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Work In Progress

Beneficiaries are pleased with the government’s health plan, but costs are high and medical providers say they are being squeezed; gubernatorial candidates reveal their ideas for improving the Health Reform


June 24, 2004
Copyright © 2004 CARIBBEAN BUSINESS. All Rights Reserved.

Creating the perfect government health plan

Despite the current administration's efforts to make the government's health plan as cost-effective as possible, providers still believe available funding is not enough to cover all the benefits offered to patients. Patients, however, couldn't be happier.

The Health Reform, the government’s plan to provide health insurance to the medically indigent, has survived changes in administration and an array of modifications.

The Calderon administration has tweaked it and there have been rumblings of protest from one group or another, but the health plan is still alive and kicking. What’s more, its more than 1.6 million beneficiaries express widespread satisfaction with the Health Reform and two of the three gubernatorial candidates have revealed plans to continue improving it.

Patients approve

Neither the Health Insurance Administration (ASES by its Spanish acronym) nor the Patient’s Advocate Office has updated statistics on beneficiaries’ satisfaction with the government health plan. So, CARIBBEAN BUSINESS conducted an informal survey at Centro Medico in Rio Piedras to determine beneficiaries’ satisfaction with the services they receive under the government plan.

All of the 20 people surveyed by CARIBBEAN BUSINESS said they were very satisfied with the health plan. That is an improvement over the 88.3% who responded they were satisfied or very satisfied in the previous survey on patient satisfaction, conducted by local consulting firm Estudios Tecnicos in 2000.

The only complaint expressed—and then by only eight of the 20 people—was that beneficiaries had to wait hours to see their physician. Despite the wait, they said, service was very good. The Patients’ Advocate Office, which Executive Director Luz T. Amador said has assisted almost 44,000 beneficiaries in 20 months, reports that most of the complaints it receives are related to medications and referrals.

Eight of the 20 beneficiaries also told CARIBBEAN BUSINESS they tend to visit their primary physician more than once a month. The rest said they visit their physician once a month.

Usually, the respondents said, the primary physician is available when beneficiaries go for a check-up. Only four respondents said there were occasions on which their doctor wasn’t available.

Contrary to the claims of their health insurers, most of the beneficiaries said they don’t visit emergency rooms often. Only three said they often do so because they suffer from chronic illnesses such as diabetes and hypertension.

Amador said the Patient’s Advocate Office is investigating why beneficiaries visit emergency rooms. "We will obtain valuable information on the symptoms and health conditions of those patients who frequently visit emergency rooms. We will also find out the nonclinical reasons patients have for visiting emergency rooms," she said.

Discovering the reasons is important to controlling the plan’s costs because an emergency-room visit is three times more expensive than a visit to a primary physician’s office.

Controlling the cost of the health plan

There is no question the government is doing a social good with the health plan, offering the medically indigent access to healthcare. There also is no question it is an expensive program whose costs must be kept in check.

The government allocated about $1.3 billion of the $23.2 billion budget for fiscal year 2003, to the health plan. ASES Executive Director Enrique Vicens expects the budget to increase by up to 8% in the upcoming fiscal year. This won’t be enough, however, to cover the expected increase in healthcare costs, which have risen approximately 14% in each of the past three years.

The Calderon administration has made some smart decisions to rein in the cost of the Health Reform. ASES said the government’s measures have resulted in savings of almost $290 million.

First, the Calderon administration reduced the number of regions from 10 to eight and decided to renegotiate region assignments and coverage rates for health insurers every three years instead of yearly. ASES is currently renegotiating the contracts with the Health Reform insurers. Sources close to some of the insurance companies involved told CARIBBEAN BUSINESS the talks aren’t going smoothly, though they couldn’t provide details. They noted, however, that this is just business as usual.

Second, the government eliminated some 200,000 beneficiaries from the rolls who were deemed ineligible for the program. Vicens said this has saved $280 million.

Third, the government called on insurers to reduce their administrative costs from 14% to 7.5% and to keep profit margins at 2.5%. This, said Vicens, has saved some $2.6 million, which he expects to jump to $6.8 million this year.

Fourth, the government decided to use only one pharmacy benefit manager for drug coverage, which has saved $7 million.

Gubernatorial candidates weigh in

While the Calderon administration continues tweaking the health plan, gubernatorial candidates Pedro Rossello of the New Progressive Party (NPP) and Anibal Acevedo Vila of the Popular Democratic Party (PDP) have already come up with their own strategies for improving the program. As of press time, Ruben Berrios of the Puerto Rican Independence Party hadn’t revealed his ideas for the health plan.

