AcademyHealth’s ill-judged choice of the 2013 Article-Of-The-Year

Posted by on Friday, Jun 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.

From: Health Affairs <>
Date: Thu, Jun 20, 2013 at 4:37 PM
Subject: Health Affairs Wins AcademyHealth’s ‘Article-of-the-Year’ Award

AcademyHealth has chosen a Health Affairs article as its 2013 Article-Of-The-Year!

The ‘Alternative Quality Contract,’ Based On A Global Budget, Lowered Medical Spending And Improved Quality
By Zirui Song, Dana Gelb Safran, Bruce E. Landon, Mary Beth Landrum, Yulei He, Robert E. Mechanic, Matthew P. Day and Michael E. Chernew
Web First July 11, 2012; print August 2012


The ‘Alternative Quality Contract,’ Based On A Global Budget, Lowered Medical Spending And Improved Quality

By Zirui Song, Dana Gelb Safran, Bruce E. Landon, Mary Beth Landrum, Yulei He, Robert E. Mechanic, Matthew P. Day and Michael E. Chernew
Health Affairs, August 2012


Seven provider organizations in Massachusetts entered the Blue Cross Blue Shield Alternative Quality Contract in 2009, followed by four more organizations in 2010. This contract, based on a global budget and pay-for-performance for achieving certain quality benchmarks, places providers at risk for excessive spending and rewards them for quality, similar to the new Pioneer Accountable Care Organizations in Medicare. We analyzed changes in spending and quality associated with the Alternative Quality Contract and found that the rate of increase in spending slowed compared to control groups, more so in the second year than in the first. Overall, participation in the contract over two years led to savings of 2.8 percent (1.9 percent in year 1 and 3.3 percent in year 2) compared to spending in nonparticipating groups. Savings were accounted for by lower prices achieved through shifting procedures, imaging, and tests to facilities with lower fees, as well as reduced utilization among some groups. Quality of care also improved compared to control organizations, with chronic care management, adult preventive care, and pediatric care within the contracting groups improving more in year 2 than in year 1. These results suggest that global budgets with pay-for-performance can begin to slow underlying growth in medical spending while improving quality of care.

From the Discussion

In year 1, total Blue Cross Blue Shield payouts to groups in the contract probably exceeded savings under the global budget. In year 2, savings achieved by the intervention group were generally larger than the surplus payments received. However, total payments to groups from Blue Cross Blue Shield of Massachusetts, including surplus sharing, quality bonuses, and infrastructure support, probably exceeded the savings achieved by most groups that year. This outcome reflects the design of the contract, which set targets based on actuarial projections to save money over its five-year duration, accounting for anticipated quality bonuses and other payments.

In addition, health care spending growth in Massachusetts slowed in this period as a result of general economic factors.

This model is informative for the broader movement toward accountable care organizations.

Published response:

Misleading Title And Abstract

By Kip Sullivan

In this article about the effect of the Alternative Quality Contract (AQC) administered by Blue Cross Blue Shield of Massachusetts (BCBS), the authors reported savings in what they variously referred to as “medical spending” and just “spending,” but they also reported that non-medical payments to providers (“surplus sharing, quality bonuses, and infrastructure support”) “probably” exceeded the savings in medical spending. They concluded: “Our findings do not imply that overall spending fell” (p. 1891).

In an earlier paper published in the New England Journal of Medicine, these authors offered the identical caveat.

Despite the authors’ warnings, Health Affairs’ editors permitted the phrase “lowered medical spending” to appear in the title of the paper, they permitted the unadorned word “spending” to appear numerous times in the abstract and text, and they failed to include in the title or the abstract the warning that “overall spending” (medical plus nonmedical costs) probably rose. This combination of errors was extremely misleading.

Health Affairs’ editors compounded these errors by permitting authors of two papers published in the next edition (the September edition) to make misleading statements about Song and colleagues’ article. Citing them, Markovich asserted that the AQC “slowed the…growth in medical spending” (p. 1974), and Sood and Higgins claimed the AQC has “demonstrated…a slowdown in the growth rate of health care spending” (p. 2043). Neither paper warned readers that medical spending is not synonymous with total spending, and that BCBS’s total spending may have gone up.

In a letter to the editor published in the November edition of Health Affairs, Rachel Nardin et al. criticized Song et al. for inserting “lowered medical spending” into the title when in fact total spending probably rose. In their reply, Song and Chernew agreed that “total payments are important” and that they probably rose. But rather than simply conceding that their title and abstract were misleading and that a few simple edits would have fixed the problem, Song and Chernew presented an illogical justification for confusing readers about the difference between medical and total spending. They argued that the need to know how providers respond to the AQC somehow justifies conflating medical with total spending. There is no justification for such an easily avoidable error.

Finally, I note that Song et al. made no effort to measure the cost to the providers of participating in the AQC, or if they did, they did not inform their readers of the outcome of this effort.

The three Health Affairs articles I have cited here are not isolated examples of scholars and editors downplaying or totally ignoring administrative or intervention costs and blurring the distinction between medical and total spending. This problem has plagued the health policy literature for four decades. It reached epidemic proportions in the 1990s.

There is an illogical but widespread assumption within the health policy community that if an intervention, such as the AQC, lowers medical spending, it must also have lowered total spending. But interventions designed to change provider behavior, be they HMOs, pay-for-performance schemes, electronic medical records, utilization review, or “medical homes,” are not free. They create new costs for both insurers and providers. Ignoring these costs, or obscuring them by celebrating reductions in medical spending and saying little or nothing about increases in total spending, should be no more acceptable than ignoring the side effects of drugs and procedures.…


Medical Spending And Global Budgets

By Rachel Nardin, David Himmelstein and Steffie Woolhandler
Health Affairs, November 2012

The title of the article by Zirui Song and colleagues (Aug 2012) claims that “The ‘Alternative Quality Contract,’ Based on a Global Budget, Lowered Medical Spending and Improved Quality.” But the Alternative Quality Contract (AQC) only lowered spending if you accept the authors’ idiosyncratic definition of the term medical spending.

