Vermont Legislature SmartTranscripts:

[Unidentified attendee]: Good

[Rep. Alyssa Black (Chair)]: morning, everyone. It is March 12. It's birthday is day eight.

[Rep. Debra Powers (Member)]: It is.

[Rep. Alyssa Black (Chair)]: I'm really excited about to this morning. Well, I may be the only one, but I'm really excited We about have watched previously a presentation that was made to the Green Mountain Care Board regarding cost sharing at Medicare cost sharing at critical access hospitals. And I really thought that we should be looking at it a little bit deeper. And so we're doing education today, and we have Jeff Stenzlund with us. And Marilyn Bartlett as well.

[Marilyn Bartlett]: Good morning.

[Rep. Alyssa Black (Chair)]: Good morning. Let's give Jeff a second to

[Jeff Stensland]: Video present on?

[Rep. Alyssa Black (Chair)]: We're seeing, like, an I with a slash through it. Our committee assistant is suggesting you look at your computer's video camera and that it might be closed.

[Rep. Debra Powers (Member)]: Wouldn't it just be black?

[Rep. Alyssa Black (Chair)]: No. That's one of That

[Rep. Leslie Goldman (Member)]: symbol it evokes like the sci fi.

[Unidentified attendee]: I to

[Rep. Alyssa Black (Chair)]: say, I've got a MacBook this year, and I never find where the little camera thing hurts. I have to Google it every time. It's usually on this call. I know, but it's not.

[Jeff Stensland]: It's not.

[Rep. Alyssa Black (Chair)]: It's some very strange place. Every time I get a new iPad, I have to

[Rep. Debra Powers (Member)]: start relearning. I can't show them. Can't show them.

[Rep. Leslie Goldman (Member)]: Emails right now on my phone.

[Rep. Alyssa Black (Chair)]: I know.

[Jeff Stensland]: My videos, so I might have to go without video.

[Rep. Alyssa Black (Chair)]: Okay.

[Unidentified attendee]: Even though I'm looking very

[Jeff Stensland]: good today, you just have to miss out on that.

[Rep. Debra Powers (Member)]: You can send screenshots and

[Rep. Leslie Goldman (Member)]: the committee has submitted a post it.

[Rep. Alyssa Black (Chair)]: It's like an eye with a big scarf process.

[Jeff Stensland]: Yeah.

[Rep. Alyssa Black (Chair)]: Well, thank you for joining us anyways. And I see that you have control. Did you have So who was gonna go first, Jeff or Marilyn? And why don't you both Okay. And then introduce yourselves. And I'll introduce myself because I haven't introduced myself to either of you. I'm representative Alyssa Black, and this is House Healthcare, and we're really excited to have you in today.

[Jeff Stensland]: Well, thank you. I'm Jeff Stansland, and I did much of this work when I was an analyst at the Medicare Payment Advisory Commission. I'm an independent consultant now, and I've spent a large part of my career looking at rural health issues and Medicare pain issues.

[Rep. Alyssa Black (Chair)]: Thank you.

[Marilyn Bartlett]: And I'm Marilyn Bartlett. I'm a senior policy fellow with NASHV, but then also have contracts with some other work that I do. I'm a CPA and actually a forensic accountant. So my work is with the dollars and the cents and following the money. And I think Jeff goes first. He lays a really good background for the whole policy.

[Rep. Alyssa Black (Chair)]: Great, thank you. And we have had you in before Marilyn on other subjects and always a wealth

[Marilyn Bartlett]: of knowledge. Thank you. It's an honor to be here. Jeff, do you want to go ahead and start? I don't know if the PowerPoint, we sent Jeff's PowerPoint in if it can be shown there.

[Rep. Alyssa Black (Chair)]: Have it. We have it.

[Unidentified attendee]: Yeah. You have it?

[Rep. Alyssa Black (Chair)]: We do. We have it. Is it something you can put up on a screen share?

[Jeff Stensland]: Let's see if I can share screen or not. I think I must be having some issues today. Let's see the screen share here. I will just start off with the presentation.

[Rep. Alyssa Black (Chair)]: All right. Tasha, are you able to share your screen? Yes, I can do that. Just give me one second. Let's give our committee assistant a minute to and she can share and then maybe roll through as you're going through sort of a next slide. Did anyone have film strips when they were kids? Yeah, of course. Film machines, remember? It was always like a real honor if the teacher picked you to like, when it went ding, you were like, Okay, I think we've got it up.

[Jeff Stensland]: Well, you for putting up with all of that. I'm just going to give you a little background to start with. Up till 1983, Medicare used to pay hospitals based on their cost. And the thought was that that was inflationary because if people said, here, you tell us what your costs are, we'll pay it. There wasn't a big incentive to reduce their costs. So they instituted prospective payment rates where we're going to say we're going to say you pay you set rates for your inpatient care. That happened in 1983. And then that tended to reduce inpatient costs. And they thought, okay, this was a success. Let's do it on outpatient care also. In 1997, they said we're also going to pay prospective payment rates on outpatient care. But at that time, there was a concern that there's some of these small rural hospitals and their volume is really low. Because their volume was low, their cost per unit was high. And they said, you shouldn't pay us the same perspective rate you're paying these urban hospitals because our volume is too low for us to keep our costs that low. And also, we have a lot of uncertainty in what our costs are going to be from year to year. So after some lobbying in 1997 in the Balanced Budget Act, they created the Critical Access Hospital Program where they said, Okay, these small rural hospitals that have 25 or fewer beds, we're going to let those hospitals continue to be paid cost based reimbursement for their inpatient and outpatient care. And what we're talking today about is outpatient care at these small critical access hospitals. And Medicare generally had cost sharing equal to 20% of the cost of care historically, but there was the question of well, what is the cost of care going to be when the patient gets the care? We don't know what the cost of the hospital will be at the end of the year. So what we're going to do is we'll charge them 20% of the list price because we know what the list price is when they come into the hospital. And that will be their coinsurance and either the beneficiary or their Medigap plan will pay that 20%.

