What is an Accountable Care Organization?

Posted by on Friday, Jul 9, 2010

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 The Center For Medicare And Medicaid Innovation Should Test Accountable Care Organizations

By Stephen M. Shortell, Lawrence P. Casalino and Elliott S. Fisher
Health Affairs
July 2010

The Patient Protection and Affordable Care Act of 2010 directs the Centers for Medicare and Medicaid Services (CMS) to create a national voluntary program for accountable care organizations (ACOs) by January 2012. ACOs are provider groups that accept responsibility for the cost and quality of care delivered to a specific population of patients cared for by the groups’ clinicians.

Accountable Care Models

Accountable care organizations will be largely based on physician practices that, in turn, may be organized as patient-centered medical homes. Many ACOs will also include hospitals, home health agencies, nursing homes, and perhaps other delivery organizations. There are at least five different types of practice arrangements that could serve as ACOs. These are the integrated or organized delivery system, multispecialty group practices, physician-hospital organizations, independent practice associations, and “virtual” physician organizations, all described below.

1. Integrated Delivery Systems

Integrated delivery systems involve a common ownership of hospitals, physician practices, and—in some cases—an insurance plan. Some examples are Kaiser Permanente, Group Health Cooperative of Puget Sound, and Geisinger Health System. These systems typically have aligned financial incentives, electronic health records, team-based care, and resources to support cost-effective care.

2. Multispecialty Group Practices

Multispecialty group practices usually own or have a strong affiliation with a hospital. Examples of this type of arrangement include Mayo Clinic and Cleveland Clinic. They usually do not own a health plan but, rather, have contracts with multiple health plans in their areas. Most have a long history of physician leadership and highly developed mechanisms for providing coordinated clinical care.

3. Physician-Hospital Organizations

These organizations are a subset of the hospital’s medical staff. One example is Advocate Health in Chicago. Most were formed in the 1990s in response to managed care pressures to negotiate with health plans. Some function like multispecialty group practices, focusing on reorganizing the delivery of care to achieve more cost-effective coordination. Although they may be less well suited than integrated delivery systems or multispecialty practices to qualify as ACOs, many could structure themselves to meet the criteria for that type of organization.

4. Independent Practice Associations

Independent practice associations consist of individual physician practices that came together largely for purposes of contracting with health plans. Over time, however, many of these have evolved into more-organized networks of practices that are actively engaged in practice redesign, quality improvement initiatives, and implementation of electronic health records. One example is Hill Physicians Group, in Northern California. Such organizations could qualify as ACOs, and that might encourage other independent practice associations to evolve similarly, given sufficiently strong financial incentives and technical assistance.

5. Virtual Physician Organizations

Finally, a number of small, independent physician practices, many located in rural areas, can organize to become “virtual” physician organizations, such as Community Care of North Carolina. This process can be led by individual physicians in rural areas or by a local medical foundation, state Medicaid agency, or similar organization that can provide the leadership, infrastructure, and resources to help small practices develop disease registries; implement electronic health records; share information; and provide better-coordinated, cost-effective care. These virtual networks could qualify as ACOs and serve as models for other groups of small practices.

Physicians can choose one or more of the above models, depending on what best fits their needs and local circumstances. But because there are so many options, the payment systems that the CMS creates for ACOs should evolve with the models chosen. Specifically, the more-integrated forms of accountable care, such as integrated delivery systems and multispecialty group practices, are capable of assuming the greatest risk. This would make them natural candidates for capitation or bundled payments, in which providers assume a relatively greater share of risk.

In contrast, less structurally integrated forms of ACOs, such as virtual physician organizations and more loosely organized independent practice associations, are best suited—at least initially—to low degrees of risk. For them, a form of limited, partial capitation for selected illnesses may be most appropriate.

To facilitate delivery system transformation and focus attention on desired health outcomes, payment systems need to change. Payment based on outcomes achieved, rather than on volume of services provided, will be the motivation for providers to focus their attention on improving the underlying systems of care.

Considerable technical assistance will be needed to implement the learning system for the development of ACOs. This will be particularly true for loosely organized independent practice associations and virtual physician networks, which currently lack the size and resources to become ACOs.



Analyzing Shifts In Economic Risks To Providers In Proposed Payment And Delivery System Reforms

By Jeff Goldsmith
Health Affairs
July 2010


These innovative payment methods all share the assumption of broader responsibility — either formally or informally — by hospitals or physicians for reducing Medicare expense through better coordination and management of care. Sadly, these diverse approaches do not appear to fit together seamlessly to encompass the entire continuum of health care.

Policy makers are unlikely to find a single “silver bullet” they can use to replace Medicare fee-for-service payment. They might have to tolerate multiple, overlapping, and partial solutions, and substantial regional variation in the mechanisms that are feasible.

