Health+Benefits the June 2019 issue

State Of Flux

Federal actors are eyeing single-payer health insurance, but states are adroitly reforming the system using vastly different, innovative models.
By Joseph Cantlupe Posted on May 24, 2019

The future status of the Affordable Care Act remains a part of the political agenda, along with calls for a single-payer (or government-run) system. In the meantime, states have initiated a variety of programs to improve patient care and efficiency in healthcare programs, and they’ve done so to plug gaps they believe have not been filled by Washington, D.C.

“States have felt increasing pressure to address health insurance markets as the Congress has proven unable to reach solutions,” says Scott Behrens, director of government affairs at Lockton Companies in Kansas City, Missouri.

Across the country, states have initiated an array of healthcare and insurance-related reforms. In North Carolina, state officials have successfully launched managed care contracts for insurance and healthcare provider groups in an effort to reduce overall costs. Maryland is partnering with the Centers for Medicare & Medicaid Services to keep updating an all-payer rate system that has been widely praised for efficiency. Wisconsin, Colorado and other states are operating multimillion-dollar reinsurance programs and public options designed to stabilize premiums. Oregon has worked with a coordinated care model that has opened the door for more care for patients with health needs ranging from behavioral issues to cardiac care and is planning to tap into the plan for commercial markets.

“One thing is really clear,” says Jeremy Vandehey, director of the health policy and analytics division at the Oregon Health Authority. “States are innovators that are trying to deliver better care on the ground. Healthcare is local. At the end of the day, care is delivered by the local hospital, the local provider. That’s where a lot of the innovation is going to continually happen. We’re trying to pay for healthcare delivery differently, improve outcomes and at a lower cost.”

The National Debate

These state actions are occurring against the backdrop of continuous single-payer debate not only on the federal level but also among some states. Many polls show a vast majority of Americans support the government-based proposals, some of which are truly single-payer options, such as Medicare for All, and some with a public or buy-in option. The calls for reform are especially highlighted among the Democratic presidential candidates, indicating that the conversation may last until 2020 and beyond. In short, the polls are showing Americans are losing faith in efforts to deal with sometimes unwieldy markets.

Still, many people might not understand what those options mean for them individually. The Partnership for America’s Health Care Future, a group that includes drug makers, insurance companies and private hospitals, supports efforts to build on the existing combined system of employer-sponsored insurance and government programs. Its research shows that, while 75% of Americans do not believe the current system ensures affordable healthcare, 85% are very or somewhat satisfied with their current health coverage.

Healthcare is local. At the end of the day, care is delivered by the local hospital, the local provider. That’s where a lot of the innovation is going to continually happen.
Jeremy Vandehey, director of the health policy and analytics division, Oregon Health Authority

Jordan Roberts, health policy analyst at the John Locke Foundation, a nonprofit think tank in Raleigh, North Carolina, offers a similar take on the public response in his state. “I suspect that the North Carolina population mirrors national polls, which find relatively broad support for a universal healthcare system that covers all Americans,” Roberts says. “But the support plummets when responders are given specifics about cost and coverage tradeoffs.”

Physicians express uncertainty about the controversial issue. A decade ago, polls showed doctors were uniformly and vehemently against the single-payer proposal. That has changed, with more doctors leaning toward the idea. Still, there are split views about single payer in their ranks, depending on who is being asked and by whom.

For instance, a widely publicized 2017 survey by Merritt Hawkins, a physician recruitment company, showed that 56% of doctors were considered either strong supporters or “somewhat supportive” of a single-payer system. That contrasted sharply with a Merritt Hawkins survey in 2008, which found that 58% of physicians opposed single payer.

The American Hospital Association has consistently opposed single payer. In February, its executive vice president, Tom Nickels, issued a press release for the AHA stating the association opposes Medicare for All because it would impede the group’s shared goals. “A one-size-fits-all approach would disrupt coverage for the more than 180 million Americans who are covered by employer-sponsored health plans,” he said. “That coverage, and plans sold on the marketplaces, offer benefits that Medicare doesn’t. Importantly, enrollees in these plans are protected from catastrophic costs.”

