STATE HOUSE NEWS SERVICE
INCREASING THE POPULARITY of tiered health insurance plans could help drive down total medical spending, industry leaders agreed Tuesday, but hospitals and insurers aren’t necessarily on the same page about how to do it.
A special commission studying how the state might reduce provider price variation in the health care system agreed Tuesday to explore ways to maximize the market impact of tiered health insurance plans.
Describing their goal as “tiering on steriods,” the group agreed to look at ways to increase the price differential for consumers between the tiers offered in plans to provide greater incentive for consumers to choose lower-priced providers.
Massachusetts Association of Health Plans CEO Lora Pellegrini, however, said insurers would like to see the state require providers, including the high-price academic medical centers, to participate in tiered networks, while hospital leaders said they saw little incentive for them in such a plan.
“I think in general they wouldn’t want to be told they have to contract with a particular plan just because the plan said so,” Lynn Nicholas, president of the Massachusetts Health and Hospital Association, said. “That’s really a slippery slope for government to start saying you have to do something, but I do think there are ways to make tiering more effective.”
Tiered heath plans offer patients the ability to make choices about how much they are willing to pay for their treatment, while generally providing coverage for services at a more diverse selection of hospitals and doctors than in limited-network plans.
Insurers place hospitals or doctors into tiers, and patients have the option of paying more or less in co-pays or deductibles, for instance, based on the provider they choose.
Experts on the 23-member panel acknowledged that tiering – even done perfectly – might only make a minor dent in overall health care spending.
Karen Tseng, head of the health care division in Attorney General Maura Healey’s office, said that only one-quarter of overall medical spending could be impacted by effective tiering, with three-quarters of all spending going toward patients who have exceeded their annual out-of-pocket limits.
“We can talk about it, but it’s not going to move the market that much,” said Steve Walsh, president of the Massachusetts Council of Community Hospitals.
Still, hospital, insurance and policy leaders decided it was worth studying what “tiering on steriods” would look like and how much it could save as one of a number of steps the state will need to take to address health care costs.
David Auerbach, the Health Policy Commission’s director of research and cost trends, presented to the provider price variation commission at their meeting Tuesday on “demand-side” incentives that can help steer consumers to lower priced options, including tiered and limited networks.
“These plans do seem to do what they’re designed to do, but they’re not that popular in Massachusetts,” he said.
Auerbach said that tiered networks, in particular, can be attractive to consumers who like choice, but can also be complicated to explain and may work “in tension with” accountable care organizations and overall care coordination. He said there is “some evidence” that providers shift pricing to get into a preferred tiers.
Pellegrini said that by requiring providers to participate in tiered networks the insurers could develop more attractive products for consumers to increase their popularity. Tseng agreed with Pellegrini that if too many of the name-brand hospitals opt out of tiered networks the products start to resemble limited network plans that can discourage consumers concerned about choice from subscribing.
“What’s in it for the providers?” Dr. David Torchiana, president of Partners Health Care, questioned about eliminating the opt-out option for hospital networks.
Torchiana said if the state wanted to get involved it should instead develop a structure for tiering providers that could be implemented uniformly across all insurers, making it easier for hospitals and doctors to understand why they were placed in a certain tier.
Dr. Stuart Altman, the chair of the Health Policy Commission, said tiered plans are better than limited networks because “people feel they have an option if they really need it.” He said that the commission appears to be straying away from the idea of overt government regulation in favor of market-based solutions, and the state should find a way to encourage providers to participate rather than force them in.
Dr. Richard Frank, a professor of health economics at Harvard Medical School, wondered whether tiering would have any impact on provider price variation, a problem that the commission was formed to address.
Frank suggested tiering may be effective in driving patients to lower-cost providers, but might do little to compress the range of prices paid from one provider to another or put community hospitals struggling with low government reimbursement rates on more solid footing.
Nicholas said that tiering could shore up financially fragile hospitals by driving a higher volume of patients to their facilities.
“Karen Tseng, head of the health care division in Attorney General Maura Healey’s office, said that only one-quarter of overall medical spending could be impacted by effective tiering, with three-quarters of all spending going toward patients who have exceeded their annual out-of-pocket limits.” Can someone explain how is it worthwhile to keep exploring something that will only create incentives for the healthiest, lowest spending consumers? Isn’t this a distraction from tackling more pressing issues like creating real price transparency for the employers who are the REAL (practically speaking) purchasers of health care? There are very doable ways we can make transparency simple and understandable. But sadly there are too many stakeholders against making this happen as it would reveal the incredible price distortions in the marketplace. And insurers would top the list of those creating barriers to practical solutions to transparency as they, most of all, do not want their customers to see the mess they’ve made of the marketplace.