Elliott Fisher questions whether ACOs will work

Posted by on Monday, Mar 28, 2011

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 Model of the Future?

By Avery Johnson
The Wall Street Journal
March 28, 2011

The 2010 health-care law encourages the development of accountable-care organizations as a way to improve care and reduce costs.

So what exactly are accountable-care organizations, anyway?

In broad outline, these entities propose to unite doctors and clinics or hospitals in groups that pool their resources with the goal of trimming spending while boosting the quality of care. When the group can show that it is improving care and delivers it for less than the cost projected—arrived at by crunching historical patient data for that market—a share of the savings goes to the ACO’s bottom line.

ACOs exist more on paper than in reality, for now.

“An ACO is like a unicorn; everyone thinks they know what one is, but no one has ever seen one,” says Gene Lindsey, president and chief executive of Atrius Health.

Elliott Fisher, the Dartmouth Medical School professor who helped coin the term ACO, and who worked with members of Congress to draft the ACO concept into the health-care law, concedes that “there are some really important questions about whether this will work.”

But, Dr. Fisher adds: “I think it’s the best hope we have.”



Cost control the next step for Massachusetts health reform

By Tanya Albert Henry
American Medical News
March 28, 2011

In February, Massachusetts Gov. Deval Patrick unveiled his cost-containment plan to follow up on the landmark 2006 coverage expansions. If approved by legislators, it would define and encourage accountable care organizations within the state; give the state insurance commissioner the ability to scrutinize insurers’ rates, including underlying physician pay, and disapprove rates that are excessive; and revamp the medical liability system to try to resolve disputes more quickly and curb defensive medicine.

Accountable care organizations

* Mandates that ACOs provide patient-centered primary care coordination and referral services.

* Requires ACOs to share financial risk, distribute savings and meet quality measures.

* Expects ACOs to be competent in population health management, financial and contract management, quality measurements, and communication.

* Charges ACOs with providing behavioral health services, either internally or by contract.

* Makes physician participation voluntary.

* Allows primary care physicians to belong to only one ACO but places no limits on specialists.

* Requires MassHealth, the Group Insurance Commission, the Commonwealth Connector and all other state-funded insurance programs to implement ACOs and alternative payments by January 2014.


Accountable care organizations (ACOs) began as an abstract concept of integrating health care providers into a not-yet-defined entity that would be rewarded for improving quality and reducing costs. Without knowing what they were, Congress included them in the Affordable Care Act (ACA). Dartmouth’s Elliott Fisher, who was one of the first to promote the concept, now says that “there are some really important questions about whether this will work.”

Nevertheless, Massachusetts, which is serving as a prototype for the now-enacted ACA, is intending to move forward with its version of ACOs. Their model not only measures quality and distributes savings, but it also shares financial risk. Also it includes exclusive primary care networks, limiting patient choices. The intent of Dr. Fisher and his colleagues is very noble, but it appears that we may be opening up the process to enable a return to the worst of the managed care era.

Quoting from a personal communication from Steffie Woolhandler and David Himmelstein, “Universal, geographically-based, non-profit ACOs are called a national health service, a reform we would heartily endorse. Unfortunately, the ACOs actually being pursued are profit-driven recreations of full-risk capitated HMOs.”

Very soon HHS will be releasing their guidelines for ACOs. The question we need to ask then is will these organizations be designed specifically to provide patients higher quality care at more reasonable costs, as Dr. Fisher envisions, or will they be designed by businessmen to… well, you know.

Aetna pushes back and sues doctors

Posted by on Friday, Mar 25, 2011

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.

Ultrasound at $59,490 Spurs Aetna Outrage in Suit Naming Doctors

By Peter Waldman
March 23, 2011

Aetna Inc. (AET) is suing six New Jersey doctors over medical bills it calls “unconscionable,” including $56,980 for a bedside consultation and $59,490 for an ultrasound that typically costs $74.

One defendant billed $30,000 for a Caesarean birth, and another raised his fee for seeing a critically ill patient in a hospital to $9,000 in 2008 from $500 the year before, the insurer alleges in the suits. The Caesarean price was more than 10 times the in-network amount Aetna quotes on its website.

The lawsuits could help determine what pricing limits insurers can impose on “out-of-network” physicians who don’t have contracts with health plans that spell out how much a service or procedure can cost.

The insurer paid some of the large charges because of state regulations mandating timely payments and to prevent doctors from sending patients big bills, (Aetna spokeswoman Cynthia) Michener said.

