It was a difficult decision, and a bittersweet one. I dearly love my patients and my co-workers, and feel I was a decent enough doc such that I was making a positive contributions to peoples’ lives and the field of medicine. But while medicine is a joy and a privilege, it’s also very challenging in many ways and substantial portions of my day (e.g. the times when I was not directly interacting with a child and family, or time not spent teaching) were not as enjoyable as they once were.

So I decided to pursue, full-time, my other passion: providing financial advice and education. I have been doing this in some capacity for over 20 years, as a part of my financial planning firm for 10 years, and also on behalf of a non-for-profit for the past 5 or so years. I’m expanding the number of financial planning and tax-prep clients I accept, and also filling up my calendar with lectures and workshops to medical colleges, residency programs, and hospital/university faculty/physician groups. I literally enjoy every minute of it, and look forward to each day I work and I expect that to continue.

I’m getting paid to educate people and help improve their financial situation and by extension increase their job satisfaction (for those who work). And because half of my clients are medical professionals, it feels that I’m still contributing to “medicine” and that I’m still a part of the field.

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“…a health plan which pays nothing except for preventive care until the deductible is met. If your plan meets IRS requirements and you have no other health insurance, you are allowed to invest in a health savings account (HSA), which allows you to deduct contributions to the account from your taxes, pay medical expenses from the account tax-free, and invest unused money for future medical expenses.”

An HSA is summarized as:

“…a special account which is used in conjunction with a high deductible health plan. Contributions to the account are tax-deductible on the federal and most state tax returns, and withdrawals are tax-free if they are used for medical expenses. Unlike a flexible spending account, unused money remains in the account and can be invested; most accounts offer either mutual funds or brokerage accounts for investing.”

By placing additional cost considerations on the consumer or patient, high deductible plans and health savings accounts were highly touted as a way to reduce health care costs by at least three proposed mechanisms: 1) increased comparison shopping for health care services, which would encourage providers to reduce their cost; 2) reduction in frivolous or unnecessary consumer spending; 3) encouragement to both the consumer and the insurer to support preventative care as a way to save on future costs.

I have long wondered (as have many) just what effect HDHP/HSA plans actually have on consumer behavior. In fact, there has been a lot of data that, yes, people who have an HDHP actually do spend less on health care. But good data is lacking on specifics. Obtaining detailed information is complicated by the fact that different people have very different plans available to them, and also different motivations for switching to an HDHP. For example, those who are younger, healthier and more affluent benefit disproportionately from an HDHP/HSA type insurance plan, and might be expected to preferentially choose such a plan if offered. Some may be forced to choose an HDHP because they can’t afford the up-front premiums of a traditional plan, while others may have only an HDHP option to choose from in the first place.

But we now have a fairly remarkable (in my opinion) research study which provides a good deal of insight into how people who have an HDHP/HSA behave relative to those with traditional insurance. The full study is titled “What Does a Deductible Do? The Impact of Cost-Sharing on Health Care Prices, Quantities, and Spending Dynamics”. A plain-language summary is available here, and the full study is available for free here.

What’s special about this study is that the authors discovered a large employer who switched everyone in their firm from traditional insurance over to the HDHP (as the only option). This allowed for a before-and-after comparison of essentially the same group of people, who had no choice but to all switch at the same time. But there were additional features of this changeover which made the comparison particularly useful. First, the original health plan had no copays, no out of pockets costs, and the premiums were entirely paid for by the employer. That is, all health related spending was paid for by the employer. Second, with the new plan, the employer contributed an amount equal to the deductible into the employee’s HSA. The net effect of these changes is that the employee, on average, would not be worse off under the new plan. However, they could potentially benefit by being able to keep any unspent money in the HSA account. Note, this is a simplification of the HDHP plan. For complete details, see the full paper.

The punch line of this study is that people do not appear to be rational spenders of health care dollars. Although spending was decreased overall, this was because people obtained less care of all kind including free preventative care such as mammograms and colonoscopies. In addition, there was no evidence of comparison shopping, even though they had been given tools assist in such comparisons of cost. This includes imaging studies such as MRIs and CT scans, which tend to be similar between facilities but for which there is considerable cost variation.

