UnitedHealth’s Simon Stevens to head NHS England

Posted by on Friday, Oct 25, 2013

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.

UNISON responds to appointment of Simon Stevens as NHS chief executive

UNISON, October 24, 2013

Responding to the announcement that the president of Global Health and group executive vice-president at UnitedHealth, Simon Stevens, will take on the role of chief executive of NHS England in April next year, UNISON Head of Health Christina McAnea said:

“The NHS is facing its first serious crisis for the best part of the decade, and it is critical that Simon Stevens respects and shares the values of our NHS – universal healthcare that is free at the point of need.

“It is surprising that no one within the NHS has been found to take on this position. We sincerely hope this is not a sign that the government wants to import America-type values into the NHS and look at ways of developing healthcare through an insurance model. If this is the intention there will be massive opposition.

“Mr Stevens will have his work cut out for him right from the start. Far from being protected from government cuts, the NHS is being starved of the funds it needs. Thousands of jobs are under threat and accident and emergency departments are creaking under the pressure of cuts, privatisation and upheaval.”

(UNISON is a UK trade union of public employees)

http://www.unison.org.uk/news/unison-responds-to-appointment-of-simon-st…

Simon Stevens, new head of NHS England, is in for a rude awakening

Under Labour, Stevens began the culture of competition in health. He will now find out just how perverse this has become

By Polly Toynbee
The Guardian, October 24, 2013

As he sowed, so shall he reap. Simon Stevens will get his just deserts as he takes up the reins of NHS England, only to find this horse has no bridle or bit, galloping out of anyone’s control. That was, of course, precisely the explosive “creative destruction” Andrew Lansley intended. Stevens returns from the biggest US health company to an NHS whose current path he designed as Tony Blair’s adviser. Now he must piece together some coherence from the fragments of what Sarah Wollaston, MP and GP, called “a grenade” tossed into the NHS.

As Lansley outlined his scheme in 2010, Stevens wrote a paean of praise in the Financial Times. It reads as a touchingly optimistic vision, where choice and competition in a perfect market deliver everything a patient or GP could desire. When he sees what he’s inherited, he may get a rude awakening. But he shares the blame, claiming authorship: “What makes the coalition’s proposals so radical is not that they tear up (our) earlier plan,” but “move decisively towards fulfilling it – in a way that Mr Blair was blocked from doing by internal opposition”.

He lists the plan’s glories: in “the new model NHS, patients are rightly being promised that ‘no decision will be made about me, without me'”. No sign yet of that. He praises “the severing of day-to-day political control of the NHS”, but now he’ll find his own control severed. How will he marry his vouchers for pregnant women with wildly unpopular maternity closures? His hope that “patient power will become real, GP commissioners will fire on all cylinders and hospitals will be liberated to innovate” is a world away from today’s NHS.

But his greatest regret may be his praise for “the decision to extend competition law across the health sector and treat the NHS as a regulated utility, with an economic regulator – Monitor”. Faith in competition fills his writings – but reality is biting back. Monitor, engine of NHS competition, has only just understood its destructive force: its chief executive, David Bennett, recently recoiled, saying Monitor would be “mad” to enforce the Lansley competition rules leaving commissioners to “spend all their time running competitive processes because they’re terrified they’re going to get in trouble if they don’t”. Too late now.

So far, 63% of contracts have been put out to tender by clinical commissioning groups (CCGs), now run by just a few GPs. The 211 CCGs are widely regarded as no match for the private sector in writing complex contracts. Section 75 of the Health and Social Care Act forces them to put all but a few services out or risk any putative bidder challenging them in court. Bringing competition law into the NHS means no one can control these unleashed forces.

