Consumer Directed Healthcare

By Parija Kavilanz, senior writer
CNNMoney.com

NEW YORK (CNNMoney.com) — The new health law puts the nation’s hospitals on strict notice.

Either they improve the safety and quality of care for patients or the government will hit them where it hurts the most — their revenue.

The legislation contains dozens of provisions, including fining hospitals, to reduce medical errors, hospital-borne infections and costly preventable readmissions.

Those three issues alone drain billions of dollars annually from the health care system.

Industry watchers and consumer advocates say the measures were sorely needed and will go a long way to protect patients and enhance efficiency in the system.

But for hospitals, the new law could present a tough challenge.

Preventable readmissions: These cost the health care system about $25 billion every year, according to consulting firm PricewaterhouseCoopers.

To tackle the problem, beginning in 2012, the Department of Health and Human Services (HHS) will publish each hospital’s readmission track record.

Experts say high readmission rates — when patients return within 30 days of discharge — indicate hospitals aren’t adequately addressing patient issues or they’re discharging them prematurely.

In 2012, Medicare will stop paying hospitals for preventable readmissions tied to health conditions such as heart failure or pneumonia. In 2014, HHS will expand that policy to cover four additional health conditions.

Medical harm: The second penalty for hospitals is tied to hospital-acquired conditions stemming from medical errors or infections.

Here, the government has set a carrot-or-stick approach.

For instance, the government currently gives hospitals an incentive payment for simply reporting their performance on things like patient satisfaction and care quality tied to treatment of conditions such as heart failure, pneumonia and hospital-borne infections.

That’s changing.

Under the legislation, hospitals won’t be paid for just reporting their performance, but beginning in 2012, will be paid commensurate to their score. Higher scoring hospitals will receive higher payment and vice versa.

In 2015, HHS will also start reporting each hospital’s record for medical errors and infections pertaining to Medicare patients.

About 15 million instances of injury or harm as a result of a medical treatment occur every year in the United States, according to non-profit group the Institute for Health Care Improvement.

These include more than than 30,000 people who die annually from catheter-related blood stream infections, according to consumer advocacy group Consumers Union’s Safe Patient Project.

In 2015, Medicare will reduce its payments by 1% to hospitals with the highest rate of medical errors and infections. The government will also no longer pay hospitals for treatment when a Medicaid patient is harmed during a hospital stay.

Doctors: A tough job just got tougher
A medium-sized general hospital could lose upward of $1 million a year from these penalties at a time when all providers are struggling to keep up with escalating health care costs.

“That’s real money,” said Brad Bowman, director with PricewaterhouseCoopers’ health care advisory practice.

On top of that, Bowman warned of an even bigger risk to hospitals — a tainted reputation.

“Think about a town with three or four hospitals,” said Bowman. “Once the local press has access to hospitals’ detailed quality and performance scores, consider the impact a story about a poor-performing hospital can have on its business.”

It will be many times more than the dollars lost to penalties, he said. “Guess what? People will now say ‘Don’t take me to hospital D but to hospital A.’”

For its part, hospitals’ main trade group, the American Hospital Association (AHA), said it is supportive of some provisions but concerned about others.

“The penalties are intended to send a strong message from Congress that they want hospitals to be efficient and keep patients safe,” said Nancy Foster, AHA’s vice president of quality and patient safety. “That’s exactly what our members are working hard to do.”

Regarding readmissions, Foster said the government has to be “strategic” about how to bring down what it labels “preventive” readmissions.

“You don’t want a fear of penalties preventing hospitals from readmitting people who may need to come back soon after they were released,” Foster said, adding that many times, patients’ economic status prevents them from properly following post-hospital care and thus landing them back in a hospital.

“We’re eagerly awaiting regulations that improve these provisions to make sure these types of cases are thought about,” she said.

If regulations aren’t sensitive to people’s social issues, she warned that the measures could frequently punish hospitals that cater to the disadvantaged population.

