GIC Takes Cost Control Steps

JULY 1998 - Members Remain Protected From Balance Billing - In
an effort to gain control over the fast rising cost of health care, the
state’s Group Insurance Commission (GIC) is taking steps to equalize
payments made to health care providers. A new system will be
implemented by which doctors and hospitals will be reimbursed for their
services.

The
new Market Based Reimbursement (MBR) plan, which takes effect July 1,
is viewed as a full frontal assault on the sky-rocketing costs of the
Indemnity Plan. Studies indicate that some health care providers
inflate charges to the Indemnity Plan to recover revenues lost under
contracts with Health Maintenance Organizations (HMOs).

Historically,
HMOs enter into contracts with health care providers that limit the
charges that can be made for a given medical procedure. Typically, an
identical visit to the doctor costs far less under an HMO than it does
for the Indemnity Plan.

Under the
MBR plan, health care providers will be paid the going market rate for
each procedure they perform. The GIC will pay essentially the same
price for a particular procedure regardless of which plan the retiree
is covered under.

The change in
reimbursement will be implemented over the next six months. MBR changes
for inpatient procedures, doctors visits, and lab services will take
effect this month. In January, the GIC will make the changes to the
outpatient system. At this time, MBR is only planned in Massachusetts.

Study Shows Cost Differences

A
comprehensive study conducted over the past two years has shown
dramatic cost differences between the Indemnity Plan and the nine other
health plans offered by the GIC. Alarming is the apparent trend of
shifting costs to the Indemnity Plan.

GIC
officials point to evidence gathered through their Medtac tracking
system, which clearly shows increased costs for the Indemnity Plan.
Several years ago, the GIC became one of the first health care managers
in the country to begin a detailed analysis of its health plans through
data collection.

The data collected
by Medtac, has proven useful, as GIC officials redraft the state’s
health care offerings. Medtac collects detailed information on all
health care services billed to the GIC plans. GIC and Medtac officials
have gone to great lengths to ensure the information remains
confidential and is used in the proper manner.

What
officials have learned is what many had suspected over the past few
years. The cost of an identical medical procedure, with the same
provider, varies greatly depending upon who pays the bill.

For
instance, the cost to treat a heart attack victim more than doubles
when the patient is an indemnity plan subscriber, as opposed to an HMO.
Under the Indemnity Plan, operated by Unicare, the cost of treating a
typical heart attack is $18,268. Under one of the eight HMO plans, the
cost is roughly $8,168.

Hip or knee
replacement surgery costs $26,751 under Unicare, while $17,740 under
HMOs. From childbirth to a fifteen minute office visit, the study
showed significant price increases for the Indemnity Plan.

“It
is obvious to anyone who has seen the data, comparing the HMO costs
with the traditional Indemnity Plan, that something has to be done. For
the Indemnity Plan to pay double what a procedure actually costs is
highway robbery,” said Association Legislative Liaison Shawn Duhamel.
“The result is that our members are being unfairly driven out of the
plan of their choice.”

Balance Billing Outlawed

As
can be expected, the news of the state’s shift in reimbursement
schedules has received a cool reception from the medical community.
Officials of the Mass. Medical Society (MMS) have warned that

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