The State of Health Insurance in California: Findings from the 2009 California Health Interview Survey

By Shana Alex Lavarreda, PhD, MPP, Livier Cabezas, MPAff, Ken Jacobs, Dylan H. Roby, PhD, Nadereh Pourat, PhD, Gerald F. Kominski, PhD
UCLA Center for Health Policy Research, February 2012

Excerpts (These paragraphs are not contiguous in the report.)

Medi-Cal, Healthy Families, and Medicare provided insurance coverage to 9.3 million people in California for all or part of 2009. Despite the presence of these state and federally run public programs, there are still many low-income, uninsured Californians who do not qualify for coverage. Additionally, there are children and their parents, people with disabilities or medical needs, and elderly Californians who are eligible for public insurance programs but who are not enrolled.

Only three-fourths of uninsured Latinos will be able to gain coverage under ACA. A slightly higher percentage (43.1%) will be eligible for the Medi-Cal expansion, but far fewer will participate in the Exchange, either with subsidies (21%) or without (9.2%). The rest will be ineligible to participate in the coverage expansions due to their citizenship status (26.8%).

The exclusions embedded in ACA will likely increase the health insurance disparities between U.S. citizens and non-citizens over time. If these issues remain unaddressed, California runs the risk of increasing racial/ethnic inequities in health care access and outcomes.

Medicare beneficiaries without Medi-Cal or a supplemental source of coverage were more likely to report delays in obtaining medical care or necessary prescription drugs.

Not all types of health insurance are equal in their impact on access. Significant variations in premiums, cost sharing, and benefits exist between employment-based and individually purchased insurance, further complicated by the high-deductible plans that exist in both markets. Medi-Cal and Healthy Families coverage have very low or no premiums and cost sharing, but funding shortfalls often threaten eligibility, benefits, and provider participation in these programs.

The uninsured were also more likely than the insured to forgo or delay needed medical care due to costs or lack of insurance; 5.7% of those with employment-based insurance reported such barriers, compared to 19.5% of the uninsured.

The existing racial and ethnic disparities in health insurance coverage and resulting access to the health care system will be exacerbated as health care reform is implemented, with the very serious possibility that more than one million California residents (including non-citizen children) will be left to rely on safety net providers who may not receive enough money to care for the residual uninsured.

According to the 2009 California Health Interview Survey, approximately 92.7% of all children who were eligible for Medi-Cal actually signed up in 2009, and a lower percentage of adults ages 19 to 64 who were eligible actually enrolled (85.0%). That represents more than 215,000 children who could have had health insurance through a low-cost, public program but who did not enroll. In addition, another 331,000 adults were estimated to be eligible for Medi-Cal but remained uninsured. Although Healthy Families does not enroll adults, a smaller number of uninsured children are eligible for the program. Approximately 189,000 of uninsured children are estimated to be eligible for Healthy Families but are not enrolled – 22.2% of the eligible population.

Variations in health care use, as well as reports of forgoing needed care or delaying it due to costs and presence of medical debt by type of insurance, are likely due to differences in deductible levels and cost sharing and benefits. These variations indicate that health insurance does not fully address the financial barriers to access. Among the publicly insured, the presence of access barriers and financial debt illustrate the challenges the Medi-Cal and Healthy Families programs have to overcome despite the perennial funding shortfalls that threaten eligibility, benefits, and provider participation in these programs.

The continuing increase in premiums is likely to increase the number of high-deductible plans not accompanied by savings accounts, increase cost sharing and lead to more medical debt, increase the ranks of those who forgo or delay needed medical care, and potentially reduce timely doctor visits and increase emergency room visits.

In October 2010, California became the first state in the nation to pass legislation establishing the California Health Benefit Exchange, a fundamental component of the infrastructure of ACA. The Board faces numerous challenges over the next two years, including how to coordinate eligibility determination and enrollment processes with state and county agencies, whether to standardize co-payments and deductibles within each of the four tiers of health plans to be offered in the Exchange as a means of facilitating comparison shopping by consumers, and providing seamless transitions for individuals between Medi-Cal and the Exchange resulting from changing income, to name just a few.

Based on considerable evidence from previous expansion of public programs, including experience with individual mandates and penalties for remaining uninsured in Massachusetts, ACA will not result in 100% enrollment rates among those who are eligible for Medi-Cal or Exchange subsidies. Furthermore, we estimate that as of 2009, 1.2 million California residents will not be eligible under ACA due to their citizenship status. As a result, despite the significant reductions in the number of uninsured that are anticipated in 2014, those who remain uninsured are likely to strain the capacity of safety net providers in certain areas of the state. Our findings suggest that ACA could have a devastating effect on counties such as Los Angeles, where 20.7% of the currently uninsured, or nearly 450,000 individuals, will not be eligible for insurance under ACA. The net effect of ACA of reducing subsidies to hospitals for uncompensated care, reducing the number of uninsured, and increasing subsidies for community health centers could leave counties such as Los Angeles more vulnerable than they are now in meeting the demand for indigent care. This geographic disparity in the distribution of uninsured Californians may temper some of the considerable overall benefits anticipated under ACA.