[Rep. Alyssa Black (Chair)]: You're referring can I interrupt just I feel like I'm going to interrupt you a lot because I have so many questions?

[Jeff Stensland]: Go right ahead.

[Rep. Alyssa Black (Chair)]: So when you say list price, are you talking about like their charge master? Just, you know, what they randomly decided to charge something?

[Jeff Stensland]: Yes, it is that it is their charge master.

[Rep. Alyssa Black (Chair)]: And that does that have any relation to what's considered cost of care?

[Jeff Stensland]: Not very much. The, back in 1997, the difference between the charges and the costs weren't as great as they are now, but over the last thirty years, we've seen list prices go up faster than costs. So now the charges on average are about 250% of costs, and they vary widely from service to service. Some some services might be 110% of costs, some might be 500% of costs. So the charges are have really lost their tethering to costs.

[Rep. Alyssa Black (Chair)]: Okay, thank you.

[Jeff Stensland]: So now I'll talk a little bit about how this coinsurance works. The program payment is going to be this is the payment from the Medicare program. Go back one.

[Unidentified attendee]: Yeah.

[Jeff Stensland]: Let me go back one slide. Yeah. So the program payment is 100% of costs minus coinsurance. And the beneficiary coinsurance is 20% of charges. As I said, this varies widely. And this compares to the PPS hospital where it's 20% of the payment rate subject to a cap. So those are the main differences. And the main thing to think about here is the program payment, the amount the government is paying is 100101% of the costs minus coinsurance. So if coinsurance is small, the government will pay a large share of the total. If the coinsurance is high, the government will pay a small share of the total. And because coinsurance is based on charges, that means if charges are high, the government pays less. We can go to the next slide. So, this is looking at the aggregate data. So, I looked at 2022 data, and at that time the coinsurance billed, this is to the beneficiary or their Medigap Plan, was $3,300,000,000 and program payments were $3,200,000,000 and the total for outpatient services at critical access hospitals with coinsurance was $6,500,000,000 So what this tells you is the beneficiaries and their Medigap plans were paying a little bit over half of the cost of these critical access hospitals. Where at a PPS hospital, they would have been paying 20%. And for the typical beneficiary using a critical access hospital, they would have had aggregate coinsurance during the year of $17.50 dollars And for about 16% of them, they would have billed that directly to the patient because they didn't have any sort of supplemental coverage through an employer or Medigap. And we can go to the next slide. And now I'm just going to go and illustrate how these charges and whether it's a low markup critical access hospital or a high markup critical access hospital can affect the coinsurance paid by the beneficiary. First, look at this first column. This is a low markup critical access hospital. And the cost of the item in all of these cases, let's say is $600 for example, that's a typical cost for an MRI. But for this low markup hospital at the tenth percentile for something that's causing cost 600, they only charge a thousand. And the co insurance is 20% of charges or $200 And the program is going to pay 101% of costs or $6.00 $6 minus the coinsurance of $200 where the program will pay $4.00 $6 So in this case, the coinsurance as a share of total payment is 33%. Now, you look at the last column, these are high markup critical access hospitals. And this use this example to represent basically a hospital at the ninetieth percentile in terms of markup, meaning how much higher their charges are than their costs. In this case, the cost of the MRI is the same, dollars 600. But in this case, the charge was set at four times cost or $2,400 The coinsurance then is 20% of the $2,400 or four eighty dollars and the program payment is $126 And in this case, the beneficiary or their Medigap plan is paying 79% of the cost. And the whole difference here is that one hospital versus another had a different list price in their charge master. And that's perfect. That's completely, at their discretion. And you may say, well, why do these hospitals have such high charges? And one tempting reason that it is high, is tempting to raise your charges is that often commercial plans will pay hospitals based on a discount to charges. They'll say something like, we'll pay you half of your charges for your outpatient services. The hospital then has an incentive to or a temptation to increase their charges a little bit so they can get a little bit more money. There's also some people who pay full charges, for example, if you don't have insurance, but you have the means to pay. I mean, go to the next slide.

[Rep. Alyssa Black (Chair)]: Before we go to the next slide, can I clarify something for my own education? Yeah, the $600 Yeah, You have cost of that. Is that the cost of care or is that like Medicare's PPS allowed or where is that 600?

[Jeff Stensland]: And this is just an illustrative example where I made that up, but that's like a typical cost for these MRI, the cost that the hospital is incurring. So that would be hospital incurred $600 to deliver the service. And CMS said, okay, in the end, that means because it costs you $600 to deliver it, we're going to give you 101% of that or $6.00 $6 And then we're going to figure out how that's going be divided between the patient and the Medicare program.

[Rep. Alyssa Black (Chair)]: How does the claim get processed in real time though, if they don't actually know the $600 until I'm assuming there's a true up.

[Jeff Stensland]: There is a true up at the end of the year, but for the actual claim, they're going to say, okay, we don't know exactly what this is going to cost. But historically, they'll look at the charges from the prior years. And they said if they say, well, historically, your your costs tended to be about one fourth of your charges, or your or your charge master had prices that were four times your cost. Therefore, we're going to estimate, for this initial claim that your costs were one fourth of your charges. So they're basically this $600 when the claim is initially paid and the beneficiary pays their coinsurance, that's based on data from past years as an estimate.

[Rep. Alyssa Black (Chair)]: How does the cost at a critical access hospital compare with the set price that like a PPS hospital? Is it usually, I mean, I'm assuming it's usually higher, which is why they've got this whole cost of care thing.

[Jeff Stensland]: Right. It's usually higher. If you look at the typical critical access hospital in, 2022, which is the year I looked at it, they had about $10,000,000 in costs for providing outpatient services to fee for service Medicare beneficiaries. And so they got about $10,000 for those services. But if they were paid PPS rates, they would have gotten about $6,000,000 on average. So the PPS rates are really only about 60% of the critical access hospitals costs.