In April 2010, Aetna said, (cardiologist Benyamin) Hannallah asked for $54,600 for a heart catheterization, up from $5,500 for the same procedure in 2007. When the insurer gave him $2,000 — a sum it deemed “usual and customary” for the procedure — Hannallah complained, and Aetna paid in full to prevent him from billing the patient for the remainder, Michener said.

Aetna tried in 2007 to impose caps on some out-of-network payments, prompting doctor complaints to the New Jersey Department of Banking and Insurance. The agency sided with the doctors, fined the company $2.5 million, and ordered it to pay out-of-network practitioners enough so that patients wouldn’t be asked to pay balances other than co-pays.

In 2009, Aetna, UnitedHealth Group Inc. (UNH), Cigna Corp. (CI) and WellPoint Inc. (WLP) were accused by the New York attorney general of underpaying out-of-network physicians by manipulating a database used to calculate payments. They paid a total of $90 million in settlements without admitting wrongdoing. UnitedHealthcare agreed that year to pay $350 million to settle a lawsuit by the American Medical Association over the same issues. Similar AMA lawsuits against Aetna, Cigna and Wellpoint are pending.


The most important innovation in coverage established during the managed care revolution was that private insurers could contract with physicians and hospitals to establish networks of providers with agreed-upon payment rates. Part of the backlash against managed care was that patients wanted the freedom to choose care outside of the networks, and they wanted their plans to pay for that care. So what did the insurers do to control fees and prices for services rendered by providers who had no contractual obligation to the insurers?

Insurers simply included in their plans some version of language to the effect that they would pay usual and customary fees in plans that covered out-of-network providers. Ingenix (founded by UnitedHealth Group) developed a data base of customary fees that led to a standard for payment of out-of-network care that was used by most major insurers. Discovery during the lawsuits that were later filed confirmed that the database was manipulated to produce an artificially low standard for customary fees. Either the providers were underpaid, or the patients had to pay excessive amounts for the balances that were billed.

Between pressure from the regulators and dissatisfaction from their own clients, the insurers were in a bind as to how they would keep the out-of-network providers from billing the patients for more than the deductibles and coinsurance.

Some physicians took advantage of this situation. They revoked their contracts with the insurers, and then charged whatever fees they thought that they could get away with. They knew that the insurers wouldn’t pressure their own clients to pay the balances, so they were basically able to extort the insurers for these outrageous fees. Now Aetna is pushing back by filing a lawsuit against these physicians for violating New Jersey Board of Medical Examiners rules against excessive fees.

Obviously, we have a problem with the way we pay for health care. The Affordable Care Act (ACA) will only perpetuate the abuses of the private insurers and the unscrupulous providers who take advantage of the system.

Fraud and abuse will always be a problem. You hear about it all the time with Medicare. That is because a single public administrator can identify fraud and expose it much more readily than a fragmented, private system that protects its proprietary information by not exposing the abuses. In fact, under ACA, the private insurers have incentives to pay outrageous fees and to pay for fraud because they get to keep 15 to 20 percent of the entire kitty. The more fraud and price gouging there is, the greater their revenues.

A single payer financing system automatically prevents gouging, and also has more effective tools to ferret out fraud. As the pain inflicted by the outrageous costs of our health care system continues to grow, the nation will welcome a single payer system, once the concept is better understood.

Are we ready for universal HIT and EHRs?

Posted by on Thursday, Mar 24, 2011

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.

Tapping the Unmet Potential of Health Information Technology

By Ann S. O’Malley, M.D., M.P.H.
The New England Journal of Medicine
March 23, 2011

Although EHRs laudably provide immediate access to patient data and electronic messaging functions, clinicians have been frustrated by the difficulty of using them to support care delivery and coordination. Transforming EHRs into effective clinical tools rather than a means of capturing information primarily for documentation and billing purposes will require progress on multiple fronts.

Continued research on clinical care processes, the design and use of HIT, and payment reform, as well as ongoing support for clinicians, will be key to the effective and meaningful use of HIT. Today’s EHRs do not sufficiently support aspects of care delivery that are vital to improving care and controlling costs.


What is the current state of the development of health information technology (HIT) and electronic health records (EHRs)? Quoting from this NEJM article, “Today’s EHRs do not sufficiently support aspects of care delivery that are vital to improving care and controlling costs.”

We should continue with efforts to improve this technology, but, at this time, it is still too early to force universal adoption through government policies.

Vermont leads the way

Posted by on Wednesday, Mar 23, 2011

Originally published in the Berkshire Eagle.

