EP469 (Part 2): The Impact on Plan Sponsors of Medicare Site-Neutral Payments and HSA Reforms, With James Gelfand, JD

[00:00:00] Episode 469 The Impact on Plan Sponsors of Medicare Site-Neutral Payments and HSA Health Savings Account Reforms. Today, I speak with James Gelfand. American healthcare entrepreneurs and executives you want to know. Talking. Relentlessly seeking value.

[00:00:29] Did you just listen to the show with James Gelfand on the impact of Medicaid cuts on plan sponsors, what the cuts actually are, and what the intriguingly named Cornhusker kickback is all about? If not, no worries. But do go back and listen to that after you listen to this show. No particular order of listening is superior for this double episode.

[00:00:49] So it's all good no matter how you have chosen to roll. Now in this show that you are currently listening to, one part of the episode 469 double episode, this is what's going to happen. I ask my guest today, James Gelfand, to get into the what and how and so what of the goings on with Medicare site-neutral payments and honest billing practices.

[00:01:12] And then I ask him the same thing with the HSA Health Savings Account Reforms currently in Congress. And look, bottom line, I was a picture of overconfidence walking into this conversation. Relative to the Medicare site-neutral payments, James has some crisp feedback for plan sponsors, which is, in a nutshell, get ahead of this. And TPAs and consultants and brokers should be all over this right now, advising clients and writing stuff into provider contracts.

[00:01:41] Then, after we cover Medicare site-neutral payments, we very seamlessly, if I do say so myself, segue into what's the what with HSAs, Health Savings Account Reforms. I did not realize a few things here. One of them is that HSAs last were taken up by Congress in 2003, back in those halicondes of high-deductible health plans, HDHPs, or even better, consumer high-deductible health plans, CHDHPs.

[00:02:11] When we all kind of thought, including me, by the way, wow, did I change my tune. But the prevailing wisdom was that giving patients and members skin in the game would evoke high-value purchasing decisions by them. And yeah, listen to me going off on why that is not really true and the moral hazard of insurance for 20 minutes in an in-between episode we will link to in the show notes where you will find all the links. So anyway, first up, we talk about Medicare site-neutral payments and honest billing practices.

[00:02:40] Then the current issues with the current HSA regs and what the future may hold. And just saying, lest anyone forget, the current HSA regulations really hinder plan sponsors' ability to offer, like, direct primary care and pay for it or do stuff to help members. With chronic conditions, keep those conditions managed. There are many not super intuitive but really impactful issues here. Now, of course, hospitals do in fact come up on this show.

[00:03:08] And I am saying this in a bunch of intros lately. But let me remind everyone, it so must be said with five underlines, all hospitals are not the same. And what a hospital does or doesn't do may not be the same as what many or most who work at the hospital believe is the right thing to be doing. Listen to the show with Dr. Komal Bajaj on just the gaping disconnects and lack of trust between clinicians and administrators, some of them, not all, of course.

[00:03:35] Also, a hospital can be doing great things and really crappy things absolutely simultaneously. These are big, sprawling places with a lot going on. James Galfand, as aforementioned, my guest today is president and CEO of the ERISA Industry Committee, otherwise known as ERIC. ERIC represents the nation's largest self-insured employers advocating for comprehensive benefits in health care policies that impact millions of employees across the country.

[00:04:01] James Galfand brings nearly two decades of experience in health care advocacy, having worked at the Chamber of Commerce and on Capitol Hill. When you are done listening to the show, please do come back and take a listen to the other part of this double episode if you haven't already. In that part, we talk Medicaid cuts and the impact on plan sponsors and etc. I also talk about how James Galfand came to find himself invited on the pod to begin with.

[00:04:29] And short version, it all started with Cora Opsall. And I say this as a thank you to Cora because these shows with James Galfand are so informative and he was, in fact, the exact right person to have these conversations with. My name is Stacey Richter. This podcast is sponsored by Aventria Health Group. James Galfand, welcome to Relentless Health Value. Thanks for having me today. There's so much going on. So I guess just selecting what to talk about is a thing in and of itself.

