Medicare Changes, Supreme Court Appeals, and Kentucky Prior Authorizations
Episode 83 Recap of the FLATLINING Podcast
This week Matthew and Ron cover several top stories circulating in the Medical Industry. They open up with updating us on changes to the Medicare Fee schedule and some possible confusion on how it is labeled on the Center for Medicare & Medicaid Services (CMS) website. Ron explained that in the past when the Physician Fee Schedule (PFS) was updated twice in one year they would label the first one “A” and the second one “B” and this one he pointed out was labeled “AB”. According to Ron, what CMS appears to have done is overlayed the new or second schedule on the first one and the new one is effective March 9 versus January 1st, unlike what had been done in the past. The effect he said, is that you can see the reimbursement rate for current services, but if you are trying to go back and check services delivered before March 9th, it is no longer there. You can review the updated fee schedule at the CMS website.
Matthew transitioned to another topic from CMS, the new updates from CMS on the Medicare Advantage (MA) rates for 2025. Referring to a Becker's article analyzing the updated rates he pointed out there is a slight decrease in benchmark payments, cutting them by .16%. According to the article, “CMS estimated plans will see 3.7% higher revenue overall in 2025. MA risk score trend of 3.86% — the average increase in risk adjustment payments year over year — will offset risk model revisions that will lead to a 2.45% decline in revenue and a projected decline in star rating bonuses, according to the agency.”
Ron explained what this means, by first pointing out that the way MA payment fees are calculated is complicated and is convoluted, including things like “overall benchmark payments”, “risk scores” and “star rating” bonuses etc. The takeaway from all this he said is this, yes, the payers are getting a reduction in the benchmark payments. But to listen to the payers Ron said, was to think they were going to go bankrupt. The counter comments from the payers’ mentioned things like they may have to take away benefits to seniors, increase rates etc. He made the comparison of these complaints a little like Jeff Bezos complaining about the price of jet fuel for his private jet. The reason for this comparison he said is because “Medicare Advantage on a per enrollee basis, is the most profitable enrollee an insurance company can have, and not by a little bit. It’s more than twice the profit per enrollee as any other type of member.” This includes employer group, individual market subscriber, and Medicaid. Ron continued by saying that the next most profitable enrollee is a Medicaid enrollee. From one perspective, he said, we can conclude that that the government is not very good purchaser of healthcare.
In contrast to physicians taking cuts on Medicare and Medicaid reimbursement rates he said, is that physicians are taking the cut not on their most profitable patients like a payer, they are taking the cut on their least profitable patients. He concluded that he found the claims by the insurers to be a bit disingenuous. Matthew pointed out that this profitability is one of the reasons why Humana was exiting the commercial market altogether to focus completely on their government insurance business.
Matthew pointed out that Bloomberg reported a drop in share prices for payers, and asked Ron if the threats to raising rates or cutting benefits will come through or if this is just a tactic to make the Biden Administration look bad. Ron said he thought it was bit of both, pointing out that Wall street doesn’t like a drop in profitability, even when it that drop in profit is from what was “obscenely profitable is now only mildly obscenely profitable.” The way to increase profits he said is to raise revenue and they may do that with some increases in rates and/or a reduction in benefits, but he doesn’t think there will be a massive adjustment to either.
The discussion shifted to Home Depot’s lawsuit with Blue Cross Blue Shield (BCBS). Ron first provided some background for understanding how BCBS operates. Explaining that basically BCBS operates as “franchises” in each state, but they also own and operate other products within each franchise. Ron explained that various BCBS state entities may have an HMO operating under another name that is not allowed to compete with the BCBS branded entity. This is what is at the core of Home Depot’s antitrust allegation.
The law suit, according to Becker's has been going on for over a decade and Home Depot is requesting the U.S. Supreme Court consider this case even though Home Depot won the challenge with a $2.67 billion settlement. Ron asked us to contemplate these numbers a minute, that a multibillion-dollar settlement is not worth as much to Home Depot as forcing BCBS to allow their other products to compete in each of the BCBS markets.
This restriction that BCBS puts on the localized products, according to Ron, might contain language that says two-thirds of revenue must come from the national BCBS plan and what it does is forces big national customers, like Home Depot to purchase the national plan and not the localized product. The localized product might produce a cost savings to for customers like Home Depot.
Ron and Matthew also discussed some technical details on how market competitiveness is measure in the healthcare markets and Ron closed this segment out with explaining that the insurers have for a long time been insulated from anti-trust laws, but now it that seems to be changing and it could be due to the Department of Justice investigation of United Health Care (UHC) for antitrust violations.
The final segment the team discussed a Kentucky bill aimed at the issue of prior authorizations. Ron explained that there are several state bills that are working their way through legislatures aimed at addressing prior authorization problems with insurance companies. Ron and Matthew have discussed this topic on numerous occasions and Ron has been featured on local and national media outlets discussing the frustrations physicians feel about this process. He said the bills are aimed at various issues within the prior authorization problem, for example how quickly the payer must respond to the physician or how prior authorizations are done. This bill focused on “Gold Carding” meaning, issuing providers who have over a 90% approval rating for prior authorization to bypass the prior authorization process completely. The bill was never called up for hearing according to The Winchester Sun resulting in its defeat.
Ron said he was confident that the payers were very nervous about this bill, explaining that nearly all physicians are above the 90% approval rate, the issue is he said, is that the process is hard and that is point. He explained here and in the past that insurers make it difficult, so physicians don’t use it and it lowers expenses for payers. He rhetorically asked if physicians are passing the “test” at a rate of 90-95%, why do you need the test at all.
Ron pointed out that the prior authorization process “chews” up a lot of money in the system not dedicated to delivering care. All that said, he wanted to be intellectually honest and said that this process probably does limit some physicians from ordering something that is not medically necessary. Matthew pointed out that insurers said that they discontinued “Gold Card” programs because of they are administratively difficult to implement, reduce quality/patient safety and lead to higher costs. Ron explained that this bill would only cover fully insured plans, ones that fall under state control, and reiterated that that the idea of letting basically all physicians order tests without prior authorization likely “scared the hell” out of the insurers.
Ron said nationally prior authorization denials are only about 3% and most of the appeals to those go through. He did take issue with the insurers claim that gold card programs increased administrative difficulties and the somewhat nebulous claim of reduced quality or patient care, but he admitted that if physicians had cart blanche to order tests, there would be some physicians that would order unnecessary tests, but they would be in the minority. He restated something he said in the past, that if the process was more akin to our judicial system, where the doctor was considered correct in ordering the test first, rather than questioned, and the insure had the burden of proving the test was unnecessary, the entire problem would go away. He pointed out that if all the money spent on both sides of the process in its current form was eliminated and the insurers focused on only what appeared to be unnecessary, he thinks the overall cost savings would exceed what is spent currently.