What about the insurance subsidies?

Posted by on Monday, Jun 25, 2012

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 Reform Subsidy Calculator

Kaiser Family Foundation

Based on the Patient Protection and Affordable Care Act (including subsequent amendments in the Health Care and Education Reconciliation Act of 2010), as signed by the President.

The premiums are illustrative examples in 2014 dollars derived from estimates of average premiums for 2016 from the Congressional Budget Office.

Premium subsidies are based on a silver plan (with an actuarial value of 70%), so all premiums shown are for silver coverage. People may be able to pay a lower premium for less comprehensive coverage (i.e., a bronze plan, with an actuarial value of 60%). The tables showing results by age and income also reflect premiums for silver coverage, though the minimum insurance that people would be required to obtain would be bronze coverage.

The actual premium calculated is adjusted for family type, and for age (within the three to one limit specified in the proposal). Subsidized people can enroll in more expensive plans, but must pay the full difference in the premium.

Health Reform Subsidy Calculator:
http://healthreform.kff.org/SubsidyCalculator.aspx#incomeAgeTables

On June 28, the Supreme Court will release its ruling on the constitutionality of the Affordable Care Act. If the full Act is repealed, individuals who would have purchased plans in the state insurance exchanges will receive neither their premium subsidies nor their tax credits for out-of-pocket expenses. What precisely would they be losing?

Let’s use the Health Reform Subsidy Calculator to check a few examples. In each example, we will assume that the policyholder is 45, has a family of four, and does not have employer coverage available. For this family living in a region with a medium cost factor, the predicted premium for the silver plan (70% actuarial value) is $14,245. In the examples, we will change only the income level.

Income:  $31,155 (133% of poverty)
Premium payment:  None – covered by Medicaid
Maximum out-of-pocket costs:  None – covered by Medicaid

Income:  $31,156 (133% of poverty plus $1)
Premium payment:  $935
Maximum out-of-pocket costs:  $4,167

Note that at this level, one additional dollar of income results in the family losing the more comprehensive benefits of the Medicaid program, and mandates that they pay a premium of $935 plus potential out-of-pocket expenses of $4,167, for a total exposure of $5,202. That’s a staggering amount at this income level. Compliance surely would be a problem, not by lack of will but simply by inability to pay.

Income:  $93,700 (400% of poverty)
Premium payment:  $8,901
Maximum out-of-pocket costs:  $8,333

Income:  $93,701 (400% of poverty plus $1)
Premium payment:  $14,245
Maximum out-of-pocket costs:  $12,500

So at an income of $93,700, the premium would be $8,901 and the potential out-of-pocket costs would be $8,333, for a total exposure of $17,234. That is quite a dent for a family that is trying to save for two college educations, a retirement fund, and maybe for replacement of the broken-down family automobile. But add just one more dollar of income and the premium shoots up to $14,245 and potential out-of-pocket expenses to $12,500, for a total of $26,745. Then what are you going to cut out of the family budget? And isn’t the $9,511 increase quite a “tax” to pay on that one dollar of additional income?

Just the premium increase alone might cause this family to downgrade their coverage from silver (70% actuarial value) to bronze (60%) in order to save on the premium. If so, this family literally would be placing a bet that none of them would develop a serious medical problem, and it would lose the bet if any of them did so. Should we really be forcing a family to gamble on its health care coverage?

If the Affordable Care Act is repealed, all of this goes away, and many more would remain with no coverage at all. That would be tragic. But even if the Act is upheld, this coverage is still far from satisfactory, and should be unacceptable as a standard for our nation. Regardless of the Supreme Court decision, we should replace the Affordable Care Act with a program that really does work: a single payer, improved Medicare for all.

Innovation leader – Medicare or private insurance?

Posted by on Friday, Jun 22, 2012

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.

How Medicare Solves Private Plans’ Problems and Vice Versa

By Austin Frakt, PhD
JAMA Forum, June 21, 2012

In a new article in the Annual Review of Economics, Katherine Baicker, Amitabh Chandra, and Jon Skinner point out some of the ways Medicare has helped solve a coordination problem among private plans:

“It is natural to ask why private providers have not adopted ACOs [Accountable Care Organizations, groups that give coordinated health care and for whom payment is tied to achieving health care quality outcomes and goals that can lead to cost savings] or more bundled payments on their own. This remains a puzzle. One explanation is that it is a coordination problem—all insurers may want to adopt larger bundled payments, but no single insurer can make the transition. This is certainly consistent with the historical record on the adoption of prospective payment for hospital care. Once it was introduced in Medicare, private plans were quick to adopt it. Similarly, private hospitals were quick to use the federal government’s efforts to measure quality of care even though nothing stopped them from forming consortiums to measure quality before these federal efforts.”