Writing about the Massachusetts health care reform program in a 2009 issue of the Wall Street Journal, Governor Deval Patrick stated, “Because of our reform, families are less likely to be forced into bankruptcy by medical costs.” Both Governor Patrick and President Obama have used the benchmark of medical bankruptcy as a key measure to prove the success of their health insurance reforms.

Unfortunately, according to a study this month from Harvard University by Dr. David Himmelstein and associates, the absolute number of medical bankruptcies in Massachusetts increased between 2007 and 2009, the years after health care reform had been enacted. Dr. Himmelstein commented, “Massachusetts health reform, like the national law modeled after it, takes many of the uninsured and makes them under-insured, typically giving them a skimpy defective policy that’s like an umbrella that melts in the rain. The protection’s not there when you need it.”

For example, in Boston, the least expensive individual coverage available to a 56-year-old carries an annual premium of $5,616 and a deductible of $2,000, and even then only covers 80 percent of the next $15,000 cost for covered services. Therefore, someone with a chronic condition like diabetes could have to pay $10,000 annually out of pocket, in addition to the premium.

The current Massachusetts heath care reform, on which President Obama has based his national reform legislation, is not adequate. Massachusetts reform has not ended medical bankruptcies in our state, a finding that strongly suggests that national reform won’t reduce medical bankruptcies nationwide.

While individuals, small businesses and towns struggle to pay for inadequate health care insurance, CEOs of non-profit health insurance companies continue to walk away with obscene amounts of our hard-earned dollars. Blue Cross /Blue Shield’s former chief executive, Cleve L. Killingsworth recently received an $11 million payout, while Blue Cross board members individually received up to $89,000 to rubber stamp Killingsworth’s compensation.

As many states and congressional Republicans look for ways to roll back President Obama’s signature health care law, Vermont is moving in a different direction. During his inaugural address, Governor Peter Shumlin proposed guaranteeing health insurance to all Vermonters, noting that current health care costs “[represent] an enormous hidden tax on families and small businesses across our state. If left untethered, the rising cost of health insurance will cripple us.” Shumlin has proposed the creation of a single-payer system for Vermont in which private delivery of healthcare would continue, but the government would act as everyone’s health insurer.

This “Expanded and Improved Medicare-for-all” option was barred from the national health reform debate by special interest groups. By choosing a single-payer program, Vermonters would divorce health insurance coverage from employment, and eliminate the administrative waste of private insurance companies, including outrageous CEO salaries.

Dr. William Hsiao, an international expert on health care reform at the Harvard School of Public Health, was commissioned by the Vermont Legislature to conduct a study about the best way to provide universal coverage, reduce the rate of cost increases, and create a primary care-focused, integrated delivery system. Hsiao stated, “The system capable of producing the greatest potential savings and achieving universal coverage was a single-payer system — one insurance fund that covers everyone with a standard benefit package, paying uniform rates to all providers through a single payment mechanism and claims-processing system. Our analysis showed that Vermont could quickly save almost 8 percent in health care expenditures through administrative simplification and consolidation, plus another 5 percent by reducing fraud and abuse. . . All told, we estimated that Vermont could save 25 percent in health care expenditures over 10 years.”

In the national health reform debate, Vermont, not Massachusetts, now leads the way.

Susanne L. King, M.D., is a Lenox-based practitioner.

The Economist on the birthday of the Affordable Care Act

Posted by on Wednesday, Mar 23, 2011

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.

A not very happy birthday

The Economist
March 17, 2011

As for costs, Mr Obama’s reforms deserve praise for expanding coverage, but they do this by adding millions of people to an unsupportably expensive system. Analysts estimate that America’s health spending will continue to soar under the reforms. That is a point hotly contested by Mr Obama’s team, who usually point to theoretical future efficiency gains and innovations that will save pots of money.

So it came as a shock when Deval Patrick, the governor of Massachusetts and one of Mr Obama’s closest friends, took a different tack. Asked recently about the pioneering health reforms in his state, which served as a model for the national reforms, he first gave a backhanded compliment to Mitt Romney. Mr Patrick then revealed the dirty little secret of Obamacare: “What these folks did in Massachusetts is frankly the same thing that the Congress did, which is to take on access first, and come to cost-control next.” In other words, America will soon have no choice but to come to grips with costs. Whatever one thinks of Mr Obama’s reforms, there is no denying that they have brought that day of reckoning closer.


The Economist joins the chorus of those who say that “America’s health spending will continue to soar under the reforms.” Many have contended that it was a mistake to have expanded coverage without first controlling costs. The real mistake was not in reversing the order of coverage expansion and cost containment, rather it was in the failure to do both simultaneously through the adoption of a national single payer program.