David Merritt, executive vice president for public affairs and strategic initiatives at America’s Health Insurance Plans, the largest single health plan association, cautioned in a September 2017 AHIP statement that single-payer “will eliminate choice, undermine quality, put a chill on medical innovation and place an even heavier burden on working taxpayers.”

States Attempt Single Payer

States such as Vermont and Colorado have stumbled over proposals for single-payer plans. Colorado voters rejected a 2017 ballot measure to enact a state-based single-payer system by a nearly 4-to-1 margin. The Colorado initiative was designed to allow residents to gain insurance through a tax-funded government insurance program, but private insurance would virtually cease to exist. Vermont floated the same idea in 2014, but the governor ditched the plan, noting it would result in high payroll assessments on business and increased tax premiums on income. While an increasing number of physicians and other clinicians see benefits to single payer, health experts point to uncertainties regarding the impact on insurers, drug makers and hospitals.

Behrens says he believes if the single-payer concept makes inroads in government, “it will be on the federal level and not the states.” Indeed, a string of states have turned down the concept, in the words of Rich Twietmeyer, executive director of sales in employee benefits at M3 Insurance in Madison, Wisconsin, “because the projected costs have been astronomical.”

A George Mason University study of Bernie Sanders’ proposal said it would lead to a $432 trillion increase in federal spending over a 10-year period.

Among the most highly publicized single-payer proposals from the states has been the push by Gov. Gavin Newsom in California, although the plans reportedly have stalled in the Democratic-controlled legislature, in part because of a lack of specifics. As soon as he took office, Newsom emphatically advocated for sweeping healthcare coverage for all Californians.

Newsom campaigned for a single-payer system and has remained committed to it. He also called on the federal government to allow California and other states to create a single-payer program.

Brokers and insurers are on edge regarding California’s plans, says Keri Lopez, president of employee benefits for Relation Insurance in Walnut Creek, California. The mere discussion of single-payer proposals has upset the strategic planning among brokers, she says. “Years ago, we would have a three- to five-year strategy for what our plans are. Not now,” Lopez says, referring to the uncertainty surrounding the single-payer proposals. “It’s difficult to plan ahead because of the potential to change.”

Lopez worries about the impact on brokers who would have to change their roles to adjust to a single-payer system. “What would our model look like? It’s a big unknown,” she says. After the ACA was implemented, Lopez says, “we saw a huge attrition of brokers who left and retired.”

Yet Lopez doesn’t believe that single payer will be a California-based initiative. A major reason, she says, is that Newsom may be “more business-friendly than he projects himself to be.” Lopez notes that, as mayor of San Francisco, Newsom supported plans to require employers to provide a minimum level of health insurance coverage to their employees or pay into a state fund. In turn, that would open access to healthcare providers. “That’s somewhat similar to the ACA now,” she says.

North Carolina Managed Care

North Carolina received approval for a federal waiver in 2018 to transition most of its Medicaid population into managed care plans. Fifteen different managed care groups won contracts, and the plans are set to be rolled out in two phases over the next couple of years, says Roberts, of the John Locke Foundation. The contracts are effectively shifting Medicaid payment models from traditional fee-for-service toward value-based care, he says.

Major healthcare systems are also participating in advanced Medicare accountable care organizations for various payment arrangements, with the idea of lowering healthcare spending, Roberts says.

“North Carolina has been a pioneer in the transition to value-based care in the public and private sectors, focusing on alternative payment models for a substantial portion of the state’s population,” he says. “There is also a focus on integrating behavioral and physical health into plans for individuals in this population with more serious conditions.”

Blue Cross Blue Shield of North Carolina has partnered with five of the largest hospital systems in shared-risk payment models, which emphasize improved health outcomes and lower healthcare costs through more managed and collaborative care, Roberts says. BCBSNC also announced an agreement with Duke Health to create a new insurance company focused on improving the health of Medicare Advantage members. Roberts says BCBSNC “appears to be excited about the work they are doing with the Blue Premier and the other ventures, which focus on value in healthcare payments.

“Given all the new ventures in North Carolina focused on value and health outcomes, I’d say this is as an exciting time as ever for the state’s insurers and providers because there is so much innovation in the effort to make the healthcare system as efficient as possible with an emphasis on lower costs and improved health outcomes.”

