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.
Designing a Medicare Buy-In and a Public Plan Marketplace Option
By Linda J. Blumberg and John Holahan
Urban Institute, September 2016
Medicare is an attractive basis for developing an insurance alternative (either a direct buy-in or a public option based in some way on Medicare rates) because the program generally has lower provider payment rates and lower administrative costs than private insurers. However, Medicare’s structure and cost-sharing requirements are different from private insurers’ as well. A Medicare-related proposal could provide more plan choice for those eligible, which would have a significant effect where few or even only one insurer offers coverage in the nongroup insurance market. Depending upon how the proposal is structured, it could reduce costs for younger adults in the private insurance market as older adults leave the risk pool. However, designing such programs raises myriad issues, each with specific implications for costs and benefits to different age groups.
Medicare Buy-In for 55- to 64-Year-Olds
We assume that a Medicare buy-in option would offer enrollees the same covered benefits and cost-sharing structures offered to current Medicare beneficiaries. Even so, a buy-in directly into the existing Medicare options would lead to questions necessitating policy decisions:
* Would potential enrollees have the choice of traditional Medicare, Medicare Advantage, or both?
* Would eligibles be able to choose between a Medicare option and Marketplace-qualified health plans for which they are currently eligible, or would Medicare be their only option outside of employer-sponsored insurance?
* Would enrollees be allowed to make separate purchase decisions for Medicare Parts A, B, and D, or would they have to purchase all if they purchase any? How will consumers respond to offers of coverage that, unlike private insurance options, have no out-of-pocket maximum? Would Medigap or some other supplemental plans be available to the 55- to 64-year-olds?
* How would the unsubsidized cost of coverage be determined? For example, what premium would be charged to individuals with high incomes? Would 55- to 64-year-olds be charged the same premiums as those age 65 and older, even though the premiums would not reflect the cost of coverage for those enrolled? Or would actuaries set premiums based on the benefits provided and cost-sharing requirements for each component? Would the high income surcharges in the current Medicare program apply to the buy-in population?
* Assuming that 55- to 64-year-old enrollees would not pay the same premiums as current-law Medicare enrollees, would premiums reflect the health care costs of only the 55- to 64-year- olds enrolling? Or would premiums be set to reflect enrollees’ health care costs being shared by others? For example, their costs could be shared with other nongroup market enrollees or perhaps with current-law Medicare enrollees, but that would require the development of a mechanism for achieving it.
* Would the 55- to 64-year-olds buying in to Medicare be eligible for financial assistance similar to that for Medicare beneficiaries today (e.g., 75 percent of Medicare Part B costs for all but the high-income beneficiaries? Would they be eligible for ACA-like financial assistance, advanced premium tax credits and cost-sharing reductions? Or would no financial assistance be offered at all? If subsidies are provided, how would they be structured? Would actuarial differences between Medicare and Marketplace silver coverage be taken into account, affecting both advanced premium tax credits and cost-sharing reductions?
* Would 55 to 64 year olds with access to an affordable employer insurance plan be permitted to enroll in a Medicare buy-in option?
A Public Option for All Age Groups
A public option is a qualified health plan that would be sold through the ACA’s government-created Marketplaces (either federal or state). The public option would bear health insurance risk like other insurers, complying with the ACA’s insurance reforms (e.g., modified community rating, guaranteed issue, and essential health benefits) and offering coverage in the same actuarial value tiers.
A public option avoids complexities associated with a Medicare buy-in for 55- to 64-year-olds. Because the option would be structured and operated in much the same way as any other Marketplace-qualified health plan, it would not have different actuarial values, cost-sharing structures, or premium structures than other Marketplace options. The appropriateness of applying a Marketplace subsidy structure to a Medicare product would not be an issue, and risk-sharing questions across different age groups would not arise. Yet several design decisions would remain:
* How would provider payment rates be set? Would they be set consistent with Medicare rates, set consistent with Medicare rates plus some percentage, or based on some other fee schedule? Many states have self-insured plans for their employees; this is another potential platform for creating a public option offered in a state Marketplace.
* If rates are set at the Medicare level (or at some other level that falls below those paid by private insurers), what leverage would the plan have to ensure sufficient provider participation? How does a state’s leverage compare with that of the federal government in this respect?
* Should public options be set up in all geographic areas or only those with high premiums, high premium growth, or otherwise weak insurer or provider competition? If the latter, who will judge appropriate locales, and by what metric will an area’s appropriateness be assessed?
From the Summary
Regardless of the approach taken, providers are likely to resist new insurance options that may move more patients into plans paying lower rates. While this is to be expected, it highlights the perpetual quandary of health care cost containment. Health care spending and its growth cannot be reduced without either paying less, on average, per unit of service rendered or reducing the quantity of services provided. No matter the strategy for containing costs, achieving that goal will take money out of the pockets of providers. To protect providers financially means abdicating cost-containment efforts of any type.
There is considerable enthusiasm for expanding on the advances of the Affordable Care Act by adding a Medicare buy-in for those 55 to 64, and by adding a public option – an insurance program run by the government competing with private health plans. What is lacking in this discussion is a precise description of either proposal considering that there are a multitude of policy options that must be decided on in order to construct these programs.
