Thursday, July 18, 2019
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Tiered health plans are here to stay
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The Mayo Clinic in Rochester, along with other health care providers around the state, is bracing for the introduction of tiered health care benefits by the state's largest insurers. (MPR file photo)
Blue Cross Blue Shield is backing off some parts of its tiered health plan, but health experts say that doesn't mean the concept is going away. Tiering is the practice of placing hospitals, clinics and doctors into categories based on the quality and cost. The practice has arrived in Minnesota and, it appears, is here to stay.

St. Paul, Minn. — Minnesota's three biggest health plans now offer or will soon offer a tiered benefit option. The insurers are HealthPartners, Medica and Blue Cross Blue Shield.

Last week Blue Cross made some adjustments to its plan, and announced that it's delaying a proposal that would put doctors into tiers after the state's largest physician group complained about it.

Like the other health plans, Blue Cross will move ahead with a new classification system that will place hospitals in tiers.

It's the start of something that I think could be very, very productive. You've got to give them credit for trying to get a hold of those costs.
- U of M professor John Kralewski

Under the Blue Cross plan, the tier 1 category is for hospitals that meet the highest measures of quality and efficiency. Hospitals that don't meet those measures will be placed in tier 2, and patients will have to pay more to go to those tier 2 facilities.

Blue Cross says most of its tier 2 hospitals meet high quality measures, but they have lower efficiency scores because they charge more for their services. In some cases, a lot more. Senior Vice President Michael Morrow points to the differences in cesarean birth costs, as an example.

"In the Twin Cities you can have the range of cost go from $9,000 to $14,000 per case," says Morrow. "That's for a pretty standard routine service that happens very often, and not a lot of variation in the technology with which the service is provided."

Hospitals might charge more for a cesarean for a number of reasons. But the most common reason is due to the makeup of their patient population.

If a hospital has mostly elderly patients on Medicare and Medicaid, then it probably is not getting fully paid for its services because the government limits its reimbursements. So the hospital has to make up the difference by charging more for other procedures.

But that practice passes on the costs to health plans, which in turn pass them on to employers who provide insurance for their employees.

Morrow says most employers have finally reached a breaking point where they can no longer keep up with the escalating cost of health care. So Blue Cross Blue Shield created its tiered hospital option to save them money. But he says employees will also save money.

"Frankly, employers are asking them to bear more of the cost. And we need to give them tools so they can be good consumers of health care," says Morrow.

Each of the three health plans has a slightly different approach to tiering, but the basic idea is the same. Medica Vice President Ann Robinow says a more open, transparent health care system will spur competition among hospitals.

"You're proving value if you have a higher price point than your competition," says Robinow. "You have to prove your value to the patient, one patient at a time."

It's a valid idea, according to John Kralewski, a professor in University of Minnesota's School of Public Health. He says as of today there's virtually no competition among hospitals.

"I think it's a start. It's the start of something that I think could be very, very productive," says Kralewski. "You've got to give them credit for trying to get a hold of those costs and do something about it, and to get a hold of those quality issues."

The Minnesota Hospital Association is going along with the tiering plan. But President Bruce Rueben says at this point, the system isn't really set up to help consumers make the best decisions about hospitals.

"I really don't think that we have information right now that's readily available to patients, that could be used to really make an educated decision about which hospital seems to do a better job on a particular problem," says Rueben. "We're just not there yet."

Despite his concerns, Rueben says most hospitals think tiering is good -- if it gets consumers more engaged in the health care debate.

"As we move towards a system where people believe now, for the first time they're really going to be paying more out of pocket and they need to be concerned about what these costs are, people want to understand these things," says Rueben. "We may have a chance now finally to get at what really are the flaws in our financing of health care in this country."

Medica will start its tiered benefit in July, and Blue Cross Blue Shield will offer its plan beginning next January. HealthPartners has had a tiered product for a couple of years.