The State of Health Insurance in California (114 pages): http://www.healthpolicy.ucla.edu/pubs/files/shic2009report.pdf

This highly informative UCLA policy report on the status of health insurance in California confirms that coverage and access have grown more dire, made even worse by the recession. Although the report explains how some of the benefits of the Affordable Care Act will provide limited improvements, it is also clear that we will fall far short of meeting all of our health care needs.

Although the report is silent on the wisdom of the financing infrastructure of the Affordable Care Act, we already know that the model is irreparably defective. The multitude of corrective patches that might be proposed would still leave us with unaffordable underinsurance as the new standard in America, along with a chronically underfunded public program for the poor. We need to replace the ACA model with a program that works – a single payer national health program.

Health Care Payers Push Back Against Costs

By Uwe E. Reinhardt
The New York Times, February 3, 2012

In a paper, “Divide et Impera: Protecting the Growth of Health Care Incomes (Costs),” published this month in the British journal Health Economics, I summarize themes touched on here and there in several earlier posts on this blog.

My argument in the paper is that what is often called overuse of health care by what are often described as excessively insured Americans — especially their use of high-cost, high-tech procedures — is at best a partial explanation for the high cost of American health care.

Yet cost-containment initiatives like high deductibles and co-insurance have taken use of health care as their chief target. These efforts will be only partly successful in controlling national health spending.

Equally important contributors to our high health spending, and probably more so, have been two other factors.

The first is the much higher administrative overhead costs loaded onto the American health system. David Cutler and Dan Ly, both of Harvard University, illuminate this proposition in their recent paper, “The (Paper) Work of Medicine: Understanding International Medical Costs,” in which they compare health spending in Canada and the United States.

Earlier, in a 2003 paper, “Costs of Health Care Administration in the United States and Canada,” Dr. Steffie Woolhandler, Terry Campbell and Dr. David Himmelstein estimated that in 1999 total administrative costs of health insurers and all other parties in health care, save patients, accounted for 31 percent of health care expenditures in the United States and 16.7 percent of health care expenditures in Canada.

A second major factor accounting for high health spending per capita in the United States is the significantly higher prices Americans pay for virtually all health care services and products.

My thesis on this issue — expressed in the title of my paper — is that these much higher prices are the product of a deliberate strategy, hashed out in our political bazaars between the supply side of health care and state and federal legislators, always to keep the payment side of our health system fragmented and relatively weak vis à vis the supply side of health care.

http://economix.blogs.nytimes.com/2012/02/03/health-care-payers-push-back-against-costs/

All comments originally published on the NYT blog

Don McCanne
San Juan Capistrano, CA

In his paper, “Divide et Impera,” Professor Reinhardt discusses three approaches to controlling health spending: single payer, all-payer, and rationing by prices.

The last, of course, is what we now have and is rejected by most of us who wish to see a more humane method of financing care. It is still supported by those who believe the health care consumer should use their own funds to shop for care, even though these supporters are reluctant to call it what is is – rationing by ability to pay.

In his article, single payer is dismissed based on lack of political feasibility, a view widely held in the United States.

In contrast, Dr, Reinhardt discusses an all-payer system in which prices are standardized and budgeted by associations – a great improvement over our current system (which Dr. Reinhardt discussed in a previous blog). However, he states, “Admittedly, a transition from the current to an all-payer system for all providers of health care in all states would be challenging, both analytically and politically.”

Politically challenging. Isn’t that like questioning political feasibility?

Is the political hurdle for an equitable and efficient single payer system really that much greater than the hurdle for a less efficient, less equitable and more fragmented all-payer system?

If we’re going to have to break down political barriers, why don’t we go for the best?

http://economix.blogs.nytimes.com/2012/02/03/health-care-payers-push-back-against-costs/?comments#permid=1

Nathan Punwani
Cambridge, MA

If we’re really interested in cost control, do we really need a public option? What about an all-payer system? What are the advantages and disadvantages of an all-payer system relative to a single-payer system (besides private insurers don’t like single payer)?

Nathan Punwani
MPH Candidate – Harvard School of Public Health

http://economix.blogs.nytimes.com/2012/02/03/health-care-payers-push-back-against-costs/?comments#permid=24

And…

Uwe Reinhardt
Princeton, NJ

The advantages of a single-payer system are:

1. They are simple and easily understood by all concerned.

2. They foster egalitarian health care delivery, because they usually are financed on the ability-to-pay principle. and providers are paid the same fee regardless of the socio-economic status of the patient.