In this Urban Institute paper, Linda Blumberg and John Holahan discuss some of the design options, and there are many more. Each option has its own advantages and disadvantages, so it is inevitable that the eventual design would forge a compromise between benefits and deficiencies. Building these two programs on top of our highly fragmented financing infrastructure inevitably perpetuates inefficiencies.
Each program would require an act of Congress. We need only to look at the insurance industry influence in the legislative process that developed the designs for the private insurance exchanges under ACA, for the Part D Medicare drug program, for the private Medicare Advantage plans, for the privatization of the Medicaid programs, for the previous public option proposals that never got off the ground, and for the co-op model that is failing in the marketplaces, and it will be obvious that the Medicare buy-in and public option will be designed to maximize the leverage of the private insurance industry at a cost to potential enrollees and taxpayers. The insurers will introduce features that are designed to make public programs noncompetitive or even cause them to fail.
When you hear people advocate for a Medicare buy-in or for the public option – and those people are everywhere – demand that they show you their model that was distilled from the multitude of policy options. (Be sure to read the Blumberg and Holahan paper so that you understand at least some of the issues.) Without such a model, the design will default to the private insurers.
Once advocates present their definitive model then analyze it to see how well it meets our reform goals. Will it ensure that everyone is covered? (No) Will it slow the increase in health care costs? (No) Will it ensure that everyone has free choice of health care professionals and institutions? (No) Will it remove financial barriers to care? (No) Will it fill in all of the gaps in coverage of our traditional Medicare program? (No)
Efforts to enact a single payer national health program are rejected because the program supposedly is not politically feasible. Does anyone really believe that a Medicare buy-in and a public option would be politically feasible in a Congress dominated by conservatives and neoliberals? It’s not the goal of a single payer model that needs to be changed; it’s the politics. That takes work. A lot of it.
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.
“The Presidential Candidates: Their Health Plans”
By Dr. Gerald Kominski
Director, UCLA Center for Health Policy Research
Professor, UCLA Fielding School of Public Health
The UCLA Center for Health Policy Research
Health Policy Seminar Series, September 27, 2016
Excerpt at 0:52:24 of the video:
Question: Will the U.S. move to universal health care in the next ten years or so?
Gerald Kominski: Wow! I’ve spent my entire career talking about the history of the effort to get universal health care in the United States. And, again, I’m looking at Mark Peterson whose written about this extensively as well and knows the history. Our history is that we have been trying to do this now for 120 years in the United States. We’ve made progress, but the progress is glacial. Having said that, we never stop fighting for that. First of all, that’s why we’re in Public Health. It’s why this center – The Center for Health Policy Research – does what it does, and it’s why thousands of people across the country, across the state…millions of people are working towards this goal. But the next ten years are very difficult…we are so divided politically right now, it is very, very difficult to imagine the scenarios that lead us to true universal access through, say, a single payer system in the next ten years. But I’m an optimist, and I believe that there are people in this room who will one day see a single payer system in this country. Now I may not be around, but some of you will be. And we’re getting there. It just takes a long time.
Video, with PowerPoint:
In this seminar Gerald Kominski discusses the health care proposals of presidential candidates Democrat Hillary Clinton and Republican Donald Trump plus those of Libertarian Gary Johnson and Green Party candidate Jill Stein.
Health policy wonks and others certainly understand the complexity of the proposals of the two leading candidates and even that of Libertarian Gary Johnson, as described by Professor Kominski. But he was able to describe Jill Stein’s proposal in full in one brief, elegant sentence. Here is his full description of her plan (at 0:41:12 of the video):
“Jill Stein, the Green Party candidate, is for a Medicare for All plan, basically a single payer plan with no copayments, no deductibles, basically free health care for all Americans.”
Physicians for a National Health Program is a nonpartisan educational organization. It neither supports nor opposes any candidate for public office.
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.
Wellmark announces individual ACA market changes in Iowa and South Dakota
Wellmark, September 28, 2016
Wellmark Blue Cross and Blue Shield announced today it will make changes in the individual Affordable Care Act (ACA) market in Iowa and South Dakota.
For the past two years, Wellmark members with individual ACA plans have endured double-digit increases. In addition, Wellmark has lost approximately $99 million over the same time period in the individual market in Iowa and South Dakota.
“Wellmark’s mission is to create affordable health insurance for people to access quality health care. And, for the majority of the past 75 years, we’ve been able to achieve that,” said Wellmark Chairman and CEO John Forsyth. “However, it’s apparent that continuing to offer plans with broad networks, combined with the rich benefits of the ACA, is not consistent with managing continually rising costs. While we could seek additional premium increases to mitigate rising costs, this is not sustainable for our members’ pocketbook.”
In Iowa, Wellmark will narrow its product choices to offer plans that are lower priced and encourage health care delivery by Iowa providers. Specifically, Wellmark will no longer offer gold tier plans nor will the company promote individual under 65 plans that use its Preferred Provider Organization (PPO) network in Iowa.
Wellmark will also continue its plans to introduce a new, simplified HMO plan called Blue Simplicity℠. This plan is like no other on the market today and is designed to help consumers understand the true value of care through simple copay plans – providing members with transparency and predictability of cost as they seek and use medical services.