While some advocacy groups in North Carolina continue to advocate for a single-payer system, a legislative fiscal report said it would cost about $40 billion—or 66% more than the governor’s state budget proposal for the next fiscal year.

Maryland’s All-Payer System

Maryland and the Centers for Medicare & Medicaid Services are in a partnership designed to improve patients’ health and reduce costs in the only all-payer hospital-rate regulation system in the country, according to CMS.

For decades, Maryland has had fixed hospital prices across all payers regulated by its Health Services Cost Review Commission. Despite that, “costs were very high, somewhere near the top 10 in the nation,” Dr. Jesse Pines, M.D. and national director for clinical innovation at US Acute Care, said in a March 2018 discussion with Leader’s Edge.

In 2010, to bring costs down, Maryland piloted a global budget revenue (GBR) program in a handful of hospitals, then expanded the program to all hospitals statewide in 2014. “The hospital gets a target budget at the beginning of the year based on historical patient loads and budgets,” Pines said. “If they go over the target, they can’t retain those reimbursements, but if they undershoot, their budget in the future year is reduced.”

Under the model, Maryland hospitals have committed to achieving significant quality improvements, including reductions in their 30-day hospital readmissions rate and hospital-acquired conditions rate. In return, Maryland has agreed to limit all-payer per capita hospital growth, including inpatient and outpatient care.

So far, the program appears to be financially successful. State figures show it has saved an estimated $400 million over three years and has held steady the state’s healthcare costs.

However, as Pines noted, “Any time you are trying to reduce costs in one part of the system and there are pockets of fee-for-service, then by the nature of the market, the care will move from the global budgets to fee-for-service because that is where the opportunity is for greater revenue.

You have to control the costs of care, and I think Maryland has done a great job doing that.
Samuel Fleet, president, Group Benefits Division, AmWINS

“The best analogy is squeezing a balloon. If you squeeze one part, another part is going to expand. The only way to do it is grab more of the balloon with the overall goal of reducing the amount of air in there. The only way to change that is to change the system of payment for overall healthcare services, where it wouldn’t just be hospitals on global budgets but where there would be GBR for other entities, like outpatient clinics.”

In January of this year, Maryland began an initiative to try to do just that by aligning non-hospital providers—such as physicians, skilled-nursing facilities, home health providers, and others—with the goals of the GBR model.

The state and CMS expect the all-payer model to succeed in improving the quality of care and reducing program costs for Maryland residents, including Medicare beneficiaries. Moreover, Maryland may serve as a model for other states interested in developing all-payer payment systems, according to CMS.

Samuel Fleet, president of the Group Benefits Division at AmWINS Group, agrees with the CMS assessment. “You have to control the costs of care, and I think Maryland has done a great job doing that,” Fleet says. “The partnership with the state, CMS and the hospital systems has opened a lot of opportunity for creativity and innovation. In that way, a small health plan can compete with the Blues in Maryland very easily.”

Fleet notes that Maryland’s plan reflects an overall industry move toward value-based purchasing, regardless of payer. “In the commercial markets, you are seeing a move more to two-sided risks”—in which physicians as well as insurers would be responsible for payments—“and they will focus on quality and efficiency,” Fleet says. “I think we’ll see the movement toward all types of payers—Medicare, Medicaid and commercial payers. Everybody is looking for a value-based methodology.”

Reinsurance Proposals

Wisconsin and Colorado are among the states proposing reinsurance programs to reduce healthcare costs and help offset premiums. Wisconsin is trying a $200 million reinsurance program designed to stabilize premiums in the state’s individual health insurance market. A five-year federal waiver, known in Wisconsin as BadgerCare Reform, authorized the program, which will be jointly funded by the state and federal governments. With the reinsurance program, premiums on the state’s individual market are projected to drop by an average of 3.5% next year, according to the governor’s office.

“Many states have or are working toward establishing a reinsurance program,” says Lockton’s Behrens. “I think states would prefer to have reinsurance at the federal level but they’re not willing to wait.”

According to Behrens, “State-based reinsurance programs have largely proven to reduce premiums and help stabilize the market.” In some instances, employers are asked to help pay for the reinsurance program, but they have faced considerable opposition, he adds.