Furthermore, even those with chronic, expensive illnesses who had always exceeded their out-of-pocket maximum (and thus depleted their employer provided funds) delayed their spending each year as long as possible, even when there was no financial incentive to do so. In addition, this group with high annual health care spending did not learn. That is, in subsequent years they continued to delay health care utilization early in the year, only to accelerate it after the out-of-pocket maximum is met.

The authors of this study did not speculate about any underlying reasons behind these observations. But I, on the other hand, am happy to do so.

Let’s start with the group of people who are healthy, and in any given year would be expected to need little to no health care spending. Even though the employees in this category have their health spending essentially paid for, they get to keep any unspent funds. So psychologically, this money is “theirs”. This money is in their accounts, it appears in their balances, and likely gets figured into their perception of their net worth. If unspent in any given year, it can be spent in any subsequent year tax-free. If one reaches age 65, it can be withdrawn in the same way IRA funds can be withdrawn, with no requirement that it be used for health spending. In fact, given that HSA money can be invested in stocks and bonds, I assume many people consider their HSA accounts more like retirement accounts rather than an account to be used for health spending. I’ll admit, I’m basically in this category. This group might be expected to behave, from a sheer financial perspective, as if they had no insurance at all. This certainly would explain why people choose to avoid care.

On the other hand, the authors of this study found no evidence of comparison shopping. From a purely financial point of view, one would expect people to attempt to minimize their spending after having made a decision to seek care. But they didn’t. Personally, I find it’s very hard to comparison shop in medicine. Even as both a physician and personal financial planner, I find that I have little insight as to what any given office visit or procedure might cost. In fact, at one point in my career I asked my employer (a major academic medical center and university) what a patient might pay to see me for an office visit (just a few ballpark examples, such as the “cash price”, one or two contracted insurance rates, and Medicare/Medicaid prices). Despite the fact that I needed this information for a research study I was conducting, the administration refused to provide this cost information to me, saying that such information was “proprietary”. I was not given this info even though Medicaid and Medicare rates are public information, and I was eventually able to find the Medicaid and Medicare rates for an office visit with me online. But if even I can’t easily find out what my own patients are charged, how can a consumer hope to find out, in advance, what they might be charged? The people in the study were even given a comparison shopping tool. In my limited experience with such tools, however, I have found them to be clunky and frustrating. I wonder if others had the same experience and chose not to use them or did not find the tool helpful.

I believe most patients simply don’t bother to shop around, as this study shows implies. It is much easier to avoid an office visit or other non-emergent procedure altogether (and thus save 100% of the cost), than to spend hours and hours of (potentially futile) comparison shopping to save perhaps 2% to 20%. Alternately, once one has decided to obtain care, it might be that cost is not the main factor, but rather other factors drive the decision, such as appointment availability, choice of physician, location, etc.

But I’m not sure I can explain the fact that those who know they will exceed the deductible and out of pocket maximum each year still delay their health care spending as much as possible. It can’t be a cash flow issue, because the money for the deductibles have already been put in a dedicated account by the employer. I can only speculate that perhaps there is some HOPE that one won’t need to spend as much (despite past experience).

I think the most interesting take-home point from this study is that when folks have a financial incentive to delay or avoid care, they actually do so. We might assume that this is bad for their health. But we don’t really know. It may be that those who avoid care might actually have better health outcomes. There is data which shows that more interventions and more testing leads to worse care and worse outcomes. In fact, one study found that greater patient satisfaction was associated with greater medical spending and that those who were more satisfied with their health care were more likely to die. But that is a topic for another day.

I’m often helping financial planning clients and friends make decisions about their health insurance, and I typically approach it from a financial perspective. But I had always suspected (partially based on my own situation) that people alter their behavior (for better or for worse) depending on their choice of insurance plan, but perhaps in irresponsible or irrational ways. This new study provides substantial evidence for this. So when discussing health insurance options with my clients, I have begun to routinely point out the non-financial or psychological “pros and “cons” between various insurance options in addition to the standard cost projections and break-even points.

In my opinion, the number of people covered under high deductible health plans will continue to increase. It can only help to have as much information as possible about how people actually behave when insured under an HDHP, and this new study helps to fill in some big gaps in our understanding.

