Savings guide from Blue Cross Association is worthy of Congress’ consideration
The Blue Cross and Blue Shield Association (BCBSA) has issued a very good report on reasonable healthcare savings that could save nearly $1 trillion over the next decade. I have raised a number of these issues in past blogs, but felt covering them again would be good as the House begins debating spending reductions to hit an $880 billion savings target in the budget reconciliation blueprint passed by the chamber in a very tight vote.
BCBSA features ten policy proposals. You can view them in detail at the third link at the end of the blog. As BCBSA notes, the $1 trillion figure over a decade is not federal budget savings alone. It breaks down as such:
- $524 billion in federal budget savings
- $389 billion in lower private insurance premiums
- $180 billion in patient out-of-pocket savings
Site neutral payments
As I have suggested on numerous occasions, BCBSA proposes sweeping adoption of site neutral payments in Medicare. BCBSA says this would save $495 billion over ten years based on two proposals it makes. This savings is a combination of Medicare, commercial, and out-of-pocket savings. It is important to remember that most of the commercial rates out there piggy-back off of Medicare rates.
In short, site neutral payments would pay the same amount for a given service regardless of where it is being furnished – a physician office, a free-standing ambulatory center, a hospital-owned off-campus facility, or on-campus hospital outpatient facility. It is unreasonable that hospitals expect to be paid more solely because they own a given facility or place of service. What’s more, about half of all doctors are now owned by a hospital or health system and physician practice patterns are changing. Hospital employers are now telling their physician employees to practice at more expensive owned settings. This is a huge drain on our healthcare system, serves as a disincentive for hospitals to be more efficient, drives up Medicare and commercial coverage costs, and increases member out-of-pocket costs.
Hospitals spin tales that they serve sicker patients, that they deserve higher payments given what they provide a community, and that other facilities have lower quality. None of these arguments hold water.
Enhanced antitrust enforcement
We know that the massive consolidation in the healthcare industry increases healthcare costs. Numerous studies show this, whether it is within the health plan industry, within the provider industry, or via vertical integration of payer and provider assets. BCBSA says tougher antitrust enforcement could reap $78 billion in savings over ten years. The Biden administration began tougher antitrust enforcement. The Trump administration looks so far to be keeping the Biden approach here.
Restrictions on provider all-or-nothing contracting
BCBSA also wants to prohibit excessive and abusive provider contracting demands. It says this would save $16 billion over ten years. In short, hospitals and providers exert their power by demanding that health plans include the entirety of an integrated provider’s assets in their network, oftentimes services and locations that are very expensive and not needed in a health plan network. This is called “all-or-nothing” contracting. As well, hospitals and providers demand that health plans do not use benefit designs that incentivize consumers’ use of hospitals in the payer’s network that offer high quality care at lower prices.
Again, these provisions drive up costs for both employers and consumers by requiring expensive providers and locataions are in network. BCBSA’s proposal would prohibit this. The providers’ use of these contracting provisions are unreasonable and should stop.
Hospital administrative cost reporting
BCBSA proposes that hospitals be required to report administrative costs and that caps be placed on their amount. BCBSA says a recent analysis shows hospital costs from July 2023 to June 2024 increased by 6.9% while inflation for all goods was 3.0% for that period. It also says that from 2019 to 2020 hospital administrative costs grew by 6.2% while clinical expenses only increased by 0.6%. Requiring that hospitals report administrative costs and setting new cost efficiency standards could generate $40 billion in savings over ten years.
BCBSA points out that insurers have caps in law on most lines of business. It is hard to understand why we would not demand this from hospitals as well.
Expansion of value-based care in traditional Medicare
While value-based care (VBC) has been expanded and is growing in the traditional Medicare fee-for-service (FFS) program, BCBSA proposes to require provider system participation in two-sided VBC payment as a condition of participating in Medicare. This would mean providers have upside gain and downside risk when they provide services. The current FFS system is only experimenting with this concept right now and has much lighter forms of alternative payment models. The proposal would also apply to MA. The savings would be $54 billion over ten years.
While I understand BCBSA’s desire, I have my doubts that many of the providers in the FFS system can truly make the leap. I would note, however, that a recent study did find that MA is having a positive effect on lowering costs in the Medicare FFS system by changing provider behavior in the old transactional system as well.
Drug proposals
BCBSA proposes a number of drug reforms to generate savings:
- Eliminating the ability for drug makers to deduct spending on direct-to-consumer spending on their taxes, which would generate $137 billion in savings over ten years.
- Shortening the exclusivity period for biologic drugs to seven years from 12 years would save $134 billion over ten years.
- Reining in drugmaker tactics to delay the entry of biosimilar drugs to the market would mean $53 billion in savings over ten years.
- Requiring the use of 340B modifiers on all medical and pharmacy claims across all markets to improve transparency would save $54 billion over ten years.
There is no question that facilitating the quicker entry of generics and biosimilars and clamping down on the nefarious activities of brand drug makers is critical to lowering costs and aiding American consumers.
Conclusion
What is truly interesting about the BCBSA proposals is that the list of ten items largely is focused on provider reimbursement and not axing coverage. This could be a way for the Republicans to keep their promises not to gut coverage but still save budget dollars. Now, providers, especially hospitals, would complain that lower reimbursement means they can take care of fewer people. But it is clear that many providers have failed to become efficient due to many of these policies and trends, especially the lack of site-neutral payments. The current system promotes bloat and a lack of accountability. So, the BCBSA proposals save not only in the federal budget but serve to help save throughout the healthcare system and transform it.
Sources and additional reading:
https://www.bcbs.com/news-and-insights/white-paper/affordability-solutions-white-paper
https://www.bcbs.com/dA/490e8f97-fb36-43ff-8b46-8ba26f5fc18d
#healthcare #healthcarereform #spending #medicare #medicareadvantage #siteneutral #antitrust #hospitals #providers #healthplans #vbc #drugpricing #biosimilars #340b
— Marc S. Ryan
