Children worse off under Utah’s privatized CHIP program

Posted by on Tuesday, Nov 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.

Central Utah children on CHIP face doctor shortage

By Kirsten Stewar
The Salt Lake Tribune
November 8, 2010

Privatizing Utah’s Children’s Health Insurance Program (CHIP) is supposed to save money and improve services.

But with no proof yet of any savings reaped, the experiment has been tripped up by service breakdowns.

The latest: Complaints from some of the 379 CHIP families in Carbon and Emery counties who say their children no longer have access to pediatric care. That’s because Intermountain Healthcare’s SelectHealth, which inherited some CHIP patients on July 1, has no primary care doctors in that region.

“Now, after 10 years with our local family doctor, we need to find a new one,” said Jason Chambers of Wellington.

Chambers said his doctor applied to become a SelectHealth provider months ago and gave up after receiving no response.

Chambers phoned the toll-free number on his CHIP card and was told his only option was to drive over the mountain to an in-network doctor in Spanish Fork. “That’s 65 miles away — four hours round trip,” to keep an appointment, said Chambers.

Legislation to privatize the CHIP program was backed by the insurance industry and sponsored in 2008 by Taylorsville Republican and insurance broker Rep. Jim Dunnigan… He said he sponsored his bill not as a favor to the insurance industry but to save taxpayer dollars and improve care through market forces.

The drive to divert the administration of publicly-financed health insurance programs to the private sector can be described at best as irrational fanaticism. The claim that private administration of public insurance programs uses market forces to improve quality and reduce costs has been disproven repeatedly. Costs of private administration are always higher, so any reductions in net spending are the result of curtailment of services.

Utah’s Children’s Health Insurance Program is one of the latest victims of this fanaticism. Requiring a four hour round trip to a primary care physician might save money by decreasing utilization, but it certainly fails on the quality measure of access.

If Utah had a publicly-administered universal health program, this wouldn’t even be an issue. Mr. Chambers’ children could continue to go to their own family physician.

Imagine with such a system in place – say a single payer national health program – if someone said that we are turning the program over to a private entity that requires you to travel to a distant community for your routine care, what would be your response? After the expletives, then what would you say?

The irrational fanatics are swarming. How long are we going to tolerate being stung?

President Obama confirms strategy to introduce a Republican reform model

Posted by on Monday, Nov 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.

President Barack Obama

60 Minutes
November 4, 2010

President Barack Obama: … I think there were some that argued, “Well, you should just stop and let people digest all these changes. And so, you shouldn’t take on something as big as health care.” And I’ll be honest with you, Steve, at the time, we knew that it probably wasn’t great politics.

Steve Kroft: You were told that by your aides.

President Obama: Absolutely… So, ultimately, I had to make a decision: do I put all that aside, because it’s gonna be bad politics? Or do I go ahead and try to do it because it will ultimately benefit the country? I made the decision to go ahead and do it. And it proved as costly politically as we expected. Probably actually a little more costly than we expected, politically.

Kroft: In what ways?

President Obama: Well, partly because I couldn’t get the kind of cooperation from Republicans that I had hoped for. We thought that if we shaped a bill that wasn’t that different from bills that had previously been introduced by Republicans — including a Republican governor in Massachusetts who’s now running for President — that, you know, we would be able to find some common ground there. And we just couldn’t.

President Obama now confirms what was obvious all along. A political decision was made to introduce the Republican model of health care reform, with the presumption that the Republicans would cooperate. The tragedy is not that it proved to be so costly politically, but rather that we are locked into a very expensive and quite ineffective model – the version that has now been abandoned by the Republicans.

Those “secret negotiations behind closed doors” were not so secret. Senators Grassley and Enzi were cooperating in their respective committees to try to build reform on what was really the Republican model, drafted by a recruited WellPoint executive. During negotiations the basic model was not modified, and the disputed differences in policy were negligible. Only after it became evident that the health care reform effort could be used to discredit the Democrats did Grassley and Enzi yield to the Republican leadership by agreeing to become opponents of the effort. This has been a tremendous lesson in the pitfalls of placing politics before policy.

Yes, the Democrats did pass a bill, but can you call that a success? The bill will not control spending, it will not insure everyone, and it will establish under-insurance as the norm, exposing individuals and families with health care needs to financial hardship.