3. They are ideal platforms for the smart application of electronic health information systems.

4. They have relatively low administrative overhead costs.

5. They give the insurer (the single-payer) a financial incentive to invest in preventive care and behavioral health care, because patients have automatic life cycle insurance under these systems so that the insurer reaps the savings in acute care treatment costs over the longer run.

6. Cost control is easy with these systems.

The disadvantages are:

1. Prospective insured do not have a choice among different insurers and different benefit packages.

2. Government, which usually operates these systems, may underfund them relative to what the people actually want and would be willing to pay for, although one should think that in a properly functioning democracy that could not go on for very long.

3. Mistakes at the center in coverage or payment matters quickly diffuse to all corners of the system.

4. Some people, notably Americans, just oppose all forms of centralized power, however efficient it may be.

http://economix.blogs.nytimes.com/2012/02/03/health-care-payers-push-back-against-costs/?comments#permid=24:15

Don McCanne
San Juan Capistrano, CA

Some of the other effective tools of the single payer model, as supported by Physicians for a National Health Program, include the following:

* Administratively efficient global budgeting of hospitals, as with police and fire departments

* Negotiation of fair rates with physicians

* Bulk purchasing of pharmaceuticals, like the VA

* Reducing diversion of patient care funds by eliminating for-profit corporations and their passive investors

* Planning and separate budgeting of capital improvements to prevent wasteful excess capacity, while ensuring adequate capacity in under-served areas

* Replacing choice of restrictive, wasteful, expensive private insurers with the choice we want – choice of our health care professionals and institutions

The greatest problem with single payer systems is that conservative governments strive to privatize and underfund the programs, such as the current efforts in England and Canada, and also here with the conservative attack on our Medicare program. Such anti-egalitarian approaches tend to shift burdensome costs to patients who are already suffering from ill health.

The efficient and equitable policies of the single payer model which would provide us with much greater value in our health care purchasing are precisely what we need. It’s the politics that we need to change, something that we should be able to do with a “properly functioning democracy.”

http://economix.blogs.nytimes.com/2012/02/03/health-care-payers-push-back-against-costs/?comments#permid=24:17

A Painful Betrayal

Editorial
The New York Times, February 2, 2012

With its roster of corporate sponsors and the pink ribbons that lend a halo to almost any kind of product you can think of, the Susan G. Komen for the Cure foundation has a longstanding reputation as a staunch protector of women’s health. That reputation suffered a grievous, perhaps mortal, wound this week from the news that Komen, the world’s largest breast cancer organization, decided to betray that mission. It threw itself into the middle of one of America’s nastiest political battles, on the side of hard-right forces working to demonize Planned Parenthood and undermine women’s health and freedom.

The Associated Press reported on Tuesday that the foundation is cutting off its financing of breast cancer screening and education programs run by Planned Parenthood affiliates. That means nearly $700,000 less for Planned Parenthood, which performed 750,000 such screenings last year, many thousands of them with money from the Komen foundation.

http://www.nytimes.com/2012/02/03/opinion/a-painful-betrayal.html

And…

Consolidated Statements of Functional Expenses

The Susan G. Komen Breast Cancer Foundation, Inc.
Year Ended March 31, 2011

Public support and revenue – $471,750,158

Program services
Research – $75,301,537
Public health education – $181,092,283
Health Screening Services – $54,089,036
Treatment services – $23,251,563
Total program services – $333,734,419

http://ww5.komen.org/uploadedFiles/Content/AboutUs/Financial/2011%20Komen%20Financial%20Statements%20FINAL(3).pdf

Nothing further needs to be said about how unwise it was for the Susan G. Komen Foundation to cut off funds for breast cancer services at Planned Parenthood facilities. Having made an error so grievous that some suggest could result in the demise of this public service organization dedicated to fighting breast cancer, we should ask if we can afford to lose their contributions to this effort.

We need to take a look at their program services.

The $75 million that they spend on research could easily be incorporated into the budget of the National Institutes of Health, the world’s largest medical research institute.

The $181 million spent on public education has reached all of us through their pink ribbon campaign. Although it certainly is important for the public to know about screening mammography, isn’t it likely that this will still be common knowledge, even without the pink ribbons?

The $54 million for screening and the $23 million for treatment actually are already being paid for by taxpayers. If you consider that the marginal tax rate for Komen donors likely averages about 30 percent, then tax subsidies for the $471 million in public support amount to about $141 million, far more than the $77 million being spent on screening and treatment. In fact, the balance of our tax subsidies would pay for most of the research that they fund.

A more fundamental question is why aren’t all women guaranteed appropriate screening and necessary treatment for breast cancer? They would be if we had a single payer national health program – an improved Medicare for all. If so, the loss of the Komen Foundation would not be all that tragic, though it is still painful to say that.

