Interview with Steven Garber Ph.D., RAND
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Cochlear Implant Reimbursement
AO/Beck: Good morning Steve. You and your colleagues published an article in October, 2002 called Payment Under Public and Private Insurance and Access to Cochlear Implants, which is the primary topic for our interview today. Nonetheless, before we talk about the study, can you give me a thumbnail sketch of you, your research team, and RAND itself?
Garber: Sure Doug. My doctorate is in economics. It's from the University of Wisconsin at Madison, and I've been at RAND for almost 13 years. My research partners were Susan Ridgely, a health services researcher and health lawyer at RAND; Melissa Bradley, a survey-research expert, also at RAND; and Ken Chin, an ENT. Ken was at UCLA when we did the study; he's now in private practice.
RAND is a not-for-profit organization based in Santa Monica, California. RAND helps improve policy and decision making through research and analysis. The study was done in RAND Health, a research unit within RAND, which works to improve health care systems and advance understanding of how the organization and financing of care affect costs, quality, and access. Those who want to know more about the study can access a four-page summary at: https://www.rand.org/publications/RB/RB4532.1/RB4532.1.pdf
AO/Beck: Please give me an overview of the study, and then we'll get into some specifics.
Garber: The motivation for the study was there seemed to be hundreds of thousands of good candidates for cochlear implants in the United States, but only a small fraction of them-a few thousand-receive cochlear implants each year. The literature indicates that, while cochlear implants are expensive, they're worth the cost. So that raises the question: If using this technology is worth the cost, why aren't more people benefiting from it?
AO/Beck: Very well stated! What did you discover?
Garber: We looked into the possibility that low levels of insurance reimbursement for audiologists, ENTs, and/or hospitals could be playing a prominent role in limiting use of cochlear implants. And we concluded that reimbursement levels for some key services and for the device itself-especially from public insurance programs-are lower than the associated costs. So inadequate reimbursement could be a major reason more people aren't getting cochlear implants.
AO/Beck: I think you hit the nail on the head - the finances are a major stumbling block. What are talking about in terms of real dollars?
Garber: Let's start with the cochlear implant system or device, because the numbers are easier to pin down.
AO/Beck: Okay.
Garber: We did a survey of hospitals. Generally, hospitals buy the implant systems from a manufacturer, and the hospital pays the bill. They often have to count on being reimbursed by a private insurance company or Medicare or Medicaid to recoup the purchase price. From the hospital survey, we learned that in 1999 hospitals were paying on average just a little less than $21,000 per implant system. We also asked hospitals in the survey how much they were being reimbursed on average from private insurers. And the answer was $18,000.
AO/Beck: So they lost $3,000 on each implant?
Garber: Right-when being reimbursed by private insurers. It gets worse in the cases of Medicare and Medicaid.
AO/Beck: Let's talk about Medicare and Medicaid.
Garber: Medicare, the federal health insurance program for the elderly and disabled, reimburses a different amount for the device depending on whether the surgery is done on an outpatient or an inpatient basis. When it was done on an outpatient basis, at the time of the survey hospitals were looking at about $6,000 in losses every time a cochlear implant surgery took place in their facility. They lost more than $10,000 per device when the surgery was done on an inpatient basis. Medicaid is also a federal program, but states implement this health insurance program for low-income people in different ways. In the case of cochlear implants, state Medicaid programs have a lot of discretion about what services they will cover and what their reimbursement rates are. Medicaid reimbursement rates covered the hospitals' costs of the devices in some states, but not others. In fact, in some states, hospitals could have lost as much as $20,000 per surgery on Medicaid beneficiaries.
AO/Beck: This sounds like a financial disaster. What are the implications of all of this? It's hard to imagine that any hospital, or any business can offer a service they lose thousands of dollars on?
Garber: Cochlear implants, can indeed, be a money loser for hospitals. For example, let's talk about Medicare. As I understand the law, if a hospital participates in Medicare for ANY kind of patient, and the hospital is capable of providing cochlear implants, they must provide access to cochlear implants for all Medicare patients. For a hospital with a cochlear implant program to say okay we won't do cochlear implants for Medicare patients they would also have to say we won't take Medicare patients at all. People who are covered by Medicare are much too important to hospitals for them to give up all of that business.
