Medical Costs

Blue Cross Blue Shield of Michigan announced on Sept. 7 that it plans to reduce the use of prior authorization (PA) by 20%, becoming the latest payer to cut its PA requirements. While the moves make care delivery less burdensome for providers and patients, health insurers should also benefit from not relying as much on PA, according to health policy experts who spoke with AIS Health, a division of MMIT.

Michael Lutz, a senior consultant at Avalere Health, says that insurers can lower their administrative burden and focus on services where PAs are essential such as costly or high-volume procedures. He adds that plans announce their PA reductions as a marketing tool, too.

Now that the COVID-19 public health emergency has ended, the health care system — including insurers — are grappling with how to proceed in the “new normal” amid shifted habits and utilization patterns. To that end, two new studies offer insights into the implications of patients’ growing use of telehealth for mental health care services.

“The COVID-19 pandemic has caused massive amounts of changes in health care delivery, but then also in terms of how individuals are dealing with the pandemic. There’s been extensive research about how anxiety has increased or [how] other mental health disorders have increased,” observes Jonathan Cantor, Ph.D., a policy researcher at RAND Corp. With that in mind, Cantor and his fellow researchers sought to build on a previous study and measure how both telehealth and in-person mental health utilization and spending has changed from 2019 to 2022.

Annual health care costs for a hypothetical American family of four covered by an employer-sponsored preferred provider plan (PPO) are estimated to reach $31,065 in 2023, an increase of 5.6% year over year, according to the 2023 Milliman Medical Index (MMI).

On average, annual health care costs per person covered by a PPO plan will grow from $6,472 in 2021 to $7,221 in 2023, the actuarial and consulting firm predicted. Approximately 36% of those total expenses are attributed to inpatient and outpatient hospital services, while professional services alone will account for 30% of total spending in 2023.

More than a quarter of HIV-positive Medicaid enrollees did not receive at least one of three necessary services for viral suppression in 2021, according to a new report from the HHS Office of Inspector General (OIG). According to one expert, that missed care is certain to rebound to Medicaid managed care organizations (MCOs) in the form of a heavy cost burden: If HIV isn’t continually treated with antiretroviral therapy (ART) drugs and patients are not monitored by practitioners, the virus will cause a patient to develop AIDS — and patients are more likely to transmit the virus to others.

Medicaid covers a notable portion — 40% — of people in the U.S. who contracted HIV in 2018, per OIG. In the report, OIG reviewed 2021 claims data for 265,493 enrollees with HIV across the country. The main findings of the report were:

Commercial health plans pay two to three times higher rates than Medicare Advantage plans for the same services delivered in the same hospital, even when those rates are negotiated by the same insurer, according to a recent study published in Health Affairs.

The researchers studied 2022 price information disclosed by almost 2,500 hospitals and 118 insurers. The results showed that on average, commercial prices were between $660 and $707 more expensive than MA prices. The largest price differences were seen in the “surgery and medicine” category, where the median commercial price for services was $1,702, while the MA median price was $928.

The commercial-to-MA price ratio varied significantly across states, with many of the most populous states seeing higher ratios. The ratio was the highest in the Southeast and lowest in the Pacific Northwest and Midwest.

Vermont’s all-payer accountable care organization (ACO), OneCare Vermont (OCV), has reduced Medicare costs but has had minimal impact on the state's Medicaid and commercial segments, a new report commissioned by CMS says. However, the state’s largest carrier — nonprofit commercial insurer Blue Cross and Blue Shield of Vermont (BCBSVT) — withdrew from the program at the end of the 2022 plan year and does not currently plan to return.

The report, prepared by NORC at the University of Chicago on behalf of the CMS Center for Medicare and Medicaid Innovation (CMMI), focused most of its cost and quality improvement analysis on Medicare. The report did not make any quantitative assessments of OneCare Vermont’s impact on the commercial market. NORC found that the ACO reduced gross spending for Medicare enrollees by $686.40 per member per year, or 6.2% per year, during the first four years of implementation, resulting in a $124.9 million net reduction of Medicare spending during those years, a drop of 5.7%. However, quality improvement and utilization assessments were more difficult to make due to the COVID-19 pandemic, which distorted utilization patterns during 2020 and 2021.