Their points are generally valid in that it’s common for private plans to adopt certain types of payment reforms and quality monitoring after these measures are introduced in Medicare but not before. Nevertheless, there are some examples of ACO-like contracts made by private plans ahead of the Medicare counterparts. And that doesn’t count the failed attempts at capitation (establishing a dollar amount to cover the cost of health care services provided for an individual during a specified length of time) by private insurers and provider groups in the 1990s. I don’t think this invalidates the general point the authors make. It seems Medicare has solved a coordination problem among private insurers.

Indeed, some of the things Medicare will do are properly viewed as public goods. All but a handful of large, dominant health plans cannot convince large hospital systems to accept a new form of payment system. But Medicare can. What health plan will do its own comparative effectiveness analysis to determine which interventions work best for managing a condition? Medicare will or could. The results of both of these types of innovations, and others, will be public information and can benefit all plans and all consumers.

History shows that Medicare has done some things private plans seem unable to do, and then private plans voluntarily copy Medicare. But it goes the other way too.

For example, private plans have innovated in ways that traditional Medicare has not. Managed care, consumer-directed health plans, prescription drug benefits, and catastrophic coverage all exist or existed in the commercial market before adoption by Medicare (if ever). In some cases, the Medicare program, though not the traditional fee-for-service arm of Medicare itself, followed private plans’ lead, adding managed care plans (Medicare Advantage) and a prescription drug benefit (Part D), for example.

There does seem to be a coordination problem among private plans that Medicare solves. Likewise, the private sector sometimes does a better job of designing health plan options. That both plan types, private and government, play a worthwhile role needn’t be shocking or blasphemous. The fact that they both play worthwhile roles ought to be widely acknowledged. Naturally, it often isn’t—least of all, it seems, in our politically charged health policy debates.

http://newsatjama.jama.com/2012/06/21/jama-forum-how-medicare-solves-private-plans-problems-and-vice-versa/

Austin Frakt makes the point that both Medicare and the private health insurers have each independently introduced innovations that then can help the other when these innovations are shared. But when you look at the respective innovations, it becomes obvious which innovator it is that truly serves the interests of patients.

Medicare attempts to create greater value when using taxpayer and premium dollars for the payment of health care services. Thus you see innovations such as the adoption of prospective payment for hospital care. We benefit both as taxpayers and as patients.

Look at the innovations of private insurers that Frakt mentions: managed care, consumer-directed health plans, and prescription drug benefit plans. These designs take away choice of health care professionals and institutions, choice of drug benefits, and also erect financial barriers between the patient and health care. Here the process of innovation is not used to benefit patients, but rather is designed to enhance the business model of the intermediary intruder – the private insurance plans.

Frakt points out that these private innovations are being used by Medicare in the private Medicare Advantage plans and in the private Part D Medicare drug benefit. True, but these are terrible innovations to introduce into Medicare because they waste funds and reduce choice while increasing administrative complexity. Medicare’s adoption of private innovations has been a bad thing, not a good thing.

Coordinated care is certainly beneficial and should be expected regardless of whether Medicare or private insurers are paying the bills. There may be instances where bundling of payment would be appropriate, just as capitation has been appropriate in selected circumstances. If it benefits both taxpayers and patients, it would be appropriate. The risk is that the business mind of the private insurers will most likely morph accountable care organizations into intermediary intruders designed to benefit third party payers, likely at a cost to patients. That is not a desirable innovation.

Frakt does make the important point that Medicare does not provide catastrophic coverage, whereas some private plans do. Medicare certainly should as well. But that’s not really a private plan innovation; it’s merely a benefit that should have been included in Medicare in the first place. That is one more reason why we advocate for an improved Medicare for all, rather than merely for a universal expansion of the existing Medicare program.

Government can do it. In fact, it is leading on the catastrophic coverage benefit by making it a requirement through the Affordable Care Act. Innovation in the private sector benefits the private sector. Innovation in the government serves the public interest. Trading public and private innovation is not in our interest when we come out the losers.

Update on deaths from being uninsured

Posted by on Thursday, Jun 21, 2012

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.

Dying for Coverage: The Deadly Consequences of Being Uninsured

Families USA
June 2012

Key Findings

* Across the nation, 26,100 people between the ages of 25 and 64 died prematurely due to a lack of health coverage in 2010.

* Between 2005 and 2010, the number of people who died prematurely each year due to a lack of health coverage rose from 20,350 to 26,100.

* Between 2005 and 2010, the total number of people who died prematurely due to a lack of health coverage was 134,120.