HHS Essential Benefits ‘Bulletin’ Draws Tide Of Comments

Kaiser Health News
February 2, 2012

As the official window of time allowed for groups to react to the Department of Health and Human Services essential benefits proposal closed, a variety of objections, concerns and common themes became clear.

CQ HealthBeat: State ‘Flexibility’ For Essential Benefits Gets Cool Reception

A tide of objections and worries rolled in just before Tuesday’s deadline for health groups to react to a Department of Health and Human Services proposal on essential health benefits. Input from health interests and consumers on the benefits “bulletin” is not being made public by the Obama administration, which asked that comments be sent to an email address rather than posted on a government website as would be the practice with a proposed regulation (Norman, 2/1).

Politico Pro: EHB Comments Show Some Common Themes

Believe it or not, businesses, insurers and consumers do see eye to eye on essential health benefits — well, on some parts, anyway. They’re at odds on some of the bigger issues, which doesn’t exactly come as a surprise. The comments submitted to HHS on its essential health benefits approach shows a wide divide between consumers … and businesses and insurers, who don’t see enough safeguards to keep the essential health benefits package affordable (Millman, 2/2).

http://www.kaiserhealthnews.org/Daily-Reports/2012/February/02/essential-benefits.aspx

Yesterday we reported that some of the most politically powerful organizations in the nation have joined together in a coalition to try to weaken the package of “essential health benefits” that will be required of health plans under the Affordable Care Act.  Excerpts from two new articles covered in the Kaiser Daily Health Policy Report should have us even more concerned.

In Politico Pro, it is reported that businesses and insurers “don’t see enough safeguards to keep the essential health benefits package affordable.” The proposal already has reduced the required benefits down to the relatively austere level of small group plans offered in the various states. These plans leave patients facing financial hardship when they must access health care.

Yet the powerful businesses and insurers want an even lower standard of benefits in order to keep the health benefits package affordable. The insurers want to protect their markets by keeping the insurance premiums affordable, and businesses also want the lowest premiums they can negotiate. Low premiums equate with higher out-of-pocket expenses for those with medical needs. In trying to make the health insurance plans more affordable, actual health care for the patients will be even less affordable.

As we have seen, the process has always been about powerful interests, with only a passive concern for patients.

In CQ HealthBeat, we see that comments on the proposal are being “sent to an email address rather than posted on a government website as would be the practice with a proposed regulation,” and are “not being made public by the Obama administration.”

The White House gave these special interests carte blanche with secretive access during the reform process. Secrecy continues. Should we be surprised when the final rule on “essential health benefits” pleases business and insurance interests, at a cost of exposing those with health care needs to greater financial hardship? No, not surprised. Outraged is more like it!

Essential Health Benefits Coalition

January 31, 2012
Letter
To: HHS Secretary Kathleen Sebelius
From: Neil Trautwein, National Retail Federation

Re: Request for Information on the Essential Health Benefits Bulletin

The Essential Health Benefits Coalition (“EHBC”) appreciates the opportunity to provide comments in response to the “Essential Health Benefits Bulletin” as issued by Department of Health and Human Services’ (HHS’s) Center for Consumer Information and Insurance Oversight (CCIIO) on December 16, 2011.

As you finalize the definition of the Essential Health Benefits (EHB) package, we want to emphasize our concerns regarding the affordability of coverage for small employers and individuals under the Affordable Care Act (ACA). HHS seeks to give states flexibility to structure their own EHB package using private market coverage options in use today to serve as benchmarks.  Yet these benchmark options are subject to the same state mandates that today keep coverage unaffordable and out of reach for many small employers and individuals. We urge HHS to consider an approach that balances reasonably comprehensive benefits with affordability for employers and individuals. A definition that does otherwise will make health coverage more expensive for employers and individuals to purchase and make jobs more difficult for employers to create.

Excerpt from recommendations:

Specifically, we urge the Department to reiterate that the Bulletin reflects the statutory requirements that:

* The EHB package does not dictate cost sharing requirements.

* Use of benefit limits included within benchmark plans is not barred.

* Future state mandates will not be added to the benchmark plan.

* Use the benchmark plan only to define the 10 categories of EHBs required by the ACA, and not any additional benefits that the benchmark may cover.

Members of the Essential Health Benefits Coalition Steering Committee:

American Osteopathic Association
America’s Health Insurance Plans
Blue Cross Blue Shield Association
Express Scripts Inc.
National Association of Health Underwriters
National Association of Manufacturers
National Association of Wholesaler-Distributors
National Federation of Independent Business
National Retail Federation
Pharmaceutical Care Management Association
Prime Therapeutics
Retail Industry Leaders Association
U.S. Chamber of Commerce

http://ehbcoalition.org/wp-content/uploads/2012/02/EHBC-Comments.pdf

HHS has proposed that “essential health benefits” for plans under the Affordable Care Act need meet only the minimal standard of state regulated plans in the small group market. Now a coalition of the usual suspects which push self-serving reforms is proposing to further weaken the “essential health benefits” standard.

