President & CEO
Cheryl DeMars joined The Alliance in 1992, assuming several roles before becoming CEO in December 2006. Cheryl works with the Board of Directors and senior leadership team to establish the strategic direction of the cooperative.
Cheryl participates in a number of national and regional initiatives that align with The Alliance’s mission of controlling costs, improving quality and engaging individuals in their health. She serves on the Advisory Board of the Wisconsin Population Health Institute, the vice chair of the Wisconsin Health Information Organization (WHIO) and the board of the Wisconsin Collaborative for Healthcare Quality.
Prior to joining The Alliance, Cheryl was a program manager at Meriter Hospital in Madison. She earned a master’s degree in social work from the University of Wisconsin-Madison.
Price transparency is a hot topic in health policy right now. For good reason; employers and their employees fork over a large share of their incomes to health care every year, yet most have trouble planning for those expenses because of complex, often obscure pricing models. At a high level, this article will highlight where price transparency in health care is headed. But first, let’s recap where things currently stand.
Midwest States Are Failing to Deliver Price Transparency
In a 2020 Report Card on State Price Transparency Laws, 16 states received passing grades for their health care transparency laws and implementation, including Minnesota, which earned a B rating. Unfortunately, all other Midwestern states (including Wisconsin and Illinois) received an F rating. States were scored based upon the strength of their transparency laws and the degree to which information is made available to the public in user-friendly formats:
An All-Payer Claims Database (APCD): APCDs are an important starting point for health care transparency. Typically, states require insurers to submit claims data from commercial health plans, state-sponsored health benefit programs, Medicare and Medicaid. Having robust data from multiple payers means more complete and accurate price information. APCDs often collect actual paid amounts rather than hospital charges, which can differ drastically from what consumers actually end up paying.
Having a publicly accessible website with prices: Collecting information is only the start. In order for health care to act like other markets, information must be made available in a user-friendly, publicly available format so consumers and purchasers can make informed decisions.
RAND Corporation’s Ongoing Study: Exposing Extremely High Prices
Not only is price transparency lacking in these states, but the prices themselves are high when compared to other states.
RAND Corporation highlights these high prices in their Hospital Price Transparency Project by showcasing the disparity between what private payers pay in each state versus what Medicare pays for those same services at the same hospitals. Here’s what we learned from the study:
Employers are paying nearly 2.5x more than Medicare: In 2018, private payers paid 247% more than what Medicare paid for the same services at the same facilities for both inpatient and outpatient care.
There’s no link between hospital prices and quality or safety: Hospital health outcomes do not show that safety and quality are commensurate with price.
There’s no evidence hospitals need to make up for “uncompensated care:” Shortfalls from government programs do not explain high prices paid by commercial plans. There’s no correlation between hospital pricing and “low” government reimbursement for Medicare to account for the variation of prices.
Price Transparency Rule: Ineffective Enforcement
With bi-partisan public support, The Trump administration signed an executive order issuing their price transparency rule, which took effect on Jan 1. of this year.
Under the final ruling, hospitals are now required to publish a machine-readable file containing their standard charges for all items and services for 300 of their “most shoppable services” in a consumer-friendly format.
Unfortunately, a significant portion of providers are not yet complying with the ruling.
Future Health Care Customers Want Transparency
Markets don’t work if consumers lack adequate information to make purchasing decisions, and the health care market is no different. When patients don’t have the information or tools required to choose care, they tend to rely upon their physician’s recommendation.
However, studies show that younger generations, especially those aged 18-24, place a priority on having information about their out-of-pocket estimates more so than their primary physician’s recommendation. Health systems would stand to benefit by catering to the needs and preferences of their future patients by providing more accurate cost estimates.
What Can Employers Do to Improve Price Transparency (And Lower Prices)
Employers can place added pressure on providers to improve their transparency by submitting claims data to their state’s APCD and to national price transparency studies, like RAND’s Hospital Price Transparency Project. The next round of their study is open for enrollment. The Alliance encourages every employer – regardless of their membership in The Alliance – to participate in this vital research. By their submitting claims data, employers will help benchmark hospital prices to Medicare which will help produce a pivot-point employers – and everybody – can use to reduce hospital prices.