Why Insurance Matters

* The uninsured are less likely to have a usual source of care outside of the emergency room.

* The uninsured often go without screenings and preventive care.

* The uninsured often delay or forgo needed medical care.

* Uninsured Americans are sicker and die earlier than those who have insurance.

* The uninsured pay more for medical care.

http://familiesusa2.org/assets/pdfs/Dying-for-Coverage.pdf

In 2010, about 26,000 of the nearly 50 million people without health insurance died due to the lack of that insurance. At best, about 26 million people will remain uninsured if the Affordable Care act is upheld by the Supreme Court. That means that we will continue to accept about 13,000 deaths per year as a consequence of our failure to enact a single payer national health program.

It is one thing to accept inordinate financial waste in our system in order to cater to the private insurance industry, but it is quite another to accept so much suffering and death. The former reflects on our illogical willingness to accept social injustices in order to cater to the moneyed class, but to knowingly accept the latter reflects on the most basic moral fiber of our society.

Is it that people don’t understand? Or are we really that animalistic?

Addendum:

Today’s Quote of the Day used updated numbers from Families USA on the number of deaths that result from being uninsured. Their numbers were based on the 2002 methodology of the Institute of Medicine.
However, under “Methodology,” the Families USA report states, “A study published by Harvard Medical School researchers late in 2009 that used more recent data found that the lack of health insurance now raises mortality rates by 40 percent. If we had applied the latter estimate of the impact of uninsurance on mortality, rather than the 25 percent figure used by the IOM, our mortality estimates would have increased substantially.”
The numbers are worse than those reported earlier today. Rather than zeroing in on sterile recalculations, let’s think about the real people whose lives are lost and what we need to do to prevent that in the future.
The Harvard study, authored by co-founders of PNHP and their colleagues:

NHIS report on insurance coverage

Posted by on Wednesday, Jun 20, 2012

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 Insurance Coverage: Early Release of Estimates From the National Health Interview Survey, 2011

By Robin A. Cohen, Ph.D., and Michael E. Martinez, M.P.H., M.H.S.A.
CDC, Division of Health Interview Statistics, National Center for Health Statistics
June 2012

The Centers for Disease Control and Prevention’s (CDC) National Center for Health Statistics (NCHS) is releasing selected estimates of health insurance coverage for the civilian noninstitutionalized U.S. population based on data from the 2011 National Health Interview Survey (NHIS).

* In 2011, 46.3 million persons of all ages (15.1%) were uninsured at the time of interview, 58.7 million (19.2%) had been uninsured for at least part of the year prior to interview, and 34.2 million (11.2%) had been uninsured for more than a year at the time of interview.

* In 2011, the percentage of children under age 18 years who were uninsured at the time of interview was 7.0%.

* Among adults aged 19–25, the percentage uninsured at the time of interview decreased from 33.9% (10 million persons) in 2010 to 27.9% (8.4 million) in 2011.

* Among adults aged 19–25, 56.2% were covered by a private plan in 2011, an increase from 2010 (51.0%).

Estimates of enrollment in HDHPs and CDHPs

Based on data from the 2011 NHIS, 29.0% of persons under age 65 with private health insurance were enrolled in an HDHP (high-deductible health plan), including 9.2% who were enrolled in a CDHP (consumer-directed health plan) and 19.9% who were enrolled in an HDHP without a health savings account (HSA). Enrollment in HDHPs increased from 25.3% in 2010 to 29.0% in 2011. There was a significant increase in enrollment in HDHPs without HSAs, and in CDHPs, between 2007 (when NHIS started collecting this information) and 2011.

Based on data from 2011, among persons under age 65 with private health insurance, 26.9% with employment-based coverage were enrolled in an HDHP, compared with 52.4% of those with a private plan that was directly purchased or obtained through means other than employment. The percentage of persons covered by employment-based private plans who were enrolled in HDHPs increased from 15.6% in 2007 to 26.9% in 2011. The percentage of persons covered by directly purchased private health plans who were enrolled in HDHPs increased from 39.2% in 2007 to 52.4% in 2011.

Insurance coverage by poverty status

The percentage of poor children who were uninsured at the time of interview decreased from 1997 through 2011. During the same period, the percentage of poor adults who were uninsured remained relatively stable.

Among children, all poverty status groups experienced an increase in public coverage between 1997 and 2011. However, the largest increase was seen among near poor children, for whom coverage by a public plan increased by 36.5 percentage points during the same period.

