Bayonne-based State Assemblyman Louis Manzo has proposed legislation that would overhaul the way hospitals are funded, creating a public body with the power to regulate insurance companies.
Called the New Jersey Board of Health Care Management Act, Manzo’s legislation would set up a board – similar to the Board of Public Utilities – that would oversee managed care and reimbursements to hospitals in the state.
Funding for acute care hospitals in New Jersey is rated as the worst in the nation, partly because insurance companies and other agencies funding medical procedures set the prices. They often set low limits for the amount for which they will reimburse hospitals.
Several hospitals in Hudson County have faced financial crises in recent years, not only because of the insurance situation, but because they treat people with little or no insurance and don’t get enough state “Charity Care” reimbursement.
Manzo said he expects a tough fight from insurance companies, but that his legislation will solve the problems faced by hospitals – some of which are on the verge of closing.
“Managed care programs have outgrown their usefulness and now serve to have a select number of insurance carriers monopolize the health care industry,” Manzo said.
Under the existing system, insurance carriers set the price, but often deny claims, forcing hospitals to hire legal staffs to fight for claim money, diverting the limited resources of hospitals from patient care.
No one watching
Manzo also noted that the state has no objective estimate of what the insurance carriers make in profits since under the current systems, insurance carriers audit themselves.
“Insurance carriers hold the purse strings for the market,” Manzo said.
When hospitals fall short of funds, the state is forced to subsidize them.
“Part of the problem is that the insurance carriers hold all the money they get from insurance premiums,” Manzo said. “What I want to do is take the bank out of their hands. I want the board to evaluate whether claims are legitimate or not.”
He said that claims should be paid to hospitals when they are made, and disputed later if there is a problem. This would maintain hospital cash flow, and if a claim proves bad, the hospital can pay the money back.
“The way it is now, insurance companies hold back the money until the hospital can prove the claim is legitimate,” Manzo said. “The hospital has already provided the service. In top of this, the hospital has to hire an accountant to prove the claim is valid. This bill would pay the claim and then dispute it later.”
Charity care
One of the most serious problems for state acute care hospitals is the requirement that they treat patients whether or not the patients can pay. While the state does give hospitals payments for treating the uninsured, the burden on hospitals is still monumental. The Manzo legislation would take some of this burden off the backs of hospitals by requiring other medical facilities and private doctors to provide volunteer medical services to a percentage of the uninsured population.
He said incentives could be offered to young doctors, such as having the state pay premiums on malpractice insurance.
Also included in this legislation would be the requirement that insurance carriers, who invest premiums paid by insurers, give back a percentage in reduced premium costs to insurers whose record of claims is good.
How it would work
Once enacted, the legislation would set up a two-year transition period to switch over from the exiting system to the new board-run program.
The board would be required to set up a uniform medical fee schedule for all healthcare procedures and service. The board would also set up minimum requirements for health benefits offered by carriers, and would set up procedures for arbitration of disputes between carriers, healthcare providers and those who are insured.
Key to accountability, the board would also set up an objective system for auditing insurance providers.
In conjunction with this, the board would also establish a formula for evaluating an insurer’s record, as well as other issues that go into deciding premium costs and an insurance carrier’s profit margin.
To ensure that the state is getting the best use out of its funding, the board would also establish a screening program for the uninsured to see if a person is eligible for other state or federal programs prior to tapping the state’s Charity Care reserves.
“By removing the power of reimbursement from the hands on the insurance carriers, hospitals and other medical providers will get a fairer evaluation of claims and prompt payment,” Manzo said. “This legislation will allow hospitals to go back to the business of treating patients.”