South Dakota changes
In South Dakota, Wellmark will no longer offer individual Affordable Care Act (ACA) plans effective Jan. 1, 2017.
“Although the ACA has done many positive things, it has also had its challenges and those challenges vary by state,” said Forsyth. “Fortunately, in 2017, the ACA gives states the ability to begin addressing those challenges with the goal of stabilizing the individual under 65 health insurance market. We look forward to working with Iowa and South Dakota policymakers on those solutions in the near future.”
The largest health insurer in Iowa, Wellmark Blue Cross and Blue Shield, is discontinuing their more comprehensive gold tier plans and is discontinuing the promotion of its PPO plans with wider provider networks. They are also introducing a new HMO plan “designed to help consumers understand the true value of care through simple copay plans” (i.e., making them better shoppers by having to bear more of the costs). These changes are compounding the two problems plaguing insurance purchasers today: requiring higher out-of-pocket spending for health care, and narrowing the selection of health care providers covered by the plans.
This is a one-way path designed to keep insurance premiums as competitive as possible. As Chairman and CEO Forsyth states, “continuing to offer plans with broad networks, combined with the rich benefits of the ACA, is not consistent with managing continually rising costs.” Insurers are not going to cover more out-of-pocket costs by increasing the actuarial value of their plans (percent of costs they will pay), and they are not going to expand their networks when they can negotiate lower prices by promising provider exclusivity.
Look, as long as we leave these people in charge, we can anticipate that they will engage in strategies that will protect and improve their own market advantage. If we had our own public program, our stewards who work for us would be engaging in strategies that would ensure our access to the health care that we need. There really is a difference. If only for selfish reasons, we should prefer the latter. The fact that it helps everyone else is a bonus.
Top wellness award goes to workplace where many health measures got worse
By Sharon Begley
STAT, September 27, 2016
When Idaho’s Boise School District receives the workplace wellness industry’s highest award Wednesday at a celebration in Atlanta, it is expected to be applauded for helping its 3,000-plus employees and their families improve their health and reduce their risk of illness.
It is “an exemplary program,” said Dr. James Fries, an emeritus professor of medicine at Stanford University and member of The Health Project, an industry-sponsored group that makes the annual award. Program participants, he said in an announcement this month, “showed improvements in health behavior,” helping Boise save money on medical costs.
Data collected by the company that sold Boise the wellness program and trumpeted the “Koop Award,” however, cast doubt on that claim. More key measures of health deteriorated than improved. Self-reported quality of health got worse. And health care costs jumped around in a way that suggests any changes were due at least in part to random fluctuations and possibly employee turnover, not any benefits of the wellness program.
This would not be the first time the Koop Award, named for the late US Surgeon General Dr. C. Everett Koop, stirred controversy. Employees in the wellness program that won in 2015, for instance, collectively achieved a lower reduction in smoking than the national average. More gained weight than lost, more raised their total cholesterol level than lowered it, and more had higher blood glucose levels after participating in the wellness program than before.
Such cases reinforce a growing recognition among experts that wellness programs — which constitute an $8 billion a year industry — “don’t lead to any visible results,” Stanford’s Emma Seppala recently wrote in Harvard Business Review. “At best, these initiatives are nothing more than lip service or PR. But at worst, they actually cause more stress.”
We still hear that employers are adopting wellness programs in order to reduce the future costs of their health benefit programs by making their employees healthier. There could be no better evidence that these programs do not work than the fact that the top award for a workplace wellness program went to an employer whose employees’ health deteriorated.
If employers really want to do something about controlling health care costs, they should get on the single payer bandwagon. Not only would that eliminate the hassle and expense of administering their health benefit programs, all of their employees would have health care automatically, and future increases in health care costs would be reduced to sustainable levels.
Any employers reading this who are not yet convinced about single payer would benefit by watching a movie developed by and for the business community, “FIX IT – Healthcare at The Tipping Point.”
The soaring cost of EpiPens is the latest in a long run of wildly increased costs of prescription drugs that are unaffordable to many, such as Turing’s Daraprim for toxoplasmosis (5,000 percent overnight price increase) and Gilead’s Sovaldi for hepatitis C ($84,000 for a 12-week treatment). These greedy grabs by their manufacturers create public anger and even congressional inquiries, but the corporate system of price escalations grinds on without relief on the horizon as Big PhRMA and its lobbyists continue to prevail. (1)
Mylan’s EpiPen story is a classic poster child for continued corporate greed that knows no bounds. Its EpiPen 2-Pak contains epinephrine with an easy-to-use auto-injector. It is a life-saving treatment for severe allergic reactions such as anaphylaxis in both children and adults. Since EpiPens generally expire after a year, its prescriptions need to be regularly refilled. The cost of a two-pack has gone up from $94.00 in 2007 to $609 today, more than a six-fold increase, while Medicare spending for EpiPens grew by almost 1,100 percent from 2007 to 2014.(2)
Why this huge jump? Look no farther than corporate greed and malfeasance. The backstory boggles the mind. Between 2007 and 2014, the annual compensation of Heather Bresch, Mylan’s CEO, went up by 671 percent from $2.4 million (when Mylan bought EpiPen) to $18.9 million.
