The days are heating up and so is the summer research! This month we read about the effects of health risk assessments on Medicare Advantage payments, how the Affordable Care Act transformed the healthcare landscape in this country, and finally, about hospital pricing and the values of transparency.

Medicare Advantage Health Risk Assessments Contribute Up To $12 Billion Per Year To Risk-Adjusted Payments

Hannah O. James, et al. Health Affairs. May 2024. Available here.

Researchers from Brown University quantified the impact of health risk assessments (HRAs) on Hierarchical Condition Categories (HCC) risk scores, to determine how HRAs increase Medicare Advantage (MA) beneficiaries’ adjusted risk, and subsequent increases in payment rates. 

What it Finds 

• HRA diagnoses and medical chart reviews influence risk score calculations, which in turn influence plan payments. Both of these tools have resulted in higher payments to MA plans.
  • HRAs alone lead to more than a 5 percent increase in coding intensity.
• Almost half of MA beneficiaries (44.4 percent) had at least one HRA in 2019.
  • Among beneficiaries with at least one HRA, HCC scores increased by 12.8 percent.
• Risk scores are significantly impacted by HRAs, with HRAs increasing overall beneficiary-level risk scores by an average of 5.7 percent in 2019.
  • One in five beneficiaries (21.3 percent) with at least one HRA had elevated HCC scores as a result of diagnoses reported in HRAs, but not in other encounter records.
  • Coding intensity varies by insurance carrier: Cigna, UnitedHealth Group and Humana all had noticeably higher increases in coding intensity attributed to HRAs compared with other MA insurers, with these three insurers representing 80 percent of all MA spending.

Why it Matters

MA enrollees make up more than half of all Medicare beneficiaries and constitute a large share of overall Medicare spending. Upcoding practices in Medicare have received much criticism, as it leads to the same quality of care at much higher costs. HRAs contribute to upcoding by increasing patients’ HCCs, often without cause. Recognition of this has prompted recent calls for MA reforms from federal lawmakers. Policymakers should consider addressing this increased coding intensity due to HRAs to improve the value of spending under Medicare, and to ensure appropriate payments in the Medicare Advantage program. 

The ACA’s Transformation of Private Health Insurance

Linda J. Blumberg and John Holahan. Urban Institute. May 3, 2024. Available here.

Urban Institute researchers conducted a landscape assessment of current evidence on the ACA to demonstrate how the ACA altered the private insurance market, considering changes in enrollment, insurer participation, and premiums.

What it Finds 

• Since the passage of the ACA, uninsurance rates have been halved, leading to a historic low in the uninsured rate.
  • In 2023, 23.7 million Americans were uninsured, compared to 46.3 million in 2009, prior to implementation of the ACA.
  • Researchers attribute a portion of these gains to increased opportunities for private insurance through the Marketplace, which covers the majority of adults and children in the United States.
  • Enrollment in the ACA Marketplace non-group insurance has almost tripled since 2014 (8 million enrollees compared to 21.3 million in 2023). 
• Affordability and access to care have improved, and the impact on private non-group insurance markets has created competition based on price and quality of care.
  • Premium tax credits have made coverage more affordable and therefore attainable. However, higher premium tax credits covered under the Inflation Reduction Act expire at the end of 2025.
  • The number of insurers in the Marketplaces has grown: Aetna increased from zero markets in 2020 to 17 rating regions in 2024, and UnitedHealth Group has increased from three regions in 2020 to 26 rating regions in 2024.
• Marketplace premiums are lower than premiums in other markets.
  • A 2016 analysis showed that, on average, Marketplace premiums were 10 percent below premiums for employer-sponsored insurance, and that average Marketplace premiums were lower in 39 of 50 states.
  • Adjusted Marketplace premiums in 2022 were 28 percent below premiums in the small-group market and 23 percent below premiums in the large-group market. 

Why it Matters

It has been ten years since implementation of the Affordable Care Act (ACA). The law has mitigated many failings of the American healthcare system by increasing coverage, transparency, and controlling costs for consumers. The historic high in health insurance coverage and improved affordability have been achieved through changes to insurance market rules, increasing consumer protections, the provision of premium and cost-sharing subsidies, and expansions of the Medicaid program in most states. Insurer participation in the non-group Marketplaces has also increased in the years since implementing the ACA, which has given consumers access to more options for comprehensive health insurance coverage. The ACA has successfully established a functional non-group market that gives consumers choice of insurers and controls spending. 

Prices Paid to Hospitals by Private Health Plans: Findings from Round 5 of an Employer-Led Transparency Initiative

Christopher M. Whaley, et al. RAND Corporation. May 13, 2024. Available here.

RAND researchers analyzed 2020-2022 medical claims data to examine geographic variation in negotiated prices for commercial insurance enrollees, as compared to Medicare rates. 

What it Finds 

• In the past ten years, premiums for employer-sponsored insurance have increased by nearly 50 percent and one of the largest reasons for this is hospital price increases.
  • In 2022, 42 percent of total personal health care spending for privately insured individuals was spent on hospital services.
  • Also in 2022, employer-sponsored insurance was responsible for $1.3 trillion in spending. $486 billion of that was spent on or in hospitals.
  • Hospital facility fees in 2022 accounted for about 80 percent of outpatient spending and 91 percent of inpatient spending. (Read more from CHIR on facility fees here and here.)
• On average, employers and private insurers are paying more than double (254 percent) what Medicare pays for the same services at the same facilities.
  • In 2022, relative prices for inpatient hospital facility services averaged 255 percent of Medicare prices, outpatient hospital facility services averaged 289 percent, and all associated professional services averaged 188 percent.
  • Commercial insurance prices for drugs administered by a provider in a hospital setting averaged 278 percent of the average sales price (ASP), which is more than double what Medicare pays (106 percent ASP). 
• Since January 2021, federal transparency requirements necessitate clear and accessible pricing information about the items and services they provide to be posted online. CMS has been reluctant to enforce these requirements, and as a result, 64 percent of hospitals are largely noncompliant.
• There is significant variation in the prices of items and services paid for by employers and private insurers for hospital care and this study did not find a clear link between hospital pricing and quality.

Why it Matters 

Around 160 million Americans maintain health insurance coverage through private, employer sponsored insurance. The prices paid to hospitals for these enrollees is significantly higher than the prices paid by Medicare. When the variation in hospital prices is not tied to commensurate differences in quality, then a part of the prices that employers pay to high priced hospitals is wasteful spending. Price transparency alone will not create meaningful change if employers do not or cannot act upon the price information to reformulate or negotiate their contracts with health insurance and care providers. Unfortunately, many healthcare markets are so highly consolidated, there is little to no competitive pressure to keep commercial prices in check.