This entry is from Dr. McCanne's Quote of the Day, a daily health policy update on the single-payer health care reform movement. The QotD is archived on PNHP's website.
Teva Offers to Buy Mylan in $40.1B Cash-and-Stock Deal
By Linda A. Johnson, AP
ABC News, April 21, 2015
Generic drug giant Teva formally offered to buy fellow drugmaker Mylan for about $40.1 billion in cash and stock on Tuesday, despite Mylan’s cold shoulder and the certainty the proposed acquisition will bring intense scrutiny by antitrust regulators.
If Israel-based Teva Pharmaceutical Industries Ltd. succeeded, the combination would dominate the global generic drug market, be a major contender in some other specialty drug categories — and have the leverage to try to raise generic drugs prices.
After years of stability, generic medicine prices recently have risen several percent a year on average. Some have skyrocketed by up to 1,000 percent, generally when competition vanishes due to consolidation or shortages caused by manufacturing quality problems.
A tie-up wouldn’t just increase Teva’s scale, allowing it to boost profitability by cutting jobs and other costs. It would increase its leverage in negotiating drug prices with insurers and other payers, noted Les Funtleyder, health care portfolio manager at E Squared Asset Management.
“That’s going to feed into regulators’ interest,” he said.
That’s particularly true in the U.S., where seven of eight prescriptions filled are for generics and employers, insurers and government health programs encourage their use to hold down costs.
New pharmaceutical products usually enter the market at the maximum prices that the market would bear. So it was always a relief when the patents expired and patients could obtain much less expensive generic versions of these drugs.
Now that almost 90 percent of prescriptions have generic versions available, the industry is busy trying to find ways of increasing generic drug prices, and they have been successful with prices rising as much as tenfold. One of the methods has been to gain greater control of markets through consolidation. That explains Teva’s interest in purchasing Mylan. Drug shortages, whether or not contrived, have also been a method of boosting prices. In many instances, drug prices sharply increased after the line was purchased by another firm, partly to recover capital investments, but no doubt to simply increase profits.
Is that the way markets should work? Supposedly markets should bring prices down, but today’s market innovations have been raising prices – almost intolerably so in the drug markets. The greater dependency on pharmacy benefit managers has only added a new wasteful administrative layer on top of our already overpriced drugs.
This would not be tolerated under a single payer system. Our own public purchaser of health care products and services would demand appropriate pricing – just enough profit to keep the pharmaceutical firms interested in pursuing their fair portion of our national health expenditures. But PhRMA had a front seat when the Affordable Care Act was constructed. That lobbying investment is really paying off for them now.
This entry is from Dr. McCanne's Quote of the Day, a daily health policy update on the single-payer health care reform movement. The QotD is archived on PNHP's website.
Obamacare, Hands Off My Medicare
By Thomas B. Edsall
The New York Times, April 22, 2015
A number of factors underpin the anti-redistributionist shift in public opinion that I wrote about last week.
First, and perhaps most important, is the emergence of significant resistance to downward redistribution among the elderly, a major voting bloc.
The views of older voters deserve scrutiny. They “worry that redistribution will come at their expense, in particular via cuts to Medicare,” Vivekinan Ashok, a Ph.D. candidate in political science at Yale; Ilyana Kuziemko, a professor of economics at Princeton; and Ebonya Washington, a professor of economics at Yale, write in a March 2015 Brookings Institution essay, “Support for Redistribution in an Age of Rising Inequality”— an essay my Times colleague Neil Irwin also discussed in a recent column that asked why Americans don’t want to soak the rich.
In the end, Ashok, Kuziemko and Washington conclude that “the elderly have grown increasingly opposed to government provision of health insurance and that controlling for this tendency explains roughly half of their declining relative support of redistribution.”
What the Brookings essay neglects to explore are the material circumstances of over-65 voters that might affect their views on redistribution. Over a third of retirees depend on Social Security for 90 percent or more of their annual income, according to the Social Security Administration. In the zero-sum competition for federal dollars, the cost of major spending programs like the Affordable Care Act has to be made up by spending cuts elsewhere.
The Obama administration has reported that the Affordable Care Act will be financed in part by $716 billion in Medicare cuts over 10 years. Somewhat improbably, the administration also contends that cuts of this magnitude will not reduce services to Medicare beneficiaries.
The decline in support among the elderly in the United States for redistributive social spending stands in contrast to Britain, Germany, Sweden and Australia where Ashok, Kuziemko and Washington found that older people were more supportive of redistribution than those of working age. In most European countries, health care is guaranteed regardless of age, while in the United States, before the enactment of the Affordable Care Act in 2010, only the elderly were guaranteed health coverage through Medicare.
This lends support to the authors’ conclusion that “seniors, a group unique in having guaranteed health insurance during our sample period, may increasingly feel that expansions of redistributive programs could come at their expense.”
Further increasing anxiety among the aged in the United States is the shift from defined benefit pensions, which guarantee payments, to defined contribution pensions, which do not.
“Our best assessment is that retirees are falling short and will fall increasingly short over time,” Alicia H. Munnell, Matthew S. Rutledge and Anthony Webb, researchers at Boston College’s Center for Retirement Research, wrote in November 2014.
“The new demographic transition is a longevity transition: how will individuals and societies respond to mortality decline when almost all of the decline will occur late in life?” Karen N. Eggleston, director of the Stanford Asia Health Policy Program, and Victor R. Fuchs, professor emeritus of economics at Stanford write in a 2012 study. The combination of longer lives and unreliable pension benefits increases retirees’ dependence “on transfers from the working population for living expenses, including large consumption of medical care,” Eggleston and Fuchs note.
In his new book, “The Business of America Is Lobbying,” Lee Drutman, a senior fellow at the New America Foundation, provides insight into a crucial element of this power shift.
Beginning in the early 1970s, just as support for redistribution began to decline, “corporate America began to devote attention and meaningful resources to politics,” Drutman writes. “The 40-year trend has overwhelmingly moved in one direction: growth. Corporate lobbying expenditures now dwarf the comparable investments of unions” and public interest or citizen groups.
From 1998 to 2012, the ratio of corporate/trade association lobbying spending to union/public interest group spending went from 22 to one to 34 to one, Drutman found.