In calculating medical spending, the authors exclude three categories of payments that Blue Cross Blue Shield of Massachusetts made to AQC providers: “surplus payments” to providers who kept fee-for-service billing below targets; bonuses for meeting quality goals; and special payments to support providers’ infrastructure to implement the AQC. The authors note, in passing, that these extra payments probably exceeded the “medical” savings. Unfortunately, they report no actual figures for the extra payments (although these figures were presumably available to the two coauthors who are executives at Blue Cross Blue Shield). In other words, Blue Cross Blue Shield’s total costs under the AQC went up by some undisclosed amount, not down.

Global budget payment strategies are currently being promoted as a way to lower total health care costs. The fact that the AQC failed to do this was probably overlooked by many readers and was clearly lost in media reports of these findings and hence in the policy debate.

The case for global budget payment strategies such as the AQC remains unproven.

The health policy community has hung its hat on accountable care organizations as being the be-all and end-all for reducing spending and improving quality in health care. Little does it matter that there is a dearth of objective evidence for this concept; they have continued to push it anyway in their support for the Affordable Care Act.

The ultimate gall of the policy community is shown in their selection of this article by Song et al, trumpeting the savings of this Massachusetts Blue Cross Blue Shield Alternative Quality Contract, when, buried in the article, we learn that the savings were burnt up by “surplus sharing, quality bonuses, and infrastructure support.”

Although the program costs, including additional administration, wiped out the medical savings, it is important to look at what the actual medical savings were. These savings were primarily due to “lower prices achieved through shifting procedures, imaging, and tests to facilities with lower fees.” There was virtually no accountable care magic here. They merely extracted better prices from some of the providers. At that, it was only 2.8 percent, a negligible amount when considering how much more effective publicly administered pricing is than pricing through private insurers. But, again, the all important bottom line is that this savings was lost through the non-medical costs of the program.

This AcademyHealth award should serve as a proxy for the compromised integrity that the policy community has shown in their efforts to push the highly flawed Affordable Care Act.

These authors, along with the Health Affairs editors who approved the misleading title, and the committee members who selected this article for the award are no doubt good people, but they did not have the courage to stand up and say, “This conclusion is (expletive deleted)!”

We know what they should have said: “Although we have shown that the promise of the accountable care organization is not fulfilled, nevertheless we do know how to control spending while improving quality and that is through the enactment of a single payer national health program.” But, no, they didn’t have the courage.

Redesigning Medicare cost sharing

Posted by on Thursday, Jun 20, 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.

Restructuring Medicare

Health Affairs, Health Policy Briefs, June 20, 2013

To reduce federal spending, advance entitlement reform, and simplify benefits, policy makers have proposed redesigning Medicare cost sharing.

What’s The Issue?

Some policy makers have recommended redesigning the program to protect beneficiaries from high out-of-pocket spending, better align incentives to reduce overuse of services, and potentially lower costs for the federal government. Opponents of such reform efforts fear that, in trying to reduce federal spending, reforms will shift costs onto beneficiaries and could make them less likely to seek needed care.

What’s The Debate?

Supporters of redesign believe that cost sharing under a redesigned Medicare program will be more predictable and simpler for beneficiaries to understand and better align incentives to reduce any overuse of services. Others fear that, if designed to reduce federal spending, restructuring the benefit design would likely shift costs onto many Medicare beneficiaries. Critics note that Medicare beneficiaries already spend three times as much of their income on health care as do people under age 65. Critics believe most beneficiaries cannot afford to pay more for their health care and are particularly concerned about proposals that include even higher deductibles or out-of-pocket caps.

Reforms of supplemental coverage, particularly efforts to limit first-dollar coverage, are also controversial. Opponents particularly question the wisdom of Medigap reforms that would likely reduce beneficiaries’ use of both necessary as well as unnecessary services.

The National Association of Insurance Commissioners (NAIC) recently recommended that the Department of Health and Human Services not add cost sharing to Medigap plans. NAIC noted that supplemental plans have little ability to change what care Medicare beneficiaries seek as well as how effective it is: The Medicare program determines what services are covered or not covered, and physicians guide individual beneficiaries on what particular care they need. NAIC expects that beneficiaries are unlikely to disagree with physicians about whether specific care is necessary, regardless of financial incentives.

What’s Next?

Medicare redesign remains a topic of interest on Capitol Hill. The House Ways and Means and Energy and Commerce Health Subcommittees held hearings on this subject on February 26 and April 11, respectively. Ways and Means Subcommittee Chair Kevin Brady (R-TX) indicated that he expected to hold more hearings on the future of Medicare and hoped to forge a bipartisan approach to reforming the program.

The topic of “entitlement reform” doesn’t go away. Regarding Medicare, virtually all proposals under current consideration include mechanisms of shifting more costs onto the beneficiaries. As this policy brief states, “Medicare beneficiaries already spend three times as much of their income on health care as do people under age 65.” We cannot place this additional burden on those who need health care the most.

The National Association of Insurance Commissioners agrees that cost sharing should not be added to Medigap plans, for the reasons mentioned above. Why should only those with Medigap plans be protected? The Medigap benefits need to be folded into the traditional Medicare program so that all can benefit by having financial barriers to care removed.

Sadly, the political momentum is moving in the opposite direction – “saving” Medicare by making it less affordable and therefore less accessible for those who need it. Do we simply sit back and watch it happen? If so, “Improved Medicare for All” will continue to wither as a health care justice goal for the nation.