Nonetheless, for better or worse, hospitals are going to play a much larger role in organizing or reorganizing care in their communities. The most promising innovations are those that build on hospitals’ existing information technology and organizational infrastructure. The key to successful innovation will be extending risk assumption to follow suit.


“Accountable care organization” (ACO) is an abstract concept of organizing health care providers into single entities that are responsible for delivering a broad continuum of care for specific patients, while bearing financial risk for the care provided. Moving beyond that abstraction, there really isn’t much new on the policy front.

Most of the types of entities that might actually be able to serve as ACOs already exist, ranging from independent practice associations to fully integrated delivery systems. Even the concept of bundling payments already has applications ranging from Medicare’s DRG prospective payments (diagnosis related groups) to capitation payments for comprehensive health care services.

So what is new? Would payment systems be designed to require that all reimbursement be provided through ACOs? If so, what would happen to the sector of the health care delivery system that would be excluded from the ACOs that controlled the health care delivery in a given region? Would those providers simply become bankrupt and shut down? Could we afford to lose them, especially with the existing deficiencies in our primary care infrastructure?

Shortell, Casalino and Fisher suggest that the establishment of “virtual physician organizations” would address that concern, but here “virtual” seems to refer to the computer term of “not physically existing as such but made by software to appear to do so.” Of course, the providers would actually exist, but they would never function as a unified ACO providing the full range of services, including hospital services, for a given population requiring at least 5000 patients with accountable care protocols for each clinical entity.

Basically, the concept of the accountable care organization is merely a relabeling of various existing policy efforts to try to control inappropriate spending in our dysfunctional health care system. Since our goal is to provide health care for everyone while slowing the growth in spending to sustainable levels, clearly these policies have failed us.

Let’s go with a system that actually works to achieve the goal of affordable health care for everyone – a single payer national health program.

The passage of the Patient Protection and Affordable Care Act of 2010 (PPACA), our new health care legislation, in March was hailed by its supporters as an historic event of the magnitude of Social Security and Medicare. But four months later, it remains controversial, with repeated polls showing three large groups of divisive opinion, including those who would work to repeal it and others who believe that it will make no difference. The Democrats have launched a $125 million PR campaign to defend the new law amidst growing signs that many Democrats facing re-election are failing to get political traction on the issue. (1) (Allen, M. Dems launch $125 M health campaign. Politico, June 7, 2010)

We are being advised by many to “wait and see” how this complex new bill plays out over the next five to ten years, but we can already know what its outcomes will be. More than 30 years of health policy science, including documentation of the repeated failures of incremental changes built into the new law, together with well-entrenched trends in our market-based system, allow us to project its outcomes with confidence. For this legislation has been molded and crafted by the political power and money of corporate stakeholders in the medical-industrial complex.

Five previous posts in 2009 described the uneasy “alliance” of the five biggest players—the insurance industry, the drug industry, the hospital industry, business and organized medicine. They will do just fine with the new law at the expense of patients, families and Main Street.

Health care “reform” this time around was intended to address these four basic system problems: (1) containing health care costs, (2) making health care more affordable, (3) increasing access to care, and (4) improving the quality of care. This post introduces a series of five that will examine how well the PPACA will do on each of these four goals, followed by an overall assessment of the law. These posts will draw in part from my new book Hijacked: The Road to Single Payer in the Aftermath of Stolen Health Care Reform, soon to be released by Common Courage Press in both print and ebook format.

These are some of the many reasons that we can already conclude that health care costs will continue to run out of control at rates far exceeding the costs of living and median household incomes.