In a November 2014 article “The Ideological Asymmetry of the American Party System,” Yphtach Lelkes of the University of Amsterdam, and Paul Sniderman of Stanford, both political scientists, develop an intriguing argument on how Republicans have mobilized public opposition to Democratic social policies that initially carried strong popular support.
The conservative strategy, they write, is to portray “social welfare policies as benefiting particular interest groups rather than society as a whole.” The more the electorate sees a policy or program as “particularistic” — as opposed to universalist — the less backing the public will give the program.
On a broader scale, the political scientists Jacob Hacker and Paul Pierson, in their chapter of the 2013 book “Representation: Elections and Beyond,” have sought to understand the logic of working-class white “support for the G.O.P. in an era of runaway inequality.”
Hacker and Pierson argue that not only has business mobilized for over four decades now, but so, too, have conservative foundations, think tanks and the religious right.
“There was a common theme linking these disparate trends: all of them worked to diminish the presence of organized voices addressing the economic concerns of ordinary Americans in Washington,” Hacker and Pierson write. “G.O.P. electoral inroads among less affluent voters have occurred alongside declining public confidence in government and growing perceptions that politicians are excessively responsive to ‘special interests.’ ”
The authors add, “In this context, calls for limited government and self-reliance receive greater hearing, especially when there are few contrary organizational signals pushing voters the other way.”
A half century ago, when the nation seemed ready to ensure health care for everyone, it was decided instead to establish programs for the two groups with the greatest needs: Medicare for retirees and Medicaid for the poor. It was intended that Medicare eventually would be expanded to include everyone.
As it turns out, these two programs have such strong political support that they not only survived the half century, they will be perpetuated indefinitely as a result of the decision to enact the the policies contained in the Affordable Care Act rather than to expand Medicare, as originally intended.
Thomas Edsall provides us with a background of understanding why our seniors so passionately support Medicare while demanding that we keep the government out of their Medicare. No matter how progressive a person’s views are, there is always an element of self-interest, and quite appropriately so. Edsall, in expanding on his anti-redistributionist article of last week, explains that seniors are concerned that further redistribution to others risks reduction of redistribution to themselves, though they might not think of it in those terms. It is this fear that has contributed to declining support by our seniors for health care for all.
Of course, conservatives, through massive lobbying efforts, have leveraged this view to convert it into policy. Those who would suffer the most through a reduction in redistribution have been particularly tenacious in clinging to the idea that greater benefits for others would reduce benefits for themselves. You know that’s true because it’s on Fox News.
In reality, a well designed system of redistribution would improve benefits for everyone. The cost would be borne disproportionately by those who are already spending massively to thwart programs of social justice.
Thomas Piketty and others have shown us that disproportionate taxation (progressive taxes) is precisely what we need, and the concentration of income and wealth at the top is so great that the lifestyles of the rich would not be impaired in the least. But just try to tell that to the elderly lady carrying the picket sign stating, “KEEP GOVERNMENT HANDS OFF MY MEDICARE!”
This entry is from Dr. McCanne's Quote of the Day, a daily health policy update on the single-payer health care reform movement. The QotD is archived on PNHP's website.
By Brian MacQuarrie
The Boston Globe, April 20, 2015
Attorney General Maura Healey is demanding that companies selling naloxone in Massachusetts explain why the cost of the drug, which is used to reverse heroin overdoses, has skyrocketed since former governor Deval Patrick declared a public health emergency a year ago.
The drug, often marketed under the brand name Narcan, has become a critical tool for emergency workers who use it to revive overdose victims. Without Narcan, thousands of overdoses during the past few years would have resulted in deaths, authorities have said.
To help ensure that distributors are not taking advantage of a sudden surge in demand, Healey’s office last week asked the distributors to provide detailed records of all naloxone sales to public entities in Massachusetts since April 1, 2014, less than a week after Patrick’s declaration made the drug available to all first responders.
Since then, price increases “have strained access to this life-saving medication at exactly the moment when it is most needed,” the companies were told in certified letters. “Our office has heard regularly from local law enforcement and public health workers worried about their ability to maintain supplies.”
Healey’s office sent certified letters requesting answers by April 30 to Moore Medical of Farmington, Conn.; Bound Tree Medical of Dublin, Ohio; McKesson Corp. of San Francisco; and Southeastern Emergency Equipment of Wake Forest, N.C.
Kristin Hunter, a spokeswoman for McKesson Corp., told the Globe that the company “does not set wholesale prices or the retail drug prices paid by consumers or health plans.”
Those prices often are set by the manufacturer. Staff from Healey’s office identified Amphastar Pharmaceuticals of Rancho Cucamonga, Calif., as the producer of much of the naloxone used in Massachusetts, and said they have been in discussions with the company about pricing since February.
Amphastar officials did not return repeated phone calls from the Globe requesting comment.
Drug manufacturers recently have been engaged in outrageous pricing practices for essential drugs that they produce – the hepatitis C drugs being an egregious example.
Narcan – a crucial life saving drug that reverses narcotic overdoses – now has much wider distribution since it has become available to first responders. The manufacturer – Amphastar Pharmaceuticals – in what has to be more than a mere coincidence, chose this time to sharply increase the price of this drug.
When the market is dysfunctional, it is the responsibility of government to intervene. The United States has shirked its responsibility. We need to revise our approach.
A single payer national health program functions as a monopsony – a single purchaser of products and services. In private markets, monopsonistic pricing can be as evil as monopolistic pricing like the example of Narcan. The difference with a government monopsony is that it gets pricing right – an adequate price to be sure that products and services remain available, yet at a price that does not gouge the taxpayers who fund the system.
Has Obamacare Turned Voters Against Sharing the Wealth?
By Thomas B. Edsall
The New York Times, April 15, 2015
With the advent of the Affordable Care Act, the share of Americans convinced that health care is a right shrank from a majority to a minority.
This shift in public opinion is a major victory for the Republican Party. It is part of a larger trend: a steady decline in support for redistributive government policies. Emmanuel Saez, an economics professor at Berkeley and one of the nation’s premier experts on inequality, is a co-author of a study that confirms this trend, which has been developing over the last four decades. A separate study, “The Structure of Inequality and Americans’ Attitudes Toward Redistribution,” found that as inequality increases, so does ideological conservatism in the electorate.