[Rep. Alyssa Black (Chair)]: So even if you had a critical access hospital who actually did charge the exact cost of care, and 20% is paid. That 20% is still going to be higher than the 20% at a PPS hospital, correct?

[Jeff Stensland]: Correct. And the PPS hospitals on average, their is about 90% of cost. So you would say on average, if the beneficiary at a critical access hospital was billed 20% of costs, they would still be paying about 30% more than a PPS hospital.

[Rep. Alyssa Black (Chair)]: Thank you. I appreciate the clarification.

[Jeff Stensland]: All right, so there's two things that are going on with the difference between the critical access hospital and the PPS hospital. And the one we talked about was how coinsurance is 20% of charges and not 20% of the PPS rate. The second thing that's becoming more important is in the OPPS system there's also a cap, and the cap is the inpatient deductible. So what they're saying is we're not going to charge you more for an outpatient service than we would if you had the service done on an inpatient basis. And you can see you don't want to encourage people to say, oh, I want to have my cataract surgery done on an inpatient basis because the cost sharing is lower. So what they have here is the cap is equal to the inpatient deductible, which in this example in that year it was $16.76 dollars So let's go through an example of something that is done at critical access hospitals and is a relatively high cost service. In the first column, we have an OPPS hospital, and for this hospital, let's say the cost of the joint replacement is $13,000 and let's say they charge $26,000 or twice their costs. The OPPS rate in this year was on average about $12,867 So what is the coinsurance going to be? If they

[Rep. Alyssa Black (Chair)]: paid

[Jeff Stensland]: 20% of the $12,000 that would be about $2,500 That's more than the cap. So they are billed the cap of $16.76 dollars Meaning they're paying less than 20% of the rate because of the cap. But now we have the critical access hospital, and they don't have a cap on their charges. And what is going on is they let's say the cost of the item was the same $13,000 and the charge was the same of $26,000 In this case, they're going to pay coinsurance equal to 20% of the charge or $5,200 And the point here is to say that this cap can be important, and the lack of a cap can result in very high coinsurance at critical access hospitals. And this is something that is much more important now than it used to be. Because you think of especially even ten, twenty years ago, there wasn't a lot of outpatient surgery done at a complex outpatient surgery done at critical access hospitals. Like at that time, things like joint replacements were done on an inpatient basis. So there's much more of these expensive, devices being implanted in an outpatient basis now than there was historically. The other thing that's changed is there's much more expensive drugs than there used to be. So some of these critical access hospitals do Part B drug infusion, so there's really expensive chemotherapy treatments. And if you look at the cases where critical access hospital patients are paying much more than the cap due to the high charges. They tend to be things like joint replacements and expensive drugs. And that is basically the story, and you might be wondering, well, the bottom line here is that when I was at the commission, the commission recommended changing the coinsurance from 20 percent of charges to 20% of estimated costs, which would reduce coinsurance on average at critical access hospitals by about 60%. And the main idea there was they would be more equitable because I think as I've shown you here, it's inequitable in that the patients who happen to live in a small town with a critical access hospital are charged much more coinsurance than other patients. And in order to bring more equity, I think several commissioners recommended or put the rationale for the recommendation as greater equity. And you may wonder, well, is this going to be you think what Congress could just go and change this? And one of the difficulties here is that it's because when because of the way the system works is if indeed coinsurance was shifted to 20% of the costs rather than charges, the amount of coinsurance that the beneficiary would pay would go down by about 60%. But the amount that the hospital gets would still be the same, meaning that the government would pay more. And at the time in 2022, it was estimated that it would be something like $3,200,000,000 of increased federal spending just to make that change. And beneficiaries of that reduced cost sharing would mostly be the Medigap plans and the employers, and also to some extent the MA plans would get more money. The Medicare Advantage plans would get more money. So you can see the the shorthand in policymakers minds is they need to be willing to spend those extra dollars in order to create more equity. And I'll turn it over to questions or the next speaker.

[Rep. Alyssa Black (Chair)]: Does Medicare Advantage sort of follow the same metric as far as how they pay?

[Jeff Stensland]: Medicare Advantage generally does not. Usually, they have some sort of set rate for the coinsurance that they're paying. Uh-huh. They usually have the they usually follow the same price that, the fee for service is paying, but they're they each have the ability to set their own, payment rules. And in some cases, it's a percentage of the amount paid, and some cases it's a fixed dollar amount that they'll pay the critical access hospitals. They also have some ability to have in in network and out network out of network. So they may say for out of network, we're going to charge you 50% of the cost at the critical access hospital, but for in network, we'll charge you, you know, x dollars.

[Rep. Alyssa Black (Chair)]: Does this affect Medicaid when Medicaid is the secondary payer?

[Jeff Stensland]: Yes. So Medicaid, if it's the secondary payer, will be billed 20 percent of charges. And in some cases, Medicaid pays it, in some cases they don't. And they usually do not have to pay it if the Medicaid rate is less than the amount that Medicare pays for each share of the program payment. So, let's say the Medicare Medicaid rate for something is $100 and the critical access hospitals cost is $200 and the program pays $100 and they say here that the amount due for Medicaid is $100 The Medicaid program in some states will say, no, we're not going to pay anything because you've already received an amount that's equal to the full Medicaid rate. And I haven't looked at different amount case to see how Vermont Medicaid works. That's step one. And then step two is, well, if the Medicaid program doesn't pay, it becomes bad debt, and the Medicare program will then reimburse the hospital for 65% of that bad debt.

[Rep. Alyssa Black (Chair)]: So, guess I'm if we use your example of the $600 MRI. Yeah. So if we're at a high markup and Medicare has paid $126 for this 600 cost of care MRI.

[Rep. Debra Powers (Member)]: Right. And

[Rep. Alyssa Black (Chair)]: if Medicaid. Has a rate. Okay, so the 20% would be $480 if Medicaid actually allows say, I don't know, I can't do the math right now but say they allow 300 for that particular MRI, then they would pay the difference between the 300 and the 126 that Medicare. Am I right?