Watch Stevens demand more changes to the law if he’s to control the unfolding chaos. Half of NHS trusts have announced a deficit for this year – that’s unprecedented – yet by 2017 the NHS must “save” £30bn. The Care Quality Commission says one in four hospitals are a safety risk, but their inspections aren’t allowed to count numbers of staff: the NHS has haemorrhaged 6,000 nurses since 2010. Many CCGs that control NHS funds are chaotic, with services falling between gaps, no one paying for them. Privatisation rushes on, at least £11bn so far, but private providers escape the NHS duty of openness or freedom for whistleblowers. Waiting times are rising, ambulance and A&E times growing, as the social care crisis blocks NHS beds with winter approaching.

Stevens will find many perversities in the competition culturre. He said top-down control was a disaster – but he may find fragmentation and lack of strategic control far worse. Can he make his perfect market work – or admit he might have been wrong?

http://www.theguardian.com/commentisfree/2013/oct/25/simon-stevens-nhs-e…

The National Health Service in England currently exemplifies the greatest problem with publicly-administered and publicly-financed national health programs: They become subject to privatization efforts whenever conservatives gain control of the government. Selecting UnitedHealth’s Simon Stevens as chief executive of NHS England surely advances Conservative Prime Minister David Cameron’s privatization scheme.

When do you suppose UnitedHealth will put in a bid to purchase the NHS? It would be great for Cameron’s budget, though the people would lose out.

Rural areas not benefitting from exchange plan competition

Posted by on Thursday, Oct 24, 2013

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 Care Law Fails to Lower Prices for Rural Areas

By Reed Abelson, Katie Thomas and Jo Craven McGinty
The New York Times, October 23, 2013

As technical failures bedevil the rollout of President Obama’s health care law, evidence is emerging that one of the program’s loftiest goals — to encourage competition among insurers in an effort to keep costs low — is falling short for many rural Americans.

While competition is intense in many populous regions, rural areas and small towns have far fewer carriers offering plans in the law’s online exchanges. Those places, many of them poor, are being asked to choose from some of the highest-priced plans in the 34 states where the federal government is running the health insurance marketplaces, a review by The New York Times has found.

Of the roughly 2,500 counties served by the federal exchanges, more than half, or 58 percent, have plans offered by just one or two insurance carriers, according to an analysis by The Times of county-level data provided by the Department of Health and Human Services. In about 530 counties, only a single insurer is participating.

The Obama administration, while not disputing the findings, responded to the analysis in a statement that the marketplaces “allow insurers to compete for customers based on price and quality.”

Observers cautioned against drawing too many conclusions from the current landscape, noting that several major insurers were waiting to see what happens next.

http://www.nytimes.com/2013/10/24/business/health-law-fails-to-keep-pric…

Polis fights sky-high rates as ski town signups stall

By Katie Kerwin McCrimmon
Solutions, October 23, 2013

Health insurance rates are so high in Colorado’s mountain resort areas that U.S. Rep. Jared Polis plans to seek waivers from the federal government so people who skip buying insurance in 2014 won’t face financial penalties.

Health coverage guides working to enroll Summit County residents in new health plans through Colorado’s health exchange have been deeply disappointed. They have not enrolled a single new client since Colorado’s health exchange launched on Oct. 1.

http://www.healthpolicysolutions.org/2013/10/23/congressman-fights-sky-h…

Another flaw in Obamacare is the failure in rural areas to make premiums affordable through health plan competition, primarily because the markets are too small to attract enough insurers to promote competition.

An example is found in the Colorado mountain resort areas such as Summit County where not one person has been enrolled through the exchange.

How many times do we have to say it? The Affordable Care Act was the wrong model for reform. It leaves in place our profoundly expensive, administratively inefficient, fragmented, dysfunctional health care financing system. Compared to what needed to be done, the improvements were only marginal, and some of the problems actually increased, such as underinsurance – plans that provide less health security and less financial security than many of us had before.

Besides, even in areas with greater plan competition, health care costs are still out of control. A publicly-administered single payer program is far more effective in getting health spending right than is health insurer competition.

Ed Kilgore: The Restive Single Payer Tribe

Posted by on Wednesday, Oct 23, 2013

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 Restive Single Payer Tribe

By Ed Kilgore
Washington Monthly, Political Animal, October 21, 2013

But if I were in the White House, I’d keep an eye on one issue they might not have thought much about in quite some time: the revival of progressive hostility to Obamacare on grounds that the law reflected a “sell-out” of the obvious single-payer solution to the problems of the health care system.

