Continuing with our series of interviews of people involved in health care in the context of the Covid-19 pandemic, I caught up with Niall Brennan, C.E.O. of the Health Care Cost Institute research group, former chief data officer of the Centers for Medicare and Medicaid Services and a former analyst at the Congressional Budget Office.
Among the points he made: “Systematically underfunding public health over a 20- to 25-year period is not the best way to prepare for a global pandemic.” He also noted that demand for any kind of primary care or non-Covid care vanished with the pandemic, and suggested that this makes for a “very profitable year” for insurers, who build the cost of non-Covid care into their rates and yet are not having to pay for that non-Covid care. Insurers have begun to offer rebates to their customers in some cases, he said.
He expects hospitals to raise their rates to compensate for the loss of income for non-Covid care, and that could easily lead to higher insurance rates and more of a burden on employers. “If hospitals jack their rates up and as a result insurers jack their premiums — well, employers were already feeling squeezed. So ultimately it’s going to come down to an affordability issue,” he said. He also predicted that more and more primary care practices may be acquired by hospitals — while smaller primary care practices with doctors 50 years old and older may simply close.
Here is our conversation, lightly edited for length and clarity.
JP
Thanks for spending time with me. Tell me who you are and what you do.
NB
I’m Niall Brennan. I’m the C.E.O. of the Health Care Cost Institute. We’re a research organization based in Washington, D.C. We analyze healthcare claims information to try and understand and demystify trends in U.S. healthcare spending and utilization.
JP
What has surprised you most about the Coronavirus era, professionally or personally?
NB
I think obviously, we live in strange times. I would probably preface my comments by saying even though these are strange times, and they have been challenging for myself personally and my family, we are extremely fortunate.
We have careers that were able to switch seamlessly to virtual engagement. We — myself and my wife — are both still gainfully employed. Our children are 19 and 14. Sort of my biggest problem now that school is finished, is making sure they get up before noon, as opposed to people who either lost jobs, have jobs that cannot be conducted virtually, have sub-optimal living arrangements or other challenges, or very young children who require a lot of attention.
More broadly speaking, it’s a terrible, terrible thing. And certainly for me it has exposed many fissures and weaknesses in the American healthcare system and in American society more broadly. I think that the recent protests in the wake of the George Floyd killing were absolutely appropriate and long overdue. I do have general feelings of sadness about the state the country is in, I do have glimmers of hope that we might be starting to see some of the systemic change that we need. So, hopefully, hopefully, it will continue.
Systematically underfunding public health
JP
So, you talked about fissures and weaknesses in healthcare and society. Can you unpack that a little?
NB
Well, it seems pretty clear that systematically underfunding public health over a 20- to 25-year period is not the best way to prepare for a global pandemic.
It appears that lavishly subsidizing hospital and physician adoption of electronic health records but not mandating interoperability or data sharing severely hampers our ability to understand things from a surveillance and real-time monitoring perspective.
There are going to be pretty profound impacts, I think, for a lot of smaller rural hospitals and other providers, potentially going out of business. The stuff that’s on the news, the lack of ventilators and overflowing hospitals and things like that — I actually think that to a certain extent, that was managed about as well as it could be. I mean, you can argue, should we have a larger national ventilator reserve or things like that, but in the end, with the possible exception of New York and — I think New York even more or less muddled through, before things became truly disastrous and out of control.
I mean, certainly the stress on the health care system in New York was incredible for a six- to eight-week period. But you didn’t have people dying in the streets, and New York seems to have been the most affected city in the U.S.
I think it’s going to have a long-term mental toll, both on the population generally, and particularly on health care providers, who I think have seen and witnessed and done things that frankly, not many of us can imagine. And I think we should worry about the long-term impact on healthcare providers and the healthcare providers’ supply chain.
The cratering of demand for non-essential care
JP
What have been the biggest surprises for the members of the Health Care Cost Institute, the people whose data you get? What are they thinking about these days?
