Thursday, July 22nd, 2010 | Posted by Greg Wiles |  Print This Article

Healthcare Bill Will Cost Hawaii Taxpayers $204 Million, State Consultant Says, But Advocates Say ‘Reform’ is Needed; Hawaii Medical Providers Prepare for the Impact

Hawaiirheumatologist.com

BY GREG WILES - Months after passage of the much-debated healthcare reform bill, it’s still unclear to Hawaii’s political leaders, insurers and taxpayers how much the measure will cost in Hawaii.

The state says the tab from healthcare reform could run more than $204 million over a 5-year period.  Healthcare insurers say it’s difficult to come up with a number until more is known about the law’s pending regulations, but that it is bound to add to costs in the next few years.

At the same time local insurers say they haven’t been waiting around for the reform bill and are pursuing ways to lower bills on their own.

The potential for higher costs was one reason why opponents criticized the Patient Protection and Affordable Care Act, which passed Congress after contentious debate in March 2010.

The measure is both lengthy (more than 2,000 pages) and sweeping in its approach to expanding health coverage, with most of the major mandates taking effect over the next 4 years.

According to the legislation’s advocates, including President Barack Obama and most of the Congress’ majority Democratic Party, the bill was supposed to control costs.

Proponents contend that reducing the number of uninsured will result in a healthier population and help catch medical problems before they escalate or show up in costly emergency room visits. They believe the bill as a needed step to providing coverage for millions of uninsured Americans and providing a framework for reducing surging healthcare inflation.

However, detractors maintain the healthcare Patient Protection and Affordable Care Act will increase public spending on healthcare and increase health insurance premiums.  They also charge the law represents a further government intrusion into healthcare and that it may have the unintended effect of increasing some costs as new taxes are passed on to consumers.

“We think this massive health law is abominable and should be repealed,” said the Heritage Foundation shortly after the act was signed into law. “And until Congress repeals it, lawmakers should starve this monstrosity of taxpayer funds.”

STATE ADMINISTRATION, MEDICAL EXPERTS AND INSURERS, SAY BILL IS COSTLY TO HAWAII TAXPAYER

The state Department of Human Services said a preliminary analysis by a consultant shows its Medicaid cost increases may jump by $204.2 million and could be more depending on what benefit package the federal government mandates as Medicaid benefits are extended to more low-income individuals and families.

Insurance companies and healthcare advocate groups are also concerned.

According to the Kaiser Family Foundation, a healthcare research organization not associated with Kaiser Permanente, the bill includes:

• Requiring U.S. citizens to carry healthcare coverage and instituting penalties for those without.
• Creation of healthcare exchanges through which certain small businesses and others can buy coverage.
• Expanding Medicaid coverage to people who are 133 percent of the federal poverty level.
• Assessing fees on companies that don’t offer coverage when they have 50 or more workers.
• Tax credits for small businesses that offer health coverage. Excise taxes on medical devices and high-cost coverage; new fees on drug makers and health insurers.
• Requiring health plans to offer preventative medicine without cost sharing.
• Create a national pool to insure those with pre-existing conditions; eliminate lifetime payment limits on coverage.

The Hawaii Medical Service Association, the state’s largest healthcare insurer, said it is easy to see where it will incur higher expenses as various measures contained in the law take effect.

The law expands the number of people who are covered, includes provisions for increasing benefits and preventative care and adds to regulatory administrative costs that point to costs rising in the short-term.

“All those are definitely things that will increase costs,” said Fred Fortin, HMSA senior vice president.

“On the other hand, you have to have some of these fundamentals in place if you’re going to address issues that are driving costs.”

Kaiser Permanente, the No. 2 health plan in Hawaii in terms of members, said it was unclear what it would cost.

INCREASES UNSUSTAINABLE, MEDICAL EXPERTS SAY

According to the Kaiser Family Foundation, premium costs rose significantly and are accompanied by higher deductibles and co-payments for consumers.

That’s been the case in Hawaii as well.

Families USA, a group that advocates for quality healthcare for all citizens, last year said healthcare premiums rose 3.7 times faster in Hawaii than median earnings during a prior decade.

The cost issue concerns HMSA, other insurers and hospitals who see the rising premiums and expenses as being unsustainable.

HMSA and Hawaii Pacific Health, the largest Hawaii health plan and hospital group respectively, aren’t waiting to see if healthcare reform slows medical inflation once all aspects of it kicks in during the next decade.

For the past several years HMSA and HPH have looked at ways to slow healthcare’s surging costs, researching and planning to put in various programs that will contribute to more efficiency while maintaining or improving care quality.

At Hawaii Pacific Health, the operator of Straub Clinic & Hospital, Kapiolani Medical Center and Wilcox Health, there’s been a $57 million investment in electronic medical records and related technology that should help it avoid duplicative tests and improve patient-doctor communications through an online portal.

Patients are given access to laboratory results and can compare them against average levels. They can also email physicians.

