Tag Archives: Costs

Typical Family of Four Now Paying Over $28,000 for Health Care

A report issued Monday by Milliman indicated that the cost of health care for a typical American family covered by the average employer-sponsored preferred provider organization (PPO) plan in 2018 is $28,166, as per the Milliman Medical Index (MMI).

Broken down into component parts, this represents the following costs:

2018 MMI Components of Spending
31% ($8,631) – Inpatient
19% ($5,395) – Outpatient
29% ($8,275) – Professional services
17% ($4,888) – Pharmacy
4% ($995) – Other (Home health, ambulance, DME, prosthetics)

The key takeaway from the report is that employers are paying more; but employees are paying a lot more.

The health care expenditures are funded by employer contributions to health plans and by employees through their payroll deductions and out-of-pocket expenses incurred when care is received, according to the report.

The report continues that they are seeing over the long-term, and that employees are paying a higher percentage of the total, with employee expenses increasing 5.9%, and employer expenses increasing 3.5% in 2018.

The total cost of health care is shared by both the employer and employee for a family of four, the MMI stated, which breaks down to three categories:

1. Employer subsidy. Employers that sponsor health plans subsidize the cost of healthcare for their employees by allocating compensation dollars to pay a large share of the cost.
2. Employee contribution. Employees who choose to participate in the employer’s health benefit plan typically also pay a substantial portion of costs, usually through payroll deduction.
3. Employee out-of-pocket cost at time of service. When employees receive care, they also often pay for a portion of these services via health plan deductibles and/or point-of-service copays.

The relative proportions of medical costs for 2018 are:

56% ($15,788) – Employer contribution
27% ($7,674) – Employee contribution
17% ($4,704) – Employee out-of-pocket

Looking at this another way, employees are paying a total of 44% as either a contribution or out-of-pocket, which adds up to $12,378, compared to the employers’ 56% and $15,788, respectively.

As health care gets more expensive, it will naturally lead to higher costs for employers, but also higher costs for employees. And as has been happening more commonly, employers are shifting more of the costs onto the employees. With stagnant wages, as reported daily in the news, this is going to be a problem for those families caught in the squeeze between rising costs for medical care and stagnant wages.

This would be resolved by creating a single payer health care system that will save both employers and employees money,

 

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State of the Line Report — 2018 Edition

It’s May, and you know what that means. It means NCCI has held its Annual Issues Symposium, and the State of the Line Report, presented by Chief Actuary Kathy Antonello.

But this year I am going to do something a little different. I am going to compare the data presented this year with some of the data from last year and the year prior, so that the reader can see how much change there has been year over year from the 2017 and 2018 reports. Last year’s data and the year before was presented in my post, “Slight Increase in Average Medical Costs for Lost-Time Claims, Part 2.”

First up, this year’s WC Average Medical Lost-Time Claim Severity in Chart 1.

Chart 1.

As you can see, there has been another slight increase in the lost-time claim severity from the 2016 to 2017 preliminary data. In 2016, the average medical lost-time claim severity was $28,800 and the preliminary 2017 severity was $29,900, an increase of nearly $1,000.

The key takeaway here is that NCCI estimates that the AY 2017 average medical lost-time claim severity is 4% higher than the corresponding AY 2016 value.

Looking back at the data from last year’s report, we can compare the preliminary 2016 data with the actual 2016 data reported above. Chart 2 exhibits last year’s data.

Chart 2.

Source: NCCI’s Financial Call Data; p Preliminary based on data valued as of 12/31/2016.

In chart 2, the preliminary medical lost-time claim severity was $29,100 and represented a 5.0% change from 2015. In 2015, it was $27,700 and saw a -1.4% change from the prior year.

This is borne out in the next chart, Chart 3, where the 2015 average medical lost-time claim severity was estimated at $28,500, or a 1.0% change from 2014.

Chart 3.

 

Next, we look at the cumulative change in medical lost-time claim severity (1997-2017p), as highlighted in chart 4.

Chart 4.

In this chart, the cumulative change in medical lost-time claim severity is contrasted with the cumulative change in the Personal Health Care Chain-Weighted Price Index (1997-2017p). The PHC is a proxy for medical care price inflation that responds to changes in the blend of different medical services over time.

From the chart, the cumulative change in medical lost-time claim severity has strongly outpaced the change in the PHC index in that same period, indicating that while the PHC index is nearly flat, the medical lost-time claim severity is rising and will continue to do so.

