From Armchair Lawyer to Bathroom Auditor. A Peculiar Friday at the Office
In the late afternoon on Friday, at the brim of the weekend, my phone shrieked with a call of urgency. It was from a client named Nancy, who, with an audible eye-roll, launched into an account of her current predicament. Here's a condensed retelling of our dialogue.
“Craig, we have a pressing compliance concern that needs an immediate solution. Regrettably, it's not tied to benefits, but I’m betting you might be of assistance.”
I read stories like this every week and become
increasingly enraged at the cruel injustice of it.
We Already Have a Socialized
System
The latest studies on the topic show that the American
taxpayer funds 71% of all healthcare in blue states like California. That leaves 29% of healthcare costs funded by
folks paying their own way to pay 224% of what the healthcare industry's
largest customer (the federal government, primarily via Medicare and Medicaid)
pays for the same procedures at the same facilities. Still think that the healthcare you receive
at work is not taxed?
The rampant fraud riddling American healthcare boggles my mind. No, I'm not talking about the
fact that one of every three dollars spent in the Medicare and Medicaid system
is squandered on waste, fraud, or abuse (1). Nor am I lamenting how America's largest
purely socialized system, the Veteran's Administration, is so indifferent to
our veteran's needs that it creates fake appointments at nonexistent clinicsso it can show auditors that the wait times and abject
patient neglect are not as they indeed are.
I'm also not referring to how and why you overpay for prescriptions by
at least 25% to 50%. Pharmacy
benefits are a treasure trove of corrupt pricing, hidden rebates, and shell
games that would expand this post beyond a reasonable length (2).
Instead, I'm talking about the gargantuan tax every
employer and employee (3) pays for the "privilege"
of buying commercial health insurance through the workplace. Because Medicare and Medicaid pay
facilities (4) so meagerlyfor services, hospitals respond by listing retail
or chargemaster prices that are three, four, five, or even ten times as high
for the same procedures at the same facilities.
Below is a 2016 summary of cost data on Medicaid (for low-income) showing that, on average, Medicaid may not even cover the actual cost of
providing services. Generally, Medicare (for the elderly) pays a little better than this in most states.
Source: Understanding Medicaid Hospital Payments and the Impact
of Recent Policy Changes, KFF, 2016.
Your health insurer then negotiates a 50% discount on
that completely phony "price" the facility claims through its
chargemaster in the hopes that employers and employees will be mollified by the
seemingly considerable discount they receive for the privilege of having a
private plan. In the end, private payers
pay a national average of 224% of Medicare and as high as 600% of a hospital's
cost in a state like California.
Does your business get to mark up its products by
600%?
Additionally, those with self-funded plans know that
you are also paying $20 per employee per month for that privilege of getting a
50% discount on a claim that's been fraudulently priced at 500% of Medicare. It is what Dave Chase, writing at Forbes, hypothesized might be "The Greatest Heist In American History."
Here is what that government promise of a $2,500 reduction in family premiums looks like in real life. It is the orange line below. See the massive drop in 2010 and the continued drop over time? Neither do I.
Source: KFF Employer Health Benefits Survey, 2018-2022.
But certainly, our fearless government leaders finally reined in the obscene carrier profits in order to protect the little guy with the passage of ObamaCare, right? Not so much.
Since 2009 the S&P 500 is up 422%.
In that same time, five of the largest health insurer stock prices are up an average of 1,921%.
Source: Yahoo Finance.
Okay, enough of this. I cannot stomach another fact in this vein.
Employers, There is
Another Way
Three Steps to a 40%
Cost Reduction - A HealthCost Revolution
Step 1: if you are too small to engage in any form of self-funding
or partial self-funding, buy as little insurance as possible. The more premium you pay, the more you are
pilfered. You have to get out of that
game. Purchase the highest-priced
deductible plan your insurer offers, then self-fund the amount under that
deductible with a Health Savings Account (HSA) or Health Reimbursement Account
(HRA). If you have less than about 250
employees, depending on your cash flow, industry, and geographic locations,
this might be the best you can do.
Step 2: If you have more than about 250 employees, you
should evaluate whether you can opt out of this fraud entirely, say goodbye to
your insurers, and move to a reference-based pricing (RBP) system whereby you
pay some reasonable margin over the Medicare price. For example, you might pay 120% to 140% of
Medicare. It fundamentally works, is
legally quite creative and astute, and will provide your employees with better
benefits, lower costs, and more freedom.
Is the first step intimidating, potentially rocky, and
one that requires plenty of education? Yes. But making this move will reduce the cost of
your health plan by 20% to 40%.