I’m not going to relitigate the whole single-payer-versus-managed-competition debate that’s been going on for decades, or even the argument that a managed competition model requires a “public option” to function properly. But whatever else it is, a single-payer system is a whole lot simpler and more predictable than anything that not only accepts but insists upon a publicly regulated and subsidized private health insurance marketplace.

Single-payer fans (or those strongly favoring a public option in a hybrid system) are never going to have much in common with conservatives who don’t believe in universal access to affordable health care and want to disable or repeal the public programs we already have. But if the one thing they do have in common — disdain for the messy hydraulics of any hybrid system — becomes the center of attention and stays there, watch out!

Ed Kilgore is a contributing writer to the Washington Monthly. He is managing editor for The Democratic Strategist and a senior fellow at the Progressive Policy Institute.

http://www.washingtonmonthly.com/political-animal-a/2013_10/the_restive_…

It is fair to say that Ed Kilgore represents the views of neoliberals who have taken control of the Democratic Party and moved it to the right: that is, he represents centrist views. What is striking about his message is that the intensive political attacks on Obamacare by the conservatives are assisting single payer advocates who are busy exposing its profound policy deficiencies. With their noise, and our reasoned policy prescriptions, middle America may be ready to move to single payer much sooner than expected.

Are we ready for ACOs?

Posted by on Tuesday, Oct 22, 2013

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.

Predicting ACO Formation: Two Studies With More In Common Than It Might Seem

By Valerie Lewis, Carrie Colla, and Elliott Fisher
Health Affairs Blog, October 22, 2013

At a time when policy makers, providers and payers are all trying to make high stakes decisions about how respond to the proliferation of Accountable Care Organizations (ACOs), divergent research findings might feel as welcome as rain on the fourth of July.

Two recently published studies, one by our group at Dartmouth and one by David Auerbach and coauthors in Health Affairs, both examined predictors of ACO formation.  On the surface, they appear to have some inconsistent findings.  Their core conclusions, however, are similar, and differences in the results are readily explained.  Most importantly, policy implications are well aligned: there is much we can do to help the transition to accountable care succeed.

A common set of policy implications

The findings in both studies also point to challenges that deserve further attention by policy makers.  How can providers without experience in risk-based contracts or who are in smaller, more fragmented practices get the additional support they may need to become an ACO?  Models like the Medicare Advance Payment model are one move to support these types of providers, but our results here and elsewhere suggest that policymakers should be further developing programs to support the financing of these systems, along with the development of analytic and care coordination capabilities that are likely necessary for ACO success.

Another important question

How can spending and quality benchmarks be refined to encourage broader participation?  Some (including us) have suggested that paying for improvement rather than absolute performance on quality may encourage underperforming systems to join the ACO model. Careful thinking is necessary from health economists and health care finance experts on how to set cost targets that do not penalize providers already on the low end of the cost spectrum.

The imperative of continued learning

Perhaps the most important conclusion, however, is to acknowledge the many uncertainties that remain.  The transition to performance-based payment systems has barely begun – and better information on what is working and what isn’t would make successful reform more likely.

http://healthaffairs.org/blog/2013/10/22/predicting-aco-formation-two-st…

If you are holding your breath to see if accountable care organizations (ACOs) are the answer to our quality and cost issues, I have some life-saving advice for you. Don’t wait, but breathe immediately!

Elliott Fisher from the Dartmouth Institute has been credited with coining the term, accountable care organization. Look at what he and his colleagues have to say: The most important conclusion is that many uncertainties remain.

One of the more important reasons for the uncertainties is that there remains a conflict between those who support better integration of health care (a noble goal) and those who support a business model that smacks of MBA-driven managed care (an ignoble goal).