According to NCCI, the medical lost-time claim costs have risen faster, +175% , than the PHC index of +61%, over the period from 1997-2017, with most of the gap occurring in the years before the recession.

However, looking at the data from last year’s report, as shown in chart 5, the cumulative change in medical lost-time claim severity was much higher, as estimated by NCCI, which was +227%.

Chart 5.

Sources: NCCI’s Financial Call Data; Centers for Medicare & Medicaid Services ; p Preliminary based on data valued as of 12/31/2016.

The next chart, chart 6, compares the relative growth rates between medical severity and price inflation.

Chart 6.

On the left-hand side, the medical lost-time claim severity grew approximately 4.5% per year faster than the medical care prices for the same period.

On the right-hand side however, the change in the medical lost-time claim severity and the medical care price tracked one another in the same ten-year period. Yet, there is a slight rise in the medical lost-time claim severity after 2015 continuing into 2017.

The key takeaways as NCCI reported were that much of the gap between the cumulative changes in medical lost-time claim severity and the PHC index since 1997 arose from the years prior to 2007. And that both the severity and care prices have grown at approximately the same rate, as indicated above.

Lastly, the next chart, chart 7, indicates the average annual change from 2012 to 2016 for all NCCI states. Note: all states in grey are either monopolistic states or are intrastate-rated states that do not report data to NCCI.

Chart 7.

The state with the highest average annual change was Nevada, and the states with the lowest average annual change, were Maine, Massachusetts, North Carolina, Oregon, and Rhode Island.

The key takeaways here are that the average annual change in medical lost-time claim severity was +2.3% from the four years between 2012 and 2016. The increase in Nevada, NCCI stated, was due to a very large claim that occurred in 2016. The decrease in North Carolina was due to a combination of large claim activity in 2012 and a change in the medical fee schedule in 2013 and 2015.

But it is apparent that most states experienced a change at, or below 10% from 2012 to 2016. And if we are to believe that claim frequency is decreasing, then we must ask ourselves, why is the medical lost-time claim severity rising, as seen in chart 1, one hundred dollars short of $30,000.

One answer we have already examined is the cumulative change in medical lost-time claim severity from 1997 to 2017, although preliminary as of this week’s report.

However, what is not shown is what lies behind those numbers, i.e., what is happening in each claim to cause the severity to rise, or not rise. There is no indication, as there never is, as to what amount of the rise is due to the cost of surgery or to other claim factors such as hospital bills, ancillary services such as medical equipment, anesthesia services, any testing performed, etc. In short, we don’t know if what is causing health care costs generally to rise also is affecting the medical lost-time claim severity.

As I have stated before in this blog, workers’ compensation must look to other alternatives to help bring down the medical lost-time claim severity. This cannot be achieved by looking between all three coasts. It must include looking at less expensive, but equally advanced medical care elsewhere. Otherwise, the gap will only get wider over time.

 

 

 

 

CMS’s Price Transparency Trick

Shoutout to Promed Costa Rica for the following article posted today on Facebook.

http://www.modernhealthcare.com/article/20180425/NEWS/180429939?utm_source=modernhealthcare&utm_medium=email&utm_content=20180425-NEWS-180429939&utm_campaign=am

CMS has been for decades the crux of the problem with the American health care system, Every model, program and scheme they have implemented addresses only the symptoms, but not the cause of the disease the patient is suffering from.

As I wrote yesterday, and the week before in my review of Health Care under the Knife, the real cause of the complexity, confusion, dysfunction and overall failures of the health care system is the system itself — meaning the economic system that has proletarianized physicians, commodified, corporatized, financialized, and monopolized health care in this country.

So now, this talk of price transparency, when the cost of care is already too high compared to other Western nations, is just a placebo being administered to a dying patient — the American health care system.

Remember these words:

“America’s health care system is neither healthy, caring, nor a system.”

Walter Cronkite

Federal Spending Increased Due to Medicare ACO’s

Once again, a topic previously discussed here has raised its head.

This time, it is the Medicare Shared Savings Program (MSSP), Medicare’s largest alternative payment model (APM).

Readers of this blog will recall previous posts about this topic. The first, from September 2015, Shared Savings ACO Program Reaps the Most for Primary-care Physicians reported that primary-care physicians were benefiting the most from the shared savings.

The next post, Challenges Remain in Physician Payment Reform, which followed on the heels of the first, discussed the challenges that remained in reforming physician payment, after then President Barack Obama (the good ole’ days) signed the Medicare Access and CHIP Reauthorization Act (MACRA) back in April.