In-network providers are often not available

Posted by on Wednesday, Jun 19, 2013

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

Out-of-Network Physicians: How Prevalent Are Involuntary Use and Cost Transparency?

By Kelly A. Kyanko M.D., M.H.S., Leslie A. Curry Ph.D., M.P.H., Susan H. Busch Ph.D.
HSR, June 2013


To determine the proportion of privately insured adults using an out-of-network physician, the prevalence of involuntary out-of-network use, and whether patients experienced problems with cost transparency using out-of-network physicians.

Data Sources

Nationally representative internet panel survey conducted in February 2011.

Study Design

Screener questions identified a sample of 7,812 individuals in private health insurance plans with provider networks who utilized health services within the prior 12 months. Participants reported details of their inpatient and outpatient contacts with out-of-network physicians. An inpatient out-of-network contact was defined as involuntary if: (1) it was due to a medical emergency; (2) the physician’s out-of-network status was unknown at the time of the contact; or (3) an attempt was made to find an in-network physician in the hospital but none was available. Outpatient contacts were only defined as involuntary if the physician’s out-of-network status was unknown at the time of the contact.

Principal Findings

Eight percent of respondents used an out-of-network physician. Approximately 40 percent of individuals using out-of-network physicians experienced involuntary out-of-network care. Among out-of-network physician contacts, 58 percent of inpatient contacts and 15 percent of outpatient contacts were involuntary. The majority of inpatient involuntary contacts were due to medical emergencies (68 percent). In an additional 31 percent, the physician’s out-of-network status was unknown at the time of the contact. Half (52 percent) of individuals using out-of-network services experienced at least one contact with an out-of-network physician where cost was not transparent at the time of care.


The frequency of involuntary out-of-network care is not inconsequential. Policy interventions can increase receipt of cost information prior to using out-of-network physician services, but they may be less helpful when patients have constrained physician choice due to emergent problems or limited in-hospital physician networks.

An important role of private health insurers is to control prices through provider contracting. The current trend is to narrow their networks of providers even more. This allows them to further squeeze payments to the providers, in exchange for reducing the numbers of their competitors. If that will slow the increase in insurance premiums, then shouldn’t patients be supportive? No, and here’s why.

When patients obtain their care outside of provider networks, they are inflicted with severe financial penalties, sometimes receiving no coverage at all, plus losing the controlled rates that the insurers have negotiated. This study shows that using out-of-network providers is frequently unavoidable. The problem is particularly severe with in-hospital care, adding to the already burdensome expenditures for high-deductibles and coinsurance.

This is a direct result of placing private insurers in the role of financial intermediaries for our health care. They profit by selling us an inordinate amount of administrative services that we don’t want and shouldn’t need, while penalizing us for obtaining care that we need when we are unable to access providers within their narrow networks.

The model is all wrong. We need to dump the intrusive and wasteful private insurers who are forcing on us services that we don’t want but have to pay for – like taking away our choice under threat of financial penalty. We need to replace them with our own public program that is designed to ensure that we get the care we need, without penalizing us for doing so.

ACOs and liability for institutional malfeasance

Posted by on Tuesday, Jun 18, 2013

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

The Looming Threat of Liability for Accountable Care Organizations and What to Do About It

By H. Benjamin Harvey, MD, JD; I. Glenn Cohen, JD
JAMA, June 17, 2013

Hundreds of health systems across the country have already adopted the ACO model (accountable care organization) and in so doing have taken on a new role of cost containment. What may be less clear to them is that they are taking on new liability risks.

Unlike MCOs (managed care organizations), ACOs will generally not have the benefit of ERISA, which does not cover them; nor are they slated to get comparable federal liability protections. As a result, ACO cost-containment efforts may be scrutinized by the court when poor patient outcomes result in malpractice litigation. For example, if a poor outcome occurs in a patient with congestive heart failure (CHF), a plaintiff could challenge an ACO’s more stringent CHF hospital admissions criteria, asserting a prioritization of cost savings over patient care. In the absence of a federal law that could offer protection, this medical liability claim would be judged by state-based standards, which do not consider federal cost containment goals when determining whether a medical decision was appropriate. Based on MCO liability case law, state courts may hold ACOs liable in this situation.

Under “agency theory” in tort law, a plaintiff in a malpractice suit is permitted to hold a health system liable for the negligent actions of its employee, ie, the treating clinician. A patient may also sue a health system directly, claiming that policies or actions of the health system are negligent. Thus, whether ACOs or not, health systems are exposed to institutional liability related to medical malpractice. How big of a divergence is ACO liability from the existing forms of institutional liability common to health systems? The key difference is the introduction of a new dimension of medical malpractice liability that goes hand in hand with the cost containment charge: the claim that the ACO’s actions or policies prioritized cost savings over patient safety, contributing to the plaintiff’s harm.

Allegations of institutional malfeasance related to cost-saving efforts could increase liability costs and create a chilling effect on ACOs. Moreover, these suits need not progress to trial to threaten ACOs. The assertion of institutional malfeasance alone adds strength to a lawsuit and introduces the potential for punitive damages. This could increase jury awards and settlement amounts. In addition, the broader nature of the claims will enable more robust discovery beyond the care received by the patient. Discovery could now reach into the corporate boardroom as a plaintiff attempts to show that institutional policies regarding resource utilization or physician compensation stifled appropriate treatment. For the ACO, this increased complexity means greater defense costs and increased pressure to settle. Beyond cost increases from more garden-variety medical malpractice cases, ACOs also could be exposed to new theories of liability. It is possible to envision a class action suit seeking injunctive relief or damages against institutional policies felt to be potentially harmful to patients, such as physician incentives payments.