The details of their recommendations are not nearly as important as the fact that this maneuver represents what has been wrong with the reform process all along. The vested interests have been in the front seat while the guileless  patients have had to accept their work product – a mandate to purchase unaffordable under-insurance, amongst many other flawed policies.

Instead of fighting over the definition of minimal essential benefits in a highly flawed health financing program, we should be joining with the nation’s patients in demanding that our elected leaders quit listening to these self-serving interests and instead enact a program that puts patients in the front seat – an improved Medicare for all.

Addendum:  Members of the American Osteopathic Association (AOA) may want to advise their leadership that, as a patient-oriented organization, AOA should immediately withdraw from this dastardly coalition.

The End of Health Insurance Companies

By Ezekiel J. Emanuel and Jeffrey B. Liebman
The New York Times, January 30, 2012

Here’s a bold prediction for the new year. By 2020, the American health insurance industry will be extinct. Insurance companies will be replaced by accountable care organizations — groups of doctors, hospitals and other health care providers who come together to provide the full range of medical care for patients.

… thanks to the accountable care organizations provided for by the health care reform act, a new system is on its way, one that will make insurance companies unnecessary. Accountable care organizations will increase coordination of patient’s care and shift the focus of medicine away from treating sickness and toward keeping people healthy.

… accountable care organizations will typically be paid a fixed amount per patient, along with bonuses for achieving quality targets. The organizations will make money by keeping their patients healthy and out of the hospital and by avoiding unnecessary tests, drugs and procedures. Thus, they will actually have a financial incentive to hire that nurse for follow-ups.

In addition to providing better and more efficient care, A.C.O.’s will also make health insurers superfluous. Because they will each be responsible for a large group of patients (typically more than 15,000), they will pool the risk of patients who have higher-than-average costs with those with lower costs. And with the end of fee-for-service payments, insurance companies will no longer be needed to handle complicated billing and claims processing, nor will they need to be paid a fee for doing so. Payments can flow directly from an employer, Medicare or Medicaid to the accountable care organizations. A.C.O.’s will require enhanced information systems to track patients and figure out how to deliver more effective care, but this analytic capacity will be directed at improving health outcomes, not at imposing barriers to those seeking treatment.

A.C.O.’s are not simply a return to the health maintenance organizations of the 1990s. Although in both models patients are members of a provider network with a specific group of doctors and hospitals, and both are paid primarily per member rather than per procedure or test, there are big differences between them. H.M.O.’s were often large national corporations far removed from their members. In contrast, A.C.O.’s will consist of local health care providers working as a team to take care of patients who are likely to be members for years at a time.

A few health insurers see this asteroid coming. Wellpoint, for example, bought the clinic operator CareMore for $800 million last summer to make the transition into the A.C.O. business. Others, like the Optum unit of UnitedHealth Group, are developing data analysis services to provide to future A.C.O.’s. If they don’t want to go the way of the dinosaurs, insurance companies will have to find a new business to be in, one that is useful in the new world of coordinated care.

http://opinionator.blogs.nytimes.com/2012/01/30/the-end-of-health-insurance-companies/

Comment originally posted on the New York Times’ website.

NYT Pick

Don McCanne
San Juan Capistrano, CA

The policy community, as represented by Ezekiel Emanuel and Jeffrey Liebman, speaks in glowing terms about idealistic, altruistic accountable care organizations (ACOs) in which health care professionals and institutions join together to improve quality and lower costs. Yet the specifics of the Medicare Shared Savings program that would establish ACOs through the Affordable Care Act (ACA), has only a superficial resemblance to these idealistic models.

The fact that the two largest for-profit insurers in the nation – WellPoint and UnitedHealth – are going after the ACO business is proof that we are in for more of the same. Eliminating private insurers by merely setting up ACOs is a pipe dream. The state insurance exchanges mandated by ACA are exchanges of private insurance plans, not ACOs.

We need to improve Medicare, dump the private insurers including the Medicare Advantage plans, and provide Medicare for everyone. Medicare has been far more effective than the private insurers in controlling costs, and would be even more so if it were our own publicly-financed single payer system.

‘Free’ preventive care can cost patients big money: Is procedure a screening or therapeutic?

By Tom Kisken
Ventura County Star, January 28, 2012

Patients are getting charged as much as $3,000 for screenings they thought would be free under a federal health care reform mandate that promises free preventive care.

Most of the problems revolve around colonoscopies — screenings designed to detect colon and rectal cancers that kill about 52,000 Americans a year.

The procedure has been covered by federal health care reform for men and women 50 and older since September 2010, although many older insurance policies are exempt from the new provision.

Some patients are still receiving bills for deductibles or co-pays when the procedures show an abnormal growth called a polyp that can develop into cancer.