Farther back, the story is even worse. Bresch is the daughter of Democratic U. S. Senator Joe Manchin III, former governor of West Virginia. She got her first job at Mylan as a favor from Milan Puskar, an earlier Mylan CEO. A scandal erupted at that time when it was discovered that Puskar had donated $20 million to West Virginia University (WVU), whose president was a Manchin and Bresch family friend, and where Heather Bresch was awarded an MBA. (3) A major investigation by the Pittsburgh Post-Gazette found that she had not completed the MBA program. That was followed by an independent report that revealed falsification of her transcripts, which led to resignation of WVU’s provost and business school dean as well as revocation of her MBA. (4)
Heather survived the scandal and rose from a factory basement job at Mylan to lobbyist to CEO. She was Mylan’s chief lobbyist when the Medicare prescription drug law was passed in 2003. In 2012 and 2013, Mylan spent about $4 million lobbying for EpiPens and for legislation including the 2013 School Access to Emergency Epinephrine Act. All this lobbying has worked out well for Mylan, which has the dominant market share for this kind of product. In 2014, the company did a tax inversion by making a deal with Abbott Laboratories to incorporate in the Netherlands. (5)
Even if insured, this kind of pricing for what is an essential drug is unaffordable to many, especially for those with high-deductible plans. A family needing a pair of life-saving treatments for an allergic family member has to pay the full price out-of-pocket until the deductible is reached, which may be $3,000 or more these days. Since prescriptions for EpiPens have to be refilled every year, this becomes an annual expense. (6) As Senator Bernie Sanders has recently said: “There’s no reason an EpiPen, which costs Mylan just a few dollars to make, should cost families more than $600.” (7)
The market for EpiPens is huge. About 40 million Americans have severe allergies to bee stings, spider bites and some foods such as nuts and shellfish. They have to have ready access to EpiPens to guard against anaphylactic shock. Mylan has a virtual monopoly on the injector units for the life-saving epinephrine. More than 3.6 million prescriptions for EpiPen two-packs were filled in 2015, bringing annual revenue to Mylan of almost $1.7 billion. (8)
Mylan has contributed heavily to both presidential campaigns. According to the Center for Responsive Politics, the company has contributed up to $250,000 to the Clinton Foundation, while one of its leading stockholders—with 22 million shares—is the hedge fund owned and managed by the billionaire John Paulson, a Trump bankroller. Mylan’s political action committee has also given to congressional candidates on both sides of the aisle. At least $71,000 has been given to congressional candidates in this election cycle, including to Heather Bresch’s father, Senator Joe Manchin III. (9)
So the greed lives on without any fix in sight. Mylan will, of course, continue to lobby for no price controls and minimal regulation as it sucks our wallets dry without remorse. It will take a tidal wave of grassroots backlash and political will in both parties to redress this ongoing scandal.
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. Geyman, JP. Big PhRMA: Blatant greed and disregard for the public
interest. The Huffington Post, November 19, 2015.
2. Appleby, J, Carey, MA. It’s not just for kids: Medicare Epi-Pen spending up 1,100 percent. Kaiser Health News, September 21, 2016.
3. Winship, M. EpiPen price hike can only happen in hijacked democracy. The Progressive Populist, October 1, 2016.
4. Garde, D. The EpiPen was her ‘baby.’ Now this PhRMA CEO is in the hot seat over price hikes. STAT, August 24, 2016.
5. Rockoff, JD. Drugmaker stung by EpiPen backlash. Wall Street Journal, August 26, 2016.
6. Skinner, G. EpiPen costs add to high-deductible insurance woes. Consumer Reports, September 12, 2016.
7. Ibid # 4.
8. Johnson, LA. How EpiPen’s maker raised prices, and hackles, so much. Associated Press, August 23, 2016.
9. Huetteman, E. Awkward target for outrage over EpiPen: A senator’s daughter. New York Times, August 24, 2016.
Editorial: Thank you for that question, Lester
By Merrill Goozner
Modern Healthcare, September 24, 2016
(Question for candidates, proposed by the New York Times): “Health insurance premiums and out-of-pocket costs are rising rapidly. What would you do to control them?”
If I were advising a candidate on how to respond to that question, here’s what I’d recommend he or she say:
“Thank you for that question, Lester. I understand why many Americans think their insurance premiums are rising rapidly. There’s been a lot of attention paid to next year’s increases for the individual policies sold on the Obamacare insurance exchanges, which will rise about 9% on average, according to the latest Kaiser Family Foundation survey.”
“Employers are forcing individuals to pick up more of the cost of their plans.”
“The employer portion of your health insurance is going up just 4% next year on average. That means the family share has to go up more than 5.5% to make up the difference.”
“Employers are doing that by putting more of us in high-deductible plans. They’re asking more of us to pay higher co-pays and deductibles. They are raising our portion of the premiums.”
“So what can we do about it? First, we have to recognize this is a big experiment that has been endorsed by economists associated with both political parties. They say by forcing patients and consumers to have more skin in the game, they will become wiser healthcare shoppers.”
“I say, to make that work, we have to have total transparency — in healthcare prices, in insurance prices, in which doctors and hospitals are in health plan networks, in quality ratings, and with good, easy-to-understand information about what constitutes the most effective and cost-effective care. I pledge to work night and day to give consumers the information they need to make smarter choices in the healthcare marketplace.”