To participate, please email your interest to RAND study researcher Brain Briscombe at email@example.com before May 28. Let him know you want to participate and provide him with your insurance carrier (or which data warehouse you use).
Employers can learn more about this study – and the important role they play in it – by attending The Alliance Annual Spring Symposium on May 6.
Although the battle for price transparency in the public policy arena has seemingly reached a boiling point, its future is still up in the air. Instead of waiting for a market shift or government intervention, smart employers are attacking high prices using other tools, too. These often include
Directly contracting with providers or joining an employer-purchasing coalition
Tiered-network options (ours saves employers an additional 10%)
Referring employees to designated centers of excellence for select procedures with bundled prices, including warranties.
On-site and shared-site direct primary care clinics
Basing provider contracts on a percentage of Medicare rather than discounts
To learn how The Alliance helps 285 employers leverage their purchasing power to directly contract with providers, contact our Business Development team.
The Alliance awarded Traci Rothenburger, with a Health Transformation Award on Oct. 1, 2020, in recognition of significantly improving her employees’ access to high-value health care by creating an on-site direct primary care clinic. The Alliance created a case study capturing Traci’s journey so other employers can follow in her footsteps. This article is a condensed version of the case study.
PROVIDING PROPER CARE WITH NORDIC PRIVATECARE
Transforming health care takes vision, determination, and often a “why not” attitude. In this case, it began in 1991 with a part-time secretary working in occupational health. Over the next 13 years, Traci Rothenburger, now Clinic Manager at Nordic PrivateCare, would apply her administrative, organizational, and people skills to improve her coworkers' lives while helping her employer control their health care costs.
Traci began in occupational health at Seats Incorporated, a subsidiary of the family-owned Nordic Group of Companies, Ltd., and soon expanded that program to include wellness and health programs, and eventually opened an on-site clinic. She was then recruited to its sister company, Flambeau Inc., she replicated and built upon that model, opening another on-site clinic, Nordic PrivateCare.
She designed it to meet the total needs of the patient, which is care that Flambeau’s workforce had been missing using the typical approach to health care – where patients only have a few minutes with their primary doctor.
Traci said her biggest challenge in creating the new clinic was finding providers they could utilize that offered high-quality services at low costs.
“I think the biggest success story for us was contracting with a broad scope of providers and services,” she continued, “between SmartChoice, Quest Diagnostics, St. Clare, and Reedsburg Hospital, we developed those relationships to make it all work together while remaining a cost-effective benefit for our employees.”
Jason Sauey, President of Nordic Group of Companies, Ltd., said his chief concern was not knowing if their workforce was large enough to support the clinic – which Flambeau proved to be – but it took longer than they expected for that to become apparent because Nordic PrivateCare wasn't immediately thought of as a big benefit by Flambeau’s employees.
“It was an odd circumstance. We couldn't seem to get it to catch fire at first, but over time, as people started to use it and word-of-mouth spread, and it came together pretty well,” he explained. “It's been a long time coming, but it seemed that people simply had to experience it to truly appreciate its value.”
INCENTIVIZING EMPLOYEES WITH QUALITYPATH
The clinic’s eventual success was, in part, thanks to properly incentivizing employees to use its services.
“We use QualityPath quite a bit, so we really ask the patient to come and to talk to us first before undergoing a surgical procedure or having a test performed. And when they go, we pay their mileage. If they need to stay overnight, we pick up the room expense for them, too.”
QualityPath by The Alliance offers a bundled price for several tests and procedures, which significantly reduces the out-of-pocket expenses for patients. It also includes built-in patient navigation, a warranty on select surgeries, and less paperwork.
Traci said they also incentivize through their wellness program, which uses a points-earned system, and that employees pay per week towards specific goals. If they complete the program, they get all the money back – which is a nice investment towards their health and wellbeing.
ON-SITE, ON-DEMAND, COMPREHENSIVE CARE
Now that employees know the clinic’s many benefits, Flambeau is reaping the rewards by using it as a recruiting tool – not only to bring people in – but to improve the health of their current employees by providing a better quality of care. The patients that use the clinic receive more personal care, too.
“It's more about spending time with our patients and employees than anything,” said Traci. “We like to have our patients come in and be seen and treat the whole person – not just the symptoms or the part that’s hurting them at that point in time.”