Insurance companies may charge for screenings or tests if patients show symptoms of cancer or are going through a colonoscopy as a follow-up to an earlier diagnosis, said Robert Zirkelbach, spokesman for the trade group. But many insurers consider colonoscopies to be preventive care — and covered — regardless of whether polyps are present, he said. Bills are sent when they aren’t told the nature of the procedure.

“One of the challenges is: How are those procedures being coded by physicians?” he said. “Is it clear that it’s a preventive service?”

Some doctors, however, insist the issue isn’t coding, but rather money and the insurers’ desire for it.

“That is subterfuge,” said Dr. Paul Sanders, a Thousand Oaks gastroenterologist, contending insurers are shifting blame from themselves to physicians. “It’s utter baloney. The insurance companies have quite intentionally blocked any way that anybody could understand what they’re going to, and not going to, pay for.”

Charles Rosen, a Simi Valley insurance broker and president-elect of the California Association of Health Underwriters, tells clients to minimize chances of any billing confusion by not talking to a doctor about any health concerns during a screening exam.

“If you have a pending issue, make another appointment,” he said.

http://www.vcstar.com/news/2012/jan/28/free-preventive-care-can-cost-patients-big-money/

Colonoscopy is one of several cancer screening tests that are covered 100 percent – no deductibles nor coinsurance are required. What separates out colonoscopy from the other screening tests is that it is frequently converted, on the spot, to a therapeutic procedure when polyps are detected and removed.

Somewhere between the billing office for the physician or outpatient department and the processing of the claim by the insurer, the diagnostic and procedure coding is changed from the free screening test to the therapeutic procedure, subject to cost sharing. The physician blames the insurer, and the insurer blames the physician. But it is the patient who is harmed by being required to pay the out-of-pocket costs of a therapeutic procedure after having been promised a free screening test.

As is typical in our health care financing system that turns decisions over to private insurers (even if only private administrators of Medicare), the president-elect of the California Association of Health Underwriters advises patients to withhold medical information until after they have received their free screening. Only then should they inform their physician about the rectal bleeding or the tenesmus that they have been experiencing. What’s a little fraud if it is only the patient that is committing it?

There are two policy lessons here.

One is that deductibles, co-payments and coinsurance should be eliminated for all appropriate care. Payment issues should not interfere with health care decisions made by the patient with the best advice of the physician. The harm dome by erecting financial barriers to care is potentially far greater than the almost negligible decrease in our national health expenditures that would result from cost sharing (most of which is merely shifted from the insurer to the patient). Obtaining appropriate health care should not result in the assessment of cost sharing penalties or fines.

The second policy lesson is that we need to throw the middleman crooks out. Only that industry would come up with a solution that patients should be instructed to lie to their health care professionals. Not a lie to withhold information? Isn’t the oath for swearing in, “The truth, the whole truth, and nothing but…”? Maybe the whole truth is confidential proprietary information. At least that’s what the insurers keep telling us when we ask for transparency.

Medicare Advantage: CMS Should Improve the Accuracy of Risk Score Adjustments for Diagnostic Coding Practices

GAO
January 2012

We found that diagnostic coding differences exist between MA plans and Medicare FFS and that these differences had a substantial effect on payment to MA plans. We estimated that risk score growth due to coding differences over the previous 3 years was equivalent to $3.9 billion to $5.8 billion in payments to MA plans in 2010 before CMS’s adjustment for coding differences. Before CMS reduced 2010 MA beneficiary risk scores, we found that these scores were at least 4.8 percent, and perhaps as much as 7.1 percent, higher than the risk scores likely would have been as a result of diagnostic coding differences, that is, if the same beneficiaries had been continuously enrolled in FFS. Our estimates suggest that, after accounting for CMS’s 3.4 percent reduction to MA risk scores in 2010, MA risk scores were too high by at least 1.4 percent, and perhaps as much as 3.7 percent, equivalent to $1.2 billion and $3.1 billion in payments to MA plans.

http://democrats.waysandmeans.house.gov/media/pdf/112/gao_macodesfinal.pdf

One of the greatest abuses of the private insurance industry is taking advantage of favorable selection. Through deceptive practices such as selective marketing, they enroll healthier individuals while receiving higher premiums appropriate for a less healthy population.

To correct for this, payment is modified through risk adjustment (RA) – reducing payments for healthier populations and increasing payments for less healthy populations. If health care spending is to be equitable, risk adjustment is mandatory in a multi-payer system such as that of the Affordable Care Act.

We now have considerable experience with risk adjustment between the private Medicare Advantage plans and the public fee-for-service Medicare program. The experience is not good. As Medicare has refined the risk adjustment tools, the private Medicare Advantage plans have found new ways to game the system which have resulted in even greater overpayments for their patients who are healthier than the data submitted by the insurers would indicate.