The erosion of the belief in health care as a government-protected right is perhaps the most dramatic reflection of these trends. In 2006, by a margin of more than two to one, 69-28, those surveyed by Gallup said that the federal government should guarantee health care coverage for all citizens of the United States. By late 2014, however, Gallup found that this percentage had fallen 24 points to 45 percent, while the percentage of respondents who said health care is not a federal responsibility nearly doubled to 52 percent.
“The Structure of Inequality and Americans’ Attitudes Toward Redistribution,” suggests that Democratic programs providing tax-financed benefits to the poor are facing growing hostility. The author of the paper, Matthew Luttig, a Ph.D. candidate in political science at the University of Minnesota, found that while “numerous political theorists suggest that rising inequality and the shift in the distribution of income to those at the top should lead to increasing support for liberal policies,” in practice, “rising inequality in the United States has largely promoted ideological conservatism.”
I asked two experts, Jacob Hacker, a political scientist at Yale, and Robert Frank, an economist at Cornell, if Luttig’s conclusions are consistent with their own research, and both said he is on target.
“The General Social Survey shows there has been a slight decrease in stated support for redistribution in the US since the 1970s, even among those who self-identify as having below-average income,” according to Saez and his three co-authors, Ilyana Kuziemko, a professor at Columbia Business School, Michael I. Norton, a professor at Harvard Business School, and Stefanie Stantcheva, a junior fellow at Harvard.
Even worse for Democrats, the Saez paper found that “information about inequality also makes respondents trust government less,” decreasing “by nearly twenty percent the share of respondents who ‘trust government’ most of the time.”
The findings of the Saez group are consistent with Luttig’s. Taken together, they suggest that even if Democrats win the presidency and the Senate in 2016, largely on the basis of favorable demographic trends, the party will confront serious hurdles if it attempts to deliver material support to working men and women and the very poor. Redistribution is in trouble, and that is likely to tie American politics in knots for many years to come.
Matthew Luttig: The Structure of Inequality and Americans’ Attitudes Toward Redistribution
Ilyana Kuziemko, Michael I. Norton, Emmanuel Saez, and Stefanie Stantcheva: How Elastic Are Preferences for Redistribution? Evidence from Randomized Survey Experiments
Thomas Edsall states that, as income and wealth inequality have expanded, the number of Americans who believe that health care is a right has declined from a majority to a minority. Of particular concern is Matthew Luttig’s finding, supported by others, that “rising inequality in the United States has largely promoted ideological conservatism.”
What mechanism might explain this? Gilens and Page have shown that the very wealthy have control over the political process. Part of that control is through the media and other forms of public communication.
Redistribution (or transfer) refers to the process of collecting taxes, largely progressive, and distributing those funds based on public need. Some public services benefit everyone, but other services disproportionately benefit those with basic needs who do not otherwise have the funds to pay for them.
Those who benefit from tax reduction have been successful in creating the meme that government redistribution through tax and spending policies is is an inappropriate role of government, a concept that, ironically, is especially prevalent amongst the poor and relatively uneducated.
Quoting from Kuziemko, Saez, et al (link above):
“About 5,000 respondents were randomized into treatments providing interactive information on U.S. income inequality, the link between top income tax rates and economic growth, and the estate tax. We find that the informational treatment has very large effects on whether respondents view inequality as an important problem. By contrast, we find quantitatively small effects of the treatment on views about policy and redistribution: support for taxing the rich increases slightly, support for transfers to the poor does not, especially among those with lower incomes and education.”
Further, they state:
“An exception is the estate tax — we find that informing respondents that it affects only the very richest families has an extremely large positive effect on estate tax support, even increasing respondents’ willingness to write to their U.S. senator about the issue.”
“We also find that the treatment substantially decreases trust in government, potentially mitigating respondents’ willingness to translate concerns about inequality into government action.”
So what can we make of this?
The nation strongly supports Social Security and Medicare – both very important programs that involve redistribution – yet the topic of redistribution is rarely mentioned in discussions of these programs, with the exception of those who would reduce redistribution by privatizing these programs.
Although many have concerns about redistribution of income, that does not seem to carry over to their views on redistribution of wealth. When people understand the degree of wealth inequality and the selective application of estate taxes, they become even more supportive of taxing those large estates.
Just as people believe the meme that “the government can’t do anything right,” even though they truly support most specific government programs, people seem to be swayed by the newly implanted meme that redistribution is a function of a government that cannot be trusted, even though they support specific programs involving redistribution. This seems to represent the phenomenon wherein empty rhetoric threatens to spill over into policy positions.
Conservatives and libertarians do support catastrophic insurance plans – clearly a private sector redistribution from those who do not experience specific losses to those who do. So the opposition is not to the concept of redistribution itself, but rather it is an ideological opposition to the government role in redistribution.
A component of this opposition is the objection to being forced to participate in a redistribution pool such as health insurance coverage. Some individuals would prefer to accept the risk of personal financial ruin even if their losses are passed onto their fellow Americans. It is the latter reason that establishes the legitimacy of the government in requiring participation of all – preventing individuals from electing to be free riders at a cost to the rest of us. Nobody supports policies requiring themselves to pay more to cover those who shirk their responsibilities to pay their own share (ideally through equitable taxes).
So do Americans believe that health care is a right? The answer is muddled by rhetorical memes, but, in general, they actually do believe that the financing of health care is a collective responsibility.
Public vs. Private Health Insurance on Controlling Spending
By Drew Altman
The Wall Street Journal, April 16, 2015
The Federal Office of the Actuary in the Centers for Medicare and Medicaid Services has charted the annual rate of increase in spending for Medicare, Medicaid, and private health insurance. As the chart (at the link below) shows, by cumulative growth in per capita spending, Medicare and Medicaid have generally grown more slowly than private insurance and are projected to continue doing so through 2023. Per capita spending is an especially useful measure for comparing public and private health insurance spending because it shows how much Medicare, Medicaid, and private insurers spend on each person irrespective of the number of people covered.
Overall… it appears that public programs control per capita spending somewhat more effectively than private coverage does. That may be just the opposite of what many would presume in a country where the private market is generally expected to outperform the public sector.
Here’s another way to think about it: While Medicare and Medicaid are far from perfect, the purchasing power and policy levers available to large public programs appear to give them an edge over our fragmented private insurance system when it comes to controlling spending.