MACRA repealed the Sustainable Growth Rate (SGR) mechanism of updating fees to the Physician Fee Schedule (PFS), and had been blamed for causing instability and uncertainty among physicians for over a decade, and that led to 17 overrides of scheduled fee cuts, at a cost of over $ 150 billion.

In Models, Models, Have We Got Models!, I suggested, rather strongly that all these models were not living up to their promise and was only creating more complexity, confusion, and dysfunction in an already dysfunctional health care system.

A post from January 2017, Illogical!, reported on yet another asinine model introduction by CMS at the Health Care Payment Learning and Action Network (LAN) Fall Summit by Adminstrator Seema Verna.

So when I received an email today from Dr. Don McCanne, former president of the Physicians for a National Health Plan (PNHP) that mentioned a press release from Avalere Health indicating that Medicare ACO’s have increased federal spending despite projections that said they would produce net savings.

According to the press release, the Medicare Shared Savings Program (MSSP) has performed considerably below the financial estimates from the CBO that was made in 2010 when the MSSP was enacted as part of the ACA.

Avalere’s press release said that this has raised questions about the long-term success of Medicare’s largest alternative payment model (APM).

The MSSP has grown from 27 ACO’s in 2012 to 561 in 2016, and most of them continue to select the upside-only Track 1, the release continued, which does not require participants to repay CMS for spending above their target.

As seen in the figure below, Avalere’s research found that the actual ACO net savings have fallen short of initial CBO projectios by more than $2 billion.

However, in 2010, the CBO projected that the MSSP would produce $1.7 billion in net savings from 2013 to 2016. Yet, it actually increased federal spending by $384 million over that same period, a difference of more than $2 billion.

Josh Seidman, senior vice president at Avalere said, “The Medicare ACO program has not achieved the savings that CBO predicted because most ACO’s have chosen the bonus-only model.”

Avalere also found that while the MSSP was overall a net cost to VMS in 2016, there is evidence that individual ACO performance improves as they gain years of experience. Avalere found that MSSP ACO’s in their fourth year produce net savings to the federal budget totaling $152 million, as shown in the next figure.

Avalere’s analysis also showed that the downside-risk models in the MSSP experienced more positive financial results overall. This indicates that there is potential for greater savings over time to CMS as the number of downside-risk ACO’s increase.

The upside-only model increased federal spending by $444 million compared to the downside-risk ACO’s $60 million over 5 years.

“While data do suggest that more experienced ACO’s and those accepting two-sided risk may help the program to turn the corner in the future, the long-term sustainability of savings in the MSSP is unclear. ACO’s continue to be measured against their past performance, which makes it harder for successful ACO’s to continue to achieve savings over time,” said Avalere’s director, John Feore.

The weird part is that despite the MSSP increasing federal spending, ACO’s are still reducing spending compared to projected benchmarks.

If you are increasing spending, then how can you at the same time be reducing spending? Isn’t this a health care oxymoron?

Which brings me back to my previous posts. CMS is a clusterfudge of programs, models, rules, regulations, and schemes that have done nothing to improve the health care system in the US. In point of fact, it has only added to the confusion, complexity, dysfunction, and wastefulness of a system no other nation has.

When are we going to wake up from this nightmare and deep six the market-driven disaster that is the American health care system? There are saner alternatives, but we are so mentally ill and obsessed with profiting from people’s illnesses that nothing changes.

Einstein was right. The definition of crazy is doing the same thing over and over again and expecting different results. We are crazy to continue with this mess.

Americans Are Skipping Health Insurance

Bloomberg on Monday published an article by John Tozzi that reported that some Americans are taking a risk and skipping health insurance because of the cost.

In the article, “Why Some Americans Are Risking It and Skipping Health Insurance”, Bloomberg interviews three families; the Buchanans of Marion, North Carolina, the Owenses of Harahan, Louisiana, and the Bobbies in a suburb of Phoenix, Arizona.

The Buchanans decided that paying $1,800 a month was too much for health insurance and decided to go without it for the first time in their lives.

Doubling insurance premiums convinced the Owenses to do so as well, and Mimi Owens said that, “We’re not poor people but we can’t afford health insurance.”

Saving money to pay for their nine-year-old daughter Sophia, who was born with five heart defects, forced the Bobbies to go uninsured for themselves and their son Joey.

