Healthcare Finance

Medicare for All

Don’t assume Medicare for All is off the table for the 2020.

A health tech colleague and I touched on Medicare for All when thinking about topics that should be addressed with his board. I’ve been thinking about it more lately because a 2018 poll recently circulated through my Twitter feed. The poll showed 70% of Americans supported for Medicare for All.

With unemployment estimated at roughly 14% now and climbing, many Americans are going to be without healthcare coverage. Some will qualify for Medicaid but others will slip through the cracks. Some coverage is better than none but no one is going to be really happy.

Healthcare is going to be an even bigger 2020 election topic than most likely anticipated. As an industry, we need to be thinking about financing versus care.

Healthcare Finance

The healthcare system is needlessly complex. What many don’t realize is that there are over 3,000+ commercial payers nationwide and it’s a bit of a moving target year to year as to which plans are operational. Plans consolidate or cease operations for other reasons. It’s time consuming to decipher all the changes. Add all the other payer classes and it becomes even more complex.

Legacy systems aren’t designed to keep up with payer and EDI changes in real time and few people in the industry understand the updates needed to the systems to ensure the data flows seamlessly. It’s no fault of their own. Most involved in revenue cycle management are not trained in healthcare finance or systems. They’re skilled at processing and managing large volumes of transactions.

Payer and EDI changes come before all the permeations of networks, authorization requirements, clean claim guidelines and payment details which add even more complexity to the process.

Managing all those permeations typically requires sophisticated contracting technology that is expensive whether it’s managed in-house or outsourced. The cost runs  6-12% of net revenue which is an estimate of collections and even more when the cost of uncollected claims is factored in.

The complexity in the payment process is why claims go unpaid, providers get financially stung out and eventually look for a partner. Consolidation increases the cost of healthcare not the quality of care.

Medicare for All

There are two main levers for healthcare providers to manage their revenue stream: payer mix and case mix. Medicare for All reduces the number of payers which means payer mix would no longer be a lever.

Eliminating a lever might make some financial professionals uncomfortable. Concerns such as coverage for treatments, drugs and services not appropriate for traditional Medicare beneficiaries but appropriate for younger beneficiaries would need to be addressed as well as scope of coverage or what we think of as plan design.

The risk of federal debarment which is the exclusion from participation keeps the fraud and abuse in check even more so than in the commercial market. It should not be a non-issue.

Meaningful Innovation

Another Medicare Advantage plan recently received venture funding. When I read the description of the company, it seemed more like a strategic initiative for existing health plans not a disruptive idea typically funded by Venture Capitalists.

Insurance companies are lucrative businesses if the management can achieve the needed scale and minimize benefit payouts, or in other words claims payments. There are a few ways to do it: skim the market for healthy members that will incur fewer claims, add complexity to the claims process to reduce payments or pay providers lower rates than Medicare.

Without getting into problems with those sorts of practices, none move the healthcare industry closer to achieving the triple aim and ultimately, delivering more value to the healthcare consumer.

Financing vs. Care

We might not agree about the cost of Medicare for All, but we can all agree with the basic premise that less complexity generally means lower cost. 

Our fear gets the worse of us when we start thinking about winners and losers. Winners and losers assume the status quo. No one in the industry has been operating in a status quo mode for years.

Streamlining the financial complexity doesn’t diminish the quality of care delivered. If anything it focuses all the players on what they do best.

Risk Pools

Risk pools are a powerful tool but they have been incorrectly within the healthcare system.

Risk Pools are a way for insurers to share the medical responsibility and financial risk with healthcare providers for managing a defined patient population. It rarely goes well.

Providers have a few big issues:

1. Insurers have premiums and investment vehicles to absorb risk pool loses. The risk pool is a limited amount of money with no means to increase the available funds. Providers end up rationing care.

2. Managing the risk pool is about predicting future medical events. The technology and methods providers use are getting better but still pretty limited.

3. The conversation between doctors and patients is changing. Patients are more informed of experimental therapies. Telling a patient NO when there is even a remote shot of something working would be tough for someone who is invested in the relationship.

Given that many insurers are becoming provider organization offering health coaching and preventative care, risk pools would be better used between the government and insurers as a way to incentivize them to keep people healthy.

The government is also better positioned to improve access by providing the Stop Loss insurance for patients with genetic issues.