Colorado hospitals hate the plan to cap their prices. Here’s how they want to control health costs

It’s getting interesting out in Colorado. As the legislation laying out Colorado’s public health insurance option gets ready to drop, the hospital industry is proposing to submit to greater public scrutiny as an alternative to price setting. The hospitals defeated an attempt to include price-setting in the state’s marketplace reinsurance program last year, but it may be getting harder to turn back the tide.

Colorado hospitals hate the plan to cap their prices. Here’s how they want to control health costs instead.

As Democrats at the state Capitol near the introduction of the long-awaited and hugely controversial bill to create a public health insurance option, Colorado hospitals on Tuesday unveiled their counter offer.

Their proposal is a “total-cost-of-care” model — essentially a big health spending budget for the state. An independent commission would be charged with setting a target to limit how much health care spending in the state can grow each year. . .

It is also, clearly, the hospitals’ attempt to steer lawmakers away from a public insurance option, which many hospitals despise because it will likely give regulators the ability to tell hospitals how much they can charge people covered by the public option.

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The hospitals’ proposal is based on programs already running in Oregon and Massachusetts. In the Colorado version, the governor and lawmakers from both parties would appoint members of an independent commission, which would scoop up a whole bunch of data and come up with a calculation of how much everyone and everything in Colorado spends, in total, on health care in a year.

Then it would set the goal for how much health care spending can grow over the next year, a target that applies both to the state as a whole and every entity within the system. In Massachusetts, for example, the state set its growth target for 2018 at no more than 3.1%.

Hospitals, insurance companies and other health care entities in Colorado that exceed the target would first have a discussion with the commission about why — and then could progress to being hit with public hearings and a formal improvement plan. But there’s no provision in the draft bill that would allow the state to, say, revoke a hospital’s license if it doesn’t rein in costs.

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I think this is great news for the whole country.

Now we have to sit back and see how it all works out. If it turns out well and everyone in Colorado likes it, we can implement it nation wide.

Testing in a small area before going nationwide is the way to go. We don't want to get stuck with a system that doesn't work.

swing_voter said:

I think this is great news for the whole country.

Now we have to sit back and see how it all works out. If it turns out well and everyone in Colorado likes it, we can implement it nation wide.

Testing in a small area before going nationwide is the way to go. We don't want to get stuck with a system that doesn't work.

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At this point we don't know what they'll do. The options on the table seem to be the Massachusetts model of an independent commission that holds the state's health care system to a cost growth target, or the Washington state approach of introducing a public insurance option that has some ability to take advantage of state-set hospital prices. But agreed, either way it will be interesting.

And the state makes its move.

Colorado unveils hospital rates for its public-option plan

Colorado officials on Monday unveiled the state's formula for hospital reimbursement rates under the state's proposed public-option insurance program.

The Colorado Health Insurance Option formula's base rate is 155% of Medicare rates, but hospitals' individual rates would vary based on hospital type, payer mix and how efficiently they deliver care. Colorado hospitals could cover the costs of providing care at 143% of Medicare rates, according to a state analysis of 2018 Medicare payment data collected by the Colorado Hospital Association and the Colorado Healthcare Affordability Sustainability Enterprise board from the state's hospitals.

The proposed reimbursement formula ensures that hospitals can cover the costs of delivering care to patients, according to Colorado's Department of Health Care Policy & Financing. The state claims that the reimbursement rates will enable large hospitals to remain profitable and ensure that independent hospitals will get paid enough to stay independent, rather than encourage them to consolidate.

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Doctors and clinics hate trying to collect their bills from the government. It is massive paperwork (cost), the government delays and delays paying - and then often refuses to pay the entire bill, saying "take 60% or nothing." Around here, most doctors, medical facilities and good private hospitals refuse to accept Medicare or ObamaCare.

NO ONE actually is even talking about improving healthcare. Not one. Rather, all they talk about is money. NONE have proposed anything to increase available medical professions and facilities. They are just bickering over who pays and how.

joko104 said:

Doctors and clinics hate trying to collect their bills from the government. It is massive paperwork (cost), the government delays and delays paying - and then often refuses to pay the entire bill, saying "take 60% or nothing." Around here, most doctors, medical facilities and good private hospitals refuse to accept Medicare or ObamaCare.

NO ONE actually is even talking about improving healthcare. Not one. Rather, all they talk about is money. NONE have proposed anything to increase available medical professions and facilities. They are just bickering over who pays and how.

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Folks have not only been talking about those issues, they've been doing something about them for years.

• Affordable Care Act -- Title III. Improving the Quality and Efficiency of Health Care
• Affordable Care Act -- Title IV. Prevention of Chronic Disease and Improving Public Health
• Affordable Care Act -- Title V. Health Care Workforce

joko104 said:

Doctors and clinics hate trying to collect their bills from the government. It is massive paperwork (cost), the government delays and delays paying - and then often refuses to pay the entire bill, saying "take 60% or nothing." Around here, most doctors, medical facilities and good private hospitals refuse to accept Medicare or ObamaCare.

NO ONE actually is even talking about improving healthcare. Not one. Rather, all they talk about is money. NONE have proposed anything to increase available medical professions and facilities. They are just bickering over who pays and how.

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I would like to see some evidence that most private hospitals, doctors, and facilities refuse to take Medicare. That is literally the bulk of their business. What hospital on earth could stay in business if it refused to see seniors?