And when patients do come in for treatment, Nordic PrivateCare offers a wide array of services to take care of them, from prescription fulfillment to urgent care and everything in between.
“We have massage therapy, chiropractic services, behavioral health, on-site radiology and imaging services, and we actually just added orthopedic consultations as well,” Traci remarked.
And if that’s not comprehensive enough, the clinic recently introduced an ER program so if somebody needs to be seen, they can call the clinic day or night, seven days a week. The result? Their ER utilization has dropped off significantly.
CONTROLLING COSTS WITH DIRECT PRIMARY CARE
Jason emphasized that the main reason for the clinic was not to mitigate high costs simply for the benefit of company, but also for its employees.
“If we can keep our costs down, it helps make sure that their deductible and their contributions are reduced as well,” he said. “As a private employer and having a self-insured plan, we’re going to feel the full brunt of the cost of our experience – and that’s a good thing – I far prefer that to purchasing [traditional] insurance,” he continued. “And although it’s difficult to be completely deterministic about the effect that the clinics have on our costs, I’m confident they’ve helped us slow the rise, if not reduce them.”
He then explained that their primary cost metric estimates they’re spending under $7,000 per employee per year in health care, which is a lot lower when compared to most other employers.
“From everything I've seen, that's far less than almost every survey I look at – which has most of them running around $12k-$14k a year. Between the convenience, the quality of care, the level of connectivity between the providers and the patients, and the cost management aspects, it’s a win-win for us and our employees.”
PROVIDING PROPER CARE DURING THE PANDEMIC
The clinic also offers telehealth services, which have come into national focus during the COVID-19 pandemic.
“By performing virtual medicine from the clinic, we’re cutting costs and providing accessible care to the people that need it – we want to make sure we’re offering care during the pandemic,” she stated.
Despite its virtual success, Jason believes that Nordic PrivateCare’s on-site services aren’t going away anytime soon and that that there’s no real substitute for great in-person care.
“Traci is what makes the clinic so great,” he said. “She engages and does the outreach and shows that she personally cares for not just our employees but her employees. When we make that connection with our people it has a great impact.”
ROOM FOR IMPROVEMENT
Jason said that future plans for the clinic remain more or less the same, but added how they’re constantly monitoring their employees’ attitudes and the health policy landscape.
“There will continue to be changes in the health care environment, and I don't necessarily think there are forces out there making it easier for employers, so as we continue to have new situations, new circumstances, and new laws, we've got to be on top of it by responding quickly and effectively to keep the clinic relevant and helpful to our people.”
Another goal for 2021 include increasing the clinic’s utilization by bringing more of their employees’ families into the clinic.
FIND A LEADER, START SMALL, AND FAIL FORWARD
When asked if she could offer advice to other employers thinking about starting an on-site clinic, Traci said to just jump in and do it – start small, and rest will follow.
“QualityPath is actually how it all started for us. Whether it was that or contracting for imaging or contracting with hospitals to do some of our smaller services, it was just starting small and expanding upon it.”
Jason’s advice for employers was simple: find someone like Traci.
“I think the biggest thing is to find a good person who you can have great confidence in to lead it. What impresses me most about Traci is that she's always staying alert and learning, and as she learns, she's finding ways for us to improve our offerings and how we deliver our services through our clinics.”
Jason also added that it might be difficult to make an on-site clinic work if you’re a small employer. He estimates that at least 120 employees are required to make it work, and if you’re smaller, going the shared-site clinic route might be more appropriate.
“Beyond that, I think it's just about experimenting; don't be afraid to try new things. If you learn that something’s not working, fail fast and move forward doing something different. That's the most important thing: continue to experiment, and if you find something that's working, do more of it."
The WHIO received a Health Transformation Award from The Alliance on October 1, 2020 for significantly improving transparency and high-value health care in Wisconsin. The Alliance created a case study that captures WHIO’s award-worthy work. This blog article is a condensed version of the case study.
The Wisconsin Health Information Organization, or WHIO, as it's known, is a non-profit data and information resource established in 2008 that helps employers, providers, health insurers, and the state government to improve the quality and control the cost of health care using claims information. It includes health care claims data on 4.9 million citizens – roughly 72% of Wisconsin's population.