[Unidentified attendee]: Yeah, that's

[Jeff Stensland]: the way it wouldn't usually work. But states have different ways of of doing Okay. Like there's one state where they specifically say we're going to set our rates so that they're equal to 80% of whatever the PPS rate is, because we don't want to be paying any coinsurance for Medicaid. Other states pay almost all the coinsurance.

[Rep. Alyssa Black (Chair)]: And I just want to be clear. So Medicare, I mean, critical access hospitals, They're not getting any more. Are they getting any more money? Then they would have. Is it strictly a function of what their charge amount is? I guess, is it more of a division of who's paying a set amount or are they getting more than that set amount?

[Jeff Stensland]: From Medicare, they're not getting more by increasing their charges. It's just a question of who is doing the pay.

[Rep. Alyssa Black (Chair)]: Okay.

[Jeff Stensland]: And as a matter of fact, they might actually get a little less from Medicare to the extent that when they jack up their, where they have high charges, the it's more likely that somebody won't pay it. Either the beneficiary without coinsurance doesn't pay it or Medicaid doesn't pay it, and then it becomes bad debt. And as I said, the Medicare program will pay bad debt payments, but it's only 65% of the cost of the bad debt for those Medicare patients who didn't pay their coinsurance. So the hospital, if it has high charges, actually get a little bit less on net for its Medicare patients. But the main point is that the hospitals are required to have the same charges for their Medicare and their non Medicare patients. And the incentive to have higher charges for your commercial patients, are often being which are often those commercial insurers are often paying you some discount to their charge master. That's such a big incentive to have higher charges there, that you would be, reluctant to reduce your charges kind of the the commercial effect, swamps the Medicare effect in terms of incentives.

[Rep. Alyssa Black (Chair)]: Is there anything stopping them from charging the actual cost of care and then negotiating contracts with commercial payers as a plus, you know, cost plus rather than a discount on?

[Jeff Stensland]: I think they could could do that. And if they did that, there would be more federal dollars coming into Vermont for care less state dollars and lower Medicaid premiums in Vermont. If they did that, there would be a, they may lose some money to the extent that there are certain people who are still paying charges. And I don't know how it works in Vermont, but things like car insurance cases, if somebody's in a car wreck or workers compensation or people without insurance, but have the means to pay, they might be paying full charges, which can be dramatically more than costs. The hospitals, if they reduce their charge master, might lose some profit on those folks.

[Rep. Alyssa Black (Chair)]: Thanks. Top brand has a question.

[Rep. Debra Powers (Member)]: Who determines whether a person has the means to pay?

[Jeff Stensland]: Usually that's the charity policy of the hospital. I think there's actually some charity requirements in Vermont that you'd all probably be more familiar with than I am. So like, usually, it's like something like, oh, if you're below 200% of the poverty rate, we aren't gonna require you to, pay your bill.

[Rep. Alyssa Black (Chair)]: You would you talked about sort of a true up. Mhmm. Is it is it done, like, on discrete individual claims, or is that done sort of in aggregate? How how is it how is that true up done?

[Jeff Stensland]: The true up is done in aggregate at the end of the year. For each one of these cases, they will have an estimated cost, as I mentioned, based on historical experience, and they'll make that as an interim payment. And then at the end of the year, they'll go through the, what they call the cost reports or the financials of the hospital, and they'll estimate the costs of all the different fee for service Medicare patient services that occurred. And then they'll look at all the interim payments that they made throughout the year. And if the interim payments are too low, they will pay more to the hospital. If the interim payments turned out to be more than costs, then the hospital will pay them back some funds. And there is one oddity that happens rarely, I don't know if it ever happens in Vermont, but there are some hospitals that have charges more than 500% on average of the costs. So you may ask, ask what happens there, like if your charges are 600% of costs on average, so then the coinsurance would be 120% of costs. And in those cases, the beneficiary or their Medigap plan would be billed 120% of costs. But then Medicare would say, Look, you got more than 101% of your costs, so then you have to pay us money back. So if you look at the financials of some of those hospitals, you'll see that the interim payments are actually the hospital paying CMS, meaning CMS makes money when these patients go to those hospitals, because the charges are so high, and the coinsurance is so high.

[Rep. Alyssa Black (Chair)]: So essentially they overcharge the patient and then the money that the patient has paid then goes back to CMS instead of back to the patient?

[Jeff Stensland]: Yes. So let's say they let's say the coinsurance was 120% of the cost and the Medigap Plan paid it. But then CMS would say we only owe you 101% of costs. So you got you received 120% of costs. So that 19% of costs, that extra that you got from the Medigap Plan, you have to send that to us.

[Rep. Alyssa Black (Chair)]: Is that is that amount? Is the is the amount that they would have to pay back. Is that a discrete number or is it in the aggregate of say what Medicare has to pay them in addition in this true up? Is it just sort of like a final number or is it based on here's how much we owe you, but here's how much you owe us And so therefore, here's the total number.

[Jeff Stensland]: And it's a final it's a final number. But for some of these hospitals that have historically had really high charges, you'll look at their reports and you'll say, well, what are these interim payments that they're making? Normally the interim payment is, oh, we think we're going to owe you X, so we'll send you X. But for these hospitals, the interim payment goes the other way with the hospital saying, oh, it looks like you're going to pay us, our co insurance will be more than the full cost, So we're going to pay the hospital. So if you look at their cost reports, you'll see that throughout the year, the hospital is sending CMS a little bit of money. And then at the end of the year, they have a true up to see that the hospital sends CMS enough money for their outpatient care.

[Rep. Alyssa Black (Chair)]: We have a question from our healthcare advocate actually in the room.