I’ve admitted that my health/medical behavior has changed now that I have an HSA. Previously, when I had traditional health insurance, I rarely hesitated to seek care when I thought I needed a physician visit. I had already committed to large premiums for the privilege of low co-pays and minimal out of pocket costs. Thus, the cost to me (for example) for an ophthalmology evaluation when I had blurry vision, or a perhaps dermatology visit for a suspicious mole, was a just small copay. In one sense, I had pre-paid for medical services. Thus the biggest “cost” to me was the inconvenience of the appointment itself. But now that I have an HSA, a routine office visit might result in a payment of as much as $400. If any labs or procedures are performed, the cost might end up being several hundred dollars more than that. So I am very reluctant to visit a physician when I’m under the deductible, because I perceive the cost to me of any doctor’s visit to be “higher” when compared to traditional insurance, due to the fact that I’m going to get a big bill in the mail which is triggered with each “touch” I have with medical care. This is despite the fact that I have had a huge upfront savings on premiums.

Delaying or avoiding care may be medically unwise, and this is not what I expected my behavior to be when I chose the HDPH/HSA plan. I had performed a detailed cost summary analysis comparing my high-deductible plan to a traditional insurance plan. I had calculated that with an HDHP/HSA I could spend up to $4000 per year out-of-pocket and yet still come out ahead compared to my other options. Because I’m otherwise healthy and it would be very unlikely to spend much in any given year, I figured I would continue to obtain all the routine care I needed and still come out ahead. And yet here I am, making justifications and rationalizations to avoid spending $100-$400 on a routine office visit, despite having “baked-in” those costs in my decision. As with the participants in the study, it seems I am also a “non-rational consumer of health care”.

In my case, I suppose it’s because I feel that the money I saved in health insurance premiums and the HSA contributions (some of which is paid by my employer) are mine (which technically, they are). So even though I come out way ahead by having selected the HSA, I naturally want to come out further ahead by limiting my health spending whenever possible. For me, the easiest and most direct way to limit spending (in the short run?!) is simply to avoid care.

Few people want to go to the doctor in the first place due to the time involved, potentially unpleasant experiences, missed work, etc. But HDHP plans add in an increased, direct financial incentive to avoid care. For better or for worse, I’m not surprised that people do so.

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In the past, (depending on the type of insurance and the state) some medical insurance payment rejections or adverse determinations were not subject to appeal, and one had to file a lawsuit in an attempt to receive coverage for a disputed service. With the adoption of the Affordable Care Act in 2010, an appeals process was mandated by federal law. Originally, the law required a binding external review process with several specific criteria designed to ensure impartiality and other consumer protection provisions. The original rules were weakened in a series of administrative decisions after intense opposition from insurance providers and related parties. That said, the law still provides significant rights for patients which did not previously exist. [Whether one feels those rights are necessary, or justify any potential increases to the cost of insurance coverage is a topic for another time.]

There are generally two appeals allowed in the process leading up to a binding decision. I’ll walk you through some of the steps, starting with an initial denial. I stick with a case of medical necessity, rather than denials based on administrative issues such as “you didn’t pay your premiums” or “your doctor’s office billed the wrong procedure code”.

Note, although there is one set of federal standards, each state is allowed to have stricter requirements or, alternately, a set of “parallel” standards if they are sufficiently equivalent to the federal standards. Thus the actual process can (and does) vary in each state. So please keep in mind that I’m merely highlighting some general features of the appeals process, rather than attempt to describe an exhaustive step-by-step process. If you would like some additional nitty-gritty details, check out this link to the most recent version of the law.

Step 1 – The Initial Denial. Coverage for a service is denied (either in advance or after the service is provided) because the treatment or test is not “medically necessary”. This is officially known as an “adverse benefit determination”. This decision must be provided to the patient in writing, within 30 days if the service has not yet been performed, or within 60 days if the service has already been rendered. But a key point to consider is that while an insurance company must give you the reason for the denial (i.e. medical necessity) the insurance company may or may not explain in enough detail for you to know exactly why the service isn’t medically necessary. They will simply cite the lack of medical necessity, and direct you to their definition of such online. But if their definition includes any mention of “plan policy”, they might not direct you to a copy of the plan policy with their denial. And it is usually the specific plan policy which provides these coverage criteria. You sometimes have to ask in writing for a copy of the plan policy, which must be given to you upon request. [See page two of “Part I” of the Medical Necessity post for examples of plan policy.]