Simply stated, this was yet another political failure in our nearly century-long quest for health care for all.

No effective bill can possibly be passed in the next two years because of the current political climate, but that does not mean that we should wait it out until the politics are right. Quite the contrary.

Many in the nation still do not understand that an improved Medicare that would cover everyone is a vastly superior option. It is imperative that we greatly intensify our efforts to be sure that they do understand. If we wait until we like the partisan ratios in the House and Senate, it will be far too late for us to have any real impact.

Get to work.

By Benjamin Day

Massachusetts voters have, for the second straight election, overwhelmingly affirmed their support for single payer health reform by turning in majority ‘Yes’ votes in all fourteen districts where local single payer ballot questions appeared on November 2. The ballots spanned 80 different cities and towns in a state of 351 municipalities, winning in every city and town reporting results so far except two. Five of the districts backing single payer reform voted for Scott Brown in last year’s special senate election, which was largely seen as a referendum on national health reform, showing that the goal of improved and expanded Medicare for All is supported by a diverse range of communities across the state. It is also striking that in a year of political change, and in a year of drawn-out economic suffering, residents recognize that single payer health reform offers the promise of a more just and humanitarian health care system, which would actually cost us less as a society and lift the burden of sky-rocketing health costs from thousands of households, employers, and taxpayers.

Similar local referendum questions passed overwhelmingly in ten representative districts in 2008, and we look forward to building momentum for the state’s single payer bill even further this coming legislative session, which begins in January 2011.

Mass-Care wants to extend congratulations to all of the hard-working volunteers who collected signatures to put these questions on the ballot, got the word out to their local media, worked on public education with community organizations in their districts, and spoke one-on-one with residents of the district on the streets, holding signs, and standing outside of polling places.

Mass-Care also wants to extend its congratulations to the Vermont single payer movement. Peter Shumlin was elected Governor of Vermont running on a single payer platform. This is incredibly exciting as the Vermont legislature recently commissioned Dr. William Hsiao, the designer of Taiwan’s single payer health care system, to draft an implementation and impact study for a potential single payer plan in Vermont.

Not every precinct has yet reported results to the state, but we include partial results in a table below. Official results for every district will be posted on the Boston Globe web-site and on this page when they become available.

District Precincts
No Yes Yes %
2nd Berkshire 19 of 23 3,433 7,698 69.2%
4th Berkshire 25 of 26 3,078 8,145 72.6%
1st Franklin 22 of 22 4,584 11,986 72.3%
8th Hampden 18 of 18 4,056 5,845 59.0%
4th Middlesex 16 of 16 6,332 7,417 53.9%
13th Middlesex 12 of 12 6,182 8,226 57.1%
14th Middlesex 10 of 11 6,461 12,871 66.6%
29th Middlesex 14 of 14 3,891 9,184 70.2%
5th Norfolk 14 of 14 6,910 7,818 53.1%
11th Norfolk 12 of 12 7,606 8,471 52.7%
12th Norfolk 13 of 13 6,998 7,806 52.7%
11th and 15th Suffolk* 36 of 36 5,279 19,309 78.5%
13th Worcester 11 of 11 5,198 7,107 57.8%
Total 222 of 228 70,008 121,883 63.5%

* Results from Suffolk district are unofficial.

Benjamin Day is executive director of Mass-Care: The Massachusetts Campaign for Single Payer Health Care.

By Jennifer Katzenberg

After listening to Dr. Rob Stone’s talk at the satellite “Rally to Restore Sanity/Keep Fear Alive” in Chicago’s Grant Park this past Saturday, I was impressed by his ability to succinctly explain the problems with the current state of health care and health reform in this country.

Stone began by saying, “I went to medical school so I could take care of people.” He talked about his years of experience as an emergency room doctor in rural Indiana where he sees everyone who comes in – insured, poorly insured or uninsured.

Appealing to the “fear” aspect of the rally, Stone shared the shameful statistic that “50 million, or 1 in 6 Americans, are uninsured” and said that “no other civilized country leaves 50 million people without coverage.”

He then asked how many people either know someone who is uninsured or are uninsured themselves. Shouts of “Yes!” erupted and hands flew up across the large crowd.