Where Does WHIO’s Data Come From?
Health plans have been using claims information for many years to evaluate the performance of their network providers and the experiences of their members.
WHIO, an All-Payer Claims Database (APCD), is essentially a super-sized claims data system. They obtain and aggregate claims data from multiple health plans and other payors on commercial, Medicare Advantage, Wisconsin Medicaid, and self-funded employer plans – including The Alliance. The WHIO cleans, integrates, and enhances the claims data to enable sophisticated measurement and tracking of quality and resource use over time.
Using WHIO's vast data resource, we're all able to access the same objective source of information, which produces transparency and paves the way for collaboration.
The All-Payer Claims Database: A Single Source of Information
Organizations participate in the WHIO so that trends and patterns in health care can be identified that would otherwise go undetected and to benchmarks results.
“Wisconsin was an early adopter of the all-payers claims database concept,” said Dana, “Many states limit the use and access of information but in Wisconsin, we encourage it’s used by all stakeholders: health plans, employers, providers, researchers, state agencies, and more. We’ve taken an approach where all are encouraged to use the information because it improves the health care delivery system overall.”
Another advantage of having a single source of claims information is that multiple organizations can access that information, reducing the administrative costs of obtaining and providing the data to multiple, separate organizations.
Providing Important Information for Payers and Purchasers Alike
Health plans and purchasers (like The Alliance) use WHIO data to identify high-value providers when designing benefit plans and making network expansion decisions. Employers also use the information to create high-value networks of providers and to design benefit plans that encourage employees to use high-quality, lower-cost provider organizations, or clinicians.
In addition, doctors and hospitals can use WHIO data to identify opportunities to improve care and lower their costs, too. Providers use the information to benchmark themselves against other organizations that provide care – or to statewide or regional benchmarks.
“Benchmarking is important because it provides organizations with the ability to put context around various results, providing them with an opportunity to create improvement strategies,” Dana explained, “So let’s say, for example, you received a result or score of 80. You wouldn't know if you're actually performing well or not by looking at that number alone. By using benchmarks, you can prioritize where you are going to put your improvement resources.”
Using Claims Information to Combat COVID-19
Under Dana’s leadership, and through an extraordinary public health crisis, WHIO – using their resource of vast information – has developed an analysis to help identify citizens who are most at-risk for severe complications of the coronavirus (COVID-19).
“We've used the information to identify individuals who are high-risk for serious diseases if they were to contract the coronavirus infection,” she said. “We provide that information to the Department of Health, Medicaid division, and other health plans, so they can individually identify these people and work with them to provide the resources necessary to make proper health care choices.”
Wisconsin Collaborative for Healthcare Quality Partnership
WHIO is planning to add additional types of data to their information system to augment their claims information.
“Beyond using claims information on its own, the WHIO is thinking towards a future where we can use our new technical platform to integrate other types of data in tandem with claims information,” Dana said.
For example, WHIO has forged a collaborative partnership (called 360 ValuCounts) with the Wisconsin Collaborative for Healthcare Quality to integrate their clinical data with WHIO claims data. That information will be used to create more comprehensive reports – starting with patients diagnosed with diabetes or behavioral health issues – to create a more complete picture of the care provided for those patients.
“With this, we'll be able to include process quality measures, outcomes, as well as the cost of care that was used to provide those outcomes,” Dana said.
An Exciting Future for WHIO and Wisconsin
WHIO is looking to expand the use of its information system by adding information on social risk (or social determinants) of health.
“In general, we can use publicly available surveys that allows us to see the environment that an individual is living in. So, for example, approximate income level, or education level, or the density of housing that they're living in, can help us identify social disparities in health care.” After being asked what she hopes the future brings for her organization, Dana responded with an aspiration for collaboration between all employers and providers.
My hope for WHIO and the State of Wisconsin is that our work is woven into the very fabric of health care in the state; where all organizations can take advantage of this information and contribute to improving the health of Wisconsinites and the healthcare delivery system through information driven decision-making.”
Read the case study.
The Alliance believes it’s important for employers to stay up-to-date on health policy legislation – especially during an election year. And because health policy can be complicated, we invited experts from the American Benefits Council to give our members a high-level look at current (and future) health policy issues during our Oct. 8 webinar. The following article is a recap from that event. Click here to view the full recording.
