1. “What is my risk if my client makes mistakes with his Medicare Set Aside (MSA)?”
2. “What’s the chance that Medicare denies my client’s care because the client misused or misreported Medicare Set Aside funds?
3. “Why can’t my client just find coverage through another private insurance plan?”
Determining the best approach to address MSAs with a client in the settlement process can be a challenge for many plaintiff attorneys. The questions above are common among plaintiff attorneys who struggle to provide comprehensive advice to their clients regarding the regulations and ramifications of the Medicare Secondary Payer statute (“MSP”).
There are still quite a few attorneys in the workers’ compensation and liability industries who try to find ways to avoid the need for a Medicare Set-Aside (“MSA”) altogether when their clients settle their claims. It is understandable; the MSP regulations are complex, and the guidelines from the Centers for Medicare and Medicaid Services (“CMS” or “Medicare”) restrict how their clients can use the settlement funds – which their clients do not like at all. In addition, most jurisdictions preclude attorneys from taking contingency fees on medical funds allocated for Medicare purposes.
These factors, among others, can lead attorneys to shy away from addressing MSP issues head-on with their clients and, instead, consider risky approaches that may put them in danger of committing malpractice. This article, in consultation with a number of the nation’s prominent plaintiff attorneys, addresses the less clear aspects of MSP compliance and the common questions attorneys have, as well as how attorneys can best protect themselves and their clients as they address these issues.
Protect Your Client’s Benefits
4. “Will Medicare really deny my client’s benefits?”
5. “Show me a case where Medicare benefits were ever denied or Medicare came after the client or attorney for misappropriated MSA funds?”
As Ametros assists attorneys and their clients all the time with Medicare and MSA issues, these questions are posed to us frequently. We see denials of treatment from CMS after settlement daily. The Medicare administrative contractors in charge of approving all Medicare claims have systems in place to automatically deny injury-related treatments for individuals who have MSAs accounts with remaining funds. The contractors are closely monitoring MSA account recipients using the Mandatory Insurance Reporting Section 111 data they receive from insurance carriers for every single settlement that involves a Medicare beneficiary. They match this data with the injured party’s MSA reporting to verify if the MSA has funding to pay, or if Medicare should accept responsibility for payment.
While very few of the MSA accounts managed by Ametros exhaust, when that occurs, Ametros automatically notifies Medicare of the account’s exhaustion. We are often contacted by Medicare to review the treatments that were paid and to determine exactly when the funds were exhausted. In most cases, Medicare requires receipt of this information before it begins providing coverage for any injury-related bills. There can be a number of unique issues that arise after settlement, such as conditional payments, denials, etc., that require specialized attention to be resolved.
There are no known litigated cases against Medicare for cutting off benefits due to misuse of MSA funds; however, that does not mean that denials of care are not routinely taking place. The ability to deny care and remain the secondary payer is the fundamental right that Medicare established in the federal MSP statute. Most industry experts have seen Medicare increase its commitment to monitoring MSA accounts over the past several years and expect that will continue into the future. In addition to workers’ compensation cases, Medicare has indicated that it plans to also institute a review process for liability cases; it’s a clear sign that, if anything, Medicare is paying closer attention to all settlements.
The reference guides and memos provided by CMS have some authority, but the authority is not statutory. An attorney could follow all the guidance provided by CMS yet still run some minimal risk of failing to address the regulations under law. Nonetheless, the safest approach is to recognize and consider MSP laws in settlement proceedings, which requires providing thorough client guidance and a qualified advocate, like Ametros, to help the client abide by the guidelines. By doing this, attorneys can show that they did everything possible to protect the client’s Medicare benefits, thus avoiding any successful claim of malpractice.
Insurance Coverage Misconceptions
6. “ But can’t my clients find coverage through another private insurance plan after they settle?”
7.”What about the Affordable Care Act?”
There is a frequent misconception by attorneys that their clients can get insurance coverage elsewhere and thereby not have to worry about an MSA. Although sometimes the injured party may initially be able to get another entity to cover an injury, most of the time insurance carriers are including exemptions for care relating to settled claims. Using another plan may be a good near-term way to save some of the MSA funds, but it may result in confusion over the long term, and the client spending MSA funds to pay for the premiums and deductibles of these new plans will put them out of compliance with Medicare’s guidelines.