[Mike Fisher (Vermont Health Care Advocate)]: Hi, Jeff, Mike Fisher here. We met

[Mike Fisher (Vermont Health Care Advocate)]: a couple months ago. You for being here. The same area, I'm wondering, I just can't think through all the scenarios. So let me ask you a little bit broader. Are there scenarios where the aggregate costs for the hospital aren't, when the hospital is making more money due to high charges than it would have gotten from Medicare, in excess of the Medicare allowance.

[Jeff Stensland]: No, I don't think there's any way any way that the hospital will get more money from high charges from Medicare. From

[Unidentified attendee]: Medicare or a questionnaire. Medicare. Yeah.

[Jeff Stensland]: The the the combination of Medicare and the cost sharing there there's a in general, the answer to that would be no. Okay. That there is no incentive coming from Medicare for high charges. The incentive is coming from the other patients.

[Rep. Alyssa Black (Chair)]: What if it's can I expand on that? And then I'm going to go back to Mike if he wants to. What if it becomes bad debt? What if, say, somebody is paying 120%? Yeah. And that 120% becomes bad debt? Yeah. Wouldn't the hospital get 65% of that?

[Jeff Stensland]: Hospital would get 65% of the 120% as a bad debt payment. They would have sent back to CMS 19% a due to their high charges to bring it back to bring the total payment down to 101%. So, the end, they would be getting 65% of their costs minus 19% of their costs. They would be getting 46% of their costs for that patient that they had really high charges for that that didn't pay their bill.

[Rep. Alyssa Black (Chair)]: Okay, did you want to continue?

[Unidentified attendee]: No, think that makes that helps. I was curious about that.

[Rep. Alyssa Black (Chair)]: Thank you, Jeff. Really appreciate it. Oh, wait, one more question. Yes, Jeff Karen Lueders. Wondering what state is the one that is doing the 80% so that there is no coinsurance, if you know?

[Jeff Stensland]: Sure. I think I may have misspoke. I think there are some states Medicaid programs usually pay the full the full 20% of charges as coinsurance. In other states, they don't. I'm not sure about any states where they're actually doing what you said.

[Rep. Alyssa Black (Chair)]: These are actually, I have a question about that. So these are all outpatient charges.

[Jeff Stensland]: Yes.

[Rep. Alyssa Black (Chair)]: And I'm, you know, I'm slightly familiar with billing on outpatient charges.

[Jeff Stensland]: And

[Rep. Alyssa Black (Chair)]: so you bill Medicare.

[Unidentified attendee]: Yeah.

[Rep. Alyssa Black (Chair)]: And of course, you bill them electronically and then Medicare crosses over The the claim to the secondary payer, including Medicaid, if in this case, if it's Medicaid. Yeah, and it's just a crossover claim that comes with. Here's how much. We paid, here's how much the coinsurance is. I guess I'm wondering, would states Medicaid, Would they even know what they're paying? Since it's all kind of this electronic. Crossover?

[Jeff Stensland]: The state's Medicaid program will get a bill saying the total cost was x and Medicare paid y, and what the hospital is entitled to receive from you is a certain number, and then the state Medicaid rules will determine how much of that number they will pay.

[Rep. Alyssa Black (Chair)]: Okay. So I guess we have to figure out what our state Medicaid rules are. Yeah, I mean, you wanted to This is just Is it easy for you or is it I don't know. Can you look at Vermont and see how it would work here? Or is that a really big project?

[Jeff Stensland]: You mean, maybe, I don't know if Marilyn has a better handle on what's actually happening from what she may have looked at.

[Rep. Alyssa Black (Chair)]: Yeah, okay. Are you talking about the Medicaid payment? He was saying that state to state it's handled differently. I think we should ask a variety of models. Okay. Yeah. We should ask Vermont Medicaid.

[Unidentified attendee]: Medicaid is the right.

[Rep. Debra Powers (Member)]: Okay, thank you.

[Rep. Alyssa Black (Chair)]: Thank you so much, Jeff. Marilyn, thank you.

[Jeff Stensland]: I apologize for my video.

[Rep. Alyssa Black (Chair)]: Did you want to go ahead and I think you can screen share. Great.

[Marilyn Bartlett]: Did it come up? It did. Well, that's a miracle.

[Rep. Alyssa Black (Chair)]: Okay.

[Marilyn Bartlett]: Well, thank you. And every time I hear Jeff speak, I've learned something. I've got two pages of notes here. So I thank you. I'm going to cover Vermont and national kind of the end impact from using those cost reports that Jeff mentioned. So just to summarize what Jeff said, this pertains to critical access hospitals. The Medicare payment is 100% of reasonable costs because they felt that this would give significant financial benefit to CAHs. And the payment is determined by costs. As Jeff mentioned, those costs prospectively aren't available when the rate is set. So they use charges. And Jeff had mentioned once that when this started in 1997 and in the late 1990s, the chargemaster rate and the costs weren't that far apart. But as we saw the different payment mechanisms coming in with insurance companies and driving discounts off charge masters and how charge masters are used, we saw this big disparity come. Just to summarize what Jeff said, this is outpatient cost sharing for your acute care hospitals. They pay the OPPS rate. Medicare payment calculation is 100% of cost that is trued up. The patient cost sharing is 20% of the Medicare approved rate at acute care and the cap is the inpatient deductible. And they're also reimbursed 75% of any Medicare bad debt. And then as Jeff so clearly showed us, this is the issue with the member pay, 20% of the charge, no cap. And then they're also paid the 65% bad debt.

[Rep. Alyssa Black (Chair)]: Marilyn, can I interrupt you and ask a question real quick? Keep hearing the 65% of Medicare bad debt, but hospitals often write things off to bad debt and then, you know, sort of patient assistance based on income. Does When we're calling bad debt, are we referring to both free care and bad debt or are we just referring to bad debt?

[Marilyn Bartlett]: Where we, on here, it is the patient co pay or the patient co insurance, the amount the patient owed, if they're not able to pay their amount owed or only pay a partial amount, Medicare will pay 65% of what patient isn't able to pay.