Acevedo Vila plans to follow through on the Calderon administration’s endeavors regarding the health reform, with a focus on improving the monitoring of insurers and providers to make sure funds are handled appropriately.

He also intends to continue projects implemented during this administration, including the smart card. "We will also study the expansion of the direct-contracting pilot project established in Guayama," said Acevedo Vila.

In addition, Acevedo Vila said he wants to "eliminate the need for beneficiaries to seek a primary physician’s approval to be able to receive medications or have tests ordered by a specialist."

Regarding the Calderon administration’s plan to open a 24-hour emergency room in each municipality, Acevedo Vila said he disagrees with those who say it wouldn’t be cost-effective. He believes holding that view could endanger the health of those who live far from medical facilities. "I promise not to sell off this government’s health facilities," he said.

His contender Rossello, the mastermind of the Health Reform, has revealed his intention to provide medical coverage to each person in Puerto Rico, although this doesn’t mean extending the health plan to everyone (CB Aug. 7, 2003). Rossello plans to offer the health plan to people whose annual income is less than twice the federal poverty level, currently $12,123 a year for one person, i.e., $24,246 a year. He also would require all employers to provide private health insurance to their workers.

Under Rossello’s proposal, people over 65 would continue receiving healthcare coverage under the federal Medicare program, and those with income less than twice the poverty level would also qualify for the health plan. People under 65 who meet the income guideline would be covered by the Health Reform.

In addition, Rossello has proposed that healthcare providers negotiate their rates with insurers collectively, which could result in a better distribution of risk. He also has proposed adjusting providers’ capitation rates and creating a fund to cover the costs of referrals, hospitalizations, and clinical tests.

Providers say payments are insufficient

ASES pays healthcare providers participating in the health plan a capitation rate—a fixed sum per patient, per month. The capitation rate, he said, is negotiated with health insurers based on the population served and its demographic composition.

"Although the payment physicians receive is based on their negotiations with insurers, this administration has implemented measures to make sure most of the money goes to pay for medical services," said Vicens.

Healthcare providers, however, say the fee isn’t enough to cover all the benefits and services to beneficiaries. They also note that the benefits keep increasing, so that some physicians, including Triple-C President Luis Marini, say the Health Reform offers better coverage than many private plans. These benefits include coverage for expensive medications.

Humana President Victor Gutierrez noted, however, that physicians are required to prescribe the generic or bioequivalent version of a drug if one exists. Beneficiaries who demand the brand-name version must pay a deductible, but some refuse to pay, even if the deductible is only a dollar or two.

Healthcare providers, meanwhile, say they have gone for months without pay because the capitation has been spent and sometimes they have ended up paying their patients’ bills. Clara Molina, medical director of an independent practice association (IPA) in Arecibo, calls this "the tragedy of the primary physician."

Say, for example, that a primary physician must refer a patient to a cardiologist. The first visit to a cardiologist alone could cost $35, said physician Jose Roman, who manages the Hostos Medical Service IPA in the western region.

This means the primary physician who made the referral has already used up the month’s capitation for the patient. Not only that, but, according to Roman, the physician would have to pay any additional costs (such as for diagnostic tests) to the cardiologist.

Sure enough, this makes primary physicians think twice before referring a patient to a specialist.

Health plan insurers, however, have a different take on the situation. "The fees we pay physicians are based on an actuarial study of the medical expenses of their covered population. Physicians need to hone their managerial skills to keep their costs in check," said Marini.

He also recommends physicians ensure they are available to their patients. This way, they can avoid having to cover costly visits to emergency rooms.

Gutierrez added that cost controls have allowed higher capitations even though the Calderon administration hasn’t substantially increased the budget for the health plan.

Sharing the risk

Vicens said the government also has taken steps to provide a more equitable distribution of risk.

"Initially, physician groups assumed most of the risk, while insurers covered expensive risks such as heart surgery," said Gutierrez. "Everyone knew physicians couldn’t assume so much risk alone, so the aim since then has been to dilute risks, particularly in the largest regions."

First, ASES set a limit on the risk to which a physician is exposed. Now, the insurer assumes risk in excess of $10,000 per patient. Second, other risks are now the insurer’s responsibility. These include high-cost services in such areas as cardiology, neurology, neonatology & pediatrics, oncology, and nephrology, as well as AIDS treatment.

Third, ASES has restructured the way capitations are paid. "We required insurers to establish a uniform compensation model to pay primary physicians. This model considers the age and gender of a beneficiary. Physicians are also paid for additional services required by newborns, the elderly, women of reproductive age, and others," said Vicens.