Health insurers initiating a takeover of health care

Posted by on Monday, Mar 21, 2011

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.

Health Insurers Respond To Reform By Snapping Up Less-Regulated Businesses

By Christopher Weaver
Kaiser Health News
March 19, 2011

Here’s one change few were talking about when the health overhaul law passed: It’s sent insurers – worried the law could stunt profits and growth – looking for new types of business.

Where are they investing? In less-regulated companies that could yield strong profits and make the main business – insurance – more lucrative. The purchases also could increase insurers’ control over more parts of the health system.

Insurers have moved into technology, health-care delivery, physician management, workplace wellness, financial services and overseas ventures in wide-ranging efforts to mitigate the new rules imposed by the law.

The current trend is largely driven by the health law, said Ana Gupte, an analyst with Sanford C. Bernstein & Co.

The newer ventures will not replace the core business of selling health coverage.

“They’re very synergistic with the health-insurance [product],” Gupte said, giving insurers more tools to control medical costs while potentially increasing earnings.

As more people receive insurance under the law, insurers would welcome 15 million new customers, according to the Congressional Budget Office. But the companies worry that the rules requiring most Americans to obtain coverage will prove too weak and allow many to go uncovered, said Robert Zirkelbach, a spokesman for America’s Health Insurance Plans.

That could leave insurers with slim gains, even as they face regulations that could limit profits, prohibit the practice of charging sick people higher rates, and funnel individuals and small businesses into government-created exchanges to buy policies.

“I’ve seen a big trend in getting further down the supply chain towards the point of care,” said Sarah James, an insurance industry analyst at Los Angeles-based Wedbush Securities. “Everybody’s looking to add on staff physicians and clinics” that can help control medical spending.

For instance, OptumHealth, a UnitedHealth subsidiary, has quietly taken control of Memorial Healthcare IPA, a Los Angeles company that manages more than 400 doctors, according to a document filed with the California Secretary of State’s office. OptumHealth declined to discuss details of the deal.

With its recent acquisitions, Humana is dipping its hand directly into patient care, gaining more control over doctors. That’s what makes acquisitions such as Concentra a “two-for-one deal,” Kusserow said. Concentra will continue to generate “great margins” for the company as a stand-alone business, he said, but also will give Humana a workforce of physician gatekeepers controlling access to costly services.

In a sign of Aetna’s interest in future acquisitions, the company hired Charles Saunders, a physician and recent veteran of the private equity firm Warburg Pincus, in January to oversee “strategic diversification.”

Some analysts do not see much of a future for companies that just stick with the business of selling insurance policies.

“If you’re a health plan, you either become a care delivery system or an information services company,” said David Brailer, a former George W. Bush administration health official who now leads an investment firm. “The traditional business is dead.”


One of the claims made by those supporting the health care legislation that placed the private insurers in the drivers seat is that these private firms would be masters at innovation. Well, we are now seeing some of that innovation as they are making their early moves to take over the health care delivery system. It might not be good for our personal finances nor our health, but it is going to give a spectacular boost to Wall Street.

A Medicare lesson for Dick Armey

Posted by on Thursday, Mar 17, 2011

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.

Civil Action No. 08-1715 (RMC)

United States District Court for the District of Columbia

BRIAN HALL, et al. (including Richard Armey), Plaintiffs,
KATHLEEN SEBELIUS, Secretary, Department of Health and Human Services, et al., Defendants.

Plaintiffs are retired Federal employees who have reached age 65 and have applied for, and are receiving, Social Security Retirement benefits. As a result, they are “entitled” to Medicare Part A, coverage. They do not, however, want Medicare coverage. And the only avenue provided to Plaintiffs to un-entitle themselves is to cease receiving Social Security Retirement benefits – and to repay all such benefits already received. Plaintiffs declaim that such a requirement is contrary to the Social Security Act, of which Medicare is a part. The Court concludes that Plaintiffs’ claims are without merit.


Plaintiffs Brian Hall, John Kraus, and Richard Armey share the following characteristics:

• They are retired from Federal employment and have attained the age of 65.
• They applied for, and are receiving, Social Security Retirement benefits.
• They are entitled to benefits under Medicare Part A.
• They had previously been enrolled in health plans under the Federal Employees Health Benefit (FEHB) program and wish to continue that coverage in full.
• They do not want to be covered by Medicare Part A and want to disenroll from Medicare Part A.
• They want to continue receiving their monthly Social Security Retirement benefits.