Step 3: In
conjunction with your move to a self-funded RBP platform, you then must also
take control of your pharmacy coverage via a direct contract with a pharmacy
benefit manager (PBM) or one of the newer consortiums that aggregate numerous
employers under one set of contract terms to maximize the pharmacy discounts
and rebates for you, not an insurer.
This move alone reduces your pharmacy bill by 25% to 50%.
An Inconvenient Truth
Or
should I say a "problematic" reality in the parlance of one of
today's most overused buzzwords? Okay, I'm making myself nauseous again.
If
your broker is not talking to you about what I call the HealthCost
Revolution of:
Getting off of first-dollar insurance plans (i.e. moving to HRAs or HSAs);
Evaluating RBP; and
Getting your Rx out of the carrier world and into a direct PBM contract...
You
need to fire them. Period. Hard stop.
I've
been an attorney for 23 years and a full-time insurance broker for 21. The required education and licensing for
brokers are hysterically ludicrous. In
most states, it takes a one-week course and a junior-high education to become a
licensed broker. Carrier influence
dominates that process as agents-to-be are taught that they have an equal
obligation to their carrier and policyholder.
Future agents are trained that this is some sort of collaborative cuddle
fest in which carriers, employers, and employees all sit around campfires,
roast marshmallows, hold hands and sing Kumbaya.
Oof. I need to step away for a bit. Why do I insist on making myself so
sick?
I
recently created this meme for my team members after a carrier emailed us,
explaining that the carrier did not expect me or my team to market my
employer's policy this year, as asking for quotes every year is not the
"best way to proceed."
Ha!
Best for whom?
Yes,
they are that brazen. They do not partner
with you and are not your friends. Their
job is to maximize revenue, and that means maximizing your premium.
Here
is the reality. Every one of those three
steps in the HealthCost Revolution reduces premiums and adds heaping piles of
work to your broker's plate. The broker will
be giving themselves a pay cut while requiring much more work and expertise. In fact, probably only about 5% to 10% of
brokers in the West are qualified to install and manage a self-funded plan, as
HMOs have been so dominant in the West that few brokers have had the
opportunity to learn what they need to effectively manage this process.
I can
hear some of you out there saying, "That's why we don't pay our broker a
commission; she is on a fee basis."
To
this, I respond, okay, great. At best,
you've capped their pay and will be asking them to do much more work to install
this protocol. Most likely, you are
paying your broker a fee and allowing your carriers to also collect the
commission that should be going to your broker. Yep, Obamacare created that double-dip trap as
well. I wrote how and why that happened
years ago here.
As a
lawyer, my training is to protect my client (policyholder) in all cases. I scoff at the "equal duty to carrier
and employer drivel" and act solely as my employer's advocate. Asking a broker to be the prosecutor, public
defender, and judge in one proceeding is a bad joke.
Our
healthcare system is a convoluted, byzantine myriad of corruption. I cannot stand by and refrain from screaming
from the rooftop. Don't get me wrong. There are plenty of fantastic people in the
healthcare system. In fact, I know that
the vast majority of them are there for the right reasons. They want to help people.
But even good people
cannot save a corrupt system.
That's
right; it’s corrupt. I used to say it
was broken, but it is not. It is
designed this way. We didn't end up here
by accident. If you doubt me, let me
repeat:
Since 2009 the S&P 500 is up 422%.
In that same time, five of the largest health insurer stock prices
are up an average of 1,921%.
The healthcare
industry represents the largest employer and the largest lobbyist in the United
States, spending $700 million lobbying
legislators and regulators every year. It
makes up 18.2% of the U.S. economy. At its highest levels, it is loaded with the shrewdest
operators you can imagine. It uses
artificial intelligence and massive data analytic tools to vacuum up every
conceivable detail about every one of us, as I recently wrote about here: WeaponizingHIPAA privacy.
Furthermore, it is important to note that officials responsible for managing federal agencies tasked with supervising the United States healthcare system frequently transition from their governmental positions to leading roles in the very corporations they once regulated. The term for this phenomenon is "revolving door," which refers to the movement of government officials between public sector roles and private sector positions, often within industries they previously regulated. This repugnant twist enables them to capitalize on their expertise, influence peddling, and skillfully manipulate the governance system for the benefit of their new employers. Recently, The Survival Podcast highlighted this phenomenon through a thought-provoking illustration. Employing humor as a coping mechanism for such prevalent absurdity is essential; without the ability to find levity in these situations, I’d struggle to maintain my sanity.
A light-hearted look at the most recent Revolving Door “swingers.” For a sobering look at the hundreds of these taking place in D.C. visit Open Secrets.
