Preexisting conditions, reinsurance, and risk adjustment

Posted by on Thursday, Jan 31, 2013

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

States rethink high-risk-pool plans

By Brett Norman
POLITICO, January 29, 2013

When the health exchanges open next year, they will cover some of the sickest and costliest patients, people who cannot easily get insurance precisely because they are so likely to run up bills that no insurer would want to be on the hook for.

The federal health law contains several measures designed to spread the risk and tamp down some of the expected turbulence in the market. But a recent change in how the Department of Health and Human Services plans to run a three-year, $20 billion fund — known as reinsurance — to cushion health plans that end up with lots of high-cost customers is forcing states to rethink their own timetable for shifting some of their highest-risk people into the exchanges.

The fear, of course, is that if all the sick people flood the exchanges and younger, healthier ones hold back, premiums could surge. The health law has a bunch of mechanisms to try to avert rate shock — but questions remain about how well they will work.

More than 300,000 people are now covered through special plans for people with pre-existing conditions — about 100,000 in pools created by the health law and more than 200,000 in older, state-run pools.

The federal plan was designed from the start to be temporary and to shut down as soon as the exchanges open.

But many states had planned on moving their high-risk pool populations into the exchanges slowly to mitigate the shock to the individual market. But now, the state high-risk pools may offload as many people as they can onto the exchanges as soon as they open in 2014 or risk losing a piece of that $20 billion pie.

The Affordable Care Act program requires all insurers to pay into the reinsurance fund — and to be paid out of it if they have a big share of really expensive customers in the individual market. State officials had anticipated having a voice in distributing those payments to hard-hit plans in their states, but HHS in December proposed that it would give the money to plans with enrollees that cost more than $60,000 per year. And state high-risk pools wouldn’t be eligible for the cash.

The reinsurance program is front-loaded, with $10 billion in the first year, $6 billion in the second and $4 billion in the third and final year. By year three, the hope is that a broad range of people will be in the state exchanges, balancing out the really high-cost patients.

“I don’t think it’s going to be enough — it will offset some but not all of the effect of the high-risk pools on the individual market,” said Jonathan Gruber, an MIT economist who has studied the issue in several states.

http://www.politico.com/story/2013/01/states-rethink-high-risk-pools-exc…

And…

HHS Risk Adjustment Model Algorithm Instructions

Centers for Medicare and Medicaid Services
The Center for Consumer Information & Insurance Oversight

Section 1343 of the Affordable Care Act provides for a permanent risk adjustment program. To protect against potential effects of adverse selection, the risk adjustment program transfers funds from plans with relatively lower-risk enrollees to plans with relatively higher-risk enrollees. It generally applies to non-grandfathered individual and small group plans inside and outside Exchanges.

The methodology that HHS proposes to use when operating a risk adjustment program on behalf of a State would calculate a plan average risk score for each covered plan based upon the relative risk of the plan’s enrollees, and apply a payment transfer formula in order to determine risk adjustment payments and charges between plans within a risk pool within a market within a State. The proposed risk adjustment methodology addresses three considerations: (1) the newly insured population; (2) plan metal level differences and permissible rating variation; and (3) the need for risk adjustment transfers that net to zero.

The proposed risk adjustment methodology developed by HHS:

• Is developed on commercial claims data for a population similar to the expected population to be risk adjusted;
• Employs the hierarchical condition category (“HCC”) grouping logic used in the Medicare risk adjustment program, with HCCs refined and selected to reflect the expected risk adjustment population;
• Establishes concurrent risk adjustment models, one for each combination of metal level (platinum, gold, silver, bronze, catastrophic) and age group (adult, child, infant);
• Results in payment transfers that net to zero within a risk pool within a market within a State;
• Adjusts payment transfers for plan metal level, geographic rating area, induced demand, and age rating, so that transfers reflect health risk and not other cost differences; and
• Transfers funds between plans within a risk pool within a market within a State.

This document provides the detailed information needed to calculate risk scores given individual diagnoses. (The report then goes into 14 pages describing the algorithm for the HHS-Hierarchical Condition Categories risk adjustment model.)

http://cciio.cms.gov/resources/files/ra_instructions_proposed_1_2013.pdf

In a single payer financing system, health care is simply paid for out of a publicly-financed, single risk pool that covers everyone, regardless of how much appropriate health care is provided to each individual.

In our current fragmented financing system, risk pools are segregated and thus are each vulnerable to an influx of high-cost patients (adverse selection). The spending on an excess of high-cost patients drives premiums up ever higher until they are no longer affordable, patients drop out, and the insurer must then shut down (death spiral).

To protect against excessive costs being borne by any single risk pool, policies have been established to cover patients who have preexisting disorders, to provide reinsurance for costs exceeding defined limits, and to transfer funds from risk pools that enrolled healthier patients to risk pools that cover more high-cost patients.