The primary purpose of accountable care organizations is to reduce health care spending. By participating in these schemes – accepting financial rewards for reducing care – physicians are exposing themselves not only to malpractice claims for negligence through failure to provide adequate health care services, but they are also exposing themselves to punitive damages for participating in institutional malfeasance related to cost-saving efforts. Surely during the trials the plaintiffs’ attorneys will let slip out the “G” word – GREED!

Greed: The secret word a la Groucho Marx (15 seconds):

Single payer saves money by reducing waste and improving resource allocation. It does not do it by paying physicians incentives for reducing health care. Most physicians surely would want to avoid even the least semblance of greed.

Replace volume with quality?

Posted by on Monday, Jun 17, 2013

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

Should Physician Pay Be Tied to Performance? No: The System Is Too Easy to Game—and Too Hard to Set Up

By Steffie Woolhandler
The Wall Street Journal, June 16, 2013

Paying doctors for better care—not just more of it—seems like a no-brainer. Yet rigorous studies of pay-for-performance bonuses have found no health benefits and some unintended harms.

An exhaustive analysis of pay-for-performance research by the Cochrane Collaborative, an international group that reviews medical evidence, unearthed “no evidence that financial incentives can improve patient outcomes.”

Consider these cases. In Britain’s massive pay-for-performance program, family doctors earned almost perfect scores (and big bonuses) for hypertension treatment, but population surveys found no decrease in blood pressure or its main complication, strokes. Meanwhile, aspects of quality that didn’t bring bonuses deteriorated.

The largest U.S. pay-for-performance experiment—Medicare’s Premier Demonstration—also flopped. The 200 hospitals that offered bonuses scored slightly worse on patient death rates than other hospitals.

Proponents argue that programs like these were flawed in one way or another, and that the next trial—or the one after—will certainly do better. They also claim successes with other programs. But none of these claims rest on rigorous science, and all those that have subsequently been subjected to rigorous tests have failed.

No Easy Measurement

Why do these programs consistently fall short? Measurement is distorted once you pay doctors based on the data they themselves create. High scores may reflect real excellence, but can just as easily reflect cherry-picking or gaming the measurement system.

One Boston-area hospital we observed improved its quality score 40% just by getting doctors to change the words they wrote in patients’ charts. Medicare gives hospitals more credit for saving patients with “acute respiratory decompensation” than those with “COPD exacerbations,” although these terms are synonyms. That kind of practice is neither illegal nor unusual.

Beyond that, it’s devilishly difficult to quantify doctors’ performance in the first place. Hospital death rates seem, at first glance, an ideal measure of medical quality. Yet, four widely used algorithms yield completely different mortality rankings; a hospital rated outstanding in one often looks downright dangerous in another.

Even if—as some proponents argue—we find performance measures that work for one group of doctors, it’s unlikely that they’ll work for all providers in all patient populations. Moreover, many providers interact in providing care, and influence each other and patients’ outcomes in complex ways. It’s hard to imagine that incentives could optimize this as a system.

Ignoring Psychology

There’s also psychology at work. Rewarding performance ignores the complexity of human drive, particularly the role of intrinsic motivation—the desire to perform an activity for its own inherent rewards. Offering your dinner-party host a $10 reward for cooking a wonderful meal isn’t likely to motivate future invitations.

Studies have found that financial incentives often crowd out intrinsic motivation. For instance, college students will spontaneously play with interesting puzzles, but once they’re paid to solve them, they lose interest in playing for nothing. When day-care centers in Israel imposed fines on parents for picking up children late, tardiness increased. Promptness transformed from a moral duty to a market transaction.

Pay for performance undermines the mindset required for good doctoring—the drive to do good work even when no one is looking. Moreover, it forces doctors to shift their attention from patients to computer screens—documenting trivial details useless for patient care but essential for compliance.

None can doubt medicine’s grave quality problems. As a remedy, pay for performance suggests manipulating greed. This can certainly change medicine, but not necessarily in the ways that we would plan, much less hope for.

(Dr. Woolhandler is a physician and professor at the City University of New York School of Public Health. David U. Himmelstein, also a physician and professor at the School of Public Health, and Dan Ariely, the James B. Duke professor of behavioral economics at Duke University’s Fuqua School of Business, contributed to this article.)…

We keep hearing over and over that we are going to have to quit paying physicians based on the volume of their services and pay on the quality of those services instead. There are two problems with this.

The first problem is that there is a certain volume of health care that needs to be delivered. If the physician is told that quality counts but volume doesn’t, then wouldn’t that physician be motivated to cut back on work done? Does anyone seriously suggest that sloth is fine – payment would be the same regardless of the volume of work? Of course not. Whether fee-for-service or salaried, the physician is going to have to produce.

The second problem is that the abstract concept that physician pay should be tied to quality does not translate into a practical model of measuring and rewarding quality. Physicians already attempt to provide the best quality they can under the given clinical circumstances. Typical measures selected are only a infinitesimal sampling of the entire work product of the physician. Today’s article explains the deficiencies of trying to come to any conclusion about quality based on this process.

The counter opinion to the article above was written by François de Brantes, executive director of the Health Care Incentives Improvement Institute, and is available at the same link above. Some of his comments are instructive: “show poor outcomes in some pay-for-performance trials,” “design flaws,” “doctors were rewarded for results that were actually poor,” “it has worked, if not always as well as it should,” and, “problems can be fixed by not letting providers set benchmarks.” If physicians, with their conflicts of interest, don’t define quality, then who does? The MBAs? Is that really better?

We definitely must address medicine’s many quality problems, ideally through beneficent public policies, but manipulating greed through pay for performance schemes is not the way to get there.

Would Syria benefit from a single payer system?

Posted by on Friday, Jun 14, 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.