NB
We have a pretty hands-off relationship with our data contributors. They give us data and we’re very grateful for that. But we’re completely independent of the data contributors. I have an independent board and we develop and execute our own research agenda.
From kind of a 30,000-foot level, the biggest thing that has happened is the cratering of demand for non-essential health care services. And of course, you can have debates over, “Is delaying a cancer treatment by six weeks or eight months, is that a non-essential service, versus not going to the emergency room for a cut on your hand when maybe you would have before?”
Because hospitals are the epicenter of the pandemic, people are pretty terrified of interacting with the healthcare system. What that means in practical terms: My sense is that that most insurers are probably having a quote unquote very profitable year because they’ve built in normal health care utilization into their premiums right people pay, and the bottom has fallen out of the market.
Sure, there are a very small number of very expensive coronavirus hospitalizations, but that’s not enough to offset the reduction in care by vast majority of the population. So I’ve seen some health insurers starting to offer rebates to their members to reflect the fact that health care utilization is significantly down compared to what was priced into people’s premiums. Car insurers are doing the same thing, because people are driving less so having less crashes and things like that.
The other thing that insurers are probably most worried about is coronavirus testing and antibody testing. Lab testing can be a little bit of a Wild West in general, and then with something kind of as emotive and something that clearly needs to be as widespread as possible as coronavirus testing. I definitely think there’s some potential for abuses.
Who will pay for testing?
It’ll be interesting to see how much of a fight there is over who has to pay for coronavirus testing. I’ve heard some people say the government should just basically write a blank check so that everybody can have coronavirus testing.
I’m sure others may have listened to the previous five minutes of my conversation and say, “Well, if insurers are saving that much money on deferred care, there should be plenty left for them to cover coronavirus testing.” But you know, the care can’t be deferred forever. So it will be interesting to see how quickly or slowly it bounces back or doesn’t bounce back to the levels that we saw before.
One final observation probably has to be the emergence of telemedicine as a as a substitute for in-person care. I think it’s fine. You know, I’ve used telemedicine myself in the past, and I think it can be great. I have always wondered how can we have a healthcare system that requires somebody to take a half day off work, take three different buses across town, to sit in a doctor’s office to physically meet a doctor who’s running 45 minutes late and then sees you or your kid for five minutes and tells you you’re fine.
So, to the extent that we can have a more humane and human-centric system, and not require that kind of friction on behalf of the healthcare consumer. I think that’s beneficial. When I put my old [Centers for Medicare and Medicaid Services] and [Congressional Budget Office] hat on, I would say that unconstrained availability or reimbursement for telemedicine to me seems to send up a giant fraud flag. So we’re going to have to keep a really, really close eye on that, if physicians start to abuse telemedicine billing codes from a fraud perspective,
Telemedicine reimbursement
JP
Have you heard specifics about telemedicine reimbursement? We’ve heard all sorts of crazy things. We’re kind of trying to write a story about that where it was it can be reimbursed at $10. The video visit gets a higher reimbursement. There’s no reimbursement for SMS. We don’t really have this sense of what the storyline is on reimbursement in. Do you have any details?
NB
I haven’t been following the policies. deeply. I do believe that C.M.S. is basically treating a telemedicine visit like an actual in-person doctor visit. I don’t think that we’ve gotten to paying for text messages, and frankly, I don’t think we should. How do you put a monetary value on a text message?
I think that physicians texting their patients is great. But they should view it as the cost of doing business and something that that’s reflected in their telemedicine fee. Or we need to move towards a capitated system, where physicians get a monthly fee or a per-member per-month fee. And text messaging is considered a part of that fee.
JP
You did mention about insurers are having a very profitable year, and rate increase request season is upon us. Here in New York, one company asked for a 19% rate increase and another 18.8%, which makes for a real head-scratcher. They’re having a profitable year. Can you speak to that?