AO/Beck: So the hospital has to accept cochlear implant surgery as a loss leader to get the more profitable surgeries?
Garber: Yes, that's correct in many cases. But hospitals can get out of the business of cochlear implant surgery by closing their programs-and we heard reports that some were doing that-and continue to serve other types of Medicare patients. But, of course, if a hospital doesn't have a cochlear implant program, it can't serve any cochlear implant candidates no matter what kind of insurance or financial resources they have.
AO/Beck: Of course, so far we have addressed hardware only. We also have the surgical costs and aural rehab. Can you tell me how those factors fit into the equation?
Garber: For audiology services or surgical fees, it's not as easy as looking up numbers for hardware costs. So what we did was survey both ENTs and audiologists at almost all of the clinics in the United States that provide services to cochlear implant patients. And we asked them how much time it takes them to perform different services and how much they are reimbursed by different kinds of insurers. We used other data to estimate what their average cost of time was on the basis of how much audiologists and ENTs make per hour when providing services to patients. And there we found that-as was the case with reimbursement for the devices-private insurers pay more on average than Medicare, and Medicare tends to pay more than Medicaid. For the surgery, we concluded that private insurers, on average, pay enough to cover surgeons' costs, and the same is true for Medicare for most surgeons. Again, Medicaid policies and reimbursement rates vary a lot across the states. And, in some states Medicaid doesn't come close to covering surgeons' costs.
AO/Beck: What about the audiology service fees for diagnostics, tune-ups and aural rehabilitation?
Garber: As far as audiologists go, we asked them about several services they perform to evaluate candidates for cochlear implants and for follow-up after surgery. We emphasized aural rehabilitation after surgery because that's what takes up a large portion of the time audiologists spend serving cochlear implant patients. And, similar to what we found for surgeons, in most cases reimbursement rates from private insurers were high enough to cover average costs for audiologists. But there's reason to be concerned about whether Medicare rates are high enough to cover audiologists' time, and in some states under Medicaid the payments are very low -- even relative to Medicare.
AO/Beck: What are your thoughts concerning 2003? Has anything changed, or is it very much the same as it was a few years ago?
Garber: I can't really tell you because we haven't collected data since early 2000. The best place to go for more recent information would be to the cochlear implant manufacturers. They follow reimbursement pretty closely.
AO/Beck: Steve, you mentioned earlier that only a small quantity of people receive cochlear implants every year, despite perhaps half a million potential candidates. Can you tell me more about that?
Garber: Sure. Again the motivation for our study was to try to understand why usage rates are so low-we estimated that only 3,000 people received cochlear implants in the United States in 1999- relative to hundreds of thousands of good candidates. At the rate we're going, we'll never catch up. More people in the United States become candidates every year. So when we look at the gap between utilization and potential numbers of people who could benefit from this technology, what we should be thinking about is -- What it would take to expand utilization substantially?
In the study we considered a thought experiment. We asked: Suppose that we try to increase from roughly 1,000 per year to 10,000 per year the number of people in the United States who receive cochlear implants through Medicare or Medicaid. Would payment rates be an impediment? We calculated how much additional time would be required from audiologists and surgeons who serve cochlear implant patients and how much money hospitals would lose on the devices. In face of reimbursement rates that often don't cover costs, our bottom line was that you really can't be optimistic about even that degree of expansion of access unless something is done about reimbursement rates in public insurance.
AO/Beck: It seems amazing that a technology which is so highly beneficial, so safe, proven effective, and so terrifically important to so many people, can be under-utilized!
Garber: I think people may wonder how we got into a situation where the reimbursement rates for cochlear implants are an impediment to expanding utilization, even though the technology is worth the cost. One key factor is that public insurance programs are under a lot of pressure to control costs. And in 2003, state Medicaid programs are under enormous financial pressure because many states are facing budget crises. But another factor may be even more important. This is that the federal agency that administers the Medicare program-the Centers for Medicare and Medicaid Services-and the individual state Medicaid programs have thousands and thousands of services and technologies to deal with. So, it's not surprising that a relatively rarely used technology, such as cochlear implants, can just fall through the cracks.