When the Affordable Care Act (ACA) was written, it was recognized that many people with preexisting conditions could not purchase insurance because the insurers wanted to keep their premiums competitive, so they refused to accept these patients. For that reason, a temporary three-year program was established to provide subsidies to new risk pools that concentrated patients with preexisting disorders. Only about 100,000 people were enrolled since the premiums were still unaffordable for many who would otherwise qualify, plus there were restrictions such as a requirement to be uninsured for at least 6 months.

Although these pools for those with preexisting disorders didn’t work very well, at least these individuals would be able to participate in the state insurance exchanges once they become operative next January 1, since ACA requires that every qualified person be accepted regardless of prior conditions (guaranteed issue).

A problem is that adding high-cost patients will drive premiums up, perhaps to a level that could precipitate a death spiral. It was thought that this would be a problem only initially, since later on the pools would be filled with younger, healthier patients who could absorb the higher costs of the sicker patients (a very dubious assumption which we will not address here).

Since this was thought to be a temporary problem, the authors of ACA added another special three-year program – a reinsurance scheme. For any enrollee whose costs exceed $60,000 per year, the government would pick up the balance. Many believe that the $20 billion to be authorized over the three years of the program is not enough to cover the anticipated need.

Well, by the time that plan is terminated, there will have been established a permanent plan to address this problem of unequal distribution of risk between these segregated risk pools – a risk adjustment scheme. This is to be done through the HHS-Hierarchical Condition Categories risk adjustment model mentioned above.

It should be pointed out that a fairly recent study of the Hierarchical Condition model used for Medicare Advantage plans has demonstrated that the private insurers have already learned how to game the system, making patients appear much more ill than they really are (NBER Working Paper No. 16977, April 2011).

It’s too bad since, by enacting a single payer system, Congress could have eliminated the need for temporary high-risk pools, the need for temporary reinsurance, and, especially, the need for risk adjustment schemes which the private insurers will always manipulate to their own advantage.

You might want to click on the link to the HHS Risk Adjustment Model Algorithm (above) and skim through the pages just to get a feeling of the complexity of the risk adjustment process. Better yet, click on the following link and in one picture you’ll understand how the process really works:

http://www.kaiserhealthnews.org/cartoons/2013/January/Risk-Factor.aspx

“Shared responsibility payment” buys you nothing

Posted by on Wednesday, Jan 30, 2013

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

Fact Sheet: Individual Shared Responsibility for Health Insurance Coverage and Minimum Essential Coverage Proposed Rules

Centers for Medicare and Medicaid Services
January 30, 2013

Under the Affordable Care Act, the Federal government, State governments, insurers, employers, and individuals are given shared responsibility to reform and improve the availability, quality, and affordability of health insurance coverage in the United States. Starting in 2014, the individual shared responsibility provision calls for each individual to have basic health insurance coverage (known as minimum essential coverage), qualify for an exemption, or make a shared responsibility payment when filing a federal income tax return.

Highlights of the Proposed Regulations

A principle in implementing the individual shared responsibility provision is that the shared responsibility payment should not apply to any taxpayer for whom coverage is unaffordable, who has other good cause for going without coverage, or who goes without coverage for only a short time.  The proposed regulations include several rules to implement this principle.

For example:

Hardship Exemption Clarified to Protect Taxpayers, Address Key Concerns

The statute gives HHS authority to exempt individuals determined to “have suffered a hardship with respect to the capability to obtain coverage.”  In developing these proposed regulations, HHS considered several particular circumstances that provide good cause to go without coverage.  To provide clarity for taxpayers facing these circumstances, the HHS proposed regulations enumerate several situations that will always be treated as constituting a hardship and therefore allow for an exemption.  Hardship exemptions include:

* Individuals whom an Exchange projects will have no offer of affordable coverage (even if, due to a change in circumstance during the year, it turns out that the coverage would have been affordable).  This rule will protect individuals who turn down coverage because the Exchange projects it will be unaffordable but whose actual income for the year turns out to be higher so they are not eligible for the affordability exemption;

* Certain individuals who are not required to file an income tax return but who technically fall outside the statutory exemption for those with household income below the filing threshold; and

* Individuals who would be eligible for Medicaid but for a state’s choice not to expand Medicaid eligibility.  This rule will protect individuals in states that, pursuant to the Supreme Court decision, choose not to expand Medicaid eligibility.

The HHS regulations also provide that the hardship exemption will be available on a case-by-case basis for individuals who face other unexpected personal or financial circumstances that prevent them from obtaining coverage.

Specific Rules and Process for Receiving an Exemption

The proposed regulations also codify the statute’s nine categories of individuals who are exempt from the shared responsibility payment. These categories are as follows:

Individuals who cannot afford coverage;
Taxpayers with income below the filing threshold;
Members of Indian tribes;
Hardship;
Individuals who experience short coverage gaps.
Religious conscience;
Members of a health care sharing ministry;
Incarcerated individuals; and
Individuals who are not lawfully present.

http://www.cms.gov/apps/media/fact_sheets.asp (Select the Fact Sheet on “Individual Shared Responsibility…” dated January 30, 2013.)

Today CMS and the IRS released two sets of proposed rules which included the exemptions that will be allowed to avoid having to pay a penalty for not being insured.