Private insurance plans, whether they be Medicare Advantage, Affordable Care Act plans or plans provided through an employer, only last for one year at a time. MSA funds are meant to be used properly for the client’s lifetime. If injured parties believe they can rely on a private plan to cover their injury costs, they have more incentives to use their MSA funds to pay for that plan or for other non-injury related costs. If the private plan they rely upon ceases to exist, increases premiums drastically or starts to deny their injury-related claims, the client will be in a very compromised position. At that point, clients will likely not have a record of what they did with their MSA funds, which will result in Medicare denials if they exhaust their funds. At the heart of the matter, it is risky to assume that a private insurance plan will be in place and available to the injured party for 10, 15 or 20-plus years after settlement.
Over the past several years, private insurance plans have become much more vigilant on MSP matters. Other insurance entities are becoming increasingly savvy regarding the fact that they should not be the primary payer for these work-related or personal injuries and are finding ways to avoid paying. Medicare is the ultimate backstop for an individual’s healthcare, so if the injured party has misused MSA funds and can’t get coverage, there really is nothing left to assist them with their care. When the client has exhausted funds and cannot find private coverage, he will likely make two calls: The first is to his attorney, the second is to a malpractice attorney.
What Is My Responsibility?
8. “I advised him of the risks; what else am I supposed to do?”
For attorneys who recognize the importance of having their clients thoroughly advised and aware of MSP guidelines, they are off to a good start. Many attorneys give their client an overview of the MSA’s purpose but struggle determining how they can truly protect themselves and their client once they hand their client what can be a sizable amount of money.
Going through self-administration alone has often proven to be too much of a burden and challenge for the injured party. Medicare seems to have realized that its 31-page Self-Administration Toolkit is just too complicated for the average individual to follow. Attorneys need to consider whether their client understands what is happening and must determine whether the client can realistically handle what is being asked of him for the rest of his life. Or as Medicare puts it: Will the client be a “competent administrator?” Providing a professional administrator to help the client with administration of the MSA funds not only shows good faith to abide by Medicare’s recommendation, but it also helps the injured party save money on medical care, remain compliant and have a resource to rely on so that he is not continually reaching out to the attorney after settlement.
As with all decisions, attorneys should consider what approach sets both their clients and themselves up for success and the most defensible case if there are complications down the road. Taking a little extra time to set up professional administration will save the attorney potential exposure on a number of issues. Also, one should not forget: Typically, carriers are offering to pay for the administration service, so it is no extra cost to the attorney or the injured party.
Plaintiff attorneys take enough risks managing and growing their businesses and fighting for their clients’ rights; there is no need to add to those challenges by risking any potential issues with Medicare.
The economics of American healthcare is undergoing a profound shift. Employers, policymakers and other purchasers are increasingly paying healthcare providers based on the benefit to the patient. For instance, the Centers for Medicare and Medicaid Services, (CMS) the agency that runs Medicare, adjusts payments to hospitals based on how well they perform on measures of patient experience, readmissions and patient safety. Private payers, too, are increasingly negotiating contracts tied to quality and safety performance.
Understandably, the changes to payment heighten sensitivity among hospitals and doctors about how their performance is measured. Even measures that have been exhaustively tested and validated face new levels of scrutiny when money is on the table. Many providers even call for delaying the changes in payment until measures can be perfected even more.
But employers and other purchasers of healthcare are determined to move forward with new payment standards without delay and will not await measurement perfection. After decades of enormous investment in healthcare with little or no accountability for quality, purchasers place a high value on understanding quality and don’t intend to reverse course and continue simply paying for everything. Employers and purchasers do not intend to return to the days when consumers had no information to make an all-important decision about which hospital to use, and purchasers paid the bill regardless of the quality of the patient experience.Purchasers want numbers, figures and rates on safety, quality and cost, calculated with vigilance, responsibility and respect for science. After decades of hard work and research, this is finally available to them.