He then referred to President Obama’s interview on Jon Stewart’s “The Daily Show” last week, highlighting Stewart’s remark that some people think the new health law is too “timid.” It is clear that Stone, along with many others, feels the health bill was indeed timid because “Congress is afraid of big corporations.”

“We try to get health insurance in this country mostly from for-profit, Wall Street-driven companies,” he said. “Wall Street has taken over health insurance,” and it’s a big problem that the new law “keeps private insurance as a major centerpiece.”

“We have to speak up for what the people need and not what the corporations need,” Stone said. The audience cheered in response.

Speaking of the private insurers, Stone said, “We’ve got to find a way to move them aside and just make one big pool of all of us where we’re all covered. … That’s what we call single payer, that’s what we call an expanded and improved Medicare.”

Stone said single-payer health reform is what is “sane,” and the crowd clearly agreed. Who could argue with that? How could anyone honestly believe in keeping people uninsured or poorly uninsured?

As Stone walked off stage, he had the crowd chanting, “Everybody in, Nobody out!”

More Americans need to hear people like Stone talk about health care so that Medicare-for-All has a chance.

Jennifer Katzenberg is an intern at Physicians for a National Health Program (

What does the election say about single payer?

Posted by on Wednesday, Nov 3, 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.

Single Payer Ballot Questions Pass in All Fourteen Massachusetts Districts!

November 3, 2010

Massachusetts voters have, for the second straight election, overwhelmingly affirmed their support for single payer health reform by turning in majority ‘Yes’ votes in all fourteen districts where local single payer ballot questions appeared on November 2.

Single-payer health insurance

Should the state representative from this district be instructed to support legislation establishing health care as a human right regardless of age, state of health, or employment status, by creating a single payer health insurance system like Medicare that is comprehensive, cost effective, and publicly provided to all residents of Massachusetts?

222 of 228 precincts reporting

Yes – 63.5%
No – 36.5%

The day after the decisive Republican takeover of the U.S. House of Representatives some pundits are claiming that this shift in political power is, in part, due to the rejection of Obamacare – the Patient Protection and Affordable Care Act. This political message is not completely clear in that there was no national expression of what the public might want instead. But look at what the citizens of Massachusetts have to say.

The people of Massachusetts have been living with Romneycare, a model of health care financing that uses the same fundamental policies as are found in Obamacare. They now know what the nation will know after 2014.

What do they say about Romneycare and Obamacare? Almost two-thirds of voters in districts that considered this issue would reject Obamacare and Romneycare in favor of “creating a single payer health insurance system like Medicare that is comprehensive, cost effective, and publicly provided to all residents of Massachusetts.”

And, oh yes, the citizens of Vermont elected, as governor, Peter Shumlin, an outspoken advocate of single payer.

Some of the people do seem to be getting the message that single payer is for their benefit, but we have much more work to do to educate the others.

Value-based insurance design

Posted by on Tuesday, Nov 2, 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.

Applying Value-Based Insurance Design To High-Cost Health Services

By James C. Robinson
Health Affairs, November 2010

Value-based insurance design programs have focused on reducing consumer cost sharing in health insurance for preventive tests and medications for chronic diseases. But for value-based design principles to have a stronger clinical and economic impact, they should be extended to expensive services and to those for which the evidence is limited or controversial. This paper proposes applying value-based insurance design principles to self-administered and office-administered specialty drugs, implantable medical devices, advanced imaging modalities, and major surgical procedures.


Applying Value-Based Insurance Design To Low-Value Health Services

By A. Mark Fendrick, Dean G. Smith and Michael E. Chernew
Health Affairs, November 2010

Value-based insurance design improves health care quality and efficiency by reducing cost sharing for services that have strong evidence of clinical benefit. The same goals can also be accomplished by increasing cost sharing for low-value services, which would ensure more effective care and achieve net cost savings. However, there are challenges in defining what is meant by “low-value services” and implementing programs to restrict such services’ use. This paper argues that investments in processes to define low-value care, comparative effectiveness research to identify services that produce harm or marginal clinical benefit, and information technology to implement findings can facilitate applying value-based insurance design to the low-value realm.