These three families are but a small part of the dozen other families Bloomberg is following to understand the trade-offs when a dollar spent on health insurance cannot be spent on something else. Some are comfortable financially, others are just scrapping by.

According to Tozzi, the share of Americans without insurance is near historic lows, the current administration is rolling back parts of the ACA. At the same time, Tozzi reports, the cost for many people to buy a plan is higher than ever.

In the case of the Buchanans, wife Dianna, 51, survived a bout with cancer 15 years ago, her husband, Keith has high blood pressure and takes testosterone. Both make more than $127,000 a year from an IT business and her job as a physical therapy assistant. They have additional income from properties they own.

However, their premium last year was $1,691, triple their mortgage payment, and was going up to $1,813 this year. A deductible of $5,000 per-person meant that having and using coverage would cost more than $30,000.

What made the Buchanans take this step was when Blue Cross and Blue Shield of North Carolina and the major hospital system in Asheville, could not reach an agreement, putting the hospital out of network. Keith Buchanan said, “It was just two greed monsters fighting over money.” He also said, “They’re both doing well, and the patients are the ones that come up short.”

The Buchanans are now members of a local doctors’ practice, for which they pay $198 a month. They also signed up for a Christian group that pools members’ money to help pay for medical costs. For this membership, it costs the Buchanans $450 a month, and includes a $150 surcharge based on their blood pressure and weight.

After dropping their coverage with Blue Cross and Blue Shield, Keith injured his knee, went to an urgent care center and was charged $511 for the visit and an X-ray. “If we can control our health-care costs for a couple of years, the difference that makes on our household income is phenomenal,” Keith said.

There is evidence, Tozzi writes, that having insurance is a good thing. People with insurance spend less out of pocket, are less likely to go bankrupt, see the doctor more often, get more preventive care, are less depressed and have told researchers they feel healthier.

Yet, some 27.5 million Americans under age 65 were uninsured in 2016 (myself included), about 10 percent of the population, according to the Kaiser Family Foundation.

The most common reason cited by KFF was that the cost was too high. A Gallup poll suggested that despite declining for years, the percentage of adults without coverage has increased slightly since the end of 2016.

However, other data, Tozzi writes, showed no significant change.

The following chart outlines the household income and health insurance status of people under 65 who qualify for government help with having insurance.

For the Bobbie family, the current administration’s proposal to make it easier for Americans to buy cheaper health plans could open options for the rest of the Bobbie family, but with over $1 million in medical costs for Sophia, these less-expensive choices would lack some of the protection created by the ACA that allowed her to get coverage.

The tax scam that became law in December will lift the ACA’s requirement that every American have coverage or pay a fine.

Some states are trying out the new rules, offering plans that don’t adhere to ACA requirements. This is the case in Idaho where the state’s Blue Cross insurer attempted to offer a so-called “Freedom Plan” that had annual limits on care and questionnaires that would allow them to charge higher premiums to sick people or those likely to become sick.

The current administration judged reluctantly that this plan violated ACA rules.

The Owenses decided to do something like what the Buchanans did. They tried a Christian health-sharing ministry for a few months, but joined a direct-primary care group, which Mimi Owens called, “the best care we’ve ever had.”

The three American families are by no means not alone in having to decide whether to have insurance or to take the risk and forgo paying huge premiums to save money or to use it for another family member with more pressing medical issues.

Two of these families are not low-income, as they both earn over $100,000 a year and could afford to buy health coverage if it was affordable. But the reality is that premiums have risen and will continue to rise and will price them out of the market.

Except for the Bobbies, no one in the other two families have serious medical issues that are exceedingly expensive, and they have found lower cost alternatives, but for many other families in the U.S., that may not be an option.

The only real solution is universal health care. Then the Buchanans, Owenses, and Bobbies of America will not have to worry about how they are going to pay for medical bills if some serious medical condition arises. We can and should be better than this.

Tax Benefits of Medical Travel

An online newspaper, Medical Tourism Daily posted an article today from The CPA Journal examining the tax benefits medical travelers could receive if they sought medical care outside of the US.

This article is a further elaboration of an earlier article written by an ERISA lawyer and that I wrote about four years ago, Beware the IRS: What to Know Before Using Medical Tourism for Group Health Plans.

Today’s article was authored by three CPA’s and PhD’s from the University of North Florida, in Jacksonville.

The authors discussed the additional savings for taxpayers who seek medical care abroad, above the savings from the medical care itself.