Drew Altman is president and chief executive officer of the Kaiser Family Foundation.
One of the primary purposes of the Affordable Care Act was to control health care spending. After five years, the impact on spending appears to be negligible except for a slight decline in use of beneficial services as a result of higher deductibles and less accessible provider networks – exactly the wrong way to control health care spending.
The data is right out front for all the world to see: large public programs are clearly more effective than our fragmented private insurance system when it comes to controlling spending.
The Affordable Care Act experiment has already failed. It’s time for single payer.
Report on Health Information Blocking
The Office of the National Coordinator for Health Information Technology (ONC)
Department of Health and Human Services, April 2015
Current economic and market conditions create business incentives for some persons and entities to exercise control over electronic health information in ways that unreasonably limit its availability and use. Indeed, complaints and other evidence described in this report suggest that some persons and entities are interfering with the exchange or use of electronic health information in ways that frustrate the goals of the HITECH Act and undermine broader health care reforms. These concerns likely will become more pronounced as both expectations and the technological capabilities for electronic health information exchange continue to evolve and mature.
The intent of the HITECH Act was to drive the rapid adoption of interoperable technologies and services to support the exchange of electronic health information to improve care and efficiency in the U.S. health care system. While this intent was and is clear to most stakeholders, based on ONC’s experience and available evidence, the developing market for health IT products and services has, in some instances, fallen short of this charge.
The precise nature and extent of information blocking remain obscured in large part by contractual restrictions that prevent the disclosure of relevant evidence. However, based on the evidence and knowledge available, it is apparent that some health care providers and health IT developers are knowingly interfering with the exchange or use of electronic health information in ways that limit its availability and use to improve health and health care. This conduct may be economically rational for some actors in light of current market realities, but it presents a serious obstacle to achieving the goals of the HITECH Act and of health care reform.
There are several immediate actions ONC, HHS, and other federal agencies can take to partially address some kinds of information blocking. In this report, ONC has outlined a number of targeted actions to deter and mitigate such conduct, within limited areas.
While important, these actions alone will not provide a complete solution to the information blocking problem. Indeed, a key finding of this report is that many types of information blocking are beyond the reach of current federal law and programs to address. Thus a comprehensive approach will require overcoming significant gaps in current knowledge, programs, and authorities that limit the ability of ONC and other federal agencies to effectively target, deter, and remedy this conduct, even though it violates public policy and frustrates congressional intent. For these reasons, in addition to the actions outlined in this report, successful strategies to prevent information blocking will likely require congressional intervention.
Information blocking is certainly not the only impediment to an interoperable learning health system. But the findings in this report suggest that it is a serious problem—and one that is not being effectively addressed. ONC believes that in addition to the actions described in this report, there are several additional avenues open to Congress to address information blocking and drive continued progress towards the nation’s health IT and health care goals. ONC looks forward to working with Congress to identify the best solutions.
On July 21, 2004, David Brailer, the then National Coordinator for Health Information Technology, released a 178 page report, “The Decade of Health Information Technology: Delivering Consumer-centric and Information-rich Health Care.” Following is my comment on that date in response to his report:
A private health care information technology system
By Don McCanne, MD
Quote of the Day, July 21, 2004
The private, competitive market has produced for us computers that are powerful yet inexpensive. Software that is used widely is quite inexpensive, and that in the public domain is essentially free after the initial development costs. With inexpensive computers and software developed in the public domain, the cost of an integrated health care IT (information technology) system should be quite modest. And the return in error reduction and administrative efficiency would far more than offset any real costs.
The Veterans Administration is far ahead of the rest of the nation in developing and utilizing an integrated IT system. And this has been developed in the public (government!) sector. Many other nations with universal health care systems have also introduced integrated IT systems primarily through the public sector.
What has the magic of the competitive marketplace produced in the way of an integrated IT system to this date? High costs, very poor penetration, and system failures! Competitive market theory dictates that we should be leading the world with a high quality health care IT system at a low cost. What went wrong?
First of all, a fragmented system of multiple private plans, public programs and being uninsured does not provide an infrastructure that is very conducive to an integrated IT system. A single payer system, or, at minimum, a highly regulated system of universal coverage through multiple plans, would provide a framework that would ensure adaptability of an integrated IT system. Of course, a single, publicly administered system would be much preferred for an integrated IT system.
But the greatest difficulty with private IT solutions lies in the very nature of these marketplace models. Their goals are, above all, to maximize profits and to maximize the market price of their shares. To achieve those goals, corporate behavior varies from that of a public entity that has a simpler goal of establishing an effective and efficient high quality system that serves the heath care system and its patients well. The public system does not have to be concerned about being a successful business enterprise, but the private model does.
What might the private sector do that doesn’t serve our interests well? They will produce products that command the highest prices that the market will bear. They will design the products to provide a continuing revenue stream. Once gaining a significant share of the market, they will design incompatibility with other systems in an attempt to garner the entire market. They will design obsolescence into their systems to ensure future markets for their new innovative products. They will partner with and perhaps acquire other related entities that can expand profit potentials through greater control of components of the health care system which their products can influence. Although these are good business practices, they are terrible policies for our health care system.
The health information technology report released today should alarm us all. Although we all agree on the importance of an integrated IT system, the Bush administration is limiting the role of the government to being an enabler that encourages the private sector to develop a successful business model. Rather than higher quality at a lower cost, we’ll end up with mediocrity at a much higher cost, wasting even more of our health care dollars.
We desperately need strong leadership from our government in developing a health care IT system that will serve us all well. But based on the current leadership that has failed to address even the fundamental issue of adequate health care coverage for all, it is unlikely that we’ll see any enlightened leadership on this in the near future.
Some say that my comments of over a decade ago were prescient. They were not. The current disarray of our health information technology system (HIT) was fully predictable.
There are times and circumstances in which the private sector sector serves us well, with appropriate government oversight, and there are times and circumstances in which the government serves us well, with appropriate private partnership.
We blew this one. We turned HIT over to the private sector while failing to provide adequate government oversight. We ended up with just what I predicted a decade ago, when David Brailer was predicting a decade leading to HIT nirvana.