AO/Beck: Thanks Steve. I want to thank you for your time and for sharing your insight and thoughts on this issue.
Garber: You're very welcome, Doug.
Garber: Sure Doug. My doctorate is in economics. It's from the University of Wisconsin at Madison, and I've been at RAND for almost 13 years. My research partners were Susan Ridgely, a health services researcher and health lawyer at RAND; Melissa Bradley, a survey-research expert, also at RAND; and Ken Chin, an ENT. Ken was at UCLA when we did the study; he's now in private practice.
RAND is a not-for-profit organization based in Santa Monica, California. RAND helps improve policy and decision making through research and analysis. The study was done in RAND Health, a research unit within RAND, which works to improve health care systems and advance understanding of how the organization and financing of care affect costs, quality, and access. Those who want to know more about the study can access a four-page summary at: https://www.rand.org/publications/RB/RB4532.1/RB4532.1.pdf
AO/Beck: Please give me an overview of the study, and then we'll get into some specifics.
Garber: The motivation for the study was there seemed to be hundreds of thousands of good candidates for cochlear implants in the United States, but only a small fraction of them-a few thousand-receive cochlear implants each year. The literature indicates that, while cochlear implants are expensive, they're worth the cost. So that raises the question: If using this technology is worth the cost, why aren't more people benefiting from it?
AO/Beck: Very well stated! What did you discover?
Garber: We looked into the possibility that low levels of insurance reimbursement for audiologists, ENTs, and/or hospitals could be playing a prominent role in limiting use of cochlear implants. And we concluded that reimbursement levels for some key services and for the device itself-especially from public insurance programs-are lower than the associated costs. So inadequate reimbursement could be a major reason more people aren't getting cochlear implants.
AO/Beck: I think you hit the nail on the head - the finances are a major stumbling block. What are talking about in terms of real dollars?
Garber: Let's start with the cochlear implant system or device, because the numbers are easier to pin down.
AO/Beck: Okay.
Garber: We did a survey of hospitals. Generally, hospitals buy the implant systems from a manufacturer, and the hospital pays the bill. They often have to count on being reimbursed by a private insurance company or Medicare or Medicaid to recoup the purchase price. From the hospital survey, we learned that in 1999 hospitals were paying on average just a little less than $21,000 per implant system. We also asked hospitals in the survey how much they were being reimbursed on average from private insurers. And the answer was $18,000.
AO/Beck: So they lost $3,000 on each implant?
Garber: Right-when being reimbursed by private insurers. It gets worse in the cases of Medicare and Medicaid.
AO/Beck: Let's talk about Medicare and Medicaid.
Garber: Medicare, the federal health insurance program for the elderly and disabled, reimburses a different amount for the device depending on whether the surgery is done on an outpatient or an inpatient basis. When it was done on an outpatient basis, at the time of the survey hospitals were looking at about $6,000 in losses every time a cochlear implant surgery took place in their facility. They lost more than $10,000 per device when the surgery was done on an inpatient basis. Medicaid is also a federal program, but states implement this health insurance program for low-income people in different ways. In the case of cochlear implants, state Medicaid programs have a lot of discretion about what services they will cover and what their reimbursement rates are. Medicaid reimbursement rates covered the hospitals' costs of the devices in some states, but not others. In fact, in some states, hospitals could have lost as much as $20,000 per surgery on Medicaid beneficiaries.
AO/Beck: This sounds like a financial disaster. What are the implications of all of this? It's hard to imagine that any hospital, or any business can offer a service they lose thousands of dollars on?
Garber: Cochlear implants, can indeed, be a money loser for hospitals. For example, let's talk about Medicare. As I understand the law, if a hospital participates in Medicare for ANY kind of patient, and the hospital is capable of providing cochlear implants, they must provide access to cochlear implants for all Medicare patients. For a hospital with a cochlear implant program to say okay we won't do cochlear implants for Medicare patients they would also have to say we won't take Medicare patients at all. People who are covered by Medicare are much too important to hospitals for them to give up all of that business.
AO/Beck: So the hospital has to accept cochlear implant surgery as a loss leader to get the more profitable surgeries?