Transparency has been the key to change. According to a multi-stakeholder roundtable convened by the Lucian Leape Institute of the National Patient Safety Foundation in 2015, “During the course of healthcare’s patient safety and quality movements, the impact of transparency – the free, uninhibited flow of information that is open to the scrutiny of others – has been far more positive than many had anticipated, and the harms of transparency have been far fewer than many had feared.” The effect is so dramatic, the report concluded, that “if transparency were a medication, it would be a blockbuster.”
The report cited my organization Leapfrog’s first-ever reporting of a measure of maternity care, early elective deliveries. These are deliveries scheduled early without a medical reason, and they pose risks to the mother and the baby, and frequently result in babies unnecessarily starting life in the neonatal intensive care unit. There had been many efforts in the past to curtail these unsafe deliveries, but it wasn’t until Leapfrog publicly reported rates by hospital that significant progress was made. In just five years, the national mean dropped from 17% to 2.8%.
Transparency has also accelerated reductions in errors and accidents that kill or harm patients in hospitals. The 2014 estimates from the federal Agency for Healthcare Research and Quality’s Medicare Patient Safety Monitoring System, which reports patient safety indicators, show progress in reducing hospital-acquired conditions, including a drop from 28,000 inpatient venous thromboembolisms in 2010 to 16,000 in 2014. This means 12,000 fewer patients in 2014 developing potentially fatal blood clots. It is very unlikely that we would have achieved a reduction of this magnitude without transparency.
Measurement and transparency do not have to be perfect to achieve remarkable progress in quality improvement. We see this in more transparent industries outside of healthcare every day. For instance, researchers studied the recent initiative in Los Angeles to issue safety grades rating the hygiene of restaurants and found it associated with a nearly 20% decline in hospitalizations from foodborne illness in the program’s first year. The composite grade used in LA was fairly rudimentary by the standards of measurement scientists in the healthcare industry, but the grade was nonetheless effective in educating consumers and galvanizing improvement.
Providers and health care executives sometimes point to flaws in their medical record and billing systems as problems that should delay the use of certain measures. However, public reporting is often necessary to break logjams in data collection. For instance, New York state’s public release of surgical mortality data for coronary artery bypass grafting procedures jump-started the movement to define and more carefully collect the procedure outcome data. Providers will get better at data collection when the data is used.
Current healthcare performance measures may not be perfect, but good people are working hard to steadily improve their validity – and that work should be done in the sunlight of transparency. Employers will gladly work collaboratively toward that end, as long as the work continues without delay. We have all waited too long for transparency and sensible payment, and the cost in human lives and suffering is already too high.
Insurance is regulated by states, and the states’ laws are implemented and administered by state insurance commissioners. This was affirmed in 1945 by the McCarran-Ferguson Act. Under that act, states regulate the business of insurance unless the U.S. Congress decides otherwise. In the past six years, the federal government has with regularity encroached on areas previously controlled solely by state insurance commissioners, such as through the following federal actions:
The creation by the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) of the Federal Insurance Office (FIO)
Dodd-Frank’s creation of the Financial Stability Oversight Council (FSOC)
The Affordable Care Act (ACA)
The Department of Labor (DOL) fiduciary rule issued April 8, 2016
These federal encroachments have led to regulatory confusion. Although state insurance commissioners are the predominant regulator of licensed insurance carriers and producers, insurance companies that are deemed systemically important non-bank financial institutions are supervised both by the Federal Reserve and by their domestic state insurance regulators. This creates significant duplication and regulatory burden; the cost of that burden – as well as some of the confusion — is ultimately passed on to consumers. Under the ACA, for instance, state insurance regulators routinely must react to hundreds of pages of regulations that are published by the Centers for Medicare and Medicaid Services. Licensed insurance producers and carriers must overhaul their operations and distribution to comply with the 1,023-page DOL fiduciary rule.
As I see it, state legislatures have given state insurance regulators dual mandates: (1) to protect consumers from the moment of purchase through filing a claim and ultimately the payment or denial of that claim; and (2) to ensure companies are solvent and can meet their financial obligations to consumers. While insurance regulators at the state level can always improve, I do believe that collectively we do a commendable job. Insurance company failures are rare, and most states respond to consumer complaints in a very timely fashion.