Right now we have a much larger problem in our health care system with an imbalance between the private sector and government. We have turned much of our health care financing system over to the private sector, especially the private insurance plans, without providing adequate government oversight. Thus we have tens of millions of individuals without insurance, many more who are underinsured, many who have impaired access to their physicians because of insurer network restrictions, many who face financial hardship when medical needs arise, and an outrageously expensive system due to the profound administrative waste of the insurers and the burden they place on the health care delivery system.
Virtually none of these problems would exist if we had the government instead of the private insurers serving us as the health care financing authority. It should be the government rather than the private insurers that distributes the funds to the private and public health care delivery systems.
It is amazing that it has taken a decade for us to discover officially that placing control of HIT in the hands of the private sector is not serving us well. What is even more astounding is that, in over half of a century, we have not seemed to learn that lesson as it applies to our health care financing.
It is not as if we have not tried. PNHP has been preaching this lesson for over a quarter of a century, especially after it became obvious that the private insurers and their managed care revolution proved to us that they should no longer be stewards of our health care dollars.
The founders of PNHP were not prescient. The need was obvious. It still is.
Health Care Coverage and Access in the Nation’s Four Largest States
By Petra W. Rasmussen, Sara R. Collins, Michelle M. Doty, Sophie Beutel
The Commonwealth Fund, April 10, 2015
In this brief we use data from the Biennial Survey to examine differences in health insurance coverage, cost-related problems getting needed care, and medical bill problems and debt among adults ages 19 to 64 in the nation’s four largest states.
The four largest states in the U.S.—California, Florida, New York, and Texas—fall into two distinct categories. The first group is represented by California and New York, both of which are operating their own health insurance marketplaces and have expanded eligibility for Medicaid to adults who earn at or below 138 percent of the federal poverty level—about $16,000 for an individual or $32,000 for a family of four.3 Florida and Texas, the second group, are using the federal marketplace to enroll residents in health plans and have declined to expand Medicaid eligibility. In this new analysis of data from the Commonwealth Fund Biennial Health Insurance Survey, we find that, in 2014, there were larger shares of uninsured adults in Florida and Texas compared with California and New York. In addition, adults in Florida and Texas were more likely to report not getting needed care because of cost and to report having problems paying medical bills.
Percent of adults ages 19-64 who are uninsured
12% – New York
17% – California
21% – Florida
30% – Texas
Percent of adults ages 19-64 who experienced cost-related access problems
30% – New York
31% – California
43% – Florida
43% – Texas
Percent of adults 19-64 reporting medical bill problems or medical debt
29% – New York
24% – California
42% – Florida
41% – Texas
The analysis suggests that the health policy decisions made by state leaders matter. Of the four states studied, New York has had the longest history of legislation aimed at enhancing the availability of affordable coverage. California also implemented an early expansion of Medicaid eligibility and, based on federal survey data, both states began achieving declines in their adult uninsured rate earlier than other states. Both have taken advantage of opportunities granted by the Affordable Care Act to further expand the reach of coverage and access. Alternatively, Florida and Texas, while experiencing robust enrollment in private plans through the federal health insurance marketplace, have not expanded Medicaid eligibility and have made less headway in reducing their uninsured populations.
While there have been significant declines in the number and share of uninsured adults since the major provisions of the Affordable Care Act went into effect in 2014, coverage gaps are leaving millions uninsured and without access to affordable coverage. An estimated 3.7 million people have fallen into the Medicaid coverage gap in states that have not yet expanded eligibility for Medicaid.
In addition, the law does not provide access to any new coverage options for unauthorized immigrants. They are ineligible for Medicaid coverage and cannot purchase private plans through the marketplace, either subsidized or unsubsidized. The Congressional Budget Office estimates that by 2020, 30 percent of the remaining uninsured will be unauthorized immigrants, or about 9 million people. Another part of the law that is leaving people uninsured is the so-called “family coverage glitch,” which defines affordability—and eligibility for subsidies—based on the cost of individual, rather than family, coverage. Currently, an estimated 2 million to 4 million people are uninsured because of this issue.
The analysis also indicates that expanded coverage is necessary to improve access to care and reduce medical financial burdens among U.S. families. But the quality and comprehensiveness of coverage across all sources of insurance (marketplace plans, individual plans, employer-provided coverage, and Medicaid), will ultimately determine the degree to which these problems are lessened for U.S. families.
New York and California have fully implemented the provisions of the Affordable Care Act whereas Florida and Texas have not. As a result, Florida and Texas have more people who are uninsured, more people who experience cost-related access problems, and more people with medical bill problems or medical debt.
Although the leaderships of Florida and Texas should be ashamed for failing to implement the programs that would ensure that more residents receive the health care that they need, the leaderships of New York and California should be ashamed as well for not demanding changes in our health care financing system that would ensure health care for everyone. The numbers in the tables above for these two “exemplary” states are disgraceful and would not be tolerated by any other wealthy nation.
Incremental patches are grossly inadequate. We need a single payer national health program.
Why the Private Health Insurance Industry Has to Go
By John Geyman, MD
PNHP Blog, April 8, 2015
The private health insurance industry in the U.S. has had a long run since shifting to medical underwriting and a for-profit status in the early 1960s. It finds itself increasingly dependent on the government as the costs and prices of health care have continued upward since the 1980s. Its many perks from government include tax exemptions for employer-sponsored insurance (ESI), privatized Medicare and Medicaid programs, and longstanding over-payments to Medicare Advantage programs. The Affordable Care Act (ACA) has added to these perks since 2010 with subsidized premiums through the exchanges, a “risk corridor system” to protect insurers from losses, and allowing automatic self-renewal for 2015 plans.
Incremental attempts to contain health care costs and reform the system since the 1990s have built upon our current multi-payer financing system. After five years’ experience with the ACA, we now know that insurers themselves are a major barrier to achieving the kind of access to affordable care that our population so desperately needs.
Here are some of the major reasons why private health insurers warrant no further bailout by government and taxpayers.