Basically, the exempt individuals will be those for whom there are no affordable plans, those whose income falls below the threshold for filing tax returns, or those who would qualify for Medicaid under federal law but their state elected not to expand eligibility. A few other exemptions are listed in the excerpts above.

One concern in the actual rule (though not listed in the CMS Fact Sheet) is that the exemption for individuals who would otherwise have to pay more than 9.5% of their income for their share of the premium of an employer-sponsored plan applies only to the employee’s coverage, but not to coverage of the family members as well. At today’s premiums, this means that an employee could pay much more than 9.5% of income if the family were to be included under the employer-sponsored plan, and that would be just for the premiums. The deductibles and other cost sharing would be in addition.

It is interesting that, instead of calling the penalty for being uninsured a tax or a fine, CMS now calls it a “shared responsibility payment,” a payment to be made when filing a federal income tax return. It is ironic that this shared responsibility payment buys you… nothing!

With all of the administrative waste that characterizes our health care system, this rule adds even more administration complexity by providing opportunities to allow individuals to remain uninsured. And the reward is, if they qualify, they don’t have to make a shared responsibility payment. Hurray!

What happened to the reform advocates who were trying to advance policies that would ensure that everyone was covered? Didn’t they have a say in this process? Oh, that’s right. Sen. Baucus had them arrested.

Senate HELP hearing on primary care

Posted by on Tuesday, Jan 29, 2013

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

30 Million New Patients and 11 Months to Go: Who Will Provide Their Primary Care?

Subcommittee Hearing, Committee on Health, Education, Labor and Pensions
United States Senate, January 29, 2013

Primary Care Access
A Report from Chairman Bernard Sanders

Conclusion

The primary health care system in America and its workforce is in significant need of a checkup. As the population grows and ages, as more doctors retire, and as the primary care pipeline dries up, we face a severe shortage of providers. The result is that millions of Americans are not getting the care that they need now and the situation may only get worse. Although the ACA took important steps towards expanding access points by increasing funding for community health centers and the National Health Service Corps, for example, the tremendous scope of the problem requires further attention and action. Just like an illness from which it will be more difficult and costly to recover from the longer we wait, we must take steps now to address the primary care access crisis in America.

http://www.sanders.senate.gov/imo/media/doc/PrimaryCareAccessReport.pdf

Video of the hearing (2 hours):
http://www.help.senate.gov//hearings/hearing/?id=dc487385-5056-a032-522c…

Written testimonies of the witnesses:

Fitzhugh Mullan, MD , Murdock Head Professor of Medicine and Health Policy at the George Washington University School of Public Health and Professor of Pediatrics at the George Washington University School of Medicine, Washington, DC:
http://www.help.senate.gov/imo/media/doc/Mullan1.pdf

Tess Stack Kuenning, CNS, MS, RN , Executive Director, Bi-State Primary Care Association, Montpelier, VT:
http://www.help.senate.gov/imo/media/doc/Kuenning.pdf

Toni Decklever, MA, RN , Government Affairs, Wyoming Nurses Association, Cheyenne, WY:
http://www.help.senate.gov/imo/media/doc/Decklever.pdf

Andrew Wilper, MD, MPH , Acting Chief of Medicine, VA Medical Center, Boise, ID:
http://www.help.senate.gov/imo/media/doc/Wilper.pdf

Uwe Reinhardt, PhD , James Madison Professor of Political Economy and Professor of Economics and Public Affairs, Princeton University, Princeton, NJ:
http://www.help.senate.gov/imo/media/doc/Reinhardt.pdf

Claudia Fegan, MD , Chief Medical Officer, John H. Stroger Jr. Hospital of Cook County, Chicago, IL:
http://www.help.senate.gov/imo/media/doc/Fegan.pdf

We have a crisis in primary care. Unless we improve and expand our primary care infrastructure, we will become more dependent on the alternatives: overuse of emergency departments, fragmented care in walk-in clinics, traveling large distances from rural communities devoid of primary care, excessive use of direct access to specialized services limited to those who can afford it, and, worst of all, limited or no health care access for those who are uninsured and cannot afford it.

Today’s hearing of the Senate HELP Committee is important because it brings attention to the seriousness of this problem, demonstrating that action is an imperative. Although, as you read this, you do not have time to watch a 2 hour video nor read a half dozen testimonies, links are provided so that you can access these resources later – perhaps during the weekend when many of you have more time. If not, these links can be saved for later reference.

Although this session was focused on primary care, a couple of comments from the testimony of Claudia Fegan are apropos because of the larger needs in health care. Claudia is not only Chief Medical Officer of Cook County Hospital, she is also a former President of Physicians for a National Health Program. She understands that primary care would function much better if we had comprehensive health care reform.

As she states, “If we would enact a single-payer national health program, where everyone was entitled to health care as a right, we could focus on delivering to our patients the best care in the world and relieve our physicians of the administrative hassles…”

And her plea to the members of the Senate HELP Committee, “I urge you to work to make a difference, not for me or you, but for the patients I have the privilege of serving, who desperately need their elected officials to care about what happens to them.”