Step 2 – The Internal Review. The patient (legally referred to as a “claimant”) must be given specific information about their right to appeal the denial, with detailed information about how to do it. This requirement is new. It used to be (again with the disclaimer, “depending on the state”) that the patient had to know if/when/where/how one could file an appeal. To initiate a (free!) appeal after the first denial, the patient and/or physician must request an appeal in writing. Additional information about the case can be submitted by the patient, physician, or both.

This first appeal is only an internal review, legally referred to as an “internal review”. This review is typically performed by an RN or MD who is an employee of the insurance company. In most cases, this review is to ensure that company policy or guidelines were correctly applied. This is usually NOT the time where any “exception” will be made. Exceptions to medically necessary policies might be due to a request for an unproven yet promising therapy, treatment for a very rare disease where it is impossible to obtain strong evidence of the benefit of most treatments, etc.

A decision must be made within 15 days for prior authorizations, and 30 days for services already rendered. One may ask for an expedited/urgent review (where a decision must be made within 3-4 days). In special cases, an emergency review (24 hours) can be requested if there is a legitimate urgent need for a determination. Remember, you must file the appeal within 6 months of notice of the initial denial.

To use an example from “Part I” (positional plagiocephaly, i.e. a flat infant head shape), an internal review may ask, “do the records indeed show that the patient has positional plagiocephaly” (as opposed to other forms of plagiocephaly)? Yes. “Is the request for treatment via helmet?” Yes. “Do we have a policy excluding helmet therapy for plagiocephaly?” Yes. Thus, coverage will be denied, and the internal review is over. It really doesn’t matter what other information is included in the appeal, or how “medically necessary” the patient or the physician (or helmet manufacturer!) thinks the therapy is, or how stupid one thinks the policy is.

Occasionally, the company will call the provider at this stage to get more information. I would caution, this is not a time for the physician to argue, yell, pout, beg, etc. Whether in your initial appeal letter or on the phone, simply give the relevant facts: the patient’s diagnosis, what the test or treatment is for, and provide the best available data for requesting that a particular service is appropriate for the specific condition. It can be helpful to include high quality references with your appeal (with the understanding that they won’t be read until the NEXT appeal).

There are times when an insurance company will request that that an external or independent reviewer actually conduct the internal review. That is, they farm out this first appeal to an external, independent review organization even though they are not required to. I assume that this is done in cases where there is no existing plan policy, or when it might be a special case, or when the company does not have the administrative tools in place to handle the specific review required. In this case, the external reviewer (defined in Step 3) will actually help the insurance company decide if their initial denial was appropriate based on their own policies.

The question which is asked is typically “Is this service considered medically necessary based on our definition of medically necessary and our related plan policy”. That is, the reviewer is basically only being asked if the policy was applied correctly, but NOT if that policy is appropriate. It is important to note that the insurance company is not required to accept the opinion or decision of any external reviewer who is asked to help with an internal review stage.

If re-denied at the internal appeal stage, the patient gets written notice of the denial of the internal appeal, called the “final internal adverse benefit determination”.

Step 3 – The external review. There is another level of appeal, and this is where things get interesting or infuriating, depending on your point of view. That’s because after the initial appeal, state law says that subsequent appeals have to go to someone independent from the insurance company, and undergo an “external review”. The insurance company can charge the patient no more than $25 for this appeal, and there is no minimum coverage amount necessary. E.g. one can appeal a $50 denied charge. FYI, an external appeal can cost the insurance company many hundreds of dollars (in the simplest of cases).

