards can result in restricted eligibility or benefits or access. I guess this is their way of allowing states to be even more generous in coverage or benefits, or to enact different provider standards as they see fit.

I’m planning an overview post at the end of this series that recaps all the key points, and I’ll talk more about cost sharing issues at that time, but this is the biggest area that will make or break a M4A system, and Sanders and Co. are getting it completely wrong. I understand they want to ensure people can afford treatment (I do, too!), and I understand they want it to be simple (I do, too!), but this kind of no-cost-sharing policy is going to prevent healthcare providers from innovating in ways that improve care quality and lower care costs. Which means it’s doing the opposite of its intended effect. I’ve described before the details of why appropriate cost-sharing policies in single-payer systems are so crucially important.

Continue to Part 3.