Short-Term Legislative Look
Ilyse Schuman, Senior Vice President of Health Policy at American Benefits Council, began the presentation and explained that on Oct. 1, the House of Representatives passed a scaled-back COVID-19 stimulus bill, but that it won’t likely pass through the Senate. “The sides seem far apart on talks about COVID-19 stimulus relief and it is unlikely that there will be a bill passed that includes health policy provisions before the election.”
She then turned her attention to a hot-button item for employers: COBRA Subsidies. “Hopes for Congress passing legislation to shore up employer-sponsored health care and other health policy priorities before the election look unlikely.”
She explained that the original version of the House-passed HEROES Act in May would have provided a 100% subsidy of premiums for terminated workers enrolled in COBRA as well as assistance for furloughed workers remaining on their employer plans. However, the COBRA subsidies portion was stripped from the scaled-back stimulus bill the House passed on Oct. 1.
“In its place was a proposal that would make all workers receiving unemployment insurance automatically eligible for premium subsidies on the ACA exchanges. This could be seen as a troubling lack of broad support for employer-sponsored insurance.”
90% of voters support the federal government taking action to help those who have lost their job preserve their employer coverage. and the American Benefits Council will continue to fight for COBRA subsidies and also consider other policies to shore up employer-sponsored coverage during this public health crisis
Though supported by both sides of the aisle, a broader surprise billing clause was not included in either House-passed bills this year, and it’s clear there are still some disagreements on which approach to take in prohibiting surprise billing. However, it remains a high priority for the retiring Senate HELP Committee Chairman Lamar Alexander (R-TN) who helped create the Lower Health Care Costs Act which also included other measures like enhancing transparency and other provisions to improve quality and affordability.
“The Alliance provided testimony to the Senate which, along with that of many others, was used to develop the Lower Health Care Costs Act and we’re really pushing to get that across the finish line with Congress. This is a testament to employers and that your voice really matters,” said Schuman.
Additionally, there was a recent executive order by the White House to come up with a surprise billing legislative fix by the end of this year; they did not specify what action to take or when it would happen, so it is in the hands of Congress for now.
COVID-19 Testing and Vaccines
Schuman moved the discussion to focus on COVID-19 by stating frankly: “Even if there is a cure or vaccine for COVID-19 by the end of the year, it is unlikely to be administered on a widespread basis. Employers need to be planning for COVID-19 workplace strategies through 2021, effectively stepping into a public health role and widespread testing for public health surveillance.”
There are still many questions that remain unanswered, including the cost of vaccines and who pays for them. Schuman said it’s worth noting that the HEROES Act would have allowed $75 billion for testing and contact tracing.
Schuman also noted how the pandemic has fueled efforts to expand access to telehealth services. “A recent report by McKinsey estimates that up to $250 billion, or 20% of the current U.S. health care spend, could potentially be virtualized.”
Next, she expressed optimism that legislation geared toward telehealth will be passed soon. “Even if no telehealth legislation passes this Congress, it will certainly continue to be a focus in the next.”
The American Benefits Council will continue to urge Congress to increase employer access to telehealth and remove state barriers for those services.
Schuman then passed the presentation over to her colleague, Katy Johnson, Senior Counsel of Health Policy at American Benefits Council, to discuss items employers can expect to see in terms of regulatory health policy initiatives.
Johnson reminded viewers that the president issued an executive order focused on hospital price transparency in June of 2019, and explained the two main requirements for the provision:
- Plans and issuers would be required to provide an internet-based self-service tool for pre-service cost-sharing estimates. Those estimates need to be individual-specific and based on negotiated rates.
- Plans and issuers would make publicly available a machine-readable file of the negotiated rate of in-network providers for services under the plan, and also a list of the historical allowed amount covered under the plan.
She then explained that the proposed rules have garnered a lot of attention – both positive and negative. In fact, over 25,000 comments were filed on them. “Price transparency could be extremely valuable as a means to reduce health care costs, but at the same time there’s a number of rules that could be difficult to administer or potentially burdensome.” Johnson then noted that the proposed effective date for the rules will likely be one or two years for proper implementation.
She closed her remarks in regards to price transparency by stating that the rules were received for internal review by the White House of Office of Management and Budget on Sept. 11, which means that pending news is imminent.