[Rep. Alyssa Black (Chair)]: So at all of our hospitals in Vermont, we have patient assistance where I think it's up to like 400% of FPL, where there's some form of discount or payment arrangement, oftentimes being a complete and total write off of the charge if the income is low enough. I'm wondering if Medicare makes a distinction between whether that that 20% of charge was written off to true bad debt, is, you know, essentially the patient just didn't pay it and the hospital ends up writing it off, or if it's from the patient assistance, which is then categorized as sort of free care.

[Marilyn Bartlett]: Yeah, what I have seen and I'd ask Jeff if he is seen differently, but what I have seen is that Medicare patients are treated differently, that for Medicare outpatient, they follow the rule of billing them, billing the Medigap plan, and then submitting to be able to pay 65% of that bad debt. And then the 35% is usually written off.

[Rep. Alyssa Black (Chair)]: Okay.

[Marilyn Bartlett]: I don't know if that was clear again, I'm working with the Medicare cost reports and that's what I see and I see where they're able to declare charity care is what they're still calling it, but it is financial assistance policy. They're able to take that 35% there to report as charity care.

[Rep. Alyssa Black (Chair)]: Okay, all right, I think I get that. Did you wanna check?

[Mike Fisher (Vermont Health Care Advocate)]: Hi, Mike Fisher here. I think

[Unidentified attendee]: our hospitals all doing this consistently and appropriately, I have a 100 questions and would really look to the board ultimately to make sure that hospitals are reporting. There's a number of moving pieces in what we just described and I wouldn't be surprised what was being done differently at different hospitals.

[Rep. Alyssa Black (Chair)]: I'm wondering when the hospitals report to the Green Mountain Care Board, their free care and bad debt. I'm wondering if it includes like the total, whole of what they're writing off or if the 65% that Medicare is then giving them in a true up payment is being calculated in that? In other words, are they saying that they're writing off more than they actually are?

[Marilyn Bartlett]: That's a very good question. And I'm glad to follow. We are working with Green Mountain Care Board right now with Kirk and Elaine and team on pulling more fields from the Medicare cost report so we can pull the fields of the, Jeff mentioned, those, payments that are the interim payment amount and we'll be able to pull out what Medicare paid on the 65%. So hopefully that will be some data that Green Mountain Care Board can look at and reconcile with the other information that they receive. It's a very good question.

[Rep. Alyssa Black (Chair)]: Thanks. Wait, you just go back Marilyn. Oh, The screen and I think Debra has a question And for

[Rep. Debra Powers (Member)]: the reason I am asking this question is I can't understand. Critical access hospitals, 101 of the cost. Next column, patient costs you 20% of the charge. If Medicare is paying 101% of the cost, I'm trying Yeah, to figure out

[Marilyn Bartlett]: that's a very, very good question. This should be Medicare pays 101% of the cost minus the patient cost share.

[Rep. Leslie Goldman (Member)]: Okay.

[Marilyn Bartlett]: That's a good catch. Thank you.

[Rep. Debra Powers (Member)]: Okay. Thank you.

[Marilyn Bartlett]: Yeah. So basically the the members co cost sharing is reducing the amount Medicare pays. Thanks for finding that. So what we took a look at was with every state, we wanted to see since the 20% is the amount that the that the coinsurance is built off of. The states will fluctuate a little bit by bad debt, how that payment comes through. So we wanted to see the blue bars show you for each state critical access hospital, the average patient out of pocket as a percent of charges. So Vermont is coming in at 17% as average of your critical access hospitals that the patients are paying an average of 17% of charges. And I counter that with the orange bar down here for your acute care hospitals. They're paying 4% here. Now we talked about their coinsurance and we'll get to that later as as a percent of payment, but this is a percent of charges. So you can see this across the nation and, the 20%. And then you can see this compared to your patients out of pocket if they are going to an acute care hospital.

[Rep. Alyssa Black (Chair)]: So this is that the out of pocket is a percent of charges, but does this take into account how high Yes. Our charges

[Marilyn Bartlett]: Okay. I use your charges, I use each hospital's percent of their charges for the Medicare

[Rep. Alyssa Black (Chair)]: patients. Okay.

[Marilyn Bartlett]: So you take going back to what Jeff was saying as things have moved and we'll talk about it is that critical access hospitals that have wanted to take on more of the outpatient services. If you're a patient and you know you're gonna pay 4% of charges here versus 17 here, this may impact side of care. So I looked at 2024 and from the Medicare cost reports.

[Unidentified attendee]: We've got a question from the room. Actually, Marilyn, I just wanna restate what you just said because I think it's something no one knows. Okay. Just to restate it, if you're a Medicare person and you're looking for outpatient care and you're worried about your charges, maybe you don't have secondary coverage or maybe you're worried about your health insurance, your Blue Cross mega gap plan having to pay too much. We in this state have been talking for a long time about how expensive UVM is for instance, compared to other states. This is a scenario where the impact on you is gonna be significantly different if you went to a PPS hospital like UVM versus a critical access hospital. And I don't think anybody knows that. Thank

[Marilyn Bartlett]: you so much for clearing that up because that is the key point here for your consumers. So we took a look at 2024 just that same chart you just saw but let's take it down to the Vermont hospital level and I listed the hospital and then this is what's reported on their Medicare cost report. This is what they received as a percent of charges. And you can see your critical access hospitals are going to be higher than the other acute care hospitals. So then we took a look at what is it as a percent of the Medicare payment because we talked about how the outpatient out of charge for critical access hospitals is going to be 20% of charges. And so we wanted to see what this looks like. And you can see here in Vermont, the average for your critical access hospitals is 48% of the Medicare payments. So the Medicare payment, that 101% is costs, Medicare is not gonna have to pay that full amount. They're gonna be paying 52% of that amount and the coinsurance comes in. Now I haven't adjusted these yet for the bad debt payment or the interim payments, but we're going to be working on that further.