The rate of private coverage among near poor children was 25.1 percentage points lower in 2011 than in 1997. Among near poor children the percentage without health insurance and the percentage with private health insurance coverage have declined since 1997, while public coverage has increased. Private coverage generally decreased among near poor adults aged 18–64, from 52.6% in 1997 to 35.4% in 2011, so that the uninsured rate is now higher than the private coverage rate for this population. Private coverage among not poor adults aged 18–64 generally decreased from 1997 through 2011.

http://www.cdc.gov/nchs/data/nhis/earlyrelease/insur201206.pdf

The good news is that the percentage of individuals uninsured at the time of the National Health Interview Survey declined from 16.0% in 2010 to 15.1% in 2011. The improvements were primarily due to an increase in enrollment of children in public programs, and an increase in enrollment of young adults in their parents’ private insurance plans.

If the Affordable Care Act is upheld, we can anticipate a further increase in enrollment in Medicaid. If not, at least public coverage for low-income children should be maintained.

The more alarming news in this report is the increase in high-deductible health plans, both those acquired through employment and especially those purchased in the individual market. The increase in private coverage made possible through the establishment of state insurance exchanges will be in lower-actuarial value plans – primarily high-deductible plans. Also employers are expected to shift more of their plans to high-deductible coverage.

High-deductible plans equate with underinsurance. These plans leave people with health care needs vulnerable to financial barriers to care. With this report, once again we see that underinsurance is becoming the new standard in America. That wouldn’t occur if we were to adopt an improved Medicare for all.

Health reform skewed by profiteers and the Supreme Court

Posted by on Wednesday, Jun 20, 2012

By George Pauk, M.D.

The Affordable Care Act, whose fate currently rests in the hands of the Supreme Court, has been characterized by some politicians as a major health reform. In fact, the law represents only a small increment of change. From a system standpoint, it hardly rocks the boat. It keeps for-profit health care corporations in the driver’s seat.

The ACA was carefully crafted to avoid upsetting the “gorilla in the room” – the private insurance industry – and was largely tailored to benefit that industry, particularly by facilitating the expansion of its customer base by at least 16 million people and lavishing it with over $447 billion of taxpayer money.

The last major health reform worthy of the name was the 1965 enactment of Medicare, a publicly funded program that has sharply reduced poverty, relieved suffering and saved countless lives. The ACA’s impact, if it is upheld by the court, will be much more modest by comparison. The main reason why: it leaves our population firmly in the grip of the avaricious private insurers with a class and employment based and fragmented system.

The arguments over the ACA at the Supreme Court last March were illuminating. Did you hear the justices, lawyers, and politicians on both sides of the law opining with authority about our health care? Wow, they seem to really think they know their pathology, epidemiology, pharmacology and health care “system-ology.”

I remember wondering at the time if I should ask Chief Justice Roberts for advice about my gall bladder or just how much broccoli I should eat.

Unfortunately, Congress and the White House have succumbed to the blandishments of the medical-industrial complex. They’ve become captives to corporate lobbyists and big campaign donors. As a result, they’ve spurned the voices of those most qualified to speak about health care: our nation’s patients and the health professionals who care for them.

Most on-the-ground health care providers (including physicians, nurses, social workers and therapists) believe that private insurance companies represent unnecessary, profit-seeking middlemen who should be replaced by a single-payer, publicly financed program providing truly universal, comprehensive care: i.e. an improved Medicare for All.

A peer-reviewed survey in the Annals of Internal Medicine in 2008 showed 59 percent of U.S. physicians now support government legislation to establish national health insurance, a jump of 10 percentage points from just five years before.

Polls, surveys and “citizen juries” have consistently shown that two-thirds of the public agrees with the idea of improving the Medicare program and expanding it to cover every person in the United States from birth to death. Just drop two words, “over sixty-five”.

The main obstacle to achieving this commonsense goal (and the main factor causing the deterioration of health in the United States today) has been the corporate takeover of health care and the for-profit health industry’s political lobbying.

Corporate lawyers, politicians, and business people have run us through a dizzying spin of HMOs, PPOs and the latest fad, ACOs, and through other so-called reforms with the goal of establishing privatized, corporate profit centers.

Today, it is more or less accepted as a given that health care CEOs “earn” yearly rewards in the tens of million dollars for making profits off the sickness of our patients. Unfortunately, the remaining nonprofits have adopted many for-profit practices.

Yet it is clear that the private insurers’ brutal denial and delays in authorizing care result in enormous human suffering and the premature death of many thousands each year.

The insurance industry is not like a physician or nurse, whose goal is to provide good care for a patient. The insurers know they will be rewarded by allowing less care, or by denying care. Such denials boost the insurers’ bottom line. Ethics goes out the window in this callous calculation. Cost control of health care is also not in the interest of business simply because larger volumes of funds provides larger profits.