There are no uncertainties with the single payer model. We should proceed immediately to the enactment of an improved Medicare for all, and then we can afford to take years to study variations of the ACO model to see if we can improve health care delivery.

24 million will be permitted to remain uninsured without penalty

Posted by on Friday, Oct 18, 2013

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.

Implementing Health Reform: The State Of The Exchanges, Income Verification, And More

By Timothy Jost
Health Affairs Blog, October 16, 2013

Information collection.

On October 11, 2013, HHS published a notice of information it was intending to collect to establish individual mandate exemptions.

There is nothing new in this notice, but the scope and number of exemptions from the ACA’s individual responsibility requirement are truly impressive.  In addition to the religious conscience, health care sharing ministry, incarceration, Native American tribe membership, and lack of affordable coverage exemptions, there is an extensive list of hardship exemptions, including:

* Homelessness;

* Eviction in the previous 6 months or the threat of eviction or foreclosure;

* A utility shut-off notice;

* Recent death of a close family member;

* A fire, flood, or other natural or human-caused disaster that caused substantial property damage;

* A bankruptcy filing in the last 6 months;

* Medical expenses in the past 24 months that could not be paid;

* Unexpected increases in necessary expenses due to caring for an ill, disabled, or aging family member;

* The presence in the household of a child claimed as a tax dependent who was denied coverage in Medicaid and CHIP where another person is required by court order to give medical support to the child. In this case, the penalty need not be paid for the child;

* A favorable eligibility appeals decision that makes an individual eligible for enrollment in a qualified health plan (QHP) through the Exchange, lower the costs on monthly premiums, or provides cost-sharing reductions, which removes the penalty for the time the individual was not enrolled in a QHP through the Exchange; or

* Residence in a state that fails to expand Medicaid if the individual would have been eligible for Medicaid.

HHS estimates that 24 million Americans will be eligible for individual responsibility exemptions and that as many as 12 million will apply for exemptions through the exchange.  In most instances, documentary evidence will need to be supplied to verify the exemption.  Unless the federal exchange website is vastly improved in the not too distant future, this could create major problems for the implementation of the individual responsibility requirement.

http://healthaffairs.org/blog/2013/10/16/implementing-health-reform-the-…

CMS.gov – Supporting Statement for the Information Collection Requirements Contained in the Exemptions Eligibility Information Collection Request (25 pages): http://www.cms.gov/Regulations-and-Guidance/Legislation/PaperworkReductionActof1995/PRA-Listing-Items/CMS–10466.html

The Affordable Care Act includes multiple categories of exemptions from the shared responsibility payment – the penalty for remaining uninsured. This new CMS release defines the category of hardships which would allow you to remain uninsured without having to pay a penalty. When you check the list, it seems that most of these hardships would indicate a greater need for having health care coverage. But instead of seeking ways to fill these gaps, ACA simply cuts these people loose with no coverage at all.

The largest category of those who are exempt from the requirement to be insured are those who simply cannot afford to pay for their share of health insurance premiums. That includes families whose incomes are so low that they are not required to file income tax returns, and individuals who would have to pay more than 8% of their incomes for premiums beyond employer contributions or tax credits for the exchange plans. It includes individuals who would have been eligible for Medicaid but are excluded simply because their states elected not to participate in the Medicaid expansion.

HHS estimates that 24 million Americans will be eligible for exemptions from the shared responsibility payments. That is, 24 million individuals will have the right to remain uninsured without having to pay a penalty. That is quite a stipulation for an Act that was supposed to bring health care to everyone. 24 million!

Clearly our politicians selected the wrong model for reform. We do not have to put up with this. If enough of us protest vehemently, we should be able to get our politicians to replace this highly dysfunctional system with a single payer national health program – an improved Medicare that covers everyone – absolutely everyone.