[00:04:55] But if we're going to be talking about maybe the top goings on that plan sponsors may need to consider such that nobody gets caught flat footed. Let's pick one. What do you want to talk about? I think a good one to talk about to start with would be this package of reforms that almost got across the finish line in December and very likely could get consideration in Congress in March.

[00:05:18] And if not March, then the next available vehicle, because it's already been agreed to between the House and the Senate and between Republicans and Democrats. There's a lot of very interesting policy in there that's all going to be very important to health care purchasers as well as to providers. But some of the most important things in there are Medicare site neutral payment policies and honest billing requirements for hospitals under Medicare. All right. So Medicare site neutral payment requirements and honest billing practices.

[00:05:47] I think a lot of our listeners are going to at least have a glimmer of what you're talking about. But just how would you describe what that means? Sure. So if you think about a hospital like a vacuum and it's looking around for other sites of care and other providers that are nearby and it's vacuuming them up and it's turning them into part of the hospital system.

[00:06:06] The reason that this happens is because hospitals can bill higher amounts for the exact same services and they can charge facility fees for patients who come onto their premises. So if they purchase your doctor's office and you go to the doctor, now they can charge you a facility fee because technically you've just been to the hospital. So Congress is looking for ways to fight back against this consolidation and against the inflation in prices.

[00:06:34] And certainly any changes in this area would be a shock to the system for some of these hospitals who frankly have been bilking both Medicare and private payers. But what Congress is looking at is saying that for certain services or perhaps for certain drugs that need to be infused on site, what they would say is this is the amount that Medicare is going to pay for this service, period.

[00:06:57] And it's not going to make a difference if it's done at the hospital or at an ASC or at a hospital outpatient department or in a physician's office. This is the amount that that service is worth to Medicare. And if Medicare does that, the hospitals suddenly lose that need to go out there and buy all the provider offices and buy all these other sites of care and to consolidate the way that they're consolidating.

[00:07:22] And you're really killing some of the incentives that are driving that consolidation and some of that price inflation. So when we talk about site neutral, we're talking about policies that could be very, very narrow or very, very broad. Right. So in this particular piece of legislation, Congress is looking at some pretty narrow policies. They're going to kind of experiment with it and say, we're going to try it for these things.

[00:07:44] And if all the hospitals don't go out of business, we'll probably look at expanding it later because doing this could save quite a bit of money for the federal government. There's been a lot of talk about site neutral payments, mainly because of the facility fee. The I'm trying to figure out a good noun to use the overabundance maybe of facility fees. And you hear some of these patient stories like I had a telehealth visit and I got charged a $600 facility fee.

[00:08:14] Or I went to my primary care office for something very primary care. You know, I had gone there many, many times. My copay used to be $22 and suddenly the hospital bought the practice. I'm going to the exact same office that has it's nowhere near the hospital campus. And I got charged $600 as a facility fee. There certainly is, as you just said, there's an incentive to buy more practices.

[00:08:42] There's incentive to steer patients to different sites of care. It does not have anything to do with clinical outcomes. I mean, maybe someone could argue that it could, but it definitely jacks up the price. Well, and I think you nailed it, Stacey, but there's also two dynamics here. So the facility fees is one issue, right? So the other dynamic here is just markups. I could go to CVS right now, I could pay $5 and I could probably get a package of 100 Band-Aids.

[00:09:09] I can go to my doctor's office and they could take one of those Band-Aids and it'll be $5 for that one Band-Aid. And the, you know, 10 seconds it took the doctor to put it on me. The hospital could charge me $50 for that same Band-Aid. So this actually takes place with every type of service that there is. No matter what it is, it is always cheaper to do that service somewhere that is not affiliated with a hospital. Hospitals innately mark everything up.

[00:09:36] And so by not treating these other sites of care, which frankly are not hospitals, by not treating them like hospitals, we can save tons of money well beyond just those facility fees, which frankly should be outlawed, period. There shouldn't be any facility fees unless you enter a hospital facility. We will have Dr. Christine Halon in a couple of weeks. And one of the things that she says, she's talking about high cost claimants and just the zeros that are involved in changing the site of care for a patient,

[00:10:04] taking them out of the hospital and putting them, I mean, maybe it's even they get the infusion at their home or whatever. And it's like hundreds of thousands of dollars that can be saved, which pretty much just emphasizes the point that you're making that there's a lot of additional spend that can happen depending on where the patient goes. And if that patient is on or about a hospital, everything that we're talking about is going to apply. At this moment in time, it's on the plan sponsor to realize what's going on and to try to navigate and steer. But, you know, that's difficult.