And isn’t her advocacy truly representative of the essence of primary care?

Bill Keller on P4P and single payer

Posted by on Monday, Jan 28, 2013

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

Carrots for Doctors

By Bill Keller
The New York Times, January 27, 2013

With its ambitious proposal to pay doctors in public hospitals based on the quality of their work — not the number of tests they order, pills they prescribe or procedures they perform — New York City has hopped aboard the biggest bandwagon in health care. Pay for performance, or P4P in the jargon, is embraced by right and left. It has long been the favorite egghead prescription for our absurdly overpriced, underperforming health care system. The logic seems unassailable: Reward quality, and you will get quality. Stop rewarding waste, and you will get less waste. QED! P4P!

If only it worked.

For if you spend a little time with the P4P skeptics — a data-bearing minority among physicians and health economists — you will come away full of doubts. In practice, pay for performance does little to improve outcomes or to control costs.

The first problem with P4P is that it does not address the biggest problem. Americans spend more than twice as much per capita as other developed countries on health care — a crippling 18 percent of the country’s economic output, and growing.

But the main reason everything costs less in other countries is that other countries tend to have one big payer — usually the government — with the clout to bargain down prices. A single-payer system has, so far, proven politically unpalatable in this country.

http://www.nytimes.com/2013/01/28/opinion/keller-carrots-for-doctors.htm…

Bill Keller, the former executive editor of The New York Times, explains why pay-for-performance (P4P) is a false solution to the problems of high health care costs and mediocre quality. Although he recognizes the correct solution – a single payer system – he follows the lead of other journalists and politicians in immediately dismissing it as being “politically unpalatable.”

Was Medicare politically unpalatable?

Consider the following oft-expressed concept. “Single payer is the solution that would bring health care to everyone at a cost that we can afford; therefore we shouldn’t adopt it because of concerns about political feasibility.” Phrased this way, obviously this is a non sequitur.

Let’s jam single payer into its proper place in government. The we’ll see how politically unpalatable it is, or rather is not.

HCA hasn’t changed

Posted by on Friday, Jan 25, 2013

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

Judge says HCA broke spending promises

By Diane Stafford
The Kansas City Star, January 24, 2013

The Health Care Foundation of Greater Kansas City has won a $162 million judgment against Hospital Corp. of America, owner of the largest hospital system in the Kansas City area.

The lawsuit contended that HCA hadn’t spent what it promised on capital improvements to the former Health Midwest hospitals that HCA bought for $1.13 billion in 2003. The lawsuit further claimed that HCA had not met its charitable health care commitments to help pay for treating indigent people.

The amounts that HCA agreed to spend within certain deadlines were part of the deal transferring the nonprofit Health Midwest hospitals to the for-profit HCA.

As agreed to by parties to the 2003 sale, the for-profit HCA was to make $450 million in capital improvements to the existing Health Midwest hospitals, which had been nonprofit institutions and needed significant upgrades.

HCA had agreed under terms of the sale to spend more than $650 million on charity health care in the Kansas City area, the judge noted in his decision. How far HCA has gone toward meeting that obligation will be scrutinized in the court-ordered audit.

But in his decision Thursday, (Judge John) Torrence said HCA’s financial accounting made it impossible to tell whether the company had met its charitable health care commitments.

http://www.kansascity.com/2013/01/24/4029002/health-care-foundation-wins…

Physicians for a National Health Program supports not only a much more efficient and equitable single payer financing system, we also support elimination of passive investors from the health care system. Corporate executives and boards that must place priorities of shareholders over patients should have no place in our health care system.

Hospital Corporation of America (HCA) is not only the largest private operator of health care facilities in the United States, it also holds the record for the largest fraud settlement, over $1.7 billion. This current judgement against HCA suggests that they continue to place a priority on profits over patients.

When HCA took over the largest hospital group in the Kansas City area, they agreed to upgrade the hospitals with much needed improvements, plus they agreed to continue to provide charity care as safety net institutions. This was in exchange for allowing them to convert these non-profit hospitals into for-profit facilities under their ownership.

Once gaining ownership, they reverted to business as usual – make money while ignoring the commitments made for charitable care and for improving the facilities. The $162 million judgment that they may have to pay (they are appealing it) to them is not much more than an expense of doing business, especially considering that their 2011 net income was $2.47 billion (adding considerably to Bain’s profits from their investment in HCA).

Although PNHP certainly objects to the diversion of profits to investors – profits that should go for patient care or to help lower costs – the primary reason that we believe that for-profit entities should be expelled from the health care system is the egregious behavior on the part of their corporate executives and board members in using patients as instruments in their quest for profits. In this instance it can be measured by the care that they avoided providing to indigent patients, and by the less than optimal care received by patients in their substandard facilities.

The next time you see a placard stating, “PATIENTS, NOT PROFITS,” keep in mind that it is not just profits, but it is the deeper significance of what corporate greed does to patient care.