Insurers now pay physicians capitations according to the municipality and the age and gender of each beneficiary.

Marini added that, based on Triple-C’s experience, only some 30% to 35% of beneficiaries visit their primary physician once a month. This means, he said, that the capitations for the 65% to 70% of patients who don’t see their physician monthly could be used to cover the costs of the rest.

CARIBBEAN BUSINESS found through its informal survey at Centro Medico that eight out of the 20 beneficiaries, or 40%, visit their primary physician more than once a month. The rest go once a month.

Other ways to cut costs, lower risk

Sources told CARIBBEAN BUSINESS the cost of the health plan also could be reduced by cutting down the number of visits to emergency rooms and restricting beneficiaries’ choice of medical specialists.

"Beneficiaries believe the health plan is free, and this is why they are visiting emergency rooms when they don’t have a real emergency. They don’t realize a visit to the emergency room costs three times as much as a visit to their primary physician," said Leida Nazario, president of the Primary Health Association of Puerto Rico, which represents more than 15 federally funded IPAs.

Many beneficiaries, however, often feel they have no choice but to go to an emergency room, perhaps because their primary physician isn’t available or because they have nobody to take care of their children, said Amador of the Patient’s Advocate Office.

Marini said most patients seek physicians’ services between 5:00 p.m. and 7:30 p.m. "Physicians usually aren’t available at this time, so patients opt to visit an emergency room. Also, if a physician isn’t available during regular office hours, patients will go to emergency rooms," he said.

Most of the beneficiaries (18 of the 20) surveyed by CARIBBEAN BUSINESS, however, said they don’t visit emergency rooms frequently because their primary physician is usually available.

Marini added that the generally ready availability of emergency rooms prompts patients to visit them more frequently, even if they don’t have a medical emergency. "Promoting [easy] access to emergency rooms runs counter to preventive medicine. More than 60% of the visits aren’t emergencies," he said (CB Jan. 8).

Some municipal emergency rooms, however, have had to reduce their operating hours—usually by eliminating the 11:00 p.m. to 7:00 a.m. shift—because the Health Department hasn’t been able to cover the cost of round-the-clock service.

"Although I agree with making emergency rooms accessible, especially in the municipalities in the center of the island, where it is difficult to reach a medical facility quickly, the costs of operating these emergency rooms are too elevated," said Roman of the Hostos Medical Service IPA.

Physicians also suggested restricting the freedom of beneficiaries to choose a medical specialist when referred by their primary physician. Right now, they can take their pick.

"In private practice, most patients—about 80% to 90%—visit specialists recommended by their primary physician. In the Health Reform, however, beneficiaries can visit any specialist," said Humana’s Gutierrez.

"If we could at least be allowed to have our patients select from a pool of specialists, costs could be controlled," said Molina of an IPA in Arecibo.

Roman said this would have the added benefit of improving communication between physicians and cutting down redundant testing of patients, which also would save money.

The future of the health plan

ASES Executive Director Vicens told CARIBBEAN BUSINESS he doesn’t expect major modifications to the health reform this year. "Instead, we will place emphasis on establishing controls on covered services. To do so, the agency has acquired a system called MedInsight, which will feed on information provided by the insurers," he said.

MedInsight is like a warehouse of health information, said Vicens. "In the first phase, it will consolidate all eligibility data gleaned from health insurers and ASES. It will include information on all claims and patient visits," he said. This data will allow ASES to better assess beneficiaries’ needs.

ASES, however, already has launched a couple of pilot programs to improve the health plan.

One is intended to study the feasibility of the government directly contracting medical groups, using health insurers only as administrators—meaning they wouldn’t be exposed to risk. Under this scheme, healthcare providers would be exposed to controlled risks, while the government would assume the cost of high-risk cases and services.

The program kicked off in Guayama on July 1, 2003. In March 2004, 9,300 beneficiaries belonging to the Carolina Family Medicine Group IPA were incorporated into the program. ASES is preparing to expand the project to more than 100,000 beneficiaries.

Vicens said that in July, ASES will have evaluated all the medical groups to be included in the next phase of the project. "In the short term, this project will allow for a reduction in costs. In the long term, it will provide a database that will help us identify better ways to manage the health plan’s finances while improving services to beneficiaries."

Physicians Roman and Molina said the idea of creating a pool of specialists is part of this pilot program, and it seems to be working.