•  No price controls. Wall Street has already factored in rapid expansion of markets for drugs, medical devices and other services in a system of expanded access. There is also a long line forming of providers of information technology and administrative services that will exploit the complex implementation of this law.
•  No bulk purchasing. The PPACA has prohibited the government from negotiating the prices of prescription drugs and retains a ban on importation of drugs from Canada and other countries.
•  Lack of control over perverse incentives that drive increased volume of services. These in turn are driven by retention of fee-for-service (FFS) reimbursement that encourages physicians and other providers to offer more services than are medically appropriate or necessary.
•  No effective mechanism to rein in marginal or ineffective technologies. Coverage policies for new drugs and medical devices are still lax and not subject to rigorous evidence-based criteria for either efficacy or cost-effectiveness.
Although the PPACA does call for a Patient-Centered Outcomes Research Institute, its role is already neutered by not having the power to mandate or even endorse coverage or reimbursement rules for any particular treatment. (2) (Kaiser Health News staff. True or false: Seven concerns about the new health law, March 31, 2010)
•  The dominant business model of health care prevails, with many facilities and services remaining for-profit and investor-owned and with an ongoing trend for increasing consolidation within industries.
•  The PPACA has grandfathered-in specialty hospitals, typically physician-owned facilities that focus on well-reimbursed procedures in such areas as cardiology and orthopedics, whereby physicians can “triple dip”, earning high incomes as providers, owners and investors.
•  More preventive services will further fuel health care inflation. While the PPACA does provide new coverage for many preventive services, this will lead to increased costs due to additional diagnostic and treatment services engendered. (3) (Russell, L. Preventing chronic disease: An important investment, but don’t count on cost savings. Health Affairs 28 (1): 42-5, 2009)
•  Private insurers can’t contain health care costs, even where they have dominant market power. A 2009 report by the Congressional Research Service, The Market Structure of the Health Insurance Industry, concludes that “The exercise of market power by firms in concentrated markets generally leads to higher prices and reduced output—high premiums and limited access to health
insurance—combined with high profits.” (4) (Austin, DA, Hungerford, TL. The Market Structure of the Health Insurance Industry. Washington, D.C. Congressional Research Service, November 17, 2009)
• There are no controls over premium rate increases by insurers. Despite the outcry by government officials, annual premium rates are escalating at rates up to 56 percent (5) (Johnson, A. Fight over health-care premiums heats up. Wall Street Journal, February 19, 2010: A6), and there is no end in sight for continued exorbitant rate increases. Insurers will continue to game the system by extracting
maximal profits and offering reduced coverage with actuarial values (the amounts insurers actually pay in coverage) as low as 60 or 70 percent.
•  National health care spending will grow unabated despite the passage of PPACA. The Centers for Medicare and Medicaid Services (CMS) projects that overall national health expenditures (NHE) will increase from its present 17 percent of GDP to 21 percent in 2019, a total of $4.470 trillion. (6) (Foster, RS. Office of the Actuary. Estimated financial effects of the “Patient Protection and Affordable Care Act,” as Amended. Centers for Medicare and Medicaid Services, April 22, 2010)

These well-documented trends leave no room to think that health care “reform” will have any chance to contain health care costs. Instead, health care inflation will be exacerbated by all the new incentives and inefficiencies in the new “system”. In our next post we will examine the impact of these trends on affordability of health care.

Dr. John Geyman is professor emeritus of family medicine at the University of Washington School of Medicine in Seattle, a past president of Physicians for a National Health Program and author of “Do Not Resuscitate: Why the Health Insurance Industry Is Dying, and How We Must Replace It.” Buy John Geyman’s Books at: http://www.commoncouragepress.com

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KFF’s health subsidy calculator

Posted by on Thursday, Jul 8, 2010

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.

Premium Assistance for Coverage in Exchanges

Health Reform Subsidy Calculator

Kaiser Family Foundation

An example for a 50 year old with a family of four, with income at 401% of federal poverty level:

$93,934 – Projected income in 2014

$16,858 – Unsubsidized health insurance premium in 2014

N/A – Maximum % of income the family has to pay for the premium

$16,858 – Actual family required premium payment

$0 – Government tax credit

$12,500 – The maximum out-of-pocket costs the person/family will be responsible for in 2014 (not including the premium)

$29,358 – Premium plus out-of-pocket costs

31% – Percent of income for premium plus out-of-pocket costs


This calculator is useful for determining anticipated individual and family costs for insurance premiums plus out-of-pocket expenses for plans obtained through the insurance exchanges, if execution of the program is optimal.

Uncertainties arise since 1) premiums are not guaranteed and could be much higher if private insurers fail to restrain cost increases, and 2) out-of-pocket costs could be much higher based on plan design, limitations of provider networks, and expenses for disallowed services and products.

Furthermore, most individuals and families will not even be allowed to purchase plans through the exchanges.

What kind of reform is this? We could have covered everyone without the need to create personal financial hardship had we adopted a single payer national health program. In fact, we can still do that.

PPACA’s redistributive aspects are at great risk

Posted by on Wednesday, Jul 7, 2010

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 Political Challenges That May Undermine Health Reform

By Theda Skocpol
Health Affairs
July 2010


As with all major social legislation, years of decisions and disputes over implementation lie ahead for the Patient Protection and Affordable Care Act. Opponents at the state and national levels may seek the law’s judicial overturn or repeal. However, a far more serious effort to undermine the law will come about through challenges to various administrative arrangements, taxes, and subsidies to fund expansions of coverage. The redistributive aspects of health reform will be especially at risk, as business interests and groups of more-privileged citizens press for lower taxes, looser regulations, and reduced subsidies for low-income people.