Syria: An overview of MSF programmes in and around the country


The conflict in Syria is extremely intense. Frontlines continue to shift. The medical system is reduced to tatters. An estimated 6.8 million people are in urgent need of humanitarian assistance inside Syria and in the neighbouring countries. And people in enclaves are cut off from assistance.

Despite the very real challenges of operating in the country, MSF is now running five hospitals inside Syria and is increasing mobile clinic activities around some of these hospitals. Simultaneously, MSF is actively seeking to open new projects where it is safe to do so.

MSF is using only private donations for its work in Syria in order to remain entirely independent of all political positioning around the crisis.

MSF is also working in the neighbouring countries: Iraq, Jordan, Lebanon and Turkey where some 1.5 million Syrians have fled. These countries have been overwhelmed by the influx of refugees and the humanitarian response has so far been unable to meet their needs.


U.S. Is Said to Plan to Send Weapons to Syrian Rebels

By Mark Mazzetti, Michael R. Gordon and Mark Landler
The New York Times, June 13, 2013

The Obama administration, concluding that the troops of President Bashar al-Assad of Syria have used chemical weapons against rebel forces in his country’s civil war, has decided to begin supplying the rebels for the first time with small arms and ammunition, according to American officials.

Supplying weapons to the rebels has been a long-sought goal of advocates of a more aggressive American response to the Syrian civil war.

But even with the decision to supply lethal aid, the Obama administration remains deeply divided about whether to take more forceful action to try to quell the fighting, which has killed more than 90,000 people over more than two years.…

New York Times Reader Comment:

Don McCanne
San Juan Capistrano, CA

They have a tragic conflagration over there and we’re helping by pouring more gasoline on it?

Is “Peace on Earth” only for Christmas cards?…

Syria needs their Mahatma Gandhi – someone who will be an inspiration for non-violence and civil rights.

And single payer for Syria? We can’t even get single payer in the United States. Perhaps we need our own Mahatma Gandhi.

Why does Kaiser have the highest premiums in the California exchange?

Posted by on Thursday, Jun 13, 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.

Kaiser’s Obamacare rates surprise analysts

By Chad Terhune
Los Angeles Times, June 12, 2013

In California’s new state-run health insurance market, Kaiser Permanente will cost you.

The healthcare giant has the highest rates in Southern California and some other areas of the state, surpassing rivals such as Anthem Blue Cross and other smaller competitors. The relatively high premiums from such a strong supporter of the federal healthcare law surprised industry analysts, and it has sparked considerable debate about the company’s motives.

Some experts say Kaiser intentionally bid high to avoid drawing too many customers next year who are sick or who have been uninsured for years and may be costlier to treat. Others suspect Kaiser was worried that lower premiums would bring an influx of newly insured patients that could overwhelm its in-house roster of doctors and hospitals.

“Kaiser is not as low cost as many people think,” said Glenn Melnick, a USC health policy professor. “They appear to be protecting themselves because the people signing up in the first year are likely to be the sickest ones.”

Overall, Kaiser is the state’s biggest health insurer with a 40% share of the market.

(Marian) Mulkey of the California HealthCare Foundation said Kaiser has regretted being the low-cost option at times in the past and being overrun by too many members at one time. Other insurers may have more flexibility to add doctors and hospitals to their network as enrollment builds.

Kaiser, on the other hand, could face the costly decision to contract with outside hospitals to absorb some of its overflow.

“We are focused on sustainable prices for the long haul,” (Bill Wehrle, Kaiser’s vice president of health insurance exchanges) said. “If you make a large mistake in this environment, it can be hard to recover.”,0,793…

Kaiser Permanente was the prototype health maintenance organization (HMO) that sparked the managed care revolution, seeking lower costs supposedly without compromising quality. So why should a low cost leader come in with the highest premiums for Covered California – California’s new exchange that is being established under the Affordable Care Act (ACA)?

The strategies and negotiations were secret, so we don’t really know. But there are a couple of possible explanations. Initial enrollment may include more people with health problems who need insurance, whereas healthier individuals may opt out since initial non-participation penalties are very small, and they can always join later. By Kaiser setting premiums higher, this initial influx of less healthy but more expensive patients would be diverted to competing plans because of the attraction of their lower premiums.

Another possible reason is that the current Kaiser patient population is relatively stable at about 40 percent of the California insurance market. When patients change their PPO or HMO plans that use provider networks, they do not have as much disruption as they do when they move into or out of Kaiser Permanente. Such a move always entails a complete change of their physicians and hospitals. Since Kaiser realizes that they have not only dominant market share but also a stable group of satisfied patients who do not want any disruption in their care, they know that they can charge a little bit more for their plans since patients are willing to pay the modest differences to avoid such disruptions.

There is another reason that is perhaps the most important of all. Kaiser Permanente is a truly integrated health care delivery system with its own hospitals, clinics, health care professionals and other components of the health care delivery system. They can provide virtually all services to every one of their plan members. Carefully planning and executing system capacity is absolutely essential in the Kaiser model.

Large, abrupt changes in enrollment can be catastrophic from a business perspective. If they lose too many patients all at once they are sitting there with expensive excess capacity that is not generating revenues. On the other hand, if they have a sudden large influx of patients, especially patients who would require greater amounts of health care, they would strain their capacity, with overloads in their primary care clinics, with patients destined for admission waiting in the hallways because the hospital’s beds are full, and with intolerably excessive queues for patients waiting for high-tech and specialized services. Obviously, they would have very unhappy patients.

Instead of making large, abrupt changes in their system capacity to match large fluctuations in patient enrollment, Kaiser controls their patient enrollment, keeping patients out if there are too many, or increasing aggressive marketing if there are too few. Under our fragmented, dysfunctional system of financing health care, it is only natural that Kaiser would adjust its patient enrollment to fit its business model rather than adjust its business model to better accommodate patients.