Triple-C’s Marini, however, believes the program is turning out to be costlier than the current model. "Under the pilot program," he said, "the insurers or third-party administrators have a higher percentage of administrative costs even though all they do is process claims." Under the current model, insurers must keep administrative costs at 7.5% of the capitation rate.

Marini also warned that because the government assumes all high risks under the direct-contracting model, it could be costlier than expected.

The second pilot program involves the introduction of the Smart Card, which carries information about beneficiaries’ entire medical history, including visits to physicians, treatments received, and medications prescribed.

Smart cards have been distributed to beneficiaries in Isabela, Vieques, and Bayamon. An islandwide rollout was scheduled for 2003, but Vicens said ASES is now focusing on expanding the program to the western region of the island this summer.

Health Secretary Johnny Rullan said the smart-card project is certain to yield savings. In fact, ASES said both programs are running smoothly and have already shown positive results. People outside the agency, however, are giving them mixed reviews.

For one, the price tag of the smart-card program has climbed to $80 million, twice the original estimate. Moreover, not all physicians have the necessary infrastructure to use the card (including card readers), and it is unclear who will pay for it: the government or physicians (CB Jan. 8).

Regardless of the controversies regarding the health plan’s cost, it seems the popular program will survive—and continue evolving—in the next government administration.

Uninsured population declining in Puerto Rico

The number of people in Puerto Rico without health insurance of any kind has dropped in recent years, thanks in part to the government’s health plan.

In 2003, 67,541 uninsured patients visited the more than 15 nonprofit medical centers represented by the Primary Health Association of Puerto Rico, said association President Leida Nazario. This is a 7% reduction from the 72,762 uninsured patients they saw in 2001.

According to Nazario, none of those thousands of people was uninsured because he or she had been wrongly cut out of the Health Reform, one of the Calderon administration’s cost-cutting measures. "Those who were kicked out really were ineligible," she said.

She said many of the uninsured are undocumented immigrants, abandoned elderly, battered women who must be on the move constantly, people who suddenly lose their jobs and their health benefits, and others who haven’t bothered to obtain the health plan benefits to which they are entitled.

Money is tight

Nazario noted the 15 healthcare centers represented by her association, also known as 330 centers because they receive federal funding under Section 330 of the Public Health Act and Title III of the Ryan White Act of 1990, are struggling financially.

"We are like a safety net," she said. "We take care of a high-risk population. We often see patients who aren’t aware of the importance of taking care of themselves and of having healthy lifestyles." This behavior, added Nazario, translates into higher health costs.

The centers’ patients include beneficiaries of the health plan. "We must give these beneficiaries the same services offered at other IPAs [independent practice associations], and this is draining our financial resources," said Nazario. "The government continues to increase the benefits it offers beneficiaries, but we don’t get paid more to cover them. Add to that the fact that our centers receive many high-risk patients who get bumped by primary physicians at for-profit IPAs, and it becomes evident that our funding is insufficient."

The situation stands to worsen with the rise in the number of beneficiaries visiting the centers. "Right now, 75% of our patients are beneficiaries of the government plan. In 2002, it was 66.3%," said Nazario.

Nazario would like the government to allow the nonprofit centers to implement cost-controlling strategies. One option is for the centers to restrict patients’ selection of medical specialists, laboratories, and pharmacies.

Another way to cut costs is to cut down the number of visits to emergency rooms, especially those outside the centers’ network. The association’s executive director Alicia Suarez also noted many patients visit emergency rooms when there is no emergency.

"Patients visit emergency rooms three times a month on average, and the problem is that many times they go to emergency rooms in hospitals instead of coming to ours. Our emergency rooms offer primary services such as stabilization," said Suarez. "A visit to an emergency room in a private hospital in Manati, for example, costs an average of $85. We can’t pay that amount when we receive only 42 cents per patient, per month to cover emergency-room visits."

How the Government Has Saved Almost $300 Million

To save $289.6 million during her term in office, Gov. Sila Calderon’s administration has made some significant changes to the government’s health plan.

Strategy: Savings

Kicking out 200,000 beneficiaries deemed ineligible: $280 million

Reducing insurers’ administrative costs to 7.5% and profit margins to 2.5% of the assigned budget: $2.6 million

Using only one pharmacy benefit manager: $7 million

Total Savings: $289.6 million

Source: Health Insurance Administration

How Much Does the Health Reform Cost?

Fiscal Years 1999-2004

1999: $853.7 million

2000: $1.04 billion

2001: $1.30 billion

2002: $1.35 billion

2003: $1.31 billion

2004: $1.40* billion


Source: Health Insurance Administration

This Caribbean Business article appears courtesy of Casiano Communications.
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