Some Alaskans get Outside options for medical care

Groups seek solution to higher in-state costs for procedures.

Anchorage Daily NewsSeptember 1, 2012 

The high cost of many medical procedures in Alaska is driving a major insurance company, Premera Blue Cross Blue Shield, to offer coverage that pays air fare, hotel and other expenses for members to undergo the same treatment in Washington state at less cost.

Premera has researched which procedures are safe for travel and can be done less expensively in the Seattle area, said Jeff Davis, president of Premera in Alaska. The insurance company will have a staff that can organize trips for patients, he said.

Premera, which has more than 100,000 members and close to half the Alaska insurance market, is encouraging medical travel in response to market demand, Davis said.

"Clients are really looking for options that maintain quality and get better control of costs," he said.

Going Outside will be voluntary for the patient, Davis said. To start with, Premera will only offer the benefits to a portion of its Alaska clients, about 32,000 members including dependents.

The travel benefit will be available for a set list of procedures, including knee and hip replacements, breast lumpectomies, laparoscopic gall bladder removal and cardiac angioplasty, Davis said.

TREND DEVELOPING?

Premera is not the only group looking outside Alaska for a solution to significantly higher in-state medical costs.

The National Education Association Alaska health plan, with 17,000 members in 27 school districts, contracted with a company called BridgeHealth to find doctors and hospitals Outside for such surgeries as knee and hip replacements and set up the trips for members who want the service, said Rhonda Kitter, the NEA health plan's chief financial officer.

Because of anticipated savings from this program, NEA Alaska members did not have an increase in insurance premiums this year, Kitter said.

NEA Alaska insures teachers and other certificated employees in Anchorage and all staff in the Matanuska-Susitna Borough School District, Kitter said.

The state of Alaska, which already pays some travel expenses if a surgery can be done less expensively elsewhere, is looking to expand the benefit, said Becky Hultberg, state commissioner of administration.

The state might cover the costs for a companion to travel with someone undergoing surgery, for example, Hultberg said. And the state is considering using a travel network company like BridgeHealth to help members find health care providers who are successful in their fields and figure out costs, she said.

Her department administers the health care plan for 16,361 state employees and dependents, and 64,923 public employee retirees and dependents. Four union trusts manage insurance for some 11,000 other employees and their dependents.

Health insurance costs for state employees and retirees more than doubled between 2001 and 2011, from $280 million to about $630 million annually, Hultberg said. Some of that is a result of an increase in the number of people covered, she said.

"A lot of it is due to medical cost inflation."

"The state can't afford to see the growth rate continue," she said. "We need to do a better job of managing the plans to get high value."

Premera is launching its Outside surgery benefit with self-funded employers, usually large employers, that hire an insurance company for a monthly fee to manage and pay claims, while the employer pays the costs, Davis said.

Premera is starting with this group because "they're actually paying the bills. They're more finely tuned into how do I reduce costs for our group," Davis said.

Everyone who participates should benefit, he said. Employees should get a reduction in co-payments -- the 20 percent or 30 percent left over after insurance pays -- and the employer should save money too.

WHAT A KNEE COSTS

How much more expensive are certain medical procedures in Alaska?

A report for the Alaska State Health Commission last year shows that the average allowable doctor's fee -- the amount commercial insurance companies will cover -- is sometimes three or four times higher in Alaska than in five comparable states.

The study, by Milliman Inc., surveyed costs in Alaska, Idaho, North Dakota, Oregon, Washington and Wyoming.

Some samples:

Knee replacement in Alaska, $7,265 average allowable doctor's fee.

Knee replacement in North Dakota, $2,269. In Washington, $2,288.

Insertion of a stent or tube in your coronary artery in Alaska, $4,487.

Insertion of intra-coronary stent in Washington, $1,331. In Idaho, $1,391.

The Milliman report doesn't have data as clear on hospital costs.

But Chris Spencer, vice president of GCI subsidiary United Utilities, had knee replacement surgery in La Crosse, Wis., in April at a cost of $26,000, compared to a nationwide average of $40,000, he said.

United Utilities has had an Outside surgery benefit for a couple of years, he said, and GCI adopted the plan this year.

"The savings being outside Alaska is almost mind-blowing," Spencer said.

He was happy enough with the results that he's going back to Gundersen Lutheran Hospital in La Crosse to have his other knee replaced this month.

WHY WE PAY MORE

One reason many medical procedures are more expensive here is that providers incur more costs, the Milliman study says.

But the study also found that doctors are more highly compensated here than in other states in the study, and hospitals and other facilities, especially in urban Alaska, are more profitable.

The amount Alaska doctors are reimbursed by commercial insurers is 169 percent of the average of the five other states in the study.

Milliman concluded average hospital costs in Alaska are 138 percent of the average of the five comparison states, and the hospitals' operating margins in 2010 were 13.4 percent, compared with 5.7 percent in the comparison states.

WHAT HOSPITALS SAY

Bartlett Regional Hospital in Juneau isn't one of the facilities with high profit margins, said interim chief financial officer Dennis Stillman.

"Right now at Bartlett our plan is to break even," he said.

Bartlett is owned by the City and Borough of Juneau and relies in part on state employees in Juneau for business.

If the state government ramps up out-of-state medical services, "We would be very disappointed," said Bartlett spokesman Jim Strader.

Stillman said that if the hospital lost $100,000 worth of business from patients going Outside, it would have to adjust costs elsewhere.

Another possible effect is that if enough patients chose to leave the state for a particular type of surgery, "you get into a spiral; then it's hard to keep the patients you do have," Stillman said.

Some skills needed for that surgery could be lost due to lack of volume, he said.

In Anchorage, spokeswomen for Providence Health and Services Alaska and Alaska Regional Hospital said the hospitals believe it is better for care to be received close to home.

"We caution those who might leave the state for surgery to consider issues like follow-up care, being far away from family and friends during the recovery period, and the fact that if there are complications from the procedure, their physician here at home may have concerns with treating the outcome of a procedure they were not involved in initially," said Alaska Regional spokeswoman Kjerstin Lastufka in an email.

The Daily News contacted several doctor's offices but none of them chose to comment.

How big an effect medical travel to the Lower 48 has on the Alaska market depends on how many people take advantage of it.

Davis of Premera said that across the country, participation is in the 2 percent to 5 percent range. He predicts Premera's medical travel program here will do much better than that.

Alaskans are willing to travel, he said: "We crafted a program specifically to work for Alaskans."


Reach Rosemary Shinohara at rshinohara@adn.com or 257-4340.

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