Assessing The Evidence For Value-Based Insurance Design

By Niteesh K. Choudhry1, Meredith B. Rosenthal and Arnold Milstein
Health Affairs, November 2010

High copayments for medical services can cause patients to underuse essential therapies. Value-based health insurance design attempts to address this problem by explicitly linking cost sharing and value. Copayments are set at low levels for high-value services. The Mercer National Survey of Employer-Sponsored Health Plans demonstrates that value-based insurance design use is increasing and that 81 percent of large employers plan to offer it in the near future. Despite this increase, few studies have adequately evaluated its ability to improve quality and reduce health spending. Maximizing the benefits of value-based insurance design will require mechanisms to target appropriate copayment reductions, offset short-run cost outlays, and expand its use to other health services.

Impact Of Health Care Fragmentation

Payers have the greatest incentive to adopt plans using value-based insurance design when they stand to benefit from reductions in spending on medical care that is averted from the use of highly effective therapies. However, the fragmented nature of the US health care system may reduce the likelihood of this scenario. Payers often carve out certain types of benefits, most notably for prescription drugs. Similarly, pharmacy benefit managers often have little incentive to reduce cost sharing for fully insured people unless such terms are specifically negotiated. In addition, patients frequently switch insurers, such as when they change jobs. Thus, with the exception of very high-risk conditions where improved quality may be achieved quickly, payers face the possibility that they will bear the cost of therapy while other payers reap the savings from averted clinical events.

The implications of insurance “churn” — the switching and dropping out of plans as employment changes — are less relevant in systems with a single payer that provides comprehensive coverage over a longer period of time.

Value-based insurance design generally refers to the drafting of insurance benefits in a way that would improve health care value. Under this concept, financial disincentives such as deductibles, copayments and coinsurance should be reduced or eliminated for health care that has been proven to be beneficial, whereas these cost-sharing measures should be increased for “expensive services and those for which the evidence is limited or controversial.” Is this a good idea?

There is already considerable evidence that reducing cost sharing for proven drugs and for preventive services is of benefit for the health of the individual. Patients taking effective maintenance medications are more likely to fill their prescriptions, and patients are more likely to access preventive screening services. However, the evidence that this saves money is quite spotty and weak. Nevertheless, eliminating barriers to beneficial care is desirable, and our health care policies should be designed to encourage such improved access.

What about increasing financial barriers to expensive care, such as specialty drugs, implantable medical devices, advanced imaging modalities, and major surgical procedures? If these expensive services are beneficial, then higher cost sharing explicitly creates rationing based on the ability to pay. Those who can afford the high out-of-pocket expenses receive the care, and those who can’t afford the cost sharing don’t. Those of us who are passionate advocates of health care justice would find this to be totally unacceptable. We would support more equitable policies to address the cost issues.

What about increasing financial barriers to expensive care for which the evidence of benefit is marginal or controversial? Do we want to have a system in which the wealthy can spend whatever they want for try-it-and-see health care, while those of more modest income are not allowed that option? First of all, there is a lot of high-cost care that falls into this marginal category, much of which should probably be made accessible to everyone. So financial barriers would still be inappropriate from a policy perspective.

But what about the care that crosses the threshold of clearly being too expensive while likely of no value or perhaps even detrimental? Should that care still be available, if only for the wealthy? Should we even care? The problem is that the health care delivery infrastructure is a limited resource; it is expensive; and we all pay for it. Diverting our health care resources, at the whim of the wealthy and those who would profit from them, places stresses on our capacity that can have undesirable consequences such as unnecessarily expanding queues.

Value-based insurance design is a bad idea for three reasons: 1) we should not have financial barriers to beneficial health care services; 2) we should not use financial barriers that establish two-tiered or multi-tiered systems which favor the wealthy while neglecting our workforce; and 3) we shouldn’t continue with the creation of administratively burdensome policies made necessary merely because our Congressional leaders value our private insurers more than they value patients.

One statement pulled out of this special issue of Health Affairs carries a very pregnant message that the authors likely didn’t intend:

“The implications of insurance ‘churn’ — the switching and dropping out of plans as employment changes — are less relevant in systems with a single payer that provides comprehensive coverage over a longer period of time.”

Cast a vote for single-payer

Posted by on Tuesday, Nov 2, 2010

Originally published in the Berkshire Eagle.

On Nov. 2, you will be able to vote for “single-payer” health care if you live in the 2nd or 4th districts of Berkshire County. This referendum is non-binding, but will send a strong message to our legislators and governor.