In summary, it is crucial to understand that health insurers do not serve as your friends or allies. When Chief Financial Officers delegate the responsibility of managing health insurance expenses—which frequently rank as the second or third largest cost for employers—to Human Resources departments, they are neglecting their fiduciary duty to minimize costs in a reasonable manner. Human Resources professionals typically lack the legal expertise of attorneys and the financial acumen of finance executives, which further underscores the importance of involving the appropriate personnel in managing these critical expenses.
It is imperative that American businesses take decisive action to reduce healthcare costs by utilizing the innovative tools at their disposal and engaging the most competent consultants or brokers to aid them in this process. Failure to do so could result in the collapse of the employer-based healthcare system, leading to the implementation of a minimal, Medicaid-for-all arrangement. Under such a system, individuals with the means would acquire supplementary coverage, while those without would face extended wait times for necessary care and elective procedures. This will, in turn, prompt the departure of more top-tier providers from the system (5).
It is essential to emphasize that this scenario envisions Medicaid for all, rather than Medicare. Despite the government's willingness to employ quantitative easing measures, injecting trillions of dollars into the economy at a moment's notice, Medicare remains prohibitively expensive—even for a nation with a $32 trillion debt and no hesitation to take on more.
Concluding on a lighthearted note, I would like to share two more memes. As the adage suggests, "A picture is worth a thousand words," so allow me to present an additional 2,000 words of insight.
(1) Malcolm K.
Sparrow, a professor at the Kennedy School of Government at Harvard
University whose book License to Steal is a classic in the field, thinks that Medicare’s
fraud-related losses may run “as high as 30 to 35 percent” of its budget. From Chapter 12 in Overcharged: Why Americans Pay Too Much For Health Care, by David A. Hyman and Charles
Silver.
(2) The following is an excerpt from the same book. It is an anecdotal example of just how
corrupt our prescription rules and practices are:
Why do so many eye
doctors use pricier Lucentis when cheaper Avastin is available? You guessed it:
Medicare pays physicians a lot more for using Lucentis. A 2013 Washington Post article explained the
finances.
Under Medicare repayment
rules for drugs given by physicians, they are reimbursed for the average price
of the drug plus 6 percent. That means a
drug with a higher price may be easier to sell to doctors than a cheaper one. In addition, Genentech offers rebates to
doctors who use large volumes of the more expensive drug.
Got that? Medicare pays
doctors far more for administering Lucentis than Avastin to patients with wet
macular degeneration because Genentech charges more for the former than the
latter. Six percent of $2,300 is $138; 6
percent of $60 will barely buy you a white chocolate mocha at Starbucks. Genentech then sweetens the deal by giving
doctors who use large amounts of Lucentis discounts that the doctors get to
keep. It’s easy to see how Medicare put
taxpayers and seniors on the hook for $1.2 billion in payments for Lucentis in
2012. The hard part is explaining why
many doctors, to their credit, continue to use Avastin. The cost to taxpayers and elderly patients
could be much higher.
(3) I write "employer and employee" here to not confuse
folks needlessly while making a different point. But make no mistake; employees pay for every
nickel of this. We often fail to
acknowledge this reality because, on its face, an employer generally deducts
10% to 50% of our healthcare premium and then pays the rest of the bill to the
carrier monthly. However, every single
penny comes from an employee's compensation.
If the employer were not forced to fund those dollars into healthcare,
that remuneration would be provided to employees in the form of pay, other
benefits, time off, or efficiencies resulting in job/employment growth, etc. This is covered expertly in Chapter 1 of
Marshall Allen's book, Never Pay the First Bill.
(4) The same phenomenon exists for providers
(doctors) as well as facilities, but the problem with providers is not nearly
as pronounced as it is with facilities. Roughly
80% of a plan's claims occur with providers, but 80% of costs are generated via
the high-cost services occurring in facilities (primarily hospitals).
(5)
America is projected to have a shortfall of 139,000
physicians by 2033, representing 13% of U.S. providers.
Turns out, insurers don’t have to decrease spending to make money. They just have to accurately predict how much the people they insure will cost. That way they can set premiums to cover those costs — adding about 20 percent for their administration and profit. If they’re right, they make money. If they’re wrong, they lose money. But, they aren’t too worried if they guess wrong. They can usually cover losses by raising rates the following year.
Frank suspects he got dinged for costing Aetna too much with his surgery. The company raised the rates on his small group policy — the plan just includes him and his partner — by 18.75 percent the following year.
