Tag: Risk adjustment

To Improve Patient Care, Think Both “Zebras” and Golf

Feb 5, 2020

By MICHAEL MILLENSON

Super Bowl Week ended with the San Francisco 49ers and 161 U.S. hospitals having something in common.

Both were publicly penalized, both lost money as a result and both passionately believed the process was unfair. Unfortunately, it’s not easy to decide whether their objections were sensible or sour grapes and, in the case of hospitals, the real-life consequences are not a game.

The penalty that pained the 49ers occurred shortly before halftime of Super Bowl LIV, when offensive pass interference was called on tight end George Kittle. The call negated a big gain that might have enabled the 49ers to take the lead.

Replays showed that the referees – nicknamed “zebras” for their black-and-white striped shirts – were technically correct in their decision. Nonetheless, controversy erupted over whether given other possible penalties called or overlooked, this one deserved a yellow flag.

Hospitals call that kind of context “risk adjustment.” A few days before the Super Bowl, the Medicare program blew the whistle on a group of hospitals having high rates of infection and other patient injuries. The hospitals who are outliers in what are blandly labeled “hospital-acquired conditions” (HACs) suffer a cut of one percent in their Medicare payments over next fiscal year.

Improving the Affordable Care Act Markets (Part 2)

Oct 24, 2019• 8

By JONATHAN HALVORSON

In a previous post, I described how some features of the Affordable Care Act, despite the best intentions, have made it harder or even impossible for many plans to compete against dominant players in the individual and small employer markets. This has undermined aspects of the ACA designed to improve competition, like the insurance exchanges, and exacerbated a long term trend toward consolidation and reduced choice, and there is evidence it is resulting in higher costs. I focused on the ACA’s risk adjustment program and its impact on the small group market where the damage has been greatest.

The goal of risk adjustment is commendable: to create stability and fairness by removing the ability of plans to profit by “cherry picking” healthier enrollees, so that plans instead compete on innovative services, disease management, administrative efficiency, and customer support. But in the attempt to find stability, the playing field was tilted in favor of plans with long-tenured enrollment and sophisticated operations to identify all scorable health risks. The next generation of risk adjustment should truly even out the playing field by retaining the current program’s elimination of an incentive to avoid the sick, while also eliminating its bias towards incumbency and other unintended effects.

One important distinction concerns when to use risk adjustment to balance out differences that arise from consumer preferences. For example, high deductible plans tend to attract healthier enrollees, and without risk adjustment these plans would become even cheaper than they already are, while more comprehensive plans that attract sicker members would get disproportionately more expensive, setting off a race to the bottom that pushes more and more people into the plans that have the least benefits, while the sickest stay behind in more generous plans whose premium cost spirals upward. Using risk adjustment to counteract this effect has been widely beneficial in the individual market, along with other features like community rating and guaranteed issue.

However, in other cases where risk levels between plans differ due to consumer preferences it may not be helpful. For example, it has been documented that older and sicker members have a greater aversion to change (changing plans to something less familiar) and to constraints intended to lower cost even if they do not undermine benefit levels or quality of care, like narrow networks. These aversions tend to make newer plans and small network plans score as healthier. Risk adjustment would then force those plans to pay a penalty that in turn forces enrollees in the plans to pay for the preferences of others.

Improving the Affordable Care Act Markets (Part 1)

Oct 22, 2019• 3

By JONATHAN HALVORSON, PhD

With each passing year, the Affordable Care Act becomes further entrenched in the American health care system. There are dreams on both the far left and far right to repeal and replace it with something they see as better, but the reality is that the ACA is a remarkable achievement which will likely outlast the political lifetimes of those opposing it. Future improvements are more likely to tweak the ACA than to start over from scratch.

A critical part of making the ACA work is for it to support healthy, competitive and fair health insurance markets, since it relies on them to provide health care benefits and improve access to care. This is particularly true for insurance purchased by individuals and small employers, where the ACA’s mandates on benefits, premiums and market structure have the most impact. One policy affecting this dynamic that deserves closer attention is risk adjustment, which made real improvements in the fairness of these markets, but has come in for accusations that it has undermined competition.

Risk adjustment in the ACA works by compensating plans with sicker than average members using payments from plans with healthier members. The goal is to remove an insurer’s ability to gain an unfair advantage by simply enrolling healthier people (who cost less). Risk adjustment leads insurers to focus on managing their members’ health and appropriate services, rather than on avoiding the unhealthy. The program has succeeded enormously in bringing insurers to embrace enrolling and retaining those with serious health conditions.

This is something to celebrate, and we should not go back to the old days in which individuals or small groups would be turned down for health insurance or charged much higher prices because they had a history of health issues. However, the program has also had an undesired effect in many states: it further tilted the playing field in favor of market dominant incumbents.

