Drug firms gouge taxpayers by gaming Part D catastrophic coverage

Posted by on Monday, Jul 25, 2016

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.

Pricey Drugs Overwhelm Medicare Safeguard

By Ricardo Alonso-Zaldivar
Associated Press, July 25, 2016

A safeguard for Medicare beneficiaries has become a way for drugmakers to get paid billions of dollars for pricey medications at taxpayer expense, government numbers show.

The cost of Medicare’s “catastrophic” prescription coverage jumped by 85 percent in three years, from $27.7 billion in 2013 to $51.3 billion in 2015, according to the program’s number-crunching Office of the Actuary.

Medicare’s catastrophic coverage was originally designed to protect seniors with multiple chronic conditions from the cumulatively high costs of taking many different pills. Beneficiaries pay 5 percent after they have spent $4,850 of their own money. With some drugs now costing more than $1,000 per pill, that threshold can be crossed quickly.

Lawmakers who created Part D in 2003 also hoped added protection would entice insurers to participate in the program. Medicare pays 80 percent of the cost of drugs above a catastrophic threshold that combines spending by the beneficiary and the insurer. That means taxpayers, not insurers, bear the exposure for the most expensive patients.

Concerns about catastrophic costs undercut the image of Medicare’s prescription program as a competitive marketplace in which private insurers bargain with drugmakers to drive down prices.

“The incentive is to price it as high as they can,” said Jim Yocum, senior vice president of Connecture, Inc., a company that tracks drug prices. Medicare is barred from negotiating prices, “so you max out your pricing and most of that risk is covered by the federal government.”


When the Medicare Part D program covering drugs was designed, conservatives were in control of the government. As a result it was decided that the ideology of competition in the marketplace should be used to improve value rather than using government administered pricing. Today’s message demonstrates once again that markets do not work in health care.

Congress knew that they would have to protect the private insurers from adverse selection – that patients with multiple chronic conditions could place an extra burden on the insurers with whom they enrolled. Thus they established catastrophic coverage with the government (taxpayers) paying 80 percent of the costs over a given threshold. This was not to protect the patients, but rather it was to protect the insurers. That is, it was not to protect the taxpayers who finance much of the program, but rather it was to protect the participants in the marketplace – the drug manufacturers, insurers, and pharmacy benefit managers – using our taxpayer funds.

Under the catastrophic coverage, insurers pay 15 percent, patients pay 5 percent, and the taxpayers pay 80 percent. This allows the drug companies to drive their prices sky high. The 15 percent paid by the insurers is closer to the reasonable price of drugs and so they have less incentive to negotiate better prices, since most of it is being paid by the government anyway. The 5 percent paid by the patient is accepted as a necessary “skin in the game” contribution so patients will not fill prescriptions that they allegedly “do not really need” (a flawed policy concept). The 80 percent paid by taxpayers perpetuates the highly dysfunctional, fragmented financing system in the U.S. – using government money for private solutions – that has driven our health care spending up to levels much higher than all other nations.

The magic of the marketplace in health care is a fraud. Taxpayers pay far less for drugs purchased by the government for Medicaid and the VA system. Other nations with greater government oversight of their health care systems also pay much less.

With a well designed single payer national health program, our nation’s pharmacy bill would be fair, and everyone would get the drugs they need. With the price of many drugs now exceeding median household income, you would think there would be a demand to fix our health care financing system. You would think so, but where’s the action?

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It is a common misperception that the U. S. has the best health care in the world, another example of “American exceptionalism.” By constant repetition over many years, this myth has become a meme, a part of our language without regard to its merit. It is assumed by many that our rapid adoption of high technology and high spending on health care must bring us the best health care. However, as Drs. Elliott Fisher and Gilbert Welch of the Center for the Evaluative Clinical Sciences at Dartmouth Medical School pointed out early on, there are diminishing returns to many of these technological “advances”. (1)

Lewis Thomas, a leading analyst of medical progress, saw this coming as early as 1975 when he described these three useful ways of looking at medical technologies:

  1. Nontechnology—non-curative care for patients with advanced diseases whose natural history cannot be changed (e.g. intractable cancer, advanced cirrhosis).
  2. Halfway technology—also care that is non-curative but may delay death (e.g. liver or heart transplants).
  3. High technology—curative treatment or effective prevention techniques (e.g. polio vaccination). (2)

Unfortunately, most of our technological advances are of the halfway non-curative type. Since they are often overused at great expense, this presents society a challenging task to manage their adoption in a cost-effective way.

How More Technology Does NOT Bring Us Better Health Care
These are some of the factors that undermine the quality of care in our profit-driven corporatized health care system:

  • Medicalization of preventive and therapeutic services, which are then promoted by direct to consumer advertising. Examples abound, including widespread use of full-body CT scans as a screening procedure without approval by either the FDA or the American College of Radiology (3), and MRIs in completely asymptomatic patients finding “abnormalities”—one study found that one-half of young adults were found to have lumbar disc bulge without any back pain. (4)
  • Early adoption of technologies without adequate testing. Adverse events in robotic surgery give us one example. Between 2007 and 2013, more than 1.74 million robotic procedures were performed in the U. S., most commonly in gynecology and urology, with 144 deaths (1.4 percent), 1,391 patient injuries (13.1 percent) and more  than 8,000 device malfunctions (75.9 percent). (5)
  • Corporate-friendly regulators. As one example, a large part of the budget of the FDA comes from user fees from the pharmaceutical and medical device industries, which are constantly pushing the FDA for earlier, accelerated approvals of their products. As a result, many products and procedures have to be withdrawn from the market as their harms become obvious, with these decisions often delayed by their manufacturers (e.g. withdrawal of morcellators for the treatment of uterine fibroids). (6)

Although many technological advances have been of great benefit to individual patients and society, such as replacement of hips and knees, coronary bypass surgery, and cataract surgery with prescription intra-ocular lens replacement, there are downsides to the rapid adoption of new technologies as well.