[00:10:34] It can't always be done. So this policy sounds like it's going to kind of stop it at the root. As you said, though, this is they're going to experiment with this and start narrow. So it's going to be we're going to pick a couple of like DRGs or something or codes. What does narrow mean? Right. So the initial program that they're looking to launch really is focused on these physician administered drugs where you have to go in and have an IV to take the drugs that you need to take.

[00:11:01] And in those cases, the belief is that it can safely be done somewhere else besides hospital. There's no questions about safety. There's no questions about the providers being capable of doing it elsewhere somewhere that is not a hospital that doesn't have an emergency room, etc. So that's where they're going to start is on that stuff. But you should know there's other legislation that's not going to be passed this year. It's not going to be passed in March. But there is other legislation that would go much, much bigger and say we're going to go well beyond that to all manner of surfaces.

[00:11:30] So that's what I mean when I say we're going to start narrow comparatively, looking at the different proposals that have been on the table in Congress. This is on the smaller side, although it still saves billions and billions of dollars for Medicare. So if I am a plan sponsor and I'm listening to this right now, is there any action steps that I should be taking? I think it's a pretty safe mantra for a plan sponsor to have to say, don't fall behind Medicare.

[00:11:57] If Medicare gets in front of you, you will be left to be picked at by the vultures of the health care system. So hospitals, let's say the hospitals have site neutral policies applied to them in the Medicare program. Well, they're going to turn around and say, oh, well, let's see. Were these employers smart enough to also implement site neutral policies? And if the answer is no, they're going to bilk those employer plans, right?

[00:12:20] They're going to charge them the hospital prices at all the physician offices and all of the hospital outpatient departments, etc. So really an astute employer and astute TPA need to be watching this and need to make sure that they're keeping up and that they're doing the same smart purchasing that Medicare is going to be doing. And that can be site neutral policies. It could also be things like centers of excellence or high performing networks.

[00:12:45] But either way, you have to be discerning on where these provision of care is taking place in order to be ahead of it. And rather, if you're left behind, the hospital is going to say, well, we're getting some carved out of our hide by Medicare, but we're going to take it back and we're going to take it back from you. And is there any advice that you might have for a plan sponsor who is looking to do that? Because, you know, we all know about the balance of power with some of these major consolidated hospitals. Are they just going to say no? No.

[00:13:13] In highly consolidated markets, there's not always a whole lot you can do other than trying to steer away from that particular market. Although steering away from the hospital is always your best option no matter what. So unless the hospital has purchased all the provider offices and all the different sites of care and the imaging sites, etc. You really should have provisions in your plan design that encourage employees and really to compensate those employees. Give them some of the savings if they're going to some of these cheaper sites of care.

[00:13:42] In markets that are more competitive, obviously, you should be creating competition. You should be playing the hospitals off each other. You should be steering to the ones where they have the best quality and the lowest cost. So you're getting the best value out of it. And hopefully your TPA is telling you this stuff before you hear it on this podcast, right? If you hear it from us and you have to go back to your TPA and say, hey, TPA, have you ever thought about doing site neutral purchasing options for your clients? You might want to shop for a different TPA.

[00:14:11] Yeah, this definitely sounds like something that should be on somebody's agendas to discuss as points of interest. I could also certainly see and just thinking about, like, for example, independent oncologists and other indie practices right now. This might be good news for them. We had Eric Davis and Autumn Young-Chu on the pod. It was a couple of years ago now, but they were talking about how some of these infusions are marked up three, four, five, ten times the price of the drug.

[00:14:38] You have some very, very wealthy sorts of practices who are, you know, in air quotes, part of the hospital, which leaves the indies scrambling. And then obviously 340B plays in here too because hospitals can actually buy the drugs much cheaper. Listen to the shows with Sean Gremminger. So as we all know, transparency and competition tends to keep prices more reasonable.