The Staying Power Of Redistributive Reform

As the New York Times reporter David Leonhardt has observed, the new health reform legislation “is the federal government’s biggest attack on economic inequality since inequality began rising more than three decades ago.” The American rich have been getting richer; meanwhile, in contrast to the situation in many other nations attempting to mitigate rising market inequalities, the U.S. government in recent decades has exacerbated them through tax cuts that disproportionately benefit the rich. But the 2010 health reform promises subsidies to millions of working people of modest means, whose employers do not provide health insurance and who cannot afford to buy it themselves in the existing marketplace. Most of the revenues to pay for coverage expansion come from Americans making more than $250,000 a year, as well as from fees on businesses and cuts in subsidies to private insurers involved in Medicare.

Anti-Reform Interests

Cheering as this aspect of reform may be to analysts concerned about rising inequality in the United States, the political storms to come should not be underestimated. Many aspects of the U.S. political system give vastly disproportionate leverage to the privileged and well-organized wealthy interests. These are the very groups and interests that Obama is asking to pay for health care for their less-fortunate fellow citizens. They don’t like it, and they have potent weapons at their disposal to fight back: money for media campaigns, legions of lobbyists, and now, with the recent Supreme Court Citizens United decision that the government may not ban political spending by corporations in elections, an unlimited ability to contribute to candidates.

With every resource at their disposal, these groups will weigh in as regulations are written at the federal level—and also as rules for insurance exchanges are devised in multiple states. They will use the system to elect representatives, senators, governors, and state legislators who share their sympathies. They will lobby politicians’ staffs to make changes in taxes, subsidies, and rules. Much of this will happen out of public view; it will be complicated and might not gain much attention from the news media.

Subtle Efforts To Undermine The Law

In the end, the clamorous campaign to have provisions of health reform declared unconstitutional may distract attention from subtler efforts to undermine the law. We will not know for a decade or so how far opponents will succeed in stripping away fees and higher taxes on the privileged, undercutting regulations on private insurers, and reducing redistributive subsidies to the less privileged. But we can predict that much of the intended redistribution will be reversed, because it is so easy and tempting for public officials of either party to enact tax breaks for the rich or to adjust regulations and subsidies as demanded by well-heeled business interests. Each individual change will seem small enough so that particular legislators, even Democrats, can rationalize their votes, but the changes will add up.


The generational redistribution implied in the new health reform will also work to the advantage of those who seek leverage to reverse key provisions. Americans slated to get more help tend to be younger and poorer. Meanwhile, seniors on Medicare, especially rich ones, are not only relatively satisfied with the pre-2010 status quo, but they are also responsive to claims that reforms will hurt their health care. Senior citizens are reliable voters, and over the coming months, they may become even more anxious if discussions are launched about how to cut the deficit by reducing spending growth on Social Security or Medicare. Republicans may face difficulties if they have to explain how the nation can simultaneously oppose any tax increases and prevent cuts to Medicare. In short, the arguments they are using now to fight “Obamacare” may come back to haunt them.

But the logic here may be political, not fiscal. The preferred course for both Republicans and the increasing numbers of senior citizens who may vote for them in 2010 and 2012 may be to get rid of or greatly reduce federal subsidies for the uninsured. These subsidies could shrink well before they are delivered in 2014 and beyond, thus making reform much less redistributive in the end.

Battle Is Not Over

In short, the bitter U.S. war over comprehensive health reform is far from finished. It remains to be seen if the promise of the legislation can be realized in a polity divided by class and generation. A century-long quest for reform may have achieved an uneasy breakthrough. But no one who follows the politics of U.S. health care should think that the battle is over.

(Theda Skocpol is the Victor S. Thomas Professor of Government and Sociology at Harvard and an internationally recognized analyst of comparative and American politics. Skocpol’s books on social revolution and the state are considered fundamental texts and have been translated into several languages.)


Today’s comment is very brief in order to give you more time to read these important excerpts from Theda Skocpol’s article. The redistributive aspects of any health financing reform are absolutely crucial, yet under the Patient Protection and Affordable Care Act, redistribution is at great risk. A single payer national health program would have much greater immunity against the vicious but opaque assault that will be taking place under the current law.

Why patients disenroll from private Medicare Advantage plans

Posted by on Tuesday, Jul 6, 2010

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.

Why Consumers Disenroll from Medicare Private Health Plans

Medicare Rights Center
Summer 2010

This report analyzes data and case notes from the 475 cases presented in 2009 by consumers who called us about disenrolling from Medicare private health plans.