1. Continued discrimination against the sick.
Despite the supposed consumer protections in the ACA, a 2014 letter from more than 300 patient advocacy groups to the Secretary of Health and Human Services described continuing ways that insurers still discriminate against the sick, including benefit designs that limit access, high cost-sharing, restrictive drug formularies, inadequate provider networks, and deceptive marketing practices. A recent study by Kaiser Family Foundation found that only one-third of households with incomes between 100 percent and 250 percent of poverty have enough liquid assets to pay their deductibles, while only about one-half can meet out-of-pocket limits. As other examples, Wellpoint developed an algorithm to search its database for patients with breast cancer with an intent to cancel their policies, while many insurers place all drugs used to treat such complex diseases as cancer, multiple sclerosis and HIV in the highest drug formulary cost-sharing tiers, thereby reducing insurers’ costs but making the drugs unaffordable for many patients
2. Fragmentation, inefficiency, and exorbitant administrative overhead.
There are some 1,300 private insurers still trying to maximize their income by avoiding the costs of sicker patients. Their administrative overhead is more than five times higher than that of the single-payer program in two Canadian provinces; the overhead of private Medicare Advantage plans averages 19 percent vs. the 1.5 percent for traditional Medicare. Although the ACA set limits of 20 percent for overhead in the individual market and 15 percent in large-group markets, a recent study has found that those requirements had no effect on insurers’ overhead spending over the first three years of the ACA.
3. Increasing costs for less coverage
The ACA provided insurers with four levels of coverage—the so-called “metals”—with actuarial values (what insurers pay vs. what patients pay) ranging from 60 percent (bronze) 70 percent (silver) to 80 percent (gold) and 90 percent (platinum). Not content with those levels of coverage, the industry through its trade group, America’s Health Insurance Programs (AHIP), has been lobbying hard for copper plans with only 50 percent actuarial value. Silver plans have been the most popular on the exchanges, so that patients are left with almost one-third of their costs, plus the cost-sharing that was required to get and maintain their policies. All this has led to an epidemic of underinsurance, whether the plans are purchased through the ACA exchanges or through the private insurance markets. The ACA has made the mistake of focusing on raising the numbers of Americans with “insurance”, but has not been effective in containing prices or costs of health care, with the result that an increasing proportion of these costs are shifted to patients and families. One-half of bronze plans in seven large U.S. cities require enrollees to pay the deductible (often $5,000) before covering a doctor’s visit.
4. Gaming the ACA for profits more than service to patients
There are many examples of this, starting with Medicare Advantage. Many insurers have been cited by the Centers for Medicare & Medicaid Services (CMS) for serious violations of Medicare’s patient protection requirements, including inappropriate denial of coverage and failure to consider physicians’ clinical information. Humana, one of the largest Medicare Advantage insurers in the country, is facing scrutiny from the U.S. Department of Justice for its risk-adjustment practices, which “upcode” the severity of patients’ illnesses in order to gain increased reimbursement, even as they lobby Congress for continued high over-payments. Meanwhile, some insurers are marketing short-term plans that last less than 12 months, evading any of the ACA’s requirements.
5. Private insurance has priced itself out of the market.
Premiums keep going up at rates much higher than the cost of living, with little or no containment by regulators. As examples, MetroPlus, a popular new entrant on the New York exchange in 2014, has requested rate hikes of up to 28 percent in 2015 for some of its enrollees, while Florida Blue, the state’s largest insurer, has announced an average rate increase of 17.8 percent for 2015. One can argue that the private insurance industry should be regarded as obsolete and not worth saving. However, the ACA has extended its life, including almost $2 trillion in federal subsidies over the next ten years (if these subsidies survive a U.S. Supreme Court ruling on their legality in coming months). Insurers have focused on attracting enrollees with low premiums, high cost-sharing, and low levels of actual coverage. Large insurers such as Wellpoint (Anthem) and Humana expect to receive $5.5 billion in 2015 through the ACA’s “risk corridor” provision that protects them from “losses.”
6. As their business plan dictates, insurers are leaving unprofitable markets without regard for patients’ needs.
Private health insurers are all about making money, so they leave unprofitable markets regardless of the public’s needs. A recent example is Blue Shield of California (which just lost its state tax-exempt status with a surplus of more than $4 billion), which withdrew from 250 zip codes in California throughout the state in 2014.
Based on the above, the time has come for us to replace private health insurers with a more efficient, not-for-profit single-payer financing system—national health insurance (NHI)—which could be enacted by passage of H. R. 676, Expanded and Improved Medicare for All.
Geyman, JP. How Obamacare Is Unsustainable: Why We Need a Single Payer Solution for All Americans. Friday Harbor, WA, Copernicus Healthcare, 2015,http://www.johngeymanmd.org
Other references are available at either link below.
Huffington Post (Same article): http://www.huffingtonpost.com/john-geyman/why-the-private-health-in_b_70…
Those supporting further implementation of the Affordable Care Act (ACA) while rejecting more comprehensive reform are trying to make the overpriced and inadequate private health plans work for us. John Geyman reminds us of some of the reasons why the private plans are actually the cause of several of the problems we face today. We need to replace them with a single payer national health program.
Medicare fix needs fixing
By Theodore R. Marmor
philly.com, April 13, 2015
In recent weeks, reform legislation that proposes to change how Medicare pays physicians drew much attention. The prod to action was the imminent expiring of the present fee schedule.
For many years, Congress had failed to reach agreement about the rate of increase in physician payments under Medicare. This, in turn, prompted annual, ad hoc “fixes” while postponing decisions on how Medicare should operate as a “purchaser” of medical care.
The surprise of 2015 is that the House of Representatives did agree, in bipartisan fashion, on a remedy. After five years of persistent and contentious debate over the Obama health reform we now know as Obamacare, the sight of Speaker John Boehner (R., Ohio) embracing Minority Leader Nancy Pelosi (D., Calif.) over a health-care bill is indeed newsworthy.
But here, as in other instances, the problem is faulty reasoning from misleading assumptions.
Take the definition of what’s wrong with our current payment arrangements. Many lawmakers say that Medicare should reject the fee-for-service method, the mode Medicare has used since its inception — and the way many industrial nations pay their doctors.
Instead, these lawmakers argue, Medicare should reward doctors for the “quality” rather than the “quantity” of their work, and reward “value” over “volume.” Sylvia Burwell, secretary of Health and Human Services, has fervently embraced “value-based payment.”
This seeming agreement over the need to do away with fee for service has prompted much discussion of alternative payment models, such as “capitation,” “bundled payments,” and monetary incentives for exemplary physician behavior.
Sounds plausible, doesn’t it? But the problem is — as all other industrial democracies have learned in the last three decades — there is no single payment panacea. Each method of compensating doctors has the vice of its virtue.