Michael Young, CEO of Atlanta-based Grady Memorial, one of the largest public hospitals in the nation, said Foster makes a valid point.

As many as 95% of Grady’s patients are in the low income bracket and 40% of those don’t have insurance, which forced the hospital to provide $300 million in “free care” last year.

“When these patients can’t pay for things like home nurse care and readmissions go up, it’s the hospital that’s getting blamed under these measures,” he said.

“The legislation is a step in the right direction but the penalties are a legitimate concern,” Young said. “For public hospitals, the next five years will be a tremendous challenge.”

A victory for consumers
From a consumer perspective, PWC’s Bowman said the law is a big win.

“Up until this point, consumers have had so little information on health care providers,” he said. “You can get more information easily on a company’s stock in India than on a hospital down the street.”

The law, he said, cracks this door open so that consumers can make more informed choices about providers.

Lisa McGiffert with Consumers Union Safe Patient Project, agreed. “These measures put us on a path to improving care because when you change their payment structure, the behavior in hospitals improves.”

And even though most of these measures affect public insurance payments, McGiffert is hopeful of a knock-on effect on private insurance payments as well.

“As Medicare goes, typically so do other private insurers,” she said. “Medicare by virtue of being the largest insurance program in the country is considered the trendsetter for insurers and providers.”

Popularity: 1% [?]

Business Insurance

By Jerry Geisel

Under the provision, employees would have to meet two conditions to be entitled to the employer-funded vouchers: their family income could not exceed 400% of the federal poverty level; and the premium contributions their employers require them to make must be between 8% and 9.8% of their income. Some experts believe the 9.8% figure was a drafting error and will be changed later in a technical corrections bill to 9.5%.

If those conditions are met, those employees would be entitled to receive a voucher from their employers, and the value of the voucher would not be tied to the plan in which the employee was actually enrolled.

Instead, the voucher’s value would be equal to what the employer would pay if the employee were enrolled in whichever of its plans offered the largest premium contribution by the employer. Experts say it isn’t clear whether “largest” refers to the percentage of the premium paid by the employer or the dollar amount of the contribution.

Then, the employee could use the voucher to purchase health insurance coverage from a state health insurance exchange. The exchanges are authorized under the reform law and are supposed to be set up by 2014.

If the cost of a policy purchased by an employee through the exchange is less than the value of the voucher, the employee could pocket the difference in cash, which would be considered income and taxed.

The voucher feature could prove costly to employers, especially those that have a heavy concentration of low-wage employees—such as retailers—and require employees to make hefty employee premium contributions, relative to their incomes.

And depending on how the legislative language is interpreted in subsequent regulations, it also could prove costly to employers that offer employees a choice of health care plans ranging from relatively low-cost to very expensive plans.

Experts say the provision is almost certain to result in adverse selection, inflating employer costs.

For example, a young, low-paid employee working for a company with a high concentration of older, less healthy and expensive-to-insure employees likely would receive a voucher whose value would be much higher than the cost of buying coverage in an exchange, especially if the employee purchased a lower-cost high-deductible plan. Under the reform law, exchanges can base premiums on the age of policyholders.

As a result, employees remaining with the employer’s plan would be the most costly to insure, pushing up the employer’s insurance premiums.

“We are talking about something that could be very costly to employers,” said Chantel Sheaks, a principal with Buck Consultants L.L.C. in Washington.

“As I read it, any employer that offers comprehensive benefits and has low-wage employees could be impacted,” said Helen Darling, president of the National Business Group on Health in Washington.

Despite the potential financial impact of the provision, few employers have focused on the voucher provision, noted Jennifer Henrikson, a legal consultant with Hewitt Associates Inc. in Lincolnshire, Ill.

The likely reason for that, Ms. Henrikson said, is that employers now have to concentrate on reform-related issues that are more pressing. The voucher provision does not go into effect until 2014, while numerous others, such as elimination of lifetime dollar limits, go into effect beginning in 2011.