The Affordable Care Act kept profit margins in check by requiring companies to use at least 80 percent of the premiums for medical care. That’s good in theory but it actually contributes to rising health care costs. If the insurance company has accurately built high costs into the premium, it can make more money. Here’s how: Let’s say administrative expenses eat up about 17 percent of each premium dollar and around 3 percent is profit. Making a 3 percent profit is better if the company spends more.
It’s like if a mom told her son he could have 3 percent of a bowl of ice cream. A clever child would say, “Make it a bigger bowl.”
Wonks call this a “perverse incentive.”
“These insurers and providers have a symbiotic relationship,” said Wendell Potter, who left a career as a public relations executive in the insurance industry to become an author and patient advocate. “There’s not a great deal of incentive on the part of any players to bring the costs down.”
You come to work one day, and notice Susan is not there. Nobody knows what happened to her, and everyone appears oddly tight-lipped about her absence. Finally, you and your coworkers are told she has taken a leave of absence. No other details are given. Attorneys, corporate compliance officers, and human resource personnel have been properly coached as to the myriad of stringent health privacy rules in the workplace, and everyone is rightfully paranoid.
I am reminded of an eccentric law professor I had who relished saying, “No good deed goes unpunished,” whenever discussing the inevitable unintended consequences of legislation or contract terms.
But after 22 years of HIPAA Privacy, I am not even sure the main impetus behind its passage was ever a good deed – at least not for those who have weaponized its use against employers.
The Health Insurance Portability and Accountability Act (HIPAA) Privacy Rule was designed to protect individuals’ medical records and other personal health information. However, the latest practices by health insurance carriers raise serious concerns about how they circumvent these rules to maximize premiums. ...
I spent some time with Armstrong and Getty this morning, discussing this story and the hidden tax built into all of our employer plans due to Medicare and Medicaid's chronic inefficiency and underpayment.
The misguided government prohibition against non-COVID care during the pandemic;
Overall inflation;
And chronic underpayment from Medicare and Medicaid (only covering about 75 cents on the dollar of actual costs).
The underpayment then forces employer plans to pay absurdly high prices (224% of Medicare in last year's study) to make up for the fact that many hospitals can't survive on government reimbursements.
When Medicaid (Medi-CAL) first passed, it was designed to cover the lowest 2% of wage earners. It now makes up 80% of patient volume at many of these rural hospitals, and about four in ten Californians are born into it. That's what you call mission creep at its finest.
As Patty Maysent, the CEO of UC San Diego Health, explains, "[t]here are hospitals all around the state ... that are two, three or four months away from running out of cash."
There are answers! Employers need not suffer through this. I've written about this extensively. Here are a couple of good starting points:
This is my latest; it can be read in full over at BeneftsPRO.
Abstract: This article examines the fiduciary obligation of CFOs, VPs of HR, and other health and welfare plan fiduciaries under the Employee Retirement Income Security Act (ERISA) to evaluate Reference-Based Pricing (RBP) in the context of their health insurance plans. The article argues that, given the federal government's endorsement of RBP and its proven efficacy in reducing employer costs and expanding participant options, it is now virtually impossible for a plan fiduciary to lawfully discharge their duties in accordance with ERISA without at least considering the implementation of RBP.
Introduction
The landscape of American healthcare has undergone significant transformations in the past decade, with the emergence of numerous innovations and cost-saving measures. The most impactful development is the rise of Reference-Based Pricing (RBP), a pricing model proving to be a game-changer for employer-sponsored health insurance plans. This article argues that, given the demonstrated benefits of RBP, CFOs, VPs of HR, and other plan fiduciaries under ERISA are now under a fiduciary obligation to evaluate the potential incorporation of RBP into their health insurance plans – at least with respect to employers that are large enough to consider particularly self-funding their health plans.
I. Fiduciary Obligations Under ERISA
ERISA imposes a fiduciary duty on plan administrators to act solely in the interest of plan participants and beneficiaries and for the exclusive purpose of providing benefits and defraying reasonable expenses of administering the plan. To fulfill this duty, fiduciaries must adhere to certain principles, including prudence, diversification, and adherence to plan documents.
The duty of prudence requires fiduciaries to act with the care, skill, prudence, and diligence that a prudent person would use in a similar situation. This duty is not merely a passive obligation; rather, it compels fiduciaries to actively engage in the management and oversight of plan assets, constantly seeking opportunities to enhance the value and cost-effectiveness of the plan.
Donovan v. Bierwirth, 680 F.2d 263, 271 (2d Cir. 1982) emphasizes the importance of fiduciaries acting with prudence and diligence in managing ERISA plans:
In every case charging breach of ERISA fiduciary duty, ... the central inquiry is whether the fiduciary has acted 'with the care, skill, prudence, and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims.'