Reasons for Disenrollment (percentage of calls)

24.8% – Provider access problems
21.5% – Misinformation/marketing abuse
19.4% – Coverage problems for medical services
19.4% – Systems/data transfer problems
8.6% – Cost-sharing too high
7.2% – Part D coverage problems
3.2% – Premium increase

Provider Access Problems

The consumer problems in this category incorporate a wide range of provider access issues. They include general complaints and lack of understanding about the limits on provider access imposed by network-based plans, as well as specific concerns, such as the potential interruption of a valued relationship with a doctor who is being dropped from the plan’s network. Provider access problems are often prompted by an acute episode of illness or diagnosis; consumers seek to disenroll when their current plan will not cover care from a home health agency, skilled nursing or other rehabilitation facility, or from a particular specialist, such as a facility or doctor specializing in cancer treatment. This category also includes cases where consumers were misinformed about the limits on provider access before joining.

Disenrollment Due to Cancer

Cancer diagnoses are implicated in a relatively small percentage — less than 5 percent — of the disenrollments, but these cases are some of the most heart-wrenching and most difficult to resolve for Medicare Rights Center caseworkers.

The majority of cancer disenrollment cases — 63.6 percent —  however, involve provider access. The limitations of the private plan networks become apparent after the consumer is referred to a hospital or cancer specialist that is out of network. Treatment of rare or advanced cancers in particular triggers referrals to specialty facilities, such as M. D. Anderson in Houston or Memorial Sloan-Kettering in New York City. During the open enrollment periods, the disenrollments are generally effective the following month. When a person is diagnosed with cancer outside of the open enrollment periods, however, rules that lock consumers into their Medicare Advantage plans for the year generally prevent disenrollment (unless the case also concerns misrepresentation or marketing fraud, as is sometimes the case), and therefore may impede access to the most appropriate cancer treatment facility.


This survey does not quantify the extent of patient dissatisfaction with Medicare Advantage plans since it was limited to individuals calling the Medicare Rights Center to find out about disenrolling from the private Medicare Advantage plans. But it does provide us with an understanding of why patients want out of their plans. First and foremost patients complain of a “lack of understanding about the limits on provider access imposed by network-based plans.”

The second most common complaint was about misinformation and marketing abuse. This was the primary reason for provider access complaints – the Medicare beneficiaries did not understand that their access would be limited to physicians in plan networks.

This has certainly been infuriating for those who have lost their choice of physicians by enrolling in the Medicare Advantage plans, but it has much greater implications under the Patient Protection and Affordable Care Act. Virtually all plans will have network-based restrictions.

President Obama promised us choice of health plans, but the marketing of his proposal was silent on the fact that virtually all of the plans would have limited access – limited choice of physicians and hospitals – because of provider network restrictions.

With the traditional Medicare program, everyone has free choice of their health care professionals and institutions. That should have been a prime goal of health care reform. It still can be should we decide to enact a single payer national health program – an improved Medicare for everyone.

A second opinion on U.S. health care reform

Posted by on Friday, Jul 2, 2010

By Claudia Chaufan MD

In a recent issue in the New England Journal of Medicine, economist Jonathan Gruber praises the Patient Protection and Affordable Health Care Act (PPACA) as a “step in the right direction,” even as he expresses a healthy skepticism about PPACA’s capacity to control escalating health care costs, which he recognizes as “key to the long-term viability of our health care system.” Gruber also argues that there is “shortage of evidence” regarding which approach will meet Americans’ health care needs while controlling costs; therefore there is “no consensus” on what works [1].

Had Gruber looked beyond the U.S. borders, however, he would have found plenty of evidence. For instance, he would have found that U.S. consumption of health care as measured by critical indicators — per capita annual doctor visits, length of stay following heart attacks, or length of stay following normal childbirth – is no greater than the OECD average, and therefore cannot justify the extraordinary level of U.S. spending [2].

He would also have found that U.S. prices for medical care commodities and services are significantly higher than in other nations and constitute a key determinant of U.S. overall spending [3], and that such prices are determined by the exceptionally high administrative overhead caused by the system’s fragmented, public-private financing [4] and by the comparatively limited market power of American patients vis-à-vis their counterparts in countries with national health systems where the government negotiates prices with drug and medical device companies [5]. And he might have concluded that PPACA will do predictably little to change all this.

Moreover, the international literature would have shown the author the extraordinary international consensus around nonprofit financing to cover medically necessary services [5].

But what about the dramatic expansion of coverage promised by PPACA? Is this not a step in the right direction? The problem is that insurance coverage, as desirable as it may be, is not health care, but just a means to that end. And the U.S. system is notorious for providing coverage without care. High co-pays and deductibles are significant obstacles to access. Nor does health insurance offer financial security: nearly 78 percent of personal bankruptcies in 2007 that were linked to medical debt involved persons who were insured at the onset of their illness or injury [6]. PPACA, by allowing the sale of premiums for policies that will cover only 60 percent of health expenses [7], will do predictably little to change this state of affairs.

