Impacts on Medicare and Private Health Insurance
The temperatures are rising, and so is the momentum in our summer research! This month, we explored the impact of health risk assessments on Medicare Advantage payments, the transformative effects of the Affordable Care Act on the healthcare system, and the implications of hospital pricing transparency.
The Impact of Health Risk Assessments on Medicare Advantage Payments
Title: "Medicare Advantage Health Risk Assessments Contribute Up To $12 Billion Per Year To Risk-Adjusted Payments"
Authors: Hannah O. James, et al.
Publication: Health Affairs, May 2024
Access: [Link Here]
Summary:
A research team from Brown University examined how health risk assessments (HRAs) affect Hierarchical Condition Categories (HCC) risk scores, ultimately influencing payment rates for Medicare Advantage (MA) beneficiaries.
Key Findings:
- Diagnoses from HRAs and medical chart reviews both significantly impact risk score calculations, leading to increased payments for MA plans.
- HRAs alone can cause a more than 5% rise in coding intensity.
- In 2019, 44.4% of MA beneficiaries had undergone at least one HRA.
- Beneficiaries with at least one HRA saw a 12.8% increase in HCC scores.
- On average, HRAs boosted beneficiary-level risk scores by 5.7% in 2019.
- 21.3% of beneficiaries with HRAs had higher HCC scores from diagnoses reported exclusively in HRAs.
- Coding intensity varied by insurer, with Cigna, UnitedHealth Group, and Humana showing the most significant increases due to HRAs, together accounting for 80% of all MA spending.
Importance:
MA enrollees represent a significant portion of Medicare beneficiaries and spending. Upcoding practices, driven by HRAs, result in higher costs without improved care quality. This has led to calls for reforms to address the inflated coding intensity and ensure appropriate spending in the MA program.
The Affordable Care Act's Impact on Private Health Insurance
Title: "The ACA’s Transformation of Private Health Insurance"
Authors: Linda J. Blumberg and John Holahan
Publication: Urban Institute, May 3, 2024
Access: [Link Here]
Summary:
Researchers from the Urban Institute reviewed how the Affordable Care Act (ACA) has reshaped the private insurance market, focusing on enrollment, insurer participation, and premiums.
Key Findings:
- Since the ACA's implementation, the uninsured rate has halved, dropping to a historic low.
- In 2023, 23.7 million Americans were uninsured, compared to 46.3 million in 2009.
- The ACA Marketplace has significantly increased private insurance opportunities, now covering most adults and children.
- Enrollment in non-group insurance through the Marketplace has tripled since 2014, from 8 million to 21.3 million.
- Improved affordability and access to care have spurred competition based on price and quality.
- Premium tax credits have made coverage more affordable, but their higher levels from the Inflation Reduction Act will expire at the end of 2025.
- Insurer participation in Marketplaces has grown, with companies like Aetna and UnitedHealth Group expanding their coverage regions significantly.
- Marketplace premiums are lower than those in other markets, with 2022 premiums 28% lower than in the small-group market and 23% lower than in the large-group market.
Importance:
A decade after its implementation, the ACA has significantly improved healthcare coverage and affordability. By enhancing insurance market rules, consumer protections, and subsidies, and expanding Medicaid, the ACA has fostered a competitive non-group market that offers consumers more choices and controlled costs.
Hospital Pricing and Transparency
Title: "Prices Paid to Hospitals by Private Health Plans: Findings from Round 5 of an Employer-Led Transparency Initiative"
Authors: Christopher M. Whaley, et al.
Publication: RAND Corporation, May 13, 2024
Access: [Link Here]
Summary:
RAND researchers analyzed data from 2020-2022 to assess the variation in hospital prices for commercial insurance enrollees compared to Medicare rates.
Key Findings:
- Employer-sponsored insurance premiums have increased nearly 50% over the past decade, largely due to rising hospital prices.
- In 2022, 42% of personal health care spending for the privately insured went to hospital services.
- Of the $1.3 trillion spent by employer-sponsored insurance in 2022, $486 billion was on hospital care.
- Hospital facility fees constituted about 80% of outpatient and 91% of inpatient spending.
- Employers and private insurers paid more than double (254%) what Medicare pays for the same services.
- In 2022, prices for inpatient hospital services averaged 255% of Medicare rates, outpatient services 289%, and associated professional services 188%.
- Commercial prices for hospital-administered drugs averaged 278% of the average sales price, compared to 106% for Medicare.
- Despite federal transparency requirements, 64% of hospitals remained noncompliant in posting clear pricing information.
Importance:
With around 160 million Americans covered by employer-sponsored insurance, the higher prices paid to hospitals compared to Medicare highlight significant inefficiencies. Transparency alone isn't enough to drive change without employers leveraging this information to renegotiate contracts. The consolidation of healthcare markets also limits competitive pressures, underscoring the need for policy interventions to control costs.