Garber: Yes, that's correct in many cases. But hospitals can get out of the business of cochlear implant surgery by closing their programs-and we heard reports that some were doing that-and continue to serve other types of Medicare patients. But, of course, if a hospital doesn't have a cochlear implant program, it can't serve any cochlear implant candidates no matter what kind of insurance or financial resources they have.
AO/Beck: Of course, so far we have addressed hardware only. We also have the surgical costs and aural rehab. Can you tell me how those factors fit into the equation?
Garber: For audiology services or surgical fees, it's not as easy as looking up numbers for hardware costs. So what we did was survey both ENTs and audiologists at almost all of the clinics in the United States that provide services to cochlear implant patients. And we asked them how much time it takes them to perform different services and how much they are reimbursed by different kinds of insurers. We used other data to estimate what their average cost of time was on the basis of how much audiologists and ENTs make per hour when providing services to patients. And there we found that-as was the case with reimbursement for the devices-private insurers pay more on average than Medicare, and Medicare tends to pay more than Medicaid. For the surgery, we concluded that private insurers, on average, pay enough to cover surgeons' costs, and the same is true for Medicare for most surgeons. Again, Medicaid policies and reimbursement rates vary a lot across the states. And, in some states Medicaid doesn't come close to covering surgeons' costs.
AO/Beck: What about the audiology service fees for diagnostics, tune-ups and aural rehabilitation?
Garber: As far as audiologists go, we asked them about several services they perform to evaluate candidates for cochlear implants and for follow-up after surgery. We emphasized aural rehabilitation after surgery because that's what takes up a large portion of the time audiologists spend serving cochlear implant patients. And, similar to what we found for surgeons, in most cases reimbursement rates from private insurers were high enough to cover average costs for audiologists. But there's reason to be concerned about whether Medicare rates are high enough to cover audiologists' time, and in some states under Medicaid the payments are very low -- even relative to Medicare.
AO/Beck: What are your thoughts concerning 2003? Has anything changed, or is it very much the same as it was a few years ago?
Garber: I can't really tell you because we haven't collected data since early 2000. The best place to go for more recent information would be to the cochlear implant manufacturers. They follow reimbursement pretty closely.
AO/Beck: Steve, you mentioned earlier that only a small quantity of people receive cochlear implants every year, despite perhaps half a million potential candidates. Can you tell me more about that?
Garber: Sure. Again the motivation for our study was to try to understand why usage rates are so low-we estimated that only 3,000 people received cochlear implants in the United States in 1999- relative to hundreds of thousands of good candidates. At the rate we're going, we'll never catch up. More people in the United States become candidates every year. So when we look at the gap between utilization and potential numbers of people who could benefit from this technology, what we should be thinking about is -- What it would take to expand utilization substantially?
In the study we considered a thought experiment. We asked: Suppose that we try to increase from roughly 1,000 per year to 10,000 per year the number of people in the United States who receive cochlear implants through Medicare or Medicaid. Would payment rates be an impediment? We calculated how much additional time would be required from audiologists and surgeons who serve cochlear implant patients and how much money hospitals would lose on the devices. In face of reimbursement rates that often don't cover costs, our bottom line was that you really can't be optimistic about even that degree of expansion of access unless something is done about reimbursement rates in public insurance.
AO/Beck: It seems amazing that a technology which is so highly beneficial, so safe, proven effective, and so terrifically important to so many people, can be under-utilized!
Garber: I think people may wonder how we got into a situation where the reimbursement rates for cochlear implants are an impediment to expanding utilization, even though the technology is worth the cost. One key factor is that public insurance programs are under a lot of pressure to control costs. And in 2003, state Medicaid programs are under enormous financial pressure because many states are facing budget crises. But another factor may be even more important. This is that the federal agency that administers the Medicare program-the Centers for Medicare and Medicaid Services-and the individual state Medicaid programs have thousands and thousands of services and technologies to deal with. So, it's not surprising that a relatively rarely used technology, such as cochlear implants, can just fall through the cracks.
AO/Beck: Thanks Steve. I want to thank you for your time and for sharing your insight and thoughts on this issue.
Garber: You're very welcome, Doug.