[00:15:00] I could definitely see that leveling the playing field a little bit here could improve the competitive ability of some of these indies. Absolutely. And this should be an opportunity for them to say, hey, Medicare is getting smart about this. Now's the time to go talk to the insurers who we work with and pitch them on better steerage policies within their networks. Moving on to what else is in this reform package of which you speak that might be worth some attention.

[00:15:28] Right. So, you know, we talked a little bit about this tax bill and how Medicaid might be part of the way that they finance the bill and how the focus of this legislation is going to be on the tax rates that individuals and corporations pay. Reminding everyone the Medicaid conversation is in the other part of this episode. But there's this tiny little sidebar conversation going on that could be very meaningful for tens of millions of Americans.

[00:15:55] And that is, would this bill include changes to health savings accounts and high deductible health plans, the plans that are paired with HSAs? Because those plans are creatures of the tax code, right? The only way to make changes to them is to change the tax code. And really, that hasn't really been done for 20 years, right?

[00:16:17] These accounts and the high deductible health plan and the definition of that, they were created back in 2003 in a sidecar bill to the Medicare Modernization Act, which created the Part D prescription drug benefit, right? So we're talking about such a long time ago that seniors on Medicare used to not have their drugs covered. It seems like an eternity ago. So that's how long it's been since we've made real, true, meaningful updates and changes to HSAs.

[00:16:45] And my goodness, we've learned a lot in that time. Back in 2003, all the smartest health policy walks and gurus were saying, look, the problem is these patients. They keep going out and getting health care. We got to change the dynamics here so they stop wanting to get all this health care. Let's put all this skin in the game so that they have to pay a big percentage of their costs. Let's put these huge deductibles in front of them where they literally get no help from the insurance company other than supposedly the negotiated rates.

[00:17:13] But they get no help until they've paid through thousands of bucks and then their insurance kicks in and will say, hey, I know this sucks, but we're going to offset that by giving you a bank account. And you can put money in that bank account and it's triple tax advantage, right? You don't get taxed on the money going in. You don't get taxed on how that money accrues and gets compound interest over time. And you don't get taxed on that money when it comes out. So it can be awesome for retiree health savings. But there are all kinds of things that we've learned since then.

[00:17:42] First of all, patients are actually not the problem. In fact, there's a lot of utilization that we want and we want more of it. We want more use of high value services. That's going to be services that can prevent much more expensive interventions that have to take place later. Things that don't cost a whole lot but do provide a lot of health benefits. So we really kind of changed how we think about controlling health care costs in the past 20 years. And HSAs have not kept up.

[00:18:10] So now might be the time when Congress actually makes some meaningful changes that starts to change that dynamic so that HSAs can be a creature of the 2020s instead of the 2000 aughts when Will Smith was singing songs for the new year.

[00:18:26] So just to kind of recap the issue that you just raised since 2003 when the last iteration of HSAs health savings accounts hit the street, which was in conjunction with those high deductible health plans where, and I'm just reminding everybody, I ranted for 20 minutes about the moral hazard of insurance in a show a couple of weeks ago. So if anybody really wants to take a deep dive into this whole skin in the game business and the good news, bad news with that whole thing, you're welcome.

[00:18:55] But what we're talking about here is the way that it was conceived of. The health savings accounts did not enable somebody to get care for even high value things before they hit the deductible, which is high because it's a high deductible health plan, right?

[00:19:17] So like if you want to make sure that somebody with diabetes is getting regular diabetes care, from what I understand, like you can't cover that. So we just talked about high value care and how it might be in a plan sponsor and the patient, nothing for nothing, their best interest to ensure that they are going to get this high value care prior to reaching their big deductible. How did the HSAs and what was passed in 2003 not facilitate that?

[00:19:47] Or like, what's the problem there? Okay, so try not to laugh. But in 2003, we at least knew that there were certain care that was preventive in nature and that it made sense to allow coverage of that with first dollar coverage, right? So the employer or the insurer can pay even if you haven't hit your deductible yet. So we said preventive care can be covered with first dollar coverage, but nothing else. Okay, what is preventive care? Well, Congress said, I don't know, ask the IRS.