Attract and retain talent through enhanced retirement benefits: As concerns about Social Security's long-term sustainability grow, employers can differentiate themselves by offering attractive retirement plans, such as 401(k) matching or pension plans. This can help them attract and retain top talent who are looking for financial security in their retirement.
Encourage longer careers and phased retirement: Employers can capitalize on the potential need for older workers to continue working by offering flexible work arrangements, such as part-time or remote work, to keep experienced employees engaged and productive. This can help employers maintain a skilled workforce and benefit from the knowledge and expertise of older employees.
Financial education and planning: Employers can provide resources, seminars, or workshops on financial planning and retirement savings to help employees better prepare for their financial future. This can lead to increased employee satisfaction and loyalty, as employees appreciate the support in navigating a potentially uncertain financial landscape.
Promote a culture of saving and financial wellness: Employers can encourage employees to save and invest for their retirement by offering financial wellness programs and incentives for participating in retirement savings plans. This can help create a financially savvy workforce that is better prepared for the future.
Collaborate with policymakers: Employers, as significant stakeholders in the retirement landscape, can use their influence to advocate for policy changes and reforms that address the Social Security funding crisis. This can help protect both their employees' interests and their own long-term business interests.
Healthcare costs in the US continue to rise, with employers paying over $13,800 per employee for healthcare in 2023. McKinsey predicts that healthcare spending could take up as much as 75% of discretionary income for those making less than 200% of the federal poverty level. 66% of employees say the cost of receiving care through their current health plan is too expensive, and over half feel that their care is more expensive than expected in the last year.
Arizent's research shows that 70% of employers believe they offer the best possible benefits, but 68% feel that their benefit design is limited by their budget. Employers who describe themselves as innovative are more likely to offer digital health tools and family-building benefits, while most agree on the importance of evaluating benefit offerings each year.
The most commonly delivered benefits are health, dental, and vision insurance, and paid sick leave, but employees desire benefits related to gym access, nutrition support, wellness activities, mental health support, chronic condition support, and family-building assistance.
Telehealth sees high utilization rates, with 72% of employees have participated in some form of virtual care appointment in the last 12 months, while mental health support, family-building assistance, and paid parental leave are used less. Healthcare navigation services are on employers' radar, with nearly 80% of employers motivated to include them to provide a better employee experience, improve health outcomes, and reduce costs.
You may recall that in "Super Size Me," documentarian Morgan Spurlock explored the effects of consuming a diet consisting solely of fast food from McDonald's. He decided to eat only McDonald's food three times a day for 30 days while following certain rules like always accepting the option of "supersizing" his meals whenever offered. He documents the effects of this diet on his physical and mental health, as well as on his weight and general well-being.
The film received critical acclaim and sparked public discussions about the health impacts of fast food, leading to changes in the fast-food industry, such as the introduction of healthier menu options and the discontinuation of the "supersize" option in some fast-food chains.
Throughout the film, medical professionals monitored Spurlock's weight and blood health. At the start of the experiment, Spurlock weighed 185 pounds with a body mass index (BMI) of 23.2, which is considered healthy.
After just a few days of consuming only fast food, Spurlock began to experience negative health effects. He gained a significant amount of weight, and his BMI increased to 25.5, which is considered overweight. By the end of the experiment, he had gained 24.5 pounds, and his BMI increased to 30, or obese.
In addition to the weight gain, Spurlock's blood health also deteriorated over the course of the experiment. His cholesterol levels increased by 65 points, and his liver function tests showed signs of damage akin to that of an alcoholic. He experienced dramatic mood swings, headaches, and decreased energy levels. He would get flat-out hangry when he'd gone more than a few hours with his Mc-y-D fix, and then upon diving into a Big Mac, he'd be as mollified as a heroine junking staving off the demons.
But did Spurlock prove that all fast food is unhealthy, or did he highlight the deleterious effects of highly refined carbohydrates, the industrial byproduct of seed oils, and the chemical cocktail of preservatives?
One of the most intriguingly disturbing parts of the documentary was when Spurlock purchased an order of McDonald's fries and kept them in a container for 10 weeks to see how long they would last without molding or decomposing. He stored the fries in the container at room temperature and did not add any preservatives or chemicals to the fries. He also did not open the container or disturb the fries in any way. After 10 weeks, Spurlock checked the fries and found that they had not molded or decomposed whatsoever.
Well, I think we have our answers, as this chap loses weight, experiences no loss in athletic performance (rock climbing), and generally maintains similar blood health (with a remarkable improvement in triglycerides).
If you want to skip to the results, jump to the 45-minute mark and just watch for about 20 to 25 minutes. Petty staggering how well things turned out.