Insurers’ criteria for exchanges

Posted by on Friday, Jan 25, 2013

UnitedHealth CEO sees ‘time of great potential and profits’

By Kip Sullivan, J.D.

The Jan. 18 Wall Street Journal carried an article about the willingness of big insurers to participate in exchanges. Its focus was UnitedHealth Group (“United Health weighs in on new exchange option,” B3). UHG consists of an insurance division (UnitedHealthcare) and a number crunching “health services” division (Optum).

According to the WSJ, UHG’s CEO Stephen Helmsley predicts UnitedHealthcare will participate in only 10 to 25 of what it says “could be as many as 100” exchanges. (I assume United derives 100 by multiplying the 50 states times 2 to reflect the Affordable Care Act provisions giving states authority to create separate exchanges for individuals and small employers.) However, Helmsley didn’t write that estimate in stone. He said he is making “absolutely no firm commitment to that range.” The Jan. 18 Minneapolis Star Tribune reported the same statement.

The WSJ article said Aetna “will probably participate in 15 exchanges in 2014,” Humana and Cigna will probably be in 10, and the Blues are expected to “participate widely.”

In short, nine months before enrollment in policies sold on the exchange is due to start, even the biggest insurers cannot say which exchanges they’ll participate in. If they are unsure about which exchanges they’ll be in, they must be even more unsure about what premiums they’ll be charging.

The WSJ article mentioned three factors that insurers say will determine which markets they participate in:

* Whether younger people will be scared off by high premiums (and not sufficiently intimidated by the fine for not having insurance);

* whether the insurer will be able to sign contracts with providers with low reimbursement rates; and

* whether the insurer already owns or can create networks of providers that restrict patient choice of provider.

In states where they already have significant market share, large insurance companies already have some sense of what their provider fees are likely to be and whether they’ll be able to create HMO-like, limited panels of providers. What insurers everywhere haven’t figured out yet is whether premiums for policies sold on the exchanges will have to soar because the exchanges attract disproportionately older and sicker people. The level of uncertainty will decline somewhat over the 2014-2016 period because the fines for not having insurance rise rapidly during those years, and that will force more healthy people to buy insurance rather than pay the fine.

The Star Tribune quoted Helmsley saying the ACA will be good for UHG. As the Star Tribune put it, Helmsley “sees the coming year – and into 2014, 2015 and beyond – as a time of great potential and profits.” The most obvious reason is that the ACA gives UnitedHealthcare millions of new customers. According to Helmsley, the ACA also raises demand for United’s “core competencies.” That is corporate speak for, “The ACA promotes the myth that health care can be improved by data crunchers. The ACA thus raises demand for our computers, our enormous claims data base, and our number crunchers.”

The Star Tribune attributed to Helmsley this exquisitely wrought prose:

“Over the last several years, we have shaped our enterprise as a uniquely adaptable construct of market-facing businesses that serve the critical markets that the ACA is expanding,” Hemsley said.

Uniquely adaptable construct? Market-facing? Construct of market-facing businesses? Don’t you wish you could write stuff like that? What Helmsley really meant was, “Thanks to the insurance industry bailout enacted by the Democrats in 2010, we expect to make a bundle. We’re quite sure we’ll make money off the ACA as a data cruncher, and we’re pretty confident we’ll make money as well selling shoddy insurance to low-income Americans forced onto the exchanges by the individual mandate in the ACA.”

Kip Sullivan, J.D., is a member of the steering committee of Physicians for a National Health Program, Minnesota chapter.

The second managed care revolution

Posted by on Thursday, Jan 24, 2013

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

HMO-Like Plans May Be Poised To Make Comeback In Online Insurance Markets

By Julie Appleby
Kaiser Health News, January 22, 2013

It’s back to the future for insurers, which plan to sharply limit the choice of doctors and hospitals in some policies marketed to consumers under the health law, starting next fall.

Such plans, similar to the HMOs of old, fell into disfavor with consumers in the 1980s and 1990s, when they rebelled against a lack of choice.

But limited network plans — which have begun a comeback among employers looking to slow rising premiums — are expected to play a prominent role in new online markets, called exchanges, where individuals and small businesses will shop for coverage starting Oct. 1. That trend worries consumer advocates, who fear skimpy networks could translate into inadequate care or big bills for those who develop complicated health problems.

Because such policies can offer lower premiums, insurers are betting they will appeal to some consumers, especially younger and healthier people who might see little need for more expensive policies.

Insurers, who are currently designing their plans for next fall, “will start with as tight a network control as they can,” says Ana Gupte, a managed care analyst with Sanford Bernstein.

Plans may also benefit from offering such policies because they are less attractive to those with medical problems, who can no longer be turned away beginning in January 2014.

Driven by consumer and employer demand for lower-cost plans, insurers are already rolling out narrow network policies that have shaved premiums 10 percent or more. A recent survey by benefit firm Mercer found that 23 percent of large employers offered such plans this year, usually among a choice of plans, up from 14 percent in 2011.