Under a President Trump, I believe the role of state insurance regulators will grow as some federal regulations are eliminated. If Dodd-Frank is reviewed, the role of the FIO and even the FSOC could change. State regulators have argued tirelessly that the FIO is not a regulator and needs to stay in its lane as authorized under Dodd-Frank. State regulators are debating with the FIO the need for a covered agreement on reinsurance collateral and are worried about state law being preempted. I think that, under a Trump administration, state regulators may be listened to much more in this debate. State commissioners and the FSOC representatives with insurance experience have also worked to ensure that the FSOC recognize that insurance is not banking and that traditional insurance is not systemic to the global financial system. A Trump administration may agree with state insurance regulators on these issues and many more. Only time will tell, of course.
State insurance commissioners need to demonstrate through the execution of states’ dual mandates that we deserve the responsibility of supervising the insurance markets in our respective states and that we do it better than it could be done from the federal level. I believe the time for state insurance commissioners to shine is now, and I hope we all continue to deliver results as our roles as the regulators of insurance carriers and producers and as the protectors of consumers become increasingly important.
Transparent reinsurance programs could emerge as significant opportunities for healthcare providers, issuers, reinsurers, technology innovators and regulators to address health insurance.
The message is clear. Having to factor in higher costs associated with new entrants to the healthcare system gives insurance firms license to charge higher rates. If these new people were put into a reinsurance pot for three to five years with costs spread over all insurers, no one insurer would be unnecessarily burdened. After this period, costs for these entrants could be reexamined and a decision could be made on how to proceed with them, depending upon the deviation from the remaining population.
Several factors are coming into play.
United Health Group indicates it will be leaving all but a few of the 34 states where it is offering health insurance under Obamacare.
A fresh Blue Cross Blue Shield study finds recent Obamacare entrants have higher rates of specific illnesses and used more medical services than early entrants. “Medical costs of care for the new individual market members were, on average, 19% higher than employer-based group members in 2014 and 22% higher in 2015. For example, the average monthly medical spending per member was $559 for individual enrollees versus $457 for group members in 2015,” the study found.
What emerges in conversations with economists, regulators and healthcare actuaries is a sense that properly designed, fair and transparent reinsurance could—and would—advance industry and public policy goals to continue insurance for all at affordable prices. This approach would represent tangible improvements over inefficient, incumbent systems. Information would be used by insurers and reinsurers, providers and regulators and, crucially, insureds to establish best performances for healthcare outcomes and expenses. Virtually everyone knows that state or regional reinsurance would have to be mandated, as voluntary systems could be gamed.
“The implementation of new policies, the availability of research funding, payment reform and consumer- and patient-led efforts to improve healthcare together have created an environment suitable for the successful implementation of patient-reported outcome measures in clinical practice,” fresh research in Health Affairs also indicates.
Risk analysis technologies could help issuers, reinsurers, healthcare institutions and citizens rein in the healthcare system’s enormous costs. Earlier this year, the Congressional Budget Office and Joint Committee on Taxation projected that, “in 2016, the federal subsidies, taxes and penalties associated with health insurance coverage will result in a net subsidy from the federal government of $660 billion, or 3.6% of gross domestic product (GDP). That amount is projected to rise at an average annual rate of 5.4%, reaching $1.1 trillion (or 4.1% of GDP) in 2026. For the entire 2017–2026 period, the projected net subsidy is $8.9 trillion.”
CBO/JCT published this stunning projection amid consensus that $750 billion to $1 trillion of wasted spending occurs in healthcare in the U.S. “Approximately one in three health care dollars is waste,” Consumer Reports says.
Key metrics should focus on estimates of risk using demographics and diagnoses; risk model descriptions; calculation of plan average actuarial risk; user-specified risk revealing and detailing information; drill-down capabilities clarifying research; monitoring and control; and calculation and comparison measures to address reinsurance validation.
Several major refinements yielding and relying upon granular, risk-revealing data and metrics would support more efficient reinsurance. All would, and could, update reinsurance information and address customer experience, trust and privacy concerns.