Hawaii Pacific Health also implementing something known as Patient Centered Medical Home, an industry term for programs focused on improving patient health care through a variety of efforts, including having primary care providers coordinate specialists and others who the patient sees.

The approach also makes use of patient educators, outreach workers and nurse practitioners who alleviate some of the workload for primary care physicians, allowing them to spend more time with individual patients and figuring ways to improve their health.

That in turn should keep more patients out of emergency and hospital rooms.

“That’s what will reduce the cost curve over time,” said Virginia Pressler, Hawaii Pacific Health executive vice president for strategic business development.

Pressler said providers such as Geisinger Health System in Pennsylvania have been able to reduce costs and improve care using similar programs. She said emergency room costs, for example, can be reduced by up to one-fifth by catching problems early.

“We’re getting some very, very exciting early results,” she said.

During the past decade HMSA’s benchmark community rated group premiums – insurance rates for small businesses -- have more than doubled. The insurer said it recognizes the need to change the way business is done.

“We absolutely have to slow down the rate of increase,” said HMSA’s Fortin.

*Preferred Provider programs; Source: HMSA

Like Hawaii Pacific Health, HMSA has been looking at ways to slow cost increases for several years.

It recently announced what will be a pillar of that program – paying providers for the quality of care provided, not just the volume.

Thus hospitals that can demonstrate lower patient re-admission rates and hospital-acquired infections will earn extra reimbursements.

“We’re not waiting for healthcare reform,” said Hilton Raethel, HMSA senior vice president.

“We’re taking the position that there’s material steps we can take.”

Insurance Status 2007-2008

Source: Kaiser Family Foundation

PAYING FOR "QUALITY"

Last month, HMSA and the Queen’s Medical Center said they had agreed on the new payment system that includes quality metrics. HMSA will still pay a fee for service provided, but there will be a quality component added to the reimbursements.

Thus physicians and hospitals are rewarded for working together to coordinate quality care while controlling costs. Facilities that lower re-admission rates, reduce inappropriate use of technology, have lower infections acquired in hospitals will be better off under the model.

Queen’s is the first hospital in the state to be signed on to the new payment system and others are to join as their contracts come up for renewal, Raethel said.

The system also is aimed at patients receiving more care through their primary care physicians. A doctor’s office visit might cost $150, whereas a visit to the emergency room might cost $600.

“More care should and can be provided in a primary care system,” he said. A portion of what HMSA saves is shared with providers.

Kaiser Permanente already has elements of what is being pursued locally, including electronic health records system and coordination of care between the physicians, hospitals and health plan.

Medicare will reward high-quality health care for the first time in its history as a first important step in fixing a health care system that has long rewarded providing more care instead of better care, Kaiser Permanente reports.

But Kaiser also noted the premium impact of the new law is not yet clear.

“The underlying factor that affects all insurance costs is the actual cost of delivering medical care, which increases each year for a variety of reasons, including new and more costly medical technologies that help treat and prevent illness; an aging population that needs more medical treatment; the growth of chronic conditions, including diabetes, obesity and asthma, wage increases and general inflation,” Kaiser said in a statement it released.

SPURRING DISCUSSION

Whatever people think of reform, the law is helping elevate discussion about the healthcare system and rising costs.

John McComas, president of AlohaCare, a provider of Medicaid and Medicare plans, said premiums can’t keep increasing the way they have.

“In 5 years, we’ll be spending something like $30,000 a year on healthcare coverage,” said McComas. “How long can employers continue to subsidize that?”

All parties will have to be part of a solution, including consumers who take a more active role in their wellness, hospitals, employers, healthcare plans and physicians.

He said some of the discussion to make this happen may come as a result of reform, no matter what people’s view of the law. It has people discussing the issue.

Even among healthcare plans there is more of a willingness to work together on solutions. That can be seen on the Big Island where the community is collaborating on solutions for doctor shortages and new electronic systems to improve efficiencies.

McComas said AlohaCare is working with competitor HMSA on a pilot project aimed at eliminating unnecessary emergency room use by patients of the Bay Clinic in East Hawaii County.

That effort started July 1 and involves having a staff person counsel patients about using regular doctor care versus visiting emergency rooms on an episodic basis.

Hawaii Pacific Health also is looking to help smaller independent doctor offices with the transition to electronic medical records, offering a discounted cost for its system compared to what they might pay individually.

“There’s a lot of collaboration,” said Pressler, explaining HPH has been willing to share what it knows about Patient Centered Medical Home with other hospitals.

“I’ve seen a tremendous shift in public consciousness about this during the last several years of debate on healthcare reform,” said HMSA’s Fortin. “One of the things that has come out of this is that no one player, no one stakeholder, can make progress alone.”

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Author: Greg Wiles

Greg Wiles is a long-time business journalist who currently works for Hawaii Reporter. His previous experience includes the Honolulu Advertiser and Bloomberg News.

Greg Wiles has written 69 articles for us.