5.2 million people fall into ACA coverage gap

Posted by on Thursday, Oct 17, 2013

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 Coverage Gap: Uninsured Poor Adults in States that Do Not Expand Medicaid

The Kaiser Commission on Medicaid and the Uninsured, October 2013

The expansion of Medicaid, effective in January 2014, fills in historical gaps in Medicaid eligibility for low-income adults and has the potential to extend health coverage to millions of currently uninsured individuals. This expansion essentially sets a national Medicaid income eligibility level of 138% of poverty (about $27,000 for a family of three) for adults. The expansion was intended to be national and to be the vehicle for covering low-income individuals, with premium tax credits for Marketplace coverage serving as the vehicle for covering people with higher incomes. However, the June 2012 Supreme Court ruling made the expansion of Medicaid optional for states, and as of September 2013, 26 states did not plan to implement the expansion.

In states that do not expand Medicaid, over five million poor uninsured adults (5.2 million people) have incomes above Medicaid eligibility levels but below poverty and may fall into a “coverage gap” of earning too much to qualify for Medicaid but not enough to qualify for Marketplace premium tax credits. Most of these people have very limited coverage options and are likely to remain uninsured.

The ACA envisioned people below 138% of poverty receiving Medicaid and thus does not provide premium tax credits for the lowest income. As a result, individuals below poverty are not eligible for Marketplace tax credits, even if Medicaid coverage is not available to them. Individuals with incomes above 100% of poverty in states that do not expand may be eligible to purchase subsidized coverage through the Marketplaces; however, only about a third of uninsured adults (3.2 million people) who could have been eligible for Medicaid if their state expanded fall into this income range. Thus, there will be a large gap in coverage for adults in states that do not expand Medicaid.

http://kaiserfamilyfoundation.files.wordpress.com/2013/10/8505-the-cover…

According to this report, “Nationally, over five million poor uninsured adults will fall into the ‘coverage gap’ that results from state decisions not to expand Medicaid, meaning their income is above current Medicaid eligibility but below the lower limit for Marketplace premium tax credits.” That is, they are not eligible for Medicaid, and at an income below 138% of the federal poverty level, they are not eligible for subsidies and therefore cannot possibly afford to purchase private plans. They will remain uninsured, even though they have the least ability to pay out-of-pocket for health care.

These individuals falling into the coverage gap represent about one-sixth of the total number of individuals who will remain uninsured (31 million). Supposedly the Affordable Care Act was designed to make health care affordable for everyone, with an emphasis on Medicaid or private plan subsidies for those who could least afford to pay for coverage. By this standard, ACA can be considered a dud.

Let’s do it right. Let’s enact a single payer national health program that provides health care for everyone while separating the funding by moving it to the tax system. That would eliminate any connection between receiving health care and having to pay for it. Needing health care is bad enough without being assessed charges (in essence financial penalties) for obtaining that care.

Physician-hospital-insurer entities forming narrow networks

Posted by on Tuesday, Oct 15, 2013

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.

Out of Network, Out of Luck

By Theresa Brown
The New York Times, October 12, 2013

For several hundred patients at the University of Pittsburgh Medical Center, it started with a certified letter informing them that they were no longer allowed to see their physicians. The reason? They were unlucky enough to have insurance called Community Blue, which is offered by a rival hospital system. Astoundingly, they were barred even if they could pay for the care themselves.

One patient, in the middle of treatment for lung cancer, said at a hearing before a State House of Representatives committee that she was prohibited from seeing her U.P.M.C. oncologist. Another, with the debilitating autoimmune disease scleroderma, said she was dismissed from the U.P.M.C. Arthritic and Autoimmune Center. A third, a five-year breast cancer survivor who needs follow-up care every six months, was cut off from the doctor who had been with her since she was first given her diagnosis.

Community Blue is sold by a company called Highmark. Like U.P.M.C., it is both a hospital system and an insurance provider, part of a growing trend toward vertical consolidation in the two industries. These and other companies insist that such consolidation streamlines the caregiving system and thus benefits the patient. But in the short term, they are waging a vicious war over patients — and as the experience in Pittsburgh shows, it’s often the patients who are losing.