Many policies that currently offer a limited network of doctors and hospitals generally allow patients to go to out-of-network providers, with whom they do not have negotiated prices. But patients who seek such care face significant co-payments, which often start at 30 percent of the bill and can go as high as 50 percent.

It is often hard for consumers to figure out how much they might be charged if they go out of network, says Lynn Quincy, senior policy analyst at Consumers Union, publisher of Consumer Reports magazine. In addition to meeting separate annual deductibles for out-of-network care, patients can be “balance-billed” by doctors or hospitals for the difference between what the insurer pays them and their total charges.

That doesn’t change under the federal health law, so consumers could be left on the hook for tens of thousands of dollars.

http://www.kaiserhealthnews.org/Stories/2013/January/23/HMO-limited-netw…

So we didn’t get single payer, but at least we got a bill that brought us an end to insurance company abuses, so they say. But did we really?

Most people purchasing plans through the insurance exchanges will select plans with lower premiums which means the bronze and silver plans that have actuarial values of 60 or 70 percent. To achieve these low values, the plans will require large deductibles and other cost sharing  – expenses that may not be affordable for many who actually need health care.

This article and others have reported on the strategy of insurers to rely more heavily on “narrow network” plans – plans that greatly limit your choice of health care professionals and institutions. Obtaining care outside of the network can result in greater cost sharing plus balance-billing for charges that normally would be disallowed. Current networks are already restrictive enough, but these new super skimpy networks will leave patients even more dissatisfied than they were at the peak of the managed care revolution. And we thought we got away from that.

Although insurers would be prohibited from deliberately excluding more costly, sicker patients, the very design of these plans motivates the healthy to buy them and the sick to shun them. Thus cherry picking and lemon dropping will still be with us, even if not overt.

Can you imagine the celebrations in the board rooms of the insurance and pharmaceutical firms? Officers and directors dancing around the table Don McNeill-style, singing, “Happy days are here again!”

Proposed Rule on Medicaid Premiums and Cost Sharing

Posted by on Wednesday, Jan 23, 2013

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

A Proposed Rule by the Centers for Medicare & Medicaid Services

Federal Register, January 22, 2013

Medicaid, Children’s Health Insurance Programs, and Exchanges: Essential Health Benefits in Alternative Benefit Plans, Eligibility Notices, Fair Hearing and Appeal Processes for Medicaid and Exchange Eligibility Appeals and Other Provisions Related to Eligibility and Enrollment for Exchanges, Medicaid and CHIP, and Medicaid Premiums and Cost Sharing

This proposed rule would implement provisions of the Patient Protection and Affordable Care Act of 2010 and the Health Care and Education Reconciliation Act of 2010 (collectively referred to as the Affordable Care Act), and the Children’s Health Insurance Program Reauthorization Act of 2009 (CHIPRA).

IV. Medicaid Premiums and Cost Sharing

A. Background

Section 1916 of the Act describes long-standing requirements for cost sharing, which apply broadly to all individuals who are not specifically exempted. Such cost sharing is limited to “nominal” amounts. Section 1916 of the Act also establishes authority for states to impose premiums on specific groups of beneficiaries with family income above 150 percent of the federal poverty level (FPL). The Deficit Reduction Act of 2005 (DRA) established a new section 1916A of the Act, which gives states additional flexibility, allowing for alternative premiums and cost sharing, beyond what is allowed under section 1916 of the Act, for somewhat higher income beneficiaries. Such alternative cost sharing may be targeted to specific groups of beneficiaries and payment may be required as a condition of providing services. Alternative premiums and cost sharing imposed under section 1916A of the Act, cannot exceed five percent of family income.

B. Provisions of Proposed Rule

2. Update to Maximum Nominal Cost Sharing (§ 447.52)

Under the authority granted under sections 1916(a)(3) and (b)(3) of the Act for the Secretary to define nominal cost sharing, at § 447.52(b) we propose to revise the maximum amount of nominal cost sharing for outpatient services, which may be imposed on beneficiaries with incomes below 100 percent of the FPL.

To simplify the rules, we propose to remove the state payment as the basis for the cost sharing charge and replace it with a flat $4 maximum allowable charge for outpatient services.

Current rules permit cost sharing for institutional care, up to 50 percent of the cost for the first day of care, for individuals with incomes below 100 percent of the FPL. We are not proposing a change but are considering alternatives for the maximum allowable cost sharing related to an inpatient stay because this is a relatively high cost for very low income people and not a service that consumers have the ability to avoid or prevent. Options under consideration include the $4 maximum applied to outpatient services, $50, or $100, which would encompass the majority of hospital cost sharing currently in effect

3. Higher Cost Sharing Permitted for Individuals With Incomes Above 100 Percent of the FPL (§ 447.52)

Proposed § 447.52 consolidates the requirements for cost sharing established under sections 1916 and 1916A of the Act. Under the statute, states may impose cost sharing at higher than nominal levels for nonexempt individuals with incomes at or above 100 percent of the FPL. Section 1916A provides that states may establish cost sharing for nonexempt services, other than drugs and ED services, up to 10 percent of the cost paid by the state for such services, for individuals with incomes between 100 and 150 percent of the FPL.