These facts are all undisputed and, for purposes of resolving this dispute, are the only facts that pertain.

ANALYSIS (excerpts)

Every individual who –

(1) has attained age 65, and
(2)(A) is entitled to monthly insurance benefits under section [42 U.S.C. § 402] of this title . . .

shall be entitled to hospital insurance benefits under part A of title XVIII [of this chapter] for each month for which he meets the condition specified in paragraph (2) . . . .

42 U.S.C. § 426(a). What this means is that an individual who has applied for Social Security Retirement benefits and qualifies to receive such benefits, so that he is “entitled” to Social Security Retirement benefits, automatically becomes “entitled” to Medicare Part A upon his 65th birthday. The only way to avoid entitlement to Medicare Part A at age 65 is to forego the source of that entitlement, i.e. Social Security Retirement benefits. There are but two ways to forego Social Security Retirement benefits: (1) fail to apply even though qualified, see 42 U.S.C. § 402(a) (requiring the filing of an application); or (2) withdraw one’s application and repay all retirement benefits already received, see 20 C.F.R. § 404.640.

Social Security regulations provide a means of avoiding entitlement to monthly Social Security Retirement benefits and thereby also provide a means of avoiding entitlement to Medicare Part A benefits. An individual may withdraw an application for Social Security Retirement benefits after it has been filed by submitting a written request and either repaying “[a]ll benefits already paid” or upon the SSA being “satisfied that they will be repaid.” See 20 C.F.R. § 404.640.3 These regulations are of no assistance to Plaintiffs, however, since they want to avoid Medicare Part A and retain their Social Security Retirement benefits.

There is a “dis-enrollment” possibility, albeit very unattractive, that allows a 65 year-old beneficiary to make himself un-entitled for Medicare Part A by foregoing one of the essential requirements to become entitled to Medicare Part A – receipt of Social Security Retirement benefits.

That Medicare entitlement has very specific consequences for a retired Federal employee: If a Federal retiree who has attained age 65 is “not covered” by Medicare Part A, perhaps because he withdrew his application for Social Security Retirement benefits, his FEHB “plan, other than a prepayment plan described in” 5 U.S.C. § 8903(4), “may not provide benefits . . . to pay a charge imposed by any health care provider, for inpatient hospital services which are covered for purposes of benefit payments” by Medicare Part A, “to the extent that such charge exceeds applicable limitations on hospital charges established for Medicare purposes.” 5 U.S.C. § 8904(b)(1)(A). Thus, even if Plaintiffs were to forego and repay all Social Security Retirement benefits, their FEHB-paid benefits would be no more, and no less, than what Medicare Part A would provide.

Plaintiffs argue that “entitled” to Social Security Retirement benefits does not mean “required to accept” so that “entitled” to Medicare Part A benefits does not mean “required to accept.” While the Plaintiffs’ plain-English reading of the word “entitled” has its attractions, in context the Medicare “entitled” does not actually mean “capable of being rejected.” An individual is “entitled” to Social Security Retirement benefits only after he has worked the requisite quarters, attained age 62 (or more), and filed an application. See 42 U.S.C. § 402. There being no affirmative filing of an application necessary for a Medicare Part A entitlement, it is a different type of entitlement because of its automatic nature. The Medicare Part A entitlement is tied exclusively to the fulfilment of two requirements: (1) receiving Social Security Retirement benefits; and (2) being age 65 – the removal of either having the effect of disestablishing that entitlement.


Plaintiffs are trapped in a government program intended for their benefit. They disagree and wish to escape. The Court can find no loophole or requirement that the Secretary provide such a pathway. Defendants’ Motion for Summary Judgment [Dkt. # 42], which was previously denied without prejudice, is reconsidered and will be granted and Plaintiffs’ Motion for Summary Judgment [Dkt. # 51] will be denied. A memorializing Order accompanies this Memorandum Opinion.

Date: March 16, 2011

United States District Judge


Although this looks like another cute trick that Dick Armey tried to pull off, it is much more serious than that. This is a another blatant effort to try to destroy Medicare as a social insurance program to which all people over 65 who are receiving Social Security benefits are entitled.

This was not a broad anti-government stance. Medicare was targeted specifically. In this civil action, the plaintiffs wanted to specify that they had the right to reject Part A of Medicare, but they weren’t rejecting government programs in general because, in the same civil action, they wanted to keep their Social Security benefits, and they wanted to keep their government-sponsored federal employee retirement health benefits program (as their primary coverage and not secondary to Medicare).