“Advanced analytics are the key,” remarked John Wisniewski, associate vice president of actuary services at UPMC Health Plan. “Predictive capability that looks at the likelihood a patient admission may be coming is the information that we can give to doctors to deal with the matter. … Whoever develops algorithms for people who will be at risk—so providers can develop plans to mitigate risk—will create value for issuers, providers and members alike.”
Available technologies support the connecting of risk assessments with incentives for risk information.
Michael Erlanger, the founder and managing principal of Marketcore, said,“We cannot know what we cannot see. We cannot see what we cannot measure. These available technologies provide clarity for more efficient health insurance and reinsurance.”
Context: Three Rs: Reinsurance, Risk Corridors and Risk Adjustment
When Congress enacted the ACA, the legislation created reinsurance and risk corridors through 2016 and established risk adjustment transfer as a permanent element of health insurance. These three Rs—reinsurance, risk corridors and risk adjustment—were designed to moderate insurance industry risks, making the transition to ACA coverage and responsibilities. The Centers for Medicare and Medicaid Services (CMS) within the Department of Health and Human Services (HHS) administers the programs. All address adverse selection—that is, instances when insurers experience higher probabilities of losses due to risks not factored in at the times policies are issued. All also address risk selection, or industry preferences to insure healthier individuals and to avoid less healthy ones.
With the expiration of ACA reinsurance and risk corridors, along with mandatory reporting requirements this December, healthcare providers, issuers, reinsurers, technology innovators and regulators can now evaluate their futures, separate from CMS reporting.
Virtually all sources commend reinsurance and risk adjustment transfer as consistently as they deride risk corridors. Reinsurance has paid out well, while risk corridors have not. Risk adjustment transfer remains squarely with CMS.
While House Republican initiatives try and fail to repeal the ACA, and some news programs and pundits say it is unsustainable, approximately 20 million subscribers are enrolled in Obamacare: with 12.7 million as marketplace insureds, with others through Medicaid and as young adults on parent plans. President Obama, in March, remarked: “Last summer we learned that, for the first time ever, America’s uninsured rate has fallen below 10%. This is the lowest rate of uninsured that we’ve seen since we started keeping these records.” Subscription ratios are off the charts. Premium increases have been modest, approximately 6% for 2016, experts find. “I see no risk to the fundamental stability of the exchanges,” MIT economist Jonathan Gruber observed, noting “a big enough market for many insurers to remain in the fold.”
Transitional Reinsurance 2014-16: Vehicle for Innovation
One of the great benefits of the ACA is eliminating pre-existing conditions and premium or coverage variables based on individual underwriting across the board. Citizens are no longer excluded from receiving adequate healthcare, whether directly or indirectly through high premiums. Prices for various plan designs go up as coverage benefits increase and as co-pays and deductibles decrease, but the relative prices of the various plans are calculated to be actuarially equivalent.
To help issuers make the transition from an era when they prided themselves on reducing or eliminating less healthy lives from the insureds they covered, to an era where all insureds are offered similar ratings, the ACA introduced reinsurance and risk corridors to cover the first three years (2014 through 2016), in addition to risk adjustment transfer, which will remain in force.
The concept is relatively simple: Require all issuers to charge a flat per-dollar, per-month, per-“qualified” insured and create a pot of money with these “reinsurance premiums” that reimburses issuers for excess claims on unhealthy lives. Issuers would be reimbursed based on established terms outlined in the ACA.
Reinsurance reimburses issuers for individual claims in excess of the attachment point, up to a limit where existing reinsurance coverage would kick in. Individuals involved with these large claims may or may not be identified in advance as high-risk. The reimbursed claim may be an acute (non-chronic) condition or an accident. The individual may otherwise be low-risk.
The important aspect is that all health insurance issuers and self-insured plans contribute. By spreading the cost over a large number of individuals, the cost per individual of this reinsurance program is small to negligible. Non-grandfathered individual market plans are eligible for payments. A state can operate a reinsurance program, or CMS does on its behalf through this year.
