- As the Affordable Care Act (ACA) brings more patients into the healthcare system, spending is on the rise, especially on chronic diseases, such as diabetes, heart disease and depression.
Blue Cross Blue Shield (BCBS) backs this point in a recent report by showing that newly insured members tend to need more healthcare compared to individuals who already had coverage through the insurance company – either privately or through their employer.
This increase in demand for services has led to increases in healthcare costs for private providers, such as BCBS. On average, healthcare costs for newly insured individuals were 19 percent higher in 2014 and 22 percent higher in 2015 than individuals who already had employer-based coverage.
Newly insured patients whose first year of coverage took place in 2014 or 2015 used more medical services across all types of care compared to those who had already been insured. These services included visits to the emergency department, inpatient hospital admissions, outpatient visits, and filled prescriptions.
Inpatient admissions were 84 percent higher for newly insured members than for individuals who had enrolled in BCBS’s insurance plans prior to 2014, BCBS reported. Outpatient visits were higher by 48 percent. Newly insured member's inpatient admissions were also higher by 38 percent, while outpatient visits and professional services for newly insured members were 10 percent higher.
First-time customers also filled 35 percent more prescriptions in 2015 compared to those who had purchased coverage before 2014. Newly insured individuals filled their prescriptions six percent more than those who had received coverage through their employer.
During the first nine months of 2015, newly insured individuals at BCBS used the hospital emergency department 79 percent more than previously covered patients. However, newly insured individuals only went to the ED 8 percent more than those who already had insurance through their employer.
The previously uninsured had higher rates of certain diseases compared to those who already had insurance. These types of diseases include diabetes, coronary artery disease, hypertension, coronary artery disease, Hepatitis C, depression, and HIV.
Treatment for these chronic diseases has produced overall higher medical costs for the commercial payer. In sum, new members of the BCBS insurance world did not come cheap.
An uninsured individual is much less likely to have preventative care and services for major health conditions and chronic diseases than an insured individual, leading them to have more health problems. The Henry J. Kaiser Family Foundation notes that before the Affordable Care Act came into being, the number of uninsured individuals had increased throughout most of the past decade due to rising healthcare costs and decreasing employer sponsored insurance coverage. Now the trend is shifting, as more and more people are becoming insured.
BCBS sees the ACA as a cure to many dilemmas in the healthcare industry, and argues that patient-focused programs that place an emphasis on coordinated care, prevention, and wellness, can lead to reductions in preventable ED visits, fewer admissions to hospitals, as well as lower hospital-acquired infection rates.
Even though the commercial side of the insurance industry has been seeing a rise in healthcare costs from new customers, Medicare only saw a moderate increase in spending in 2014. According to a recently published report, Medicare spending for healthcare costs only went up by 2.4 percent per person in 2014. Overall health care spending rose 5.3 percent in 2014, reaching $3 trillion, according to CMS.
The continuing rise of healthcare costs puts pressure on all types of insurance companies to make modifications to their business models - and in turn, demand that healthcare providers keep their costs in check.
Medicare has been promoting the transition towards value-based reimbursements, and has set an ambitious goal for payers and providers. By the end of 2018, CMS would like to see 90 percent of traditional Medicare payments move into value-based reimbursement structures.
One way that Medicare hopes to accomplish this goal is through accountable care organization (ACO) programs. These organizations strive to deliver care that is appropriate for a patient rather than administering as many tests as they can or administering medical service they don’t need. Private payers are also following Medicare’s lead in attempting to cut costs by using ACOs.
In addition to these efforts, the healthcare industry will continue to move toward quality care through frameworks established by laws such as Medicare Access and CHIP Reauthorization Act of 2015 (MACRA).
MACRA and the Merit-Based Incentive Payments System (MIPS) will help accelerate Medicare’s shift toward value-based payments by providing more robust incentives for providers.
MACRA specifically streamlines multiple quality programs while heavily linking provider payments to value and quality measures.
Through upcoming laws and current programs being implemented that focus on quality of care over quantity, the healthcare industry will continue to transform – especially with the arrival of newly insured individuals. Medicare will continue its goal of maximizing quality care while reducing costs through value-based reimbursements and ACOs, and many private insurance providers will follow in their footsteps.