Historically, U.P.M.C. was the biggest health care provider in Pittsburgh and Highmark the largest insurer. U.P.M.C., though, has been selling its own brand of insurance for over a decade, and Highmark recently affiliated with a local multisite hospital system, now known as the Allegheny Health Network.

U.P.M.C. responded to the formation of the Allegheny Health Network by labeling Highmark a competitor and a threat to its financial sustainability. It has also announced that its current contract with Highmark will not be renewed, meaning that in December 2014 almost all U.P.M.C. hospitals will be open to Highmark customers only at out-of-network rates, which are among the highest in the country.

At the same time, U.P.M.C. is running an aggressive ad campaign for its own health insurance plan, and Highmark subscribers with Community Blue have been denied access to their U.P.M.C. physicians.

More health systems nationally are following the lead of U.P.M.C. and Highmark, combining health insurance with the provision of care itself.

The worry is that integration will yield not better care but higher profits achieved through monopolistic consolidations and self-serving business practices.

http://opinionator.blogs.nytimes.com/2013/10/12/out-of-network-out-of-lu…

Integrating health care is a great concept that theoretically should improve coordination of care, reduce duplication, provide incentives to meet quality and outcome targets, improve access to appropriate specialized care – in general, improving quality while reducing costs. That is the idea behind the Accountable Care Organizations established by the Affordable Care Act. How is it working out in the real world?

We’ve watched as insurers have consolidated. Although they tout that they are providing higher quality at lower costs through managed care, in fact they have used their oligopolistic leverage to limit patient access to their selected network providers. Although they contend that they are selecting the highest quality providers, in fact, they are excluding quality institutions such as academic medical centers and going with the cheapest contracts they can extract from the health care community.

In response, we are witnessing an explosion in consolidation of health care providers – hospitals and physician groups – often into single entities. Obviously this results in “must have” groups that in turn have leveraged their oligopolistic negotiating power in dealing with the insurers.

Not to be outdone, we are now seeing insurers and consolidated health care systems joining together to increase their control of markets, and thereby share in the spoils. When you see patients with lung cancer, breast cancer, and scleroderma being cut off from their care strictly on the basis of realignment of the health care business models, you can dismiss the concept that these changes are changes that are designed to benefit patients. The ugly competition that is taking place between Physician-hospital-insurer entities (Phi) is cutthroat and certainly not in the patients’ best interests. (Phi seems to be an appropriate symbol for these entities since, in Lacanian psychoanalysis, it is the symbol for “the phallic function.”)

The Affordable Care Act very specifically was designed to keep control in the private sector. Private sector business models will always do what they are designed to do – anything to make more money. If we really do want a system designed to provide the best care possible with our available resources, we need to dismiss the private insurers and put our own public stewards in charge. They would have the responsibility of answering to us.

Editorial – Inequality for All

Posted by on Friday, Oct 11, 2013

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.

Inequality for All

By Don McCanne, qotd editor
Quote of the Day Editorial, October 11, 2013

Yesterday, my wife Sandy and I had the pleasure of joining a group from our local chapter of the League of Women Voters in viewing the new documentary, Inequality for All, featuring former Labor Secretary Robert Reich. The lesson of the film did not escape those attending. The last couple of decades have left low- and middle-income people behind while all of the workers’ gains in productivity have moved up to the very wealthiest.

This is an important issue for those who support single payer reform – improved Medicare for all. The average health care costs for the typical working family of four are now over $22,000 while the median household income is $50,000. If everyone is going to have the health care that they need, some of that wealth flowing upwards needs to be redirected to health care, and to other social needs as well.

