Health Plans Undergo Major Changes to Cut Costs
Policy + Politics

Health Plans Undergo Major Changes to Cut Costs

iStockphoto/The Fiscal Times

Here is some news that may come as a shock to Republicans who want to repeal health care reform. Most of the changes it promotes in the delivery system will take place anyway, except for Medicare, which lags behind the private sector. 

The health care insurance industry, whose policy making council is meeting in Washington this week, is beginning to roll out private plans for the working-age population that incorporate most of the changes foreseen for Medicare in the Affordable Care Act. They include creation of accountable care organizations, coordinated care and medical homes on the delivery side and bundled payments, pay-for-performance and shared savings with providers on the payment side.

Reforms in the private sector are already rolling down the track, and repealing the bill will do nothing to stop it, top officials from Aetna, Cigna and UnitedHealth on Monday told a forum sponsored by America’s Health Insurance Plans, the industry trade group. They vowed not to make the same mistakes of the 1990s, when the industry’s last major effort at cost control was abandoned after patients revolted over poorly implemented managed care.

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“We’re at a tipping point that’s demanding reform of the delivery system pushed by employers and by state governments that can’t afford this anymore,” said Alan Muney, chief medical officer at Cigna. In addition to selling insurance plans, the company also processes claims for many of the nation’s largest self-insured employers, who are also demanding change. “Health care reform could die tomorrow and it wouldn’t change a thing.”

Top officials from Blue Cross Blue Shield of Illinois and the Advocate Health System outlined some of the changes already underway in that state, where Advocate’s network of 10 hospitals, 250 community-based physician practices, and 5,500 physicians has begun its transformation into one of the accountable care organizations foreseen for Medicare. Advocate’s 700,000 customers represent about 15 percent of the private insurance market in the Chicago area.

Over the past year, the group has embedded 60 case managers in physician practices to manage high-cost patients with chronic diseases; closely monitored patients discharged from its hospitals; sent case workers into patient homes to ensure compliance with discharge instructions; and even encouraged adoption of end-of-life advance directives where appropriate. The goal is to prevent emergency room visits, reduce hospital admissions and reduce readmissions.

“There’s no such thing as a discharge anymore, it’s a handoff,” said Lois Elia, vice president of AdvocateCare, which coordinated adoption of the new system with Blue Cross Blue Shield. “We see ourselves less as a hospital holding company than a population health management company.”

One year after the program started, the bottom line is that per-patient costs across the Advocate system were down 6.8 percent from the previous year compared to spending that stayed essentially flat in the rest of the region. “Our hospitals are now seen as cost centers,” said Elia. “This is a new language for us.”

There is a downside, of course. Fewer hospital admissions translate into reduced revenue for hospitals and physicians and fewer jobs in local communities. Hospitals and physician offices were the single biggest source of new jobs in the U.S. for most of the past two decades.

“Is it possible for each hospital in the Chicago region to operate at 10 percent lower rates of utilization and still survive?” asked Scott Sarran, chief medical officer for Blue Cross Blue Shield of Illinois. “That’s the big elephant in the room. Those that overbuilt may not survive.”