Despite our emphasis on technology, comparative studies of eleven health care systems around the world show how poorly we rank in terms of access and quality of care. (Table1) (7)

Can Health Care Technologies Be Managed in the Public Interest?
We have to ask why we haven’t been more effective over the years in evaluating and regulating the adoption and use of medical technologies. The answer, not surprisingly, is the economic and political power of corporate stakeholders in our market-based system. Two national organizations were established by Congress in the 1970s—the Office of Technology Assessment (OTA) in 1975 and the National Center for Health Care Technology (NCHCT) in 1978. Both were later abolished after a strong backlash from vested interests, especially the medical device industry and several professional medical societies. (8-10)

The FDA, as our major regulator for evaluation and approval of new health care technologies, has long been handcuffed by political forces preventing comparative evaluations of competing technologies based on required evidence for positive long-term outcomes. It has been underfunded, lacks sufficient authority, and is dependent on the industries it attempts to regulate through recurrent authorizations of user fees—a fox in the henhouse situation. There are many conflicts of interest among reviewers on its panels, and it is not permitted to use cost-effectiveness in its approval process. Health care industries collectively spent $489 million on lobbying in 2014, about one-half of which was spent by the drug industry in its ongoing effort to gain more rapid FDA approval based on weaker evidence. (11) As just one example, the FDA allowed expanded marketing of off-label cancer drugs in 2009 despite the lack of clinical evidence of their effectiveness. (12)

These problems can be fixed when we come to understand their adverse impacts on patients, families and taxpayers, develop the political will to confront the power of corporate interests in the status quo, and enact legislation for universal access through single-payer national health insurance, together with a stronger science-based regulatory system free from lobbying and political interference.

John Geyman, M.D. is the author of The Human Face of ObamaCare: Promises vs. Reality and What Comes Next and How Obamacare is Unsustainable: Why We Need a Single-Payer Solution For All Americans

Visit: www.johngeymanmd.org

Fisher, ES, Welch, HG. Avoiding the unintended consequences of growth in medical care: How might more be worse? JAMA 281: 446-453, 1999.

Thomas, L. The Lives of a Cell: Notes from a Biology Watcher. New York. Bantam Books, 1975.

Brenner, DJ, Hall, EJ. Computed tomography—an increasing source of radiation exposure. N Engl J Med 357: 2277-2285, 2007.

Jensen, MC, Brant-Zaawadzki, MN, Obuchowski, N et al. Magnetic resonance imaging of the lumbar spine in people without back pain. N Engl J Med 331: 669-673, 1994.

Alemzadeh, H, Iyer, RK, Kalbarczyk, Z et al. Adverse events in robotic surgery; a retrospective study of 14 years of FDA data. Cornell University Library, July 21, 2015.

Thompson, D. FDA warns against procedure for uterine fibroids, hysterectomy. CBS News, April 18, 2014.

U. S. health system ranks last among eleven countries on measures of access, equity, quality, efficiency and healthy lives. New York. The Commonwealth Fund, June 16, 2014.

Perry, S. The brief life of the National Center for Health Care Technology. N Engl J Med 307: 1095-1100, 1982.

Mervis, J. Technology assessment faces ax. Science 266: 1636, 1994.

Leary, RL. Congress’s science agency prepares to close its doors. New York Times, September 24, 1995.

Demko, P. Healthcare’s hired hands: When the stakes rise in Washington, healthcare interests seek well-connected lobbying firms. Modern Healthcare, October 6, 2014.

Abelson, R, Pollack, A. Medicare widens drugs it accepts for cancer care: More off-label uses. New York Times, January 27, 2009.

Medical Economics: Obamacare receives a big, fat ‘F’ from physicians

Posted by on Friday, Jul 22, 2016

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 Joanna Haugen, Jordan Rosenfeld
Medical Economics, July 25, 2016

The Affordable Care Act (ACA) has been a lightning rod for criticism from various healthcare stakeholders, including physicians, since the law’s passage six years ago.

With the upcoming presidential election likely to alter the landscape of “Obamacare”—from simple tweaks by Democrats to outright attempted repeal by Republicans—Medical Economics asked healthcare policy experts and our readers to debate the law’s effect on U.S. physicians.

Our editorial staff, with the assistance of our physician advisers, selected eight provisions and consequences (both intentional and unintentional) stemming from the law.  Policy analysts provided their thoughts on how Obamacare has shaped the last six years. Then we  asked physicians from our editorial advisory board, our 200-member Reader Reactor Panel (comprised of physician readers nationwide who help direct our content), and our e-newsletter subscribers to grade the various elements based on their own experiences.  Each physician ranked each element in terms of how it assisted their day-to-day work as physicians on a score from 0 (not at all) to 10 (extremely helpful). The average of all respondents was used to derive the letter grade. Physicians also offered short justifications for their ranking.

Medicare bonus for primary care physicians
Grade: 33 = F

Medicaid-Medicare parity
Grade: 34 = F

Increased coverage through healthcare insurance exchanges
Grade: 35 = F

Narrow networks
Grade: 29 = F

Accountable care organizations
Grade: 29 = F

Outcomes-based reimbursement
Grade: 28 = F

Physician ratings via the Physician Compare website
Grade: 26 = F

Expansion of health IT
Grade: 31 = F


Celebrations of the success of the Affordable Care Act have to be tempered by the knowledge that it leaves too many uninsured, that health care is still not affordable for far too many, and that the benefits of tighter insurance regulation were largely offset by the insurance design changes of excessive cost sharing and restrictive narrow networks. One other goal was to improve payment systems so that patients would receive greater quality at lower costs. So what do physicians think about the implementation and effectiveness of the design changes in the payment system?

In this survey, physicians gave a grade of F to all eight of the design features evaluated. In trying to improve payment systems, the legislators and bureaucrats have certainly botched things up. Not only have they failed to achieve any improvement, they have made things worse. Not only that, they have compounded physician burnout, now affecting over half of all physicians. Having an unhappy physician negatively impacts patient care.

Much blame can be attributed to the focus of the policy community and the MBAs that guide them. Medicine is about taking care of patients, but the policy community approaches it as a business that can be improved by incentives.