There is, however, an alternative proposal whose financial and policy soundness are based on decades of international experience and evidence. It would improve and expand Medicare to include all residents in the nation or in one state. That alternative may have to wait until PPACA unravels, as it predictably will [8].

President Obama argued that a model of reform as that implemented by PPACA would allow Americans to build on “what works” [9] – a decades-long experience with employer-sponsored for-profit health insurance. Maybe paradoxically, however, PPACA will unravel as employers realize that it is cheaper to pay a fine than pay for increasingly more expensive and inadequate policies, and employees enter the individual health exchanges implemented by the new law and find them so expensive that they “clamor for a nationalized health care system” [10].


1. Gruber, J., The Cost Implications of Health Care Reform. N Engl J Med: p. NEJMp1005117.

2. Peterson, C.L. and R. Burton, U.S. Health Care Spending: Comparison with Other OECD Countries. 2007. Order Code RL34175(September 17): p. http://assets.opencrs.com/rpts/RL34175_20070917.pdf (Accessed November 10 2007).

3. Anderson, G.F., et al., It’s The Prices, Stupid: Why The United States Is So Different >From Other Countries. Health Affairs, 2003. 22(3): p. 89-105.

4. Woolhandler, S., T. Campbell, and D.U. Himmelstein, Costs of Health Care Administration in the United States and in Canada. The New England Journal of Medicine, 2003. 349(August 21): p. 768-75.

5. White, J., Competing solutions: American health care proposals and international experience. 1995, Washington D. C: The Brookings Institution.

6. Himmelstein, D., U. , et al., Medical Bankruptcy in the United States, 2007: Results of a National Study. The American Journal of Medicine, 2009. 122(8): p. 741-746.

7. Dorgan, B., The Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act. http://dpc.senate.gov/dpcdoc-sen_health_care_bill.cfm, 2010. Democratic Policy Committee.

8. Angell, M., Is the House Health Care Bill Better than Nothing? Physicians for a National Health Program, 2010: p. http://www.pnhp.org/news/2009/november/is_the_house_health_.php (May 17, 2010).

9. The New York Times, Obama’s Health Care Speech to Congress. 2009: p. http://www.nytimes.com/2009/09/10/us/politics/10obama.text.html?_r=1&pagewanted=print (Date accessed September 12, 2009).

10. Helderman, R., Gingrich in Va.: A Republican Congress could defund health care law. 2010: The Washington Post. p. http://voices.washingtonpost.com/virginiapolitics/2010/05/former_speaker_of_the_house.html.

Claudia Chaufan, M.D., Ph.D., is assistant professor at the Institute for Health and Aging at the University of California, San Francisco. She teaches sociology of health and medicine, sociology of power, public health, comparative health care systems and sociological theory. Dr. Chaufan is also vice president of Physicians for a National Health Program-California (http://pnhpcalifornia.org/).

What do the revised Anthem Blue Cross prices mean?

Posted by on Thursday, Jul 1, 2010

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.

WellPoint Scales Back Rate Increases Sought in California

By Avery Johnson
The Wall Street Journal
July 1, 2010

Health insurer WellPoint Inc. is backing off its plan to increase prices by as much as 39% for individuals in California, instead seeking rates for this year that it said would result in a $100 million loss for the company there.

On Wednesday, WellPoint’s Anthem Blue Cross unit told the California Insurance Department that it wants to increase prices for individual policyholders by an average of 14%, down from the 25% average it had previously sought.

“The actual rates we would need are higher than this, but we made a business decision to get a rate implemented,” said Brian Sassi, WellPoint’s president and chief executive of its consumer business unit.

Wellpoint had been hammered for months by the Obama administration and consumer advocates over the size of its initial rate proposal. Angela Braly, its chief executive, and other insurance executives contend that the rising cost of care and demands for higher reimbursement from providers are driving premiums—and that the federal health-overhaul law didn’t do enough to control costs.

WellPoint plans to file 2011 rates in California that do cover costs, they said.

Len Nichols, a health economist at George Mason University, said that WellPoint has “been asserting the point that, ‘You’ve got to understand we can’t control costs.’ And that point has been made, and the message has been heard.”


After withdrawing a request for an average 25 percent increase in premiums for individual health plans in California, Anthem Blue Cross is now asking for an average 14 percent increase, which they claim will result in a loss that they will make up with 2011 premium increases. With medical inflation, a further increase in adverse selection, and an adjustment to eliminate losses, next year’s premium increases will be even more intolerable.