As a backstop, the federal government put some money in the pot through 2016—just in case the pot proved inadequate to provide full reimbursement to the issuers. In a worst-case scenario, the sum of the reinsurance premiums and the federal contribution could still be inadequate, in which case the coinsurance refund rate would be set at less than 100%.
As it turned out, 2014 reinsurance premiums proved to be more than adequate, so the refund rate was 100%, and the excess funds in the pot after reimbursement were set aside and added to the pot for 2015, just in case that proves inadequate.
Reinsurance functions on this timetable through this year:
CMS transferred approximately $7.9 billion among 437 issuers—or 100% of filed claims for 2014, as claims were lower than expected— and it has yet to release 2015 payments. The results for 2015 are coming this summer.
From the outset, states could, and would, elect to continue reinsurance, the CMS contemplated. In 2012, the CMS indicated that “states are not prohibited from continuing a reinsurance program but may not use reinsurance contribution funds collected under the reinsurance program in calendar years 2014 through 2016 to fund the program in years after 2018.”
Subsequent clarification in 2013 did not disturb state discretion. Current regulation specifies that “a state must ensure that the applicable reinsurance entity completes all reinsurance-related activities for benefit years 2014 through 2016 and any activities required to be undertaken in subsequent periods.”
One course of action going forward from 2017 and varying from state-to-state could be mandatory reinsurance enacted through state laws. Healthcare providers, issuers, reinsurers, regulators and legislators could define the health reinsurance best suited to each state’s citizens.
Reinsurers could design and manage administration of these programs possibly at a percentage of premium cost that is less than what is charged by the federal government today. While these reinsurance programs would be mandated, they could include a component of private reinsurance. For example, reinsurers could guarantee the adequacy of per-month reinsurance premiums with provisos that if these actuarially calculated rates turned out to be inadequate in any given year or month, there will be an adjustment to account for the loss in the following year. Conversely, if those rates turn out to be too high, 90% or more is set aside in an account for use in the following year. This way, reinsurers could participate by providing a private sourced solution to adverse claims.
Risk corridors apply to issuers with Qualified Health Plans (exchange certified plans) and facilitate transfer payments. The CMS noted: “Issuers whose premiums exceed claims and other costs by more than a certain amount pay into the program, and insurers whose claims exceed premiums by a certain amount receive payments for their shortfall.” Technically, “risk corridors mean any payment adjustment system based on the ratio of allowable costs of a plan to the plan’s target amount,” as the CMS designated.
Risk corridors are politically contentious. Sen. Marco Rubio (R-Florida) likened risk corridors to bailouts. The HHS acknowledged it will “explore other sources of funding for risk corridors payments, subject to the availability of appropriations… includ[ing] working with Congress on the necessary funding for outstanding risk corridors payments.” And, a knowledgeable analyst, Dr. David Blumenthal, noted that risk corridors are not bailouts.
Going forward, evaluations of risk corridors will demand due diligence. Several health exchanges failed from any number of factors—from too little capital for growth experienced, inadequate pricing, mismanagement or risk corridor payments.
Whether innovation can yield effective risk corridors or whether risk corridors will simply fade out as transitional 2014-2016 regulation will depend on institutional and industry participants. Risk corridors did not score unalloyed approbation among sources.
Risk Adjustment: Permanent Element of ACA
Risk adjustment remains in force and impels issuers with healthier enrollees to offset some costs of issuers with sicker ones in specific states and markets and of markets as a means toward promoting affordable health care choices by discouraging cherry picking healthier enrollees.
The HHS transferred approximately $4.6 billion for risk adjustment among issuers for 2014.
At first blush, one might postulate that risk adjustment does the job and that reinsurance and risk corridors could just as reasonably fade out. There is some logic to that argument.
On the other hand, state or regional level reinsurance could make up for risk adjustment shortfalls. In some instances, risk adjustment seems to be less friendly to issuers that take on higher-risk individuals, rather than rewarding high tech issuers and providers with back office capabilities coding claims in such a way as to tactically game risk adjustment.