We now await the Supreme Court ruling. The court, which has generally favored corporate interests, may rule to uphold the law or to strike it down, in whole or in part. In either case, we’ll still end up saddled with the greedy private insurers.

We can’t go on like this. It’s immoral and economically unsustainable. Whatever the court’s ruling is, our nation needs to immediately move to enact true reform: a single-payer system, otherwise known as an improved Medicare for all.

Dr. George Pauk lives in Phoenix, where he practiced internal medicine and endocrinology until his recent retirement. He is a member of Physicians for a National Health Program (www.pnhp.org).

Massachusetts model fails to provide financial security for the sick

Posted by on Monday, Jun 18, 2012

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.

SICK IN MASSACHUSETTS: Views on Health Care Costs and Quality

Harvard School of Public Health/WBUR/Blue Cross Blue Shield of Massachusetts Foundation/Robert Wood Johnson Foundation
June 2012

This poll examines the views of sick adults in Massachusetts regarding the cost and quality of health care in the state as well as their perceptions about their own health care in the past year. “Sick” adults in Massachusetts (27% of adults) are defined as those who said they had a serious illness, medical condition, injury, or disability requiring a lot of medical care or had been hospitalized overnight in the previous 12 months. Focusing on the experiences and opinions of those who have had significant recent medical care yields special insight into the current problems and opportunities facing Massachusetts’ health care system.

Today most sick adults in Massachusetts see the cost of health care as a serious problem for the state, and they view the problem as having gotten worse over the past five years. Sick adults are more troubled by costs than they are by quality.

Although Massachusetts has nearly universal health insurance coverage, the costs of health care are a serious financial problem for many sick adults and their families. Some sick adults report having been refused medical care for financial or insurance reasons. Additionally, some sick adults say they did not get needed medial care because they could not afford it. Taken together, these finding suggest that insurance coverage does not protect some Massachusetts residents against the financial hardships of illness, likely reflecting recent trends in higher deductibles and co-payments.

http://www.scribd.com/doc/96682782/Sick-in-Massachusetts

This survey is particularly important because it provides the real life health care financing experiences of patients who have serious medical problems – precisely those for whom the system should be designed to serve.

In Massachusetts, “Forty percent of sick adults in the state said the out-of-pocket costs of medical care are a ‘very serious’ (16%) or ‘somewhat serious’ (24%) problem for them.” Obviously the financing system is not serving well those individuals with major medical needs.

Another significant finding: “About a quarter of sick adults (24%) who have been insured at any time during the past year say they have had a problem with their insurance paying a hospital, doctor, or other health care provider in the past 12 months.” Thus the insurers are not doing their job either.

Since the Affordable Care Act uses a financing design similar to that of Massachusetts, we can anticipate the same miserable performance for the nation, or more likely even worse because of other design flaws in ACA.

At a minimum, we should expect the health care financing system to work well for those with serious problems. The ACA design won’t cut it. We really do need a single payer national health program that would work well for all of us.

Small businesses support beneficial health reform policies

Posted by on Friday, Jun 15, 2012

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.

Small Business Owners’ Views on Implementing the Affordable Care Act

Small Business Majority
June 14, 2012

Executive Summary

The rising cost of health insurance has been and continues to be one of the biggest problems facing American small business owners. To help relieve them of that financial burden, the Affordable Care Act was signed into law on March 23, 2010—a piece of legislation that is already reining in Americans’ health coverage costs. More than two years later, the law’s fate rests in the hands of nine Supreme Court justices who are expected to issue their decision this month in the case against the law. According to scientific opinion polling, only one-third of small business owners would like to see them overturn it. On the other hand, half would like to see it upheld with, at most, only minor changes. This support grows after learning more details about its key provisions.

The poll, conducted in eight states with diverse political profiles—Florida, Illinois, Louisiana, Michigan, Missouri, New York, Texas and Virginia—found that once small business owners hear more about the healthcare law, their support for keeping it intact—either as is or with minor changes—rises to a 56% majority, while the desire for repeal falls to 28%—a 2:1 margin. Moreover, entrepreneurs strongly support many of its key provisions affecting small business owners.

One of the law’s crucial components, which has tremendous small business support, is the health insurance exchange—an online marketplace where small business owners will be able to pool their buying power when they purchase coverage. By a striking 8:1 ratio, owners say they would use their state exchange or at least consider using it, compared to those who say they would not consider using it when they provide benefits. The majority of entrepreneurs find possible features of the exchange very appealing, and, by a 2:1 ratio, they support their state applying for federal funds to set one up.

