Healthcare Council Policy Review
September Edition 2008
New Payment Policies to Address Preventable Medical Errors
The U.S. Centers for Medicare and Medicaid Services (CMS) made the first move last year to hold hospitals financially responsible for preventable medical errors by adopting a policy that identifies mistakes for which payment will not be issued. The shift in policy signaled the start of a sea change for the healthcare industry that now has some of the nation’s largest insurers following suit while more and more state Medicaid programs are looking towards adopting similar policies, known as “never events” policies.
Blue Cross Blue Shield of Illinois is among those private insurers that have recently announced they will no longer pay for hospital procedures that result in serious medical errors that are not only emotionally and potentially physically costly to the patient, but also drive up healthcare costs all around. The National Quality Forum, a nonprofit group focusing on healthcare safety, developed a list of 28 medical errors that constitute these “never events” that include everything from serious infection to surgery on the wrong patient or wrong body part to the death of an otherwise healthy patient. Blue Cross, Aetna, and Cigna are among those large insurers that are using the Forum’s list as the basis for these new payment policies that will ultimately create greater incentive for improved quality of care.
Many states are also following up on CMS’ recommendation that their Medicaid programs implement similar policies. Illinois, however, appears to be dragging its feet with the Department of Healthcare and Family Services claiming that they are still studying the issue. Illinois appeared poised to become a national leader on tackling medical errors in 2005 when it enacted two laws creating a Hospital Report Card that will document hospital-acquired infections and nursing staff levels and an Adverse Events Report that will record egregious hospital errors. Those reports have not yet been issued nor do Illinois officials expect to assemble the data necessary to produce those reports until next year.
"Mistakes to cost hospitals"
"Illinois ponders how to treat medical errors"
"More states shred bills for awful medical errors"
Interactive Map: State-by-State look at medical mistake billing policies
Massachusetts’ Healthcare Reform Grows Costlier for Businesses
In 2006, Massachusetts made the unprecedented move to implement an ambitious expansion of its state-subsidized health insurance program known as Commonwealth Care. Since that time, other states have held Massachusetts’ healthcare reform up on a pedestal while others have held it up as a cautionary tale. Illinois, under the Blagojevich administration, has been one of the states that have sought to emulate the Massachusetts’ experience even as reports rolled in earlier this year that the state had drastically underestimated enrollment numbers while hospitals and providers are being made to suffer lower reimbursement rates. Now businesses, already forced to foot some of the bill for one of the largest healthcare expansions in the nation, are being forced once again to pick up the tab to cover the program’s financial missteps.
Massachusett’s Governor Deval Patrick’s administration recently issued new state regulations that will hit businesses, particularly small businesses, in the pocketbook hard, possibly forcing more employers to drop coverage completely. Under the state’s current healthcare program, employers with more than 10 full-time employees have the option of paying at least a third of workers’ premiums within the first 90 days of employment or ensuring that at least a quarter of their full-time workforce is covered by an employer plan. The new state regulations, if adopted, will now force employers to meet both requirements or face a financial penalty. With the state doing little to reduce healthcare costs, many employers may find it more cost-effective to drop coverage and pay the fine.
State lawmakers also had to approve supplemental funding earlier this month to cover a $100 million shortfall in the program for this past year. This funding was scraped together by imposing an additional assessment on health insurance companies’ reserve accounts, requiring additional payments from hospitals and shifting money out of a state fund that is dedicated for health insurance for the unemployed.
"Leaders nip, tuck healthcare policy"
"Businesses rip healthcare proposal"
"Opinion: Small businesses pay for plan's shortcomings"
Marketplace Efforts Temper Rise in Healthcare Costs
According to a recent survey of insurers conducted by Aon Consulting Worldwide, healthcare costs are expected to increase an average of slightly more than ten percent in 2009. While the survey shows no change in the upward trend of national healthcare costs, that projected rise is one of the smallest increases surveyors have seen in six years, thanks in part to efforts employers and insurers are making towards enhancing wellness and disease management programs.
The rise in healthcare costs still translates into higher costs for employers, who will most likely see their costs increase more than ten percent over the next year. For many employers struggling with keeping on top of these costs, the increase will mean higher costs for employees and changes in benefit designs.
The souring economy will also leave many companies feeling little relief from the slowing increase in healthcare costs. For instance, General Motors recently announced major changes to its employee healthcare plan in an effort to counteract sagging sales, starting with the cancellation of benefits to retirees age 65 and older. Current employees will be forced to absorb higher co-pays and monthly contributions and dependents are no longer eligible for coverage on their 24th birthday.
"Health care costs seen rising 10 percent in 2009"
"More health care cost pain seen in 2009"
"GM Health-Care Pain Spreads"
Small Businesses Push for Pooling Opportunities
Although the increase in healthcare costs appears to be waning, small employers are still seeing huge jumps in their costs when compared to those of larger businesses. The National Federation of Independent Business (NFIB) reports that small businesses have seen their health insurance costs rise by nearly 130 percent over the last eight years and still pay, on average, nearly 20 percent more in premiums than large businesses pay for the same benefits. As a result, Congress is seeing more initiatives surface that small employers hope will provide them with greater relief.
Illinois Senator Dick Durbin has previously championed legislation known as the Small Business Health Options Program (SHOP) Act that would allow small businesses with 100 employees or less to come together in either a statewide or national pool in order to obtain lower health insurance rates. Last month, Delaware Congresswoman Nydia Velazquez also introduced another similar measure known as the Cooperative for Healthcare Options to Improve Coverage for Employees (CHOICE) Act to allow small firms to pool their employees through voluntary state cooperatives in order to obtain reduced health insurance rates. Both initiatives also extend tax credit incentives to small businesses that pick up some of the costs of their employees’ coverage.
Both the CHOICE and SHOP proposals have successfully wooed bipartisan support, but none of the pooling initiatives have received serious debate. The insurance industry and regulators also have not weighed in completely on the proposals, but supporters remain hopeful that the push to shape the healthcare reform debate around market-based approaches will thrive regardless of November’s election outcome.
"Healthcare debate may hinge on pooling"
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