A single-payer health care program would be an expanded and improved Medicare system for everyone, not just senior citizens. The government would be the only administrator of the health care funds (the “single payer”), rather than the hundreds of for-profit health insurance companies which currently administer our health care dollars.

The insurance companies add to the enormous cost of health care by keeping 20-30 percent of our health care dollars for their administration, profits and exorbitant CEO salaries. In contrast, Medicare uses less than 1.5 percent of our health care funds for administration. “Single payer” refers only to the administration of health care dollars, not to the delivery of care, which would remain in the hands of health care providers.

Who will benefit from a single-payer system?

First, patients will experience cost-savings and better access to care. Rather than paying insurance premiums that increase in price each year for policies that provide less coverage with higher deductibles and co-payments, everyone will pay a modest income tax that will cost less than current premiums for health care insurance. Plus, patients will be able to choose their own doctors.

Second, doctors and hospitals will benefit, because they will no longer have to hire legions of office workers for administrative tasks. Doctors will be relieved of the onerous paperwork demands from multiple insurance companies, freeing them to spend more time with their patients.

A majority of doctors support single-payer health care. The annual study by the Massachusetts Medical Society found doctor shortages throughout our state, especially in the Berkshires, and especially in primary care. Doctors were asked about their preferences for a health care system: they picked single-payer health reform over a public option, over high-deductible plans, and over the Massachusetts health reform — in short, over every other option presented. The current Massachusetts health reform was least favored.

Third, business will benefit, especially small business owners who view rising health insurance costs for their employees as their greatest concern. If everyone were covered by a single-payer program, payment for health care would no longer be tied to employment, and business owners would be freed from an expensive, complicated responsibility.

Fourth, towns and cities will benefit because they will not need to provide health insurance for their active and retired employees; instead, that money can be used to improve other services such as education.

Fifth, our state will benefit. The recent health care legislation that extended health insurance to 97% of our state population has required enormous infusions of cash to provide subsidies for those unable to afford health insurance policies. As a result, we have filled the coffers of the private health insurance industry, while seriously straining the state budget.

Sixth, even though the Massachusetts referendum is not a national vote, the United States would benefit from a single-payer national health program by saving $400 billion per year in administrative costs alone; a serious consideration for a financially-strapped country. The legislation just passed by President Obama and Congress, the Patient Protection and Affordable Care Act (PPACA), makes only minor improvements to an unsustainable for-profit health insurance system. Similar to the Massachusetts legislation in its laudable attempt to provide universal coverage, this legislation is not cost-effective.

Our government will subsidize private insurance premiums for the “near poor,” channeling $447 billion of taxpayer dollars to private insurers over the next decade. As Drs. Steffi Woolhandler and David Himmelstein (founders of Physicians for a National Health Program) have written, “Morphine has been dispensed for the treatment of cancer — the reform (PPACA) may offer a bit of temporary relief, but it is certainly no cure.”

Another physician, Dr. Edward Ehlinger, wrote, “Insurance is a strange model for health care . (Insurance) is meant for life’s uncertainties, but illness is a pretty sure thing ” That’s why we don’t use the insurance model for fire and police protection or for education. Health care should also be in the category of essential services we will all need someday.

The only loser after single-payer health care is enacted will be the health insurance industry, the middlemen who provide no medical care and siphon our hard earned premiums into their own exorbitant profits.

If you are in favor of a single-payer health care system for Massachusetts, I urge you to vote “Yes” on Question 4 on Tuesday, Nov. 2.

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

Private insurers game Part D

Posted by on Monday, Nov 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.

Fixing Flaws In Medicare Drug Coverage That Prompt Insurers To Avoid Low-Income Patients

By John Hsu, et al
Health Affairs
October 28, 2010


Since 2006 numerous insurers have stopped serving the low-income segment of the Medicare Part D program, forcing millions of beneficiaries to change prescription drug plans. Using data from participating plans, we found that Medicare payments do not sufficiently reimburse insurers for the relatively high medication use among this population, creating perverse incentives for plans to avoid this part of the Part D market. Plans can accomplish this by increasing their premiums for all beneficiaries to an amount above regional benchmarks. We demonstrate that improving the accuracy of Medicare’s risk and subsidy adjustments could mitigate these perverse incentives.