There is a giant industry of firms which has, by necessity, arisen to handle these appeals. Such firms are referred to as “Independent Review Organizations” (IROs), and act as intermediaries between the insurance companies and panels of contracted. Thus, the patient and doctor can submit another appeal, and this gets sent to an IRO of the insurance company’s choosing (for the most part). The IRO then selects an appropriate physician to review the case. The reviewer is required to be an actively practicing, board certified MD with at least 5 years’ experience, who has knowledge about the service under consideration, and has no ties to the insurance company, the patient, or the patient’s treatment providers.

By law, this is the appeal where the insurance company cannot rely upon plan policy or their own internal definition of medical necessity. Instead, reviewers are asked to give their own opinion of whether a service was “necessary” and should be covered, based on the best medical evidence. In this case, the reviewer is asked to act as an expert witness of sorts, and to make a case for or against the safety, efficacy, and cost-effectiveness, of the service under consideration. At this stage, it’s common for this level of appeal to go to three (or more) independent reviewers, with a “majority rules” framework. This level of appeal is legally binding, and no further appeal is permitted.

The specific rules for how exactly the reviewer is supposed to make a determination is ill defined. But here is how New York State describes external reviews:

“For medical necessity appeals, the external appeal agent will make a determination as to whether a health plan acted reasonably, with sound medical judgment, in the best interest of the patient.

For experimental / investigational treatment appeals, the external appeal agent will make a determination as to whether the proposed health service is likely to be more beneficial than any standard treatment or treatments for a patient’s life-threatening or disabling condition or disease.

For clinical trial appeals, the external appeal agent will make a determination as to whether the clinical trial is likely to benefit the patient in the treatment of the patient’s condition or disease.

For rare disease treatment appeals, the external appeal agent will make a determination as to whether the requested health service is likely to benefit the patient in the treatment of the patient’s rare disease and that such benefit to the patient outweighs the risks of such health service.”

As you can likely predict, many appeals will be based on grey areas, of which there are many in medicine. For example, there are some rare diseases for which there will never be very good evidence on what is “likely to benefit the patient”. And there are many cases where a good case could be make for either side. Taking helmet therapy for positional plagiocephaly as an example, some physicians feel strongly that it works, or works well enough over other therapies to consider it medically necessary, despite the very high cost. Others feel strongly that there is insufficient data to support the effectiveness. Thus, when such a case goes to the final level of an appeal, the final determination may come down to the “luck of the draw” based on which reviewers get assigned the case.

[For the record, I believe that there is insufficient evidence that helmet therapy is effective for the treatment of positional plagiocephaly when compared to other cheaper alternatives. Note, I’m not saying that it definitely does NOT work, but only that it is certainly not clear that it definitely works. In addition, there is little evidence that plagiocephaly leads to any real medical problems. Thus I (and most others) have the opinion that it’s a cosmetic issue, and not a medical issue. But I have well-respected colleagues who have a different opinion. Given this controversy, and the cost of helmet therapy, I’m not surprised that helmets are usually not covered by insurance. I could never say that a health plan was not being “reasonable” (one of the appeal criteria) in denying coverage for treatment with a helmet.]

So, how is this information useful to a patient, or to a physician who is asked by the patient to help them through the appeal process? First, and foremost, do not fight with the insurance company on the definition of medically necessary in the first level of the appeal process, without consulting the insurance plan language. You are wasting your keystrokes by writing a 10 page letter on why you feel a service might be “most definitely, certainly, slam-dunk medically necessary!” Also, find out the laws which apply in your state regarding insurance coverage appeals, and what type of language is used to determine the final appeal.

My advice is to submit the relevant records, state your case about why you feel service should be covered, and be sure to cite the BEST references available (and provide a copy with the appeal), so that the independent reviewer has all the information close at hand. Also, don’t overstate the case, and certainly don’t misread or stretch the literature. For example, I’ve seen letters regarding positional plagiocephaly which have cited dozens of research papers which supposedly claimed that “plagiocephaly leads to developmental delays”. However, no medical professional believes this to be true (at least I hope not). While it is true that almost all studies note the association between developmental delays and plagiocephaly, it is the delays which are responsible for the plagiocephaly, and not vice versa. Fixing the head shape certainly does not improve the delay, or prevent any future cognitive or motor delays.

If you have any experience with the appeals process (especially corrections or clarifications), feel free to share them in the comments section below.

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