Montana is signaling it’d step away from an revolutionary means of setting the costs its public worker well being plan pays hospitals for providers, an method that has saved the state thousands and thousands of {dollars} and change into a mannequin for well being plans nationwide.
The plan gained nationwide renown amongst employers and well being care value reform advocates when, in 2016, it established most quantities the well being plan would pay for all inpatient and outpatient providers. Those quantities had been pegged to Medicare reimbursement charges. The adoption of that mannequin, often called reference-based pricing, has saved the state tens of thousands and thousands of {dollars}. Taxpayers assist fund the medical plan, which insures public staff and their households, for a complete of about 28,800 individuals.
Montana didn’t invent reference-based pricing, however the state made waves by having a well being care plan of that measurement set costs for all providers, not simply sure procedures, resembling knee replacements.
Now, Montana is positioning itself to tweak its mannequin, simply as extra states and employers, looking for to chop prices, take into account adopting it. That has well being economists and people working to decrease hospital costs elsewhere questioning whether or not the state is as soon as once more shifting forward of the curve — or setting itself up for a setback.
“We look to Montana for the success story,” stated Gloria Sachdev, president of the Employers’ Forum of Indiana, a nonprofit that tries to enhance well being care pricing. “Now that it’s doing something new, I think a lot of eyes will be on Montana.”
In September, the state awarded Blue Cross and Blue Shield of Montana a contract to take over administration of the general public worker well being plan beginning subsequent yr. The contract requires utilizing Medicare’s charges as a baseline to set total targets for the quantities the plan will reimburse hospitals. It offers Blue Cross the power to satisfy these objectives with reference-based pricing — but in addition by negotiating offers with particular person well being care suppliers utilizing a mixture of reimbursement fashions.
The state stated in a information launch saying the contract that its new reimbursement targets will save $28 million over the following three years. But the main points within the contract on how that shall be achieved are imprecise.
Blue Cross, considered one of Montana’s largest insurers, gained’t elaborate on its plans whereas Allegiance Benefit Plan Management, the general public worker well being plan’s present administrator, challenges the state’s contracting determination. Allegiance had held the contract for the reason that state adopted the reference-based pricing mannequin.
John Doran, a Blue Cross spokesperson, stated state officers instructed firm officers to direct all inquiries to the Montana Department of Administration.
Asked how upcoming modifications will have an effect on the well being plan’s present mannequin, Montana officers pointed to the state’s contract with Blue Cross. According to that doc, Blue Cross can create “custom alternative payment arrangements with providers” with state approval.
In the state’s information launch, officers stated the objective is to “modernize” its six-year-old reimbursement technique. Department of Administration Director Misty Ann Giles stated within the launch that the state picked a vendor to assist it “become more flexible to reach its goals efficiently.”
The U.S. has struggled to answer the rising value of well being care. The Centers for Medicare & Medicaid Services estimated that in 2020, well being spending grew almost 10%, reaching $4.1 trillion, or $12,530 per individual. More than 160 million individuals within the U.S. have employer-sponsored medical health insurance. Historically, the costs that worker well being plans pay have been privately negotiated between well being care suppliers and third-party directors like Blue Cross, with negotiations typically beginning on the costs that hospitals suggest.
That course of has exacerbated the dearth of transparency in the price of care and has contributed to large variation within the costs that non-public insurance coverage pay. In a research of medical claims information from 2018 to 2020, assume tank Rand Corp. discovered that non-public insurers in some states, resembling Washington, paid hospital costs that had been lower than 175% of what Medicare would have paid for a similar providers on the similar services, whereas in different states, they paid costs that had been 310% of the Medicare charge or greater.
In 2016, Montana took a daring leap. Instead of negotiating down from hospitals’ listed costs, the state set a variety for what hospitals can cost for providers, establishing most prices as a set proportion above Medicare charges. If hospitals refused to barter via that mannequin, they risked shedding entry to the sufferers insured via the state’s largest employer.
Marilyn Bartlett, who led the change to reference-based pricing when she labored for Montana, stated that at the moment, the plan had been shedding cash for years and risked its reserves dropping into the negatives. By 2017, Bartlett stated, the plan’s reserves had gathered extra money than the state’s common fund, and the premiums state staff paid stayed stage.
“We had flattened the price curve, and in fact we had a negative,” stated Bartlett, now a senior coverage fellow with the National Academy for State Health Policy advising different states on tips on how to decrease well being care prices. “That was unheard of.”
Dr. Stephen Tahta, president of Allegiance Benefit Plan Management, stated that whereas Allegiance was administrator of the well being plan, it saved greater than $48 million.
Hospital representatives have stated a rising variety of employer-based plans are contemplating growing their reliance on reference-based pricing.
In current years, California’s retirement plan that gives insurance coverage advantages to public staff has labored to increase reference pricing for sure medicines.
And the state of Colorado joined a buying alliance to barter with hospitals over pricing for its public worker medical plan this yr, looking for to make use of Medicare charges as a baseline. Bob Smith, government director of that alliance, the Colorado Business Group on Health, stated that whereas main well being programs have bucked that course of to date, sufferers even have a well being care value comparability software to choose suppliers that cost cheap costs and supply high-quality care.
The American Hospital Association opposes reference-based pricing, saying it may improve the quantity sufferers should pay for care. One means that might occur is thru steadiness billing, when a supplier expenses a affected person for the distinction between the fee set by the plan and the quantity the supplier expenses.
Those advocating for pricing reform have stated that hospitals’ preliminary costs earlier than negotiations may be arbitrary and that Medicare’s charges are a good start line. Medicare reimbursements may be adjusted if a supplier faces steep bills resembling working in a rural place or hiring staffers to supply specialty care.
In the contract awarded in September, the state set a ceiling of not more than 200% of Medicare charges for the quantities the Blue Cross plan would pay suppliers total in its first yr. The contract says Blue Cross will goal reimbursing suppliers an total charge of 180% of Medicare’s charges by yr three of the settlement.
The state left it to Blue Cross to discover a method to attain these objectives.
After KHN shared Blue Cross’ reimbursement particulars within the state contract with Chris Whaley, a well being economist and coverage researcher for Rand, he stated it’s onerous to understand how the brand new method will work out. Blue Cross’ plan doesn’t say how typically the corporate will negotiate offers with suppliers outdoors of reference-based pricing. Whaley stated that might lead Montana to lose give attention to its reimbursement technique.
“It seems like the model is already working really well,” Whaley stated. “Is the reference-based pricing model something that’s going to be developed and improved upon? Or is it something that is maybe going to be stripped down and not have the same impact as before?”
Allegiance is alleging that the contract was awarded via an unlawful bidding course of and that it might find yourself elevating well being care prices for state staff and taxpayers.
Belinda Adams, a Department of Administration spokesperson, stated state officers are reviewing the problems raised by Allegiance however imagine the hiring course of was honest and authorized.
The state has 30 days from when Allegiance submitted its protest to concern a call on the corporate’s claims if the 2 sides don’t attain an settlement that settles the dispute. In the meantime, Adams stated, Blue Cross is making ready to take over administration of the general public worker well being plan in January.