Some of the wealthy one-percenters do understand this. Featured in the documentary was entrepreneur and venture capitalist Nick Hanauer. The following link is to a six minute TED video in which Nick explains the phenomenon and why it is important to us. (For political reasons, TED removed this video from its website, but it is still available through YouTube.)

http://www.youtube.com/watch?v=bBx2Y5HhplI

In our dinner discussion after viewing Inequality for All, some commented that, though the film explained the problem well, it seemed to leave off any plan for action. It does not require much intuitiveness to think of what actions we might take, though the website for the film does help us by discussing six categories for action:

* Raise the minimum wage
* Strengthen workers’ voices
* Invest in education
* Reform Wall Street
* Fix the tax system
* Get big money out of politics

Inequality for All: http://inequalityforall.com

For those who would like to learn more, Berkeley Professor Emmanuel Saez, who was also featured in the documentary, has published extensively on this topic. Many of his papers  – several co-authored by Thomas Piketty – can be downloaded from his website:

http://elsa.berkeley.edu/~saez/

“Where-to-compete” decisions for insurers

Posted by on Thursday, Oct 10, 2013

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.

Where To Compete In A Post-Reform World

By Shubham Singhal, senior partner in McKinsey’s Detroit office
Health Affairs Blog, September 30, 2013

The power of “where-to-compete” decisions, particularly in an industry in as much flux as US health insurance, is enormous. Our analyses suggest that the bottom-line performance differential between a payor who selects a market-average portfolio across businesses and geographies and an identical payor who instead selects a top-quartile portfolio is likely to be almost twofold. Across industries, McKinsey research shows that the majority of the performance differential among corporations results from their alignment with “rising tide” markets rather than from share gain within less attractive markets.

Furthermore, we have found that there are three “macro” approaches that can enable companies to thrive during major industry disruptions: refocus their portfolio on more attractive businesses, build one or two large new businesses, or radically transform their business model. The first two rely squarely on where-to-compete decisions. The last approach is not for the faint of heart.

Thus, today’s payors must carefully choose which markets they want to concentrate their resources on to win. The choices made will be critical not only within the payors’ core health-plan business but also in adjacent areas within the healthcare value chain.

***

Given the disruptive changes in the healthcare industry, payors that want to thrive over the next few years will need to develop the discipline to make and act on where-to-compete decisions. They will need insights into where growth and margin will be earned, the foresight to determine when inflections points in the market might happen, a clear view of their own competitive advantages and capabilities (which would give them the ability to win and earn a superior return), the fortitude to make tough resource-allocation decisions, and the agility to alter their course as the market shifts. Acquiring the needed discipline is challenging but necessary. The upside from getting where-to-compete decisions right is substantial enough to demand top management’s attention — and the downside is potentially fatal.

http://healthaffairs.org/blog/2013/09/30/where-to-compete-in-a-post-refo…

Marketplace Plans Vary Widely In Costs, Within Counties And Across The Country

By Jordan Rau and Julie Appleby
Kaiser Health News, October 4, 2013

Consumers shopping in the new health insurance marketplaces will face a bewildering array of competing plans in some counties and sparse options in other places, with people in some areas of the country having to pay much more for the identical level of coverage than consumers elsewhere.

Nationwide, 18 percent of counties have only one insurer offering plans and 33 percent of counties have only two insurers competing, the KHN analysis found.

http://www.kaiserhealthnews.org/Stories/2013/October/04/Marketplace-plan…

Private insurers are a totally different animal than public health coverage programs, and this “where-to-compete” industry advice typifies that difference.

Public programs, such as Medicare, make every effort to deliver health care to those that need it. Private insurers make every effort to ensure the success of their business model.

Mimicking Willie Sutton’s famous strategy to rob banks because that is where the money is, private insurers “carefully choose which markets they want to concentrate their resources on to win.” The Kaiser analysis shows that one-third of counties have only one or two insurers offering plans. According to the McKinsey advice, for the insurers covering those counties, the decision is “potentially fatal.”

The Affordable care Act has put the wrong people in charge. We can change that. Fix Medicare and then provide it for everyone. Let’s replace “where-to-compete” with “where-to-provide-care.”

Inequality at core of high health care spending

Posted by on Wednesday, Oct 9, 2013

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.

Note:  This rather wonkish article is much easier to read on the website (link below) since it includes a series of graphs that helps to visualize the concepts presented.

