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UPMC, Highmark fight likely to trump health act, Medicaid controversies

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Saturday, Feb. 22, 2014, 9:00 p.m.

To anyone who wants to know what forces will shape health insurance in Western Pennsylvania in 2014: Look up.

UPMC and Highmark Inc., whose names sit atop two of Downtown's tallest buildings, continue to fight over whether UPMC, the region's largest health care provider, should negotiate a contract with Highmark, the state's largest insurer. Experts say the battle's importance for health care in Western Pennsylvania will eclipse the other major developments in 2014: the implementation of the federal Affordable Care Act and a possible expansion of the state's Medicaid program.

“I think everybody is looking at Pittsburgh and saying, ‘Wow. That's about as scary as it gets,' ” said Dave Matheson, a senior adviser at the Boston Consulting Group, who co-authored a study of the health care system in a November issue of the Journal of the American Medical Association.

In most health care markets, insurers and hospitals are able to hash out which entity will manage a patient's care — the company paying for it or the hospital providing it. But it didn't work out that way in Pittsburgh, Matheson said.

“Both players saw themselves as sufficiently powerful and strong to be playing those roles — and they felt entitled to play those roles,” Matheson said.

State lawmakers could force the two to come to terms. State Reps. Dan Frankel, D-Squirrel Hill, and Jim Christiana, R-Beaver County, introduced a pair of bills that would require UPMC to negotiate a contract with Highmark, and force the two into arbitration if they can't come to terms.

“If you listen to Highmark, they're betting on legislation that will be passed that will require UPMC to be a part of Highmark's network. If you talk to UPMC, they say that doesn't make sense for us,” said Tom Tomczyk, a principal in the Downtown benefits consulting firm Buck Consultants.

UPMC mounted a campaign against the bills, urging its employees to call lawmakers to voice opposition and distributing what Frankel and Christiana characterized as campaign-style fliers.

“When it gets in politicians' hands, you just never know what's going to happen,” Tomczyk said.

The United States spends more on health care than any other country. A report by the International Federation of Health Plans found the average cost of a day in a U.S. hospital was $4,287, with some costing more than $12,000 a day. In Australia, the country with the next-highest average, it costs just $1,472 a day, the study found.

The recession helped slow the growth of health care costs.

“Over the last 10 years or so, we've had significantly lower increases in the total amount of health care expenditures,” Matheson said.

The Center for Medicare and Medicaid Services found health care spending from 2009 to 2011 grew at the slowest rate – 3.9 percent a year – since the federal government began tracking spending in 1960. The slow growth coincided with the broader economy's sluggish recovery from the worst downturn since the Great Depression.

The Affordable Care Act's effect on health care costs will become clearer as more provisions of the law are implemented in 2014.

“The biggest thing we're looking at on our end is really the Medicaid expansion and what is going to happen in the next year,” said Antoinette Kraus, director of the Pennsylvania Health Access Network, a public advocacy organization that focuses on access to health care.

Expanding Medicaid, as authorized by the health care law, would bring billions of federal dollars to Pennsylvania, and cover 500,000 poor people. Corbett initially rejected the money, saying it would cost the state too much when federal support shrinks in future years.

In December, he asked the federal government for permission to use the Medicaid money for a hybrid program that would help the working poor buy private health insurance rather than insure them through the government program.

The issue is fraught with politics. Republican governors in 20 states, and Republican legislators in three others, have rejected Medicaid expansion, a move that's in line with the party's broader opposition to the Affordable Care Act.

If the Obama administration doesn't grant Corbett's request, “the question is, is the governor going to walk away and say, ‘I tried. The federal government didn't approve it?' ” Kraus said.

The issue could influence the governor's race this year, she said. If the Medicaid expansion doesn't happen, Democrats could attack Corbett for “leaving money on the table” and failing to help the working poor get insurance. If Corbett gets approval for his hybrid expansion, he can tout “how they were able to create this new, innovative Medicaid system,” Kraus said.

A larger test for the Affordable Care Act will be how many uninsured people sign up for coverage through the federal or state-run exchanges. Sixteen states and the District of Columbia built their own exchanges. Eight states run their exchanges in partnership with the federal government. The feds run the exchanges in 26 states, including Pennsylvania.

“This is a particularly interesting year because you do have the implementations of the exchanges, which are a very big part of the Affordable Care Act, and I guess we will eventually know how many of those exchanges have begun to work and how many have fallen flat on their face,” Matheson said.

The federal exchange got off to a rocky start, when its website,, failed to work properly for the first couple of months.

“It's almost inevitable that you will have some that fail pretty badly because there are a lot of them,” Matheson said.

The mixed outcome likely will allow the political battles over the health care law to continue. Republicans will hold up the worst-performing insurance exchanges as proof that the law doesn't work, while Democrats will trumpet the successful ones to show they did the right thing, Matheson said.

“I think there's a lot of uncertainty,” Tomczyk said. “There are going to be winners and losers.”

Mike Wereschagin is a staff writer for Trib Total Media. He can be reached at 412-320-7900 or




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