Furthermore, half of entrepreneurs report they’d be more likely to purchase insurance through the exchange beginning in 2014 when the small business tax credit will be available only to those using the exchange. That’s more than three times the number (14%) who say they’d be less likely to purchase from the exchange. Of respondents who fall into the basic qualification parameters for the tax credit, more than half are already taking advantage of it. Of eligible employers who aren’t claiming it, nearly half say it’s because they are not aware it exists. And nearly half of entrepreneurs say that if their company qualified for the credit, they would be more likely to provide or continue providing healthcare to their employees.

Significant majorities of small business owners also support nearly all the other provisions we asked them about: medical loss ratio, rate review, pre-existing condition exclusion bans, eliminating annual dollar limits on insurance benefits, preventing rating based on health status or sex and more.

Finally the poll revealed a strong interest (67%) in workplace wellness programs, if these programs would help lower coverage costs.

http://www.smallbusinessmajority.org/small-business-research/downloads/Small_Business_Owners_Views_on_ACA.pdf

Rather than asking about a broad spectrum of health reform policies, this poll was limited to questions about policies contained in the Affordable Care Act. From this poll no conclusions can be drawn about opinions of policies specific to single payer, but we can conclude that small business owners clearly do want reform that serves them and their employees better than the status quo in health care.

It remains our task to inform them that the policies of the single payer model will serve them far better than the meager policies of the Affordable Care Act. The majority of small business owners would support an improved Medicare for all if they had a clear understanding of the policies behind it, since it’s far better for them than ACA.

Let’s get to work and let them know the possibilities.

Artificially creating dysfunctional competition through limited-network plans

Posted by on Thursday, Jun 14, 2012

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.

Navigating the Health Care Maze

By Abby Goodnough
The New York Times, June 12, 2012

Even if the Supreme Court strikes down the federal mandate, many people believe that some form of exchanges could still be crucial to expanding coverage in a number of states. In Massachusetts, insurers bid to participate in the Connector — offering plans that include some level of hospitalization, prescription drugs, maternity care and other services deemed essential by the state — and the Connector uses its market leverage and unique guidelines to promote innovation and competition among them.

“It can — and it has — helped people find more affordable options than they otherwise knew existed,” said Glen Shor, executive director of the Connector.

A vast majority of the people who have gotten insurance through the Connector since the economic downturn began have not had to worry about deductibles because they qualify for subsidized coverage. In that program, the big challenge has been keeping costs down as enrollment has steadily climbed.

One strategy has been to reward the lowest-cost insurers in Commonwealth Care, the subsidized program, by driving customers to them. (For example, people who pay no premium because of their income can choose between the two lowest-cost insurers.) Some insurers have responded by limiting which doctors and hospitals customers can use.

Such limitations are controversial, but Mr. Shor said limited-network plans are just the kind of cost-saving innovation that exchanges are well-positioned to bring about by promoting competition in the market.

http://www.nytimes.com/2012/06/13/us/navigating-the-health-care-maze.html?pagewanted=2&hpw&pagewanted=all

One of the greatest strategic errors in this entire health care reform process has been to fixate on the promotion of competition in the health care market. An example of how deviant this has been is the push to expand limited-network plans.

Think about it. What we want is our choice of hospitals and our health care professionals. What the insurance industry has done is to package their own selection of hospitals and professionals into limited networks, and then prohibit our access to out-of-network care unless we pay prohibitive financial penalties. For this, collectively we are paying even more in wasteful administrative costs. It is totally illogical to pay for extra administrative services designed to artificially take away our choices in the health care market.

Think of what it would be like if we did that with housing. Imagine the government mandating us to select a residential benefits plan. Suppose when we were ready to rent or purchase a residence the third party administrative agency told us that we could have access to only residential buildings within their limited network, though we would have our choice of bronze, silver, gold or platinum houses or apartments. Adding to the insult, collectively we would have to pay extra to this administrative agency that artificially takes away our choices.

What if third parties in the private market were able to corner the food industry and contract with them to create artificial limited-network food plans, with a government mandate that we had to select one of the plans? Within the segregated food market you could shop bronze, silver, gold or platinum selections based on the food insurance premium paid. You could shop outside of the segregated markets, but only by paying large financial penalties.  Again, collectively we would be paying extra to meet the costs of this intrusive third party administrator that would be taking away our choices.

Shifting competition in food markets from producers and retailers to an artificial third party administrator, or shifting competition in housing from the builders or landlords to an artificial third party administrator is about as logical as shifting competition in health care from the hospitals and professionals to an artificial third party administrator, all of which would charge us extra for taking away our choices. We wouldn’t tolerate that in food or housing. Why should we continue to tolerate it in health care?

