Day: January 5, 2011

     Most medical stop loss insurance policies pay retail instead of lower, negotiated discounted fees. Most don’t know this and don’t care, “since it is the insurance company paying the bill.”  The fact of the matter is that we are all paying for the higher reimbursement rates in loaded premium charges, as much as 46% more.

Hospital PPO contracts contain outlier provisions. Once the outlier, or threshold is reached, a typical PPO contract then reverts back to a small percent off “billed” charges, all the way back to the first dollar. Many of these PPO contracts stipulate that the outlier discount is 5% off billed charges.

Billed charges are like new car sticker prices; there is no correlation between the sticker price and actual costs. It is an arbitrary made up number, and the number is put up there really high. That makes the PPO discount look really good. But it is all a game foisted upon the unknowing consumer.

So, if the PPO outlier is placed at $50,000, and a typical PPO average “discount” is 35%, then a $45,999 hospital bill is repriced through the PPO contract by 35%, or $32,499. But, if the claim comes in at $50,001, the discount is reduced to 5% and the PPO repriced bill then becomes $47,501. This represents a +46% increase in plan reimbursement to the hospital.

As you can see, it is in the best interest of the hospital to inflate the bill to exceed the outlier. They get paid more money. And is it no wonder that almost all PPO contracts prohibit the payer from auditing the hospital’s bill?

Do you get the picture now?

Could this pricing phenomenon be linked to increasing stop loss premium? Why would you pay a vendor for the privilage of paying exhorbitant fees to pay for exhorbitant hospital charges?

More and more employers who self fund their group medical plans are eyeing captives.

Editor’s Note: Compare your current stop loss premium with this report: http://www.iscebs.org/Resources/Surveys/Documents/stoploss10summary.pdf.

Also see HM Insurance article – http://www.imakenews.com/seroper/e_article000971860.cfm?x=b11,0,w (excellent piece)

     Texas Business reports: The Texas attorney general’s office recently resolved a state enforcement action against Mylan Laboratories Inc., which was charged with inaccurately reporting drug prices to the Texas Medicaid program.

Under an agreement, Mylan must pay $65 million to the state and the federal government.

 Texas’s share of the recovery is $23 million.

The state’s enforcement action against Mylan stems from the defendant’s failure to properly report the price of its drugs to the Texas Medicaid program.

Court documents filed by the state allege that the price Mylan provided to retail pharmacies caused the taxpayer-funded Texas Medicaid program to significantly overpay the pharmacies for certain generic drugs.

In 2007, Texas initiated legal action against Mylan and two other drug manufacturers. The first of those three cases settled last summer when Teva Pharmaceutical Industries, Ltd. paid $169 million to resolve claims brought by Texas, several other states and the federal government.

The three defendants named in the enforcement action were:

•           Teva Pharmaceuticals Inc. of Pennsylvania (with subsidiaries Lemmon Pharmaceuticals Inc., Copley Pharmaceuticals Inc. Ivax Pharmaceuticals Inc., Sicor Pharmaceuticals Inc., Teva Novopharm Inc. and Teva Pharmaceutical Industries, Ltd.),

•           Mylan Laboratories Inc. of Pennsylvania (with national subsidiaries Mylan Pharmaceuticals Inc. and UDL Laboratories Inc.), and

•           Sandoz Inc. of New Jersey (with subsidiaries Geneva Pharmaceuticals Inc., Novartis Pharmaceuticals Inc., Eon Labs and Apothecon Inc.).

In order for pharmaceutical products to be eligible for reimbursement from Medicaid, Texas law requires that manufacturers accurately report market prices to the taxpayer-funded program. The Medicaid program bases its reimbursement to pharmacies on the pricing information reported to it by drug manufacturers.

The State’s three-year investigation revealed that the defendants sold hundreds of Medicaid-covered drugs at steeply discounted prices to large pharmacies such as Wal-Mart, CVS, Walgreens, and others – but concealed this same pricing information from the Texas Medicaid program.

As a result, state officials were misled about current market prices for the drugs. When pharmacies sought Medicaid reimbursement for these drugs, the false price reports led the Texas Medicaid program to unnecessarily spend millions of taxpayer dollars on the defendants’ products. Thus, Medicaid reimbursed at significantly higher rates than the discounted rates already established between the defendants and these retailers.

The scheme was brought to the state’s attention by Ven-a-Care of the Florida Keys Inc., an industry whistleblower. Since 2003, settlements in the Ven-a-Care drug-pricing cases have recovered more than $300 million for the Texas Medicaid program.