This issue of capacity is important. The United States needs to improve central planning since we have amongst the worse maldistribution of capacity. We have too many regions with excess capacity, which causes wasteful over-utilization, and other regions with deficient capacity, which impairs access to needed care. As a major player, allowing Kaiser to have autonomy in its planning takes good care of Kaiser but at a cost of fragmenting the systemic planning that we need.

Most proposed single payer models include integrated health systems such as Kaiser Permanente. Presumably Kaiser, like other players in the system, would negotiate global budgets, fees and capitation rates, and negotiate separate budgets for capital improvements.

But what about patient choice? The new accountable care organizations (ACOs) would still ensure patient choice, especially since, under the ACA rules, patients may not even know that they have been assigned to a particular ACO. Should Kaiser, which, in essence, is a transparent mega-ACO, be allowed to lock their patients into their own system when other ACOs cannot?

Suppose their patients had the freedom to come and go as they please. Would  the patient choices be that be much different from choosing another primary care entity that has well established referral patterns for high-tech and specialized services, and established practice relationships with other hospitals? Isn’t the goal of expanded information technology to provide a similar level of interconnectedness between all providers that Kaiser has within its own system?

Instead of being a closed system, shouldn’t Kaiser just be another choice for patients within the health care delivery system? Under a single payer system, that choice would not be based on price since single payer eliminates the need to shop prices. Rather choice would be based on perceived quality. Wouldn’t it be better if the various elements of the health care delivery system were knocking themselves out to be sure that they have very contented, healthier patients?

(Changing the Kaiser Permanente model is controversial. Today’s comment should not be considered a specific recommendation, but should be used to get people thinking about what type of structural reforms would best serve the interests of patients – all patients, not just Kaiser’s).

Does the nation support health care as a right?

Posted by on Tuesday, Jun 11, 2013

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

Summary Memo on National Poll Findings of Public Opinion on U.S. Healthcare System

The Morning Consult, June 11, 2013

This bipartisan poll included a national sample of 1,000 likely voters and was conducted May 22 to May 26, 2013 by Republican pollster John McLaughlin of McLaughlin & Associates and Democratic pollster Margie Omero of Momentum Analysis.

Q6:  In general, do you view health care as a right guaranteed to all citizens or is it something that citizens should be primarily responsible for providing for themselves?

44% – Guaranteed right
47% – Citizens responsibility
9% – DK/Refused

Q8:  In your own personal opinion, which of the following do you see as the  biggest problem facing health care today?

58% – Too expensive
11% – Too many uninsured
17% – Not worth the price
5% – Accessing quality doctors
9% – DK/Refused

Q10:  And who do you believe is most responsible for the cost of health care coverage?

44% – Insurance companies
10% – Hospitals
4% – Doctors
12% – Drug companies
1% – Medical device companies
9% – Individuals
19% – DK/Refused

Q40:  Currently, health care benefits provided by an employer are tax-free for both employers and employees. On the other hand, health insurance benefits are not tax-free for people who either buy insurance themselves or do not receive benefits from their employers. Knowing this, do you favor or oppose changing the law so health insurance benefits provided by employers are taxed?

9% – Strongly favor
15% – Somewhat favor
20% – Somewhat oppose
43% – Strongly oppose
13% – Neither…

Three-fourths of likely voters believe that the biggest problem in health care today is that it is too expensive or not worth the price. When allowed to select only one option as to who is responsible for the costs, close to half blame the insurance companies, with far less blame placed on others. It seems like the voters would want something done about costs, but there is no voters’ revolt in sight. Maybe we have a problem with framing.

Although most outspoken supporters of a truly universal health program claim that health care should be a right, just as many believe that it should be an individual responsibility. The social justice argument is not going to sway those who have views opposed. Shoving a “Health Care Is a Right” placard in their faces only turns them off even more. Framing health care as a right is too polarizing.

Regarding employer-sponsored health plans, only about one-fourth favor ending the income tax exemption of the benefits, whereas about two-thirds would oppose taxing these benefits. Just as with their views on high health care costs, voters are also concerned about preserving an existing government tax policy that helps give limited relief of their costs – their own personal costs, that is.

When individuals have to buy their own insurance, they are very concerned about unaffordable premiums, and they blame the insurers for that. When they access health care, they are concerned about high out-of-pocket expenses, especially the deductibles. Even when they receive insurance through work, many realize that this insurance was paid for by forgoing wage increases. The high costs of health care are a personal matter for them, and they want relief.

Rather than talking about abstract health care rights, we should be framing the problem as an intolerable personal financial burden – one that is perpetuated through our reliance on expensive but ineffective private insurance plans. We need to explain that they can get relief from this burden on two fronts: 1) Free access to health care by curtailing out-of-pocket expenses, and 2) Replacing unaffordable premiums with equitable public funding.

The first point was covered yesterday with the brief from EPI titled, “Increased health care cost sharing works as intended – It burdens patients who need care the most.” We can get rid of this burden. People need to understand that many other nations provide care that is free at the time of service – no deductibles, no copays. That’s what they want to hear, though for those who are dubious that this is possible, we can explain that we can do this by replacing the private insurers with an efficient Medicare-like program.

For the second point, we can explain that, under an equitable tax system, individuals pay no more than they can afford, based on their income, and for most individuals that would be less than they are currently paying in both direct and hidden costs of health care.

So the framing needs to appeal to the individuals’ concerns about their personal high health care costs: Are you spending too much out-of-pocket for your health care and for your insurance? Would like like to be able to get rid of your private insurance and have health care free at the time you need it? We can do this if we make some modest improvements in Medicare and then provide it for everyone, paying for it through fair taxes.

