Tag Archives: Cost

Controlling rising medical costs

The 2017 Milliman Medical Index noted that medical expenditures (inpatient, outpatient, and professional) made up about 80% of the total cost of healthcare for a family of four, and that nationally the cost increases from 2016 to 2017 were about 4%. However, many employer plans have experienced much higher cost increases, especially in certain areas of the country. In 2016, for the first time, independent physicians made up less than half of the practicing physicians in the United States, according to an American Medical Association (AMA) study. Physicians who work with hospitals charge a facility price at their offices, which could result in increases in costs and significant discrepancies in prices for the same services. Additionally, hospitals have continued to merge with each other, and while these mergers offer the potential for lower costs by increasing efficiencies, a 2016 study by Northwestern University, Harvard University, and Columbia University found that prices at merging hospitals actually increased 7% to 10% if the hospitals that merged were within the same state. Given these factors, along with general price inflation and increased utilization, plan sponsors should consider ways to mitigate costs using any or all of the strategies below.

Price transparency and quality

Providing price transparency, coupled with information on quality of care, is a way to promote consumerism within a health plan so that both the plan sponsor and the members who are receiving benefits can save costs. There are various vendors that offer plan sponsors and members the ability to “shop” for surgical procedures and doctors based on price and quality metrics. Cost and quality advantages can result from steering members to specialized “Centers of Excellence” for a given procedure.. Members can be incentivized to choose the lower-cost facilities or physicians (without sacrificing quality) through a reduction or elimination of member cost–sharing, or even with rebates (that is, the plan will “pay” the member to choose a lower-cost alternative).

Narrow networks and carve-outs

Another way to steer members toward cost-effective facilities is through the use of a narrow network. Most health plans offer a narrow network option (for both insured and self-insured plans), which limits member access to a smaller pool of doctors and hospitals within their larger networks. The narrow (or preferred) network promises better discounts on claims than regular in-network claims, and the plan sponsor can encourage members to use these facilities by reducing member cost-sharing within the narrow network. The plan is designed to have an additional tier of cost-sharing, with the preferred network having the lowest member cost-share. Furthermore, plan sponsors with direct contracts can consider carving out a particular facility from in-network if the facility is not a cost-effective, high-quality option (and there are other options available to the members).

Alternative payment strategies

In addition to steering members through plan design and incentives, certain plan sponsors can look to alternative payment strategies to further control costs while ensuring that quality of service does not suffer. For example, a bundled payment can be used in place of fee-for-service for certain procedures with predictable episodes of care (e.g., total joint replacement). The plan sponsor pays the same amount regardless of days spent in the hospital or rehab visits, which can help to reduce unnecessary services. A plan sponsor can also enter into a shared savings arrangement with a group of providers, such as an accountable care organization (ACO). An ACO is a group of doctors and hospitals whose focus is on providing coordinated care to certain members within a plan. Ideally, the main goal of both the ACO and the plan is to keep costs low without sacrificing quality. If successful, both share in the savings achieved. Plans with a large enough membership can enter into these alternative payment strategies on their own; for smaller plans, they may be able to contract through their insurance carrier or third-party administrator.

This article first appeared on LaborPress.org.

Plan sponsors must consider several strategies to manage pharmacy costs

In recent years, pharmacy costs have been a hot topic. Plan sponsors must remain vigilant and stay current on industry strategies used to manage pharmacy costs. In this article, Milliman consultant Ajanthan Balasinkam outlines a number of important considerations for plan sponsors, including plan design, contracts, the opioid crisis, and the specialty pipeline.

Chronic disease management considerations

Disease management strategies can include a range of activities with varying approaches and levels of intensity. These strategies are also often mixed with other care management approaches.

Differentiating the disease management programme components, targets and interventions is important before evaluating return on investment or cost and quality impact. There are three broad programme designs to consider:

• Transitional care models
• Telephone-based disease management
• Utilisation and case-based disease management programmes

Although demonstrating savings in disease management programmes has proven difficult, it is not impossible. In this paper, Milliman’s Lalit Baveja and Mason Roberts explain the reasons why and also explain why it’s important to thoughtfully manage and continually review performance.

Milliman report on U.S. organ and tissue transplants finds slight rise in average annual cost, survival rate overall

Milliman has released the 2017 edition of its triennial report on the estimated costs of U.S. organ and tissue transplants. The report summarizes average annual costs per member per month (PMPM), including utilization and billed charges, related to the 30 days prior and 180 days after transplant admission for organ and tissue transplants. This includes single-organ transplants such as heart, intestine, kidney, liver, lung, and pancreas, and a number of multiple-organ transplants; tissue transplants include bone marrow and cornea.

While the findings vary greatly by transplant and population type, the study found that, when compared to all combined organ and tissue transplants in the 2014 report, billed charges saw an average annual increase of 3.5% for those under 65, and 7.7% for those over 65. The analysis also revealed a dramatic decrease in wait times for kidney transplants and intestine transplants, while wait times for organs such as heart and pancreas have increased since the 2014 report. Survival rates have generally increased slightly when compared to Milliman’s previous report.

Organ and tissue transplants are a vital but expensive healthcare service, and the costs for these transplants are not readily available. This research is an important tool for providers, payers, and the public to better understand the utilization and billed charges surrounding organ and tissue transplantation.

To view the complete report, click here.

Price transparency considerations

Increased price transparency from healthcare providers may help individuals become better consumers and reduce overall healthcare costs. However, some studies indicate that more price transparency may actually increases costs. In this article, Milliman’s Shyam Kolli explores the forces driving the need for price transparency. He also discusses potential ways to improve transparency.

The potential cost of gene therapy may surprise payers

An estimated 80% of rare diseases are genetic. For patients diagnosed with rare genetic diseases, gene therapies may offer an adequate treatment option. However, gene therapies may be costly for payers using the current payment models in the U.S. healthcare system. Milliman actuaries Anne Jackson and Jessica Naber discuss the issue in the article “The future is now: Are payers ready for gene therapies?