[Rep. Alyssa Black (Chair)]: Oh, we don't seem nearly as high as other states, but how do the number of critical access hospitals in Vermont compare to some of these other states? I'm wondering about percentage of our population receiving their care at a critical access hospital compared to I look at a high line for Florida, but what is Florida's rate of critical access hospitals to population?

[Marilyn Bartlett]: Yeah, that's a really good point. We haven't done that analysis. Now I'm here in Montana. We have 48 critical access hospitals and 11 acute care hospitals. And we're widely dispersed but as far as services they provide, I'm not up to speed on that. This North Carolina one really kind of, I wondered if it was a reporting anomaly, but there's some that are up there pretty high, but I'm not sure of that because this is just the critical access hospitals. And, but I know what you're speaking of that's, you know, even in Montana where we have 48, an average of that's gonna look different than an average of six or seven. So I understand what you're saying. We can take a look at that though. The number of critical access hospitals in these States.

[Rep. Alyssa Black (Chair)]: Thank you.

[Marilyn Bartlett]: So this is looking at the average Medicare outpatient payments. So what I should have done a stack bar pretty much but the average Medicare payment, this is total in Vermont is the green line. So that's what the Medicare payment has done over time. The blue line shows you how much the average patient is paid. So as those charges go up and as Medicare prices go up, as healthcare costs go up, you're gonna see that blue line to continue. So this is an increasing trend for your patient payment on the cost share here. I then compared it to your acute care hospitals and the green line is showing you the average Medicare payment for your acute care hospitals. Blue line is showing you the average total for the patient pay. Further showing you that difference of what your acute care hospitals receive from Medicare versus what they receive from patients compared to the critical access. The last or one other thing we looked at was the out of pocket percentage of Medicare patients. And we looked at the average here for inpatient and outpatient. On the right is the Vermont critical access hospitals and the average out of pocket payment of the total payment you can see it's running up to the 48%. That's been steadily increasing compared to the average out of pocket spending on the bottom for your for the part A, excuse me, part A is the inpatient, I should explain that part B is the outpatient. So going to a critical access hospital, your payment portion for inpatient is running around 10% of the total Medicare payment where it's going up to 48%. Again, this is outpatient on this. I move over here to the left to your acute care hospital, the dark green line is the average outpatient payment from your patients as a percentage of the total Medicare payment is dropping and then we take a look at inpatient because there are different rules for the coinsurance amount at critical hospitals between inpatient and outpatient. So we took a look at outpatient charges for the critical access hospitals. This is average. These are what the charges are doing. These are the total charges. So they are steadily increasing. And that is something that further exacerbates this issue. We took a look at the outpatient service mix and the inpatient service mix and these are the total charges for those mixes. And this we see frequently there is a move to more outpatient. Of course, during the COVID years, you know, you saw the dip in the 2020 on the outpatient services. We knew that that was going to occur, but you see the ever increasing outpatient services and we're seeing a decline in the inpatient services. And, you know, in most states, I know in Montana, have wanted that, we have promoted that to use critical access hospitals for outpatient services. And I think this is an unintended consequence of multiple things to come to the point that we have seen this issue as far as the patients are charged.

[Rep. Alyssa Black (Chair)]: I think we're guilty of that as well here.

[Marilyn Bartlett]: Yeah, we are too.

[Rep. Alyssa Black (Chair)]: Mean, everybody promotes, you know, oh, this is great. You can do everything on an outpatient basis now. So it's less cost of care, but this is a real unintended consequence.

[Marilyn Bartlett]: So I read the Macpac report to Congress from June 2025 and Macpac is the advisory group to Congress. And they have, as Jeff mentioned, consistently recommended that things be changed to set coinsurance for outpatient services at critical access hospitals equal to 20% of the payment amount and then put a cap. The cap would be equal to the inpatient. So basically the same payment method that you see in acute care hospitals. They did predict in that report that the coinsurance payments would be 2,100,000,000.0 lower and that would be picked up by the federal government. They also talk how it could reduce Medigap premiums. It would reduce Medicaid billing. It would reduce employer sponsored plan supplemental Medicare premiums. And you've mentioned all of those in your discussions today. You've you've talked about Medigap and the employer sponsored. So it would definitely decrease all of those.

[Rep. Alyssa Black (Chair)]: Has Has there been a cost comparison between the increase in outpatient services at critical access hospitals and the rates for Medigap plans?

[Marilyn Bartlett]: I don't know of one. Jeff may. We've not done that at NASHP to see the impact on neti GAAP rates. We have not done that, but Jeff may know. It's a good question.

[Rep. Alyssa Black (Chair)]: Yeah. I mean, I know that know that we have ever increasing rates on our Medigap plans. And I mean, for me, I couldn't wrap my brain around why Medigap would be going up so exponentially higher than what the Medicare rates are going up because, you know, like if Medicare goes up 3%, you would think that the Medigap would only go up 3%. But it seems like this might be a contributing factor.

[Marilyn Bartlett]: Yeah, it may very well be especially I've heard within Vermont with some of the plans you know not offering the Medicare Advantage anymore.

[Rep. Alyssa Black (Chair)]: So

[Marilyn Bartlett]: patients are Medicare eligible are moving to traditional Medicare and this is traditional Medicare. Know Medicare Advantage is a little bit different product but as they move to that and there's an onslaught more of, people, I'm sure their risk index has changed. But I'm with you, I'm on traditional Medicare and I have a Medicare sup and I've never quite figured out how it goes up. But a lot depends on the policy and things that maybe your Medigap policy covers that Medicare doesn't, but I haven't dug into that. It's a good point because we're, you know, just kind of accept that. We accept, well, if this is gonna happen, Medigap's gonna go up, but you're asking a very good question. Why? And is there an alignment?