Would a single payer system fix this? It would provide a more equitable, efficient and effective financing system, but it would still be subject the whims of legislators and bureaucrats who do not seem to appreciate the sanctity of the physician-patient relationship. Once we have in place a national single payer system, our work is not done.

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Obamacare’s Other Success, Under Threat

By Editorial Board
Bloomberg View, July 20, 2016

Obamacare has made great strides toward its signature goal: to reduce the number of Americans without health insurance. Unfortunately, another important goal — ensuring that everyone’s insurance policy provides adequate coverage — remains under siege in the courts and Congress.

Before the Affordable Care Act, private health insurers were free to exclude coverage for all sorts of care.

Moreover, if anyone’s medical expenses grew too high, insurers could cut them off. A serious or complicated illness or injury could leave people essentially uninsured.

Obamacare changed things by establishing 10 categories of benefits that most insurance plans must cover — including hospitalization, prescription drugs, laboratory services and mental health care — and prohibiting annual or lifetime limits on those benefits.

This month, however, a federal appeals court ruled that people can buy plans with far more limited coverage. Yet those who buy such plans risk being surprised twice — first when they’re saddled with the tax penalty for not carrying adequate insurance, and then when they need care and find their coverage doesn’t go as far as they thought.

Republicans in Congress have likewise targeted Obamacare’s minimum coverage requirements, arguing that consumers, not the government, should determine what services they want insurers to provide.


The majority of Americans believe that everyone should have the health care that they need when they need it, and that we need a financing system that will pay for it. Others believe that they should take care of their own health care needs and not be required to pay into a risk pool that covers the health care of others. So should the health insurance system provide comprehensive coverage for all, or should it allow individuals to purchase coverage for only those benefits they perceive they might need?“As a man, why should I have to pay for maternity benefits I’ll never use?” “As a woman, why should I have to pay for treatment of prostate cancer – a disease that I’ll never have?” “I take good care of myself; why should I have to pay for care of disorders of others due to their smoking, illicit drug use, reckless driving, sexual promiscuity or whatever?” “I’m healthy so why can’t I wait until I will likely need health care instead of wasting money on insurance now?”

“I want to take care of myself by buying only the insurance I need now, and everyone else can buy whatever they feel they need.” But what about that unexpected disorder that racks up medical bills of $350,000? “Well, I didn’t mean that. Nobody can pay those bills, so the government should pay it instead.”

So we’re divided between “we’re all in this together” and “I’ll take care of myself, and you’re on your own.” But medical care doesn’t work that way. The twenty percent of people who use eighty percent of health care are reliant on pooled funds to pay for their health care. Most of the eighty percent who are relatively healthy will someday shift into the high health care needs group and likewise also be dependent on pooled funds.

Although the Affordable Care Act was a step forward in pooling health care risk, there is a campaign to move us in the other direction. An effort to shut down inadequate plans was reversed by the Supreme Court, even though those plans will unfairly shift costs to others when they do not adequately cover expensive diseases and injuries. Also many politicians want to ensure that people will be able to “buy only the insurance they need” through gimmicks such as private insurance exchanges offering the choice of low benefit plans, purchases out of state to avoid regulatory oversight of insurers, reliance on health savings accounts — usually underfunded, etc.

As a group, those individuals who want to take care of themselves include many individuals who will have high medical expenses. Whatever way they set funds aside – spartan insurance plans, health savings accounts, personal savings – collectively they will not have enough funds set aside to pay for the expensive care some members of their group will need. Besides, they have fragmented much of their funds such that only a limited amount would be available for others, largely through catastrophic plans that have intolerably high deductibles. Whereas those of us who support universal pooling of risk would cover our costs equitably, those who are on their own will dump costs onto the rest of us through taxes we pay for public programs or through higher medical bills due to shifting to us the costs of care provided to those who do not pay their bills.

When people sign up for Medicare, they do not ask for only the Medicare that they need. They expect that they will get essentially the same Medicare that everyone else has (though some may receive similar benefits through the private Medicare Advantage plans). It should be that way not for just Medicare beneficiaries, but for everyone. We should improve Medicare and then make it universal. That will satisfy the majority of us who believe that we are all in this together, and for those who want to be on their own, they will accept the benefits of a Medicare for all program just as they now accept Medicare in their retirement years. Also, they will have paid in their equitable share, based on ability, just like the rest of us.

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What does the 13% average Covered California premium increase mean for the rest of us?

Posted by on Thursday, Jul 21, 2016

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.

Covered California Health Plan Rates To Jump 13.2 Percent In 2017

By Chad Terhune and Pauline Bartolone
Kaiser Health News, July 19, 2016

California’s Obamacare premiums will jump 13.2 percent on average next year, a sharp increase that is likely to reverberate nationwide in an election year.

The Covered California exchange had won plaudits by negotiating 4 percent average rate increases in its first two years. But that feat couldn’t be repeated for 2017, as overall medical costs continue to climb and two federal programs that help insurers with expensive claims are set to expire this year.

Some health-policy experts were surprised by the magnitude of the increase in California. Others said it was inevitable the rates would catch up to the rest of the country after insurers determined their coverage had been priced too low.

Blue Shield of California said its premiums were going up 19.9 percent, the highest statewide increase. Anthem Inc., the nation’s second largest health insurer, said it had an average increase of 17.2 percent in its Covered California plans. HMO giant Kaiser Permanente, in contrast, posted an average increase of 6 percent.

“While these rates hikes aren’t as bad as the annual double-digit increases before the Affordable Care Act, that’s not much comfort to consumers who don’t see their paychecks increase by the same percentage,” said Anthony Wright, executive director of Health Access, a consumer advocacy group.

These rate increases apply to people who purchase their own coverage in the individual market, not the majority of Americans who get their health insurance through work or government programs such as Medicare and Medicaid.