The Obama administration and members of Congress are critical of these increases, blaming Anthem Blue Cross for excessive profits – as if a $100 million loss in this market somehow reflects egregious profits (though, of necessity, they are profitable in other markets).

Obama and Congress are totally off target when they blame the private insurers. The private insurance model does not and cannot work to control costs and insure everyone, no matter how much market advocates wish it could. It is Obama and Congress who bear much of the blame because they were the ones who decided to keep the private insurers in charge.

Although we can blame our elected leaders now, if we don’t communicate to them clearly that they must bring us the reform that we need – a single payer national health program – then we will be left with only ourselves to blame.

The following text is the testimony that Dr. Margaret Flowers presented to the National Commission on Fiscal Responsibility and Reform at its June 30 hearing in Washington. Dr. Flowers is congressional fellow for Physicians for a National Health Program.

I am Dr. Margaret Flowers and I am here today on behalf of Physicians for a National Health Program, the leading physician research, education and advocacy organization in support of a truly universal single-payer health system in the United States. I will speak specifically about the contribution of health care costs to our national deficit and the evidence-based remedy to control these costs.

When compared to health care in other advanced nations, the United States excels in only one area – the amount of money spent per capita per year. Despite our high spending, the U.S. leaves a third of the population either uncovered or underinsured and thus vulnerable to financial ruin.

Medical debt is a leading cause of bankruptcy and foreclosure in our nation despite the fact that most families declaring medical bankruptcy had insurance when they began incurring such debt.

Our health outcomes are relatively poor, placing us 37th in the world, and we rank the highest in preventable deaths, over 100,000 preventable deaths per year, when compared to other advanced nations. It is clear that we are getting poor value in return for our health care dollar.

Health care costs, which are rising 2.5 percent faster than our GDP, are a leading driver of our financial deficit. In fact, if our health care costs were comparable to those in other advanced nations, which provide nearly universal health care with better outcomes, we would currently experience a budget surplus.

The recent health legislation, misleadingly titled the Patient Protection and Affordable Care Act (PPACA), lacks proven cost controls and is predicted to cause U.S. health care costs to rise faster than if there had been no reform at all (Centers for Medicare and Medicaid Services, April 2010) despite continuing to leave tens of millions out.

Given the impact of health care costs, members of this commission may attempt to decrease the deficit by cutting our public health insurance programs, Medicaid and Medicare; however, doing this would be a mistake because it would increase poverty, worsen health outcomes and increase costs.

Since its enactment nearly 45 years ago, Medicare has substantially lowered poverty among the elderly. Studies show that health disparities in the U.S. start decreasing when our population reaches the age of 65. And the cost of health care per beneficiary is rising more slowly for those on Medicare than for those with private health insurance.

Medicaid and Medicare have not caused our rising health care costs but are victims of our fragmented and failed market-based model of health care financing. Shifting the cost of health care from the taxpayer to the patient will not magically make these health care costs disappear or become sustainable.

The solution to our economic crisis is to jettison the costly failed market model of health care and adopt a publicly financed and independently delivered national improved Medicare for All. This is commonly known as “single payer.” A national improved Medicare for All system has myriad benefits:

* Administrative savings of approximately $400 billion per year, which is enough to provide comprehensive high quality health care to all who are uninsured and underinsured.

* Ability to negotiate for pharmaceutical prices as a monopsony which would lower costs by about 40 percent and bring our prices in line with those of other advanced nations.

* Inherent cost controls of global budgeting for health facilities, negotiated fees, bulk purchasing and rational, rather than profit-driven, allocation of capital expenditures and health resources.

* Ability to identify outliers and develop quality improvement tools.

* Eliminate the burden of rising employee health care costs on businesses.

* Enhance the competitiveness of U.S. products in international markets.

* Liberate our population to pursue advanced education or entrepreneurial enterprises.

* Allow older workers to retire which would increase job opportunities for our younger workers.

* Stimulate the economy because families would have more money for discretionary spending.

* Improve the health, and therefore the productivity, of our workforce.

* Eliminate bankruptcy and foreclosure due to medical debt.

* Eliminate the spend-down required for those who need long-term care funded by Medicaid.

* Provide true health security to our population so that nobody has to choose between necessary medical care and other necessities such as housing, food, education and clothing.

Given these multiple economic benefits – and I have not begun to describe the ways in which national improved Medicare for All would improve patient choice and quality of health care – it is no surprise that the single payer approach is supported by the majority of those in the U.S. and the majority of American physicians. This was evident once again last Saturday in the town meetings sponsored by America Speaks when participants across the nation demanded single payer as an option to solving the health care crisis and 71 percent voted not to cut Medicaid and Medicare.