Health in 2 Point 00 — Episode 39

Jul 17, 2018

Jessica DaMassa decides the the way to deal with mourning Croatia’s loss in the World Cup Final is to make you suffer through my explanation of what’s wrong with the Trump Administration’s decision to screw over health plans and destabilize the exchanges. Oh and Higi gets a mention too — Matthew Holt

After Transparency: Morbidity Hunter MD joins Cherry Picker MD

Jul 17, 2015• 16

By SAURABH JHA, MD

When report cards of performance became available, cardiac surgeons in New York and Pennsylvania avoided high risk patients. Could something similar happen, nationally, after the forthcoming revolution in transparency inspired by Propublica’s data release?

Take two fictional orthopedic surgeons, Cherry Picker MD and Morbidity Hunter MD.

Cherry Picker lives in the Upper East Side of New York. His patients give him great reviews on Yelp. His patients read every comment on Yelp before making any decision. Cherry Picker has a beautiful family. When he smiles, light refracts from his shiny teeth.

Cherry regularly appears on TV. He writes for the sleek, metrosexual publication, FHM. Cherry specializes in knee injuries in weekend warriors. His patients often call him from the ski slopes in Colorado, Whistler and Zermatt. Cherry is good at his craft. But his patients are even better at their craft – post-operative recovery. Cherry doesn’t actively seek such patients. His patients are selected for him by his zip code, reputation, long waiting list and Yelp.

Morbidity Hunter’s real name is Harjinder Singh. He migrated from Punjab and works in a safety net hospital in North Philadelphia. Singh wanted to work in Beverley Hills, but to convert his J1-visa to a green card, he had to work in an area of need. Once he started working, he liked his job. His daughters liked their school and his wife liked the house they bought. Singh doesn’t have shiny teeth. He hasn’t appeared on TV, although his daughters tease that he can play Sonny from Exotic Marigold Hotel.

Singh’s colleagues named him Morbidity Hunter because he operates regardless of how sick his patients are. He never says no. Nearly all his patients are obese and diabetic. The School of Public Health sends students to shadow him to learn about polypharmacy. The hospital went on a spree of hiring hospitalists when Singh started. Continue reading…

Obamacare Premiums Are Going To “Skyrocket”? Forget About It.

Apr 5, 2014• 109

By JOE FLOWER

Being against Obamacare has been the keystone, the capstone, the mighty sledgehammer, the massive metaphor of your choice for the right for five years now. They couldn’t stop it from being passed. They couldn’t stop it at the Supreme Court.

They weren’t able to choke it off by “defunding” it. They rejoiced at the rubber-meets-the-sky rollout of Healthcare.gov, but then the kinks got worked out of that.They railed at the administration using discretionary powers built into the law to help it work better. Every horror story of Obamacare ruining people’s lives they came up with turned out to be false.

Almost all of the people cynically cancelled by the insurance companies as a way to sell them more expensive insurance got insured again fairly quickly. Then 7 million people signed up on the exchanges, and altogether some 10 million formerly uninsured people now have medical coverage.

But the right still needs to call it a “train wreck.” The magic mantra has to work for them. Just this morning, here’s a Republican Congressman saying that we have to cut Food Stamps because: Obamacare. Say that again slowly?

It’s getting harder and harder on the right to come up with new ways to say it isn’t working when it actually seems to be working. I have to hand it to them, though: Those spin factories are filled with hard-working creative people. Get to work early, stay late, trash Obamacare. Hey, it’s a living.

So what’s the latest? This fall, Obamacare premiums are going to “skyrocket”!

The Weightlessness of Obamacare

Feb 18, 2014• 3

By J.K. Wall

So many old rules in health care and insurance no longer seem to apply.

I keep stumbling upon situations, where, what used to be up is now down and what used to be down is now up.

No one seems to know for sure how things will settle out under the new reality created by Obamacare and the even more unpredictable reactions to the law by health care companies, employers and, most especially, you and me.

I’ve started using the term “weightlessness” to describe this state we’re in. Picture the astronauts on the international space station, floating through a room, flipping at will, as likely to settle on a wall or on the ceiling as on the floor.

That’s what life is like under Obamacare now—for physicians, hospital administrators, insurance executives, benefits brokers and employers.

Here are a few examples:

1. I wrote last week about how a chunk of workers, even at large employers with generous benefits, would actually get a better deal on health insurance from the Obamacare exchanges than from their employers. So their employers are starting to consider whether they should deliberately make health benefits unaffordable for those low-wage workers, so they can qualify for Obamacare’s tax-subsidized insurance.

That could be good for both employers and employees. The effect on taxpayers, which would switch from granting a tax credit to employers to instead granting it to the employees, is unclear.