California has been a leader in establishing and implementing the health insurance exchanges authorized by the Affordable Care Act. Although they did hold down premium rate increases in the first two years to 4 percent (still above the rate of inflation), the higher costs of health care have caught up with them. That requires an average of a 13.2 percent premium increase for the next year (though other regulatory and market factors cause greater year to year fluctuation in the premiums). What does this mean for those enrolled in those plans and for the rest of us who obtain our health care coverage elsewhere?

Some of those enrolled in the Covered California plans will find the premium increases to be beyond their means. Many of them will be able to shop for plans with lower premiums, but they will likely have to pay higher deductibles, though those who are eligible for government subsidies may find that the burden is not too great. In changing plans, many will have to disrupt their current care since their new plans will have different provider networks. The effort to make the insurance premiums more affordable clearly has detrimental effects in physician choice and affordability of actual access to health care.

In California those people purchasing plans in the individual market will have very similar experiences except that they are not eligible for government subsidies that could reduce the impact of the premium increases.

The employee contribution to employer-sponsored plans has been more stable, although that is beginning to change. Starbucks is the latest of employers who are using private insurance exchanges in which the employees use a voucher or equivalent to purchase their plans. The impact will be very similar to the ACA exchanges – less choice in health care providers and greater out-of-pocket costs merely because eventually the voucher will not be enough to cover plans with wider networks and less cost sharing.

Even Medicare may eventually be impacted. The push to private Medicare Advantage plans is succeeding because of government overpayment to these plans. The conservative and neoliberal coalition is advocating for the establishment of a voucher program for private Medicare plans (premium support), crowding out the traditional Medicare program.

Politicians will likely respond to inevitable protests of intolerable increases in the beneficiaries’ portion of the Medicare premium by allowing insurer innovations in coverage that will reduce the premiums. We already know what some of these will be: larger deductibles and other cost sharing, narrower provider networks, or intrusive prior authorization designed to limit access to expensive drug products and procedures. But this will be nothing compared to what the insurance industry will likely do once it is granted a free rein to innovate. It’s in the DNA of this industry.

ACA supporters are assuring us that we don’t have to worry about these high premium increases in the exchange plans because patients are free to shop for cheaper plans. But they have left out the rest of the story.

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NHS privatization – lessons for the U.S.

Posted by on Monday, Jul 18, 2016

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.

NHS – on life support

By Alex Scott-Samuel
Politics of Health Group POHG Blog, July 17, 2016

I want to give a broad political overview of what’s happening in the NHS in England and of the background to the current situation.

As you’ll know, the English NHS is in a bad way, with practically every part of the country in financial deficit. Many hospitals and many services are being closed down, cut back or rationed. At the same time, many long term contracts for the provision of NHS services are being awarded to private sector companies – though often people are unaware of this because the likes of Virgin, Carillion and SpecSavers are allowed to operate under the NHS logo.

By definition, these arrangements are wasteful, because private companies have a duty to make profits and to give those profits to their shareholders. That means that public money is haemorrhaging out of the NHS – whereas when a public provider of NHS services makes a surplus it is reinvested in the NHS.

There is also a substantial legacy of (mainly Labour initiated) private finance initiative (PFI) funded hospitals, whose exorbitant loan interest payments have to be made before NHS funds can be spent on routine services. And it’s no coincidence that people’s inboxes are filling up with adverts for health insurance, with their invitations to jump the NHS queues. Everything I’ve described forms part of what in my view is an intentional strategy by the Conservative government to create financial, managerial, professional and public chaos throughout the NHS, so that private provision of NHS services, alternative private health services, health insurance, and NHS co-payments and ultimately charges will be seen as inevitable.

This ‘cultural revolution’ takes many different and apparently unrelated forms whose destructive nature is denied by the government – which continues to assert that it has the public interest at heart and that it is factors like the ongoing impact of the credit crash, the increasing costs of drugs and medical equipment, the ageing population and our unhealthy lifestyles which are the true problems facing the NHS. The building blocks for privatisation to which I have referred currently include: the aforementioned awarding of NHS contracts to private bidders – often asset strippers who provide poor quality services, fragment and undermine the cohesive public ethos of the NHS; the creation by the Treasury of NHS deficits and of regulations which forbid them; enforced rationing of services to extend waiting lists and encourage patients to seek private alternatives; manufactured confrontations with doctors and other members of the NHS workforce; the imposition of ‘new models of care’ which undermine NHS hospitals and create community based healthcare structures ripe for privatisation; personal health budgets, designed to link with health insurance. There are many more and I can provide documented evidence for all of them. It is a national scandal.

What is to be done? Until we have a government committed to tackling and reversing this appalling onslaught on our beloved NHS, we must continue to expose what is happening, to challenge it and to campaign loudly and widely in order to increase public awareness and action.


The phased privatization of England’s National Health Service is taking a toll in undermining “the cohesive public ethos of the NHS.” This brief description by Dr. Alex Scott-Samuel will give you a hint of the disaster that is taking place. Their political leaders apparently have learned nothing from the dysfunction that characterizes our system in the U.S., nor are we learning anything from them.

At a time that we need to be converting our fragmented public and private insurance system into a single public program, we are going in the opposite direction. Our public Medicare program is being privatized through similar cognitive processes as are taking place in England.

Just as the Conservative and Labor parties have conspired in these changes, here in the U.S. the Republicans and Democrats, the latter now dominated by the neoliberals, are damaging the traditional Medicare program through neglect while pushing on with fiscal and regulatory policies that have expanded enrollment in the private Medicare Advantage plans. When you read the paragraph above on the “cultural revolution” you cannot help but note the similar ethic of the two nations driving this insane march to rent-seekers nirvana at a cost of compromising patient care.

We can learn something from this, can’t we?