[00:20:16] So the IRS. Because of all their medical credentials. Yes. So they literally made a list and it's now part of the tax code. It's in the IRS code where they have a list of what they consider to be preventive. And I doubt you've ever had a guest on this show who would say, you know what? I'm in agreement with that list. I'm good with it. That's the list. That's what's preventive. Nobody would say that because nobody agrees with that because it's very narrow thinking, right? They're thinking, okay, what does prevent mean?

[00:20:45] Well, you know, I'm a tax attorney and I say that prevent means you are stopping a disease before it takes place. But once somebody is infected with something or once somebody has a condition, managing that condition is no longer preventive. This is backwards thinking, but it was the way that they thought about it 20 years ago. So if you fast forward to 2017, the Trump administration, the first Trump administration, they looked at these rules and they said, this is not smart.

[00:21:13] This is not a good way to do business. And they took a couple of years and what they ended up doing was releasing new guidance that actually for the first time allowed employers or insurers, if they wanted to, to expand the definition of preventive coverage. And by expanding that definition, you then expand what the employer or insurer can pay for before a patient hits their deductible.

[00:21:38] And what a lot of employers did was they massively expanded in such a way that employers started offering free insulin, right? They started offering multiple visits for certain kinds of care. And what the employers saw was that this was preventing hospitalizations. It was preventing operations. It was preventing surgery. It was preventing people from progressing in their disease state and having to get on high cost specialty medications. And it was saving money.

[00:22:06] It was improving health and saving money. Everything that we talk about wanting in healthcare. So this happened because of guidance. It is sub-regulatory in nature. It is not statute. The next administration that comes along could say, you know what? We're inking it back. We're going back to the 2003 rules. So actually just this week, the House passed legislation that said, we are going to codify that particular guidance, which is great. I doubt the Senate is going to then take up that legislation, although they should.

[00:22:36] But if we're going to truly revisit those 2003 rules, we need to broaden even more and say, listen, we need to give some discretion to employers and insurers to figure out what is it that we should be covering with first dollar coverage that enables us to save money and improve health. I think a no brainer for this would be on-site clinics. That's a big one for many of the companies that I work with.

[00:23:02] They have an on-site clinic who they know provides very high quality care at very reasonable costs. They want employees to use it as much as possible. Right now, a lot of employees say, well, I got to pay through my deductible first anyway. So I might as well go somewhere else to get my care. So there's all kinds of examples like that where we could change the rules and lower health care costs.

[00:23:24] Okay, so I just want to connect or clarify what you're talking about with preventative care and HSAs only being able to be used in high deductible health plans for preventative care and the concept of first dollar coverage. Could you just explicitly connect these concepts in case anybody is a little lost? Sure.

[00:23:48] So when Congress created health savings accounts, which are bank accounts, they said, in order to put money into this bank account, you must have what we call a high deductible health plan. And this is defined in statute. What is a high deductible health plan? And the definition is, you know, it has a certain number of dollars that you have to pay before the insurance benefit starts paying.

[00:24:13] And it only very limited things that can be covered before you hit that deductible. So when we are talking about, oh, well, what about an on-site clinic? We want on-site clinic to be able to be covered. Well, once you have access to that on-site clinic and you don't have to pay for it, your high deductible health plan is no longer qualified, right? It's violating those IRS rules, which means you're now banned from putting that money into your health savings account.

[00:24:39] Just like the code says, if you want to put money into your HSA, you can have that high deductible health plan and you can't have any other coverage. So you have to have that HTHP and only that HTHP. So if you also have a direct primary care plan or if you also have access to the TRICARE benefit or access to the Indian Health Service or access to Medicare, you're banned from putting money into the health savings account, bank account.

[00:25:05] So if I'm just summing this up, it's kind of a downstream consequence of the way that that 2003 bill got set up, which is that the HSAs are a, you know, come as a set with these high deductible health plans. And there's a very strict definition of what is a high deductible health plan. And what that means is nobody can pay for anything until the patient member reaches high deductible, except maybe this very narrow definition of preventative care.

