Health Care Troubles and a Simple Solution

UPDATED BELOW
In the spring of 2011, my partner Avery, a semi-pro cook, was working in the kitchen of our house in Santa Barbara when she cut straight through an artichoke and into her hand, severing tendons and sending blood everywhere. I was still working in France, so she called 911 and the fire department came. They took a look and called an ambulance, which drove her from the house on the Eastside to Cottage Hospital, an 11-minute drive of 3.3 miles in length, for which she was later billed $1900.

At the hospital, the first question was, “Do you have insurance? The second question was, “what kind of insurance do you have?” Avery had Anthem PPO and presented the card with the hand that wasn't oozing blood. She was waved through to immediate treatment, and one night, one surgery, and many doctor and hand therapy visits later she was on the mend. The care was good and the out of pocket cost ended up being about $2000, for some reason under the $3000 annual (in-network) cap including $410 as her share of 11 minutes in the ambulance.

That is a very happy ending under American health care. Will this be possible under the new health insurance regime, as UC’s Office of the President replaces Anthem with UC Care?

The switch is causing an uproar at UC Santa Barbara, and major concern at several other UC campuses. The UCSB problem is that it won’t have the Tier 1 benefits that other campuses get, and some subset of employees will pay more out of pocket than their colleagues at other campuses.

At a well-attended town hall on campus last week (partial audio here), there was plenty of concern about interrupted health care, reduced care, costs getting shifted onto employees—and also an undertone of worry that as a perennial “younger campus” UCSB was being relegated to second-tier status. “The breaking up of the UC system continues,” one person suggested to me in an email. There’s also the steady erosion of “total compensation” for UC employees. Salaries have been below the comparison average for years. Recently, pension and benefits are going to the same place. One effect of UCOP’s recent financial strategy has been the end of UC’s comparative advantage for employees.

But first, the answer to the care question is yes it will be the same—if you’re willing to pay more. Under Anthem, when you cut your hand open, and regardless of your doctor’s status in Anthem’s network you paid 20% of ER costs, 20% of emergency transportation, and 40% of surgical and other fees—if performed by a non-network doctor. But once one’s insurance was identified, an in-network surgeon seems to have been procured, and hence the semi-manageable out-of-pocket costs described above.

UC Care will be different: an outline is here. There is more detail here (now Scribd here), where it’s easier to compare its 3 tiers. (October 9th replacement of that link is here.) If you are my blog partner, UCLA professor Michael Meranze, and you cut your hand open in your kitchen in Santa Monica, an ambulance takes you to UCLA Medical Center, you pay $100 for ER costs, 20% of physician costs, and $100 for the outpatient surgery. That is Tier 1 UC Care, and it is available at all UC Medical Centers and other designated hospitals. Cottage in Santa Barbara is not one of these.

So if next year I cut my hand open in my kitchen in Santa Barbara, I will pay 20% of the full cost of all of the above. That is under Tier 2 of UC Care, which is Blue Shield’s Preferred network. UC Vice President for Human Resources Dwaine Duckett assured employees at the UCSB town hall that Cottage and Samsum Clinic would both be available for UC Care Tier 2 patients. And they are still available to HealthNet patients as well under HMO referral conditions.

But why would Cottage look at my UC Care card and treat me as Tier 2? I don’t know for sure, but I assume that they would want to know if my regular doctor is actually part of the Blue Shield network. And the answer to this question would be no. In that case, I will be treated as a non-network person attached to “non-preferred providers,” in other words, as a patient from Tier 3. Then I will be paying 50% of all costs (except ambulance and ER at 20%) up to an annual cap of $5000 (for individuals, or $15,000 for families).

There’s also reason to think my case is typical rather than anomalous. First of all, people want to keep their doctors, and the right to do this has become a national political issue in the Age of Obamacare. The UCSB town hall heard harrowing testimony—one faculty member reported that two of his wife’s three surgeries for brain cancer would happen at Cottage, and then the third, which fell after January 1, was supposed to be with another surgeon at a different hospital 50 miles from where they lived? It’s not clear whether there are continuity provisions.