Other Potential Guidance
Johnson said that employers are now allowed to send employees to the ACA exchange using tax-free money in an HRA – but there are a lot of stipulations attached to it. “Rules were proposed to help employers avoid an employer mandate penalty last fall, but we haven’t seen a final ruling yet.”
Another note she mentioned was that payments for Direct Primary Care arrangements are currently considered medical care, but in most cases “you are not eligible to receive HSA benefits in tandem with a Direct Primary Care arrangement.”
The Health Benefits Council is working hard on the congressional side to remove that barrier to Direct Primary Care for employers. They are also working to help individuals carry over their flexible-spending arrangements they were unable to use due to the pandemic into 2021 so people don’t forfeit the money they set aside.
The Affordable Care Act in the Supreme Court
Johnson closed her presentation by sharing news regarding the ACA and explained that a few weeks ago the Trump administration released the America-First Healthcare Plan, which supports coverage for pre-existing conditions, as the ACA – which currently covers pre-existing conditions – is being challenged in a case being heard by the Supreme Court on Nov. 10.
She then turned it back over to Schuman to explain the differences in each presidential candidate’s positions on major health care topics.
Cheryl DeMars, president and CEO of The Alliance, took the stage at Disrupt Madison to talk about how employers can join together to “disrupt” health care and create positive change. This speech was a prelude to the unveiling of The Alliance’s High-Value Health Care initiative at the cooperative’s annual meeting, and a call-to-action for employers to get involved to help change health care.
Have you watched the classic movie, The Wizard of Oz?
Then you probably remember Dorothy’s ruby slippers.
Do you remember what Glinda the Good Witch said to Dorothy about the slippers?
She said, “You’ve always had the power my dear. You just had to learn it for yourself.”
The Power Within Alliance Members
Dorothy trying to find her way home reminds me of employers trying to change health care. You have the power, you just have to learn it yourself.
The Alliance is a cooperative of 240 ruby-slipper wearing employers who are taking control of health care through self-funding.
In Baraboo, Wis., Flambeau opened its own health care clinic for employees. The clinic provides free care to employees many of whom were not getting routine preventive care. Over the course of the next five years, Flambeau’s health care costs rose less than one percent – not per year, but IN TOTAL – IN 5 YEARS.
In Westfield, Wis., Brakebush Brothers did even better. In 2014, they began self-funding their benefit plan, opened an on-site health care clinic and made other investments in employee well-being. Four years later, their health care costs are less than they were in 2014. Yes, that is correct - their health care costs went down.
The Alliance helps employers realize the power of their ruby slippers. And, together, we are making a difference in this market. Alliance members are moving their business to doctors and hospitals that provide good care and cost less. In the process, they are creating a market that recognizes and rewards better value – just like every other industry.
We invite you to join us – the more the merrier. Because after all, there’s no place like The Alliance . . . There’s no place like The Alliance . . . There’s no place like The Alliance.
The question of whether to expand Medicaid in Wisconsin has been the topic of a lot of discussion and debate. The debate often conflates issues of politics or philosophy with the economics of what expanding the Medicaid program would mean. We asked Donna Friedsam, Distinguished Researcher, with the University of Wisconsin Institute for Research on Poverty to provide us with an objective review of the data. The conclusion of the analysis is that Medicaid expansion will increase the number of insured people in Wisconsin and will bring additional funds to the state. What it won’t do is correct the market dynamic, which requires employers to band together and be willing to adopt more comprehensive actions to drive change. This is what we need to do in partnership together. Thanks, Donna, for providing this analysis!
How might Medicaid expansion affect private insurance premiums in Wisconsin?
A lot of confusion surrounds this debate about Medicaid expansion, and people argue variously about how it would affect insurance rates in the private commercial market. In recent months, Wisconsin-based studies seemed to show opposite results, which makes it hard to know what to think.
The weight of the evidence, however, is clear about two economic impacts:
Medicaid expansion in Wisconsin could lower premiums for those with private individual insurance in the Marketplace established under the Affordable Care Act.