After a handful of publicly traded insurers last month reported second-quarter 2023 earnings that reflected the impact of increasing utilization, additional insurers reporting results in August said they witnessed a similar phenomenon, particularly among the Medicare Advantage population. But the insurers indicated that they were able to factor those trends into their bids for the coming plan year, while analysts were reassured that the issue was largely confined to MA and not the commercial sector.

UnitedHealth Group first disclosed the uptick in outpatient care utilization in June, sparking an insurer-stock selloff. Shortly after, Humana Inc. revealed in an 8-K filing with the U.S. Securities and Exchange Commission that it was also seeing elevated medical costs due to an increased use of services. Humana in that filing projected its insurance medical loss ratio (MLR) for the full year would settle in the higher (worse) end of its previously stated 86.3% to 87.3% range. “This expectation is primarily driven by the emergence of higher than anticipated non-inpatient utilization trends, predominantly in the categories of emergency room, outpatient surgeries, and dental services, as well as inpatient trends that have been stronger than anticipated in recent weeks, diverging from historical seasonality patterns,” the MA-focused insurer stated. The company also explained that it was seeing strong growth in its MA membership, including a “higher-than-expected proportion of age-ins” during the three-month Open Enrollment Period that ran from January to March, and such members tend to have an above-average MLR when compared to more established customers.

Health care operators such as hospitals or providers that are owned by private equity companies often have higher costs for payers and patients, according to a systematic review of research studies that was published on July 19 in BMJ. Alexander Borsa, one of the review’s authors, tells AIS Health, a division of MMIT, that the increased costs are primarily due to the groups’ rate negotiating skills as well as the trend of private equity companies looking to consolidate clinical practices, leading to less competition in certain markets.

The researchers also found that private equity ownership was associated with mixed to harmful impacts on health care quality, while they noted there were not enough studies to make conclusions about private equity ownership’s effect on health outcomes and costs to operators.

They wrote, though, that “no consistently beneficial impacts of [private equity] were identified” in the studies they examined.

The growth of outpatient facility fees “derives from the intersection of the United States’ increasingly consolidated health care provider market, highly complex health care billing systems, and frequently inadequate health insurance coverage,” according to a new study from the Georgetown University Center on Health Insurance Reforms (CHIR). The study’s authors and managed care experts tell AIS Health, a division of MMIT, that unless regulators and policymakers act, the trend that serves as a tool for maximizing hospital revenue is likely to intensify.

Facility fees are charges assessed by hospital systems for care delivered in an outpatient setting “that ostensibly cover the institution’s operational expenses for providing care,” the report says. They are separate from the professional claims that physicians, nurse practitioners, and other health care professionals submit [to insurers] for reimbursement for their services and expenses.” The practice of charging those fees is likely to happen whenever an independent practice is acquired by a health system — a frequent occurrence in recent years.

Demand for Novo Nordisk A/S’s Wegovy (semaglutide) may spike even higher following the Danish pharma giant’s Aug. 8 announcement that the diabetes drug, recently approved by the FDA for use as a weight loss treatment, “reduces the risk of major adverse cardiovascular events by 20%” in patients with obesity. Clinicians and pharmacists say the drug’s broad appeal became even greater with the news but suggest that insurers and plan sponsors are likely to continue to erect access barriers to Wegovy given its high cost and clinical limitations.

Novo said a double-blinded trial “compared subcutaneous once-weekly semaglutide 2.4 mg with placebo as an adjunct to standard of care for prevention of major adverse cardiovascular events (MACEs) over a period of up to five years,” and “achieved its primary objective by demonstrating a statistically significant and superior reduction in MACE of 20% for people treated with semaglutide 2.4 mg compared to placebo.”