4. Cost Sharing for Drugs (§ 447.53)

To provide additional flexibility to states, and to further encourage the use of preferred drugs, we are proposing to define nominal for this purpose so as to allow cost sharing of up to $8 for non-preferred drugs for individuals with income equal to or less than 150 percent of the FPL or who are otherwise exempt from cost sharing. States will have the flexibility to apply differential cost sharing for preferred and non-preferred drugs in whatever manner they consider most effective. For example, a state may charge $2 for preferred and $6 for non-preferred drugs or $0 for preferred and $8 for non-preferred drugs.

For individuals with family income above 150 percent of the FPL, per section 1916A(c) of the Act, cost sharing for non-preferred drugs may not exceed 20 percent of the cost the agency pays for the drug.

5. Cost Sharing for Emergency Department Services (§ 447.54)

In order to make it easier for states to utilize existing flexibilities to reduce non-emergency use of the ED, at § 447.54(a) we propose to allow cost sharing of up to $8 for non-emergency use of the ED no waiver will be required.

For individuals with family income above 150 percent of the FPL, per section 1916A(e) of the Act, there is no limit on the cost sharing that may be imposed for non-emergency use of the ED.

If an emergency condition does not exist, § 447.54(d) includes the requirements for hospital screening and referral currently codified at § 447.80(b)(2), to ensure that beneficiaries have appropriate access to other sources of care, before cost sharing is imposed. Hospitals must assess the individual clinically, identify an accessible and available alternative provider with lesser cost sharing, and establish a referral to coordinate scheduling. Examples of accessible alternative providers are those that are located within close proximity, accessible via public transportation, open extended hours, and able to serve individuals with LEP and disabilities.

5. Premiums (§ 447.55)

At proposed § 447.55, we consolidate and simplify the requirements for premiums established under sections 1916 and 1916A of the Act. Proposed § 447.56(a) describes the option to impose premiums on individuals with family income above 150 percent of the FPL, as established under section 1916A of the Act, while paragraphs (a)(1) through (a)(5) describe the options to impose premiums for specific populations as established under section 1916 of the Act. Except for the minor revisions described below, we are not seeking to change current policy related to premiums.

At § 447.55(a)(5), we propose to revise requirements related to premiums imposed on medically needy individuals whose income is under 150 percent of the FPL. We removed the current income-related scale currently at § 447.52(b) and instead would provide states with the flexibility to determine their own sliding scale for establishing premiums for the medically needy up to maximum of $20 instead of the $19 in current regulation.

VII. Regulatory Impact Analysis

C. Estimated Impact of the Medicaid Premiums and Cost Sharing Provisions

1. Overall Impact

Based on our policy analysis, we do not anticipate significant costs or savings from these proposed changes at the program level given the targeted nature of the cost sharing. We believe these proposed policies would encourage less costly care and decreased use of unnecessary services, which may reduce state and federal costs for the specified services.

2. Anticipated Effects

As states better understand their options for imposing premiums and cost sharing, more states may take advantage of existing flexibilities, such as cost sharing of up to 20 percent of the cost of the service, and the option of allowing providers to deny services for unpaid cost sharing, both of which are targeted to somewhat higher income beneficiaries. Research has shown that higher-than-nominal cost sharing on very low-income individuals can have an adverse impact on access to services by discouraging or preventing such individuals from seeking needed care. However, such impacts are not likely to result from the changes proposed here as they are largely focused on services where there are more appropriate and less costly alternatives. Increased cost sharing may have a negative impact on providers, as uncollected cost sharing reduces provider reimbursement, to the extent that the beneficiary cannot or does not pay the cost sharing and services are nonetheless provided. Under the DRA provisions and this proposed rule, however, states may minimize this impact by allowing providers to deny services for failure to pay the required cost sharing in certain circumstances.

https://www.federalregister.gov/articles/2013/01/22/2013-00659/medicaid-…

Why do patients go on the Medicaid program? Because they’re dirt poor, that’s why. To even bring up a discussion of premiums and cost sharing on these down-and-out people represents the ultimate of bureaucratic insensitivity.

Admittedly, there was some effort to target the cost sharing to encourage more appropriate and less costly alternatives, but permitting states to require up to five percent of family income for out-of-pocket costs is truly unaffordable for most of these families.

This shows how much traction the make-them-shop-with-their-own-money crowd has gained – the moral hazard freaks who are hazardous to our health care morals. There are more effective and humane means of controlling health care costs, single payer being the most obvious. We do not need to erect financial barriers that can impair access to beneficial services, for the poor or for anyone else.

Perhaps the most disturbing statement in this Proposed Rule is the following: States may allow providers “to deny services for failure to pay the required cost sharing in certain circumstances.” Deny services for failure to pay “nominal” cost sharing?! What does that say about health care justice in America?