A recent independent study published in the national journal Health Affairs summarizes the data. Another study, commissioned by the Wisconsin Office of the Commissioner of Insurance, also shows lower premiums in Medicaid expansion states. That report estimates that, under a Medicaid expansion, 25,000-30,000 Wisconsin residents currently enrolled in ACA Marketplace plans would become eligible for Medicaid. These lower income consumers tend to have higher health risk, and their transfer from the Marketplace to Medicaid improves the risk pool in the ACA Marketplace and may thereby reduce those premiums.
Those opposed to Medicaid expansion express concern about moving people from ACA Marketplace plans to Medicaid. Providers often argue that the commercial plans pay market rates to providers, while Medicaid’s low payment rates cause providers to “cost-shift” their underpayments to other private payers, thereby increasing premiums for others. Many economists and analysts, challenge the argument that provider prices reflect cost-shifting due to Medicaid underpayment expansion and that Medicaid expansion would increase insurance premiums. A study released in February by a Wisconsin-based group had argued that Medicaid cost-shifting would increase private insurance prices, but a review by two UW economists, population health experts and other economists and policy analysts, found that analysis had deviated from standard econometric practice, producing invalid results.
Medicaid expansion would reduce uncompensated care at hospitals.
Medicaid expansion would reduce the number of uninsured persons in Wisconsin by up to 40,000, reducing uncompensated care for health care providers. A study released by two UW economists in April 2019 shows that the Medicaid expansion could produce a net reduction in providers’ uncompensated care costs of as $100 million annually.
If provider prices are in fact driven by cost-shifting from payment shortfalls, a decrease in uncompensated care for providers should allow providers to reduce the prices they charge to payers and consumers. However it remains to be seen whether a reduction in uncompensated care burden for hospitals will actually translate to lower prices for the rest of the market.
In Wisconsin, and many other parts of the country, health care providers have market power such that they do not necessarily pass on cost reductions to payers. Indeed, even as providers voice concerns about underpayment by government payers, many Wisconsin hospitals and health systems report healthy and increasing margins, in aggregate posting about 10 percent margin for Wisconsin hospitals in 2017 and 5 percent margin for health systems. In the last two biennia, the Wisconsin state legislature allocated tens of millions of dollars to hospitals to help offset concerns about such cost-shifting from their reported Medicaid shortfalls. And hospitals and health systems experienced dramatic reductions in uncompensated care following implementation of the Affordable Care Act. The cost-shifting theory would hold that these developments should help relieve providers’ need to shift costs to private payers. Did payers experience those benefits?
Don’t people already have access to affordable coverage through the ACA?
Those opposed to Medicaid expansion have pointed out that federal subsidies on the ACA Marketplace make health plans available at very low premium prices for people with very low incomes. They cite plans available with 18-cent monthly premiums. It is true that ACA-subsidies available for low-income consumers may, in some cases, bring a resulting plan premium to near zero. But these near-zero premiums are not linked to Silver metal level plans through which low-income consumers qualify for cost-sharing reductions; By selecting a very low-cost Bronze plan, a consumer will remain exposed to substantial cost-sharing. As well, such low premium private Marketplace plans differ substantially from Medicaid coverage of behavioral health services, dental services, and services for working adults with disabilities, such that the low-income populations may not be able to afford such needed services.
Federal data for the 2019 open enrollment period show the following: Wisconsin consumers selecting Bronze plans pay, on average, a $67 monthly premium post-subsidy, and consumers selecting a Silver plan, for which they can qualify for cost-sharing reductions, pay an $88 monthly premium post-subsidy. Marketplace enrollment in the state has declined substantially over the past two years, particularly among those with incomes below 200 percent of the federal poverty level, raising concerns about affordability of coverage for this population.
The Bottom Line
Medicaid expansion can moderate health insurance premiums by improving the risk pool in the ACA individual market. Medicaid expansion would reduce the number of uninsured persons in Wisconsin by up to 40,000, reducing uncompensated care for health care providers. And it will bring in hundreds of millions in federal funds to pay for items in the state budget currently being supported by state tax revenue, as noted in Gov. Evers’ budget proposal and a memo from the Wisconsin Legislative Fiscal Bureau. But Medicaid expansion will not correct the market dynamics that result in high health care prices. The challenge of health care prices, and the broader challenge of high health insurance premiums for all purchasers, requires consideration of other, more comprehensive solutions.