Inequality Is At The Core Of High Health Care Spending: A View From The OECD

By Richard “Buz” Cooper
Health Affairs Blog, October 9, 2013

It is commonly said that the US spends more than twice as much on health care as other developed countries, yet its outcomes are worse. The inference is that too much care is provided, to no good end.

Such international comparisons are drawn from the Organization of Economic Cooperation and Development (OECD), a group of 34 developed countries. Analyzing these data is a multi-step process, like peeling an onion, and the truth resides deep within its core.

The process starts by adjusting health care spending for “purchasing power parity” (PPP) and expressing it in US dollars. By that measure, per capita spending in the US is 160 percent more than the OECD mean, and this is the basis for the notion that the US spends more than twice as much. But it is only the first layer.

The second layer is the economy. The US spends more principally because it is wealthier, but even in proportion to its gross domestic product (GDP), the US spends more, about 60 percent more. But that is only the second layer.

The third layer is price. Health care prices are inordinately high in the US and inordinately low in many other countries, particularly those that exercise price controls. Therefore, to understand how much care is given, comparisons of health care spending must be adjusted for the purchasing power parity of health care (HC-ppp). When so adjusted, spending in the US is still higher relative to its GDP, but by only 31 percent. This represents the core difference in services. Some are administrative, but most are health care services.

What explains this 31 percent? A large body of evidence suggests that it results from poverty and income inequality, which are more prevalent in the US than in any other OECD country except Chile, Mexico and Turkey. And poverty is associated with substantial increments in spending. For example, the poorest decile of Medicare beneficiaries spends 30-40 percent more than the wealthiest; overall hospital utilization rates in large urban areas are 25-35 percent more than in their wealthiest Zip codes; and hospital readmissions are most prevalent from poor neighborhoods and in safety-net hospitals.

Much of this relates to chronic illness, which is most prevalent among the poor. And chronic illness rates are higher in the US than in most other OECD countries, higher than Canada or England and higher than the average of France, Germany, Italy, Japan, Spain and the UK. Similarly, obesity, which is most common among the poor, is most prevalent in US. And the rates of infant, maternal and preventable mortality, which are often taken as measures of health care effectiveness but are actually markers of poverty and the burden of disease, are all higher in the US than in any other advanced economy.

The Gini coefficient is a measure of income inequality. To estimate the impact of income inequality on health care spending, it was applied to the spending level in each of the OECD countries. So doing erased the difference between the price-adjusted level expected from GDP and the actual expenditures in the US. Thus, while the US spends more than twice as much on health care than the mean of other OECD countries, its greater GDP and higher prices explain most of it, and income inequality offers an explanation for the rest.

But there is more, and it is the core of the core. The OECD measures a host of spending categories in addition to health care. In most, spending in the US is proportional to its GDP. Health care, which exceeds the OECD norm, is one exception. A second is social spending, and it deviates in the opposite direction. Social spending in the US is 33 percent less than predicted from GDP. And recent trends are constraining it further by limiting funds for food stamps, housing subsidies, and programs that serve youth, the elderly, and the homeless.

It is difficult not to connect the dots from inadequate social spending to excess poverty and income inequality to more chronic illness and higher health care spending. These dots reside in the core of the OECD onion, and the failure to cope with them is placing an unsustainable burden on our health care system.

http://healthaffairs.org/blog/2013/10/09/inequality-is-at-the-core-of-hi…

In this article, Richard “Buz” Cooper develops the theme that income inequality and excess poverty along with our inadequate compensatory social spending are the primary reasons that our health care spending is so high. Others might prefer to frame the reasons in different terms, but that does not change the fact that it is imperative that we establish policies to cope with these societal deficiencies.

As an aside, he does mention that some of the core differences in U.S. services are administrative, but then does not mention that much of that administrative waste could be recovered by establishing a more effective and efficient health care financing system (i.e., single payer).

Buz Cooper’s Health Affairs biography states, “He has rediscovered the essential role of professionalism in health care and the central importance of poverty in the growth of health care spending.” Let’s see what we can do to help the rest of the policy community and our politicians make the same discovery.

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