Under the Medicare Part D program for prescription drugs, private insurers are paid more for lower-income subsidized patients with greater health care needs. Since the insurers find that the higher payments are still below what they find to be acceptable, they are setting their premiums at rates above the benchmark levels. This results in an automated transfer of these higher-cost beneficiaries to competitors’ programs.

As long as Congress continues to insist on using private plans for Medicare Part D, we will always see efforts by the insurers to enroll healthier patients while avoiding the sick – gaming by private insurers sometimes referred to as cherry picking and lemon dropping. (Of course, this is also true of private insurers throughout the individual, small group, and large group markets.)

The authors of this study recommend yet more administrative complexity by introducing additional modifications of the calculations in an effort to reduce these perverse incentives, but such changes certainly would not prevent the insurers from seeking other forms of gamesmanship. They owe it to their investors to game the system as much as possible.

How is the Patient Protection and Affordable Care Act addressing this problem? It isn’t. We could have had reform that would increase efficiency and equity while eliminating the private insurers, but Congress rejected that. It’s still not too late to change.

More evidence of the expanding menace of high-deductible health plans

Posted by on Friday, Oct 29, 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.

Profiling California’s Health Plan Enrollees: Large Enrollment in High-Deductible Health Plans

By Dylan H. Roby, Gina L. Nicholson, and Gerald F. Kominski
UCLA Center for Health Policy Research
October 2010

Three million commercially insured Californians were enrolled in high-deductible health plans in 2007. High-deductible health plans (HDHPs) have been gaining momentum in the health insurance market as a way to encourage more rational use of health care services. However, HDHPs come with risks.  While the plans offer lower monthly premiums than typical health insurance coverage, they carry much higher deductibles for health care services. For these plans, the average annual deductible for individuals with employer-based insurance is more than $1,800. Studies have shown that significant cost sharing may create disincentives for both necessary and unnecessary care. While individuals with high-deductible plans may be less likely to utilize the emergency room for care, they may also delay necessary treatment or doctor visits.

Another mechanism for improving the affordability of health insurance is the Health Savings Account (HSA), which allows individuals with high-deductible health plans to set aside tax-deductible funds for medical expenses. However, only 23% of commercial HMO and 20% of commercial Kaiser HMO enrollees with HDHPs reported having HSAs as well. Thirty-one percent of commercial PPO enrollees reported having a Health Savings Account in addition to their HDHP.

With the recent passage of health reform, individuals and families will be mandated to have health insurance beginning in 2014. To comply with the mandate and attempt to save money, consumers may purchase plans with lower premiums. However, they could still face high deductibles and cost-sharing requirements, which would harm their ability to access health care.

Full UCLA report (35 pages):

This large study from the UCLA Center for Health Policy Research provides yet one more confirmation that the use of high-deductible health plans (HDHPs) continues to expand because of the very high cost of private health insurance, yet these high-deductible plans are causing patients to delay or decline necessary health care.

The supporters of HDHPs claim that health consumers can be protected by health savings accounts. Yet this study confirms that two-thirds to four-fifths of Californians with HDHPs do not have health saving accounts. They remain exposed to the full brunt of the deductible.

These findings are particularly applicable to the insurance exchanges which will be established in 2014. The subsidies to purchase plans within the exchanges will be targeted to the bronze and silver plans. These are plans with lower actuarial values – paying a lower percentage of the health care costs – but they will be the plans that most individuals will have to select because the more generous gold and platinum plans will be unaffordable.

How do the bronze and silver plans maintain a lower actuarial value? Primarily by requiring large deductibles. (Also they may apply greater coinsurance rates – a percentage of the health care costs for which the patient is responsible – and they may strip benefits down to the minimum permitted by government regulations.) Thus high-deductible health plans that reduce access to care will become the norm.

We can do better than that. We can improve Medicare by providing first-dollar coverage – eliminating deductibles and coinsurance – and expanding benefits to include all essential services, and then make it universal so everyone is covered. The near nominal cost of first-dollar coverage is well worth having the assurance that financial barriers to all necessary health care would be removed for everyone.

How does the Affordable Care Act define ACOs?

Posted by on Thursday, Oct 28, 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.