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Evaluation of the Multi-Payer Advanced Primary Care Practice (MAPCP) Demonstration, Second Annual Report

For the Multi-Payer Advanced Primary Care Practice (MAPCP) Demonstration, the Centers for Medicare and Medicaid Services (CMS) joined state-sponsored initiatives to promote the principles characterizing patient-centered medical home (PCMH) practices. After a competitive solicitation, eight states were selected for the MAPCP Demonstration: Maine, Michigan, Minnesota, New York, North Carolina, Pennsylvania, Rhode Island, and Vermont. [p. 1-1]

In 2011, CMS selected RTI International and its subcontractors, the Urban Institute and the National Academy for State Health Policy, to evaluate the MAPCP Demonstration. The goal of the evaluation is to identify features of the state initiatives or the participating PCMH practices that are positively associated with improved outcomes. [p. 1-2]

Overall, Year Two of the MAPCP Demonstration found state initiatives still attempting to hit their stride. … All states agreed that the benefits of the MAPCP Demonstration were not likely to be strongly visible at this time. Our quantitative analysis supported this contention by finding very few consistent, favorable changes associated with the MAPCP Demonstration across the eight states. [p. 11-6]


Comment by Kip Sullivan, J.D.

In early 2015, I posted two comments here stating it will be impossible for anyone to explain the results of CMS’s “patient-centered medical home” (PCMH) experiments. In those comments (one on CMS’s Comprehensive Primary Care Initiative and the other on CMS’s Multi-Payer Advanced Primary Care Practice Demonstration), I argued that CMS’s PCMH demonstrations will fail to produce useful results because they test variables so poorly defined they cannot be measured. How do evaluators measure the effects of wobbly notions like “patient-centeredness,” “whole-person focus,” “culture of improvement,” “coordination of care across the medical neighborhood,” and “patient engagement”? How do evaluators test those notions one at a time, never mind simultaneously?

The latest reports on the Multi-Payer Advanced Primary Care Practice (MAPCP) Demonstration, one of three PCMH pilots CMS has conducted, confirm my prediction. On May 11, 2016, CMS released both the second- and third-year evaluations of the MAPCP demo. The second-year evaluation (the one quoted above) focuses on Medicare expenditures and quality data while the third-year evaluation presents data on the Medicare beneficiaries involved in the demo. (Neither CMS nor the authors of the evaluations, RTI International and two subcontractors, explained why the evaluations were released together.) Because the second-year evaluation is the one that contains data on the demo’s effect on cost and quality, I focus my remarks on that report.

As they did in the first-year evaluation, RTI reported mind-boggling variation in the definition of the PCMH, both between and within states. [1] Here is RTI’s description of what it was CMS and the states thought they were testing: “While the expectations established by all eight state initiatives varied, states were likely to establish requirements addressing three aspects of performance: practice transformation, quality improvement, and data reporting.” (p. 2-4) I italicized words in that sentence that convey maximum abstractness and imprecision. Half that sentence is italicized. Given the elusive definition of “medical home,” is it any wonder that states “varied” in their “expectations” of PCMHs?

RTI’s report concluded that the PCMHs have not saved money for Medicare during the demo’s first two years and are having almost no effect on quality. Not surprisingly, RTI was unable to explain why the demo is failing (“failing” is my word, not RTI’s).

Here are the main findings from the second-year evaluation:

(1)    Medicare costs incurred by PCMHs (as measured by claims submitted to CMS) did not differ from non-PCMH clinics by a statistically significant amount in any state except Vermont (see Table 2-9,  p. 2-38);

(2)    with a few exceptions, PCMHs failed to outscore non-PCMHs on the very, very few quality measures RTI chose (diabetes, cholesterol and hospital admissions measures) (see Tables 2-6 p. 29 and 2-10, p. 2-40), and when they did, the differences were tiny.

For reasons RTI declined to discuss, RTI made no attempt to determine net savings, that is, whether PCMH costs were higher than non-PCMH costs when CMS’s subsidies to the PCMHs were taken into account. [2]

If you were RTI, how would you make sense of these findings? You stated in both your first- and second-year reports that PCMHs “are expected” to lower costs and improve quality. Moreover, you have promised CMS and your readers you would “identify features of the state initiatives or the participating PCMH practices that are positively associated with improved outcomes” (see excerpt above and identical language at p. 2 of the first-year report). [3]

But you have also reported that PCMHs vary on every dimension imaginable, which means the PCMHs have no uniform “features” for you to analyze. How, then, do you fulfill your promise to “identify features” of PCMHs that explain the PCMHs’ performance?

If I were in RTI’s shoes, I would not have promised to “identify features” of PCMHs for any purpose under the sun. Instead I would have stated upfront that PCMHs are maddeningly non-uniform – as a class, they are featureless – because they are defined so vaguely. Because they are defined so vaguely, the employees of PCMHs do not feel constrained to focus on any particular service or type of patient. I would have said the vague definition of “PCMH” and the glorious heterogeneity of activity that goes on in PCMHs guarantees “homes” cannot be tested. Finally, I would have said that a reasonable explanation for why “homes” are failing is that “homes” are not focusing on any particular treatment or type of patient. They are spending their limited resources on all services and patients rather than a small and uniformly defined subset of services or patients.

But RTI did not say that. RTI’s solution so far has been to avoid discussing the bind it has created for itself. To date RTI has not identified the features or concrete characteristics of PCMHs (the independent variables) that might have some influence over the dependent variables (cost and quality).

RTI comes close to identifying factors that might conceivably be considered independent variables in the course of making several excuses for the PCMHs’ poor performance. RTI clearly identifies one excuse and implies several others. The one alleged problem RTI clearly offers as an excuse is insufficient time and money for PCMHs to demonstrate their true potential. Other excuses that are only implied include (1) inaccurate data and impediments to data sharing caused by glitches in health information technology, (2) poor integration of mental health services with other medical services, and (3) insufficient use of patient “portals.”