If you pay physicians per capita — known as capitation, an annual or monthly amount for each patient signed up with a practice — the hope is that the doctors will care more about the health of their patients and less about the number of procedures they perform.
But there is little or no evidence to back up this hope. Many other countries use fee-for-service payments, but spend far less on health care than we do, and yet get decent results, without alarming problems of excess procedures.
Under Britain’s National Health Service, physicians were once paid almost exclusively by capitation, and it generally served them well. Now general practitioners get paid partly per capita, partly by meeting targeted actions, and partly by the equivalent of a “salary” for being available on weekends and evenings. They are experimenting with a mix of payment methods.
So the international evidence shows there is no one obvious way to pay doctors. How to manage sensibly the mix of methods is the important challenge.
The celebration of paying for “value over quantity” assumes we know how to identify value and pay for it. Yet, there is considerable disagreement in modern medicine about how much one way of working is better than another.
For example, an attempt to establish a standardized cost-benefit analysis of treatments for Medicaid patients in Oregon in the late 1990s fell apart upon implementation. There was no agreed-upon list of what treatments were more valuable on grounds of both cost and quality, and physicians were rightfully indignant when their professional knowledge about what was best for their individual patients was upended by a rulebook.
In reading the bill that the Senate will soon vote on, I can’t help but notice how the new prescriptions for physician behavior represent marketing jargon more than considered thought. For decades, one has seen prepaid group practice redefined as “managed care,” while actually what was going on were mostly efforts to reduce the costs of care.
We have now seen a whole series of reforms celebrated for giving the patient financial “skin in the game,” based on a vision of a medical-care marketplace where large deductibles force patients to make choices among goods and services that earlier forms of health insurance did not do.
As if these issues weren’t enough to abandon this bill and start over, there are a couple of specific provisions that represent a Trojan horse for the further undermining of traditional Medicare. One is the imposition of deductibles on Medigap plans that the majority of Medicare beneficiaries buy to help with cost-sharing, a reform that will discourage seniors from seeking needed care. The other is a measure that would require wealthier people to pay higher Medicare premiums — a measure that could further erode universal political support for the program.
The Senate should take this legislation back to the drawing board.
Ted Marmor is a professor emeritus of political science and public policy at Yale University and co-author, with Rudolf Klein, of “Politics, Health and Health Care.”
The Senate is back in session this week and is expected to rush through H.R.2 – the House approved “SGR fix.” SGR has got to go and CHIP needs to be funded, but the unproven and administratively burdensome replacement for SGR, along with the Medicare tweaks, are worse than the current fee-for-service method of financing health care.
It is wrong to replace bad legislation with bad legislation. As an interim measure, we should get rid of the existing bad legislation by repealing SGR, since Congress has made it an emergency. Ted Marmor, in this important article, explains why this legislation then needs to be taken back to the drawing board so we can keep the good (funding CHIP) and get rid of the bad.
Ted Marmor is an icon in the academic world of the politics of Medicare. It is urgent that we take heed of his advice.
H.R. 2, Medicare Access and CHIP Reauthorization Act of 2015
“(A) IN GENERAL.—[T]he Secretary shall establish an eligible professional Merit-based Incentive Payment System (… ‘MIPS’) under which the Secretary shall—
“(i) develop a methodology for assessing the total performance of each MIPS eligible professional … for a performance period … [of] a year;
“(ii) using such methodology, provide for a composite performance score … for each such professional for each performance period; and
“(iii) use such composite performance score of the MIPS eligible professional for a performance period for a year to determine and apply a MIPS adjustment factor ….
H.R. 2, the bill passed by the House of Representatives late in March to repeal the Sustainable Growth Rate formula, instructs the Secretary of Health and Human Services to measure the “total performance” of hundreds of thousands of doctors every year. “Total performance” is to be measured by a “composite performance score.” This score will be some number between zero and 100.
According to the authors of H.R. 2, “total performance” refers to both the cost and quality of care. It is extremely difficult and costly to measure accurately either “total cost” or “total quality” alone, especially at the level of the individual doctor (as opposed to large groups of doctors). Combining an inaccurate score for quality with an inaccurate score for cost to derive a “composite performance” is not a good idea. But even if each score were accurate, it would still not be a good idea because the decision about how much weight to give to each score is arbitrary. In the Infinite Wisdom of Representatives John Boehner and Nancy Pelosi, who negotiated the final version of H.R. 2, the cost score will account for 30 percent of the composite score.
If Boehner and Pelosi had proposed that CMS share the grossly inaccurate and arbitrary composite score with physicians privately, the worst we could say about it is that it will be a waste of money. No human being, including doctors, can make use of feedback that is inaccurate. But Boehner and Pelosi are proposing to use the score to publish report cards listing “good” and “bad” doctors, and to punish “bad” doctors by withholding 9 percent of their reimbursement and using the savings to reward “good” doctors with a 9 percent increase. This pay-for-performance scheme is the heart of H.R. 2’s so-called Merit-based Incentive Payment System (MIPS).
The negative consequences will vastly outweigh any positive consequences. Costs will rise, physician morale will be further damaged, sicker and poorer patients of all ages will be harmed, and concentration within the health care system will increase as rising administrative costs force small clinics to close and join large hospital-clinic fiefdoms.
To construct a “composite score” on each doctor for cost or quality, the HHS Secretary will have to solve several difficult issues. Of these, the most important are:
I’ll focus the rest of this comment on the attribution problem. A brief explanation of its mind-boggling complexity should be enough to cause reasonable people to oppose MIPS.
Here are H.R. 2’s instructions to the Secretary on how to attribute patients to doctors who bill Medicare:
In order to facilitate the attribution of patients … to … physicians or applicable practitioners…. [t]he Secretary shall develop patient relationship categories and codes that define and distinguish the relationship and responsibility of a physician or applicable practitioner with a patient…. Such patient relationship categories shall include different relationships of the physician or applicable practitioner to the patient (and the codes may reflect combinations of such categories), such as a physician or applicable practitioner who—
“(i) considers themself to have the primary responsibility for the general and ongoing care for the patient over extended periods of time;
“(ii) considers themself to be the lead physician or practitioner and who furnishes items and services and coordinates care furnished by other physicians or practitioners for the patient during an acute episode;
“(iii) furnishes items and services to the patient on a continuing basis during an acute episode of care, but in a supportive rather than a lead role;
“(iv) furnishes items and services to the patient on an occasional basis, usually at the request of another physician or practitioner; or
“(v) furnishes items and services only as ordered by another physician or practitioner. [emphasis added]
Note first of all how different H.R. 2’s attribution method is from the methods used to attribute patients to “accountable care organizations” and “medical homes.” The standard method used by Medicare and Medicaid to attribute patients to ACOs and “homes” is to attribute patients to the primary care doctor who provides the plurality of primary care services, measured either by visits or expenditures, to the patient during a one-year period. (In the case of ACOs, the patient is further attributed to an ACO if the doctor belongs to one.)