Private health insurance is rapidly becoming a thing of the past. There is a steady trend in fewer people being enrolled in employee-sponsored health plans. This is expected to increase under PPACA as businesses have an incentive to drop insurance benefits and pay the lower cost penalty.

There is a steady trend in people choosing high deductible plans which leave them financially vulnerable in their time of need. As people enter the individual market, those with health conditions will find it difficult to afford adequate insurance.

The trends for those who are uninsured and underinsured will continue upward. Under PPACA, billions of public dollars will be used to subsidize rising private insurance premiums for policies that cover fewer and fewer services. The result is a flow of patient and public dollars into the coffers of private insurance corporations with declining return in terms of health care. This trend is not sustainable.

The alternative scenario of a national improved Medicare for All will save lives and save money. National improved Medicare for All will place our nation on the path of becoming one of the best health systems in the world – something of which we can all be proud.

This commission has the ability to recommend creating a financially sustainable universal health system. I urge the members of this commission to recommend addressing the deficit through adopting this most popular approach: national improved Medicare for All. Don’t cut Medicare. Protect it, improve it and expand it to cover everyone.

Proof that individuals game the individual mandate

Posted by on Wednesday, Jun 30, 2010

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.

Short-term insurance buyers drive up cost in Mass.

By Kay Lazar
The Boston Globe
June 30, 2010

The number of people who appear to be gaming the state’s health insurance system by purchasing coverage only when they are sick quadrupled from 2006 to 2008, according to a long-awaited report released yesterday from the Massachusetts Division of Insurance.

The result is that insured residents of Massachusetts wind up paying more for health care, according to the report.

“The active members subsidize some of the costs tied to those individuals who terminate within one year,” the report says.



During the reform process the concern was expressed repeatedly that an individual mandate – requiring individuals to purchase their own health insurance – would result in gaming the system. People would enroll when they needed expensive care, and then drop out after the care was completed. The experience in Massachusetts has demonstrated that it did not take long for the public to learn this game, for this is precisely what has happened. Nevertheless, the individual mandate is now the law of the land.

Options being considered to reduce this form of adverse selection include, as examples, allowing open enrollment for only one month per year, or increasing the penalty for remaining uninsured. Although such measures might reduce this tendency to game the system, they will not eliminate it.

It is the structure of the financing system that is fundamentally flawed. It cannot be fixed merely by tweaking the mandate, nor by tweaking the thousands of other provisions in this dysfunctional system. It needs to be replaced with a structurally sound system.

With a single payer national health program the issue of an individual mandate would be moot since everyone would be enrolled, automatically, throughout life.

Sen. Evan Bayh’s fortunes tied to WellPoint

Posted by on Wednesday, Jun 30, 2010

By Chris Gray

Sen. Evan Bayh, D-Ind., a staunch opponent of single-payer national health insurance who waffled on his support of even a meager government-run public option in this past year’s health care debate, has about a third of his stock invested in just one company: Indianapolis-based WellPoint, Inc., perhaps the most notorious of health insurance companies.

Bayh’s WellPoint stock is worth about $1 million. His net worth is modest by Senate standards, totaling no more than about $3 million in 2008.

Using data provided by opensecrets.org, a PNHP analysis of congressional health insurance stock assets revealed that the industry is not a popular one for legislators, with investments totaling only $2.1 million. Bayh’s investments are almost half that total.

The only other legislators with significant holdings in health insurance stock were Rep. Rodney Frelinghuysen, R-N.J., Rep. Jane Harman, D-Calif., and Sen. John Kerry, D-Mass. Frelinghuysen holds $300,000 in Aetna stock; Kerry has the same amount in WellPoint. Harman has $150,000 in Aetna and $50,000 in WellPoint.

But Frelinghuysen, Kerry and Harman are all among the 20 wealthiest members of Congress, and their health insurance stock is less than 1 percent of their portfolios. Bayh stands out as a clear outlier.

The Indiana Democrat is set to retire at the end of the year. He has disparaged single payer as “socialized medicine” and spoke out against the public option for much of the year before announcing in October that he would not oppose a public plan. He joined Republicans to filibuster an amendment to the Senate bill in December that would have allowed the re-importation of drugs from Canada and Europe.

Bayh’s wife, Susan, sits on the board of directors for WellPoint, and over the past six years has earned at least $2 million in compensation, according to The Street magazine. The Street also said her appointment to the board in 2003 would likely have been viewed as a surprise, since she was relatively young and inexperienced to be helping to direct a multibillion-dollar board.

Bayh frequently stressed his “fiscal conservative” credentials as he helped organize the so-called Blue Dog Democrats, and favored maintaining and bolstering the system of for-profit health insurance throughout the reform debates.

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