When Medicare was enacted, a decision was mode to be certain that absolutely everyone over 65 on Social Security would be enrolled in Part A – the hospital component. Enrollment would be totally automatic, so much so that an individual could refuse enrollment only by refusing Social Security benefits and refunding to the government any payments already made.

What Dick Armey was trying to do was to establish the principle that individuals could decline Medicare completely and choose a private option (though in this case his private option was a government-sponsored private plan). This would be another step beyond merely selecting a private Medicare Advantage plan, still subject to Medicare regulations. This would totally divorce private plans from Medicare. The intent of the conservatives all along has been to move Medicare patients into private plans and then destroy Medicare by drastically underfunding it (and “drowning it in a bathtub”).

One of the most fundamental principles of the single payer model is that absolutely everyone is automatically enrolled. Opting out is not an option for anyone. People would still have the freedom to not use the health care system, but they couldn’t opt out of enrollment any more than pacifists like me can opt out of paying for our wars.

The conservatives and libertarians oppose single payer, and they fear that Medicare will be improved and then provided to everyone, as a single payer system. They will not stop in their efforts to shred Medicare into tatters, and walk away with their affluent friends to obtain their boutique health care on their own, leaving the rest of us to fend for ourselves – as if “personal responsibility” could buy a ticket to health care.

Let’s fool them. Let’s fix Medicare and then enroll absolutely everyone – automatically!

Lowering mortality by adding more diagnoses (a game)

Posted by on Wednesday, Mar 16, 2011

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.

Geographic Variation in Diagnosis Frequency and Risk of Death Among Medicare Beneficiaries

By H. Gilbert Welch, MD, MPH, Sandra M. Sharp, SM, Dan J. Gottlieb, MS, Jonathan S. Skinner, PhD, John E. Wennberg, MD, MPH
March 16, 2011

Context: Because diagnosis is typically thought of as purely a patient attribute, it is considered a critical factor in risk-adjustment policies designed to reward efficient and high-quality care.

Objective: To determine the association between frequency of diagnoses for chronic conditions in geographic areas and case-fatality rate among Medicare beneficiaries.

Design, Setting, and Participants: Cross-sectional analysis of the mean number of 9 serious chronic conditions (cancer, chronic obstructive pulmonary disease, coronary artery disease, congestive heart failure, peripheral artery disease, severe liver disease, diabetes with end-organ disease, chronic renal failure, and dementia) diagnosed in 306 hospital referral regions (HRRs) in the United States; HRRs were divided into quintiles of diagnosis frequency. Participants were 5 153 877 fee-for-service Medicare beneficiaries in 2007.

Main Outcome Measures: Age/sex/race–adjusted case-fatality rates.

Results: Diagnosis frequency ranged across HRRs from 0.58 chronic conditions in Grand Junction, Colorado, to 1.23 in Miami, Florida (mean, 0.90 [95% confidence interval {CI}, 0.89-0.91]; median, 0.87 [interquartile range, 0.80-0.96]). The number of conditions diagnosed was related to risk of death: among patients diagnosed with 0, 1, 2, and 3 conditions the case-fatality rate was 16, 45, 93, and 154 per 1000, respectively. As regional diagnosis frequency increased, however, the case fatality associated with a chronic condition became progressively less. Among patients diagnosed with 1 condition, the case-fatality rate decreased in a stepwise fashion across quintiles of diagnosis frequency, from 51 per 1000 in the lowest quintile to 38 per 1000 in the highest quintile (relative rate, 0.74 [95% CI, 0.72-0.76]). For patients diagnosed with 3 conditions, the corresponding case-fatality rates were 168 and 137 per 1000 (relative rate, 0.81 [95% CI, 0.79-0.84]).

Conclusion: Among fee-for-service Medicare beneficiaries, there is an inverse relationship between the regional frequency of diagnoses and the case-fatality rate for chronic conditions.


This study from the Dartmouth Institute confirms the intuitive observation that the number of diagnoses of serious chronic conditions in Medicare beneficiaries has a positive correlation with case-fatality rates. The greater number of serious problems a person has, the greater the risk of death. But observation of the regional distribution of these serious diagnoses provides troubling results.

In this study, hospital referral regions varied in the average number of diagnoses per patient of these serious chronic conditions. There is an inverse relationship between the regional frequency of diagnoses and the case-fatality rate. As an example, if you had multiple serious diagnoses, your chances of dying are less if your diagnoses were made in a region where more people have a greater number of diagnoses than if the same diagnoses were made in a region where not as many people received multiple diagnoses.

