Montana is signaling it would step away from an progressive means of setting the costs its public worker well being plan pays hospitals for providers, an method that has saved the state thousands and thousands of {dollars} and turn out to be a mannequin for well being plans nationwide.
The plan gained nationwide renown amongst employers and well being care value reform advocates when, in 2016, it established most quantities the well being plan would pay for all inpatient and outpatient providers. These quantities had been pegged to Medicare reimbursement charges. The adoption of that mannequin, referred to as reference-based pricing, has saved the state tens of thousands and thousands of {dollars}. Taxpayers assist fund the medical plan, which insures public workers and their households, for a complete of about 28,800 individuals.
Montana didn’t invent reference-based pricing, however the state made waves by having a well being care plan of that size set costs for all providers, not simply sure procedures, equivalent to knee replacements.
Now, Montana is positioning itself to tweak its mannequin, simply as extra states and employers, searching for to chop prices, think about adopting it. That has well being economists and people working to decrease hospital costs elsewhere questioning whether or not the state is as soon as once more shifting forward of the curve — or setting itself up for a setback.
“We glance to Montana for the success story,” stated Gloria Sachdev, president of the Employers’ Discussion board of Indiana, a nonprofit that tries to enhance well being care pricing. “Now that it’s doing one thing new, I believe loads of eyes will probably be on Montana.”
In September, the state awarded Blue Cross and Blue Defend of Montana a contract to take over administration of the general public worker well being plan beginning subsequent 12 months. The contract requires utilizing Medicare’s charges as a baseline to set total targets for the quantities the plan will reimburse hospitals. It provides Blue Cross the flexibility to fulfill these objectives with reference-based pricing — but in addition by negotiating offers with particular person well being care suppliers utilizing a mixture of reimbursement fashions.
The state stated in a news release asserting the contract that its new reimbursement targets will save $28 million over the following three years. However the particulars within the contract on how that will probably be achieved are imprecise.
Blue Cross, considered one of Montana’s largest insurers, gained’t elaborate on its plans whereas Allegiance Profit Plan Administration, the general public worker well being plan’s present administrator, challenges the state’s contracting decision. Allegiance had held the contract because the state adopted the reference-based pricing mannequin.
John Doran, a Blue Cross spokesperson, stated state officers instructed firm officers to direct all inquiries to the Montana Division of Administration.
Requested how upcoming modifications will have an effect on the well being plan’s current mannequin, Montana officers pointed to the state’s contract with Blue Cross. In line with that doc, Blue Cross can create “customized various cost preparations with suppliers” with state approval.
Within the state’s information launch, officers stated the purpose is to “modernize” its six-year-old reimbursement technique. Division of Administration Director Misty Ann Giles stated within the launch that the state picked a vendor to assist it “turn out to be extra versatile to succeed in its objectives effectively.”
The U.S. has struggled to reply to the rising value of well being care. The Facilities for Medicare & Medicaid Providers estimated that in 2020, well being spending grew nearly 10 percent, reaching $4.1 trillion, or $12,530 per individual. Greater than 160 million people within the U.S. have employer-sponsored medical insurance. Traditionally, the costs that worker well being plans pay have been privately negotiated between well being care suppliers and third-party directors like Blue Cross, with negotiations typically beginning on the costs that hospitals suggest.
That course of has exacerbated the dearth of transparency in the price of care and has contributed to vast variation within the costs that non-public insurance policy pay. In a research of medical claims knowledge from 2018 to 2020, suppose tank Rand Corp. found that personal insurers in some states, equivalent to Washington, paid hospital costs that had been lower than 175 % of what Medicare would have paid for a similar providers on the similar amenities, whereas in different states, they paid costs that had been 310 % of the Medicare fee or increased.
In 2016, Montana took a daring leap. As an alternative of negotiating down from hospitals’ listed costs, the state set a spread for what hospitals can cost for providers, establishing most prices as a set share above Medicare charges. If hospitals refused to barter via that mannequin, they risked shedding entry to the sufferers insured via the state’s largest employer.
Marilyn Bartlett, who led the change to reference-based pricing when she labored for Montana, stated that at the moment, the plan had been shedding cash for years and risked its reserves dropping into the negatives. By 2017, Bartlett stated, the plan’s reserves had accrued more cash than the state’s common fund, and the premiums state workers paid stayed stage.
“We had flattened the value curve, and actually we had a destructive,” stated Bartlett, now a senior coverage fellow with the Nationwide Academy for State Well being Coverage advising other states on find out how to decrease well being care prices. “That was exceptional.”
Dr. Stephen Tahta, president of Allegiance Profit Plan Administration, stated that whereas Allegiance was administrator of the well being plan, it saved greater than $48 million.
Hospital representatives have stated a rising variety of employer-based plans are contemplating rising their reliance on reference-based pricing.
In recent times, California’s retirement plan that provides insurance coverage advantages to public workers has worked to expand reference pricing for sure drugs.
And the state of Colorado joined a buying alliance to barter with hospitals over pricing for its public worker medical plan this 12 months, searching for to make use of Medicare charges as a baseline. Bob Smith, govt director of that alliance, the Colorado Enterprise Group on Well being, stated that whereas main well being programs have bucked that course of to this point, sufferers even have a health care price comparison tool to choose suppliers that cost affordable costs and supply high-quality care.
The American Hospital Affiliation opposes reference-based pricing, saying it will possibly improve the quantity sufferers should pay for care. A method that would occur is thru balance billing, when a supplier costs a affected person for the distinction between the price set by the plan and the quantity the supplier costs.
These advocating for pricing reform have stated that hospitals’ preliminary costs earlier than negotiations may be arbitrary and that Medicare’s charges are a good place to begin. Medicare reimbursements may be adjusted if a supplier faces steep bills equivalent to working in a rural place or hiring staffers to supply specialty care.
Within the contract awarded in September, the state set a ceiling of not more than 200 % of Medicare charges for the quantities the Blue Cross plan would pay suppliers total in its first 12 months. The contract says Blue Cross will goal reimbursing suppliers an total fee of 180 % of Medicare’s charges by 12 months three of the settlement.
The state left it to Blue Cross to discover a method to attain these objectives.
After KHN shared Blue Cross’ reimbursement particulars within the state contract with Chris Whaley, a well being economist and coverage researcher for Rand, he stated it’s arduous to understand how the brand new method will work out. Blue Cross’ plan doesn’t say how typically the corporate will negotiate offers with suppliers exterior of reference-based pricing. Whaley stated that would lead Montana to lose deal with its reimbursement technique.
“It looks like the mannequin is already working very well,” Whaley stated. “Is the reference-based pricing mannequin one thing that’s going to be developed and improved upon? Or is it one thing that’s possibly going to be stripped down and never have the identical impression as earlier than?”
Allegiance is alleging that the contract was awarded via an unlawful bidding course of and that it may find yourself elevating well being care prices for state workers and taxpayers.
Belinda Adams, a Division of Administration spokesperson, stated state officers are reviewing the problems raised by Allegiance however imagine the hiring course of was truthful and authorized.
The state has 30 days from when Allegiance submitted its protest to problem a call on the corporate’s claims if the 2 sides don’t attain an settlement that settles the dispute. Within the meantime, Adams stated, Blue Cross is making ready to take over administration of the general public worker well being plan in January.
KHN (Kaiser Well being Information) is a nationwide newsroom that produces in-depth journalism about well being points. Along with Coverage Evaluation and Polling, KHN is without doubt one of the three main working applications at KFF (Kaiser Household Basis). KFF is an endowed nonprofit group offering info on well being points to the nation.
