Health care changes shift important decisions from managed care plan to patients

February 2006

Arriving at reception desks in some mid-Atlantic states are patients with health plan cards with new alphabet soup letters: CDHP, HSA and HDP. These are methods that shift important decisions, such as what laboratory tests, imaging studies and other ancillary services are needed, from the managed care plan to the patient.

Health savings accounts (HSAs) are part of a federal program and High-deductible plans (HDPs) are a new creation of the managed care industry. Here is a brief explanation of these plans:

• HSAs are simply personal tax-protected depository accounts, functionally similar to IRAs. Funds can be added yearly, are cumulative year-to-year and can only be used to pay for health care costs. The family, the employer or any program can add funds to the account, most commonly as a pretax salary deduction with or without an employer (matching) contribution.
• HDPs represent a form of health insurance in which the first layer of payment, typically several thousands of dollars, is the responsibility of the patient (deductible). Once the maximum deductible is reached, the second layer, traditional insurance coverage with covered, non-covered, approved, non-approved and “not medically necessary” services, becomes effective.
• The two work hand-in-hand with the overall title “Consumer Driven Health Plans” (CDHP), with the HSA serving as the source of funds to cover the costs of the deductible portion of the HDP. The presumption is that by making the patient the primary check writer, paying at the time of service and, in a sense, becoming the guardian of the funds, there will be better control of health care spending (picking and choosing of providers and services by the patient) and less opportunity for fraud (watchdog payer).

For most patients who are currently protected by commercial health insurance, it simply appears to split prior paid-to-insurer yearly premium costs into two: a contribution amount to a patient-supervised HSA and a premium paid to the insurer for a back-up insurance plan. The goal for the HMO is to make the total cost of the two less than the original, and to put spending controls in place at the front desk or in patient’s hands. The reality is lots of nonreimbursed, time-consuming education of the limitations of the plan to the unwary patient (consumer) who is forced to use a bank charge or debit card to pay part of the deductible, which carry a high percentage cost to the physician’s office for their use.

For the patient, since typically the amount of yearly contribution to the HSA is less than the deductible, any differences in medical costs between the amount of money placed in the HSA and the kick-in coverage of the back-up insurance comes directly out-of-pocket, so it is an incentive for the patient to spend the HSA conservatively. The patient may ponder whether the recommended lab tests or x-ray, particularly an MRI or CT, are really necessary or if they can wait a month or two to see if things clinically improve. The pediatrician may be responsible for a delay in timely diagnosis because of the patient’s insistence to delay implementation of the laboratory or imaging evaluation. The costs of “non-covered services” or “non-approved services” continue to be the responsibility of the patient even after the kick-in, and any copays and coinsurances built into the specific plan would still apply. These plans represent cost-shifting of risk and responsibility from the insurer to the patient.

Physicians will likely still have to:

• adhere to the contracted participating provider discounted fee schedules of the payer, and if not, they will have to keep charges market sensitive to compete with other local providers who are participating providers: Patients will actively seek out those physicians providing the service for the least dollars;
• file a claim, so it can be adjudicated for payment, and the insurer can determine which “pocket” the funds will come from, what’s covered and what is not;
• wait in many cases for the usual adjudication process to be completed in order to have access to payment or spend valuable administrative time, at the time of service, adjudicating the claim in real time electronically (computer or telephone). This means that there will probably be a significant delay in full receipt of money earned until the presumed medically knowledgeable HMO employees decide how much of the invoice, if any, is the responsibility of the HMO and how much is the responsibility of the consumer;
• explain and account for each service and each test during the encounter, since the patient is the payer. Patients may refuse, object or try to negotiate lesser service in effort to conserve funds; and
• spend significant time explaining to their administrative staff the current confusing and complex system of billing codes and procedures in effort to make sense of the patient-payer.

How do they work?

There are two currently used payment schemes. One is the use of a dedicated debit/credit card system, in which the charge amount is entered at the time of visit “reserving your payment.” After the submitted claim is adjudicated, the approved funds are transferred into the practice’s account. It remains the insurer’s right to determine what and how much is paid, and which portion of the payment comes from the patient and which portion comes from the insurer.

By entering the payment at the time of service, it appears that the physician is being paid in real time. However, the real dollars paid appear at a later time; it is very much like the process of depositing money in a bank: It takes several days for the “deposit to clear.” There is no current legislation that controls the time lag between when a credit or debit card amount is entered into the system and when the money is transferred into, and becomes available to, the practice account.

There may be some small cost savings by not having to do follow-up patient billing for extra copays, deductibles or items that are not covered, since the patient portion is already on the debit/credit card. However, there is typically a 2% to 3% debit/credit card processing charge, which probably negates any cost savings achieved. Practices will still have to review each EOMB for correct processing and payment, and it appears that the secondary appeal and review process will be unchanged. There are no cost savings in this area.

The second payment method involves the administrative staff calling the insurer’s 800 number or accessing the Web site at the time of service, entering each line-item charge, getting online “approved fees” and then collecting the discounted payment directly from the patient. In this case, the practice is paid immediately, but it is a time-consuming process. The other issue that needs to be accounted for with this methodology is what happens when the insurers says that some charges are not approved or not medically necessary. How should practices handle this? How much effect will it have on patient flow at the front desk.

In conclusion

It is difficult to predict the long-term penetration of these new insurance plans in the overall picture of health insurance. Considering, however, the potential dollar savings to the actual premium payers and the transfer of dollar risk away from the payer, it may be substantial. There is also a greater, more hidden, gain for insurers — these new plans also more visibly transfer the decision to proceed, or not, with medical care away from the plan’s medical director to the patient, lessening the public risk of “not approving needed medical care.” This will be reduced to what is contracted for rather than what is covered. The effect of this factor is not measurable at this time. Important concerns that becomes magnified with this change to CDHPs, especially for pediatricians, is the legal, malpractice, abuse or neglect issue and physician responsibilities that arise when patients opt out of care recommendations.

As always, it is important that physician-managers educate themselves and fully research these new products, the effects on their practices and how best to incorporate them into practice. Practices that do so will have a competitive advantage, staying “ahead of the curve.”

In reviewing comments on the AAP Section on Administration and Practice Management listserv e-mails, most physicians are unhappy and frustrated and feel helpless because of these plans. A few practices seem to like them, but most find that patients have shifted their trust and loyalty from the pediatrician to the HSA plan. When there are differences of opinion as to the necessity of lab tests or imaging, the anger is directed away from the HMO and toward the pediatrician.

These plans appear to have a hidden agenda: Divide (the physician from his patients) and conquer. This is what we mean by a gift of a Trojan horse. By acceptance of these plans, will we lose the confidence and trust of our closest ally and friend, our own patient? Watch out for these novel plans. Be informed. Plan for them. Or they may be the death knell of your pediatric practice.