The authors discuss possible explanations, but I’ll go out on a limb, and a very solid one at that, and give my opinion.  Assigning a greater number of serious diagnoses to a patient permits greater remuneration from upcoding, and it provides rewards for favorable quality and outcomes results since the patient is not as ill as the list of diagnoses would otherwise imply.

It is very difficult to differentiate a list of well documented diagnoses from an embellished list that may include some poorly substantiated notations in the record allegedly supporting the diagnoses. It would be very difficult to ferret out the claims that do not warrant additional consideration based on complexity or quality outcomes.

Reform was supposed to bring us higher quality at a lower cost, but it appears that continued gaming of the system will bring us higher costs with spurious results on quality and outcome assessments.

Much more work needs to be done before we could rely on these observations to improve quality and reduce costs. In the meantime, we could certainly tackle the issue of costs head on by the well proven method of enacting a single payer national health program. Quality and efficiency will be a continual work in progress.

Employer-sponsored health plans under the Affordable Care Act

Posted by on Tuesday, Mar 15, 2011

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.

Health Policy Brief: Employers and Health Care Reform

Health Affairs/Robert Wood Johnson Foundation
March 9, 2011

To expand access and strengthen the employment-based health system, the Affordable Care Act of 2010 will require midsize and large companies to make payments to the federal government if they do not offer health insurance to their employees and dependents starting in 2014.

What’s in the law?

Under the Affordable Care Act, beginning in 2014 employers with at least 50 full-time employees (or equivalent full- and part-time workers) will have to provide “qualified” health insurance coverage to their full-time employees and their dependents. Qualified coverage means that plans are comprehensive (pay at least 60 percent of health care expenses) and affordable (cost less than 9.5 percent of employees’ household incomes).

If employers don’t offer qualified coverage, and if their employees purchase coverage instead through a new state insurance exchange with the assistance of federal subsidies, companies will have to make an “assessable payment” of up to $2,000 for every full-time employee beyond the first 30 employees. The amount of the assessment will be adjusted annually to reflect the growth in national insurance premium costs.

If employers do offer coverage, but the coverage does not meet certain parameters, they may still have to pay assessments. First, employers will be assessed if a plan is judged not to be comprehensive. This means the coverage must have an “actuarial value” of at least 60 percent. In other words, the employer pays on average at least 60 percent of health care expenses and the employee pays on average 40 percent of these expenses through deductibles and copayments.

Second, employers will be assessed if the employees’ premiums are considered unaffordable relative to their household incomes. Specifically, the employee’s share of the premium must not exceed 9.5 percent of his or her annual household income.

Starting in 2014, if either of these two conditions is not met, the employer must pay a $3,000 annual assessment for each employee who declines his or her employment-based insurance and obtains government-subsidized coverage through an exchange.

Small businesses with fewer than 50 full-time employees (or equivalent full- and part-time workers) don’t have to meet the requirement and are exempt from having to offer health insurance.

Many companies face payments:

A study by the Mercer consulting firm found that 38 percent of US employers may face paying assessments starting in 2014, because their coverage might not be considered affordable for at least some of their employees.

“Free-choice vouchers”:

Employees who earn less than four times the federal poverty level (in 2011, $43,560 for an individual and $89,400 for a family of four) and whose share of the premium is between 8 percent and 9.5 percent of his or her household income, can choose to enroll in an exchange instead of the employer plan. The employer must issue the employee a “free-choice voucher” equal to the amount the employer would have paid under the employer’s plan.

Tax on high-value health plans:

Beginning in 2018, “Cadillac” or high-value health plans will be subject to a 40 percent excise tax on premium amounts exceeding $10,200 for single coverage and $27,500 for families.

What’s the likely impact?

The Congressional Budget Office (CBO) and the Joint Committee on Taxation estimated that provisions of the Affordable Care Act, including the employer requirement, will result in 3 million fewer people having employer-provided coverage in 2019. This would be the net result of a series of big changes.

First, the CBO estimates that 6–7 million people would acquire employer coverage for the first time because the requirement would increase workers’ demand for coverage through their jobs. Second, another 1–2 million who currently have employment-based coverage would instead move to the exchanges because the coverage would be more affordable. Third, about 8–9 million others covered under an employer plan under current law would lose employer coverage because firms would choose to no longer offer coverage. These firms are likely to be smaller companies employing lower-wage workers who would be eligible for exchange subsidies.

In addition, according to the CBO, employers will pay about $52 billion in additional assessments between 2014 and 2019. Under the law, that money will be put toward the new subsidies for millions of workers and their families to defray the cost of purchasing health coverage through the exchanges.