Baucus/Hatch taxpayer gift to Amgen

Posted by on Tuesday, Jan 22, 2013

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

Fiscal Footnote: Big Senate Gift to Drug Maker

By Eric Lipton and Kevin Sack
The New York Times, January 19, 2013

Just two weeks after pleading guilty in a major federal fraud case, Amgen, the world’s largest biotechnology firm, scored a largely unnoticed coup on Capitol Hill: Lawmakers inserted a paragraph into the “fiscal cliff” bill that did not mention the company by name but strongly favored one of its drugs.

The language buried in Section 632 of the law delays a set of Medicare price restraints on a class of drugs that includes Sensipar, a lucrative Amgen pill used by kidney dialysis patients.

The provision gives Amgen an additional two years to sell Sensipar without government controls. The news was so welcome that the company’s chief executive quickly relayed it to investment analysts. But it is projected to cost Medicare up to $500 million over that period.

Supporters of the delay, primarily leaders of the Senate Finance Committee who have long benefited from Amgen’s political largess, said it was necessary to allow regulators to prepare properly for the pricing change.

But critics, including several Congressional aides who were stunned to find the measure in the final bill, pointed out that Amgen had already won a previous two-year delay, and they depicted a second one as an unnecessary giveaway.

Amgen has deep financial and political ties to lawmakers like Senate Minority Leader Mitch McConnell, Republican of Kentucky, and Senators Max Baucus, Democrat of Montana, and Orrin G. Hatch, Republican of Utah, who hold heavy sway over Medicare payment policy as the leaders of the Finance Committee.

Amgen’s success also shows that even a significant federal criminal investigation may pose little threat to a company’s influence on Capitol Hill. On Dec. 19, as Congressional negotiations over the fiscal bill reached a frenzy, Amgen pleaded guilty to marketing one of its anti-anemia drugs, Aranesp, illegally. It agreed to pay criminal and civil penalties totaling $762 million, a record settlement for a biotechnology company, according to the Justice Department.

Amgen, whose headquarters is near Los Angeles and which had $15.6 billion in revenue in 2011, has a deep bench of Washington lobbyists that includes Jeff Forbes, the former chief of staff to Mr. Baucus; Hunter Bates, the former chief of staff for Mr. McConnell; and Tony Podesta, whose fast-growing lobbying firm has unusually close ties to the White House.

In some cases, the company’s former employees have found important posts inside the Capitol. They include Dan Todd, one of Mr. Hatch’s top Finance Committee staff members on health and Medicare policy, who worked as a health policy analyst for Amgen’s government affairs office from 2005 to 2009. Mr. Todd, who joined Mr. Hatch’s staff in 2011, was directly involved in negotiating the dialysis components of the fiscal bill, and he met with “all the stakeholders,” Mr. Hatch’s spokeswoman said, not disputing when asked that this included Amgen lobbyists.

Aides to the senators said some heavy donors had won and others had lost in the Medicare negotiations — proof that the legislative outcome was based on the merits. “What is the best policy for Montanans and people across the country lies at the heart of every decision Chairman Baucus makes,” said Meaghan Smith, a spokeswoman for Mr. Baucus. “It’s as simple as that.”

http://www.nytimes.com/2013/01/20/us/medicare-pricing-delay-is-political…

With appropriate anger, we can point our fingers toward Sen. Baucus and his colleagues for their involvement in this corrupt half billion dollar taxpayer gift to Amgen, a biotechnology company that has already paid over three-quarters of a billion dollars in penalties for prior criminal acts to which they pled guilty. Sen. Baucus especially deserves our ire since he led the process in bringing us the Affordable Care Act – an act that was designed specifically to serve the financial interests of the private insurance and pharmaceutical industries, at a consequential cost to patients and taxpayers.

Of course, Sen. Baucus is not alone in accepting payment in exchange for favorable legislation. All members of Congress have fundraising challenges. If you check OpenSecrets.org, you will find that most members of Congress are tainted, though they vary in their egregiousness.

Who is ultimately to blame? We elect these people. Health care justice doesn’t stand a chance when displaced by the power of greed and corruption, and we simply turn our backs on it.

Second Inaugural of President Barack Obama

Posted by on Monday, Jan 21, 2013

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

Second Inaugural Speech

President Barack H. Obama, January 21, 2013

We, the people, still believe that every citizen deserves a basic measure of security and dignity. We must make the hard choices to reduce the cost of health care and the size of our deficit. But we reject the belief that America must choose between caring for the generation that built this country and investing in the generation that will build its future. For we remember the lessons of our past, when twilight years were spent in poverty, and parents of a child with a disability had nowhere to turn. We do not believe that in this country, freedom is reserved for the lucky, or happiness for the few. We recognize that no matter how responsibly we live our lives, any one of us, at any time, may face a job loss, or a sudden illness, or a home swept away in a terrible storm. The commitments we make to each other – through Medicare, and Medicaid, and Social Security – these things do not sap our initiative; they strengthen us. They do not make us a nation of takers; they free us to take the risks that make this country great.

http://www.nytimes.com/2013/01/21/us/politics/obamas-second-inaugural-speech.html?_r=0&pagewanted=all

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