Medicare “Accountable Care Organizations”

Shared Savings Program – New Section 1899 of Title XVIII

Centers for Medicare and Medicaid Services (CMS)
Office of Legislation

Preliminary Questions & Answers

The Affordable Care Act (ACA) improves the health care delivery system through incentives to enhance quality, improve beneficiary outcomes and increase value of care. One of these key delivery system reforms is the encouragement of Accountable Care Organizations (ACOs). ACOs facilitate coordination and cooperation among providers to improve the quality of care for Medicare beneficiaries and reduce unnecessary costs. This document provides an overview of ACOs and the Medicare Shared Savings Program.

Q: What is an “accountable care organization”?

A: An Accountable Care Organization, also called an “ACO” for short, is an organization of health care providers that agrees to be accountable for the quality, cost, and overall care of Medicare beneficiaries who are enrolled in the traditional fee-for-service program who are assigned to it.

For ACO purposes, “assigned” means those beneficiaries for whom the professionals in the ACO provide the bulk of primary care services. Assignment will be invisible to the beneficiary, and will not affect their guaranteed benefits or choice of doctor. A beneficiary may continue to seek services from the physicians and other providers of their choice, whether or not the physician or provider is a part of an ACO.

Q: What forms of organizations may become an ACO?

A: The statute specifies the following:
1) Physicians and other professionals in group practices
2) Physicians and other professionals in networks of practices
3) Partnerships or joint venture arrangements between hospitals and physicians/professionals
4) Hospitals employing physicians/professionals
5) Other forms that the Secretary of Health and Human Services may determine appropriate.

Q: What are the types of requirements that such an organization will have to meet to participate?

A: The statute specifies the following:
1) Have a formal legal structure to receive and distribute shared savings
2) Have a sufficient number of primary care professionals for the number of assigned beneficiaries (to be 5,000 at a minimum)
3) Agree to participate in the program for not less than a 3-year period
4) Have sufficient information regarding participating ACO health care professionals as the Secretary determines necessary to support beneficiary assignment and for the determination of payments for shared savings.
5) Have a leadership and management structure that includes clinical and administrative systems
6) Have defined processes to (a) promote evidenced-based medicine, (b) report the necessary data to evaluate quality and cost measures (this could incorporate requirements of other programs, such as the Physician Quality Reporting Initiative (PQRI), Electronic Prescribing (eRx), and Electronic Health Records (EHR), and (c) coordinate care
7) Demonstrate it meets patient-centeredness criteria, as determined by the Secretary.

Additional details will be included in a Notice of Proposed Rulemaking that CMS expects to publish this fall.

Q: How would such an organization qualify for shared savings?

A: For each 12-month period, participating ACOs that meet specified quality performance standards will be eligible to receive a share (a percentage, and any limits to be determined by the Secretary) of any savings if the actual per capita expenditures of their assigned Medicare beneficiaries are a sufficient percentage below their specified benchmark amount. The benchmark for each ACO will be based on the most recent available three years of per-beneficiary expenditures for Parts A and B services for Medicare fee-for-service beneficiaries assigned to the ACO. The benchmark for each ACO will be adjusted for beneficiary characteristics and other factors determined appropriate by the Secretary, and updated by the projected absolute amount of growth in national per capita expenditures for Part A and B.

Q: What are the quality performance standards?

A: While the specifics will be determined by the HHS Secretary and will be promulgated with the program’s regulations, they will include measures in such categories as clinical processes and outcomes of care, patient experience, and utilization (amounts and rates) of services.

Q: Will beneficiaries that receive services from a health care professional or provider that is a part of an ACO be required to receive all his/her services from the ACO?

A: No. Medicare beneficiaries will continue to be able to choose their health care professionals and other providers.

Q: Will participating ACOs be subject to payment penalties if their savings targets are not achieved?

A: No. An ACO will share in savings if program criteria are met but will not incur a payment penalty if savings targets are not achieved.

Q: When will this program begin?

A: We plan to establish the program by January 1, 2012. Agreements will begin for performance periods, to be at least three years, on or after that date.

Further details for the shared savings program will be provided in a Notice of Proposed Rulemaking which CMS expects to publish this fall.

