Proposal might save NC $300M in health care costs. Hospitals say it’s a bad idea

October 28, 2018 GMT

State Treasurer Dale Folwell is battling hospitals across North Carolina over costs, pushing a new plan that would save money for the largest insurance plan in the state and potentially send ripples throughout the health care industry.

The State Health Plan for state employees, retirees and teachers has more than 720,000 members, and it spends some $3.3 billion a year. Eighty percent of that comes from taxpayers.

Folwell says there’s not nearly enough transparency in the system, and he wants a whole new spending model. Instead of the plan’s administrator, Blue Cross Blue Shield of North Carolina, negotiating rates in secret with hospitals, the plan would pay set amounts.

Not only would this save money, he said, it would force closely held data on what insurance plans pay into the open.

The state’s rates will be tied to Medicare, the federal health insurance plan for senior citizens. Payments would vary by service, but on average, the plan would pay hospitals and doctors 177 percent of what Medicare pays.

The North Carolina Healthcare Association, which represents hospitals statewide, is against the change, saying Medicare rates are often “well below” actual treatment costs and that Folwell’s plan could force hospitals to discontinue some services.

Even when the new rates cover costs, the plan will eat into a margin hospitals need to cover the cost of 24-hour emergency rooms and treating people who can’t afford to pay, Healthcare Association spokeswoman Julie Henry said. If rates get locked in, publicly, other insurers may push for something similar, she said.

“Then United (Healthcare) ends up saying, ‘Why are we paying more?’” Henry said.

Folwell is essentially trying to upend a model where insured patients subsidize care for the uninsured, a basic element of the U.S. health system.

“That can be a tenet of our health care system,” he said Friday, “But it’s not going to be a tenet of the State Health Plan.”

Nationally, only Montana’s state employee plan has moved to this system. If Folwell is successful in North Carolina, others may follow, including private employers, according to Mark Hall, a professor of law and public health at Wake Forest University.

“It’s very notable,” Hall said. “It really is a bold stand.”

The appointed board that oversees the State Health Plan approved Folwell’s pitch Monday. It was the culmination of a fight pushed not just over cost, but over the hard-to-follow way health care costs are presented.

Folwell has repeatedly accused Blue Cross and hospitals of keeping key information secret, even from him. Two months ago, after UNC Health Care sent him a contract with vast portions blacked out, he put out a heavily redacted press release to mock the secrecy.

The new pricing is slated to go into effect in January 2020, and the Treasurer’s Office predicts it will save $300 million in the first year alone.

Between now and the start date, it will be up to hospitals and physician groups to decide whether to accept offered rates. If they don’t, they’ll be out-of-network, increasing costs or shutting the door for state employees and retirees in the area.

“There’s a market power on both sides of that negotiating table,” Hall said. “In a lot of markets, there’s only one hospital.”

The State Employees Association of North Carolina is squarely behind Folwell’s plan. It pitched one pegged to 150 percent of Medicare as far back as 2011, SEANC lobbyist Ardis Watkins said.

The hospital association is hoping to convince the plan to make changes before 2020. UNC Health Care said in a statement Friday that a “sharp decrease in hospital payments will be devastating to hospitals across North Carolina, including UNC Health Care.”

Watkins said that, if the situation is truly dire, hospitals should release more information on their deals with insurers. SEANC said that, under the current State Health Plan model, procedures cost as little as 71 percent of what Medicare pays to as much as 994 percent.

“If this is a crisis moment for providers, then it seems like it would be a moment to share what they’re getting paid,” she said.

Blue Cross considers the deals it negotiates with hospitals to be trade secrets. But it also says it provides Folwell with what the state needs to audit the plan, including all claims data.

Folwell said key information is missing: What the company contracted with hospitals to pay.

It’s possible this fight will spill over into the General Assembly as the health care industry pressures the State Health Plan not to make this move.

Folwell, a former member of the House, said he occasionally hears a bill is coming to, as he puts it, increase plan costs and decrease transparency.

“Guess I just have to wait to see who files it,” he said.