“And if some people simply can’t afford to put money into the health savings accounts accompanying these plans, let’s remove some of the tax subsidies given high-income people for their health insurance so we can finance a generous federal match for what lower-income people contribute.”
“Let me now turn to what can we do about those rising individual rates for plans sold on the exchanges. The bottom line is we need more people to sign up. The No. 1 reason why rates are rising is that not enough healthy uninsured people signed up for coverage.”
“We need everyone who is uninsured to jump into the individual insurance pool.”
Merrill Goozner certainly understands the political realities about health policy. To a question on health costs that could be part of tonight’s presidential debate, he suggests an answer for the candidates that aligns with the current financing system under the Affordable Care Act. Unfortunately, because of the restrictions he apparently placed on himself, it’s a terribly deficient answer.
For the problem of high-deductibles he suggests making patients better shoppers through greater transparency in prices, in network composition and in quality ratings. But that would have almost no impact on making the deductibles and other cost sharing more affordable.
He accepts the dubious concept that health savings accounts should accompany these high-deductible plans, and further suggests that the accounts for lower-income individuals be subsidized. Health savings accounts are strictly an administrative tool that increases the complexity and waste in health care financing. When the accounts are depleted, beneficial health care services are forgone – not a desirable outcome. If you are going to have first dollar coverage built into the HSAs, why not instead save administrative hassles and expenses by building first dollar coverage into the insurance program itself?
For the high premiums of the exchange plans, he suggests enrolling more of the healthy to dilute the risk pool. But the low-lying fruit has been picked. The policy community is beside itself in trying to figure out how to bring more into the exchange plans, while having only negligible success in doing so.
Goozner is certainly highly respected by me and others, but we wish that he and others like him would move beyond feeble patchwork solutions and support a program that would make health care accessible and permanently affordable for all. Of course that would be a single payer national health program – an improved Medicare for all. Goozner understands that we won’t hear that from either candidate tonight, but that doesn’t mean that we shouldn’t be asking for that response.
Valeant avoids double-digit price hikes with 9.9 percent increases
By Ed Silverman
STAT, September 22, 2016
In response to intensifying criticism over drug prices, Allergan chief executive Brent Saunders promised not to raise prices by more than single-digit percentage points. So far, no other head of a large drug maker has spoken publicly about this notion or agreed to do the same thing.
Yet some companies may adopt this approach quietly — and push the envelope in the process.
How so? One way is to raise prices on drugs by 9.9 percent. And this is what Valeant Pharmaceuticals did last week.
The drug maker, which has been widely vilified for buying older medicines and then jacking up the prices to sky-high levels, increased list prices for three eye medicines by exactly 9.9 percent, according to Wells Fargo analyst David Maris.
The “9.9 percent increase versus an even 10 percent seems very odd and may be an attempt to stay under the radar of managed care plans and states looking out for double-digit price increases,” Maris wrote in an investor note.
The 10 percent threshold has taken on more than symbolic weight, though.
A bipartisan group of congressional lawmakers last week introduced a bill that would require drug makers to justify their pricing and provide a breakdown of their costs before raising prices on certain products by more than 10 percent. The legislation largely mimics bills that have been introduced in more than a dozen states, although only Vermont has passed such a law.
For a pharmaceutical firm infamous for abusive pricing of their products, a 9.9% increase is an obvious attempt to keep under the radar by avoiding a double digit increase, but nobody is fooled by this. Valeant could have had a 9.8% increase, but, no, it had to be 9.9%.
In spite of the extensive adverse publicity, the industry continues to gouge. It’s time for our government to represent us by introducing publicly-administered pricing – paying legitimate costs plus fair profits. The industry will not walk if we are giving them a fair deal.
Would You Like Some Insurance With Your Insurance?
By Bram Sable-Smith
Kaiser Health News, September 21, 2016
Gap plans, used to cover out-of-pocket expenses like high deductibles, are becoming increasingly popular among consumers and businesses.
Gap insurance is in a category of insurance known as “limited benefit.” No matter how bad a person’s situation, the plan will pay out only a certain amount of money.
Now, there’s renewed interest in gap plans. With monthly premiums on health insurance going up, more people are choosing cheaper, high-deductible options. In 2016, more than 90 percent of people buying insurance under the ACA chose plans with an average deductible of $3,000 or higher.
“The cost of health insurance is going up, and businesses have been forced to deal with that by raising their deductibles or increasing out-of-pocket costs for their employees,” said (Alex Forrest, an insurance broker in South Carolina).
With a gap plan, he said, companies can offer a package of health benefits that keeps out-of-pocket-expenses for employees down.
“That’s actually just insurance for my insurance,” said freelance designer Susannah Lohr.
Health economist Deborah Chollet of Mathematica Policy Research, an independent research firm, said the insurance reforms in the ACA were designed “basically to drive these kinds of creative insurance arrangements out of the market.”
Because gap plans aren’t major medical insurance, Chollet explained, they’re not regulated by the health care law and can avoid complying with consumer protections built into the law. So the companies providing gap insurance, she said, “can ask you about your health status, they can deny you coverage, they can do all of the kinds of things that the Affordable Care Act prohibits.”