The main takeaways from the article are as follows:

  1. Deductibility of Medical Expenses – generally, the deductibility of medical expenses is determined without regard to where the expenses are incurred. Taxpayers seeking medical care abroad are subject to the same rules and regulations as those who seek medical treatment in the US. There may be some differences in the types of expenses incurred. Example: medical travelers generally incur travel and lodging expenses not associated with domestic medical care. The type and quality of medical care vary from country to country; some treatments, therapies, or drugs administered in other countries may be seen as experimental in the US. Medical facilities may also be different, with services performed on both an in and outpatient basis. Lastly, some overseas providers may require a significant, upfront, lump-sum payment, which would make determining deductibility of expenses.
  2. Allowable Medical Expenses – in order to deduct the cost of medical travel, the expenses incurred must qualify as medical expenses rather than as personal or vacation expenses. To qualify as a medical expense, costs must be incurred for the diagnosis, treatment, cure, or prevention of a mental or physical illness or injury. The cost of equipment, supplies, medicines, and materials needed for the diagnosis, treatment, prevention, or cure of illnesses and abnormal conditions may include, but are not limited to some of the traditional medical expenses. Medical insurance premiums are also allowed to be deducted, as well as long-term care services and transportation costs related to treatment are also deductible. For medical travelers, transportation expenses and meals and lodging expenses are also deductible, under certain conditions (meals and lodging only).
  3. Potential Tax Benefit – in order for a medical traveler to derive any benefit from medical expenses, the taxpayer must have allowable medical expenses that exceed 10% of adjusted gross income (AGI) and must itemize. Choosing to itemize actual expenses implies that the taxpayer has expenses that exceed the standard deduction. They cannot deduct both the standard deduction and itemized expenses in the same tax year.
  4. Paying for Medical Care Abroad – paying for medical expenses while living or traveling abroad is different from paying for medical expenses domestically. Many providers out of the US do not bill insurance companies directly. US citizens living and working abroad may want to fund medical care through high-deductible medical plans in conjunction with health savings accounts (HSA’s). US citizens are taxed on all income worldwide; therefore establishing an HSA can provide significant tax benefits in addition to effectively fund out-o-pocket costs. They can also be used by US citizens traveling abroad for the sole purpose of medical care, as long as the services qualify for the treatment of medical expenses in the US.

The authors conclude their article by advising medical travelers planning to travel for the purpose of medical treatment to carefully consider all factors involved with the tax treatment of their expenses. Lastly, they should keep detailed records and documentation.

It is incumbent on the patient, and not the facilitator to thoroughly educate themselves about the benefits and liabilities they may face if they fail to properly account for all of there medical travel expenses. It would be a wise and customer-focused facilitator, well-versed in tax issues to advise all medical travelers so that they can realize even greater savings from the medical care they receive.

New Study Concludes States with Employer Choice Have Higher Claim Costs

While scanning LinkedIn yesterday afternoon, I noticed someone had posted a link to an article in the Journal of Occupational and Environmental Medicine (JOEM) early last month.

The abstract stated that the financial impact of choice of physician within workers’ compensation had not be well studied, and that the purpose of the article was to assess the difference in cost between employer and employee directed choice of physician.

As many of you will recall, this subject was one of the first topics I covered when I began my blog over five years ago.

The following articles are linked here for your review:

Employee vs Employer Choice of Physician: How best to Incorporate Medical Tourism into Workers’ Compensation

Employee vs. Employer Choice of Physician Revisited: Additional Commentary on How Best to Incorporate Medical Tourism into Workers’ Compensation

Employer Choice States See Lower Claim Costs

Follow-up to Employee/Employer Choice: Three Years Later

The authors, Tao, Leung, Kalia, Lavin, Yuspeh, Bernacki (2017) analyzed 35,640 indemnity lost time claims from a 13-year period at a nationwide company, using multivariate logistic regression to determine association of medical direction with high-cost of claims.

Tao et al. found that states that have employer-directed choice of physician have lower risk of having high cost claims, greater than or equal to, $50,000, but had higher attorney involvement compared to employee direction. Their results showed that the net effect of attorneys offset the benefits of employer choice.

This study may be in line with the WCRI study I cited in the article above, “Employer Choice States See Lower Claim Costs”, but because of higher attorney involvement, the benefits are negated.

They concluded that states that permit employer selection of treating physician have higher cost due to greater participation by attorneys in the claims process.