But H.R. 2 uses the phrase “patient relationship.” The Secretary is to develop “patient relationship” codes based on at least two criteria: whether the doctor’s role is a “lead” role or a “supportive” role; and whether the patient’s condition is acute or chronic. “Supportive” doctors are further divided into those who order services on their own versus those who order or provide services on the orders of another physician.
As if this weren’t vague enough, the Secretary is authorized to create codes that combine these categories. Thus, a “lead doctor,” say a primary care doctor caring for a patient with coronary artery disease over a long period of time, might bill as a hybrid “lead-supportive” doctor during a heart attack (an “acute episode”), at which time much of the “primary responsibility” for the patient shifts to a cardiologist. How will the division between “lead” and “supportive” be determined? The mind bridles and balks. But let us push on.
Despite the odd language in H.R. 2 about what a doctor “considers themself,” it’s a safe bet that doctors won’t be allowed to “consider” any relationship they like and enter the code for that relationship on the claim form (doctors will have to enter a relationship code on every claim). Because doctors will have every reason to think the Secretary’s risk-adjustment scheme will not protect their composite score from being dragged down by sicker patients, they will have an incentive to “consider” that they were not the “lead” doctor for difficult, sicker patients and, conversely, that they were the “lead” doctor for easier, healthier patients.
So, if doctors are not going to be allowed to select any relationship that appeals to them, the Secretary will have to develop “percent of services” attribution algorithms that resemble those in use now in the Medicare and Medicaid ACO and “medical home” pilots. These algorithms are already causing problems for ACOs, which consist of dozens and even hundreds of doctors, and which stand to lose only a percent or two of their incomes. The problems these algorithms will cause doctors under MIPS are much more severe. Under MIPS, individual doctors will eat all losses, and these losses could amount to 9 percent of their Medicare income.
ACOs are complaining about attribution algorithms because the use of a plurality threshold means many patients are assigned to doctors who really are not the patient’s primary doctor (see the request for an “attestation” requirement in this letter from the National Association of ACOs, p. 5). Consequently, many patients assigned to an ACO visit doctors outside of the ACO. Analysts and business consultants refer to this problem as “leakage.”
The small body of research on this “leakage” problem indicates it is serious. One study that simulated leakage under Medicare’s ACO algorithm estimates it amounts to 30 percent. In other words, of the visits CMS assigned to ACOs, only 70 percent actually occurred to providers within the ACO. The other 30 percent “leaked” – they saw providers outside the ACO. For specialists, the leakage rate is 67 percent according to a study published last year.
A close cousin of the ACO “leakage” rate is the ACO “churn” rate – the rate at which patients are assigned to a different ACO each year. The estimated annual churn rate for the 10 large hospital-clinic chains that participated in the Physician Group Practice Demonstration (regarded widely as a test of the ACO concept) was 25 percent (see Section II.E of CMS’s final rule for the Medicare Shared Savings Program, p. 67861.)
It is possible to reduce “leakage” and “churn” by using a formula that attributes patients to doctors who provide a high percent of all services to a patient rather than the under-50-percent threshold used now. (Minnesota uses a 20-percent threshold for its Medicaid “home” program.) Such a method would attribute only the most “loyal” patients to doctors. But this would create another problem: Relatively few patients could be attributed. Which would mean Boehner and Pelosi’s pay-for-performance scheme would apply to only a small minority of patients and would, therefore, affect only a small portion of the average doctor’s Medicare income.
MIPS, ACO, and “home” advocates must choose their poison: They can choose an attribution formula that cannot determine accurately which patients belong to which doctor but which will maximize the financial pressure on doctors; or they can choose a formula that will attribute far fewer “phantom” patients to doctors but which will greatly reduce the number of patients assigned to doctors and, consequently, the financial pressure doctors will be under to “perform.”
Let me close with a brief description of the two remaining calculations that will determine the “composite score” required by H.R. 2: Adjusting physician scores for factors outside their control, and merging the quality and cost scores into a “composite score.” The risk-adjustment calculation will be crude; the weighting of the composite score by cost and quality will be arbitrary.
As I mentioned at the outset, the MIPS pay-for-performance scheme depends not only on an accurate attribution method, but on an accurate method of risk-adjustment – adjustment of physician cost and quality scores for factors outside physician control such as patient health, income, and breadth of insurance coverage. Even the best risk-adjustment schemes are deplorably inaccurate. Medicare’s risk-adjustment scheme for the Medicare Advantage program, the most studied scheme in America and probably the world, can predict no more than 11 percent of the variation in expenditures among Medicare enrollees (see page 8 here).
But as is the case with the attribution problem, there is no feasible solution to the risk-adjustment problem. Improved risk-adjustment will require the collection of much more medical and demographic data on all patients, which will be very expensive.
Finally, let us ask by what logic or moral principle the House of Representatives decided to give the cost score 30 percent of the weight of the composite score. The question is rhetorical. There is no rational explanation for that choice.
In sum, the MIPS composite score will be a meaningless number for three reasons: The attribution method will be grossly inaccurate, the risk-adjustment method will be grossly inaccurate, and the useless cost and quality scores these methods will produce will be mashed together by an arbitrary 70-30 weighting ratio.
We will pay a heavy price for this latest experiment in the never ending experiment with managed care. MIPS will make the Sustainable Growth Rate formula look like a stroke of genius.
Kip Sullivan, J.D., is a member of the board of Minnesota Physicians for a National Health Program. His articles have appeared in The New York Times, The Nation, The New England Journal of Medicine, Health Affairs, the Journal of Health Politics, Policy and Law, and the Los Angeles Times.
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