Patient Protection and Affordable Care Act
Sec. 3210. Development of New Standards for Certain Medigap Plans
(a) (1) IN GENERAL.—The Secretary shall request the National Association of Insurance Commissioners to review and revise the standards for benefit packages described in paragraph (2) under subsection (p)(1), to otherwise update standards to include requirements for nominal cost sharing to encourage the use of appropriate physicians’ services under part B. Such revisions shall be based on evidence published in peer-reviewed journals or current examples used by integrated delivery systems and made consistent with the rules applicable under subsection (p)(1)(E) with the reference to the ‘1991 NAIC Model Regulation’… To the extent practicable, such revision shall provide for the implementation of revised standards for benefit packages as of January 1, 2015.
National Association of Insurance Commissioners (NAIC)
Letter Re: PPACA Sec. 3210
December 19, 2012
Dear Secretary Sebelius,
Pursuant to section 3210 of the Patient Protection and Affordable Care Act (ACA) you have requested the National Association of Insurance Commissioners (NAIC) to review and revise the NAIC Medicare supplement insurance (Medigap) model regulation to include nominal cost sharing in Medigap Plans C and F to encourage the use of appropriate physicians’ services under Medicare Part B. Section 3210 directs the NAIC to base these revisions on evidence published in peer-reviewed journals or current examples used by integrated delivery systems.
Consistent with the process established by the Social Security Act for changes to Medigap standards, the NAIC appointed the Medigap PPACA (B) Subgroup (Subgroup) comprised of state insurance regulators, representatives from the Centers for Medicare and Medicaid Services (CMS), insurers and trade associations, consumer advocates, and other experts in the areas of Medicare and Medigap.
The NAIC has performed its requested review of the standards for Plans C and F under Section 3210 of the ACA. We were unable to find evidence in peer-reviewed studies or managed care practices that would be the basis of nominal cost sharing designed to encourage the use of appropriate physicians’ services. Therefore, our recommendation is that no nominal cost sharing be introduced to Plans C and F. We hope that you will agree with this determination.
Medigap is a product that has served our country’s Medicare eligible consumers well for many years, offering them security and financial predictability with regard to their Medicare costs. Medigap’s protections are now inappropriately being held responsible for encouraging the overuse of covered services and increasing costs in the Medicare program.
We do not agree with the assertion being made by some parties that Medigap is the driver of unnecessary medical care by Medicare beneficiaries. As you are aware, Medigap plans pay benefits only after Medicare has determined that the services are medically necessary and has paid benefits. Medigap cannot alter Medicare’s coverage determination and the assertion that Medigap coverage causes overuse of Medicare services fails to recognize that Medigap coverage is secondary and that only Medicare determines the necessity and appropriateness of medical care utilization and services.
The statute requires the NAIC to base nominal cost sharing revisions on “peer-reviewed journals or current examples of integrated delivery systems”. However, the Subgroup discovered that there is a limited amount of relevant peer-reviewed material on this topic. None of the studies provided a basis for the design of nominal cost sharing that would encourage the use of appropriate physicians’ services. Many of the studies caution that added cost sharing would result in delayed treatments that could increase Medicare program costs later (e.g., increased expenditures for emergency room visits and hospitalizations) and result in adverse health outcomes for vulnerable populations (i.e., elderly, chronically ill and low-income). Most of the studies do not consider the same population of health insurance beneficiaries as those that purchase Medigap products.
Medigap Reform: Setting the Context for Understanding Recent Proposals
Kaiser Family Foundation, January 13, 2014
This issue brief contextualizes recent proposals to change Medigap plans in order to understand how they may affect Medicare beneficiaries, using recently available data.
Many proposals and recommendations would prohibit Medigap plans from providing first-dollar coverage by requiring plans to include deductibles for Part A and Part B services. Such proposals are designed to discourage utilization (and reduce spending) by exposing beneficiaries to greater costs when they seek medical care.
Table 1 at this link lists proposals:
It is really a sad commentary on the dysfunctional state of our health care financing system when insurance deductibles – supposedly designed to make patients better health care shoppers – have caused such great financial burdens that a market of plans has been generated to insure against deductibles and other cost-sharing losses that frequently are no longer affordable.
Let’s take a closer look at gap plans that are designed to fill in the deficiencies in traditional coverage.
It is the high deductibles that have brought this issue into the forefront. There are two primary reasons for the growth in the prevalence and in the dollar amount of the deductibles. One is that health insurance premiums have continued to become less and less affordable. Both individuals and employers who purchase plans are looking for relief, and high-deductible plans do have lower premiums.
The other reason is that the policy community is dominated by a partnership of right-wing ideologues who insist that patients must feel financial pain when they access health care services, and centrist policymakers who worry more about premiums, figuring that public insurance subsidies (ACA) and public welfare programs (Medicaid) will protect those who are less able to afford care, while accepting, with regret, the increasing burden placed on middle-income Americans.
So is gap insurance designed to help pay deductibles a reasonable solution? If the gap policy is adequate to increase the actuarial value of the combined coverage of gap plus high-deductible plans to the levels of more traditional health plans then the combined premiums must be higher since the administrative costs of two insurers would be greater than those of one comprehensive insurer alone. Besides, under the gap plans patients could face other coverage problems since the plans do not have to comply with the regulatory and benefit requirements of qualified health plans as defined by the Affordable Care Act.