RTI’s justifications for the PCMHs’ unimpressive performance appear primarily in two sections in the second-year evaluation: A half-page section entitled “Lessons learned” in Chapter 2 (pp. 2-9 and 2-10) and the last three pages of the final chapter, Chapter 11 (pp. 11-3 through 11-6). Here is how RTI articulated the insufficient-time-and-money and health IT excuses:

Finally, a common lesson in all states was the need for ample time and resources to bring about practice transformation, including adequate resources for program administration and oversight. [M]any interviewees believed that three years was not enough time for the MAPCP Demonstration to show positive results. … [pp. 2-9/10] The most frequent lesson, mentioned by five states … was that the demonstration was not long enough. [p. 11-5]

All eight states reported challenges with health information technology (health IT) and the quality and timeliness of data, which was associated with challenges with patient attribution and payment. [p. 2-7] Health information technology … infrastructure is an integral component of most states’ PCMH demonstrations; in fact, it was the most common challenge that MAPCP Demonstration programs faced during Year Two. Unfortunately, many states had problems operationalizing their health IT plans. [p. 11-3] [4]

I characterize RTI’s justifications for the PCMHs’ poor performance as “excuses” because RTI’s reasoning is circular. The justifications rely on assumptions that RTI does not spell out and which are not evidence-based. For example, neither RTI nor anyone else has the foggiest idea how much money and time “homes” need to demonstrate their magic.

But let us set aside the circular reasoning problem and ask whether any of the problems RTI discusses can be converted into measurable variables. Obviously money, time, health IT and other variables could have been precisely defined prior to the onset of the demo, and in that event those variables could have been measured and examined to see how well they correlated with cost and quality outcomes. But that didn’t happen. At this late date, there is nothing RTI can do to make those variables more concrete and more uniform and, therefore, measurable. The only solution in the future is for CMS and RTI to insist on a radically slimmed down and more precise definition of the services “homes” are supposed to deliver.

I want to stress that RTI’s inability to draw lessons from the MAPCP demo will not hinge on the demo’s outcomes – on whether the demo ultimately shows that PCMHs have negative or positive outcomes or no impact at all. The problem is the nebulous definition of the entity being tested – the “medical home.” We can see this problem in RTI’s chapter on Vermont, the only one of the eight participating states in which PCMHs lowered costs (not counting fees paid by CMS to the PCMHs) compared with non-PCMHs. RTI makes no attempt to explain what it was about Vermont’s PCMHs that made them effective cost-cutters while PCMHs in the other seven states were not.

In my view, the most plausible explanation for Vermont’s performance is that Vermont PCMHs received more money and in-kind help than PCMHs in other states, those additional resources did good things for patients, and those additional resources weren’t counted as a form of spending. But even if my explanation is correct, it still wouldn’t tell us what we want to know, which is what it was PCMHs did with the extra resources that resulted in less use of traditional medical services.

I hope it is clear to readers why we can predict with certainty that the final report on the MAPCP demo (which is due in 2017 according to one of the contractors I exchanged emails with) will fail to “identify features” of PCMHs “that are positively associated with improved outcomes.” It is conceivable RTI will report some “positive outcomes” although that looks unlikely now. What is inconceivable is that RTI will be able to link “features” of PCMHs to those outcomes. If RTI makes any link or connection between any variable and any outcome, it will be based on more circular reasoning. It will be based on pure speculation.


1. For a discussion of the factors that vary within the MAPCP demo, see my comment on the first-year evaluation here.

2. Screw your thinking cap on tightly, because I’m going to take you down a rabbit hole RTI created but did not justify. The rabbit hole has several sub-holes, so watch your step.

For reasons RTI did not explain, RTI created not one but two control groups against which to compare the performance of MAPCP PCMHs. The two comparison groups were non-PCMH clinics and PCMH clinics not in the MAPCP demo. This would make little sense even if the “medical home” notion were well defined.

To add to the mystery, RTI did this for all expenditure and quality measures but with one exception: Its “budget neutrality” or “net savings” measure. That measure asks the question, Did CMS save any money on the MAPCP PCMHs after taking into consideration the “care coordination fees” CMS paid out to the MAPCP PCMHs?  For reasons known only to RTI and presumably CMS, RTI calculated the “budget neutrality” measure using only the non-MAPCP PCMH comparison group. By this strange methodology, RTI found no statistically significant increase or decrease in Medicare net spending. By this strange method, RTI concluded the “budget neutrality” requirement of the demo had been met as of year two.

The mystery doesn’t end there. RTI reported that in two states, New York and Michigan, the PCMHs in the MAPCP demo reduced total Medicare gross spending (that is, Medicare costs as measured only by claims) by statistically significant amounts compared with non-MAPCP PCMHs, but not compared with non-PCMHs. Meanwhile, the opposite outcome occurred in Vermont. In Vermont, MAPCP PCMHs lowered Medicare gross spending by a statistically significant amount when the control group was non-PCMHs, but not when the control group was PCMHs not in the MAPCP demo. RTI made no attempt to explain these baffling outcomes.

I apologize, but our tour of the rabbit hole is not over yet. I have one last tunnel to show you. RTI allowed Minnesota to be an exception to its two-comparison-group rule. For Minnesota, RTI derived its estimates for all cost and quality measures, including its “budget neutrality” or “net savings” measure, using only non-PCMHs as a control group. RTI did offer an explanation of sorts for this exception. RTI said so many PCMHs in Minnesota were in the MAPCP demo it was impossible to construct a control group of PCMHs not in the demo.

Our tour of the rabbit hole is now over. Please ascend back to the real world slowly to prevent severe disorientation.

3. Note the bias in this articulation of RTI’s goal: The outcomes will consist of only “improved outcomes.” “Worse outcomes” cannot possibly occur.

4. The third-year evaluation sets forth the same problems that RTI describes in the second-year evaluation. For example, RTI states: “In Year Three, almost all [eight state] initiatives continued to report significant challenges related to the timeliness and quality of the data provided by the initiatives to practices. Interviewees in most states also reported payment challenges persisting from earlier years.” [p. 2-7]

Kip Sullivan, J.D. is a health policy expert and frequent blogger, and is a member of PNHP Minnesota’s legislative committee. 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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Physicians are not familiar with the MACRA reforms, nor the ensuing pain

Posted by on Monday, Jul 18, 2016

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.

Holy MACRA! Half of docs have never heard of Medicare payment reform

By Dave Barkholz
Modern Healthcare, July 14, 2016

Half of non-pediatric physicians have never heard of the Medicare Access and CHIP Reauthorization Act of 2015—a new CMS payment plan that will put 4% or more of their Medicare reimbursement at risk beginning in 2019, according to a new survey by Deloitte & Touche.

