Anthem’s Goal: Drop Medicaid, Obamacare Patients, Buy Into Medicare Advantage (MA)
Anthem is a very profitable insurance juggernaut.
It reported a $1.1 billion windfall on the Trump tax cuts, according to Healthcare Finance News. In 2018, its profits soared 27% over 2017—and 2017’s profits were 55% higher than 2016’s—which is the logical result of raising premiums, shedding Medicaid and Obamacare patients from its rolls, and buying Medicare Advantage (MA) companies.
On December 21, 2017, Anthem acquired HealthSun, which it described as “one of the fastest-growing integrated Medicare Advantage health plans and health care delivery networks in Florida.” On February 15, it bought America’s 1st Choice, another for-profit Florida/South Carolina MA company. It plans to continue expanding its MA business. See “Anthem profits skyrocket 234%,” in the February 1, 2018 issue of Healthcare Finance News.
How Medicare Advantage (MA) Purchases and Provider Pay Cuts Dovetail
What do acquisitions of MA companies have to do with slashing specialist and imaging RVUs?
Everything.
MA companies receive a fixed amount of money per enrollee per year, typically 2% to 14% more than spending per patient for traditional Medicare, according to a study by the Leonard D. Schaeffer Center for Health Policy & Economics at the University of Southern California, published July 10, 2017 in JAMA Internal Medicine.
With fixed revenue per enrollee, if Anthem can persuade CMS to slash payments to specialists, some of those RVU reductions to specialists flow straight to its bottom line.
Here are the details:
- Like an HMO [health management organization], an MA insurer signs up providers to its networks. Payments to those providers are contractually fixed, typically at 91% to 102% of the traditional Medicare rate, according to the USC study. Unless there is a contract term allowing for changes, reimbursements to in-network specialists would not be affected by a reduced RVU for the duration of the agreement, which is typically three years.However, at the next contract negotiation, the MA plan could use the reduced RVU as leverage to cut the contractual pay of its in-network specialists. Typically, providers in rural areas, or geographic areas where an MA dominates, are most vulnerable to take-it-or-leave-it contracts, according to a February 10, 2018 Modern Healthcarearticle, “Medicare Advantage plans underpay rural providers. Is that a problem?”
- In contrast, out-of-network providers would be hit immediately. Under a Medicare rule, MA plans must pay out-of-network physicians the traditional Medicare RVU rate. If specialist RVUs were cut, MAs could reduce payments as soon as the cuts were to go into effect. See the rule at “42 CFR 422.214 – Special rules for services furnished by noncontract providers,” Commercial insurance is more complex but is often tied to Medicare rates of pay.
- Another twist: patient advocates want to reduce specialists’ RVUs because they believe high RVUs for specialists contribute to the shortage of primary care physicians.
However, it’s unlikely that reducing specialist RVUs (and thereby raising primary care pay in the budget-neutral RVU system) would help boost primary care for MA enrollees. The way the MA payment scheme is set up, they have strong financial incentives to maintain shortages of in-network primary care physicians.
Long waits for appointments mean delayed care or patients giving up trying to get an appointment, saving the MA money. Given that financial incentive, it seems unlikely that MAs would hire more primary care physicians or raise their pay.