2. Even though insurers were certain that price would be king on the Obamacare exchanges, that hasn’t led most customers to buy the plans with the cheapest premiums. As I wrote Friday, 76 percent of those shopping on the exchanges in my home state of Indiana have picked the higher-premium silver and gold plans, with only 24 percent picking bronze plans.

“There are a few geographies where we believe we are gaining share despite lower price competition which points to the value of our local market depth, knowledge, brand, reputation and networks,” WellPoint Inc. CEO Joe Swedish said during an January conference call with investors.

It’s possible that’s a result of older and sicker patients being the earliest buyers on the exchange, and that as healthier people buy coverage, they’ll gravitate to the low-cost bronze plans. But that hasn’t happened—which, as I wrote on Friday, has proved wrong hospitals’ concerns about the super-high deductible bronze plans.

How Health Plan Risk Adjustment Models May Change Under the ACA

Jan 3, 2014• 4

By KIP PIPER

Risk adjustment is a key mechanism to ensuring appropriate payments for Medicare Advantage plans, Medicare Part D drug plans, and Medicaid health plans. Since health plans vary in their mix of healthy and sick enrollees, risk adjustment modifies premium payments to better reflect the projected costs of members served and compensate plans that enroll high-cost patients.

Historically, risk adjustment was only used in Medicaid and Medicare – in effect, redistributing some revenue from health or drug plans with a relatively healthier mix of members to those plans with a more costly enrollment profile. However, the Affordable Care Act (ACA) extends risk adjustment to the individual and small group health insurance markets starting in 2014.

A new brief from The Synthesis Project tackles the issue and makes several interesting recommendations for how to improve risk adjustment methods for the post-ACA market. Without accurate risk adjustment, health plans have a strong financial incentive to seek out only the healthiest enrollees, especially under ACA-mandated adjusted community rating. Under adjusted community rating, health plans may not vary premiums based on health status or sex and are limited in how much they may vary premiums based on age. Under ACA, the healthy, the young, and men subsidize the health costs of the unhealthy, the older, and women.

Risk adjustment is therefore a necessary factor in stabilizing the dramatically new post-ACA health insurance marketplace, particularly the new Health Insurance Exchanges. Even then, the ACA is a giant game of musical chairs. The market under ACA will be chaotic and challenging, with a mix of winners and losers once the music stops and the dust settles, which will take at least three to five years.

Five Questions Journalists Should Be Asking About the Affordable Care Act

Nov 16, 2013• 3

By Seth J. Chandler

I’m hearing a lot of the lazy “but what are the political implication” perpetual horse race questions from the media about recent developments surrounding the Affordable Care Act. That’s fun Inside-the-Beltway stuff, but in the mean time there are real people who are likely to be helped and hurt with matters as essential as their health. So, what I am not hearing enough of yet, however, are tough, substantive questions that get to the heart of whether the Affordable Care Act is going to be stillborn.

Here are some questions that I think intelligent journalists and blogger ought to be asking in light of recent developments with the Affordable Care Act. Getting answers in many cases may take persistent questioning and closer scrutiny of existing documents. In others, FOIA requests may be needed.

1. Actual v. Anticipated Age Distributions in the Exchanges

What is the age distribution by state and in the aggregate of persons who it is claimed have enrolled in Exchange-based plans under the Affordable Care Act? Once we have this data, we can compare it to (a) census data on the age distributions in the various states and (b) any prior estimates on what the age distribution of Exchange enrollees would be such as those described in this government document.

If there is a significant difference between the age distribution encountered thus far and the anticipated age distribution, that increases the probability of the ACA succumbing to an adverse selection death spiral.

Getting Quality Right: Exercise Due Caution When Grading Hospitals, Schools and Doctors

Dec 7, 2012• 16

By Peter Ubel, MD

If Americans judged the quality of hospital care the way Newsweek judges high schools, we would soon be inundated with “charter hospitals” that only treat healthy patients.

As reported in The New York Times, thirty-seven of Newsweek’s top 50 high schools have selective admission standards, thereby enrolling the cream of the eighth grade crop. That means that when these high scoring eighth graders reach eleventh grade, they’ll be high scoring eleventh graders, helping the school move up the Newsweek rankings. These selective admission schools simply have to avoid screwing up their talented students.

That’s no way to determine how good a school is. The measure of a good education should be to assess how well students did in that school compared to how they would have been predicted to do if they had gone to other schools.

Imagine two liver transplant programs, one whose patients experience 90% survival in the year following their transplant and the other whose patients experience only a 75% survival rate. Based on that information, the former hospital looks like the place to go when your liver fails. But aren’t you curious about the kind of patients that receive care in these two hospitals? Wouldn’t you want to know whether that first hospital was padding its statistics by selectively transplanting relatively healthy patients?