According to the Canadian Institute for Health Information (CIHI), the median wait time for priority procedures in Canada in 2020 was 16.8 weeks, up from 10.9 weeks in 2019. Priority procedures are defined as procedures that are clinically necessary, but their delay could result in the patient's condition becoming more serious.
However, wait times vary widely depending on the province or territory and the specific medical facility. In 2020, the median wait time for priority procedures ranged from 10.6 weeks in Quebec to 32.9 weeks in Prince Edward Island. Even the median wait time for cancer-related surgeries was 4.8 weeks.
Patients are often forced to travel to a different province to try and get care more quickly.
This is a summary of the current situation from the Mises Institute:
Currently, there are approximately 1.2 million Canadians stuck on a government waiting list for healthcare that they need. This is a death sentence for many of them, as it has been for thousands of patients who have gone before them. ...
Patients who endure considerable suffering as they languish on a waiting list—where many of them die—cannot be seen to have been given reasonable access to health services in the government’s Medicare system. The government also prevents them from having reasonable access to a private healthcare option.
Thus, reasonable access is an obvious deception, with benefits flowing to highly paid, power-hungry politicians, bureaucrats, and administrators wanting to maintain control over massive, inefficient healthcare bureaucracies at the federal and provincial levels. This deceitful behavior fits the definition of fraud and should be prosecuted as such.
Thousands of Canadians die while they wait for the care that the government promised to deliver when they needed it. ...
If politicians were personally accountable for the damage they caused, guess what? They wouldn’t cause any damage! However, we cannot hold them personally accountable because equality under the law does not exist in a democracy.
In the private sector, you are accountable for your own actions. If you break your neighbor’s window, you pay for the replacement. If you are a politician and you break the window in the course of performing your official duties, you can charge the cost of the new window to taxpayers....
When citizens demand better service, politicians respond by saying, “Okay, but that means we have to take more of your money.” So, taxes are raised, more bureaucrats and administrators are hired, and the inefficient Medicare bureaucracies that politicians and bureaucrats regard as their personal fiefdoms grow ever larger. That’s why healthcare is the single largest item in many provincial budgets. ...
AI is being used extensively in the area of the pre-authorization of your medical claims. Prior to approving a medical service or procedure, insurance companies often require a pre-authorization process where doctors must submit detailed information about the medical necessity of the service or procedure. AI algorithms can analyze this information to quickly determine whether the service or procedure meets the insurer's criteria for coverage.
Lawfully, AI is not supposed to autonomously make these decisions without human intervention. The final decision on whether to approve or deny a claim is supposed to rest with human reviewers who use the information provided by AI systems as one of many factors to consider. So what happens when those human reviewers are doctors that reflexively sign the denial in less than two seconds without reading or even opening the patient file?
Well, increased profits for the Government Healthcare Complex and a fresh glimpse at the utopia of AI medicine. This whole article is worth your time to read. It is an excellent glimpse behind the curtain. The following is from ProPublica:
The company [Cigna] has built a system that allows its doctors to instantly reject a claim on medical grounds without opening the patient file, leaving people with unexpected bills, according to corporate documents and interviews with former Cigna officials. Over a period of two months last year, Cigna doctors denied over 300,000 requests for payments using this method, spending an average of 1.2 seconds on each case, the documents show. The company has reported it covers or administers health care plans for 18 million people....
A Cigna algorithm flags mismatches between diagnoses and what the company considers acceptable tests and procedures for those ailments....
'We literally click and submit,' one former Cigna doctor said. 'It takes all of 10 seconds to do 50 at a time.'...
Cigna does not expect many appeals. In one corporate document, Cigna estimated that only 5% of people would appeal a denial resulting from a PXDX review.
"According to a new report from Care.com, many U.S. employers are looking to revamp their benefits packages this year. The survey suggests that 95% of leaders are planning to re-examine their strategies, with nearly half of respondents – some 47% – looking to cut back benefits. ...[W]hen leaders were asked about what benefits they planned to cut, top answers included adoption/fertility assistance, commuter benefits, education and wellness resources, health and fitness discounts, and home office stipends."
FSAs (Flexible Spending Accounts), HSAs (Health Savings Accounts), and HRAs (Health Reimbursement Arrangements) are all types of tax-advantaged accounts that can be used to pay for qualified medical expenses.
Physical therapy, nutritional supplements, and gym memberships may be eligible expenses that can, in rare cases, be reimbursed using these accounts, but there are some specific rules and limitations about which, you must be cognizant.
