News CoverageThe Deseret News (Salt Lake City, UT)
Insurers try tiered coverage to trim cost of health care
by Theresa Agovino, Associated Press writer
Nov 28, 2002
NEW YORK -- Some insurance companies are trying yet another tactic to drive down health-care costs, using tiered medical coverage to steer patients from high-priced hospitals and doctors to less expensive ones.
The new plans establish price categories for hospitals and doctors in the same way that many plans now are "tiering" prescription drugs, requiring patients to pay more themselves for the costlier alternatives.
The rationale is the same: If some of the money comes from their own pockets, patients will opt for cheaper services.
Consumer advocates and hospital executives fear the plans will force people to make medical decisions based on cost rather than quality. The insurers say the wide differences in prices for similar services aren't always justified. Hospital prices, in particular, can vary by thousands of dollars in the same city.
CompCareBlue, a unit of BlueCross & BlueShield United of Wisconsin, began offering a tiered product last month. Michael Bernstein, CompCareBlue's president, called it "probably the most elegant way for consumers to understand the price differences."
He said all the hospitals included in the plan provide quality care, and that some major academic medical centers are included in the policy's low cost option.
"We think every hospital in the network measures up on quality," said Bernstein. "We based the program solely on cost to us, because we didn't feel equipped to make quality distinctions."
Plans typically have two tiers -- one less expensive and one more -- with a third category for out-of-network services.
One plan option offered by CompCareBlue would require patients to pay nearly $3,000 for an out-of-network hospital stay. Treatment at the hospital in the least expensive tier would cost the patient $300. Other plans have less dramatic differences, mandating patients to pay a $250 per-stay premium for more expensive hospitals.
Tiered hospitalization plans cost 5 percent to 15 percent less than traditional policies, which will require the same co-payment or patient fee no matter what the hospital's charge is.
Bernstein said his company's plan was designed for employers who want to continue to offer coverage to workers, without the premium rate hikes that are accompanying the rise in health-care costs.
Hospital costs are becoming a bigger factor in those costs. Spending on hospital inpatient services increased 7.1 percent last year -- nearly three times the 2000 increase, according to a survey by the Center for Studying Health System Change, a research institute based in Washington, D.C. Outpatient services costs rose 16.3 percent, outpacing prescription drug spending, which grew 13 percent.
Hewitt Associates estimates health-care costs will grow 15.4 percent in 2003 after rising 13.7 percent this year and 10.2 percent in 2001.
Other companies that began offering tiered plans this year are PacifiCare of California, Blue Shield of California and Tufts Health Plan, based in Waltham, Mass.
Jamie Court, executive director of the Foundation for Taxpayer and Consumer Rights, said the new plans hurt poorer patients.
"These products create a barrier to access for those with great medical need but little money," he said.
Insurers hope hospitals that charge more will feel the competitive need to lower prices. Hospital officials say it's not that simple.
"These programs don't lower costs, they simply shift them to the consumer," said Carmela Coyle, senior vice president-Policy at the American Hospital Association.
She said an institution's location, specialties or staff all are important factors that a patient should be able to consider without regard to cost.
Hospitals in the Tufts Health Plan are divided into two categories: community hospitals and academic medical centers, with the latter costing consumers about $250 more per stay.
Because Boston has a high concentration of academic medical centers, even patients with routine conditions often choose to be treated at pricey institutions. John Kingsdale, Tufts's senior vice president of planning and development, said 40 percent of hospital discharges in Massachusetts are from an academic medical center, compared with a national average of 16 percent.
The Tufts plan also charges patients $15 to $20 more for visits to specialists than to primary care doctors.
Kingsdale said the real differentials are much greater than the plan suggests.
"We have to find ways to influence the delivery of health care towards less expensive options," said Kingsdale. "If we don't do this, we are just going to be in a situation where costs keep going up."
While the plans now available are based on price, PacifiCare plans next year to introduce a program that takes quality into account, using such measures as the number of coronary bypass operations performed and use of computerized systems for ordering tests and prescriptions.
Dr. Sam Ho, PacifiCare's chief medical officer, said the new plans should in theory push some hospitals to cut costs and others to improve quality so they can be included in the preferred network.
In the last few years, consolidation of hospital ownership in a handful of chains has given them tremendous clout over the insurance companies, which hope these programs will swing the pendulum back.
"We need to introduce new dynamics into the healthy care system," Ho said. "Patients need to be more in the game, and doctors and hospital need more incentives to increase quality and lower costs."