The intent of the provision isn’t clear, experts say. A much broader version of the provision was backed by Sen. Ron Wyden, D-Ore., who has sponsored a proposal in which employers no longer would offer coverage to their employees, but instead would give them cash that they would use to purchase health care coverage on their own.

Many issues involving the provision itself are not clear. “There is a lot of complexity here that has to be figured out,” said Sandi Hunt, a principal in the San Francisco office of PricewaterhouseCoopers L.L.P.

For example, the provision says the voucher contribution would be equal to the amount the employer would have paid if the employee had been “covered under the plan with respect to which the employer pays the largest portion of the cost of the plan.”

That legislative language is about as “clear as mud,” Ms. Henrikson said. For example, it isn’t clear whether the largest portion of the premium refers to the percentage of the premium paid by employers or the actual dollar amount employers pay, though experts say it likely is the latter.

If the latter interpretation is adopted through regulation, the provision could have a costly impact on employers that give employees a choice between lower-cost plans, such as consumer-driven health care plans and much more costly plans, such as traditional preferred provider organizations.

Take the case of a young employee enrolled in a high-deductible plan with a premium of $10,000, of which the employer paid $7,000. The employer also offered a more traditional PPO plan costing $15,000, of which the employer paid $10,000.

In that example, the employee would be entitled to a $10,000 voucher, funded by the employer. If the employee then found coverage in the exchange, perhaps similar to the high-deductible plan in which he was enrolled, for $8,500, he could purchase the coverage and then have $1,500 in additional cash. But his employer’s health insurance cost would be $1,500 higher.

Popularity: 1% [?]

American Chronicle
Michael Jordan – April 09, 2010

Any time of year can be the right time to consider setting up a Health Savings Account (HSA). If you need a new way to reduce taxes while you put money away, an HSA may be just the thing for you.

Insurance Information

These high-deductible health insurance plans coupled with IRA-style savings accounts are really pretty easy to understand, offer a number of benefits and are becoming more popular.

What is an HSA? HSAs were developed to maximize your savings on health insurance while providing a valuable tax break. The two parts of an HSA program are an eligible, high-deductible health plan and a tax-advantaged savings account. For an individual, an HSA-eligible health insurance plan must have an annual deductible of at least $1,050 for individuals and $2,100 for families.

Insurance Tips

The second part of an HSA program is an IRA-style savings account that allows you to reduce your taxable income by building savings. You can deposit funds up to the total of your health plan’s deductible into the HSA each year. So, within certain regulatory limits, the higher your health plan’s deductible, the more you can tuck away tax-free.

How does the Tax Savings work? If you make $40,000 a year and you put $2,000 in your HSA, you’ll only pay taxes on $38,000. Like an IRA, the HSA is meant to encourage you to save for retirement. Funds placed into your HSA can be invested and the balance will roll over each year into retirement.

You can use your HSA funds to cover medical expenses such as over-the-counter drugs, eyeglasses, co-payments and any medical costs incurred before your annual deductible is met.

Popularity: 1% [?]

You can ask the IRS for more time to file your tax return.  However that won’t extend the deadline for funding an individual retirement account or a health savings account for last year.  There’s a firm deadline of April 15th, 2010, for making a contribution to your 2009 traditional IRA, your 2009 Roth IRA, or your 2009 health savings account.

Tax deductions for HSA contributions are limited to maximum dollar amounts set per year:

For 2009: $3,000 for individual coverage, $5,950 for family coverage. $1,000 for additional catch-up contributions for people age 55 or older.

For 2010: $3,050 for individual coverage, $6,150 for family coverage. $1,000 for catch-up contributions.

Report your tax-deductible HSA contributions on IRS Form 8889, with the total contributions also reported on Form 1040.  Insurance companies report your HSA contributions to the IRS using Form 5498-SA.

If you would like more information, please contact NEOS Consumer Driven Healthcare at 877-636-7472 or by visiting our website at www.NEOSCDH.com

Popularity: 1% [?]