On a federal level, the ACA established a three-year reinsurance program, starting in 2014, “that was paid for in part by an assessment on both insured and self-funded health plans,” Behrens says. Known as the transitional reinsurance fee, it was not popular among employers, he suggests. “Our experience was that most employers were not eager to pay the TRF,” Behrens says, “and were glad to see it expire.”

The political fight on the state level over reinsurance was reflected in Oklahoma, Behrens says. Its reinsurance plan would have been paid for through an assessment on employer plans. Several employer associations told CMS they opposed the assessment, he says. Eventually, Behrens says, Oklahoma withdrew the plan.

The ERISA Industry Committee, the HR Policy Association, the National Association of Wholesaler-Distributors and the Self-Insurance Institute of America outlined their concerns in a letter to CMS.

Naturally, employers are pushing back, but they may need to start asking whether paying a small amount for reinsurance now is better than paying more to fund a single-payer system later,
Scott Behrens, director of government affairs, Lockton

While the community “recognizes the importance of a stable individual insurance market and supports state efforts” to lower costs, the assessments would have an opposite impact, the industry groups said. The assessments on employer-sponsored insurance penalizes businesses and would result in “reduced stability for some employer-sponsored plans,” among other issues, the industry groups wrote.

It may not be smooth, but there is room to overcome complexities, Behrens says. “Naturally, employers are pushing back, but they may need to start asking whether paying a small amount for reinsurance now is better than paying more to fund a single-payer system later,” he says.

Wisconsin insurers are also involved in a statewide cooperative that focuses on a group of rural school districts that pool purchasing power to reduce costs related to insurance coverage and healthcare. The cooperative allowed one district to save $200,000 through lower premiums and lower contributions. The program replicates a state program that enables more affordable coverage among farmers, says Twietmeyer, from M3 Insurance.

M3 is representing about a dozen groups in the cooperative statewide, which could represent thousands of members. According to Twietmeyer, the cooperative’s larger numbers result in more stability and strength, which gives it some leverage with providers not only to reduce costs but also to provide better access to care. “Statewide,” he says, “our cooperatives have outperformed leveraged trend [in spending] each year. It’s more predictable than with a small group. It’s a win, win.”

Colorado officials also have initiated plans for a reinsurance program, with several lawmakers saying they believe reinsurance is a proven program that will lower the cost of health insurance premiums. Gov. Jared Polis asked the legislature to invest $1 million in the program for 2020. A year ago, the state scrapped a similar program because officials believed it would cost too much to fund.

Recently, Colorado’s state Senate approved a measure to endorse a study to create a state-run health insurance option. The bill would direct state agencies to consider plans that would compete with existing private insurance plans and those offered on Colorado’s healthcare exchange. The idea is simple: curb some of the nation’s highest insurance premiums, state officials say. Although premiums are increasing in rural areas, there is a concern among private plans that the government would be a competitor, according to some lawmakers.

The public option plan does raise some questions, according to Behrens. Among them: would the state wield unfair bargaining power? “A public option is an exit ramp to government-run healthcare,” Behrens says. “A public option forces insurers to compete with a program driven by politics and backstopped by taxpayers. As lawmakers, the government is able to set and change the rules of negotiation. That’s a power no private carrier can match.”

Oregon’s ‘Share in the Learning’

Over the years, Oregon has worked extensively to evaluate and improve Medicaid’s effectiveness. Among its premier programs has been its coordinated care model, which has integrated hospital-based services with primary care, behavioral health and social support. Initiated in 2012, the model was a significant transformation of its Medicaid program spurred by an innovative arrangement with CMS, which provided an upfront investment of $1.9 billion to the state. By setting budgetary goals, the state has significantly limited the growth in Medicaid spending while also drastically reducing emergency department visits and hospital admissions. Now the state is laying out plans to improve the commercial markets.

Vandehey, from the Oregon Health Authority, says state programs are subject to a 3.4% growth-spending target instead of the 4.7% national forecast. As a result, there are savings of almost $700 million.

Vandehey says the Oregon program is an example that other states may want to examine to reduce costs. “We try to figure out what works and spread it to other markets,” he says. “We continually look for ways to evolve, a really patient-centered focus to improve outcomes.” And, he says, “We want to share in the learning.”

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