Let’s turn to a gap program with which we have considerable experience – the Medigap plans that cover some of the coverage gaps in the traditional Medicare program.
The stand-alone traditional Medicare program leaves individuals vulnerable to high out-of-pocket costs if they have significant medical problems. Many are protected with additional coverage such as retiree health benefit plans, VA health benefits, Medicare Advantage plans, or dual coverage with Medicaid. Most individuals not eligible for these plans purchase Medigap plans to avoid losses from significant gaps in the Medicare coverage. But, once again, being covered with multiple plans increases administrative costs and complexity. It would be much more efficient and less costly to have an improved Medicare program for everyone that did not necessitate additional coverage. Medigap, particularly, is a wasteful intrusion that should be eliminated by folding the Plan F Medigap benefits into the traditional Medicare program (while making other improvements in Medicare while we’re at it).
Yet the right-wing ideologues and the wimpy moderate policy wonks that follow them have been insisting that we need to reduce the benefits of the Medigap plans. Specifically they would mandate deductibles under their consumer-directed ideology – making patients more thrifty health care shoppers. Innumerable studies have show that deductibles cause patients to forgo beneficial health care services – not a policy position we should be supporting.
How pervasive this concept is was demonstrated by Sec. 3210 of the Affordable Care Act. That section required the National Association of Insurance Commissioners (NAIC) to come up with a recommendation based on evidence published in peer-reviewed journals or current examples used by integrated delivery systems to support requiring cost-sharing to be included in the Medigap plans, in order to make patients better health care shoppers, and that the recommendations would be implemented by January 1, 2015.
Why didn’t this happen? NAIC reported that they were “unable to find evidence in peer-reviewed studies or managed care practices that would be the basis of nominal cost sharing designed to encourage the use of appropriate physicians’ services. Therefore, our recommendation is that no nominal cost sharing be introduced to Plans C and F.”
Further, “None of the studies provided a basis for the design of nominal cost sharing that would encourage the use of appropriate physicians’ services. Many of the studies caution that added cost sharing would result in delayed treatments that could increase Medicare program costs later (e.g., increased expenditures for emergency room visits and hospitalizations) and result in adverse health outcomes for vulnerable populations (i.e., elderly, chronically ill and low-income).”
Unfortunately, their take-home message has been ignored by the policy community who continue to clamor for more cost sharing. Specifically, NAIC stated, “We do not agree with the assertion being made by some parties that Medigap is the driver of unnecessary medical care by Medicare beneficiaries. As you are aware, Medigap plans pay benefits only after Medicare has determined that the services are medically necessary and has paid benefits. Medigap cannot alter Medicare’s coverage determination and the assertion that Medigap coverage causes overuse of Medicare services fails to recognize that Medigap coverage is secondary and that only Medicare determines the necessity and appropriateness of medical care utilization and services.”
Yet the Kaiser Family Foundation report on Medigap reform includes a table with a dozen different proposals from across the political spectrum calling for controlling Medicare costs by increasing the financial burden placed on Medicare beneficiaries with Medigp plans.
We don’t need insurance to insure our insurance. We need a national health program that would ensure that everyone has affordable access to all essential health care services. That will never happen with our current system; ACA patches cannot possibly accomplish that. Single payer Medicare for all, without gaps, is what we need.
Is Direct Primary Care the Solution to Our Health Care Crisis?
By Edmond S. Weisbart, MD, CPE, FAAFP
Family Practice Management, Sep-Oct 2016
Direct primary care (DPC), a reformulation of concierge medicine, has intrinsic appeal to overburdened physicians. Its advocates promise a competitive income at a fraction of the volume of patient responsibilities, and they claim it as a patient-friendly, consumer-driven strategy that can meet the needs of patients across the economic spectrum.
However, there are potential downsides to DPC, which this article will discuss.
1. DPCs exacerbate the growing physician shortage.
Retainer practices such as DPC practices commonly close their panels when they reach about 900 patients, which is much lower than the typical practice panel size of around 2,300 patients.
2. DPCs are essentially unregulated insurance, capitating physicians and removing vital patient protections.
Paying a monthly fee for a specific range of services is one definition of an insurance model. Despite that, DPCs often fall outside of insurance regulation.
3. DPC relies on an erosion of medical benefits.
Much of a patient’s health care requires services beyond primary care. High-deductible health plans can expose patients to full retail pricing for these additional services and medications unless their plans have negotiated discounted rates. These health care costs can quickly become a hardship for many patients.
4. DPCs exacerbate disparities in care.
Although the evidence is still emerging, DPCs may be choosing to locate in areas most able to financially support the model. Studies have suggested that DPC physicians have smaller proportions of African-American, Hispanic, and Medicaid patients and see smaller proportions of people with diabetes.
The wrong solution to a real problem
U.S. physicians are among the least satisfied in the modern world.5 Much of this dissatisfaction is related to the amount of time spent on non-clinical administrative functions, particularly tasks related to insurance companies. Physicians’ desire to reduce frustrating administrative work is understandable, but DPC is not the solution. Physicians considering a transition to DPC need to consider the impact on physician shortages, disparities in health care, and patient access to health care services outside the DPC.