“Pay and walk away”:

Among companies of all sizes currently offering benefits, 76 percent reported they would continue to do so in January 2014. Of the rest, 15 percent reported they would offer coverage to at least some full-time employees, and 9 percent said they would stop offering coverage altogether. Among firms with 200 or more full- and part-time equivalent employees, 7 percent planned to drop coverage. “For some large firms, in particular, there is a desire to pay and walk away,” said Susan McIntyre, senior vice president of Market Strategies International’s health care division, in a statement.

Tempted to drop coverage:

The math could make the idea to drop coverage tempting. In 2010, the average annual premium cost for employer-based coverage was $5,049 for a single person and $13,770 for a family, although employers generally do not pay the entire cost. Many employers might consider paying $2,000 or $3,000 in assessments to be more cost-effective. On the other hand, many large employers say they view offering health coverage to be an important part of their overall compensation strategy, and necessary to attract the best workers.

It is possible that employers will watch closely to see how their peer companies respond. In a July 2010 survey by Fidelity Investments, 65 percent of large employers said they were not seriously considering eliminating health care benefits because of the new law. But when asked what they would do if others dropped coverage, 36 percent said they too would consider eliminating coverage. Another 36 percent said they would not drop coverage and the remaining employers were unsure.


What will happen to employer-sponsored coverage under the Affordable Care Act? Perhaps one of the most alarming provisions of the Act is that plans with a 60 percent actuarial value (patients pay an average of 40 percent of their health care bills) qualify to fulfill the employers’ obligations to provide coverage or pay an assessment. Thus the Act is establishing under-insurance as the new standard.

Premiums on more generous plans are approaching a level that will trigger a a 40 percent excise tax. One way to avoid that tax would be to reduce the actuarial value of the plans to the minimum requirement. With employers’ aversion to taxes, many will surely consider that.

With these low actuarial value plans, employees will surely complain about the high out-of-pocket costs they will face when they need health care. Since employers won’t want to make their employees unhappy, they will be motivated to drop their plans altogether and pay the much lower assessments required by the Act. We already know that most employers may not want to lead on this, but a great many will certainly follow once a few do it, and they have said so.

It is frequently stated that employers will want to continue to offer plans in order to attract more qualified employees, but this argument seems rather disingenuous. Employers now have an out.

When employers drop their health plans, there is no assessment on the first 30 employees, and then only $2000 for each beyond the 30. Employers can use some of the savings for pay raises, and then the employees, most of whom will be eligible for government subsidies, can select their own plans in the exchanges. Why would employers use health plans as an enticement – plans that are otherwise readily available in the exchanges – when they can use higher wages to compete in the labor markets?

Our experience shows that plans with low actuarial values – usually high-deductible plans – still frequently have premiums that are unaffordable for many. Combining unaffordable premiums with low actuarial values, it won’t be long before middle-income Americans realize that the private insurers have foisted off on us a highly defective product: UNAFFORDABLE UNDER-INSURANCE. You go broke if you buy it, and you go broke if you need to use it!

Single payer, anyone?

Physicians and patients want greater compensation for moving to coordinated care

Posted by on Monday, Mar 14, 2011

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.

Swiss Experiment Shows Physicians, Consumers Want Significant Compensation To Embrace Coordinated Care

By Peter Zweifel
Health Affairs
March 2011

Policy makers in several industrial countries are seeking to limit the rise in health care cost growth by supporting coordinated or integrated care programs, which differ from most prevailing forms of medical organization in how physicians are paid and how they work in groups. However, as long as fee-for-service payment systems remain an option, general practitioners will be reluctant to embrace coordinated care because it would give them less autonomy in how they practice. A study in Switzerland indicates that general practitioners will require a pay increase of up to 40 percent before they are willing to accept coordinated care, and a similar study found that Swiss consumers wanted a substantial reduction in premiums to accept it. These findings suggest that provisions of US health care reform designed to encourage the growth of coordinated care — such as accountable care organizations and medical homes — may face a challenging future.


This Swiss discrete choice experiment, evaluating willingness to pay, indicates that both physicians and patients want greater compensation if they are to shift from the traditional fee-for-service arrangement to a coordinated care program.

Although HHS has not yet released the proposed rules for accountable care organizations, they will be coordinated care entities. The release of the regulations has been delayed because of internal disagreements. The question is, will accountable care organizations be such a turnoff that physicians and patients will want to be compensated if they have little choice but to participate in them?

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