Evaluating and cultivating these opportunities are timely amid the uncertainties of the presidential and congressional elections that may yield executive and legislative lawmakers intent on undoing ACA provisions, starting with risk corridors. Such legislation could produce losses for issuers and reinsurers.
Nelson A. Rockefeller Precedent
In 1954, then-Undersecretary of Health Education and Welfare Nelson A. Rockefeller proposed reinsurance as an incentive for insurers to offer more health insurance. S 3114, A Bill to Improve the Public Health by Encouraging More Extensive Use of the Voluntary Prepayment Method in the Provision of Personal Health Services, emerged in the first Eisenhower administration to enact a federally funded health reinsurance pool. Rockefeller intended the reinsurance as a means toward an end, what would eventually be dubbed a “third way” among proponents of national health insurance. President Truman and organized labor championed the approach into the mid-’50s. So did the Chamber of Commerce and congressional Republican adversaries of the New Deal and Fair Deal, who were chaffing to undo Social Security as quickly as they could. The American Medical Association also supported this third way because it opposed federal healthcare reinsurance as an opening wedge for socialized medicine. Despite limiting risk and offering new products, insurers demurred because of comfort zones with state regulators and trepidation about a federal role.
Nelson A. Rockefeller, then-undersecretary of the Department of Health, Education and Welfare, presenting a federally funded health reinsurance plan, 1954.
Source: Department of Health Education and Welfare—now Health and Human Services
Rockefeller’s health reinsurance plan would “achieve a better understanding of the nation’s medical care problem, of the techniques for meeting it through voluntary means, and of the actuarial risks involved,” HEW Secretary Oveta Culp Hobby testified to a Senate subcommittee in 1954.
Rockefeller’s health reinsurance plan did not make it through the House. Organized labor decried it as too little, the AMA said it was too intrusive. Upon hearing news of the House vote, a frustrated Dwight Eisenhower blistered to reporters, “The people that voted against this bill just don’t understand what are the facts of American life,” according to Cary Reich in The Life of Nelson A. Rockefeller 1908-1958. “Ingenuity was no match for inertia,” Rockefeller biographer Richard Norton Smith remarked of industry and labor interests in those hard-wired, central-switched, mainframe times.
“’It’s déjà vu all over again’ like Yogi Berra,” said one insurance commissioner immersed in the ACA on hearing Ike’s quote.
The idea of national health insurance went nowhere despite initiatives by Sen. Edward M. Kennedy (D-Massachusetts) in the late ’70s and President Bill and First Lady Hillary Clinton roughly 20 years ago, until Congress legislated Obamacare.
Innovative, Transparent Technologies Can Deliver Results
Nowadays, more than 60 years after Rockefeller’s attempt, innovative information technologies can get beyond these legislative and regulatory hurdles. Much of the data and networking is at hand. Enrollee actuarial risks, coverage actuarial values, utilization, local area costs of business and cost-sharing impacts on utilization are knowable in current systems. Broadband deployment and information technology innovations drive customer acquisition and information management costs ever lower each succeeding day. Long-term efficiencies for reinsurers, insurers, carriers, regulators, technology innovators and state regulators await evaluation and development.
Reinsurance Going Forward From 2017
So, if state reinsurance programs can provide benefits, what should they look like, and how should they be delivered?
For issuers, state-of-the-art transparent solutions improve the current system by enabling issuers to offer more products and services and becalm more ferocious industry adversaries while lowering risks and extending markets. Smaller, nimbler issuers may provide more innovative solutions and gain market share by providing the dual objectives of better health outcomes with lower costs.
For regulators, innovative, timely information sustains the indispensability of state regulators ensuring financial soundness and legal compliance—while allowing innovators to upgrade marketplace and regulatory systems, key regulatory goals that Iowa’s insurance commissioner, Nick Gerhart, pointed out recently. Commissioner Gerhart envisions regulators as orchestra conductors, acknowledging that most insurance regulatory entities are woefully understaffed to design or operate such reinsurance programs themselves, but they will, and they can lead if the participants can provide turnkey capabilities.