And second, Tier 2 consists of the Blue Shield Preferred network, which has to have doctors in it for you to see if you want to belong to Tier 2. I assume that being Tier 2 at Cottage would require that your doctor be Blue Shield and have admitting privileges. There are parts of California that have great Blue Shield networks. For example, a search for Blue Shield network providers in any specialty within 15 miles of 94301, Palo Alto’s zip code, yields 983 doctors. The same search for Blue Shield’s Santa Barbara network (any specialty within 15 miles of zip codes 93101 or 93110) yields 20 doctors. And 8 of them are pathologists.

The UCSB UC Care situation seems to be this. UC Care has a lower monthly premium than Anthem did, but higher copays and caps for the non-network people who are the ones mostly likely to seek a PPO in the first place. Then, at UCSB there is no Tier 1, so the low-cost high quality option is not available at all in the area. UCSB does have Tier 2 access to the local hospital, but Tier 2 Santa Barbara—the Blue Shield preferred network-- barely exists. Tier 2 may wind up being Tier 3 for most SB UC Care people for most conditions, unless they can gear up for a 40-100 mile ambulance ride. The cross-campus inequities are obvious: what most campuses can get for $20 copays (or $100 per outpatient surgery) will push UCSB employees up towards their $5000 / $15000 annual caps.

How did Santa Barbara fall through the PPO cracks (along with, at least initially, Berkeley, Merced, and Santa Cruz)? UC Care was based on a UC med center tie in--Mr. Duckett said the medical centers came to UCOP wanting to bid for the UC employee health business—which put the non-medical campus at a disadvantage.

He also said that in the Santa Barbara case there wasn’t a failed negotiation between UC and Cottage, but between Cottage and Blue Shield. Blue Shield made bids, and Cottage “made the decision that we don’t feel as though we should be offering these types of discounts.” Cottage does have a health care monopoly in town, and seems to be holding out for more money—even if it risks losing much of Santa Barbara County’s biggest payroll to providers outside the area.

Mr. Duckett said his office would continue to lean on Cottage and Blue Shield, and that in the meantime UCSB folks should write letters to “anyone who will listen.” This strikes me as shifting responsibility onto people who didn’t create the problem and who have no power to fix it. UCOP is putting together an insurance network, and it needs to function normally across all the cities where its employees live. UCOP obviously needs to finish putting its network together.

In the meantime, there’s a simple way to restore cross-campus equity. UCOP could reimburse all UCSB UC Care patients for the difference between (a) what they are paying for the tier they are forced to use (Tier 2 at best, mostly likely Tier 3), and (b) what they would be paying if they had a local version of Tier 1.

For example, if the hand wound needs $55,000 of reconstructive surgery, the would-be Tier 1 patient would pay $1500 to UC Care, and UC would pay $3500 to UC Care to make up the $5000 of the UC Care charge to the patient, who at UCSB has to be in Tier 3. UC would make a similar payment to match the difference between a $100 outpatient surgery and the 50% of $55,000 which a UC Care Tier 3 patient would be obliged to pay.

This may seem at first like a subsidy to UCSB employees that other campuses don’t get. But in reality medical campus employees are already getting an equivalent to this subsidy from the university. And this arrangement would be temporary, while UCOP restores cross-campus equity.

On the other hand, if UCOP does no more than encourage Cottage and Blue Shield to settle, it puts UCSB at a recruitment and retention disadvantage in relation to other UC campuses, which weakens a UC system that is already struggling to keep up with its peers in other places.

UPDATE: Michael has found a 7 page list of UC Care TIer 2 providers (Blue Shield's Preferred network) in Santa Barbara, which I've posted here.  So please take my gloom about Tier 2 with a grain of salt. The UCOP patch would apply to a solid Tier 2 as well as to Tier 3.