This GAO report recommends that Medicare needs to increase its data collection and revise its application of risk adjustment in an attempt to recover some of the overpayments that would be made in the future. However, the experience to date indicates that the private insurers will use the greater complexity to further game the system to their own advantage.

PNHP co-founders Steffie Woolhandler and David Himmelstein state it well in this comment on risk adjustment:

“RA (risk adjustment) folks have been making this claim for decades; great improvement is just around the corner. To us, the most interesting part of the 2004 enhancement of Medicare Advantage RA is not that plans beat it, but that the gaming was actually much more lucrative AFTER the enhancement than before. Static analyses of RA schemes can virtually always come up with schemes that explain far more of the variance than existing schemes – ie. they’re better. But once incentives are based on a particular RA scheme, the gaming is on. There is absolutely no evidence that RA works or can work in the dynamic reality of profit-seeking health care insurers/providers.”

Private insurers operate on market principles. They will always place business interests first. They chase the money.

A universal public insurance program operates in the interests of patients. Gaming risk adjustment is a totally foreign concept to administrators of a single payer system.

Why would we ever want to have private plans involved at all? Dump them and we’ll get rid of the problems of adverse selection and favorable selection. Keep them and they’ll always game the system. They win, and we lose.

How the Health and Social Care Bill 2011 would end entitlement to comprehensive health care in England

By Allyson M Pollock, David Price, Peter Roderick, Tim Treuherz, David McCoy, Martin McKee, Lucy Reynolds
The Lancet, January 26, 2012

(Excerpts)

The National Health Service (NHS) in England has been a leading international model of tax-financed, universal health care. Legal analysis shows that the Health and Social Care Bill currently making its way through the UK Parliament would abolish that model and pave the way for the introduction of a US-style health system by eroding entitlement to equality of health-care provision. The Bill severs the duty of the Secretary of State for Health to secure comprehensive health care throughout England and introduces competitive markets and structures consistent with greater inequality of provision, mixed funding, and widespread provision by private health corporations. The Bill has had a turbulent passage. Unusually, the legislative process was suspended for more than 2 months in 2011 because of the weight of public concern. It was recommitted to Parliament largely unaltered after a “listening exercise”. These and more recent amendments to the Bill do not sufficiently address major concerns that continue to be raised by Peers and a Constitution Committee of the House of Lords, where the Bill now faces one of its last parliamentary hurdles before becoming law.

Fundamental to the Bill are provisions that transform a mandatory system into a discretionary one with structures that permit the introduction of charging for services that are currently free under the NHS, as well as a system in which much delivery would be privatised. Under the current statutory framework the Government has a legal duty to secure comprehensive health care, whereas, under the new system, substantial discretionary powers will instead be extended to commissioners and providers of care. These measures will increase inequalities of provision.

The whole system has been publicly administered and funded on the basis of contiguous geographical areas by bodies, now called primary care trusts (PCTs), that act on behalf of the Secretary of State and have responsibility for the health-care needs of everyone in their area.

The Bill creates two new bodies with responsibility for managing care: an NHS Commissioning Board and Clinical Commissioning Groups (CCGs), the number of which remain unclear. PCTs will be abolished and not replaced.

Clause 12 of the Health and Social Care Bill repeals the Secretary of State’s “duty to provide” specific services. Instead, a “duty to arrange” provision is imposed on each of the many CCGs that will also have transferred to them the power to determine what care is necessary to meet all reasonable requirements. However, CCGs will not have the duty to promote a comprehensive free health service.

As well as transferring powers from the Secretary of State to other bodies, the Bill leaves each CCG free to choose the patients for whom they have responsibility. Unlike PCTs, CCGs will not be responsible for all residents within contiguous geographical areas. CCGs select patients, initially assembling their patient populations on the basis of general practitioners’ (GPs) lists; they will not have to cover everyone in a geographical area but only “persons for whom it [the CCG] has responsibility”. Nor will they be required to arrange for the provision of all the services that are currently part of the comprehensive health system.

These changes will have substantial legal consequences. First, the duty to provide a national health service throughout England would be lost if the Bill became law. It would be replaced by a duty on an unknown number of CCGs, not GPs, to arrange provision as they see fit for various sections of the population for which they are separately responsible. Second, CCGs would not be bound by the “duty to continue to promote a comprehensive free health service” when exercising their functions. Under present law, according to a judgment of the Court of Appeal, the Secretary of State “has the duty to continue to promote a comprehensive free health service and he must never, in making a decision [about services provided], disregard that duty”. Third, the Secretary of State’s accountability to Parliament for the provision of services to patients in the new NHS will be diminished.

The Government has not disclosed the radical nature of this reform.