Another word about our obsession with competition. The policy community recognizes that much of the dysfunction in health care is related to fragmentation of our system – both in financing and in health care delivery. Efforts are being made to integrate health services to provide an efficient, coordinated flow of health care. These efforts require cooperation between the various sectors of the health care delivery system. Competition is a divisive, destructive, evil force when it occurs within a system that should be joining together in cooperation for the public good.

Private insurers compete. Public administrators cooperate. In health care, we need more cooperation. ‘Nuff said?

2012 health care spending, including administration

Posted by on Wednesday, Jun 13, 2012

This entry is from Dr. McCanne's Quote of the Day, a daily health policy update on the single-payer health care reform movement. The QotD is archived on PNHP's website.

National Health Expenditure Projections: Modest Annual Growth Until Coverage Expands And Economic Growth Accelerates

By Sean P. Keehan, Gigi A. Cuckler, Andrea M. Sisko, Andrew J. Madison, Sheila D. Smith, Joseph M. Lizonitz, John A. Poisal and Christian J. Wolfe
Health Affairs, June 2012

2012

$2,809.0 billion – NHE (National Health Expenditures)
$8,952.8 – NHE per capita
17.9% – NHE as percent of GDP
$37.5 billion – Government administration (Note d)
$162.6 billion – Net cost of health insurance (Note e)

d  Includes all administrative costs (federal, state, and local employees’ salaries; contracted employees, including fiscal intermediaries; rent and building costs; computer systems and programs; other materials and supplies; and other miscellaneous expenses) associated with insuring individuals enrolled in the following public health insurance programs: Medicare, Medicaid, Children’s Health Insurance Program, Department of Defense, Department of Veterans Affairs, Indian Health Service, workers’ compensation, maternal and child health, vocational rehabilitation, Substance Abuse and Mental Health Services Administration, and other federal programs.

e  Net cost of health insurance is calculated as the difference between calendar year premiums earned and benefits paid for private health insurance. This includes administrative costs and, in some cases, additions to reserves; rate credits and dividends; premium taxes; and plan profits or losses. Also included in this category is the difference between premiums earned and benefits paid for the private health insurance companies that insure the enrollees of the following public programs: Medicare, Medicaid, Children’s Health Insurance Program, and workers’ compensation (health portion only).

Conclusion

For 2011 through 2013, the lingering effects of the economic recession and modest recovery, mostly in the form of limited growth in incomes, are expected to continue to constrain health spending growth. In 2014 the coverage expansions laid out in the Affordable Care Act for Medicaid and for private health insurance are expected to increase the growth rate for health spending to 7.4 percent, with notable increases expected in spending on physician services and prescription drugs for newly insured patients. By the end of the projection period, higher income growth and the continuing shift of baby boomers into Medicare are expected to cause health spending to grow roughly two percentage points faster than overall economic growth, which is about the same differential experienced over the past thirty years.

http://content.healthaffairs.org/content/early/2012/06/11/hlthaff.2012.0404.abstract

This is the annual report that is used most often as a resource for our health care spending.

The numbers to remember for 2012:

National Health Expenditures:  about $2.8 trillion
Health spending per capita:  about $9000
Spending as a percent of GDP:  about 18%

After the transitions of the next decade, health care spending is expected to continue to grow two percentage points faster than overall economic growth – the same differential experienced over the past thirty years. It makes you wonder when Herbert Stein’s principle will kick in (essentially, if it can’t go on, it won’t).

Since we are seeing an increase in the political rhetoric divided over whether the government or markets should be the dominant force in health care financing, it is worthwhile looking at the total administrative costs of these two approaches to financing health care. Although government spending accounts for about half of all health care spending, we are paying private insurers more than four times as much in administrative costs and profits as we are spending on government administration of health insurance programs.

It is true that the net cost of private health insurance includes the administrative costs of private Medicare Advantage plans and private Medicaid and CHIP managed care plans, but this does not begin to account for the four fold differences in total administrative costs between public and private insurance.

Keep this in mind during the national debate over the Affordable Care Act this political season, which will continue to take place regardless of the Supreme Court decision. One side will argue that we need to encourage free markets of private plans plus private options for Medicare. The other side will argue that we need exchanges to provide choices of private plans, while continuing to offer private Medicare Advantage plans. The one side will talk about private markets while condemning the government, whereas the other side simply will avoid rhetoric referencing the government while touting the virtues of nominal ACA reforms of the private insurers. Both sides are wrong!

We need to get rid of the private insurers and switch to a publicly administered single payer national health program. Besides, then we can address more effectively our health care costs that continue to increase at a rate two percent above the growth in our economy – a rate that is intolerable when compounded year after year.

Center for American Progress report on illusive administrative savings

Posted by on Tuesday, Jun 12, 2012

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.