You can work on the rhetoric. Just be sure that they hear that they will not have their health care threatened simply because they cannot afford to pay for it. Some may feel that it is their right, and some may not. But they all want to hear that in the future they finally can have relief from their own personal financial burdens of health care.

Burdening patients who need care the most

Posted by on Monday, Jun 10, 2013

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

Increased health care cost sharing works as intended

It burdens patients who need care the most

By Elise Gould
Economic Policy Institute, May 8, 2013

A number of different health care policy proposals that have emerged in recent years share a common goal: make households directly pay for a larger share of most health expenditures by encouraging higher deductibles, higher copays, or higher co-insurance rates. The rationale of such proposals is that too-generous insurance policies (either those provided by employers or public insurance such as Medicare) distort the prices consumers face, and that removing this distortion would allow patients to choose their health care more wisely, hence slowing health care cost growth.

This brief argues that this is a flawed strategy for health care cost containment. The health care market is unlike other markets; thus, forcing increased cost sharing on American households is a deeply inefficient strategy for trying to contain health care costs. Forcing Americans to pay a higher share of health costs will not induce them to shop around and compare prices when they are experiencing chest pains or their child is suffering from an asthma attack. Further, consumers of health care are in no position to second-guess their doctor when she tells them an MRI is better than an X-ray (and hence worth the higher price) to diagnose a condition. Lastly, unlike other markets, prices of health care services faced by consumers bear very little relation to providers’ cost to supply these services. Hence, these prices provide little to no information for consumers looking to judge the relative efficacy of various health care interventions.

In addition, increased health cost sharing is unlikely to make American health care more affordable to those currently unable to afford it, and will instead likely place the largest burdens on those who need care the most.

Most cost-sharing proposals lead to higher out-of-pocket medical costs, hitting those who require a high degree of medical care especially hard. The short-term cost savings achieved as patients respond to increasing out-of-pocket burdens may be realized by reducing medically necessary health care—a penny-wise, pound-foolish result.

Most cost-sharing proposals are poorly targeted for containing overall system costs. They miss the expensive cost drivers. Any cost containment would be driven by reduced medical care, not reduced prices.

* Not all moral hazard is inefficient

* Cost sharing can lead to medically and economically inefficient decisions

* Cost sharing is a poorly targeted cost-containment device

A major objective of health care reform was to slow the intolerable escalation in health care spending. Most of the pilot initiatives included in the Affordable Care Act (ACA), such as accountable care organizations and bundled payments, will likely have very little impact on our national health expenditures. But one important policy approach – the subject of this EPI brief – began before ACA was enacted and is probably responsible for most of the slowing in health care spending that was not directly due to the recession.

That policy is placing a financial burden on individuals who need care, especially through higher deductibles, but also through other forms of cost sharing. The impact of this policy is expressed well in the title of the brief: “Increased health care cost sharing works as intended – It burdens patients who need care the most”

Talk about a flawed policy! We are attempting to cover as many people as possible considering the limitations of ACA, and yet, at the same time, we are expanding the use of policies that keep patients away from care that they should have – by erecting these financial barriers. We are increasing the spending on private insurance plans while reducing the spending on health care by preventing insured people from getting the care they need!

How many times do we have to say it? Many other nations provide first dollar coverage – not charging any fees when health care is accessed – yet they have been much more effective in slowing cost escalation. You do not have to expose patients to potential financial hardship to bring costs under control.

This is one of the most important flaws of ACA (and there are many of them). It not only allows, but it actually encourages, through low actuarial value plans, the expansion of these financial disincentives to obtaining health care. If you read the full EPI brief, you will understand better why we must abandon this approach. Unfortunately, the author provides only a couple of feeble suggestions as to alternative approaches, but you will not find in the brief what we really need to do.

It is astounding that when it comes down to the obvious – that we need a well designed single payer national health program – so many knowledgeable people in the policy community choke up. Let’s let them know that it is okay to say it: WE NEED A SINGLE PAYER NATIONAL HEALTH PROGRAM!

I guess we really don’t have to shout. But we should explain to our colleagues and the public at large the reasons contained in this EPI brief explaining why cost sharing is harmful to our health and how it leads to financial insecurity. Then we can explain, in a calm voice, how we can fix this by improving Medicare (partly by including first dollar coverage) and then providing it for everyone. Naw. They’re not listening. We’d better shout.

Response to Goldman and Leive’s critique of Medicare for All

Posted by on Friday, Jun 7, 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.

Why ‘Medicare-For-All’ Is Not The Answer

By Dana Goldman and Adam Leive
Health Affairs Blog, May 14, 2013

The Affordable Care Act survived the Supreme Court and a presidential election, so why does it face such an uncertain future?  One reason is that it was essentially silent on how to control costs.  This has led many pundits — including the likes of Paul Krugman and Robert Reich — to argue that the best approach would be to extend Medicare to everyone.

The idea of universal Medicare is powerful and attractive.

However, the argument that Medicare is superior in terms of cost savings and quality is flawed and ignores key factors that make any conclusion decidedly more nuanced. As the country’s fiscal challenges pressure us to make dramatic health system changes, we should be wary of calls to implement “Medicare-for-All.”