For FSAs, eligible expenses are determined by your employer's plan and may vary. You can usually use FSA funds to pay for physical therapy with a prescription from a healthcare provider. Nutritional supplements and gym memberships are likely not eligible expenses, unless they are prescribed by a healthcare provider for a specific medical condition.
For HSAs, physical therapy, nutritional supplements, and gym memberships may be eligible expenses, again, if they are deemed medically necessary by a healthcare provider. In that case, you can use HSA funds to pay for these expenses as long as they are not considered cosmetic or meant for general health and wellness purposes.
For HRAs, the rules and eligibility requirements will vary depending on your employer's plan. It's important to check with your employer or plan administrator to see if physical therapy, nutritional supplements, or gym memberships are eligible expenses. In most cases, these procedures will only be covered if they are deemed necessary by a healthcare provider.
In general, it's important to keep receipts and documentation of your expenses, and to check with your plan administrator to make sure that the expenses you are considering are eligible before using your FSA, HSA, or HRA funds to pay for them.
The IRS recently issued new guidance on this topic. There was nothing earth-shatteringly new in their statement, but more clarity has been provided. Here is a summary of the IRS's pronouncement by Thompson Reuters:
For the cost of therapy to be a medical expense, the therapy must treat a disease—thus, amounts paid for therapy to treat a diagnosed mental illness are medical expenses, while amounts paid for marital counseling are not. Likewise, the costs of nutritional counseling and weight-loss programs are medical expenses only if the counseling or program treats a specific disease diagnosed by a physician (e.g., obesity or diabetes); otherwise, these costs are not medical expenses. The cost of a gym membership is a medical expense only if the membership was purchased for the sole purpose of affecting a structure or function of the body (e.g., a prescribed plan for physical therapy to treat an injury) or treating a specific disease diagnosed by a physician (e.g., obesity or heart disease). However, the cost of exercise for the improvement of general health is not a medical expense, even if recommended by a doctor.
There are more self-funded than fully insured plans among companies with 100 or more employees (38,000 vs. 32,000). And if you are an employee at a company with 100 or more employees, you are twice as likely to be covered by a self-funded plan as a fully insured plan.
I'm a sucker for all of these types of lists. This one is from Wallet Hub. The map below is interactive, and you can hover over any state to see where it ranks. If you hit the Wallet Hub link you can review their methodology.
5 States with the lowest tax burden (best at bottom):
New Hampshire
Wyoming
Deleware
Tennessee
Alaska
5 states with the highest tax burden (worst at top):
Remember that “rule” in Obamacare that required all your preventive care and annual health exams be "free?" It was a blissful notion conjuring up unicorns flying across the sky, sprinkling fairy dust from their rainbow-colored stethoscopes.
We told employers and employees then - don’t count on it. First of all, nothing is ever free. The new law simply meant that all the preventive care you were supposed to get in a given year, would now be pre-paid with higher premiums. In other words, if you did not go to the doctor each year and maximize all of the preventive care that would be appropriate for someone of your health, age, and sex, you’d now be overpaying as all of our premiums increased by about 1 percent to cover the government mandated pre-payment racket.
So, how is this manifesting as double payment for many folks?
All our premiums went up 1% to prepay for it; and
If you aren't a hyper-diligent health-bill-nazi, you're likely being double-billed now when your doctor’s office keys in that you had a preventive exam as well as discussion, follow-up on, or evaluation of X. Where “X” can be any ailment, bump, sore, cut, tick, twitch, stressor, or annoyance in your life.
Our medical system even has a procedural code for “bitten by duck, initial encounter.” It is W61.61XAICD-10, in case you’d like your physician’s office to use it on your next visit. Please, if you do, don’t confuse that code with being “struck by a duck.” That is code W61.62. There are 155,000 codes in the ICD-10 system, in case you were wondering. And yes, because I know it is burning in the back of your mind as you read my scintillating post, there are codes for subsequent encounters with ducks as well; and for mere “contact” with a duck. U.S. Healthcare has ducks covered. But Cornish game hens? Not so much. In that case, you’d have to go with “pecked by chicken,” under ICD-10 code W61.33.
To say that our system has been bureaucratized beyond recognition into some sort of Frankenstein monster of public-private plunder is an understatement.
The government controls a larger share of health spending in the United States (85%) than in 30 other advanced nations, including Canada (75%) and the United Kingdom (83%), each of which has explicitly socialized health systems.Source.
So, are preventive visits pre-paid and copay-free under Obamacare? Only if you have impeccable health and you and your doctor do not discuss your blood pressure, blood glucose levels, sun exposure, moles, sniffles, or whether you’ve been pecked by a Cornish game hen. Of course, some doctors get it and are more forgiving than others. There are cases where you can get away with your depraved, thieving ways and attempt to get free healthcare advice during your purely preventive visit by asking about that odd little bump that’s appeared in your nether regions. Bandit!