NB
Are these New York-based companies? I don’t really have a whole lot of insight into that. I would definitely recommend like reaching out to somebody at the Society of Actuaries or the American Academy of Actuaries to explore that further.
New York was the epicenter of the outbreak. So maybe New York had a seesaw of lower utilization but higher coronavirus costs,
They could also be proved proactively building in or expecting higher rates from hospitals to cover the costs of [personal protective equipment] and things like that. That’s sort of idle speculation on my part — you’re better off talking to an actuary who could probably who could give you a more informed answer.
Hospitals expected to raise rates
JP
You mentioned something else that I just wanted to follow up on – the expectation of higher rates from hospitals. We have heard that hospitals have lost income from things like elective surgeries and all non-COVID care, and the theory is that in the C suites of the hospitals, people are looking at their bottom line and planning to increase rates, not only to cover P.P.E., but also to cover that absent care. Have you heard anything about this?
NB
I think it’s quite possible. You know, hospitals have C.F.O.’s. They have a bottom line. They’ve been able to get away with relatively unconstrained pricing increases over a long period of time. And certainly, they have been the heroes or suffered the brunt of the pandemic. So I think from a narrative perspective, we were sort of finally getting to a place before coronavirus, talking about hospital pricing, and asking, were these 10%, 15%, 30%, 50% increases in hospital prices justifiable or sustainable?
And then the pandemic came along and, you know, hospitals were the epicenter and the heroes, and incredible sacrifices were made. So I think it’ll be interesting to see, as we return to normal, what part of the narrative wins out. Will it be the “O.K., the pandemic was the pandemic but we really need a conversation about hospital prices” or will it be the “Hospitals saved us in our darkest hour, so they can do whatever they want”?
I think employers are going to have a big say on this. If hospitals jack their rates up and as a result insurers jack their premiums — well, employers were already feeling squeezed. So ultimately it’s going to come down to an affordability issue.
Insurers, flush with cash
JP
One other issue about insurer rates. We keep hearing that people who follow the industry are expecting fairly the highest ever medical loss ratio rebates this autumn. Does that comport with what you’re hearing?
NB
Yeah, I think so. Yeah.
JP
And that would be as a result of insurers being pretty much flush with with cash, right? This is a very profitable year theme.
NB
Essentially, yeah. It’s deferred utilization. It’s a structural byproduct of the fact that we had a global pandemic that decimated non-essential health care utilization that was built into their rates. Last year when they were pricing health insurance products, they didn’t say, “Let’s price this and hope that a global pandemic comes along so we can make a bunch of money.”
JP
We’ve talked about some of the changes in the industry. Are there any other big changes?
NB
I think this will probably encourage more consolidation. More physicians will be more open to being a part of a hospital group or a larger physician group, because they don’t like the financial exposure. Even if they don’t, I think physicians will be much more amenable to a capitated payments as opposed to fee-for-service. Because if you were a capitated physician, essentially nothing would have happened to your bottom line or revenue structure. But because a lot of physicians still bill fee-for-service, their revenue was decimated overnight.
Primary care docs still getting paid
JP
Very true — my friends who are direct primary care docs who essentially are capitated payments are looking around and going, “I’m really sad for all of my friends who are not in direct primary care but we’re not really hurting that much.”
NB
Nope, their revenue stream should be exactly the same in fact, again because they’re capitated, they’re like a microcosm of what’s happening with the health insurance industry. So, imagine you’re getting $100 a month for a patient panel of 100 patients, and in any given month 80 of those patients come in, and you’ve got staff and lights and you know, various things. And then you have a month where you’re still getting paid your per-member-per-month for all hundred patients, but only 15 of them come in, you’re actually probably making money.
JP
I don’t think any of them would say that they’re making money but they are saying that they feel much more comfortable than the non-D.P.C. docs.