Paper Cut – Reducing Health Care Administrative Costs

By Elizabeth Wikler, Peter Basch, and David Cutler
Center for American Progress, June 2012

This paper outlines the nature of administrative costs affecting both health care payers and providers, and considers ways to contain these costs. Many such efforts are underway, including the ongoing implementation of the Health Insurance Portability and Accountability Act alongside several different elements of the Affordable Care Act. Continued progress in these areas is thus a central step to lower administrative spending.

Even still, many additional actions will be needed. In the pages that follow, we outline a three-pronged strategy for addressing administrative costs:

* Integration: embedding administrative simplification rules and systems into existing reform efforts

* Coordination: bringing together similar administrative processes by different health care participants to maximize efficiency

* Leadership: creating a new federal office dedicated to simplifying health care administrative plans

Tackling wasteful administrative costs in our health care system in these three ways would result in savings we estimate at $40 billion per year.

These savings are eminently achievable. By integrating new performance standards to promote adoption of electronic transactions such as requiring that electronic health records include utilization metrics for electronic billing and other administrative transactions, we can achieve roughly $26.1 billion in annual savings. By coordinating similar processes by different health care participants—such as physician credentialing and enrollment, quality and safety reporting, and enrollment and retention systems for public programs—we can save $7.7 billion each year. And by ensuring leadership at the federal government level through a new senior-level office dedicated to ensuring that administrative simplification plans are carried through and that innovative results are achieved, we can save potentially much more.

Tackling excessive administrative costs offers a promising opportunity for reducing health care costs while improving the quality of care for all Americans.

report
http://www.americanprogress.org/issues/2012/06/pdf/papercuts_final.pdf

column
http://www.americanprogress.org/issues/2012/06/healthcare_admincost.html

About the Center for American Progress

The Center for American Progress is an independent nonpartisan educational institute dedicated to improving the lives of Americans through progressive ideas and action.

We develop new policy ideas, critique the policy that stems from conservative values, challenge the media to cover the issues that truly matter, and shape the national debate.

Founded in 2003 by John Podesta to provide long-term leadership and support to the progressive movement, CAP is headed by Neera Tanden and based in Washington, D.C.

http://www.americanprogress.org/aboutus

The Center for American Progress is dedicated to “improving the lives of Americans through progressive ideas and action.” Yet they were involved in bringing us the Affordable Care Act (ACA) while working with others to keep single payer off the table. They understand that one of the more important features of single payer is administrative efficiency. Let’s see how they would address that under ACA.

Basically, they have three proposals. They would move administrative functions such as billing into the patients’ electronic medical records; they would coordinate processes such as physician credentialing and patient enrollment through information technology systems, and they would add a new governmental bureaucratic agency to provide oversight of these additional administrative functions.

They contend that this would save about $40 billion annually, though $34 billion of that is already projected through the provisions of ACA and HITECH implementation. They contend that their proposal would add another $6.21 billion to the savings.

Can you imagine the expense of these complex computer systems and the nightmare of trying to coordinate and integrate the various systems amongst aggressive competitors, each of whom would attempt to position themselves in a effort to dominate the market? And obsolescence? That’s built in, both through efforts to perpetuate revenue flows to this industry, and through disruptive innovation designed to capture competitors’ markets. This won’t save costs. Costs will dramatically increase.

And adding another governmental administrative bureaucracy to our dysfunctional system is going to reduce administrative costs? In their effort to continue to suppress single payer they seem to have rejected the obvious concept that they need to REPLACE our current fragmented system of private plans and programs that wastes so much in administration. Instead, they would pile more onto the system.

It’s not as if they didn’t understand. They even cited a paper by David Himmelstein and Steffie Woolhandler, well known in the policy community as authors of landmark papers on administrative excesses in health care. But they didn’t include one of the obligatory Woolhandler/Himmelstein papers that showed that the United States could recover hundreds of billions of dollars in administrative waste by switching to a single payer system. Instead, they pushed their own proposal purportedly showing a highly dubious savings of a mere $6 billion, even though it is much more likely that their proposal would increase costs instead.

Neera Tanden, president of the Center for American Progress has been deeply involved with the current administration in formulating and advocating for the Affordable Care Act. This article seems to be a dishonest vehicle for continuing to dismiss single payer, with the excuse that they are taking care of the administrative inefficiencies, and supposedly saving us money in so doing.

This article coincides with the pending release of the Supreme Court decision on the constitutionality of the Affordable Care Act. It seems to be a preemptive maneuver in anticipation of the imminent surge in demand for a single payer national health program when the decision is announced. They may think that, with this paper as a distraction, they’re ready for us, but we’ve got their number. Let’s lead the surge.

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