With CMS preparing final rules this autumn, just 21% of self-employed or small-group physicians and 9% of physicians employed by hospitals or larger groups were even somewhat familiar with the pending reimbursement changes, the survey showed.

Physicians with a high share of Medicare payments were just as clueless about MACRA as those with lesser exposures, Deloitte found.

MACRA has two payment tracks. Clinicians in advanced alternative payment models can earn bonuses annually of 5%.

The majority of physicians, though, will participate in the Merit-based Incentive Payment System. On that track, physicians can earn plus or minus 4% of reimbursement in 2019, 5% in 2020, 7% in 2021 and 9% in 2022.

Medicare’s own MACRA projections show the vast majority of physicians in groups of less than 10 suffering penalties.

That includes 87% of solo practitioners who can expect their reimbursement to fall and 70% of physicians in groups of two to nine, Medicare data show.


Deloitte release:


Quote of the Day: MACRA and the ethics of physician burnout (4/22/16):


(WARNING: Reading the Table of Contents of the following document has been known to cause acute bouts of depression)

Federal Register: Medicare Program; Merit-Based Incentive Payment System (MIPS) and Alternative Payment Model (APM) Incentive Under the Physician Fee Schedule, and Criteria for Physician-Focused Payment Models:


Physicians celebrated the passage of MACRA because it brought the end to the despised SGR method of making adjustments to Medicare payment rates. The legislation was not simply a repeal of SGR, but it was repeal and replace legislation. Most physicians are not “even somewhat familiar with the pending reimbursement changes.”

Physicians complain about Medicare’s low payment rates, but are they in for a surprise. Most solo and small group physicians will have rate cuts of up to 9 percent under MACRA.

Those interested in more information may want to read the Federal Register entry on MACRA’s MIPS and APM (link above), or maybe not, since it could take you the better part of a week. Just reading the very long Table of Contents may be enough.

In a fairly recent Quote of the Day we described how MACRA will likely compound the current epidemic of physician burnout (link above). It’s depressing.

We can do something about it. We can enact and implement a well designed single payer national health program. For those who think that the current system is better, it is probably time to make an appointment with your mental health professional.

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This has been the mantra of market advocates for many years under the theory of consumer-directed health care (CDHC), which posits that patients will be more judicious in their use of health care if they have “more skin in the game” (ie. through more cost-sharing). It has been repeated so often and for so long as to become a meme: a self-replicating myth or slogan that by constant repetition becomes part of everyday language, without regard to its merit.

Here is a classic quote in 2006 by senior fellows at the Hoover Institution, a conservative think tank, putting the blame and responsibility on patients for the control of health care costs:

Greater reliance on individual choice and free markets are the solutions to what ails our health care system . . . A handful of policy changes that harness the power of markets for health services have the potential to give patients and their physicians more control over health-care choices, create more health insurance options, lower health care costs, reduce the number of uninsured persons—and give workers a pay increase to boot. (1)

A Rebuttal of This Meme
The last three decades have demonstrated how false this claim is in terms of cost containment. Over utilization by patients is not the root cause of health care inflation, as these findings show:

  • Increased cost-sharing through deductibles, co-payments, coinsurance and out-of-pocket costs when patients seek health care not only don’t adequately control costs but add financial barriers that lead many patients to delay or forgo care altogether. The 2003 Commonwealth Fund Biennial Health Insurance Survey led Commonwealth Fund President Karen Davis to draw this conclusion: “the evidence is that increased patient cost-sharing leads to under use of appropriate care.” (2) A 2007 systemic review by investigators at RAND and the National Bureau of Economic Research found that studies published between 1985 and 2006 showed that increased cost-sharing for prescription drugs is associated with increased use of ER visits and hospitalizations as well as worse clinical outcomes. (3)
  • Even with health insurance, many millions of people find necessary care unaffordable. The cost of health insurance and care in 2016 now exceeds $25,000 a year for a typical family of four with an average employer-sponsored PPO plan, triple that in 2001 (4); this is an impossible burden compared to today’s median household income of about $53,000. According to a report from the Commonwealth Fund in late 2015, health care costs are unaffordable for one in four privately insured working-age people and more than one-half of those with incomes below 200 percent of the federal poverty level ($23,340 for individuals and $47,700 for families of four). (5)
  • Almost all health care services are ordered by physicians, up to one-third of which are unnecessary, inappropriate, or even harmful. (6)
  • Physician-induced demand is much more important than patient-induced demand. Demand by patients for health care is not very sensitive to prices. The major factors that drive up health care costs include higher prices, technological advances, changing thresholds for defining existing “disease” (e.g. osteoporosis and hyperlipidemia), wasteful administrative costs in a mostly for-profit inefficient system, vigorous marketing by providers and suppliers, including direct-to- consumer advertising of drugs and medical devices, and corporate profiteering throughout our medical-industrial complex.
  • Almost two-thirds of U. S. physicians are now employed, especially by expanding hospital systems, with pressure on them to become more “productive”, including by upcoding services to drive their employers’ revenues up.
  • Underutilization by patients is a much bigger problem than overutilization, since many patients cannot afford care, even if insured, because of high deductibles, copayments, co-insurance, and out-of-pocket costs. Deductibles for bronze plans purchased on the ACA’s exchanges in 2014 averaged more than  $5,000 for individuals and $10,000 for families. (7)
  • According to a 2014 report from the Commonwealth Fund, almost one-third of privately insured, working age Americans with a medical problem did not go to a doctor because of cost (8); a 2015 Gallup poll found that as many as 16 million Americans with chronic conditions avoided seeing a doctor because of out-of-pocket costs. (9)
  • If patients shop, as they are advised to do on the ACA’s health exchanges, prices are not transparent for either hospital or physician services, and directories of networks are often inaccurate. For many patients with urgent needs, shopping is  not realistic, and if insured, they are frequently restricted in their choices by their coverage.