Another thing that we didn’t really talk about was the massive job losses, which generally means massive loss of health insurance. How is that going to play out in the world of insurance? I mean, are we going to see more people on Medicaid if they can get on Medicaid? What’s the insurance industry perspective? What does that look like a year out? Five years out?
NB
Again, I don’t work for the insurance industry. So this is not an insurance industry perspective, but I will gladly share my dilettante observations with you. I think it depends. Yes, I think Medicaid rolls could expand. I think that the Affordable Care Act exchange enrollment could increase significantly if people don’t get jobs back, or if the jobs that they get back are less likely to offer health insurance.
In many respects, this is sort of what the Affordable Care Act was designed for. If you lose your job and don’t qualify for Medicaid, there is now an insurance option for anybody via the federal and state exchanges. It’s hard to tell what the specific numbers and swings will be. We will also probably have an increase in the number of people without insurance.
Impact on primary care
JP
So two or three years down the road, for the people who are getting insurance through their employers, those employers will be asked to pay more because the insurance companies would be seeking to recover that lost revenue. There are so many implications on down the road, it’s very hard to get your arms around.
You talked about consolidation. One of the people that I spoke with about these topics predicted that there would be a further drop in primary care as a result of consolidation — that people would have fewer opportunities to find doctors and the doctors would be more attached to hospitals and the patients would ultimately find that primary care suffers the aftereffects of the pandemic more than hospitals. What do you think about that?
NB
I’m not sure. You know, there are people like Farzad Mostashari, who have very strong opinions and concerns about the impact of the pandemic on primary care.
Just because a primary care provider has been acquired by a larger physician group or a hospital — that in and of itself, I don’t think, restricts access. I think what we may need to worry more about is — and I may not have the demographics exactly correct — but kind of smaller practices in rural areas, with doctors that are in their 50’s, 60’s, 70’s, maybe just deciding to hang up their white coat and be done with it. And if those doctors can’t be replaced, then you have an access problem.
Telehealth and consolidation
JP
Of all the changes that we’ve talked about, which are the ones that will stay with us and shape the new healthcare system most?
NB
Telehealth is definitely here to stay. Consolidation is absolutely definitely here to stay. It was here to stay before all this happened. And you know, we’ve done a lot of work, looking at the competition in hospital markets around the United States.
Also, the one thing that this has done is I think it’s made people fundamentally re-evaluate the risk-reward of, unfortunately, human interaction. I do think that there was probably some amount of health care that took place when people went to see doctors because they had insurance and the copay was low, or the worried well — things like that. But now — until there’s a widely available vaccine, I am certainly going to think very carefully about any close human interactions outside my family that aren’t exactly necessary. So I don’t know where in-person healthcare utilization falls on that spectrum.
JP
Yeah, my GP emailed me to say that they’re opening up for physicals and could they schedule me and I just was like, nope.
The human interaction piece. I think that has the aggregate effect of separating us and dividing us at a time when it really would be advantageous for us to be more united and more and less polarized,
NB
Yes. And I am pretty sure that this is having a serious toll on Americans’ mental health, the social isolation and lack of human interaction.
More spending on public health?
JP
Yeah, I couldn’t agree more. I’m very fortunate to, to I’m living with my daughter. If I was living alone, I think it would be very challenging. I wanted to ask: you started out by talking about whether it was really a good strategy to systematically underfund public health. Do you think there’s a possibility that the pandemic and George Floyd’s killing and the protests would be an impetus to spend more on public health, or is that a pipe dream?
NB
I think it remains to be seen. I would have said they were a zero-sum game and in order to spend more in one area, another area has to be cut. But we’re kind of in a printing money phase right now. So I think the evidence is pretty clear that we need to modernize and fund public health at every level from local to state to national. I don’t have a view as to the circumstances under which that, you know, is more likely to happen or not.
JP
I am running out of questions is, is there anything that we have not talked about that you think should be on record here?
NB
I can’t think of anything. I enjoyed the conversation.
JP
Thank you, I did too!