[00:25:32] And the second that anybody pays for anything for this particular individual that isn't on that IRS list, whoops, you are now do not have a high deductible health plan and therefore you cannot have an HSA. So is that the, would that be a good summary? You nailed it. And it's probably worth mentioning that there are some people who say the real solution here is to just completely get rid of this definition of high deductible health plans. And maybe what we need to do is just say, hey, you want a health savings account?

[00:26:01] Have a health savings account, right? The problem with that, which I don't, I don't disagree with it from a policy perspective necessarily. But the problem is if you were to ask Congress about what would be the cost, how would this affect the deficit if we did that? The Congressional Budget Office and the Joint Committee on Taxation, who are the ones who do these kinds of estimates, they would say that will increase the deficit by tens or even $100 billion.

[00:26:30] Depending on how many people then say, oh, well, you know what? I like putting money into a bank account that doesn't get taxed. We may have, you know, 100 million people who decide that they are now going to put 20 grand a year or whatever the limit is to this year. We're going to put all that money into a health savings account. So from a legislative cost estimate perspective, it would be very, very difficult to just completely jettison this definition of high deductible health plan.

[00:26:58] And that's why groups like Eric, like my group, that's why we're trying to improve that definition. And maybe later it'll be the time to say, you know what? We've moved on. You know, we're ready to just get rid of these high deductible health plans and say, you want an HSA, have an HSA. But for now, we're kind of stuck in this frame that was put together back in 2003. Thank you for that explanatory interlude. All right. So back to our main theme here.

[00:27:23] You were saying that on or about 2017, there was some sub-regulatory guidance that allowed plan sponsors to offer certain things to members on high deductible health plans that didn't technically qualify as preventative care and didn't disqualify the plans. But now, right now, there is an opportunity to get all this codified into law. Or did I misunderstand that? Well, I think that that guidance was finalized in 2019. It took some time to get it out.

[00:27:53] It's again, it's the IRS. They don't do anything quickly. So that is one piece of the puzzle. But if you look at what Congress is actually considering that they might want to include in this tax bill, it goes far beyond that.

[00:28:05] So not only would they potentially codify that guidance and potentially expand it to include even more preventive services and more high-value care to be first-dollar coverage, but they're also potentially going to say, we're going to allow care at an on-site clinic or a near-site clinic to be pre-deductible coverage. So that you couldn't do that in 2017, 2019. Right. You still, today, you cannot do that. But Congress might, they want to go further, I think.

[00:28:31] So they're also going to look at and say, you know, maybe we should allow people to pay for physical activity. One way to stay healthy is to, like, do Peloton or do Weight Watchers. And you could take the money in your HSA. You could use it for that. Maybe they'll go even further and say, we're going to look at direct primary care. And we're going to say that you can have a membership with one of these primary care providers that essentially takes a capitated payment every month. And it's their job to keep you healthy. And we're going to say, you can do that.

[00:29:01] Along with your HSA. Maybe they'll expand the eligible population. Right now, there's a lot of people who are discriminated against and can't have an HSA. For example, veterans. Veterans have access to some TRICARE benefit that actually prevents them from being able to put money into a health savings account. So if you're a veteran and you work for an employer that offers a high-deductible health plan, you might be stuck on that HDHP. And you can't even get the bank account where you get the real benefit from.

[00:29:29] Native Americans is another example because they have coverage that they can potentially get to the Indian Health Service. And that blocks them from being able to make use of a health savings account. And of course, another population is working seniors who are eligible for parts of the Medicare program, even though they're still working and they still have a job. Well, again, they could have a high-deductible plan, but they couldn't benefit from the health savings account. So there's a lot of these tweaks that could be made where millions of people would benefit.

[00:29:58] And Congress, for the first time, they actually take this up as part of the tax bill. That is interesting. So, James Gelfand, is there anything I neglected to ask you that you want to mention here? No, I think we've covered a lot. We have covered a lot. That we have. James Gelfand, if anyone is interested in learning more about your work or about ERIC, where would you direct them? Check out our website on ERIC.org. James Gelfand, thank you so much for being on Relentless Health Value today. Thank you for having me.

[00:30:24] This is Sean Grimminger, President and CEO of the National Alliance of Healthcare Purchaser Coalition. If you like this podcast, I strongly recommend subscribing and leaving a review.