Despite some 30 years’ failed expectations that more cost-sharing by patients will contain costs of health care, why do we continue with this policy that increasingly makes health care inaccessible and unaffordable to a growing part of our population? The big reason, of course, is the economic and political power of the corporate stakeholders in our present multi-payer financing system, such as the insurance, drug, and medical device industries. Their power in the political process supports the status quo and resists real health care reform. After six years, the Affordable Care Act (ACA) has failed to adequately rein in costs or prices. Cost-sharing is a central part of the ACA, supported by Hillary Clinton, and will be in whatever ”plan” the Republicans will come up with if they gain enough political control to repeal and replace the ACA. We must abandon the meme that patients can contain health care costs and move to a single-payer, not-for-profit financing system, or the health care crisis will get steadily worse until the system implodes.

John Geyman, M.D. is the author of  The Human Face of ObamaCare: Promises vs. Reality and What Comes Next and How Obamacare is Unsustainable: Why We Need a Single-Payer Solution For All Americans


  1. Cogan, JF, Hubbard, RG, Kessler, DP. Keep government out. Wall Street Journal, January 13, 2006: A12.
  2. Davis, K. Half of Insured Adults with High-Deductible Health Plans Experience Medical Bill or Debt Problems. New York. Commonwealth Fund, January 27, 2005.
  3. Goldman, DP, Joyce, GF, Zheng, Y. Prescription drug cost sharing: Associations with medication and medical utilization and spending and health. JAMA 298 (11): 61-88, 2007.
  4. Milliman Medical Index. Healthcare costs for a typical American family will exceed $25,000 in 2016 and have tripled since 2001. Milliman, May 24, 2016.
  5. How high is America’s health care cost burden? Findings from the Commonwealth Fund Health Care Affordability Tracking Survey, July-August 2015. Issue Brief. The Commonwealth Fund, November 20, 2015.
  6. Wenner, JB, Fisher, ES, Skinner, JS. Geography and the debate over Medicare reform. Health Affairs Web Exclusive W-103, February 13, 2002.
  7. Goodenough, A, Pear, R. Unable to meet the deductible. New York Times, October 17, 2014.
  8. Ungar, L, O’Donnell, J. Dilemma over deductibles: costs crippling middle class. USA Today, January 1, 2015.
  9. The editors. Out of Pocket, out of control. Bloomberg View, February 16, 2015.

Projected national health expenditures

Posted by on Thursday, Jul 14, 2016

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.

National Health Expenditure Projections, 2015–25: Economy, Prices, And Aging Expected To Shape Spending And Enrollment

By Sean P. Keehan, John A. Poisal, Gigi A. Cuckler, Andrea M. Sisko, Sheila D. Smith, Andrew J. Madison, Devin A. Stone, Christian J. Wolfe and Joseph M. Lizonitz (all from CMS Office of the Actuary)
Health Affairs, July 13, 2016 (Online before print)


Health spending growth in the United States for 2015–25 is projected to average 5.8 percent — 1.3 percentage points faster than growth in the gross domestic product — and to represent 20.1 percent of the total economy by 2025. As the initial impacts associated with the Affordable Care Act’s coverage expansions fade, growth in health spending is expected to be influenced by changes in economic growth, faster growth in medical prices, and population aging. Projected national health spending growth, though faster than observed in the recent history, is slower than in the two decades before the recent Great Recession, in part because of trends such as increasing cost sharing in private health insurance plans and various Medicare payment update provisions. In addition, the share of total health expenditures paid for by federal, state, and local governments is projected to increase to 47 percent by 2025.

National Health Expenditures (NHE) 2016

NHE  $3.3507 trillion
NHE as percent of GDP  18.1%
Government proportion of NHE  46%
NHE per capita  $10,345.5


The health sector is in the midst of a unique period, in which various forces are exerting differential pressures on health spending growth. Economywide and medical-specific price growth have been very low, helping restrain inflation’s impact on health spending, and the Medicare program is experimenting with various alternative payment approaches. Meanwhile, many Americans are gaining access to health coverage for the first time, aging into Medicare, or finding that a greater share of their health expenses needs to be paid out of pocket. And the Medicaid program is evolving: Its population mix is increasingly likely to be covered through private plans.

For the period 2015–25, growth in health spending is projected to average 5.8 percent, influenced in part by an expectation of higher economywide and medical prices. By 2025, as economic, legislative, and demographic influences play out, the health spending share of the economy is projected to reach 20.1 percent, up from 17.5 percent in 2014, and governments are anticipated to sponsor 47 percent of health spending, up from 45 percent in 2014. The percentage of the US population that is uninsured is expected to be 8 percent in 2025, down from about 11 percent in 2014.


CMS National Health Expenditure Projections 2015-2025:

The Great Recession has contributed to slowing of the growth in health care spending in recent years, but the future changes are predicted to be more closely related to various demographic related coverage changes plus certain payment trends including the increase in cost sharing in private insurance plans. Also the increase in the government contribution to our national health expenditures deserves special mention.

Regarding increases in patient cost sharing, it is no secret that this has been a blunt instrument to control spending, resulting in a decline in use of beneficial health care services. As has been stated repeatedly, we need more patient-friendly methods of slowing the increase in spending such as fairer publicly-administered pricing through a single payer national health program.

The government contribution to our national health expenditures has increased to 46 percent, but that does not include two large components of taxpayer-funded government spending on health care: 1) The government contribution to employee health insurance on the federal, state and local levels, and 2) the massive tax expenditures for employer-sponsored health plans (i.e., the health insurance component of the employee benefit package is not subject to income taxes, reducing revenue for the government which must be made up by other taxpayers).

The irony is that we already pay in taxes devoted to health care alone more than almost every other nation pays in public and private health care spending combined. Without increasing our current level of spending we could pay for a comprehensive, government-financed, single payer national health program. Yet we continue to support our dysfunctional financing system that wastes so much on administrative excesses while perpetuating injustices by misallocating distribution of our health care resources.

We can and must do better.

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