Real-world advice: if your doctor asks you if there is anything else bothering you in your physical, and it is something minor about which you were mildly curious, say, “yes, I do have another question, but it is kind of a silly one and I don’t want to be billed for moving our visit beyond a purely preventive visit.”
A good doctor will gladly answer your question and not bill you. If your doctor doesn’t roll that way, it’s a decent sign that you may need a new doctor.
Now, if the issue is large enough that you want to discuss it and don’t care if it goes on for a few minutes, then by all means, ask. But know that your free exam just moved into an office visit for which you will pay a copay, co-insurance, or the visit cost if you are on a high-deductible health plan. But what would you rather do, finish this visit for free and then return in a few weeks to address the burning topic? If you do that, you’re doubling your time and will still pay for the visit.
Here is how Yahoo News covered this new phenomenon that’s been around for more than a decade (highlights are mine):
‘I got scammed’: Americans describe getting surprise medical bills via health care loopholes
Sometimes a simple coding mishap can result in a major headache for a patient, as was the case for Anthony, a 29-year-old based out of Norwalk, Conn.
When Anthony visited his doctor for a routine annual checkup — which his insurance plan through Cigna advertised as 100% covered without a copay — he ended up receiving a bill for $132.09.
This was because his doctor’s office coded the visit as an “office visit” instead of an “annual checkup or preventative care.” In an effort to clear up the confusion, Anthony called both Cigna and his doctor’s office, and Cigna assured him that it was simply listed under the wrong code and would be covered if the doctor’s billing department corrected it.
“I submitted a complaint to Westmed, and they forwarded it to the billing department,” Anthony told Yahoo Finance. “They rejected my request several times. According to them, the office staff had the final word on the billing code. I was able to talk to the office staff directly too, but I’m not sure who was responsible for selecting the billing code there.” …
“Wasted a bunch of time, and, frankly, I got scammed," Anthony said. "In the end, I got no explanation why they used the wrong code, and the bill was sent to collections. It’s going to hurt my credit score and in the U.S., that also means my ability to find a place to rent or even buy a house if I ever get the chance. It’s the kind of thing you lose sleep over.”
'They think short-term'
A loophole in the ACA — commonly known as Obamacare — is part of the reason why this issue persists in the U.S.
Under the ACA, insurers are required to cover preventive services such as cancer screenings, immunizations, and well-woman visits without cost-sharing, meaning that the individual receiving the services is not required to pay anything.
A study published in 2021 in the journal Preventive Medicine found that “in addition to premium costs meant to cover preventive care, Americans with employer-sponsored insurance were still charged between $75 million and $219 million in total for services that ought to be free to them.” …
Not-so-free procedures
Because of these loopholes, patients often find themselves billed for routine procedures that typically are fully covered by their health insurance.
Several individuals, who asked to remain unnamed due to privacy concerns, shared with Yahoo Finance the forms they were required to sign in order to be seen for routine physicals and other preventive exams.
In one of the forms, an individual was told that if they discussed any new or chronic medical issues with their doctor, their insurance would be billed for both an office visit and a preventive health exam.
For another individual, their form indicated that if they discussed new acute conditions or a worsening chronic condition, if a diagnostic test was ordered, or if a treatment changed, they would also be subject to two separate bills.
“There are a lot of gray areas but generally, those shouldn’t be billed,” Jenifer Bosco, a staff attorney at the National Consumer Law Center, told Yahoo Finance. “In the worst case, some providers do engage in what’s referred to as upcoding where they will try to bill for things or get reimbursed at a high rate for things that really should be either preventive or should be billed at a lower rate.”
For example, a preventive colonoscopy meant to screen for cancer is required to be covered at 100% by health insurance providers. However, if a polyp is discovered and removed from the patient during that screening, that procedure becomes a “surgery” rather than a screening and is billed as such.
“It makes zero sense charging the cost of something or the cost to the patient for something while they’re literally mid-procedure,” Bosco said. “You can essentially bill two visits for the same time, which I think intuitively just doesn’t make a lot of sense to most people. If you’re going in for one visit, how can you be charged for two and also be losing that free preventive visit at the same time?”
According to the Preventive Medicine study, patients were saddled with a total of $12.8 million for preventive colorectal screenings in 2018, while wellness visits incurred charges of up to $73.1 million.
“It feels a little bit like a bait and switch, and that’s not on the doctors,” Shafer said. “That’s just how we’ve set up the reimbursement guidelines and everything else. It’s frustrating.”