In the USA, opposition to health reforms under both the Clinton and Obama administrations is articulated as erosion of personal freedom by increasing government powers. Conversely, pro-market reforms of universal health systems in Europe are often justified on the grounds that they increase personal freedom by transferring powers from government to non-governmental or commercial bodies and by increasing choice. Citizens’ rights in democracies are underpinned not just by limitations on government powers but also by legal duties imposed on governments, such as those that guarantee citizens access to health care. The Bill would withdraw this legal underpinning. As the Bill enters its final critical stages it is crucial that Peers observe three red lines for the NHS (below) and are fully aware of the key parts of the legislation that would abolish core NHS functions, if they are to safeguard the NHS for future generations.

****

Red lines to protect the NHS

# The Secretary of State must have the duty to secure provision of comprehensive and equitable health care for the whole of the population of England, taking action whenever there are problems.

# CCGs (Clinical Commissioning Groups), operating on behalf of the Secretary of State, must make sure that comprehensive and equitable health care is available for everyone and be responsible for all residents living in single geographically defined areas that are contiguous, without being able to pick and choose patients.

# Nothing must be done that undermines the ability of the Secretary of State to fulfil the duty to secure provision of comprehensive and equitable health care, by bringing more of the NHS within the scope of EU competition law so that, in particular:

* There must be no increase in the commercial contracting of health services;
* The current authorisation system for central regulation of Foundation Trusts must be retained;
* Statutory functions of CCGs must be carried out by NHS staff, with CCG finances being used solely for the benefit of patients;
* Statutory and enforceable codes of conduct must be laid down for all NHS bodies, underpinned by sanctions that are rigorously policed;
* Information about commercial contracting, including the planning, procurement, financing, and monitoring, must be available as a matter of course.

http://www.thelancet.com/journals/lancet/article/PIIS0140-6736(12)60119-6/fulltext (The Lancet is offering access to this important article for free, but they do require registration.)

The Conservative government of David Cameron is about to destroy England’s National Health Service, as we know it. While we are struggling in our attempt to ensure health care for everyone (and are still not receiving it under the Affordable Care Act), the British government is severing its responsibility to secure comprehensive health care throughout England.

Health care justice is an international cause. We should partner with our colleagues in England to support their cause in this moment of crisis, as they later partner with us to see that health care justice becomes a reality in the United States… and throughout the world.

Children’s, Blue Cross deal curbs payments

The Boston Globe
January 24, 2012

Children’s Hospital Boston has agreed to a three-year contract with Blue Cross Blue Shield of Massachusetts…

Perhaps most important, Children’s and its doctors groups will accept global payments for the first time, meaning they will be given a budget for patients’ care rather than billing for each visit and procedure.

“The contract is completely aligned with our aggressive and comprehensive efforts to take costs out of the system, while also improving quality,” said Children’s president Sandra Fenwick.

Until recently, it was thought unlikely that specialty providers such as Children’s, a 395-bed teaching hospital that is a national leader in pediatric research and training, would join the new global payment plans being offered by insurers.

Fenwick said the deal makes Children’s the first pediatric hospital in the nation to take global payments instead of traditional fee-for-service reimbursements. The contract also covers the Children’s Physicians Organization, made up of 959 specialists, and the Pediatric Physician Organization at Children’s, which includes 279 primary care doctors.

http://articles.boston.com/2012-01-24/business/30655411_1_pediatric-care-health-care-providers-specialty-hospitals

Under a well designed single payer system, hospitals would be funded through global budgets, much like police and fire departments, libraries and other civic institutions. Single payer eliminates the need to provide complex, itemized billings for each and every patient to any of hundreds of third party payers. The hospitals are simply paid a global fee that covers all of their costs for the year. As Canada and other nations have shown, global budgeting dramatically reduces the high costs of the administrative excesses that U.S. hospitals face.

Blue Cross Blue Shield of Massachusetts has now negotiated the first contract with a pediatric hospital that they say uses global budgeting. So can we use this as an experiment to prove that global budgeting will work in the United States? Unfortunately, no.

This contract has almost nothing in common with global budgeting under a single payer system. A global budget limited to one insurer does not place the entire hospital under a single global budget. Far from it. They still have to interact with all other payers in our fragmented financing system. Further, the products and services provided to Blue Cross Blue Shield patients must be segregated and itemized separately to know the amount of the budget to be negotiated. The uncertainties on how to allocate various hospital costs also can result in inequities amongst the various payers, likely making Blue Cross Blue Shield a winner while other payers lose.

When we are told later on that we do not want hospitals globally budgeted under a single payer system because it did not work for Children’s Hospital Boston, be prepared to answer that this was not global budgeting. This was merely another individual contract between one hospital with its physicians’ organizations and one insurer, under a fragmented financing system in which it was impossible to achieve the efficiencies of globally budgeting of the hospital’s entire costs.

We can even invent a term based on what this process is. It is “segregated budgeting.” We can make that a pejorative term by demonstrating that it is merely another insurer gimmick in our dysfunctional system of financing health care. Let’s keep the definition of “global” clean, and not let the insurers steal it from us.