[Jeff Stensland]: This is Jeff. When we looked at what would happen if they changed the coinsurance to 20%, the payment rate, which would be about a 60% reduction in coinsurance, For the typical state, we estimated that would reduce Medigap premiums by about $5 a month. Because the coinsurance would go down, that means the Medigap plan is paying less. That means they can have lower premiums. But for a state like Vermont, which is more critical access heavy, that would be a larger amount, and I didn't, do those estimates, but I'm guessing somebody like Blue Cross of Vermont could probably do that in a couple hours of saying what would happen if the if the policy was changed. A couple other things that increase your medic gap premiums. One is that the Medicare prices only go up by maybe 3% or something. But the types of services that Medicare beneficiaries are getting changes. So Medicare beneficiaries have been getting a lot more really expensive Part B drugs. And so if there's more really expensive chemo drugs, or you know, the price of new drugs is really high, that will result in higher Part D premiums being paid.

[Rep. Alyssa Black (Chair)]: Yeah, I'm just I'm thinking about, you know, not only people purchasing their own Medigap, but I'm thinking about our retirees for state employees, our retirees for teachers. You know, that's the state paying those. Also, we've done, we've tried to do a lot of work in the last few years about expanding our expanding MSP. And the income levels from Medicare Savings Program and how we might inadvertently be, I don't know, subsidizing a lot of this. Any questions? Did you have more?

[Marilyn Bartlett]: No, I think this is it. Should have. I'll stop sharing.

[Rep. Alyssa Black (Chair)]: Leslie? Thank you. Thank you

[Rep. Leslie Goldman (Member)]: for this. I probably need to hear it four times or five or six or whatever before I can get my head around it. But I'm wondering, since this is federal, what actions at the state level can we take? Can state legislatures take?

[Marilyn Bartlett]: Jeff, do you have comments on that?

[Jeff Stensland]: If you were to do something at the state level, since the federal rules are set, you would have to do something that would involve reducing the charges or reducing the increase in charges at the critical access hospitals. But maybe there was a cap, say on on how high the charges could be for Part B drugs at critical access hospitals. And then there would need to be some sort of working with the hospitals themselves, because I want you to work with them themselves to make sure that somehow they're not if their charges are restrained, that somehow that doesn't we create a reduction in their commercial revenue, which is based on these often discounts to charges. So there would be some moving parts that you need to work through to be able to restrain charges or bring charges closer to costs without reducing the revenue that these small hospitals are receiving.

[Rep. Alyssa Black (Chair)]: Do you think our critical access hospitals know this?

[Jeff Stensland]: I think the critical access hospitals know it. I think the patients don't. And I think the critical access hospitals, if you could fix this, I think it would be better for them. Like I was thinking, I was talking to one person who ran a critical access hospital and she said she had a very upset patient because the patient went to her hospital for a cataract surgery, and got a really big bill because sent out patient surgery. And the patient's husband went to a PPS hospital for his cataract surgery and got a really small bill for that. So that's the kind of thing that's uncomfortable for a critical access hospital to explain, you know, why is the bill that I got three times what the bill is for my neighbor who went to Burlington for the same care?

[Rep. Alyssa Black (Chair)]: I'm going to ask a really dumb question. Is there anything I mean, I realize it's the way it's done. It's always been done. It's just accepted. Is there anything that says that a hospital has to have their charge the same or the same procedure, same service? Does it have to be the same for everyone? I mean, critical access hospitals have a separate charge master that's just cost of care? And could they bill Medicare for just cost of care and then have a completely separate charge master for everybody else?

[Jeff Stensland]: Medicare rules require that they charge everybody the same thing. And they kind of need that constant charge to be able to estimate the costs.

[Rep. Alyssa Black (Chair)]: Okay. Even though the charge has no bearing or relevance to what anything actually costs. I mean, we know that.

[Jeff Stensland]: But there is on average this cost to charge ratio that they use to create the costs. Do it is useful to to have a common charge to estimate costs.

[Rep. Alyssa Black (Chair)]: I do find it a little ironic that you mentioned the outpatient drugs, pharmaceuticals. We did a bill last year where we capped outpatient drugs at 120% of Medicare or average sales price, and then we exempted all the critical access hospitals.

[Rep. Leslie Goldman (Member)]: How did we do that? Because of pushback, I guess, right? I never really understood actually why we did that. Maybe this isn't a place to

[Rep. Alyssa Black (Chair)]: talk about it.

[Rep. Leslie Goldman (Member)]: The Zion period. I mean, I never got.

[Rep. Alyssa Black (Chair)]: Any other questions? Oh, go ahead.

[Marilyn Bartlett]: I was going to say when I implemented reference based pricing in Montana, one of my babies was on inpatient and outpatient infusible drugs.

[Rep. Alyssa Black (Chair)]: Yeah

[Marilyn Bartlett]: so I understand what you're saying on that but yeah I appreciate what Jeff said that the cost to charge ratio that is calculated through the Medicare cost reports definitely is used in a multiple of ways and it's kind of one set of charges.

[Rep. Alyssa Black (Chair)]: So it sounds like recommendations is we sort of need more data at this point. I I think you had said, Marilyn, that you're working with Green Mountain Care Board.

[Marilyn Bartlett]: Yes. We are right now, we we hopefully will. But within a week, we've been working on pulling a lot of fields out of HCRIS, which is the Medicare cost report database to be able to have all the data fields. We're talking about the bad debt, we're talking about interim payments and we've been able to find some interesting things where we can see in a hospital so much that they've had to pay back to Medicare, which means that the patients had paid a lot more on coinsurance and that extra payment goes back to Medicare. So we're gonna have a lot of data nationwide and working with Green Mountain Care Board will be able to flush that through and have more information.

[Rep. Alyssa Black (Chair)]: Mean, to me that is the most infuriating piece of knowledge, the fact that we are literally paying back the federal government money, Vermonters money. Well, you. Thank you both for And sharing with I think this is something that we will keep looking at and keep monitoring. And if it gets to the point where we have enough data, then we might think about whether or not any action would be required legislatively to help the Green Mountain Care Board with this issue. So we thank you very much.

[Marilyn Bartlett]: Thank you.

[Rep. Alyssa Black (Chair)]: Great.