(In fairness, no attempt is made to edit their explanation of why “Medicare-for-All” is not the answer. Please use the following link to access their reasoning.)…


Theodore Marmor Says (May 19):

This critique of Medicare is bafflingly opaque to the difference between single payer systems providing broad, first dollar coverage and the particular features of Medicare US version 2013. The arguments for the former rely on normative appeal of principles like those of the Canada Health Act, on experience with very limited if any patient cost-sharing at the point of service, and decades of comparative financing experience. On that basis, one can compare how Canadian developments differ from those in the US from 1971 – when their system was operational – to now. Not everyone would agree that Canadian experience is superior, but it would be difficult to argue the case that the US experience was superior. So, why are those data not addressed seriously when dealing with “international experience.” One cannot coherently argue against that form of medical care policy by selectively observing features of American medical care and speculative claims about the extent of ‘fraud’ in private and public health insurance. The monopsonist noted in the article is not US Medicare, but Canadian Medicare at the provincial level—or, by extension, the NHS in the UK. There are indeed issues of fraud in the US, but interestingly, there is no serious evidence presented that supports the claim that private health insurance is superior on that front.

Finally, in no OECD nation is health care financing the central explanation for the profile of the population’s health. Health care serves lots of purposes and is important in many ways, but it ought not be evaluated primarily or substantially–in rich countries with basic public health–for major changes in population health profiles.

Dana Goldman Says (May 23):

There is a tone here that somehow the Canadian system is ‘better’ — or at least non-inferior and less expensive. But surely everyone can agree that the Canadian system restricts choice, has greater delays, and is starting to show cracks. Just try getting Erbitux for Stage IV colon cancer ; or an office visit in Yarmouth, Nova Scotia, where they held a lottery to see who would get primary care.
(See or…).

In fact, cancer is a poignant example, as research we published in Health Affairs last year demonstrated that the US has better survival than the EU, and the gap is widening. These better outcomes come at a cost, but a straightforward cost-benefit analysis indicates that the gains are worth it. (See

The point is that the US — while wasteful — has a system that on average provides the best access and choice, especially with the ACA. Canada has a lower global budget, but it has restricted choice. If we move to global budgets, we can lower costs, but we shouldn’t fool ourselves that health outcomes will magically improve and access will improve.

Jon Oberlander Says (May 23):

Dana Goldman is concerned about tone in blog responses – I am more concerned by his factual errors and misleading statements. Comparing the United States to Canada, Goldman writes that “the US — while wasteful — has a system that on average provides the best access and choice, especially with the ACA.” It is not clear what “the best” means here – best in the world? Or only in North America? Regardless, it is simply inarguable that Canada provides better health security to its citizens with universal coverage at a much lower cost than the US.

To be sure, Canada has its share of significant problems. But it is a bit much for Goldman to cite issues in primary care shortages and a lottery for care as an indictment of Canada without mentioning America’s own issues with primary care or the now famous Oregon lottery for Medicaid or medical care costs driving Americans (including those with insurance) into bankruptcy and much more. Even when the ACA is fully implemented, over 30 million US residents will lack insurance coverage – we will not match Canada on universality.

Goldman is worried about Canada’s limits on choice but he does not note that the US is itself not free of constraints: many Americans face constraints on choice of medical care options because they do not have any coverage at all, do not have a choice of insurers from their employer, or have restricted choice of doctor because they are in a managed care plan. In short, Goldman’s conviction that the US has the “best access and choice” is strangely divorced from the evidence.

Finally, Goldman’s published work does not, as he claims, demonstrate that higher US spending on cancer produces better results than the EU. That work has serious methodological problems which undercut its conclusions:

Evidence Supports Medicare For All

By Ida Hellander
Health Affairs Blog, June 7, 2013

Dana Goldman and Adam Leive’s effort to discredit the single payer, Medicare-for-All model of financing health care — or as they put it, make “any conclusion decidedly more nuanced” — is sorely lacking in nuance, defined by Merriam-Webster as “made or done with extreme care or accuracy.”

As Goldman and Leive note, the Affordable Care Act will not control rising costs. In addition, the Congressional Budget Office estimated last week that even after it is fully implemented, the ACA will leave 31 million Americans uninsured. The support of Nobel Prize-winning economists like Paul Krugman and Joseph Stiglitz, the former chief economist at the World Bank, along with Professor Robert Reich, the former U.S. secretary of labor, reflects a broad consensus that the only way to provide universal coverage and control costs is a single-payer system.

(In fairness, and because of the length of today’s message, no attempt is made to edit Ida Hellander’s response to Goldman and Leive. Please use the following link to access her response.)…

We rarely respond to criticisms of Medicare for All since most of them are driven by conservative/libertarian ideology devoid of any acknowledgment of health care justice. Single payer advocates simply cannot have an intelligent discussion with someone who does not believe that society has a moral obligation to ensure that absolutely everyone has affordable access to appropriate health care.

We had to make an exception in this case. Dana Goldman is a Professor and the Leonard D. Schaeffer Director’s Chair at the University of Southern California, and, until 2009, was RAND’s Distinguished Chair in Health Economics. Because he is “a nationally-recognized health economist influential in both academic and policy circles” (HA Bio), a response was obligatory on our part.

The thrust of their discrediting of Medicare for All is that they challenge the lower prices that Medicare pays, the much lower administrative costs of the Medicare program, and they even challenge the mediocrity of our health outcomes. Anyone with a basic knowledge of health policy cannot be but perplexed by their attack of these well established facts.

As an example of the questionable credibility of their statements, Jon Oberlander cites the dubious cancer statistics in his comment above. The link that he provides to The Incidental Economist is to an article that quotes the critique I had of the cancer study Goldman cites – a study of which he is a co-author.

Ida Hellander, in her full article, makes the very important point that Goldman and Leive “confuse today’s Medicare program (not a single payer but just one plan in a marketplace of multiple public and private plans) with Medicare for All (single payer).” Although they were off in what they did criticize, they did not discuss the other very important features of the single payer, improved Medicare for all model advocated for by PNHP.

By providing us with such a flawed critique of Medicare for All, Goldman and Leive have helped to make the case for us by demonstrating that they have to stretch their rhetoric to the breaking point to come up with arguments against it.

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