Moreover, every insurer negotiates reimbursements lower than the billed amount. Have you never seen an EOB?

The real question is why do hospitals in the United States need to charge so much more than they do in any of our developed peer nations? My wife worked in insurance defense firms for over 15 years. She pulled medical records and billing all the time. If it were any other industry, we would call it what it is, fraud and extortion. For example, it is common for a hospital to charge over 400 dollars for a 20 dollar metabolic panel by billing for each result individually even though its a single test. A neurologist might bill 5k for literally 2 minutes of his time to glance at a CT scan. A plastic surgeon will easily bill 20k for a few minutes of his time putting in a handful of facial stitches in a patient in critical care. Bills are coded in such a way that it takes an expert to understand them, and an entire consulting industry has cropped up in the last 20 years to show providers how to maximize billing all the way to the legal line of fraud. In fully half of all healthcare markets, its a monopoly where one health system controls the entire market and can just dictate pricing - with insurers having no ability to negotiate lower prices. The provider industry is full of corruption and rent seeking and there is a reason why no country on earth wants our health system.

Democrats and Republicans want to blame insurers and pharma. You could take every ounce of profit out of an insurance plan and a family policy might go from 14k a year to 13.2k a year. Prescription drugs in total amount to just 10% of over all healthcare spending. The real problem, the ones that are engaging in pure extortion, are these big health systems. Medicare reimbursements are higher than than what they would get in any other country on earth, yet they still bitching. When it costs that much more to do something here than it would anywhere else, that tells you there is a lot of corruption and rent seeking in the system.

SouthernDemocrat said:

The real question is why do hospitals in the United States need to charge so much more than they do in any of our developed peer nations? My wife worked in insurance defense firms for over 15 years. She pulled medical records and billing all the time. If it were any other industry, we would call it what it is, fraud and extortion. For example, it is common for a hospital to charge over 400 dollars for a 20 dollar metabolic panel by billing for each result individually even though its a single test. A neurologist might bill 5k for literally 2 minutes of his time to glance at a CT scan. A plastic surgeon will easily bill 20k for a few minutes of his time putting in a handful of facial stitches in a patient in critical care. Bills are coded in such a way that it takes an expert to understand them, and an entire consulting industry has cropped up in the last 20 years to show providers how to maximize billing all the way to the legal line of fraud. In fully half of all healthcare markets, its a monopoly where one health system controls the entire market and can just dictate pricing - with insurers having no ability to negotiate lower prices. The provider industry is full of corruption and rent seeking and there is a reason why no country on earth wants our health system.

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That's what's so interesting about a public option experiment. You can do other things, of course. Massachusetts scrutinizes, and cajoles, and publicizes, and quasi-regulates, all via an independent commission, and that sort of works at limiting overall spending growth. Connecticut builds hospital price increase limits into its insurance rate review process, in that it simply won't approve rate increases that incorporate hospital price increases above its cap. And Maryland has been in its own sphere for decades, directly setting all-payer rates for hospitals (the last holdout for a once common practice) since the '70s and is now approving global budgets for all of the state's hospitals.

But a public option is a sort of soft rate-setting. It's not about being "public" (the ones that are advancing in Washington and Colorado aren't public insurers at all!), it's about being able to lean on prices set by the state. Which is an advantage private insurers effectively have under Medicare Advantage, as well. The state says this insurer get to reimburse at X price, in this case 155% of Medicare, and they get to compete against other products and payers in the market. Preferences don't seem to be as "sticky" when folks are buying insurance with their own money, which means people are quite likely to vote with their feet--and wallets--which is the fundamental dynamic assumed by the public option.

If the price level for most payers is somewhere around Y and the public option is paying at a lower price level X, then if hospitals want to keep the foot traffic to the public option from becoming a stampede they will need to provide price concessions to non-public option payers (presumably somewhere above X but below the status quo Y). The limiting factor, of course, is that the marketplace is relatively small, so you either need more people shopping for their coverage in the marketplace or the public option has to be available to employers for the full impact to be realized. But it's a fascinating and inevitable experiment. And perhaps the last olive branch before more draconian measures are rolled out to attack hospital prices.

SouthernDemocrat said:

The real question is why do hospitals in the United States need to charge so much more than they do in any of our developed peer nations? My wife worked in insurance defense firms for over 15 years. She pulled medical records and billing all the time. If it were any other industry, we would call it what it is, fraud and extortion. For example, it is common for a hospital to charge over 400 dollars for a 20 dollar metabolic panel by billing for each result individually even though its a single test. A neurologist might bill 5k for literally 2 minutes of his time to glance at a CT scan. A plastic surgeon will easily bill 20k for a few minutes of his time putting in a handful of facial stitches in a patient in critical care. Bills are coded in such a way that it takes an expert to understand them, and an entire consulting industry has cropped up in the last 20 years to show providers how to maximize billing all the way to the legal line of fraud. In fully half of all healthcare markets, its a monopoly where one health system controls the entire market and can just dictate pricing - with insurers having no ability to negotiate lower prices. The provider industry is full of corruption and rent seeking and there is a reason why no country on earth wants our health system.

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Looks like you answered your own question.

The bad news is there's no fixing it. The healthcare market is full of politically powerful special interest groups and labor cartels and there is no way they will allow anyone to stop the gravy train.