Think of health insurance and reinsurance as generational opportunities for significant innovation rather like the Internet and email. When the Department of Defense permitted the Internet and email to evolve to civilian markets from military capabilities in the 1980s, the DOD initially approached the U.S. Postal Service. Senior Post Office management said it welcomed the opportunity to support email: All users need do is email correspondence to recipients’ local post offices by nine p.m. for printing, enveloping, sorting and letter-carrier delivery the following day.
Similarly, considerable opportunities chart innovative pathways for state and regional health reinsurance for 2017 and beyond.
One path, emulating the post office in the ’80s, keeps on coding and bemoans a zero sum; it would allow the existing programs to fade away and will respond to whatever the president and Congress might do.
Another path lumps issuer health reinsurance as an incumbent reinsurer service without addressing the sustainability of state health exchanges or, indeed, any private health insurers in the absences of risk spreading with readily available information technologies.
The approach suggested here—mandated state health reinsurance—innovates to build sustainable futures. Enabling technologies empower all stakeholders to advance private and public interests through industry solutions advancing affordable healthcare.
Are your workers’ compensation medical doctors treating injured workers from a P.O. Box? That may sound ludicrous, but most workers’ compensation data suggests just that. The rendering physician’s address is a P.O. Box.
In the past, documenting only the provider’s mailing address was acceptable because that and a tax ID were all that were needed to pay bills and file 1099s. Now, having more complete data has become profoundly important.
Data on providers is scrutinized to determine medical performance, claim cost and outcome. Accurate analysis relies on the data-complete data. Rendering physicians must be documented on the bill so that their performance is accurately tied to the correct injured worker and claim in the data. Including the 1) treating physician’s name, 2) physical location and 3) NPI number of the rendering provider on each bill lets analytics tell us who are the best and why. When those three little data elements are missing, so is any useful information for medical management.
When the data contains group or facility demographics without the rendering physician’s name, the actual treating physician cannot be linked to the claim. Performance cannot be logically averaged among all the providers in the group. Obviously, not every treating provider is equally gifted or competent.
The HCFA (Health Care Finance Administration) standardized form has a box to document the rendering provider’s name and NPI (National Provider Identification). That box must be used.
Sometimes, the name of the provider is documented on the billing form but is not captured in the OCR (optical character recognition) process, whereby the data on the bill is translated to a digital form.
Even when bills are submitted electronically, that data element, while present, may not be forwarded. The digital bill is usually handed off to a bill review service that analyzes the appropriateness of the charges and passes its conclusions on to the payer. Rarely is all the information from the HCFA billing form passed on to the payer. The provider information that is handed off may be just the billing address and tax ID.
Sometimes, the name and NPI of the rendering physician are omitted simply because it has always been done that way. No one has thought to change the procedure.
In other words: Retrieving definitive provider demographics might be a simple matter of requesting it!
Sometimes, though, the reason accurate data is missing may be more sinister. The Centers for Medicare and Medicaid Services (CMS) requires the rendering physician name and NPI number on bills submitted to Medicaid and Medicare. CMS simply withholds payment on bills without that information. But those standards are not applied in workers’ compensation. The frequent result is bad or misleading data, but it can be even worse.
Unfortunately, omitting the name and NPI of the rendering physician is sometimes deliberate. This could be strategic or actual fraud. Some large multi-specialty medical groups and multi-location practices deliberately omit such information because they want the anonymity for their individual practitioners. They want to avoid measurement of their providers’ performance. They do not want individuals identified, not even by the location in which they practice. All the providers in the group treat from a P.O. Box and under the group NPI number.
Some providers deliberately obfuscate the data so they can stay under the radar to overbill. They submit different addresses and even different NPI numbers on their bills. The practice is clearly fraudulent because CMS expects that one physician or other medical provider is assigned one NPI. Providers who commit fraud also circumvent CMS.
Regardless of the reason for bad medical provider data, payers can correct the problem by demanding more. Often, the solution is as simple as asking the bill review service for more complete data. Further upstream, it might be as simple as requiring all providers in a network to include the name and NPI of the actual treating physician on the HCFA billing form.
All you require is the 1) rendering physician’s name, 2) physical location and 3) NPI number with every bill. With that information, the best and worst providers can be identified, and the fraudulent ones exposed.