What problem is being addressed by the establishment of direct primary care practices (DPC)? The administrative hassle in dealing with a multitude of payers is replaced with a single retainer fee paid by the patients. That benefits physicians by reducing overhead expenses and freeing up time for a more relaxed clinical work environment.
Patients enrolled in DPC practices benefit from improved accessibility and more personal attention for their routine primary care needs. DPC physicians are not included in insurer provider networks thus their patients pay not only the retainer fee but they are also responsible for the full deductible of their catastrophic plans. Thus DPC practices cater to the carriage trade whereas less affluent individuals find the arrangement to be truly unaffordable should they develop problems requiring specialized care or hospitalization.
Do physicians have an obligation beyond the patients in their own practices? Should they be supporting policies to ensure that adequate affordable care is available to all members of the community at large? DPC reduces both access and affordability. In spite of implementation of ACA we still have intolerable disparities in care, and DPC will only exacerbate those disparities.
DPC is designed to allow physicians to retreat to their cosy practices while escaping from their moral obligation to meet the health care needs of the community at large. They are supported by their wealthy clients, or customers, or patrons, or whatever they’re called.
If these physicians really supported the positions they held when interviewed by the medical school admissions committees, instead of fleeing to DPC practices, they would be advocating for reform that would bring essential, affordable care to everyone – an improved Medicare for all. It is painful to listen to their curt dismissal of reform that would bring health care justice to all.
Are Nongroup Marketplace Premiums Really High? Not in Comparison with Employer Insurance
By Linda J. Blumberg, John Holahan, and Erik Wengle
Urban Institute, September 2016
We compare unsubsidized 2016 nongroup marketplace premiums to the average employer sponsored insurance premiums in all 50 states and 73 metropolitan areas. We adjust second lowest cost nongroup marketplace premiums to account for the differences in actuarial value, induced utilization, and age distribution of enrollees. We find that nationally, nongroup marketplace premiums are 10 percent lower than the average employer sponsored insurance premium, after the adjustments. There is variation at across states and metropolitan areas, but more than ¾ of states and more than 80 percent of metropolitan areas having lower marketplace than employer premiums.
Premiums in the nongroup insurance Marketplaces attract considerable attention, with some concerned that average growth rates since 2014 are high in some areas and that this might signal a fundamental weakness with the new nongroup insurance markets. This analysis places nongroup Marketplace premiums in a context where we can compare them, apples to apples, with employer-based insurance. Our findings show that in more than 75 percent of states and more than 80 percent of the metropolitan areas we can study, nongroup premiums are actually lower than employer premiums in the same area, even though nongroup insurance tends to have higher administrative costs per enrollee than does average employer coverage. In fact, once adjusting for year, actuarial, and associated utilization differences, half of states’ nongroup Marketplace premiums are lower than their average employer premiums by double-digit percentages. Metropolitan-area findings are similar.
In a previous analysis, we found that Marketplace nongroup insurance premiums tend to be lower in rating areas with more participating insurers and in those with Medicaid insurers or provider-sponsored insurers participating (Blumberg et al. 2016). Nongroup Marketplace premiums may tend to be lower because Marketplace insurers are more aggressive in offering narrower provider network plans than their group market counterparts. Other market characteristics may play roles, such as premium transparency and plan comparability. The large differentials between nongroup and employer premiums in many areas also may indicate that nongroup premiums continue to be underpriced in some areas; the large premium increases seen in several states may be part of the process through which these markets will reach a stable equilibrium.
Thus, with few exceptions, the level and growth of nongroup premiums in the Marketplaces should not be interpreted as evidence that these new markets are weak. Nongroup insurance, when adjusted to make its premiums comparable to employer premiums, is much more often than not lower cost than the average coverage offered through employers. But the persistent, uncomfortable truth is that health care is an expensive commodity, regardless of the market in which one purchases it.
Much has been written about the anticipated large increases in premiums for the nongroup health plans being offered through the ACA exchanges (Marketplaces) compared to the more modest increases in premiums of employer-sponsored group plans. This new Urban Institute report shows that premiums adjusted for plan equivalence for the nongroup exchange plans have actually been lower than those of employer plans. So what is the significance of this?
Although numerous factors no doubt contributed to this difference, it is likely that the most important was the strategy of insurers to initially offer lower premiums to gain market share with the intent of later adjusting premiums upward once competitors were reduced or eliminated. The miscalculation resulted from the fact that most employers did not drop their plans and thus there was not a large influx of healthy workers into the exchanges. There also was a component of adverse selection since many younger, healthier individuals stayed out completely, increasing the costs of covering the less healthy enrollees. Higher administrative costs of the nongroup plans compared to the employer plans were largely offset by lower negotiated rates for the narrower plan networks.
So the higher premium increases in the exchanges were necessitated primarily by initial lowballing and also by higher spending than anticipated. The insurers, with all of their actuarial talent, fell short, and some of the nation’s largest insurers are withdrawing.
So what is the lesson here? This is simply one more example of why supposed marketplace competition is a cumbersome and wasteful way to finance a health care system. An equitably-funded universal risk pool is not only more efficient, it is more equitable as well – including everyone, at a cost they can afford.
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