Link to text of Sec. 1899 (under Sec. 3022) with a brief summary (plus text and summary of Sec. 2706 – Pediatric ACO Demonstration Project):

Since enactment of the Patient Protection and Affordable Care Act (PPACA) there has been considerable enthusiasm and hype over the provisions establishing accountable care organizations (ACOs). The purpose of today’s message is to look past the hype to see precisely what PPACA says about ACOs.

Today’s quote is the explanation of the applicable section of PPACA as provided by the Centers for Medicare and Medicaid Services (CMS). A link to the precise language of the section is also provided.

Sec. 3022 Of PPACA amends Title XVIII of the Social Security Act by adding Sec. 1899, the Shared Savings Program. The title alone provides a hint of what this really is about since it is not named Accountable Care Organizations.

Many entities already exist that can be called accountable care organizations. These include group practices, networks of individual practices, partnerships or joint ventures between hospitals and health care professionals, and hospitals employing health care professionals. Under PPACA, the Secretary of Health and Human Services (HHS) can include as ACOs any other group of providers and suppliers deemed appropriate.

What the law does is to add another administrative layer that is designed to reduce costs and promote quality. The existing entities plus any new ones formed have to meet certain requirements to qualify as an ACO, and then that allows them to participate in the shared savings program.

The specific requirements:

* Willing to become accountable for the quality, cost, and overall care of the Medicare fee-for-service beneficiaries assigned to it

* A legal structure to receive and distribute shared savings

* A leadership and management structure that includes clinical and administrative systems

* A minimum participation of 5000 patients

* A sufficient number of primary care professionals

* Agree to participate for a minimum of three years

* Define processes to promote evidence-based medicine and patient engagement, report on quality and cost measures, and coordinate care, such as through the use of telehealth, remote patient monitoring, and other such enabling technologies

* Demonstrate patient-centerness criteria specified by the Secretary

* Measure quality of clinical processes and outcomes, patient experience of care, and utilization

This program applies to patients in the traditional fee-for-service Medicare program. Patients do not enroll in the ACOs. They are assigned by the Secretary based on utilization of primary care services. The patients may not even know that they have been assigned, as they are free to go to any providers of their choice, in or out of the ACO.

The ACOs are still paid fee-for-service by Medicare just as they always have been. That doesn’t change (though an amendment authorizes the option of a partial capitation model).

So how do ACOs achieve higher quality and lower cost?

The ACOs are not rewarded monetarily for meeting the quality standards. Their motivation to comply is to avoid being suspended from the program.

Costs are reduced by the shared savings program. A benchmark is established for each ACO “using the most recent available 3 years of per-beneficiary expenditures for parts A and B services for Medicare fee-for-service beneficiaries assigned to the ACO.” If the ACO can provide care for costs below the benchmark, the ACO then shares those savings with HHS. The benchmark is reset at the beginning of each 3 year agreement.

If the costs are above the benchmark, then the fees are still paid as usual, with no adjustments.

Think about this. The incentives continue to promote greater volume. There is no penalty for running the charges up. Is the reward for reducing the volume and intensity of services enough? Since fixed costs for the ACO are relatively unchanged, the reductions in marginal overhead expenses due to reduced volume must be greater than the amount of savings that HHS shares with the ACO in order to come out ahead. Since this is the opposite of “making it up in volume,” it is more likely that net income will be reduced. Further, since the benchmarks are reset every 3 years based on lower utilization, it is very unlikely that that the ACO could continue to ratchet down services to qualify for shared savings.

Some models of integrated health systems function well and should be encouraged as long as the goal is higher quality and greater value, while shunning policies that provide perverse incentives for greater profits by reducing beneficial health care services. But why would a well-functioning integrated health care system want to add an additional administrative layer, with additional quality-reporting requirements, just to be designated as an ACO, especially when the net result likely reduces the bottom line?

It is truly unfortunate that the fervor and hype over ACOs have provided yet one more distraction from the important task at hand. We need to replace our flawed health care financing system with one that works – a single payer national health program. That would include everyone of us in a quality system that we could pay for.

About this blog

Physicians for a National Health Program's blog serves to facilitate communication among physicians and the public. The views presented on this blog are those of the individual authors and do not necessarily represent the views of PNHP.

News from activists

PNHP Chapters and Activists are invited to post news of their recent speaking engagements, events, Congressional visits and other activities on PNHP’s blog in the “News from Activists” section.